In 2016, Louis Wilen (“Wilen”), a retired computer programmer from Montgomery County, discovered that the State Department of Assessments and Taxation (“SDAT”) was miscalculating the Homeowners’ Tax Credit (“HTC”).1 As a result, HTCs awarded in 2019 to just Montgomery County alone were improperly reduced by $4.4 million.2 Wilen alerted SDAT and lawmakers about the miscalculations in 2016, and in 2017, Maryland House Bill 633 (“HB 633”) was introduced to correct the problem.3 However, shortly thereafter, the bill died in the Maryland General Assembly.4
The Office of Legislative Audits (“OLA”) recently released an audit report confirming that the miscalculations have been happening since 2005.5 Specifically, individual homeowners under the age of 65 had their HTCs reduced by roughly $692, and homeowners at least 65 years old had their HTCs reduced by roughly $1,038.6 Unfortunately, OLA could only calculate the discrepancies for 2019.7
HTCs were created to benefit low-income families, seniors, and people who may have lost their jobs.8 The improper HTC calculations were due to SDAT’s incorrect treatment of additional tax credits offered by local jurisdictions.9 OLA recommended that SDAT “consult with legal counsel on how to proceed regarding any refunds resulting from the HTC miscalculations.”10 SDAT responded that it would adjust how the credit is calculated but will not offer any refunds.11 Wilen along with Maryland taxpayers demand that SDAT fix the mistake; “[t]he government doesn’t just get to say, ‘[o]ops, we made a mistake, so we get to keep the money.”12 Likewise, Governor Larry Hogan also believes this is unacceptable and states he will figure out what happened and how to fix it.13
Delegate Alfred Carr stated he is reviving HB 633 and including an amendment that will address the issue of refunds for potentially the last three years.14 HB 633 works at clarifying how the homeowner credit applies when taxpayers are also eligible for local tax credits.15 It also offers guidance on how to calculate the homeowners credit favorable to taxpayers.16
While reviving HB 633 seems like a logical response to Maryland’s mistake, taxpayers still lose out on receiving any refunds through 2005 to which they were initially entitled.
Furthermore, HB 633 may die in the general assembly leaving Maryland taxpayers with no resolution. On the other hand, calculating refunds for all effected taxpayers and retroactively refunding billions of dollars that the state has already used is problematic. In particular, where in Maryland’s budget does that money come from? Even still, Governor Hogan’s response gives taxpayers hope that a resolution is to come that will address both future calculations of HTC and compensation to affected Maryland Taxpayers.
Candice Miller is a third-year law student at the University of Baltimore School of Law, where she serves as an Associate Editor for Law Forum. Additionally, Candice is completing her second semester as a student attorney with the UB Law Tax Clinic, is a Student Liaison for the ABA Law Practice Division and is a Student Ambassador for the MSBA. In January 2021, Candice will begin a legal internship with Frost Law, where she will continue to work on a variety of tax and estate matters. Candice will graduate with her Juris Doctor in May 2021 and her Master of Laws in Taxation in 2022. Upon completing her Juris Doctor, Candice will begin clerking for the Honorable Kevin F. Arthur on the Court of Special Appeals of Maryland.
1 Lindsay Watts, Maryland Shortchanges Taxpayers Millions of Dollars, According to State Audit, FOX5 (Oct. 15 2020) https://www.fox5dc.com/news/maryland-shortchanges-taxpayers-millions-of-dollars- according-to-state-audit.
2 Stephanie Ramirez, I Just Saw the Report Over the Weekend,’ Hogan on FOX 5 Exclusive: Md. Taxpayers Shortchanged Millions, FOX5 (Oct. 20, 2020) https://www.fox5dc.com/news/i-just-saw-the- report-over-the-weekend-hogan-on-fox-5-exclusive-md-taxpayers-shortchanged-millions.
3 Watts, supra note 1.
4 Id.
5 Office of Legislative Audits, Audit Report: State Department of Assessments and Taxation 20 (2020).
6 Id.
7 Id.
8 Watts, supra note 1.
9 Office of Legislative Audits, supra note 5 at 18.
10 Office of Legislative Audits, supra note 5 at 21.
11 Ramirez, supra note 2.
12 Watts, supra note 1.
13 Ramirez, supra note 2.
14 Watts, supra note 1.
15 Prop. Tax: Homeowners’ Prop. Tax Credit – Definition of Total Real Prop. Tax hearing on H.B. 633 Before the H. Comm. On Ways & Means, 2017 Leg., 437th Sess. (Md. 2017) (statement of Del. Alfred Carr Jr., Md. H.D. for Dist. 18).
16 Id.
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