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Gov. Larry Hogan and Comptroller Peter Franchot. (The Daily Record / Bryan P. Sears)

Hogan, Franchot launch website to return $200m in taxes

ANNAPOLIS — Maryland’s governor and comptroller Monday announced an effort to reunite as many as 55,000 taxpayers with hundreds of millions of dollars in overpaid state taxes as a result of a federal court decision.

Gov. Larry Hogan and Comptroller Peter V.R. Franchot said the new website,, is aimed at helping Maryland residents determine if they are owed a refund as a result of a 5-4 U.S. Supreme Court decision. The high court upheld a 2013 Maryland Court of Appeals ruling that found Maryland law violated the federal Constitution’s Commerce Clause and illegally prohibited taxpayers from deducting taxes paid to jurisdictions outside of Maryland.

“Many of these taxpayers don’t even know they were overcharged and don’t know they are entitled to a refund,” Hogan said.

Hogan and Franchot estimate that up to 55,000 taxpayers, mostly small businesses, could be eligible for a share of as much as $200 million — all of the money comes from piggyback taxes paid to local governments.

The ruling primarily affects businesses. Most individual taxpayers who work in Pennsylvania, Virginia, Washington, D.C., and West Virginia do not pay taxes on wages earned in those states. Those who work in Delaware but live in Maryland could seek a refund through an amended return for as far back as 2011. And if they filed protective claims for previous years, they could claim even larger refunds.

So far, the comptroller’s office has paid out about 4,000 claims totaling $53 million. Those claims date back to 2006.

Franchot said the majority of those who are owed back taxes can only go back to 2011.

“We expect thousands more amended returns to be filed in the coming weeks,” Franchot said.

Despite defending the tax policy, Franchot said it wasn’t something he believed in.

“In my heart of hearts, even though I was sued by the Wynnes, I don’t feel badly because I actually kind of secretly agreed with them that this is double taxation but as the comptroller I had to do my administrative job defending Maryland’s laws, as they’ve been interpreted for a long time, to the best of my ability,” Franchot said. “We lost the decision at the Supreme Court. Now it’s decided and this money is owed these Maryland taxpayers.”

The state will pay out the refunds on the protected filings from a reserve account set aside for local income taxes and allow the counties to repay that money over nine quarters beginning in fiscal 2017.

The General Assembly last year, in anticipation of the court ruling, attempted to protect counties by lowering the interest rate to be applied to the protected claims to 3.25 percent — well below the 13 percent that the state collects on late tax filings or pays out if it holds a refund in excess of 45 days.

Franchot was critical of the lower interest rate and laid the changes at the feet of the legislature and suggested that it might be challenged in court.

“I’m not suggesting there be litigation but I’m warning local jurisdictions that they should be prepared for future litigation,” Fanchot said.

Hogan, speaking of litigation to even out the two interest rates, added: “Seems to me what’s good for the goose is good for the gander.”

Del. C. William “Bill” Frick, D-Montgomery, said the legislature made the change in order to protect local jurisdictions from an additional financial burden if the state were to lose the case.

“We did it at the behest of local governments and to protect county budgets,” Frick said.

Frick called on Hogan to release $68 million in additional non-mandatory education funding, saying it was important to local governments given the tax reductions resulting from the Supreme Court ruling.

“I don’t know why he would be so gleeful that local government will have an additional significant burden on their resources,” Frick said. “We got an education system to run. We’ve got a transportation system to run. It would be nice if Larry Hogan would try to help us.”