The Maryland General Assembly adjourned its 2021 Legislative Session at midnight on April 12th. The General Assembly adjourned “Sine Die” which is a Latin term that means adjourning without a future date to return. This mean all legislation under consideration during the 442nd Legislative Session is dead and will not be considered until 2022. This Session was like no other due to the gathering restrictions caused by COVID-19 and the need to enact legislation that would address the many challenges caused by the pandemic. The General Assembly was still able to debate and vote on thousands of bills many of which have a direct impact on your business.
During the Legislative Session, the Chamber monitored the work of the State Senate and the House of Delegates. We reached out to them when a particular piece of legislation was of concern because of its impact on Chamber members and the economy. The Chamber prepared this document to provide you with a high-level overview of legislation that was passed and sent to the Governor for his signature. There were over 3,000 bills considered by the General Assembly and the Legislative Committee identified those that may impact all businesses. There are several industry specific bills presented in the wrap up.
On April 22nd, the Chamber hosted a virtual Leadership Lunch to present the Legislative Wrap up and discuss future concerns, It is important to note that the Governor can veto legislation approved by the General Assembly. He has until June 1st to do this and over the past few years he has used his veto power several times. So, stay tuned to find out the outcome.
Last March when the uncertainty of COVID-19 took hold, the General Assembly was faced with
predictions of large budget shortfalls. This did not happen due to several rounds of stimulus funding from the federal government. With $3.9 billion in federal pandemic relief, lawmakers approved a $52 billion Maryland budget. The Governor and the Maryland General Assembly worked together on the RELIEF Act, which provided more than $1 Billion in targeted tax relief and economic stimulus for families and small businesses. The influx of federal dollars helped stabilize the State’s budget and provide much needed financial support to citizens and businesses throughout the State.
The R.E.L.I.E.F. Act (Recovery for the Economy, Livelihoods, Industries, Entrepreneurs, and Families)
Gov. Larry Hogan and lawmakers were quick to enact more than $1 billion in pandemic relief early in the session. It included more than $178 million in direct payments to more than 400,000 state residents. A tax credit for low-income residents was expanded by an estimated $478 million over the next three tax years. The balance of the money went to help the unemployed. Some state and local income taxes were repealed on unemployment benefits for tax years 2020 and 2021. Small businesses also received a break on sales taxes.
Progressive County Income Tax
The bill would adjust the rate and restructure the formula for a county to impose income taxes. It increases the minimum rate a county can impose to 2.25% and the bill would also enable counties to implement progressive tax structures, higher tax rate for higher income. The bill authorizes the counties to establish the new rates and brackets. To do this the County Council would have to pass legislation to establish the new rates and brackets. Eleven counties and Baltimore City are already charging a flat rate of 3.2%, where Anne Arundel currently sits at 2.8%.
The Chamber opposed this bill since it creates new taxing authority for local governments. In addition, an increase of the local income tax rates would make Anne Arundel a much less attractive place for businesses and high-income individuals who would seek to locate and reside in lower tax counties or states. Trying to establish a “progressive tax structure” that is equitable would be difficult and create great political turmoil for Maryland counties which would have to ultimately vote on the new tax structure.
Digital Advertising Tax
The General Assembly overrode the Governor’s veto of HB 732 from the 2020 Legislation Session which would place a tax on ads placed on Facebook, Google and other digital platforms. The Chamber does not support taxing internet advertising. The fight is not over, as the US Chamber of Commerce, the Internet Association, NetChoice and the Computer and Communications industry filed a suit against the State of Maryland citing that it violates the Internet Tax Freedom Act and is an infringement of the Due Process Clause of the US Constitution. Also included in this tax package, was a tax increase on tobacco products, which has subsequently gone into effect.
Surcharge on Transfer Tax
County Executive Steuart Pittman requested authorization from the General Assembly to impose a transfer tax surcharge on real estate valued at more than $1 million and dedicate the proceeds for affordable housing.
The Chamber is opposed to this bill because it will be harmful to the economic growth of the economy and disproportionately hurts small business. The Chamber recognizes the need for affordable housing in the County and supports a comprehensive approach to increasing the supply of affordable housing but does not support the allocation of tax dollars to the proposed and undefined Housing Trust Special Reserve Fund. This is enabling legislation and only applies to Anne Arundel County. The County Council would have to pass legislation to implement this tax. The bill will take effect July 1, 2021.
