Sec. 52-54. Imposition and applicability of tax.

*Editor’s note—2011 L.M.C., ch. 19, § 2, states, in part: The payment date for the development impact tax imposed under Articles VII and XII (now Articles IV and V, 2016 L.M.C., ch. 7, § 1) of Chapter 52, as amended by Section 1 of this Act, applies to any building for which an application for a building permit is filed on or after that date. The payment date for the Transportation Mitigation Payment and School Facilities Payment, imposed respectively under Section 52-59 and 52-94 (now Section 52-51 and 52-59, 2016 L.M.C., ch. 7, § 1), apply to any Payment required on or after that date.

2024 L.M.C., ch. 22, § 2 states: Sec. 2. Expedited Effective Date. The Council declares that this legislation is necessary for the immediate protection of the public interest. The amendments made in Section 1 take effect on January 1, 2025, and must apply to any application for a building permit filed on or after January 1, 2025.

2021 L.M.C., ch. 2, § 1, states: Sec. 2. Effective date – Transition. This Act takes effect on February 26, 2021. The amendments in Section 1 must apply to:

(1) any application for a building permit filed on or after February 26, 2021; except for

(2) any dwelling unit in a development for which a preliminary plan application is filed prior to February 26, 2021 that includes 25% affordable units as defined in Sections 52-41(g)(1) through 52-41(g)(4) or 52-54(d)(1) through 52-54(d)(4); or

(3) any development in a former Enterprise Zone for which a preliminary plan application is filed and accepted before January 1, 2021.

2020 L.M.C., ch. 37, § 2, states: Effective date - Transition. This Act takes effect on March 9, 2021. The amendments in Section 1 must apply to:

(1) any application for a building permit filed on or after February 26, 2021; except for

(3) any development in a former Enterprise Zone for which a preliminary plan application is filed and accepted before January 1, 2021.

2011 L.M.C., ch. 19, § 2, states, in part: The payment date for the development impact tax imposed under Articles VII and XII (now Articles IV and V, 2016 L.M.C., ch. 7, § 1) of Chapter 52, as amended by Section 1 of this Act, applies to any building for which an application for a building permit is filed on or after that date. The payment date for the Transportation Mitigation Payment and School Facilities Payment, imposed respectively under Section 52-59 and 52-94 (now Section 52-51 and 52-59, 2016 L.M.C., ch. 7, § 1), apply to any Payment required on or after that date.

2003 L.M.C., ch. 26, § 2, states: Effective Date; Transition.

(a) This Act takes effect on March 1, 2004, and the development impact tax for public school improvements imposed under Section 52-89 (now Section 52-54, 2016 L.M.C., ch. 7, § 1), added by Section 1 of this Act, applies to any building for which an application for a building permit is filed on or after that date.

(b) The development impact tax for public school improvements does not apply to any residential building located in a Metro Station Policy Area or Town Center Policy Area if:

(1) a site plan which includes that building was approved by vote of the County Planning Board, or the equivalent body in any municipality, before May 1, 2003; and

(2) (A) a building permit is issued for that building before September 1, 2006; or

(B) if the building is part of a mixed use project, a building permit is issued for any building or structure in that project before March 1, 2005.

Editor’s note—Article V, “Public Advocate for Assessments and Taxation,” § 52-40, derived from 1974 L.M.C., ch. 28, § 1, and 1986 L.M.C., ch. 37, § 3, was repealed by 1993 L.M.C., ch. 44, § 1. See § 20-41A.

Sec. 52-52. Definitions.

In this Article all terms defined in Section 52-39 have the same meanings, and the following terms have the following meanings:

Cost of a student seat means the construction cost of a school, not including the cost of land acquisition, divided by the program capacity of the school.

Development impact tax for public school improvements means a tax imposed to defray a portion of the costs associated with public school improvements that are necessary to accommodate the enrollment generated by the development.

High-rise unit means any dwelling unit located in a multifamily residential or mixed-use building that is taller than 4 stories.

Low-rise unit means any dwelling unit located in a multifamily residential or mixed-use building that is 4 stories or less.

Public school improvement means any capital project of the Montgomery County Public Schools that adds to the number of teaching stations in a public school.

