Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

Analysis of State Residential Property Tax Assessments

Summary Analysis by the

Montgomery County Taxpayers League of

State Residential Property Tax Assessments

Authors: Gordie Brenne and Carol Placek

February 26, 2018

Executive Summary

Did you know that Maryland is one of only two states that assess residential property at the state level (OLO 2018-1, pg. 1)1 ? Is this antiquated system fair? Are reassessments delayed and incomplete? Are there inefficient workflows between the state and Montgomery County?

Tax Equity – Unimproved property taxpayers are subsidizing more expensive, improved property owners. Under assessments are much more than the $20M a year estimated by the Office of Legislative Oversight (OLO). And “improved” homes with missed final inspections are not always picked up in the out-of-cycle reassessment process.

Lost Revenues – Fixing this process that Montgomery County shares with the state would capture additional revenues the county needs to help with projected revenue problems. Plus, reducing reliance on volatile income taxes by boosting less volatile property tax revenues is a good strategy. The County’s conclusion that higher assessments for major improvements are subject to Charter limits is questionable.

Fairness and Extra Revenue – Montgomery County is already paying for half of the state’s very labor intensive process. It might be less costly to have the County perform the entire process as is done by most local governments around the nation. If the County got such a waiver, we could realize an additional $140M in annual property tax revenue – in addition to earning the 10% share of property taxes we give to the state.


1 Office of Legislative Oversight Memorandum Report 2018-1m dated January 23, 2018; https://www.montgomerycountymd.gov/OLO/Resources/Files/2018 Reports/OLOReport2018-1.pdf


Background on the Underassessment Problem

How big is the underassessment problem? OLO recently released this report which estimates that Montgomery County’s residential property assessment base would be $2.7 to $3.6 billion higher if sales prices were fully incorporated into the State Department of Assessments and Taxation (SDAT) assessment methodology. This translates overall into $20M to $26.9M in additional annual property tax revenue (at the current general county tax rate of $0.7484 per $100 of assessed value).

The County’s interpretation of the charter limit on overall property tax increases, which we believe is misguided for major improvements, currently prevents it from realizing this revenue. It would also permit a 1.1 cent decrease in the property tax rate if the assessment base were increased. Further, while the Department of Finance has estimated that “escaped property” costs Montgomery County only $1M a year, “escaped property” represents properties that were never assessed, and excludes under-assessments of existing and improved properties. Of the two, the underassessment issue is the bigger problem.

Based on an earlier report by the County’s Office of the Inspector General (OIG), Communication of Building Permit Information to SDAT (OIG-17-001) which was critical of how Montgomery County’s Department of Permitting Services (DPS) works with SDAT, the Taxpayers League met with DPS Director Diane Schwartz Jones and Treasurer Mike Coveyou. The purpose of those meetings was to understand why some of the OIG’s recommended corrective actions were not implemented.

Our preliminary review led us to conclude that DPS is inefficient in how it handles work critical to reassessments. We also concluded that additional Department of Finance controls are needed to improve collections (only one person has been assigned to review compliance for property tax revenues).  In addition, only 85 Inspectors and 30 Permit Technicians were identified as part of the DPS process. If the remaining 121 employees are not directly involved in the permitting process, that results in an unacceptable overhead rate of 51%.

Our business case for an independent review of DPS and the Dept. of Finance is included as Attachment 1. 

We asked DPS and the Department of Finance for comments.  Chief Administrative Officer (CAO) Firestine responded in the spring of 2017 (also shown in Attachment 1), and we agreed to address these comments once this OLO review was complete.

This summary connects OLO’s review of SDAT practices with the OIG’s earlier review of DPS, and with the Taxpayers League business case for DPS and Department of Finance changes. Opportunities to improve the business process between Montgomery County and SDAT are summarized along with a complete optimization alternative that puts Montgomery County in the driver’s seat to restore incentives, accountability and fairness.

