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When an Exemption is Not an Exemption: Maryland Tax Court Refuses 368(a) Exemption for LLC

Real Estate Law Update

A recent Maryland Tax Court decision found that although a conveyance of real property resulting from a merger between a limited liability company and a corporation may fall under Section 368 (a) of the Internal Revenue Code, the conveyance was not entitled to the exemption from recordation and transfer taxes on deeds that were “made pursuant to reorganizations described in Sec. 368(a) of the Internal Revenue Code.”

Section 368(a) of the Internal Revenue Code permits reorganizations and mergers between corporations to be free from federal taxes, and Maryland law recognizes the non-tax status of an IRC 368 (a) merger by providing that a conveyance of property made pursuant to a 368(a) reorganization is exempt from recordation and transfer taxes. But in the Court’s decision it found that if there is a merger under Section 368(a) involving a limited liability company, it doesn’t necessarily mean that any real property conveyances pursuant to such a merger are exempt from recordation and transfer taxes.

The case of Super-Concrete Corporation vs. State of Department of Assessments and Taxation involved a merger between a Maryland limited liability company and a District of Columbia corporation. The merger was considered a merger between corporations under Section 368 (a) of the Internal Revenue Code because the LLC elected to be treated as a corporation for federal tax purposes. In connection with the merger, the LLC conveyed its real property to the surviving corporation. The corporation claimed an exemption from the recordation and transfer taxes under Section 12-108 (p) (2) and 13-207(a) (10) of the Maryland Code – the 368(a) exemption.

The Tax Court, however, refused to allow the exemption. It found that the merger was between a limited liability company and a corporation and not between two corporations. The fact that the LLC was recognized under federal law as a corporation and therefore the merger fell under 368(a) did not control how Maryland law would treat the LLC. The Court found that under Maryland law the LLC was not a corporation and the 368(a) exemption did not apply. Super-Concrete was assessed $299,770.12 in recordation and transfer taxes.

This case can be viewed in its entirety on the Maryland Tax Court website at

Ann Marie Mehlert is a real estate attorney at Lerch, Early & Brewer in Bethesda, Maryland who works with real estate developers, investors and owners on all aspects of commercial real estate. For more than 25 years she has negotiated and documented transactions from acquisition and financing through development, leasing and sales. For more information on conveying real property, contact Ann Marie at (301) 907-2803 or



This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.


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