Development Impact Taxes
WHAT IS A DEVELOPMENT IMPACT TAX?
It is the tax, set by the Montgomery County Council, assessed on new residential and commercial buildings and additions to commercial buildings in the county to fund, in part, the improvements necessary to increase the transportation or public school systems capacity, thereby allowing development to proceed.
The Department of Permitting Services is charged with collection of Development Impact Taxes. Development Impact Taxes must be paid before a building permit is issued.
WHAT CHANGES HAVE BEEN MADE RECENTLY TO THE DEVELOPMENT IMPACT TAX LAW?
A new category, "Social Service Agency", has been added. This rate would apply to non-profit organizations that primarily service Montgomery County residents.
HOW DO THESE TAXES APPLY TO MY RESIDENTIAL PROJECT?
If you submit an application for a building permit for new residential development (single –family detached, single-family attached, multifamily, high-rise, multifamily senior) you will be assessed the Transportation and the School Impact taxes at the current rates.
If you demolish a residential dwelling you may be entitled to a waiver of the impact taxes if you rebuild a residential dwelling on the same site. Construction of the new dwelling must begin within one year of demolition.
If you file an application for a building permit for a new single family dwelling and decide to change the type of house you will construct you will be required to file a new application for the building permit and you will be assessed impact tax taxes (both Transportation and School Impact Taxes) at the rates that are in effect the date you file the new application.
HOW DO THESE TAXES APPLY TO MY COMMERCIAL PROJECT?
If you submit an application for a building permit for new commercial development (new building or addition) you will be assessed the Transportation Impact taxes at the current rates.
The applicable rate is determined by the use category of construction (office, industrial, retail, place of worship, etc.).
If you demolish a commercial building you may be entitled to a reduction or waiver of the impact tax if you rebuild a new commercial building on the same site. Reductions and waivers are based on the square footage demolished and the square footage of new construction. Construction of the new building must begin within one year of demolition.
WHAT ARE IMPACT TAX CREDITS?
A property owner may receive an Impact Tax credit if the owner enters into a participation agreement to provide additional transportation or school capacity. A property owner may also receive a credit if they are required, through the development approval process, to build or contribute to transportation or school improvements that provided additional capacity. The Department of Transportation must calculate the credit.
WHERE CAN I FIND OUT MORE ABOUT DEVELOPMENT IMPACT TAXES?
Additional information on the Impact Tax laws can be found at the following web site:
Questions concerning impact-tax collections may be directed to DPS by calling 311 in Montgomery County or (240) 777-0311 outside of Montgomery County.