School service area means the geographically defined attendance area for an individual school. (2003 L.M.C., ch. 26, § 1; 2016 L.M.C., ch. 7 , § 2; 2016 L.M.C., ch. 36, §1; 2020 L.M.C., ch. 37, § 1; 2024 L.M.C., ch. 22 , § 1.)

Editor’s note—2018 L.M.C., ch. 18, § 1, states: Sec. 2. Effective date; Transition. This Act takes effect on March 1, 2017. The amendments to the development impact tax for transportation improvements and the development impact tax for public school improvements added by Section 1 of this Act, must apply to any application for a building permit filed on or after March 1, 2017. If a property owner is required to pay the development impact tax rates for transportation or public school improvements that take effect on March 1, 2017, the Director of Finance:

(a) must not require the payment of a transportation mitigation payment or a school facilities payment for the same development; and

(b) must refund the payment or give the property owner a credit against the development impact tax for transportation due for the development in the amount of any transportation mitigation payment made for the same development prior to March 1, 2017.

2018 L.M.C., ch. 18, § 2 states: Expedited Effective Date. .... This Act takes effect on the date on which it becomes law and must apply to any transportation mitigation payment made on or after November 29, 2016.

2016 L.M.C., ch. 36, § 2, states: Effective date; Transition. This Act takes effect on March 1, 2017. The amendments to the development impact tax for transportation improvements and the development impact tax for public school improvements added by Section 1 of this Act, must apply to any application for a building permit filed on or after March 1, 2017. Any property owner who is required to pay the development impact tax rates for transportation or public school improvements that take effect on March 1, 2017 must not be required to pay a transportation mitigation payment or a school facilities payment.

Sec. 52-53. Findings; purpose and intent.

(a) The amount and rate of growth will place significant demands on the County to provide public school improvements necessary to support and accommodate that growth.

(b) The County, through its adoption of the Capital Improvements Program, indicates its commitment to provide public school improvements.

(c) The County has determined that a combination of approaches will be necessary to fully achieve the level of public school improvements needed to accommodate growth. Thus, the County proposes to fund a program of public school improvements through development impact taxes to support new growth in the County.

(d) Imposing a development impact tax that requires new development to pay a share of the costs of public school improvements necessitated by that development in conjunction with other public funds is a reasonable method of raising the funds to build improvements in a timely manner.

(e) The development impact tax for public school improvements will fund, in part, the improvements necessary to increase public school capacity, thereby allowing development to proceed. Development impact taxes authorized in this Article will be used exclusively for public school improvements.

(f) In order to assure that the necessary public school improvements are constructed in a timely manner, the County intends to make sufficient funds available to construct the public school improvements.

(g) The County retains the power to determine the public school improvements to be funded by development impact taxes; estimate the cost of such improvements; establish the proper timing of construction of the improvements to meet school capacity needs as identified in the Growth Policy; determine when changes, if any, may be necessary in the County CIP; and do all things necessary and proper to accomplish the purpose and intent of this Article.

(h) The County intends to further the public purpose of assuring that adequate public school capacity is available in support of new development.

(i) The County’s findings are based on the adopted or approved plans, planning reports, capital improvements programs identified in this Article, and specific studies conducted by Montgomery County Public Schools.

(j) The County intends to impose development impact taxes for public school improvements until the County has attained build-out as defined by the General Plan. (2003 L.M.C., ch. 26, § 1; 2004 L.M.C., ch. 2, § 2; 2016 L.M.C., ch. 7, § 2.)

Sec. 52-54. Imposition and applicability of tax.

(a) An applicant for a building permit for a residential development must pay a development impact tax for public school improvements in the amount and manner provided in this Article before a building permit is issued for any residential development in the County unless:

(1) a credit for the entire tax owed is allowed under Section 52-58; or

(2) an appeal bond is posted under Section 52-48.

(b) Except as expressly provided in this Article, this tax must be levied, collected, and administered in the same way as the tax imposed under Article IV. All provisions of Article IV apply to this tax unless the application of that Article would be clearly inconsistent with any provision of this Article. This tax is in addition to the tax imposed under Article IV, and any tax paid under this Article must not be credited against any tax due under Article IV.

