Cumberland Times-News

April 7, 2013

Delegate wants to protect small businesses from estate taxes

Committee to study failed bill later this year

Bethany Rodgers
The Frederick News-Post

—  ANNAPOLIS — Little by little, Delegate Kathy Afzali says, she is trying to chisel away at Maryland’s estate taxes.

This session, Afzali aimed a blow at the state’s practice of taxing family businesses upon the death of their owners. She proposed to spare from estate taxes up to $5 million of family-operated business property and limit to 5 percent the tax rate on nonexempt holdings.

She says the plan would protect small businesses through generations and take pressure off owners during their lifetimes.

When the owner of a small company dies, heirs often struggle to make required payments to the state, said Afzali, R-District 4A. The struggle to raise funds might prompt them to sell pieces of the business or shut it down entirely, she said.

To avoid this predicament, some owners stockpile money so that when they die, the estate taxes don’t push their businesses underwater.

“What ends up happening is you have to spend so much money planning your estate that you’re taking that money from your business,” Afzali said. “Instead, where you should be spending, it is expanding your business, hiring new people.”

While the bill did not build enough momentum to pass this year, Afzali’s committee decided to study the proposal after the session ends. Afzali said she takes this as a sign that members of the House Ways and Means Committee appreciate her idea and are willing to shape it into something that would find favor in the full Legislature.

The potential for lost revenue might make the current proposal less attractive to lawmakers, said Delegate C. William Frick, who will also participate in the interim study.