OLO Review Scope and Objectives

The OLO 2018-1 report scope focuses on the accurate and timely assessments of major improvements, and makes two worthwhile recommendations: to review with SDAT (1) the incorporation of sales prices into in- and out-of-cycle assessments, and (2) better ways to identify properties for out-of-cycle assessments. However, the OLO report does not go far enough to call out SDAT assessment deficiencies, identify actionable opportunities for improvement, or suggest that major improvements could increase County property tax revenues by interpreting major improvements as “new construction” under the County Charter. (We make additional recommendations following our summary of OLO findings. Attachment 2 summarizes our concerns about the OLO study methodology)

The OLO review scope excludes DPS and Finance processes that we cited in the fall of 2016 (except for the inclusion of one control over the validation of cost data on permits shared with SDAT, see Attachment 1). The scope does include a review and comparison of resale values to reassessments for 15,541 residential properties from July 2013 to December 2014 (OLO 2018-1, pg. 9). Furthermore, the objectives were to review SDATs methodology for reassessing properties with more than $100,000 in renovations or additions, and to compare assessments to the sales prices of residential properties. We believe that timely and accurate major improvement assessments support tax equity by ensuring that those with more expensive homes have a higher assessment and pay more taxes. Identifying properties that have had $100,000+ value improvements is the first step to achieving tax equity.

Lastly, the report raises (without resolving), a central question about whether or not reassessments are limited by “uniform standards” to costs per square foot, or whether recent market sales prices are more useful. This is critical to establishing a reassessment methodology that is fair to taxpayers. Taxpayer League research concludes that Maryland law permits using sales prices to assess property value and also permits properties to be individually assessed (Attachment 2 includes citations and our research).

Taxpayers League Summary of OLO Findings and Conclusions

We distilled four summary findings from the OLO report below, each followed by our conclusions that the SDAT process is inefficient and unfair to taxpayers who subsidize homeowners that make unassessed improvements.

1. SDAT reassessment process is inefficient and relies on poor DPS data (OLO Findings 1 and 2). SDAT says it receives sufficient information from DPS to perform reassessments. SDAT representatives report that they receive all the data needed from DPS permits for out-of-cycle reassessments, but OLO notes that construction costs do not translate to market value and this may be a key factor in under assessments. Only about 25% of residents respond to SDAT requests for more cost information. Finally, OLO notes that the reliability of permit cost estimates is poor, even though SDAT uses this data.

Conclusion: The SDAT business process is still broken and is unfair because it misses properties that need to be reassessed. Poor DPS permit data contributes to the problem.

2. SDAT does not use market values for reassessments, and the scope misses internal improvements (OLO Findings 3 and 4). SDAT does not use sales prices to determine values, but rather uses square foot cost factors and depreciation (pg. 15). State law requires out of cycle reassessments by SDAT for improvements greater than $100,000, but these assessments are typically based on exterior observations only (pgs. 2-3). These SDAT external assessments ignore interior improvements that add substantial market value. DAT assessors do not take into account market factors for out of cycle reassessments (pgs. 4 and 5).

Conclusion: SDAT practices contribute to under assessments which are unfair.

3. SDAT does not look at or assign enough people to review reassessment opportunities (OLO Finding 5). SDAT reassessed 91 residential improvements over $100,000 in 2017 that added $36.3M in property value (pg. 8). Also, SDAT has assigned only 7 assessors to residential property new construction and improvements over $100,000 in Montgomery County (pg. 3).

Conclusion: SDAT relies on physical inspections but doesn’t assign enough people to perform inspections. In 2017, only 13 inspections were assigned per SDAT assessor. Automated systems are needed to identify reassessment opportunities to improve productivity.

