Montgomery County Council Approves Bill to Allow Property Tax Prepayments

Vote represents complete turnaround after early opposition


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Montgomery County Council members

Update - Wednesday, 9 a.m. - Montgomery County has posted information on its website to inform property owners how they can prepay property taxes before the end of the year -  (https://apps.montgomerycountymd.gov/realpropertytax/)

After rejecting the idea last week, the Montgomery County Council is now letting property owners prepay their estimated 2018 taxes to take advantage of state and local deductions soon to be limited in a federal bill.

The council vote 7-1 in a special session on Tuesday in favor of the county’s prepayment bill. Last week, a memo to County Executive Ike Leggett indicated that a majority of the council’s nine members didn’t support the proposal.

On Tuesday, though, only council member Craig Rice voted against the bill. Council member Tom Hucker was absent.

Council members called the special session to vote on the bill Tuesday “unprecedented.” They said an outpouring of support for the proposal led many of them to ultimately support it.

Council member Roger Berliner, who proposed the bill last week, said that about 40 percent of county residents itemize their taxes to take advantage of deductions such as the state and local tax deduction. Under the newly approved federal Republican tax-cut bill, the state and local deduction is capped at $10,000. The tax-cut legislation doesn’t permit prepayment of income tax, but allows prepayment of property tax.

The county had to rush through the legislation Tuesday because it previously didn’t allow residents to prepay property tax. Other jurisdictions, such as Washington, D.C., and Howard County, are accepting property tax prepayments this year, as well.

Federal Republican legislators approved the tax cut bill last week and President Donald Trump signed it on Friday. Its provisions include lowering the corporate tax rate from 35 percent to 21 percent and dropping the top tax bracket’s rate from 39.6 percent to 37 percent.

Montgomery County residents can potentially save thousands of dollars on their overall tax payments by prepaying 2018 property taxes before the end of the year to take advantage of the uncapped state and local deduction when they file their 2017 taxes. County officials said Tuesday they did not know if the prepaid taxes will be deductible in 2017 since the 2018 taxes have not yet been assessed. Ultimately it will be up to the IRS to decide, the officials told council members.

After the bill was signed, the county immediately began distributing information about how property owners can prepay.

Council President Hans Riemer said that council members initially believed only the “most affluent” would benefit from prepayment, but later came to believe “it will benefit the middle class.”

He said council members heard from retirees, teachers and others who said the benefits would be significant enough for them to rush to put together the prepayment.

Property owners who plan to prepay will need to estimate their 2018 bill based on their 2017 payment, according to county staff. For the prepayment to be accepted, it must be postmarked before Jan. 1.

“This bill stands to benefit many, many more people than probably realize it,” said Ariel Lavinbuk, one of six residents who testified in favor of the bill Tuesday.

The council introduced the bill, held a public hearing and voted on it Tuesday morning. This is a notable departure from the council’s traditional process of holding public hearings and committee work sessions, often over several months, before the full council votes on a bill.

Paul White, a Bethesda resident, told the council he and his wife already pay more than $10,000 in state income tax—so they won’t be able to deduct any of their county property tax payment, as well, once the federal bill goes into effect.

He said he expects to pay more than $3,000 in additional taxes in the future.

“If we lose that amount from our finances … that’s going to cause an impact,” White said. He said he’s an environmental scientist and his wife is an office administration professional, and they are now concerned about their financial situation.

Rice said he opposed the bill because it will primarily benefit wealthy people. He said wealthy people already received tax breaks in the federal legislation and are going to be given another break by the county.

Council member Marc Elrich, who initially opposed the bill because it could reduce county income tax revenue, said he remains concerned about the impact on county revenue.

County finance and treasury staff members present for the council session Tuesday said they did not yet know what impact accepting prepayment would have on the county’s budget.

Elrich said he doesn’t want social services to be cut as a result of allowing property tax prepayments.

Berliner said the county might be able to offset any income tax revenue losses by earning interest on the prepayments, which the county would receive seven months in advance of when they’re due. He said the bill was a way for the county to “postpone the pain” that the federal tax bill will inflict on mostly Democratic, wealthy counties such as Montgomery County.

“We are about to do right by our residents,” Berliner said just before the council voted to approve the bill.

Information being distributed by Montgomery County on Wednesday about how to prepay:

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