Recordation Tax To Be Imposed on Maryland Indemnity Deeds of Trust (IDOTs)

May 18, 2012

After several years of failed efforts, the Maryland Legislature, in special session, passed a bill this week that will make Indemnity Deeds of Trust (IDOTs) securing $1,000,000 or more of indebtedness subject to Maryland's State Recordation Tax (the rate of which varies from County to County), effectively ending the use of IDOTs in Maryland. This is a major turn of events for commercial real estate owners in Maryland who, up to now, have enjoyed several decades of recordation tax deferment based on the IDOT structure.

The new law goes into effect on July 1, 2012. Any new financing transactions using IDOTs and securing amounts of $1,000,000 or more which are recorded on or after July 1, 2012 will be subject to the State Recordation Tax to the same extent as standard deeds of trust. If you are contemplating a refinance of existing indebtedness and had anticipated using an IDOT, you must record your IDOT by no later than Friday, June 29th, 2012. In fact, because of potential administrative delays which may be experienced in the recordation process, it is advisable to present IDOTs for recordation significantly in advance of the June 29th date.

The new law also calls for a work group to be formed within the State Department of Assessments and Taxation to study the impact of the change, with a final report due to the Governor and General Assembly by no later than December 31, 2012.