Labor and Employment
The Governor’s RELIEF Act indicated that unemployment insurance rates for 2021 would be calculated based upon business’ experiences from 2017, 2018, 2019, and would exclude 2020. This provision, along with over a billion dollars of federal money that the state was able to backfill into the unemployment insurance fund, was meant to stabilize unemployment insurance rates. However, due to the depletion of state funds over the past year, it was necessary for the state to move all businesses to the so-called “Table F” for unemployment insurance rates, which still results in large rate increases for a lot of Maryland businesses. The legislature did pass legislation requiring the Department of Labor to provide payment deferrals and payment plans for businesses with less than 50 employees.
Essential Workers Protection Act
After much debate and comments from the business community, a heavily amended version of HB 581 was passed by the General Assembly. Broadly, the bill establishes the following rights, benefits, responsibilities and obligations related to essential workers, essential employers and catastrophic health emergencies:
- An essential employer must provide safe working conditions during an emergency and subject to availability, necessary amounts of safety equipment at no cost to essential workers.
- An essential employee has a right to refuse to perform an assigned task as provided under current OSHA and MOSH rules and regulations.
- An essential employer must take proactive steps to minimize the risk of transmission of the communicable disease that is the subject of the emergency, including paying for an essential employee to be tested for the disease if free tests are not available and the employee’s insurance does not cover it.
- An essential employer must provide an essential worker with public health emergency leave when federal or State funding is made available for that purpose, calculated based on an employee’s average working hours.
- An essential employer may not knowingly misclassify an essential worker as an independent contractor or other classification to avoid any other benefits due to an essential worker during an emergency.
The final product passed by the legislature allows for on-premises sports wagering at Maryland’s six casinos, thoroughbred racetracks, the three major professional sports venues, existing off-track betting facilities, and commercial bingo licensees. The bill also allows for up to 30 additional on-premises wagering sites and up to 60 mobile wagering licenses. The casinos and racetracks will likely be the first to actually offer wagering, followed by licensing and a competitive process for the additional on-premises and mobile licenses. The goal is to have at least some wagering available by the 2021 NFL season and the full licensing process is expected to take 12-24 months.
Tourism Bureau Oversight
This legislation gives the County and Annapolis governments greater oversight of the Visit Annapolis & Anne Arundel County tourism bureau. The bill allows the county auditor with authority to audit the tourism bureau. The legislation will also provide a cut of hotel taxes to the Annapolis Art in Public Places Commission and the city’s housing trust to be used for housing assistance payments.
Alcohol Carryout – Bars, Restaurants, & Taverns
This bill enables local liquor boards to adopt a local ordinance to authorize the provisions of the Governor’s Executive Order that allowed the sale of carry out beverages during the state of emergency. The bill becomes effective on July 1, 2021 and sunsets after two years.
Legislation was passed allowing movie theaters in Anne Arundel County to obtain a license that would allow them to serve beer and wine. Service is capped at a maximum of two servings per customer.
Future Legislative Concerns
The Time to Care Act of 2021 would have established a Family and Medical Leave Insurance Program similar to the way that the unemployment system is set up. Employers and employees would split payments into the fund and employees would be entitled to receive benefits under that fund if they need and are eligible to take FMLA leave. Though this bill did not receive a vote in either chamber, we would expect it to receive serious consideration in the future.
In a bit of a surprise, legislation that would require Maryland emissions to be “net-zero” by 2045 did fail to pass before the session ended. This will remain a legislative priority for years to come.
Single use plastics
Two separate pieces of legislation which would have respectively banned the use of plastic bags and foodservice single use plastics failed to pass.
Maryland faced budget challenges at the beginning of the year, but due to better than expected revenues and a huge influx of federal money, the state’s budget situation was vastly improved for the 2021 session. However, uncertainty hangs over the long-term fiscal health of the state.
This session was the first in years that we have not seen a bill introduced that would require employers (with certain exceptions) to provide employees with their schedules a certain number of days in advance. This should always be on the radar of business groups as other states have implemented these policies and Maryland should give it serious consideration.
Click Here to watch the Leadership Luncheon General Assembly Recap for more details.