(1) Infill Impact Areas; and

(2) Turnover Impact Areas.

(d) The tax under this Article must not be imposed on:

(1) any Moderately Priced Dwelling Unit built under Chapter 25A or any similar program enacted by either Gaithersburg or Rockville;

(2) any other dwelling unit built under a government regulation or binding agreement that limits for at least 15 years the price or rent charged for the unit in order to make the unit affordable to households earning equal to or less than 60% of the area median income, adjusted for family size;

(3) any Personal Living Quarters unit built under Section 59-3.3.2.D, which meets the price or rent eligibility standards for a moderately priced dwelling unit under Chapter 25A;

(4) any dwelling unit in an Opportunity Housing Project built under Sections 56-28 through 56-32, which meets the price or rent eligibility standards for a moderately priced dwelling unit under Chapter 25A;

(5) any development located in an enterprise zone designated by the State;

(6) except for a development located in the City of Rockville, any development located in a Qualified Opportunity Zone certified by the United States Treasury Department or in an area previously designated as an Opportunity Zone, including a development located in the following census tracts as defined by their 2010 Census Boundaries: Silver Spring – 25.00, 26.01; Takoma Park – 17.03, 20.00, 23.01; White Oak – 15.05, 15.09, 14.21; Wheaton – 38.00; Rockville – 9.04; Gaithersburg – 7.24, 7.23, 7.13, 8.13; and Germantown – 8.30; or

(7) a house built by high school students under a program operated by the Montgomery County Board of Education.

(e) The tax under this Article does not apply to:

(1) any reconstruction or alteration of an existing building or part of a building that does not increase the number of dwelling units of the building;

(2) any ancillary building in a residential development that:

(A) does not increase the number of dwelling units in that development; and

(B) is used only by residents of that development and their guests, and is not open to the public; and

(3) any building that replaces an existing building on the same site or in the same project (as approved by the Planning Board or the equivalent body in Rockville or Gaithersburg) to the extent of the number of dwelling units of the previous building, if:

(A) an application for a building permit is filed within four years after demolition or destruction of the previous building was substantially completed;

(B) the Director of the Department of Permitting Services or the Director’s designee finds that the applicant was unable to apply for a building permit or commence construction within four years after demolition or destruction of the previous building was substantially completed due to circumstances beyond the control of the applicant or the applicant’s agents; or

(C) the previous building is demolished or destroyed, after the replacement building is built, by a date specified in a phasing plan approved by the Planning Board or equivalent body.

However, if in any case the tax that would be due on the new, reconstructed, or altered building is greater than the tax that would have been due on the previous building if it were taxed at the same time, the applicant must pay the difference between those amounts.

(f) If the type of proposed development cannot be categorized under the residential definitions in Section 52-39 and 52-52, the Department must use the rate assigned to the type of residential development which generates the most similar school enrollment characteristics.

(g) A Clergy House must pay the impact tax rate that applies to a place of worship under Section 52-41(d) if the house:

(1) is on the same lot or parcel, adjacent to, or confronting the property on which the place of worship is located; and

(2) is incidental and subordinate to the principal building used by the religious organization as its place of worship.

The place of worship tax rate does not apply to any portion of a Clergy House that is nonresidential development. (2003 L.M.C., ch. 26, § 1; 2007 L.M.C., ch. 16, § 1; 2015 L.M.C., ch. 4, § 1; 2015 L.M.C., ch. 37, § 1; 2016 L.M.C., ch. 7, § 2; 2016 L.M.C., ch. 8, § 1; 2016 L.M.C., ch. 36, § 1; 2020 L.M.C., ch. 37, § 1 ; 2024 L.M.C., ch. 22 , § 1.)

(a) must not require the payment of a transportation mitigation payment or a school facilities payment for the same development; and

2018 L.M.C., ch. 2, § 1, amends 2015 L.M.C., ch. 37, § 2, to state: Sec. 2. Applicability.

(a) Except as provided in paragraph (b) or (c), County Code Section 52-41(g)(5), formerly 52-49(g)(5), and Section 52-54(c)(5), formerly 52-89(c)(5), both inserted by Section 1 of this Act, do not apply to any development which received preliminary subdivision plan approval or site plan approval (or a similar approval in a municipality) before October 22, 2015.

