Estate Planning & Administration
Tax Law |
| Home | The Firm | Attorneys | Practice Areas | Contact Us | News |
Impairment of Collateral in Maryland
By by: John F. Rodgers
Maryland has a personal property tax on businesses. The taxing authorities are given a priority right to collect taxes from assets owned by the business and they have a statutory lien. Some Courts have held that such lien has a super priority over UCC liens and that in the event of a sale of such assets the lien follows the asset (even to a bona fide purchaser for value). What this means is that if a lender is attempting to liquidate the assets of an insolvent debtor by exercising its UCC rights the bank may be selling impaired collateral which could result in a claim against the bank for payment of these taxes. Banks making loans in Maryland should consider the following:
1. Requiring Commercial debtors to escrow sufficient funds to pay the personal property taxes. That way, the Bank will have funds available to pay these taxes or will know if its customer is under water well before the tax assessment date.
2. Sell assets prior to December 31 so that there are not even greater assessments against the collateral.
Persons purchasing assets of a business even from a bank need to be aware of this unrecorded lien against the assets. Purchasers should take the following actions:
1. Purchasers should check with the Maryland Department of Assessments and Taxation to ensure that the assets they are buying do not have unpaid tax liens.
2. If they find that there are unpaid taxes, negotiate with the taxing authorities (state and county) to see if they can get a release for a smaller sum.
3. Reduce the purchase price by unpaid taxes.
Redmon, Peyton and Braswell, LLP has attorneys skilled in handling purchases and sales of businesses and in advising lenders in transactions. We look forward to meeting with you to help you with your business transaction. Should you find that your company is being pursued for taxes owed by others, we have experience in contesting these claims in Court.
DISCLAIMER: This article is not intended as legal advice and may not be relied upon. It is informational in nature only, and for promotional purposes, and may or may not be appropriate to your situation.
