Boating industry, DNR spar over vessel excise tax bill

The boating industry sparred with the Department of Natural Resources on Wednesday at a Senate committee hearing on a bill that would cap the state’s vessel excise tax.


Senate Bill 90, proposed by Sen. John Astle, D-Annapolis, would limit that tax to $10,000 per boat.

Supporters of Astle’s legislation told the Senate Budget and Taxation Committee the bill would allow hundreds more boat owners to keep their vessels in the state. They also said it would increase sales not just of boats but of boating accessories and related services.

But the DNR representatives presented a University of Maryland study indicating a tax cap’s benefits would not outweigh the negative effect on the Waterway Improvement Fund.

The fund, fed mainly by vessel excise tax revenue, provides grant money for dredging and other projects intended to keep the state’s waters healthy.

Mark O’Malley, DNR’s director of boating services, said the tax cap would severely reduce available funds by eliminating the money paid by large yacht owners.

“Clearly, for the good of our boaters and boating safety, the maritime industry and the Chesapeake Bay, we need to keep this money in the fund,” O’Malley said.

The excise tax forces a boat owner to pay 5 percent of the value of his boat if it stays in the state longer than 90 days a year. Some in the boating industry point to it as the reason boat sales in Maryland didn’t rebound as the economy recovered in 2011.

Maryland’s sales fell from $183 million in 2010 to $162 million in 2011, placing the state number 26 in the nation in such sales. In 2008, boat sales were $248.5 million.

About 4,600 fewer boats registered with the DNR in 2011 than in 2010. It was the eighth consecutive year the state registered fewer boats than the year before.

But O’Malley blamed the loss of funding for the Waterway Improvement Fund on “the nation’s sagging economy.” He said the fund has decreased 50 percent over the last 10 years to around $14 million. Astle’s bill, he said, could cut millions more.

The University of Maryland study presented by the DNR proposes increasing boater registration fees.

It estimates that a vessel excise tax cap would stimulate the sales of 25 additional boats in Maryland, or only 30 percent of the 82 additional sales and registrations necessary to maintain revenue in the Waterway Improvement Fund at the 2011 level.

Susan Zellers, executive director of the Marine Trades Association, said her organization offered to pay for half of the study but ultimately wasn’t included in the process.

Frank Dawson, the DNR’s assistant secretary for aquatic resources, said the Marine Trades Association declined the agency’s offer to be involved.

Zellers said that in any case, the DNR’s reasoning for opposing the bill was flawed.

“The department would leave you with the impression that they’re the only ones that are concerned about the Waterway Improvement Fund,” Zellers told the Senate panel.

“But I remind you that the DNR is the administrator of the fund. We are the true benefactors. The boating industry are the ones that benefit from this.”

Astle said the tax was driving business out of the state.

He said that brokers say purchases lag in Maryland because residents go to tax-free Delaware or to Virginia, where there’s a 2 percent tax and a $2,000 tax cap.

Ken Comerford, owner of Annapolis-based North Point Yacht Sales, said his business loses sales because Maryland isn’t perceived as a “very user-friendly state.”

“What we’re trying to do is create more people that will register in the state of Maryland,” Comerford said. “When we lose the service, we lose job opportunities.”

The bill’s House of Delegates counterpart, House Bill 548, will be heard before the House Ways and Means Committee on Feb. 28.


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