- Posted December 10, 2018 at 8:19 PM
- Categories Eminent Domain and Condemnation, Litigation, Real Estate
Think of your commercial property lease as a boat for a moment, and condemnation by the government as a storm – is your lease ready for a condemnation storm? The most basic level of preparedness, the equivalent of having the right number of reliably functional life jackets, is to have an effective Condemnation Clause in your lease. Just as many boat owners and passengers do not give their life jackets a second thought in advance of a voyage, the same is true of Condemnation Clauses. Then when a condemnation storm unexpectedly hits the property, landlords and tenants reach for the lease only to find they are not adequately covered by the Condemnation Clause, or worse, there is no Condemnation Clause.
Ambiguous Condemnation Clause – A Faulty Life Jacket
Ideally, the Condemnation Clause in a commercial lease will provide clear guidance for the landlord and tenant in the event the property faces eminent domain before the lease expires. What is the difference between condemnation and eminent domain you may ask? While “eminent domain” is the constitutional power of the government to take all or a portion of a privately owned property for public use in exchange for just compensation, “condemnation” is the term used for the act of exercising that power, the process of the taking itself. Unfortunately, not all Condemnation Clauses are clearly drafted, leaving landlords and their tenants to litigate over the ambiguities, where they could otherwise be working together to weather the storm. Taking an adversarial position to resolve ambiguities is costly, time-consuming and can take a toll on valued long-standing business relationships. Better to have condemnation contingencies clearly framed at the outset of the lease.
Condemnation Triggers Lease Termination – Don the Life Jacket
The primary guidance the Condemnation Clause provides landlords and tenants is to affirm the circumstances under which condemnation triggers the lease’s termination; whether the lease will terminate only by a complete taking or also by a partial taking of the property. The Condemnation Clause should also define the apportionment of the just compensation proceeds, if any, between the landlord and tenant. Regardless of whether the tenant is entitled to a share of any proceeds under the lease, the government will still pay the tenant’s relocation expenses, including a portion of the tenant’s resulting increased rent at a comparable new location. The tenant may also be compensated for certain improvements (fixtures) to the property the tenant installed, but cannot relocate to a new space.
Complete or Partial Takings – The Type of Storm Matters
The complete taking of a property through eminent domain will terminate a tenant’s leasehold interest in the property, just as it will terminate the landlord’s ownership interest. A Condemnation Clause will provide how the compensation paid by the government will be allocated between the landlord and tenant.
If only a portion of a property is taken, a good Condemnation Clause will state whether either the tenant or landlord may terminate the lease and under what circumstances. The partial taking may only impact property value, or it could render the property unable to function as currently used, thus triggering lease termination. A partial taking scenario raises many challenging questions that a thoughtfully-drafted Condemnation Clause should address, including: Will the lease continue if there is a partial taking, or will even a partial taking trigger automatic lease termination, making it indistinguishable from a complete taking? Will the lease continue at the landlord’s option, or will the tenant get to decide whether to continue based upon its own assessment of whether its use of the property is significantly impaired? Will there be a pre-agreed rent abatement as incentive for the tenant to remain, or perhaps a pre-agreed apportionment of the just compensation proceeds between the landlord and tenant?
No Condemnation Clause – No Life Jacket
Where there is no Condemnation Clause, the lease is still terminated by operation of law if there is a complete taking of the property, and no further rent is owed by the tenant. However, the question of whether the tenant shares in the condemnation award is left open, which leaves the landlord and tenant to litigate the apportionment of the condemnation proceeds. In a partial taking, the absence of a Condemnation Clause leaves many other unanswered questions, the foremost being whether the lease is terminated or if it may be terminated by either party. There is no reason to allow this degree of unpreparedness, which can be easily avoided with a Condemnation Clause.
Prepare For the Storm Before It Comes
Hopefully the message is clear – if a condemnation storm hits your property, a Condemnation Clause is as imperative to a lease as life jackets are to a boat. However, having one in your lease is not enough; you must also ensure that it is unambiguous and that it adequately addresses the challenging questions raised in the event of a taking.