4. SDAT practices result in an estimated $20M in lost property tax revenues (OLO Findings 6, 7 and 8). OLO sampled 15,541 home sales where assessments were performed after sale only, comparing assessed values to sales prices, and found that 69% of the homes were under assessed, compared with 80% in Howard and 55% in Prince Georges Counties, although the total value of under-assessments was greater in Montgomery County ( $178.3M) which extrapolates to $2.7 billion to $3.6 billion for all residential properties in Montgomery County (pgs.10-11). under-assessments contribute to $20M in lost property tax revenues after taking into account Charter limits (pg. 12), although this estimate includes properties that did not have new construction.

Conclusion: SDAT under assessments are a material problem, and could be greater than $20M if homes that did not have major improvements were eliminated from OLO’s sample. The problem is not limited to Montgomery County, and basing assessments on sales would increase revenues significantly.

Taxpayer League Recommendations

The fact that Maryland is one of only two states that does assessments at the state level is a red flag. Before doing any further study of how to improve the state and County processes, Montgomery County should first recalculate lost annual property tax revenues to size the problem and get a better understanding of the revenue opportunity from improving the business process.

Montgomery County should then consider the costs and benefits of taking over the responsibility for reassessments from SDAT to improve efficiency and tax equity. A waiver from the state’s current uniform assessment process could be negotiated in exchange for the 10% portion of property taxes now received by the state. This would monetize the value of all the additional process steps the county now performs for SDAT and allow the County to further streamline the process and make it fair. The Taxpayers League would support this transfer of responsibility and revenues only if the additional revenues that formerly went to the state are set aside in a lock-box to fulfill a decade old promise, not kept, to eliminate the energy tax. Establishing a DPS revenue budget for property taxes would create missing controls to incentivize and discipline needed improvements.

This would also align the business process and revenues squarely where the incentives lie, at the County level. Such a change must be accompanied by a rigorous plan by DPS and the Department of Finance to implement needed controls to make this function work efficiently and effectively, in accordance with Taxpayer League comments 1, 2 and 3 from our 2016 review (see attachment). We are particularly concerned about delayed and incomplete DPS final inspections, since timely final inspections are key to triggering reassessments. CAO Firestine’s 1/8/18 response to the OLO report centers on the fact that the law requires a uniform assessment process, and that relying on market, not cost data would be at variance with this requirement. We think the law supports use of sales data, but this needs to be resolved by the County in negotiations with the state over cost and revenue responsibility.

Here are eight additional process-oriented recommendations to increase tax revenues in the short-term:

1. Report properties with building permits issued for $75,000 or higher costs or an equivalent square footage, and check whether or not an out-of-cycle tax bill was issued to indicate a major improvement was reassessed.

2. Use sales price and MSL listing information (price, features, pictures) to set assessment value for for-sale “mansionizations”, where developers expand or rebuild existing residences to sell. The County could provide such information to SDAT or SDAT could access it directly. If the house is not sold until after SDAT reassesses it, the sales price should be used for the next triennial reassessment.

3. Fix the issues hindering SDAT from accurately identifying permits for major improvements, such as using/verifying both cost and square footage data, and fixing/preventing data entry errors.

4. Identify outlier properties that have sold for much more than their assessed value and earmark these properties for SDAT to use in developing the next triennial assessment.

5. Investigate assessments for the 2,688 properties that were issued permits for $100,000 or higher value but not finalized since 2000. Work with SDAT to reassess properties where improvements were made but not reassessed.

6. Ensure that expired permits are followed up on immediately after their expiration and clear the backlog of expired permits.

7. Work with SDAT to fix grossly antiquated valuations and methods used to assess to value features in a property (ceiling height, baths, kitchens, fireplaces, porches/balconies, exterior finishes, etc.) and the quality levels. The methods and valuations do not extend high enough to capture the value of today’s higher-end additions and renovations in Montgomery County.

