With a projected budget deficit of nearly $3 billion, the 2025 Maryland General Assembly session was dominated by efforts to address the shortfall, without sacrificing economic growth. During the 2025 session, legislators addressed key issues facing businesses and individuals, including data privacy and AI, energy, and labor & employment policy. 2,605 bills were introduced during the session, and 878 were passed.
So, what do you need to know about potential risks and opportunities following the session? Read on for our attorneys’ insight into key bills – and their potential impact on you, your family, or your business. Below, our attorneys share their insight into a selection of new laws that may impact you, your business, or your community.
This update is not intended to be exhaustive, and provides a brief synopsis of significant legislation that you may want to be aware of. To discuss the implications of these laws and for strategic analysis specific to your business, please contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or connect with us here.
Business Planning & Transactions
Budget Reconciliation and Financing Act of 2025 (HB 352)
The Budget Reconciliation and Financing Act or “BRFA” made a number of changes to Maryland’s tax laws. The most notable may be an unprecedented “Tech Tax” , which mandates a new 3% tax on certain IT and software/data services (applying to services categorized under NAICS 518, 519 or 5415), and system software/application software publishing services (categorized under NAICS 5132). Exemptions include cloud-based services that are provided to cybersecurity companies, and certain pass-through entities when parent company owns or has voting power of at least 80% of the pass-through company. The Tech Tax faced significant opposition and was originally part of a greater comprehensive professional services tax bill that was introduced but not passed.
In addition to the Tech Tax, the BRFA, included a number of tax increases for certain “higher income” individuals, including:
- New personal income tax brackets with higher tax rates.
- A 2% surcharge on capital gain income.
- A phase out of itemized deductions.
Of note: Interpretation of the Tech Tax remains under discussion, and further clarifications from the Comptroller is expected. We will continue to monitor this legislation and keep you informed of any relevant updates.
Effective date: July 1, 2025.
Operation of Family Child Care Homes (HB 785)
In an effort to increase access to child care, this bill makes it easier to open in-home daycares by removing zoning rules and preventing HOAs and co-ops from restricting child care services in homes. Only licensed child care providers would be protected by this legislation.
Effective date: October 1, 2025.
Corporate Transparency Act: Final Update
Earlier this year, following an exhausting cycle of back-and-forth challenges and appeals, the CTA, with its cumbersome and ambiguous reporting requirements for many businesses and individuals, was ruled unconstitutional and struck down by the Courts. In addition, the U.S. Department of the Treasury announced that it would not enforce any penalties regarding the CTA, and would narrow the scope of the rule to apply only to foreign reporting companies.
What does this mean for you? CTA reporting is no longer required for United States citizens or for companies formed in the U.S., and the stiff penalties for noncompliance are no longer applicable. Unless there is another reversal in the future, you won’t see any more client alerts from us!
Next Generation Energy Act (HB 1035),
Climate Change Adaptation & Mitigation (HB 128), and
Building Energy Performance Standards (HB 49)Rising costs of energy for both businesses and individuals was a focus for legislators during this session – and this bill provided a “win” to report to their constituents, establishing a framework to fast track permitting process for energy generation projects. In addition, this legislation introduces (with some exemptions) incentives for reducing greenhouse gas emissions, ends subsidies for trash incineration, and sets aside approximately $200 million in utility rebates from the State’s Strategic Energy Investment Fund to be paid to households (approximately $80 per household, split into two rebates) in 2026.
Effective date: June 1, 2025; July 1, 2025; October 1, 2025
For more information about legislation that may impact you or your business, please contact an attorney in our Business Planning & Transactions Practice Group.
Labor & Employment
Family and Medical Leave Insurance Program (HB 102)
After years of deferred implementation timelines, the Family and Medical Leave Insurance program (FAMLI) has been delayed by another eighteen months. Under this bill, required monetary contributions will begin on January 1, 2027. FAMLI benefits will become available at least 6-12 months after (no later than January 3, 2028).
Additional changes include:
- Delaying optional participation in the program by self-employed individuals until final regulations are adopted (no later than July 1, 2028). The Maryland Department of Labor will set the contribution rate by May 1, 2026.
- An “Anchor Date” was established, meaning the earlier of when an application for benefits is complete or when FAMLI leave begins.
- The wage rate for the employee will then be based on the highest of the previous four calendar quarters immediately preceding the Anchor Date.
- A provision for a possible annual increase in the weekly benefit amount tied to the Consumer Price Index.
Additional Insight: What is FAMLI?