Because of the competing interests between a landlord and tenant, the terms and conditions of Condemnation Clauses vary widely. What is important is that the impact of a future condemnation be considered when the lease is negotiated.
James (Jamie) Roth is an associate in Miller, Miller & Canby’s Litigation Practice Group where he concentrates his practice on real estate litigation with a focus in eminent domain, as well as business and commercial litigation.
Whether you are a landlord or a tenant, contact Jamie Roth at 301-762-5212 to discuss your Condemnation Clause, or if you have learned that the government may be taking all or a portion of your property. For more information on Miller, Miller & Canby’s Eminent Domain and Condemnation Law Practice and representative cases, click here.
- Posted December 3, 2018 at 3:02 PM
- Categories Litigation, Real Estate, Business & Tax, Maryland Property Tax News
All properties in Maryland are assessed on a three-year tax cycle. If an appeal is not filed at the beginning of the cycle, a property owner loses the right to challenge the full three-year cycle but may still appeal the assessment for the remaining years. This appeal deadline is December 31. By filing a petition for review, a property owner can have a State assessor review whether a reduction is warranted. Typical grounds for requesting a reduction include tenant vacancies, decreases in rental income, sales of comparable properties at reduced values, and elimination of structures or improvements. An appeal might also be warranted where the owner simply missed the February deadline to appeal the assessment for the full three-year cycle.
At the end of December, the Maryland Department of Assessments and Taxation (SDAT) will issue new assessment notices to owners of one-third of all commercial and residential properties in Maryland. In Montgomery County, commercial properties in Kensington, Silver Spring and Wheaton will be reassessed. In Frederick County, commercial properties in Urbana, Ijamsville and parts of Frederick will be reassessed, while in Prince George’s County commercial properties in Greenbelt, College Park, Hyattsville and Riverdale can expect new assessments. Property owners have 45 days from the date of the assessment notice to challenge these new assessments.
Miller, Miller & Canby has been challenging the assessments of various types of properties in Maryland for more than 30 years and has obtained substantial reductions in real property assessments for our clients. We have successfully appealed the assessments on office buildings, retail stores, senior living centers, warehouses, industrial sites, casinos, apartment buildings, golf courses and cemeteries.
Michael Campbell is a partner in the litigation group at Miller, Miller & Canby. In addition to trial and appellate advocacy, his practice focuses on real estate litigation and property tax assessment appeals. Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for property tax guidance or to help reduce your commercial Maryland property tax assessment. For more information about the firm’s Maryland property tax appeals practice and representative cases, click here.
- Posted November 19, 2018 at 3:14 PM
- Categories 5G Wireless Infrastructure and Small Cells Zoning, Land Development, Real Estate
On October 30, 2018 the Montgomery Council deferred action on Zoning Text Amendment (ZTA) 18-11, Telecommunications Towers – Approval Standards.
Current Montgomery County Zoning Requirement
Montgomery County requires cell towers be at least 300 feet from residential areas. Carriers and wireless infrastructure companies seek an update to the county’s 1990s-era zoning regulations that were aimed at tall, macro sized towers (e.g. 100 feet tall).
Why Montgomery County Needs to Address Small Cells and 5G Wireless
A new September 2018 FCC order takes significant steps toward facilitating small cell deployment and 5G wireless. Click here to view the MM&C blog article on the new FCC Order. State and local municipalities are scrambling to enact legislation to place boundaries on small cell zoning and protect residential communities. Many state and local municipalities are suing the FCC because they believe the order preempts their ability to regulate the placement of small cell facilities. Wireless carriers are also suing the FCC, as they believe the FCC Order did not go far enough to cut regulations and expand the much needed 5G Infrastructure.
According to Council President Hans Riemer, “We need to support the future of wireless while balancing the impact it will have on our communities. The zoning measure that I supported, ZTA 18-11, accomplished both these goals.”
The Montgomery County Council has been working to address the future of wireless infrastructure in Montgomery County over the past few years. The telecommunications industry is running out of capacity on wireless networks in the County due to growing demand and they need to place antennas all over and especially at the street level to meet customer service and capacity demand in and around residential neighborhoods. 5G Infrastructure requires a significant increase in antennas at the street level, as well as on tall existing structures, such as towers, buildings, and water tanks.
