BALTIMORE — If you make an error on your taxes, there’s a good chance you’ll hear about it, but for years, the State of Maryland had been miscalculating property tax credits, and it went unnoticed until recently.
This past session, the General Assembly enacted a new law requiring the State Department of Assessments and Taxation to identify homeowners who may be owed a refund.
An audit revealed this miscalculation impacted thousands of people and incorrectly reduced property tax credits by millions of dollars. And while the error dates back to at least 2005, the law only requires the state to go back to 2017.
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Auditors found SDAT had incorrectly subtracted other tax credits before calculating the Homeowners Property Tax Credit (HTC). The HTC helps homeowners by setting a limit on the amount of property taxes someone must pay based on their income. However, not everyone has been receiving the full credit.
For example, homeowners whose principal residence is in Montgomery County automatically qualify for the Income Tax Offset Credit (ITOC) for $692.
Homeowners who also qualified for the HTC had their credit reduced because the state was deducting the ITOC, or a different local property tax credit, before calculating the homeowner’s tax liability.
SDAT told legislators and auditors that this wasn’t an error. The procedure was based off of a tax court decision from 2011. However, a memo written in 1996 by the state’s Assistant Attorney General advised the Department not to deduct local tax credits.
A spokesperson for SDAT said it wasn’t until 2018 that the memo was rediscovered. And in 2020, they changed their procedures to no longer deduct local property tax credits, with the exception of the Homestead Tax Credit.
If you were impacted by this situation, you could be getting money back from the state before the end of the year, but probably not in the next few months.
In an email to WMAR-2 News, a spokesperson for SDAT wrote:
"SDAT is still working through the process of impacted homeowners getting their refunds. They should be getting a letter from SDAT within the next couple of months outlining funds due, and a refund by the end of the year.
We have made significant progress since the bill passed but have been focused on the annual tax billing process over the past month and a half. Now that that's nearly complete we'll be able to turn our attention back to this project as a continuing priority."
If a homeowner is no longer at that address, SDAT has obtained access to the MVA’s database and will attempt to notify the homeowner at the new address.
If they can’t locate the homeowner then the funds will be transferred to the Comptroller’s lost property fund and can be obtained at a future date.
The bill goes back three years because that’s the time limit a taxpayer would have to amend their return.
It was approved unanimously by the General Assembly. Governor Hogan did not sign the bill, however, it still became law. The law took effect on June 1, 2021.
WMAR-2 News Mallory Sofastaii will provide additional updates on the status of these refunds.