Tuesday, September 29, 2015

The Maryland Tax Refund Facts

It's not a normal refund.

So Governor Hogan is pushing this new outreach program, you might have seen the pictures or the reports:



So what's going on? Here are the basics:

1) Maryland had a unique tax system, where part of the "county" tax was actually set and colleceted by the state government. This part of the total income tax did not have a credit for out of state taxes. That meant that someone who worked in a different state would by the full rate in that state, and the full rate of this "county" tax. A handful of states credited that "county" tax against their own income assessments, but the majority of states did not.

2) This tax plan created a condition where any income earned across state lines was subject to double-taxation and, critically, income earned just within Maryland was not. It was, in function but not name, a tariff on interstate work.

3) A fellow in Howard County, Brian Wynne, earns his living through corporate payouts from business in multiple states, including states not giving credit against MD taxes. He sued the state of Maryland, claiming a Constitutional violation of the Commerce Clause.

4) The Supreme Court ruled that it doesn't matter if it's called an income tax or tariff, penalties against crossing state lines are unconstitutional. Period.

5) Now Maryland has to refund all the taxes collected under that scheme for the last few years that were collected on double-taxed income.

Those are the facts.

You may qualify for the refund if you paid taxes on income in states that do not border Maryland except Delaware (Meaning you might get the refund for Delaware.) You have to file the relevant documents to apply for the refund, which are here. If you only worked in Maryland itself, you do not qualify.

If you paid taxes to localities in Pennsylvania, you may qualify, PA state taxes do not qualify.

This action is required by the Court decision, and Governor Hogan, given his current agenda, is likely thrilled to have the chance to enact it. The state legislature cannot do anything about it, and Governor is required to follow it.

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