Small Cell Antennas are a Key Component of 5G
According to T-Mobile’s website, small cell antennas and distributed network connections are lower power than traditional cell sites, and can handle large quantities of data – as well as large numbers of users. Because they are smaller than traditional cell sites, their antennas and radios can be located closer to the mobile device user. This is key to enhancing a customer’s mobile experience – whether they are texting, sending pictures, streaming live video, or calling 911. Small cells and DAS (Distributed Antenna System) can help improve coverage, especially in hard to reach locations where man-made and natural obstacles to radio waves occur. They target areas with spotty coverage and enable stronger cellular signals. Small cells also help offload capacity challenges that the networks are facing due to significant wireless usage, especially data usage (non-traditional telephone uses such as searching the internet, watching movies, etc.) by customers. A trade off of this smaller equipment on lower structures being placed closer to the residential customer is that the wireless signal does not travel very far from the antennae location and much less than when placed on a taller, macro site location, which necessitates more structures placed closer together.
Montgomery County Council Legislation
The Council successfully established rules for small cell antennas in Montgomery County commercial areas earlier this year. Bill ZTA 18-11 addressed small cell antennas in residential areas. “Unfortunately amendments were introduced that essentially sought to obstruct deployment of wireless infrastructure in the future. This was a real concern because many people want to have good wireless coverage in their neighborhoods, whether to use devices for entertainment and communication, or to call 911, or to work from home, you name it. Our County needs to embrace wireless infrastructure, just as we embrace water, power, and transportation infrastructure”, said Hans Riemer. To read Council President, Hans Riemer’s full statement, click here.
MM&C Telecommunications Attorney, Sean Hughes said “ZTA 18-11 wasn’t a viable solution for small cell zoning in order to provide consumers with the enhanced state of the art wireless connectivity they desire. It would essentially require a conditional use for any small cell short telephone or light pole replacements (e.g. 20-30 feet high) in a residential zone; which is the same process as requesting a traditional macro cell tower site (above 100 feet high).”
In a statement from Montgomery County Executive Ike Leggett, he said “I am very disappointed that the County Council has withdrawn the proposed Small Cell Tower bill from consideration. We have failed to adequately protect our communities and neighborhoods. We now run a much greater risk of the State – and federal government – preempting any local say on the terms and conditions of small cell tower placement in our neighborhoods.”
Rather than approve a bad bill that would set Montgomery County back and invite State and Federal pre-emption, Council President Reimer pulled the legislation. He will work with the newly elected Montgomery County Council in 2019 to revise Bill ZTA 18-11.
The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning attorneys and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.
Sean P. Hughes is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic. To learn more about the firm’s Land Use and Zoning practice, click here.
Cathy Borten is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.
- Posted October 25, 2018 at 2:19 PM
- Categories 5G Wireless Infrastructure and Small Cells Zoning, Land Development, Real Estate
On Sept 5, 2018 the Federal Communications Commission (FCC) pushed an order to streamline small cell siting. The Commission’s Order states: To meet rapidly increasing demand for wireless services and prepare our national infrastructure for 5G, providers must deploy infrastructure at significantly more locations using new, small cell facilities. Building upon streamlining actions already taken by state and local governments, this Declaratory Ruling and Third Report and Order is part of a national strategy to promote the timely buildout of this new infrastructure across the country by eliminating regulatory impediments that unnecessarily add delays and costs to bringing advanced wireless services to the public.
The Commission’s order limits the fees localities can charge for reviewing small cells in a public Right-of-Way, sets shot clocks on those reviews, and affirms local governments can apply reasonable aesthetic considerations. The order raised concerns, as many localities say the order will deny them the right to effectively govern small cell placement in a ROW.
During the vote, FCC Chairman Ajit Pai stressed how he and Commissioner Brendan Carr, made it a point to discuss the draft order with local governments to get their input. Carr said the order ensures, “No city is subsidizing 5G.” Carr stressed that economists believe the changes will save $8,000 per deployment of each small cell, money that could help bring 5G deployments to more places.
