BALTIMORE — Maryland taxpayers could see refunds on improperly calculated tax credits, if legislation is passed by the General Assembly.
The Joint Audit and Evaluation Committee reviewed the findings of an audit from October that found the Maryland State Department of Assessments and Taxation improperly calculated certain property tax credits resulting in low-income homeowners being overcharged millions of dollars.
The tax credit under scrutiny is the Homeowners Property Tax Credit (HTC), which helps homeowners, particularly seniors and those with household incomes below $60,000, afford their property taxes.
The Office of Legislative Audits (OLA) found SDAT was improperly deducting other local tax credits from homeowners’ state and county real property tax liabilities, resulting in the HTCs awarded to homeowners in Montgomery County and Baltimore City being improperly reduced.
HTCs awarded to 5,388 applicants were improperly reduced by $4.4 million for fiscal year 2019. The error dates back to at least 2005, according to the report.
During the hearing on Tuesday, SDAT Director Michael Higgs disagreed with the findings of the OLA and said SDAT had been calculating HTCs appropriately, according to a tax court decision in 2011. However, the department began re-evaluating its procedures in 2018, and effective this year, will no longer deduct local tax credits when calculating HTCs.
“This was not an error. We did nothing wrong. We simply changed policies and the new policy is being put in place going forward,” Higgs told lawmakers.
He added that the department has no plans to go back and issue refunds to taxpayers who were shortchanged.
“You were wrong. So, now you have changed the policy so that you’re comporting with the law, and yet, there is this simple yah, but we’re not going to go back and address the fact that there are taxpaying residents of this state who were, pardon my French, screwed over and you’re not going to address that and make them whole. And that hypocrisy I find to be somewhat glaring. How do you rationalize that?,” asked Senator Ben Kramer (D-Montgomery County).
“What SDAT was doing, as far as we were concerned, was not in violation of state law but that it was disparate treatment that was unintentional and needed to be resolved with new policies,” Higgs responded.
“I don’t get the okay, now that we know we messed up, tough luck. It’s really a bad attitude,” added Senator Cheryl Kagan (D-Montgomery County).
SDAT remains firm in their decision to not reimburse taxpayers, but Higgs said they will if new legislation requires them to.
“If the legislature has a disagreement with our position that this wasn’t a mere change in policy but that SDAT was in error and the people do deserve refunds of those tax credits, then we are more than happy to implement it, but our reading of the law says that this was not an error on SDAT’s part but that it was a change in policy,” Higgs said.
In October, Delegate Al Carr (D-Montgomery County) announced his plans to introduce legislation that would require the state to go back three years, recalculate the credits using the new method, and issue refunds to anyone overtaxed.