8. Change what qualifies as “new construction” for major improvements. While a County Charter provision limits growth of the County property tax base, new construction is exempted and can increase the property tax base. “New construction” is not a defined term in the County Charter, so the County has some latitude in determining what qualifies as “new construction.” The County currently does not use assessments for major improvements to increase the property tax base, but it could do so if it interpreted major improvements to be “new construction” for purposes of the County Charter limit. There is nothing that would prevent this, and it is a reasonable interpretation. The County should evaluate this change, as it is currently missing out on appropriately taxing the large amount of expensive infill development that is occurring in the County.

Attachment 1

Efficiency Review Business Case, Department of Permitting Services (DPS)

Montgomery County Taxpayers League, October 2016

We were pleased to meet with you to go over how DPS is addressing corrective actions for improving building permit information provided to the State Department of Assessments and Taxation (SDAT, OIG-17-001, August 25, 2016). You made it clear to us that DPS does not agree with the appropriateness and cost-effectiveness of several of the IGs recommendations.

We also learned that DPS is responsible for a wide range of permitting services, and has to consider how best to allocate resources between competing public safety and economic development objectives as it processes its workload.

We believe, as we’re sure you do, that efficient tax collection depends on compliance by permit applicants who expect fair and equitable enforcement, and efficient and effective DPS and SDAT workflows. We think DPS is at a critical juncture with SDAT, and the County needs to improve property tax collections or face even higher tax burdens.

We were unaware of the complexity of the tasks your 85 inspectors and 30 permit technicians perform, comprising 115 of the total 236 DPS employees. In addition to SDAT, you talked about interfaces with the Dept. of Finance, MNCPP (for address data base to get tax IDs), and with the public. It appears that over time DPS has had its core mission expanded to include collection of impact taxes, and funding and even doing SDATs job. While we compliment you on performing next day inspections, we wonder if it comes at the cost of weak follow-up for existing permits since we’ve heard of instances where occupancy permits are granted in arrears, when homes are sold.

In short, permitting is a complex business process. We believe DPS must be managed to optimize property reassessment tax revenues while achieving public safety and economic development objectives. This may be a tall order for an organization with aging work flows and systems and a growing work load. We estimate that inefficient DPS and SDAT processes cost the County $10M a year in reassessment revenues, although this may be subject to estimating errors due to our small sample and assumptions about data we had no access to. A critical a new Finance Department internal control could detect and correct errors by comparing expired permits to assessments, and measure and monitor the size of this problem. Based on your comments, we make three preliminary observations and recommendations below to make revenue collections more efficient:

1. Relationship with SDAT Needs More Controls– SDAT may not be able to implement the changes needed to get timely and accurate reassessments without more help from DPS. DPS has reached out to SDAT with technology and technical assistance. However, SDAT only gets 10% of collections, which amounts to a poor incentive for the state. We learned that Montgomery County pays ½ of SDAT costs and deserves more control over reassessments. The recent history of new DPS reports (those for occupancy permits, demolitions, residential and commercial use, and tax IDs), all took place in the last year, under duress of audit and Council scrutiny, not as a result of continuous improvement by on-going control systems.

2. Data Collection and Integrity Weaknesses– There are issues that need to be resolved related to responsibility for missing or incorrect tax IDs, erroneous or lowball cost estimates submitted by home owners on permit applications, alternatives SDAT has for information needed to trigger reassessments outside of 3 year cycle, and how cost validation could slow down permit processing by DPS permit technicians. DPS responsibility for verifying construction completion independent of builder notifications was also questioned, although a recent procedure to compare sales to permits outstanding was cited as an improvement. In short, improved data could involve more work by DPS and higher costs, but could also lead to higher compliance rates. We have learned about some expired permits were corrected with occupancy permits at the time of sale with no retroactive change to assessments. We are also concerned that if key data doesn’t get validated, it creates lots of rework, and sends a message to applicants that we don’t care.