If the U.S. doesn’t act to ease such deployment, other countries will, Carr said. China “wants to lead the tech sector for the next decade. They are moving aggressively to deploy the infrastructure needed for 5G. Everyday, China is deploying 460 cell sites. That is 12 times our pace.”
Click here to read the FCC order. The map below indicates in blue the states where a small cell bill has been enacted. Please note, Maryland does not currently have a small cell bill.
Local jurisdictions in Maryland, including Montgomery County are reviewing how they will handle the FCC Order.
“The FCC order takes significant steps toward facilitating small cell deployment and 5G wireless. Since Maryland has failed to pass any legislation addressing small cells, and Montgomery County recently failed to pass legislation that would allow small cells in residential areas, it will be interesting to see what impact the FCC order has locally”, says MM&C Real Estate Attorney, Cathy Borten.
Montgomery County may join other Washington metropolitan jurisdictions in filing an appeal of the FCC small cells order that set timetables for localities to make siting decisions and capped application fees. “We plan to argue that the FCC has significantly overreached and is seeking to remove local control,” said Montgomery County Council President Hans Riemer (D-At Large). Riemer has said he hopes the council can agree on new county regulations before the FCC order takes effect in January. “I think it would help make the case that local governments can be relied upon to make changes for wireless technology,” Riemer told The Washington Post.
The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning, land use and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.
Sean P. Hughes is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic. To learn more about the firm’s Land Use and Zoning practice, contact Sean on 301-762-5212.
Cathy Borten is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, contact Cathy on 301-762-5212.
- Posted October 20, 2018 at 9:56 PM
- Categories Land Development, Real Estate, MM&C Happenings, Featured Events
The Maryland DC Wireless Association’s Tenth Annual Golf Tournament took place on September 20, 2018 at the Whiskey Creek Golf Club in Ijamsville, Maryland. It brought together members of the association, as well as friends, colleagues and community members for a relaxing day of golf in support of various worthy charities. Miller, Miller & Canby was a sponsor of this year’s event which raised $50,000 for charity.
Miller, Miller & Canby’s Sean Hughes serves on the board for the Maryland DC Wireless Association and, along with other board members, is involved in testifying and providing key insight for policymakers concerning wireless legislative issues and amendments on the local, state and even federal level, as well as raising funds for charitable causes through events like its annual golf event. Sean played in a foursome with Bob Gough, MM&C Managing Partner and Real Estate Attorney, and two firm clients. Cathy Borten, MM&C Real Estate Attorney, volunteered at the golf tournament.
Each board member is able to direct a portion of the proceeds to a local charitable organization. Miller, Miller & Canby have directed their $5,000 portion to be shared equally to Ride Allegheny and Hopecam. Ride Allegheny is a 310 mile bike ride benefiting Operation Second Chance, which supports Veterans and their families’ immediate financial and emotional needs and interests. Hopecam is a local charity that helps kids with cancer overcome the social isolation of cancer treatment by connecting with their friends and classmates through technology.
Sean Hughes is a telecommunications attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications. Cathy Borten is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, and commercial financings and settlements.
For more information about Miller, Miller & Canby’s Land Use practice, please click here or contact Sean Hughes or Cathy Borten at 301-762-5212. For more information about Miller, Miller & Canby’s Real Estate practice, please click here or contact Bob Gough at 301-762-5212.
Photo Credit: Mike Keller Photo
MM&C Real Estate Attorney, Cathy Borten and Barb Pivec from Calvert Crossland.
Do you remember the unfortunate story of Terri Schiavo? In February 1990, Terri Schiavo, a Florida resident, suffered a heart attack that deprived her brain of oxygen for several minutes and caused brain damage. Terri slipped into what doctors describe as a “persistent vegetative state,” which is an irreversible loss of consciousness. Terri could no longer communicate with others, her movement was limited to minor reflexive nerve and muscle activity, and she could only survive with the assistance of an artificial feeding tube. Terri was only 26 years old.
For several years, Terri’s husband and her parents requested that Terri be kept alive with an artificial feeding tube. Initially, the family hoped that this would give Terri some time to recuperate from her injuries. Unfortunately, by 1998, Terri had shown no signs of improvement, and her husband requested the removal of the feeding tube because he felt that Terri would not have wanted to continue to live in this condition. Terri’s parents vehemently disagreed with the request to remove the feeding tube - they would not let go of the hope that Terri might improve.