FAMLI allows eligible employees to receive up to 12 weeks of certain paid family and medical benefits (24 weeks in certain circumstance(s)) from the State. “Covered employee” is defined as an employee who has worked at least 680 hours performing services under employment located in the state over the four most recently completed calendar quarters immediately preceding the date on which leave is to begin. All employers, including out of state employers who employ one individual in Maryland, must comply with FAMLI.
Employment and Insurance Equality for Service Members Act (HB 895)
Employment protections are expanded to include the National Oceanic and Atmospheric Administration and the Public Health Service with those uniformed services and reserve components that are currently protected (Army, Navy, Air Force, Marine Corps, Space Force and Coast Guard). In addition, this bill expands permissible hiring preferences for eligible veterans (those who received an honorable discharge or certificate of satisfactory completion of uniformed service) to include the spouse of an eligible veteran who has a service-connected disability, the surviving spouse of a deceased eligible veteran, and the spouse of a full-time active member of the uniformed services.
Effective date: October 1, 2025.
Unpaid Parental Leave (HB 1340)
The definition of “employer” under the Maryland Parental Leave Act is altered under this bill to exclude employers who are covered by the federal Family and Medical Leave Act (FMLA) for the current calendar year. These employers are not required to provide employees up to six weeks of unpaid parental leave and maintain health insurance during the time under the Maryland Parental Leave Act as they would under FMLA.
Effective date: October 1, 2025.
For more information about labor and employment legislation that may impact you or your business, please contact an attorney in our Labor & Employment Practice Group.
Construction
State Contracts – Prohibited Provisions (SB 453)
This bill more narrowly defines current language prohibiting the inclusion of certain provisions in State contracts, clarifying that the State cannot be contractually limited in its ability to recover the cost of a replacement contractor. A State contract may not include a provision that limits the State’s ability to recover the difference in the cost of a replacement contractor to perform the services not performed by the original contractor, if the sum of the amount paid to the replacement contractor and the amount paid to the original contractor exceeds the costs provided for in the contract with the original contractor.
For example, if the State contracts to pay a contractor $100,000 to perform a job and the contractor defaults after performing $50,000 worth of work, the State cannot contract away its right to recover the $20,000 overage from the original contractor if it has to pay $70,000 to a replacement contractor to finish the job.
Effective date: October 1, 2025 (applies to contracts signed on or after this date).
HVAC Equipment Sales (HB 1162)
Regulations for the sale of HVAC equipment are altered under this bill, which requires purchases of HVAC equipment to be made by individuals (or the employers of individuals) who hold a master HVAC license, a master restricted HVAC license, or a limited HVAC license. With each sale, the business selling the equipment must provide the purchaser with a written notice of the licensure requirement for all providers and installers of HVAC equipment. With certain exceptions, businesses now face misdemeanor charges and civil penalties for knowingly selling HVAC equipment to unlicensed individuals. This law does not apply to HVAC sales between businesses that sell HVAC equipment.
Effective date: October 1, 2025 (implementing regulations required by January 1, 2026).
For more information about construction-related legislation that may impact you or your business, please contact an attorney in our Commercial Litigation Practice Group.
Estate Planning
Trustee Resignation (HB 146)
Under current Maryland law, unless a trust specifically permits a trustee to stop acting as trustee or has a procedure for resignation, that trustee has to ask the court before being able to stop serving as trustee. This bill establishes a trustee resignation provision, streamlining the process by not requiring a court order (this applies to all trusts, including those established prior to the effective date).
Effective date: October 1, 2025.
Claims on an Estate – Unpaid Child Support (HB 261)
When someone passes away, there is an order in which certain individuals or entities get paid. Previously, unpaid child support was lumped in with “all other claims” on an estate, at the bottom of the list. This bill elevates the priority of unpaid child support.
Effective date: October 1, 2025.
Task Force on Fiduciary Adjudication (HB 315)
Maryland has a unique probate court system. The Orphan’s Court and the Register of Wills oversee most probates (e.g., the administration of a deceased person’s Will), while guardianships, trust matters, fiduciary litigation, and probate appeals are handled in Circuit Court. This bill establishes a task force aiming to investigate whether the probate court system should be overhauled, including whether a new court that specializes in fiduciary matters should be created within the Circuit Court.
Effective date: July 1, 2025 (report and recommendations are due on or before January 1, 2026).
For more information about estate planning-related legislation that may impact you or your business, please contact an attorney in our Estate Planning Practice Group.