3. Accountability Gaps– Trade-offs between public safety and economic development objectives need to be resolved to improve DPS workflows. The limited controls over data or processing errors noted above lead to reduced property tax collections, in part because responsibilities and property tax revenue targets for reassessments are not set for DPS or the Dept. of Finance. Inspectors are key to moving the process along and reaching milestones for reassessments, but it was noted that inspector productivity has not been benchmarked against Howard or Fairfax counties. It appears to us that whatever standards exist, may be the product of negotiations with the union and not objective, outside benchmarks. Also, productivity standards for permit technicians were not mentioned. Legal questions include how far back the county can go to tax a major improvement that it did not reassess after the improvement was built, and how far back can the county collect tax if a reassessment after improvement had errors (e.g., not enough square feet, property quality or condition not accurate)?

Given these observations, we recommend an independent review be performed of DPS workflows and Finance Department controls, productivity and organizational accountabilities to determine what’s best for the county. The study would need to look at alternate workflows and automation to replace legacy systems that would improve productivity, timeliness and quality. It would also need to look at strategic issues like improved accountability and controls for new and issued permit follow-up, and even new legislation to increase revenues by shifting responsibilities from SDAT to DPS to streamline reassessments.  

Executive Response

CAO Tim Firestine in a 2/2/17 email responded to these observations and comments with the following comments:

Following the October 26, 2016, Montgomery County Taxpayers’ League (MCTL) meeting to discuss Final Advisory Memorandum OIG 17-001 dated August 25, 2016 from the Office of the Inspector General and to discuss assessment questions raised by the MCTL, you submitted an e-mail to me that included your “observations and recommendations.” I appreciate your message and would like to clarify the County’s role as it pertains to your specific comments:

MCTL comment 1: Relationship with SDAT Needs More Controls – SDAT may not be able to implement the changes needed to get timely and accurate reassessments without more help from DPS. DPS has reached out to SDAT with technology and technical assistance. However, SDAT only gets 10% of collections, which amounts to a poor incentive for the state. We learned that Montgomery County pays ½ of SDAT costs and deserves more control over reassessments. The recent history of new DPS reports (those for occupancy permits, demolitions, residential and commercial use, and tax IDs), all took place in the last year, under duress of audit and Council scrutiny, not as a result of continuous improvement by on-going control systems. 

The Department of Permitting Services (DPS) has provided SDAT access to its databases and building plans for close to two decades. For nearly 13 years, DPS has provided SDAT with nightly reports on the residential and commercial building permits that it issues in accordance with State law.

DPS has consistently and promptly provided additional information and support as requested by SDAT. For example, in 2014, SDAT raised a concern that, despite the licenses provided by DPS to its systems, SDAT could not access plans to determine if reassessment had occurred. After further investigation, it was determined that the lack of access was a result of SDAT staff turnover. DPS immediately provided new licenses so SDAT could again access permit plans. Additionally, in spring 2016, SDAT requested a variety of additional information from DPS. As a result, DPS began sending monthly reports in multiple formats. DPS also provided reports on use and occupancy permits and demolition permits, and granted access to its new ePlans database.

MCTL Comment 2: Data Collection and Integrity Weaknesses: There are issues that need to be resolved related to responsibility for missing or incorrect tax IDs, erroneous or lowball cost estimates submitted by home owners on permit applications, alternatives SDAT has for information needed to trigger reassessments outside of 3-year cycle, and how cost validation could slow down permit processing by DPS permit technicians. DPS responsibility for verifying construction completion independent of builder notifications was also questioned, although a recent procedure to compare sales to permits outstanding was cited as an improvement. In short, improved data could involve more work by DPS and higher costs, but could also lead to higher compliance rates. We have learned about some expired permits that were corrected with occupancy permits at the time of sale with no retroactive change to assessments. We are also concerned that if key data doesn’t get validated, it creates lots of rework, and sends a message to applicants that we don’t care.

 DPS’s chief function is to optimize the safety of the public by efficiently processing permits and overseeing construction activities. DPS’s expertise lies in code analysis and, as such, it validates plans for compliance with critical building codes for the safety and welfare of the using public. As required, DPS provides the building permit information to SDAT. 