The ensuing legal battle over Terri’s right to die consumed her loved ones and the court system. For seven painful years, both parties fought to convince the courts that they knew best what Terri would have wanted in these circumstances. The Florida courts consistently ruled in favor of Terri’s husband, but Terri’s parents wouldn’t give up - they appealed the courts’ decisions again, and again, and again.
No matter how you may feel about the moral and political issues that Terri’s case brings to the forefront, most people would agree that they would not want their loved ones to suffer the 15-year nightmare that Terri and her family experienced. Fortunately, the means to plan for end-of-life medical decisions are available.
Legal Options That Can Prevent Family Turmoil
Terri Schiavo’s case highlights the fact that the elderly are not the only people at risk of becoming incapacitated and being compelled to face life and death medical decisions. Moreover, all Americans have the legal right to make decisions about what kind of medical treatments or procedures they choose to have, or choose not to have, if death is imminent or if they are permanently unconscious and have no reasonable expectation of recovery. Every state in the country has passed laws detailing how to exercise those rights. In 1990, Florida law provided Terri the right to make a Living Will which would have allowed Terri to express her wishes to her family and to prevent the years of family turmoil and court involvement.
Unfortunately, Terri did not exercise her right to execute an Advance Medical Directive, Living Will, or Health Care Power of Attorney before her heart attack. As a result, the Florida courts had no choice but to get involved in Terri’s personal affairs once her family could no longer agree on how to treat her condition. The most important lesson from Terri's case is that every adult should create a proper legal document expressing his or her wishes regarding end-of-life medical care.
Maryland Health Care Law and Advance Medical Directives
The Maryland Health Care Decisions Act provides that any competent adult can make decisions regarding the provision of health care to that individual or the withholding or withdrawal of health care from that individual. In Maryland, these decisions are expressed in writing through the use of an Advance Medical Directive. An Advance Medical Directive typically consists of two parts. The first part is the “Appointment of Health Care Agent,” where you name the individual who will make health care decisions for you if you are unable to make those decisions yourself. You should also name successors or back-up agents in the event your primary agent is unable or unwilling to serve as your agent. The second part of your Advance Medical Directive is your “Living Will,” where you express your wishes concerning end-of-life medical treatment.
Planning Early is Critical
An Advance Medical Directive should be prepared by an attorney who understands the laws and issues involved and can customize a plan according to your wishes. By being proactive, you give yourself the greatest chance that your wishes will be enforced. Terri Schiavo could have spared her family years of bitterness, strife, and public disharmony if she has just taken the time to clearly and unequivocally express her wishes. While her tragic end may have been impossible to avoid, Terri’s family would likely have been at peace had they known that Terri would have chosen to remove the feeding tube. Maybe if Terri had made her voice heard, her family could have remained united in the face of their common tragedy.
With appropriate planning, you can guarantee that your family is not challenged with making difficult decisions while they are already confronting a traumatic situation. Granted, it is difficult to face our own mortality and consider the inevitable. But by addressing these issues head on and discussing them, you will alleviate potential crises and show your loved ones how much they mean to you. The most important step you can take in creating any plan is to discuss your intentions with those who will be affected by it before the plan is needed.
Finally, it is crucial to remember that even if you have a Will, Trust, or other end-of-life legal documents in place, if they have not been recently updated, changes in the law or your own views could prevent them from accomplishing your intended objectives. An Advance Medical Directive is only one of several legal documents that every adult needs for an effective and complete estate plan.
David A. Lucas is an Attorney in Miller, Miller & Canby’s Estates & Trusts and Business and Tax Practice Groups. David is committed to providing his clients with a well-crafted estate plan so they may avoid probate, protect their assets and legacies, and provide for the security of their loved ones. He takes a special interest in ensuring that the dreams parents have for their children and grandchildren are not lost to taxes, poor planning, or procrastination. He speaks frequently on a variety of estate planning topics to both the general public and private groups.
