NEWS

General Assembly passes bill to cap vessel excise tax

April 8, 2013 -- By ALEX JACKSON ajackson@capgaznews.com

The marine industry earned a win Monday when the General Assembly passed a bill to send more money to the Waterway Improvement Fund and cap the state's vessel excise tax at $15,000.

The Senate voted 36-10 Monday to concur with and pass a House version of Senate Bill 90.

The bill would put 0.5 percent of cash from the motor fuel tax into the Waterway Improvement Fund, which funds dredging and other projects for the state's waterways. It would also set in place a $15,000 vessel excise tax cap that would be revisited three years from now to see if it benefits the state.

In March, it seemed as though the tax cap part of the bill had been defeated. SB 90, sponsored by Sen. John C. Astle, D-Annapolis, was completely revamped in a Senate committee to eliminate a proposed $10,000 tax cap.

But after the extra cash was allotted for the Waterway Improvement Fund, House Speaker Michael E. Busch said he and others were able to convince the Department of Natural Resources to back away from its previous opposition to the tax cap.

The bill now heads to Gov. Martin O'Malley's desk for a signature.

Some in the Senate weren't satisfied with the changes, which were made by the House Ways and Means Committee. They echoed sentiments that the cap was a "tax break for the rich."

Sen. Delores Kelley, D-Baltimore County, said she had a pile of emails when she came in on Monday morning from people in her district who were opposed to the cap.

"Why would we pick something like luxury yachts to limit taxation on?," asked Sen. Delores Kelley, D-Baltimore County.

Maryland's vessel excise tax requires boat owners to pay 5 percent of the value of their boat if they buy it in the state or keep it here longer than 90 days a year. By capping the tax at $15,000, the bill will only benefit boat owners whose vessels are worth $300,000 or more.

Supporters of the legislation, however, told the Senate Budget and Taxation Committee in February the bill would allow hundreds more boat owners to keep their vessels in the state. They also said it would increase sales not just of boats but of boating accessories and related services.

Susan Zellers, executive director of the Marine Trades Association of Maryland, said she was "very pleased" when the legislation was revived.

Just two weeks ago, Zellers and lawmakers involved in the effort to cap the tax were talking about how they were going to renew their effort next year.

"I'm very pleased. I just didn't see why it wouldn't go forward," Zellers said.

Brokers say boat purchases are lagging in Maryland because residents go to tax-free Delaware or to Virginia, where there's a 2 percent tax and a $2,000 tax cap.

Maryland's boat sales fell from $183 million in 2010 to $162 million in 2011, placing the state No. 26 in the nation. In 2008, boat sales were $248.5 million.

The original legislation by Astle and Del. Ron George, R-Arnold, by capping the tax at $10,000, would have benefited boat owners whose vessels are worth $200,000 or more.

Because the proposed tax cap is now $15,000, some worry the three years provided in the bill as a trial period might not be long enough to show the state the benefits originally expected with a $10,000 tax cap.

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