Property owners now taxed on
payments
by Jessica Ablamsky, Staff Writer
jablamsky@gazette.net
March 14, 2012
http://www.gazette.net/article/20120314/NEWS/703149565/bill-would-exempt-eminent-domain-payments-from-state-taxes&template=gazette
When 210
square feet of Freda Mitchem’s side yard were seized
by Maryland to add a turn
lane on Connecticut Avenue,
she was shocked to learn her reimbursement was subject to state and federal
taxes.
A bill sponsored
by Sen. Richard Madaleno (D-Dist. 18) of Kensington
would change that, modifying state tax code to exempt properties acquired by
the state for transportation projects. An amendment that Madaleno
is expected to introduce Thursday would expand the bill to exempt all partial
properties purchased by the state.
Madaleno did not return calls for comment. Senate Bill
807 is scheduled for a hearing Thursday in Annapolis.
“You could
say, ‘Freda, if you're looking at $8,000, why do you care?’” said Mitchem of Chevy Chase.
“For many people, $1,840 is a lot of money.”
The bill was
sparked by the experiences of no more than seven or eight homeowners. But
projects such as the Purple Line — a $1.9 billion light rail that would connect
Bethesda to New Carrollton
via Silver Spring — could affect more Montgomery
residents in the future, she said.
About 500
parcels might be needed to build the rail, including about 170 that would be
temporarily condemned during construction, according to a January report in The
Washington
Post.
The list of
properties was based on years old information and a new list will not be
generated until 2013, said Mike Madden, Purple Line project manager for the
Maryland Transit Authority
Freda Mitchem and her husband, Arnold, have
lived in their home for 26 years. Their land was seized to add a turn lane to Connecticut Avenue
from Capital Beltway Exit ramp 33 to Jones
Bridge Road.
The project
is intended to relieve congestion in the wake the Sept. 15 merger of Walter Reed Medical Center
in Washington, D.C.,
and the National Naval
Medical Center
in Bethesda, into the Walter
Reed National
Military Medical
Center in Bethesda.
The merger
was part of the 2005 federal Base Realignment and Closure Act, which calls for
closing and consolidating hundreds of military facilities nationwide. It
brought 2,500 employees to the military campus and is expected to double the
number of annual visits to 1 million.
For Mitchem, the seizure was personal. The side yard was a
place to for the grandchildren to play and adults to talk, but without that 210
feet it is too small.
“It's just
the principal of the thing,” she said. “It just strikes me as unfair. You
didn't voluntarily sell anything, it was taken for the
public good. By the way, you are going to be taxed on the taking.”
Before the
Maryland State Highway Administration initiates negotiations with a landowner,
the property is appraised by a qualified real estate appraiser, whose appraisal
is reviewed by the SHA’s Appraisal Review Division
Paying taxes
on their compensation is a problem faced only by people who lost part of their
property. Maryland tax code follows federal rules, which allow individuals who
lost their entire property to exclude as much as $250,000 from income taxes and
couples to exclude as much as to $500,000.
The change
would cause the state’s general fund to decrease an about $373,700 in fiscal
2013, and remain steady through fiscal 2017, according to the bill’s fiscal
analysis. The state would also experience a one time loss of $22,000 in fiscal
2013 for tax form changes and computer programming modifications.
The bill is
supported by the Maryland Chamber of Commerce,
the Chevy Chase Valley Citizens Association and other
local organizations.
“I’m sure
some people will think this is a sleeper, but if it is your property that is
being taken then it becomes a big deal,” said Greg Humes,
vice president of the Chevy Chase
Valley Citizens
Association.