David has focused his practice on helping families preserve their financial wealth and legacies for future generations through the use of Trusts, Wills, Powers of Attorney, Advance Medical Directives, Living Wills, and other estate planning strategies.
Contact David at 301-762-5212 to discuss your estate plan to take advantage of the laws available today and ensure flexibility for future changes. For more information on Miller, Miller & Canby’s Estates & Trusts Practice, click here.
- Posted September 13, 2018 at 1:16 PM
- Categories Legal News & Notes Newsletter
The September 2018 issue of Miller, Miller & Canby's Legal News & Notes quarterly email newsletter announces three new firm attorneys, Maryland estate tax changes, a new liability for Maryland general contractors, new sales tax regulations based on the Supreme Court's Wayfair decision, and much more. Click here to view newsletter.
More than 1,000 people streamed into the Strathmore Music Hall last Friday evening to hear renowned author Dr. Temple Grandin speak about her groundbreaking work in animal behavior and autism. Dr. Grandin, professor of Animal Science at Colorado State University, is known around the world for her insights on autism in humans and applications of sensory-based thinking to the humane treatment of animals.
“We were proud to be a sponsor of this important program featuring Dr. Grandin, whose work has changed our perceptions of autism and largely influenced understanding of animal behavior,” said Miller, Miller & Canby attorney Soo Lee-Cho, who is principal and co-chair of the firm’s Land Use group and has served on the Rockville Science Center’s Board of Trustees since 2009. “We are also honored to support the important work of the Rockville Science Center in Montgomery County, as the organization strives to inspire interest in the principles of science and how they impact our communities,” she added.
Attendees of the event included dignitaries such as Montgomery County Council member Sidney Katz, Governor Larry Hogan’s Chief of Staff Matthew A. Clark, and members of the Rockville City Council, Mark Pierzchala, Beryl Feinberg, Virginia Onley and Julie Palakovich Carr, as well as supporters of the Rockville Science Center and members of the community.
Dr. Grandin’s work surrounding sensory-based thinking has made her a best-selling author and earned her global media attention; she has appeared on NPR, BBC, 60 Minutes, and in Time Magazine, The New York Times, Forbes and USA Today. HBO made an Emmy-award-winning move about her life.
During her talk at Strathmore, Dr. Grandin recounted her own journey as an autistic individual. Though she did not speak until she was almost four years old, she was fortunate to have benefited from therapy that enabled her to be mainstreamed into elementary school with her peers. Her message to the audience was one of understanding and hope: that as a society we can benefit best by learning from each other and appreciating the different things we can all contribute. Her message of hope for autistic individuals was that they should focus on all the things they CAN do. Her autism, she stresses, allows her to see things others miss.
Dr. Grandin holds a B.A. in Psychology from Franklin Pierce College, an M.S. in Animal Science from Arizona State University and a Ph.D. in Animal Science from the University of Illinois.
After the event, Dr. Grandin signed copies of her book and further engaged with attendees.
The event was organized for the benefit of The Rockville Science Center, and sponsored by Miller, Miller & Canby and other organizations, including the Foundation for Biomedical Research. The Rockville Science Center is dedicated to “inspiring a passion for lifelong exploration of science for our diverse community.”
Pictured from left to right: David Delalio, Director of RSC Makerspace at Rockville Memorial Library; Melissa Scales, RSC Board of Trustee; Dr. Temple Grandin; Soo Lee-Cho, RSC Board of Trustee; Judy Ackerman, RSC Board of Trustee; and Nancy Delalio, RSC Architect
- Posted August 27, 2018 at 7:21 PM
- Categories Business & Tax
Wasting (almost) no time and as a direct response to South Dakota v. Wayfair, the Maryland Comptroller of the Treasury has presented proposed regulations to enforce the state’s sales tax collection requirement to out-of-state sellers, irrespective of whether those sellers have a physical presence in Maryland.
In a prior article, I detailed how the U.S. Supreme Court reversed almost 50 years of precedent relating to state sales and use tax law. Indeed, with the stroke of Justice Anthony Kennedy’s pen, Wayfair lifted a key restriction in response to a twenty-first century problem – namely, how to capture sales tax revenue from our increasing dependency on online shopping. In this regard, Wayfair has provided a bright-line rule (at least until Congress decides to weigh in) – actual, physical presence in the taxing state is no longer the standard or required.