Family Law
Divorce and Assuming Conventional Home Mortgage Loans (HB 1018)
In legislation that is expected to have far-reaching implications for many Marylanders, this bill requires banking institutions, credit unions, and mortgage lenders to include a provision in all conventional home mortgage loans that, in the case of a divorce, allows one borrower to assume the existing mortgage interest rate and terms of the other. To qualify, the assuming borrower must still satisfy the existing credit and underwriting standards.
Providing divorcing homeowners with the ability for one party to retain the home without having to refinance at a higher rate (which in many cases is cost-prohibitive), this also applies retroactively to all traditional conforming loans, offering relief to many existing borrowers.
Effective date: October 1, 2025.
Child Custody Determinations (HB 1191)
In a much-anticipated change to Maryland family law, the State’s longstanding factors that are considered to determine what is in the best interest of a child regarding legal or physical custody are formally codified under this bill. In addition, this bill establishes that in order to modify an existing child custody order, the court must determine that there has been a significant change of circumstances since the original order was established relating to the needs of the child or the ability of the parents to meet those needs, and that modifying the order is in the best interest of the child. So, what would a change of circumstances be? An example is if a parent relocated, causing physical custody to be impossible to reasonably fulfill.
Effective date: October 1, 2025.
Additional Insight: How is Child Custody Determined?
So, what exactly was codified under HB 1191? The Court must consider 15 different factors in determining child custody, including
- Stability and the foreseeable health and welfare of the child
- The child’s relationship with each parent, any siblings, other relatives, and individuals who are or may become important in the child’s life
- The child’s physical and emotional security
- The child’s developmental and day-to-day needs
- How to place the child’s needs above the parents’ needs
- How to protect the child from the negative effects of any conflict between the parents
- How to maintain the child’s relationship with the parents, siblings, other relatives, or other individuals who have or likely may have a significant relationship with the child
- The parents’ relationship with each other, including how they communicate with each other and how the parents will resolve any disputes in the future without the need for court intervention
- The child’s preference, if age-appropriate
Permanent Protective Orders by Consent (HB 929)
Under this bill, Defendants may agree to a permanent protective order against them in certain cases, allowing victims to request permanent protection sooner than currently permitted. It is expected that Defendants could voluntarily consent to avoid going to trial or receiving a lengthier sentence.
Effective date: October 1, 2025.
Adult Adoptions (HB 243)
Eliminating the requirement of parental consent, this bill streamlines the adult adoption process by removing outdated procedural barriers and allowing adults to consent to their own adoptions, which can be especially difficult to obtain in cases where prospective adoptees do not know where a parent is. Additionally, the spouse of the adoptive parent, such as a biological parent of the adoptee, will no longer be required to join the adoption petition.
Effective date: October 1, 2025.
For more information about family law-related legislation that may impact you or your business, please contact an attorney in our Family Law Practice Group.
On a Lighter Note: “Crushing” It
On June 1, just in time for beach season, the original Maryland orange crush became Maryland’s official State cocktail. Perhaps eager to wrap up the session and head “downy ocean, hon” legislators passed the Orange Crush bill (SB 764) in the final minutes of the last day of the legislative session. The crush has a storied – and even contentious – history in the Mid-Atlantic, with Maryland second to name the refreshing beverage as its official cocktail; Delaware made the designation official last year.
However, in a 2024 “battle of the best orange crush” between Maryland Senator Ben Cardin and Delaware Senator Chris Coons held in the Capitol building, Cardin’s Maryland crush took the top prize. So, whether you’re sipping a crush this summer where it originated (Harborside Bar and Grill in Ocean City) or enjoying a cold one in the comfort of your home, you’ll be fulfilling your civic duty by supporting state law. Cheers!
What to Watch for in 2026
In addition to a plethora of bills aimed at regulating data privacy and AI that were introduced this year and we expect to be reintroduced in future sessions, the much-contested B2B Business Services Tax, Data Broker Bill, and No Tax on Tips, and Housing for Jobs bills, among others, are expected to be re-examined in 2026.
Also potentially in the pipeline for 2026 are changes to Maryland Estate and Inheritance Tax systems. As we were tracking here, Governor Moore proposed significant changes, which would have eliminated the Inheritance Tax altogether but at the cost of lowering the Estate Tax exclusion to $2 million per person.
We will continue to track these issues and keep you informed of any relevant developments. Follow us on LinkedIn for up-to-date insight into new legislation that may impact you, your family, or your business. For more information about legislation that may impact you or your business, including how to advocate for your business’ interests, please contact an attorney here.