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The Montgomery County Council today approved Bill 8-11 that will create
a five-cent charge on each paper or plastic bag provided by a retail
establishment to a customer at point of sale, pickup or delivery. The
bill is intended to inspire consumers to use more reusable bags, which
in turn could lead to fewer bags littering the environment.

Neil H. Greenberger
Legislative Information Officer
Montgomery County Council
240-777-7939

Montgomery County Council Approves
5-Cent Tax on Carryout Bags

Bill 8-11 Creates Charge on Paper or Plastic Bags Provided by Retail Establishment at Point of Sale, Pickup or Delivery

ROCKVILLE, Md., May 3, 2011-The Montgomery County Council today approved Bill 8-11 that will create a five-cent charge on each paper or plastic bag provided by a retail establishment to a customer at point of sale, pickup or delivery. The bill is intended to inspire consumers to use more reusable bags, which in turn could lead to fewer bags littering the environment.

The tax, which was proposed by County Executive Isiah Leggett, was approved by an 8-1 vote. Councilmembers Phil Andrews, Roger Berliner, Marc Elrich, Valerie Ervin, George Leventhal, Nancy Navarro, Craig Rice and Hans Riemer voted to approve the tax. Councilmember Nancy Floreen was opposed.

The proposed tax will not apply to bags provided by a pharmacy containing prescription drugs; a newspaper bag or bag intended for
initial use as a garbage, pet waste or yard waste; a bag provided at a seasonal event, such as a farmers market; or a paper bag that a restaurant gives a customer to take prepared food or drinks from the restaurant. The tax also will not apply if the bag is used to package a bulk item (such as small items at a food or hardware store) or to wrap perishable items (such as fresh or frozen food or flowers).

Retail establishments will retain one-cent of each five-cent tax to cover administration fees of collection. The establishment would be
required to indicate on a transaction receipt the number of bags provided.

The law will take effect Jan. 1, 2012.

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The $1,000 Joyce Starks Engineering Scholarship is being offered to a college student majoring in engineering. The winner also may be offered a paid summer internship. Candidates must have a permanent home address in WSSC’s service district, and be enrolled in a degree program that leads to a bachelor’s or advanced degree in Engineering.

Past winners may compete.

Applicants should send a copy of their official transcript along with a cover letter, proof of permanent residency, two references and a 400 to 1000-word essay on the following:
What topic have you studied that makes you believe it is important for engineering to be mindful of “green” environmental initiatives, and how would this make you a good candidate for a WSSC scholarship and potential summer internship?

The reference letters must be submitted separately, or in a sealed envelope if sent with the application materials.

Send all materials to:
Charlett Bundy, Esq., Corporate
Secretary, WSSC, 14501 Sweitzer Lane, Laurel,
MD 20707.

Applications must be postmarked
by June 30, 2011.

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Click here to Download Listing Sheet

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The act subjects recipients of rental income from real estate to the same information-reporting requirements as taxpayers engaged in a trade or business. Thus, rental income recipients making payments of $600 or more to a service provider in the course of earning rental income are required to provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This provision will apply to payments made after December 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants in the course of earning the rental income.

While rental property owners will not actually issue the required 1099s until early 2012, they need to start keeping adequate records of payments starting January 1, 2011, so they will be prepared to issue correct 1099s. They will also need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.

Exceptions
The law provides an exception for individuals who can show that the requirement will create a hardship for them. The IRS is directed to issue regulations on this, but has not done so yet, so there is currently no guidance on what constitutes sufficient hardship to qualify for the exception or how a taxpayer would demonstrate that hardship.

The law also contains an exception for individuals who receive rental income of “not more than a minimal amount.” Again, the IRS is directed to issue regulations to determine what constitutes “not more than a minimal amount” but has not done so yet.

If such guidance is not forthcoming before January 1, all individuals who receive rental income should start keeping records of payments to service providers so they are prepared to issue 1099s in 2012.

The law also contains an exception for members of the military or employees of the intelligence community if substantially all their rental income comes from renting their principal residence on a temporary basis.

Information Return Penalties
Taxpayers should also be aware that in addition to creating a new reporting requirement, the act increases the penalties for failure to file a correct information return. The first-tier penalty increases from $15 to $30; the second-tier penalty increases from $30 to $60; and the third-tier penalty increases from $50 to $100. For small business filers (with average annual gross receipts under $5 million), the calendar-year maximum increases from $25,000 to $75,000 for the first-tier penalty; from $50,000 to $200,000 for the second-tier penalty; and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard increases from $100 to $250.

The increased penalties apply to information returns required to be filed on or after January 1, 2011.

Expanded 1099 Reporting After 2011
Currently, payments to corporations are excepted from the 1099 information reporting requirements, but starting for payments after December 31, 2011, businesses (including, now, individuals who receive rental income) will be required to file an information return for all payments aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation). This change was made by the Patient Protection and Affordable Care Act, P.L. 111-148, which was enacted in March. That act also expanded the information reporting requirements to include gross proceeds paid in consideration for property.

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