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MD lawmakers considering bill refunding homeowners shortchanged on tax credits

Posted at 6:00 AM, Jan 26, 2021
and last updated 2021-01-26 19:12:16-05

BALTIMORE — Maryland lawmakers are considering legislation that would issue refunds to homeowners who didn’t receive the full value of certain property tax credits. There was a hearing on the bill on Tuesday afternoon.

In October, the Office of Legislative Audits found that the State Department of Assessments and Taxation improperly calculated the Homeowners’ Tax Credit in atleast two jurisdictions (Baltimore City and Montgomery County), and the error dates back to at least 2005.

READ MORE: Audit shows Maryland homeowners were overtaxed millions of dollars

Lawmakers held a hearing on the OLA’s findings in December.

“There are taxpaying residents of this state who were, pardon my French, screwed over,” said Senator Ben Kramer (D-Montgomery County).

To correct the situation, Montgomery County Delegate Al Carr, along with 18 others, introduced House Bill 158, which requires SDAT to determine whether a homeowner is owed a refund of property taxes as a result of the miscalculation, and for the Comptroller to pay the determined amount.

“SDAT has all the information about who has applied for the Homeowners’ Tax Credit in the past, so they’re able to track those people, identify those people, and recalculate those credits so people can get what they’re owed,” said Carr.

Moving forward, the department has agreed not to deduct other tax credits before calculating the HTC, however, the director didn’t admit to the error discovered by auditors.

“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,” said SDAT Director Michael Higgs during the hearing in December.

RELATED: Lawmakers hold hearing on audit revealing Marylanders were overtaxed millions of dollars

The department also admitted to finding documentation dating back to 1996 advising them not to deduct property tax credits when calculating the HTC, with the exception of the Homestead Tax Credit.

WMAR-2 News Mallory Sofastaii obtained a copy of that memo and asked the department why it wasn't being followed. A spokesperson wrote:

"The Department rediscovered the memo in 2018 while researching whether the policy could be changed. We are unaware of the circumstances that led to the policy that existed from 2005 through 2019."

Auditors estimated at least $4.4 million could be owed to homeowners in Montgomery County and Baltimore City for fiscal year 2019.

The bill doesn't include the estimated cost to the state, however, HB158 limits refunds to the last three years, and gives the state six years to issue payments.

“If it were you or me or anyone who didn’t pay the correct amount of state taxes and the state went after us and said no you have to pay up the amount that you owe, they would go after us for three years. So, fair is fair. We’re just going to have the state be treated the exact same way,” Carr said.

The Department of Budget and Management issued a statement of information on the bill. DBM wrote in part:

“While the sponsor’s intentions for introducing this bill may be laudable, this additional entitlement spending exacerbates the State’s ability to fund our current fiscal needs while also planning for overall funding priorities for the future. By using mandates and entitlement spending more and more often, the General Assembly perpetuates the difficult task of reigning in our State’s long-term structural budget deficit.”

During the hearing on Tuesday, Louis Wilen, a Montgomery County resident who identified the miscalculation in 2016, gave his testimony.

"I really think it would be hard to find a more clear case of a state agency unwilling to admit an error that resulted in measurable damages that were invisible to low and moderate income taxpayers," said Wilen.

The Maryland Association of Counties also testified in support of the bill.

"We think that this is great way to move forward and it also properly holds the state accountable for errors made by SDAT and makes sure they’re going back those three years," said Kevin Kinally, the legislative director.

SDAT issued a letter to the Ways and Means Committee proposing changes to the bill.

"SDAT anticipates a technical amendment changing the language in Section 2 so that the Department would determine whether a homeowner is due additional State Homeowners’ Tax Credits, as opposed to a property tax refund. If an amendment is adopted to accomplish that change, the Department would be able to administer this legislation so long as the homeowner is presently living in the same property as they were from 2017-2019. It is unclear how the Department would address payments to previous homeowners who have since moved, and possibly cannot be located."

The Department is still working to determine a more accurate fiscal impact, but estimates state expenditures would increase by $9 - $12 million.

The bill would need to make it out of the committee in order to move forward. It’s unclear, if implemented, when homeowners could expect to see refunds.