(b) If a development approved before October 22, 2015 is amended any time thereafter to include additional dwelling units and at least 25% of the additional dwelling units are exempt under paragraph (1), (2), (3), or (4) of Section 52-54(c), or any combination of them, then Section 52-41(g)(5) and Section 52-54(c)(5), apply to the additional units.

(c) If the relevant preliminary subdivision plan was approved before January 1, 2008, Sections 52-41(g)(5) and 52-54(c) apply to building permit applications for the unbuilt portion of the development.

2016 L.M.C., ch. 7, § 3, states: Reporting. When a development proposes at least 25% affordable dwelling units under Section 52-41(g)(5) and Section 52-54(c)(5), the Department of Housing and Community Affairs must report to the Council the location of the development, the total number of units in the development, and the number of affordable units within 30 days from the date of the agreement to build MPDUs. If a development with 25% of affordable dwelling units does not obtain an agreement to build MPDUs with the Department of Housing and Community Affairs, then the Department of Permitting Services must report to the Council the use of any impact tax exemption under Section 52-41(g)(5) and Section 52-54(c)(5) within 30 days from the date the exemption is granted.

2015 L.M.C., ch. 37, § 2, states: Applicability. County Code Section 52-49(g)(5) and Section 52-89(c)(5) (now Section 52-41(g)(5) and 52-54(c)(5), 2016 L.M.C., ch. 7, § 1), both inserted by Section 1 of this Act, do not apply to any development which received preliminary subdivision plan approval or site plan approval (or a similar approval in a municipality) before this Act took effect.

2015 L.M.C., ch. 37, § 3, states: Reporting. When a development proposes at least 25 percent affordable dwelling units under Section 52-49(c)(5) and Section 52-89(c)(5) (now Section 52-41(g)(5) and 52-54(c)(5), 2016 L.M.C., ch. 7, § 1), the Department of Housing and Community Affairs must report to the Council the location of the development, the total number of units in the development, and the number of affordable units within 30 days from the date of the agreement to build MPDUs. If a development with 25 percent of affordable dwelling units does not obtain an agreement to build MPDUs with the Department of Housing and Community Affairs, then the Department

of Permitting Services must report to the Council the use of any impact tax exemption under Section 52-49(c)(5) and Section 52-89(c)(5) within 30 days from the date the exemption is granted.

2003 L.M.C., ch. 26, § 2, states: Effective Date; Transition.

(b) The development impact tax for public school improvements does not apply to any residential building located in a Metro Station Policy Area or Town Center Policy Area if:

(1) a site plan which includes that building was approved by vote of the County Planning Board, or the equivalent body in any municipality, before May 1, 2003; and

(2) (A) a building permit is issued for that building before September 1, 2006; or

(B) if the building is part of a mixed use project, a building permit is issued for any building or structure in that project before March 1, 2005.

Sec. 52-55. Tax rates.

(a) The Council must establish the rates for each school impact tax district by resolution after a public hearing advertised at least 15 days in advance.

(b) Any Productivity Housing unit, as defined in Section 25B-17(j), must pay the tax at 50% of the otherwise applicable rate.

(c) The County Council by resolution, after a public hearing advertised at least 15 days in advance, may increase or decrease the rates established under this Section.

(d) The Director of Finance, after advertising and holding a public hearing as required by Section 52-17(c), must adjust the tax rates set in or under this Section effective on July 1 of each odd-numbered year in accordance with the update to the Growth and Infrastructure Policy using the latest student generation rates and average Montgomery County Public School construction costs. The Director must calculate the adjustment to the nearest multiple of one dollar. The Director must publish in the County Register the amount of this adjustment not later than May 1 of each odd-numbered year.

(1) Inflation cap on tax rate increases. Notwithstanding subsection (d), the Director must cap the biennial tax rate adjustment not to exceed 20%.