SDAT’s role is to assess property in Maryland, which is a process of valuation that does not only equate to cost. SDAT assigns tax ID numbers by addresses and maintains that database, though it does use the DPS-provided Excel spreadsheets to ensure that the information in reports is properly attributed to the tax ID number. Also, DPS continues to work with MNCPPC to download information MNCPPC receives from SDAT so that the information will appear on permit reports. This brings full circle back to SDAT its own information which SDAT has stated is unnecessary for DPS to provide.

Cost information is provided by the International Codes Council for permit fee purposes for jurisdictions that charge fees on that basis. Generally, DPS construction permits are based on a rate per square foot. 

Assessments are triennial and DPS provides the necessary information about building permits that SDAT can use to determine if an interim reassessment is warranted for a given property. In addition to declared cost, information we provide to SDAT includes square footage and type of construction which we believe is useful in determining whether a mid-cycle reassessment should be undertaken. Given SDAT’s access to reports on demolition permits, building permits, occupancy permits, and information relative to addresses, dates of issuance, square footage of construction, type of construction, declared cost, etc., we believe SDAT should have sufficient data to determine if reassessment is in order.

MCTL Comment 3 – Accountability Gaps: Trade-offs between public safety and economic development objectives need to be resolved to improve DPS workflows. The limited controls over data or processing errors noted above lead to reduced property tax collections, in part because responsibilities and property tax revenue targets for reassessments are not set for DPS or the Dept. of Finance. Inspectors are key to moving the process along and reaching milestones for reassessments, but it was noted that inspector productivity has not been benchmarked against Howard or Fairfax counties. It appears to us that whatever standards exist may be the product of negotiations with the union and not objective, outside benchmarks. Also, productivity standards for permit technicians were not mentioned. Legal questions include how far back the county can go to tax a major improvement that it did not reassess after the improvement was built, and how far back can the county collect tax if a reassessment after improvement had errors (e.g., not enough square feet, property quality or condition not accurate)?

DPS maintains performance standards such as its signature service of providing next day inspections. The inspections that are called for in the County are based on building codes and are virtually the same as in Fairfax and Howard counties. These inspections may be summarized as footing, framing, close-in, electrical/mechanical, and final inspections. 

DPS does not inspect for purposes of valuation of property but instead to assure that timely inspections occur as phases of work are completed and to determine if construction work is in accordance with building codes and the approved construction drawings.

SDAT’s responsibility encompasses all assessment-related activities. While this cost figure can be a trigger for SDAT to review the assessment of a property outside of the three-year cycle, reassessment is actually required only when the improvements made add at least $100,000 to the value of the property (Tax-Property Section 8-104). The cost information, which is not required by state law, is information that may lead SDAT to consider the value of the property, similarly achievable by the verified square footage of construction, data which is also available to SDAT.

Many factors are considered when assessing property value, and there is not a one-to-one relationship between the cost of the added improvements and the value that the improvements add. In fact, the National Association of Realtors (“Remodeling Impact Report 2015”) estimates that while converting a basement to living space adds 69% to the cost of the project as new value to the property, adding a new bathroom only nets a 52% ROI (52% of the Cost of the improvement is value for the property). A basement conversion that costs $100,000 would only add $69,000 to the value of the property, and would therefore not lead to an updated assessment (under state law). As discussed at the October 26 meeting by Mr. Coveyou and Ms. Jones, cost does not equal value.   

State law, specifically Tax-Property Section 8-417(c) and Section 8-104(c), respectively, although 8-104(c) does not speak to reassessments, per se, but assessments, is helpful in understanding the statute on taxing a major improvement that was not reassessed after improvements were made. Note that SDAT, not the County, assesses and/or reassess property. When “escaped property” (Section 8-417) is discovered, SDAT assesses the property for the current year and the three previous years, and the owner is then sent property tax bills for all four years. When an assessment error is found, the property is reassessed and taxed beginning the next July 1st. Whenever an “escaped property” is found and reported to the County, we send the information to SDAT for disposition. This occurs infrequently.

