A quiet change in Maryland law is shifting when developers have to pay impact fees—and it could meaningfully affect your construction timeline and cash flow.
Most construction and trades owners in Maryland don't realize that a provision buried in the state's Housing Certainty Act fundamentally changes when they have to pay development impact fees and excise taxes. Under the old rules, these fees were due upfront or during construction. Under the new law, they're deferred until the project is complete.
Effective October 1, 2026, Maryland law (§ 20-128(C)(1)) prohibits local jurisdictions from collecting development impact fees or excise taxes until a residential development project has been fully constructed and meets certificate of occupancy requirements. This applies to small residential developers and builders statewide.
The shift is straightforward: instead of paying these fees when you pull a permit or at various construction milestones, you now pay them when the project is finished and ready for occupancy.
Impact fees and excise taxes can represent significant capital outlay during construction. Deferring payment until project completion directly improves cash flow throughout the entire building period. For smaller developers and builders working with tight margins or limited credit lines, this change can mean the difference between being able to finance a project and having to delay or scale back.
The provision also reduces the administrative burden of tracking multiple fee payment deadlines across different project phases. You'll have one payment obligation at the end, not several scattered throughout construction.
The law does preserve one limited collection window: local jurisdictions can still collect impact fees up to 30 days before final inspection. This gives municipalities a way to secure payment before the certificate of occupancy is issued, while still deferring collection well past the early construction phases when cash flow pressure is typically highest.
The October 1, 2026 effective date gives jurisdictions and developers time to update billing systems and procedures. If you're planning projects that will be under construction by that date, it's worth confirming your local jurisdiction's implementation plan.
This applies to residential development projects in Maryland. If you're a general contractor, subcontractor, or trades business working on residential builds where the developer or builder is responsible for impact fees, understanding this change helps you anticipate your client's cash flow situation and project financing needs.
The provision is codified in § 20-128(C)(1) of the Maryland Code, found on pages 9-10 of SB325.
For a detailed breakdown of how this applies to your specific trade or region, free business-specific resources are available through Maryland construction industry associations and local building departments.