KENT COUNTY, MARYLAND
COUNTY COMMISSIONER'S

PUBLIC HEARING - 3/27/2001

Code Home Rule Bill No. 2-2001

A Public Hearing was held on Tuesday, March 27, 2001, at 10:33 a.m. in the County Commissioners' Hearing Room, County Government Center, Chestertown, Maryland on Code Home Rule Bill No. 2-2001 which is an Act to repeal and re-enact with amendments Section 152.21 of Article VI, Chapter 152 of the Code of Public Local Laws of Kent County, 1994 Edition, Title "Taxation" to provide for tax credits for businesses that create new jobs pursuant to the provisions of Section 9-230 of the Tax Property Article of the Annotated Code of Maryland removing therefrom the abrogation provision.

County Commissioners Ronald H. Fithian, Larry B. Beck and W. Michael Newnam were in attendance as well as Rex Kershaw and members of the media.

Notice of the public hearing was read into the record by Commissioner Fithian.

Commissioner Fithian explained the purpose of the legislation was to re-enact same language in Code Home Rule Bill 5-98 providing a tax credit for business but eliminating the abrogation provision.

The law is proposed to read as follows:

CHAPTER 152

Chapter 152. Taxation.

TAXATION ARTICLE VI

BUSINESSES THAT CREATE NEW JOBS.

152-21. Definitions -

(a) In this section, the following words have the meaning indicated:

(1) "Business entity" means a person conducting a trade or business in the County, that is subject to the County individual or corporate income tax, insurance premiums tax, financial institution franchise tax, or public service company franchise tax.

(2) "New permanent full-time position" means a position that:

a. a full-time position of indefinite duration;

b. located in Kent County;

c. newly created, as a result of the establishment or expansion of a business facility in the County; and

d. filled.

(3) "New permanent full-time position" does not include a position that is:

a. created when an employment function is shifted from an existing business facility of the business entity located in Maryland to another business facility of the same business entity if the position does not represent a net new job in the County;

b. created through a change in ownership of a trade or business;

c. created through a consolidation, merger, or restructuring of a business entity if the position does not represent a new job in the County;

d. created when an employment function is contractually shifted from an existing business entity located in the County to another business entity if the position does not represent a net new job in the County; or

e. filled for a period of less than 12 months.

(4) "New or expanded premises" means real property, including a building or part of a building that has not been previously occupied, where a business entity locates to conduct its business.

(5) "Assessed value" is the value of real property as determined by the Department of Assessments and Taxation to which a county property tax rate may be applied.

(b) Property tax credit.-- A property tax credit may be granted against the County property tax imposed on real property owned or leased by a business entity that meets the requirements specified under section (c) of this section and on personal property owned by that business entity that meets the requirements specified under section(d) of this section.

(c) Qual~fications for credit -- (1) To qualify for a tax credit under this section, a business entity shall:

(i) construct or expand by at least 5,000 square feet the premises on which it conducts its business through purchasing or constructing new premises or by leasing new premises and

(ii) employ at least 25 individuals in new permanent full-time positions in a

new or expanded premises

(2)A tax credit may not be granted under this section if:

(i) the new or expanded premises has otherwise been granted a tax credit or exemption under this Article for the taxable year; or

(ii) the business entity has been certified for a tax credit under Article 83k §5-1101 of the Annotated Code of Maryland.

(d) Location of eligible personal property . -- To qualify for a property tax credit under this section against property tax imposed on personal property a business entity shall certify that the personal property is located on the new or expanded premises that qualify for a tax credit under subsection (c) of this section.

(e) Computation of property tax credit. -- (1) The County Commissioners shall compute the amount of the property tax credit granted under subsection (b) of this section for new or expanded premises and the personal property located on those premises that may be claimed against the County property taxes that would otherwise be due to equal a percentage of the amount of property tax imposed on the assessed value of the new or expanded premises, as follows:

(i) 52% for the 1st and 2nd taxable years;

(ii) 39% in the 3rd and 4th taxable years;

(iii) 26% in the 5th and 6th taxable years; and

(iv) 0% for each taxable year thereafter.

(2) The County shall notify the Department of Assessments and Taxation that a business entity has been approved for the property tax credit and the assessed value of the new or expanded premises.

(f) If the County tax credit allowed under subsection (e) in any taxable year exceeds the total tax otherwise payable by the business entity for the taxable year, a business entity may apply the excess as a credit for succeeding taxable years until the earlier of:

(ii) the expiration of the 5th taxable year after the taxable year in which the county tax credit is claimed.

(g) Reduction of taxes under lease agreement. -- The lessor of real property eligible for tax credits under section (b) shall reduce by the amount of the tax credits computed under section (e) the amount of taxes for which the eligible business entity is contractually liable under the lease agreement.

(h) The business entity shall refund to the County and State tax credits earned, if during the three taxable years succeeding any year in which a credit was earned, the business entity fails to satisfy the applicable thresholds to qualify for a property tax credit required under subsection (e) of this section.

(i) The business entity shall submit the following information to verify that the business entity is not subject to subsection (g) and (h) of this section:

a. certification as to the size of the premises occupied.

b. annual employment records certifying the number of full time employees and the date that each was employed.

Mr. Kershaw advised that if Code Home Rule Bill 5-98 had a December 31, 2000 cutoff date it could not be repealed and enacted, only enacted. Commissioner Beck reported that the matter was being heard today as a result in an error (specifying a cutoff date) in the previous bill.

Mr. Kershaw inquired if the expected amount of economic revenue justified the loss in tax revenue from this bill. Commissioner Fithian advised that the bill has never been used and its intent was to entice small business to Kent County as well as encourage business expansion. Commissioner Beck stated that no tax revenue would be lost, this bill applied to new construction or expansion and the original tax base stayed in place.

Commissioner Fithian advised that this bill was one small way of attracting businesses to the area given that Kent County could not compete with the Western Shore's job market and workforce.

Mr. Kershaw expressed his disappointment in the Commissioners' inability to provide exact facts and figures of revenues, gain or losses, associated with this bill. Commissioner Fithian clarified that since the bill has not been used, it would be impossible to assimilate data and further more, depending on the size of business, number of employees, etc., data cannot be predicted to calculate the facts and figures he requested. Again, Commissioner Fithian reiterated the purpose of the bill was economic development enhancement.

The third reading of this proposed legislation will be held on Tuesday, April 3, 2001, the next legislative day.

This hearing was taped for reference and adjourned at 10:45 a.m.