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Attorney general urges court to reconsider decision in tax case

The Office of the Maryland Attorney General is threatening to wage a Supreme Court fight if the state’s top court does not reconsider its ruling in a recent income tax case.

The Court of Appeals’ 5-2 decision in Maryland State Comptroller v. Wynne found it was unconstitutional to bar Maryland residents from deducting, from city or county taxes, the tax they pay to other states when they earn money there.

If the decision is not overturned, local governments stand to lose between $40 million and $50 million a year, the attorney general’s office wrote in its motion for reconsideration of the January decision.

At issue is Tax-Gen. Article Section 10-703(a), which allows Maryland residents to deduct the income taxes they pay to other states from their Maryland tax. However, the state says the law does not apply to the so-called piggy-back tax the state collects for local governments.

Brian and Karen Wynne challenged the law after the comptroller said they could not deduct from their Howard County tax bill the $84,550 they paid in income taxes to other states in 2006.

The Wynnes’ out-of-state income was derived from Brian’s ownership share in Maxim Healthcare Services Inc., which operates nationwide.

The Maryland Tax Court, an administrative agency, ruled for the comptroller, but was overturned in 2011 by a judge in Howard County Circuit Court.

The Court of Appeals took the case, heard argument last May and issued its opinion on Jan. 28.

In case its motion for reconsideration is denied, the attorney general has asked the court to stay the effect of its ruling in anticipation of administrative action, a legislative change by the General Assembly or a certiorari petition to the Supreme Court.

It also asked the court to declare that the ruling does not apply retroactively.

Daily Record legal affairs writer Steve Lash contributed to this report.