After reviewing the data, the Department of Finance (FIN) believes that any foregone revenues due to “escaped property” or incorrect assessments within the County total less than $1 million. Property that is not captured mid-cycle for reassessment will be captured in a matter of a few years or less due to the triennial assessment cycle.

Attachment 2

OLO Study Methodology Concerns, February 2018

1. Missing Reassessments

While the OLO study reports that SDAT feels it gets sufficient data from DPS now, it is only recently that information flows from DPS to SDAT have improved to include monthly reporting of building permits issued and finalized permits that are ready for reassessment. Previously SDAT had access to DPS systems, but was not informed when building permits were finalized and ready for reassessment. This lack of structured, usable reporting created strong possibilities that earlier completed major improvements were not discovered by SDAT for reassessment. The OLO report did not specifically address this issue.

– The OLO study does not identify how many properties had very large assessment/sales price differences or find reasons for gross under-assessments. Instead, OLO focused on average differences in sales prices and assessments, which co-mingled properties with and without major improvements.

– The OLO analysis of properties with major improvements does not analyze how many major improvements SDAT failed to reassess, which DataMontgomery (CountyStat) data indicates may be a major problem.

– From 2000-2010 DataMontgomery shows 2,228 addition or alteration residential permits with a $100,000 plus value that were issued but never finalized (and thus possibly never reassessed). From 2011 to mid-2016, 460 such permits were issued but never finalized. Waiving property final inspection was in the past permitted under County law and could result in a major property improvement not being reassessed. Statistics on expired permit inspections are not reported, and DPS only performs expired permit inspections as time permits.

– From 2000-2017, DataMontgomery shows 6,342 permits with a $100,000 or higher values that were finalized. The County should match the associated property tax Identification numbers with out-of-cycle tax bills to identify properties that were possibly not reassessed. If it is determined that SDAT is incorporating some of these reassessments in a triennial reassessment instead of in an out-of-cycle reassessment, SDAT needs to change its practices, because the triennial assessment will phase in the higher assessment over three years instead of incorporating the full value change as of the date of completion, as is required by Maryland law for major improvement. Reassessing the improvement in the triennial reassessment instead of at full value would result in lower taxes for the homeowner and county.

2. Basis and Timing for Reassessments

Taxpayer League research concluded that Maryland law permits using sales prices to assess property value and also permits properties to be individually assessed. Maryland Tax – Prop Code Section 2-203 (2016) titled Assessment Reviews states in part:

(b) Manner of review. — For the review under subsection (a) of this section, real property is not required to be reviewed individually or separately, but it may be grouped:

(1) in areas;

(2) by character or use; or

(3) in any other manner that the Department considers to be helpful or necessary.

(d) Aids in reviewing property. — When reviewing real property under this section, the Department may use property description cards, property location maps, land classification maps, unit value maps, land use maps, zoning maps, records of new construction, sales records, building cost information, private appraisals, periodic surveys of assessment ratios, or any other material or information that the Department considers to be a reliable aid in determining real property value.

Maryland law permits a property to be individually assessed and the property’s sales price to be used in the next triennial reassessment. As neighborhoods mature, homeowners renovate to different extents, making neighborhoods less uniform, and assessments based on sales of other, non-comparable homes less accurate. If a property is sold after undergoing a major improvement, the sales price can be used to determine the new assessment value for the out-of-cycle assessment. (Under Maryland case law precedent, the sale of a house cannot trigger an out-of-cycle assessment, but when completion of a major improvement triggers the out-of-cycle reassessment, the sales price can be used in setting the reassessment value). In this case the sale of the house would not trigger the reassessment, the major improvement’s completion triggers the reassessment. If the initial reassessment is performed based on cost estimates, the sales price information can be incorporated at the next triennial reassessment.