Instructions For Maryland Personal Property Return

§1-209 of the Corporations and Associations Article. Entities can

11) EXEMPTIONS

qualify at the time of formation or via a charter amendment for an

Property tax exemptions provided by statute shall be strictly

existing domestic entity. Please refer to the Businesses section of

construed. Before an exemption can be obtained the taxpayer must

the Department’s website for more speciﬁc information.

show afﬁrma tively that the exemption is clearly allowed.

Businesses may ﬁle amended returns to correct reporting

8) LATE FILING PENALTIES

errors or claim missed exemptions (except for missed

A business which ﬁles an annual return postmarked after the

manufacturing exemptions) within three years of the April 15

due date of April 15, 2011 will receive an initial penalty of 1/10 of

date that the return was originally due.

one percent of the county assessment, plus interest at the rate of

For manufacturing exemption requests, an application must be

two percent of the initial penalty amount for each thirty (30) days

submitted on or before September 1, 2011 or within 6 months

or part thereof that the return is late. If returns are ﬁled late, do

after the date of the ﬁrst assessment notice for the taxable year

not prepay penalties. They will be assessed at a later date.

that includes the manufacturing personal property in order to

9) PERIOD COVERED

qualify for the current tax year. Section 7-104 of the Tax-Property

All returns shall cover the calendar year regardless of any ﬁscal

Article of the Annotated Code of Maryland has been revised to

include subsection (d) that allows the owner of manufacturing

year. All information required in this return shall be given as of

January 1, 2011 except line items and which refer to the

personal property to ﬁle an application within 6 months after the

twelve calendar months of 2010. This return must be accompanied

date of the ﬁrst assessment notice for a taxable year that includes

the manufacturing personal property. If the application is

by Form 4A and 4B (Balance Sheet and Depreciation Schedule)

approved, the exemption shall be granted for the taxable year. The

provided with the return unless the business does not own any

exception to the September 1 deadline is applicable to taxable

personal property in Maryland. A substitute Balance Sheet,

including Schedule L from IRS Form 1120, may be used, however

years beginning after June 30, 2009. No manufacturing

exemption can be granted unless a timely application is ﬁled.

Form 4B (Depreciation Schedule) must be completed. Informa tion

Once ﬁled, no additional manufacturing applications are required

supplied on the second, third and fourth pages and enclosures are

not open to public inspection. If the Balance Sheet reﬂects

in subsequent years.

property outside the State of Maryland, please reconcile with the

All personal property owned by certain organizations, including

property reported on the return.

religious groups, government, non-proﬁt educational institutions,

non-proﬁt charitable organizations, non-proﬁt hospitals, cemetery

10) WHAT MUST BE REPORTED

and mausoleum companies, and certain other organizations or

Generally all tangible personal property owned, leased,

groups which meet certain “strict use” criteria is exempt. These

consigned or used by the business and located within the State of

are referred to as exempt organiza tions and are fully exempt

Maryland on January 1, 2011 must be reported. Property not in

throughout Maryland from any assessment and taxation. To obtain

use must still be reported. All fully depreciated and expensed

this type of exemption, an organization must submit written

personal property must also be reported. Personal property

information detailing its operation. If the organization is required

includes but is not limited to ofﬁce and plant furniture, machinery,

to ﬁle an IRS Form 990 it should be included with the written

equipment, tools, furnishings, trade ﬁxtures, inventory, and all

information. It should be noted that because the laws differ,

other property not considered part of the real estate.

organizations granted exempt status by the Internal Revenue

Personal property in this State (other than operating property of

Service are not neces sarily exempt from personal property

rail roads and public utilities) falls into two subclasses:

taxation in Maryland.

Stock in business or inventory is goods held by a taxpayer for

In addition, State law requires that certain types of personal

sale and goods placed on consignment to another for sale in the

property be fully exempt throughout Maryland from any

expectation of a quick turnover. Stock in business does not include

assessment and taxation. These include aircraft, farming

goods manufactured by the taxpayer but held by the taxpayer for

implements, residential (non-business) property, most registered

purposes other than sale or goods manufactured by the taxpayer

vehicles, boats not more than 100 feet in length, customized

but placed in possession and control of another as in the case of

computer software, intangible personal property (e.g., stocks,

leased property. Stock in business is assessed at cost or market

bonds, patents, goodwill, trademarks, etc.).

value whichever is lower. LIFO method of valuation is prohibited.

Beginning July 1, 2011 a 2% gross receipts tax on short-term

All other personal property includes all personal property other

lease or rental of heavy equipment property by rental businesses

than inventory and is assessed at full cash value. Taxpayers shall

must be paid directly to local government, and at the same time

report such property which has been acquired by purchase at cost

exempts that property from the personal property assessment

in the year of acquisition. Taxpayers shall report such property

effective July 1, 2011. Rental businesses must determine whether

which has been acquired other than by purchase (including

they are required to pay the gross receipts tax and are qualiﬁed to

property manufactured by the taxpayer) at what the property

receive this exemption. The legislation requires an entity to meet

would have sold for in the year of acquisition. To assess “all other

all of the following provisions: 1) it must receive the largest

personal property” the Department generally applies a 10% rate of

segment of its total receipts from the short-term leases or rental of

depreciation per annum to the reported property. Exceptions to the

heavy equipment; 2) it must be deﬁned under Code 532412 of the

10% rate can be found on the Depreciation Rate Chart on page

North American Industry Classiﬁcation System as published by the

four (4). Normally, property will not be depreciated below 25% of

U.S. Census Bureau; 3) the property exempted must meet the

the original cost.

deﬁnition of heavy equipment property as deﬁned in § 9-609(D)(5)

of the Political Subdivisions Article and 4) the lease or rental of the

All questions must be answered in full unless the business does

heavy equipment property is for a period of 365 days or less.

not own, lease, or use personal property and answers Section I

question C no. If the reporting taxpayer does not own the class of

Businesses owning exempt personal property described in the

property covered by any question, the word “none” or the ﬁgure

paragraph above should report the total cost of that property on

“0” should be written in the appropriate blank space. Estimated

form 4B (Depreciation Schedule), line 11. Do not report this type

assessments may be issued when questions remain unanswered

of property on the Form 1.

or the answers are incomplete or evasive. Real property is not to

Full or partial exemptions may apply depending on the location

be reported on the return.

of the property for: manufacturing/R&D machinery and equipment,

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Instructions For Maryland Personal Property Return - 2011 Page 4

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