Many States Changing Sales Tax Regulations
In the wake of Wayfair, many state tax laws and regulations (including those in Maryland) which had modeled their sales tax laws after the physical presence requirement immediately became outdated. Now, those states have the green light to expand their tax base to include revenues from beyond their borders. Some states may take a conservative stance and promulgate laws identical or similar to South Dakota’s which required out-of-state sellers to collect the state’s sales tax if such seller has, within one year, over $100,000.00 of gross revenue from sales delivered to the state, or 200 or more separate sales delivered to the state; while other states may be more aggressive. Maryland is among the first states to take the plunge and has taken the conservative approach.
Maryland Proposed Sales Tax Regulations
Maryland’s proposed regulation is identical to the minimum requirements set forth by South Dakota. Specifically, the Comptroller has proposed expanding the definition for an “out-of-state vendor” that is required to collect Maryland sales tax to include such vendors that have, within one year, over $100,000.00 of gross revenue from sales delivered to Maryland, or 200 or more separate sales delivered to Maryland. In short, any out-of-state vendors meeting either of these thresholds will be deemed to have the requisite “substantial nexus” with Maryland. If approved, the new Maryland sales tax regulations go into effect beginning October 1, 2018. Click the download attachment link below to view the proposed Maryland sales and use tax code.
What Online Retailers Should Do
Out-of-state sellers delivering goods or services to Maryland residents or businesses need to be aware of this development and any other State sales tax regulations that may arise in the future. October 1 is approaching, and if the regulation is approved, businesses will find themselves with compliance issues thrust upon them. Any out-of-state businesses that are concerned with how this potential regulation will affect them (or any in-state businesses concerned with other states’ proposed laws/regulations) need to consider meeting with a tax professional to discuss the applicability and compliance of these laws/regulations on their operations. Maryland is among the first dominoes to fall in response to Wayfair. However, more states may soon follow and businesses need to be cognizant of new developments in any state where they deliver goods or provide services.
Indeed, unless Congress exercises its authority under the Commerce Clause to enact legislation to address these sales tax base expansions, it is only a matter of time before states start pushing the envelope on the substantial nexus requirement for how much contact a business needs to have in a particular state to expose it to that state’s taxing authority. Until that time, businesses need to monitor and comply with any new laws, or risk facing assessment or audit.
Chris Young is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on tax controversy work and helping clients deal with new tax regulations. He may be reached at 301-762-5212 or at firstname.lastname@example.org. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.
Miller, Miller & Canby litigation attorney, Diane Feuerherd, authored a recent Maryland Appelate Blog which introduced the applicants for the Court of Appeals and Court of Special Appeals based on three vacancies on Maryland’s appellate courts, arising from the forthcoming retirements of Judge Sally D. Adkins of the Court of Appeals, Chief Judge Patrick L. Woodward of the Court of Special Appeals, and Judge Deborah Sweet Eyler of the Court of Special Appeals.
Click here to read the full blog article.
In December 2017, Ms. Feuerherd joined the joined the Maryland State Bar Association’s Maryland Appellate Blog as its Blog Manager. Founded in 2013, the Maryland Appellate Blog is sponsored by the MSBA Litigation Section, and is dedicated to disseminating information about appellate practice and appellate law. The blog covers news from Maryland’s Court of Appeals and Court of Special Appeals, as well as the U.S. Supreme Court and U.S. Court of Appeals for the Fourth Circuit. It features commentary from a number of contributors and guest authors, including coverage of notable arguments, practice tips, commentary on implications of specific rulings or trends, and interviews with appellate judges.
Diane Feuerherd is an associate in Miller, Miller & Canby’s Litigation Practice Group and focuses her practice in appellate, commercial and business litigation. She has successfully represented individuals, property owners, and businesses in a variety of matters ranging from administrative hearings before the Board of Appeals of Montgomery County, to trials in state and federal courts, and to appeals before the Court of Special Appeals and Court of Appeals. She may be reached at 301-762-5212.