With so much attention being devoted to the debate over the federal estate tax, many people forget that some states also have their own estate tax laws. However, one state delegate in Maryland has not forgotten about her state’s estate taxes. She is attempting to decrease the tax burden levied on small businesses, which could make formulating an estate administration strategy more financially advantageous.
Currently, Maryland law levies a tax on family businesses once the owner dies. The delegate believes this to be an unfair burden on small businesses. Many times, after the tax is levied the heirs to the business struggle to make the necessary tax payments. In the worst-case scenario, the business may be forced to shut down as a result of the overwhelming tax burden.
The state delegate proposed to create a $5 million exemption for family-owned small businesses, while also capping the tax rate to five percent of the holdings that are not exempt. The delegate was able to present the bill to the members of the state legislature, but in the end, she was not able to obtain enough votes to enact the bill into law. However, state lawmakers have stated they are willing to examine the proposed bill in order to possibly rework the language to gain enough support to pass.
On the other hand, nobody knows exactly how the Maryland lawmakers will change the estate administration bill in order to eventually pass the proposal into law. For example, the exemption as well as the tax rate cap may be altered in order to appease lawmakers worried about the loss of tax revenue to the state government. Those looking to plan their estates in Maryland may want to keep a close eye on what the state legislature ultimately decides.
Source: Cumberland-Times News, “Delegate wants to protect small businesses from estate taxes,” Bethany Rodgers, April 7, 2013