(2) Carryover of biennial tax rate adjustments in excess of 20%. If the biennial tax rate adjustment exceeds 20%, the excess dollar amount must be carried over and added to the tax rate after calculating the next biennial adjustment. If this total adjustment, including any carried over value, again exceeds 20%, the excess dollar amount must be carried over and added to the tax rate after calculating the biennial adjustment.

(e) Any non-exempt dwelling unit in a development in which at least 25% of the dwelling units are exempt under Section 52-54(d)(1) must pay the tax discounted by an amount equal to the impact tax rate applicable in the Infill School Impact Area for that unit type up to the amount of the impact tax otherwise applicable.

(f) A 3-bedroom multi-family dwelling unit located in an Infill Impact Area must pay the tax at 40 percent of the otherwise applicable rate.

(g) Stacked flats must pay the multifamily low-rise applicable rate.

(h) A 1-bedroom garden apartment must be calculated using the high-rise residential rate if the preliminary plan was approved before January 1, 2025. (2003 L.M.C., ch. 26, § 1; 2007 L.M.C., ch. 16, § 1; 2016 L.M.C., ch. 7, § 2; 2016 L.M.C., ch. 36, § 1; 2018 L.M.C., ch. 3, §1; 2020 L.M.C., ch. 37, § 1; 2021 L.M.C., ch. 3, §1; 2023 L.M.C., ch. 19, § 1; 2024 L.M.C., ch. 22, § 1.)

Editor’s note—2023 L.M.C., ch. 19 , § 3, states: Sec. 3. Transition. The amendments to the development impact tax for transportation improvements and the development impact tax for public school improvements added by Section 1 of this Act, must apply to any application for a building permit filed on or after the effective date of this Act.

2018 L.M.C., ch. 18 , § 1, states: Sec. 2. Effective date; Transition. This Act takes effect on March 1, 2017. The amendments to the development impact tax for transportation improvements and the development impact tax for public school improvements added by Section 1 of this Act, must apply to any application for a building permit filed on or after March 1, 2017. If a property owner is required to pay the development impact tax rates for transportation or public school improvements that take effect on March 1, 2017, the Director of Finance:

(a) must not require the payment of a transportation mitigation payment or a school facilities payment for the same development; and

Sec. 52-56. Accounting; use of funds.

(a) The Department of Finance must maintain and keep adequate financial records that:

(1) show the source and disbursement of all revenues under this Article;

(2) account for all funds received; and

(3) assure that the funds are used exclusively for the public school improvements listed in subsection (d).

(b) Interest earned on revenues under this Article must be used solely for public school improvements.

(d) Revenues raised under this Article may be used to fund planning design, acquisition of land, site improvements, utility relocation, construction, and initial furniture and equipment for any:

(1) new public elementary or secondary school;

(2) addition to an existing public elementary or secondary school that adds one or more teaching stations; or

(3) modernization of an existing public elementary or secondary school to the extent that the modernization adds one or more teaching stations. (2003 L.M.C., ch. 26, § 1; 2016 L.M.C., ch. 7, § 2; 2016 L.M.C., ch. 36, § 1.)

(a) must not require the payment of a transportation mitigation payment or a school facilities payment for the same development; and

Sec. 52-57. Refunds.

(a) Except as provided in this Section, Section 52-46 applies to any petition for a refund of taxes paid under this Article. Subsections 52-46(a)(1) and (d) do not apply to taxes paid under this Article.

(b) Any person who has paid a tax under this Article may apply for a refund of the tax if the County has not appropriated the funds for public school improvements of the types listed in Section 52-56(d) by the end of the sixth fiscal year after the tax is collected.

(c) The Director of Permitting Services must investigate each claim and hold a hearing at the request of the petitioner. Within 3 months after receiving a petition for refund, the Director must provide the petitioner, in writing, with a decision on the refund request. The Director must specify the reasons for the decision, including, if a refund is claimed under subsection (b), a determination of whether funds collected from the petitioner, calculated on a first-in-first-out basis, have been appropriated or otherwise formally designated for public school improvements of the types listed in Section 52-56(d) within 6 fiscal years. (2003 L.M.C., ch. 26, § 1; 2016 L.M.C., ch. 7, § 2.)

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