A bill that would allow condominium units to be taxed like individual homes was introduced recently in the Maryland General Assembly.
The legislation, drafted by the National Capital Condominium Federation of Kensington, is designed to end the much-criticized system of aggregate taxation.
Under present law condominium complexes are assessed as a whole for real estate taxes. The total is then divided among the owners of the different units according to the square footage, sales value or potential maintenance cost of each unit. Sometimes a combination of these criteria is used.
It is the choice of a formula for division that has caused charges of unfairness from owners. If, for example, a single criterion like area is used as the basis for division, a larger ground floor apartment could be taxed more than a smaller one in the penhouse. If the bill basses, each unit will be assessed and taxed individually.
Another important provision of the bill (SB1171) would give condominium or homeowner associations the power to set up procedures for administrative hearings and the levying of fines on members found in violation of regulations. The purpose of such a system, now used successfully in Florida and several other states, is to avoid the expense and delay of having to take violators to court for each offense.
The legislation would permit associations to choose their own method of judging their owner members and to establish their own schedule of fines up to $100 for each occurrence. A lien could be put on each unit up to the amount an owner refused to pay.
The association's decisions could, however, be appealed in the courts. In such a case, the lien would be held in abeyance. Copies of the bill are available from the Maryland Geneal Assembly's legislative information, call 261-2300.
A free newsletter explaning the alternatives available to condominium assoications under the Tax Reform Act of 1976 is available from the Community Associations Institute News. It urges those affected to study the options carefully to take advantage of the most advantageous tax situation.
According to CAI president Lincoln C. Cummings, some associations having little money left in their operation/maintenance accounts at the end of the year may wish to file under the old regulation which carries a corporate tax rate 18 to 22 per cent.
Under the Tax Reform Act, the unspent maintenance funds an association has at the end of its tax year are no longer treated as taxable corporate income. Unrelated income, however, such as that from party room rentals and laundry operations would be taxable at a rate up to 48 per cent.