BERLIN — Area residents who live in Maryland but work in neighboring Delaware, of which there are many, could be eligible for a share of millions of dollars in tax relief after a Supreme Court decision earlier this year.
Earlier this year, the U.S. Supreme Court ruled favorably in a constitutional challenge brought by a Maryland couple asserting they were essentially double-taxed on the income they earned in other states. Maryland residents who earn income in other states are required to file income tax returns in both the states in which they reside and the state in which they work. Maryland allows residents who live in the state but work in another state to deduct income tax paid to other states, but heretofore has not applied the deduction to a local piggyback tax paid to the counties or municipalities in some cases.
Earlier this year, Maryland residents Brian and Karen Wynne won their case in the U.S. Supreme Court after challenging that payment of local income tax in both Maryland and other local jurisdictions represented illegal double-taxation. The Wynnes won their case when a majority of the justices ruled Maryland’s income tax law was indeed unconstitutional.
As a result, as many as 55,000 Marylanders who live in the state but earn income in another, are now eligible for a share of $200 million in tax refunds. Locally, there are likely hundreds of residents in Worcester County who work and paid income tax in neighboring Delaware during the prescribed time period spelled out in the Wynne decision, essentially from 2011 to 2014.
The state of Maryland in general, and the Comptroller’s Office specifically, were named defendants in the suit that ultimately went against them. While they ultimately lost the case that went all the way to the Supreme Court, Governor Larry Hogan and Comptroller Peter Franchot this week attempted to turn the loss into a positive with a launch of a website to connect those Marylanders eligible for a refund to the $200 million in tax relief. To that end, Governor Larry Hogan and Comptroller Peter Franchot this week urging eligible Maryland residents who filed and paid income taxes to another state between 2011 and 2014 to apply for a tax refund against the county portion of their Maryland state income taxes.
“For years, I have said that Maryland citizens were being overtaxed and overcharged and now an estimated 55,000 taxpayers are eligible for substantial income tax refunds,” said Hogan this week. “The Supreme Court’s decision earlier this year allows us to provide another $200 million in tax relief, which will immediately go back into the pockets of Maryland taxpayers and back into our state economy.”
In the Wynne’s case, the couple owned shares in a Delaware-based medical staffing corporation that did business in multiple states in the region and their income was taxed in both Maryland and Delaware, for example. The Wynne’s situation was complicated because it involved corporate earnings in multiple states, but the governor’s office this week confirmed the tax relief could available to rank-and-file workers who live in Maryland and work in a neighboring state. Locally, there are likely hundreds of Worcester and Wicomico County residents who work and pay income taxes in Delaware because of the close proximity to their homes and their jobs.
Although Maryland and the Comptroller’s Office were the defendants that ultimately lost in the Wynne case, Hogan and Franchot this week seemed to embrace the defeat and what it could mean in terms of an economic shot in the arm to thousands of Marylanders.
“For the thousands of Maryland taxpayers impacted by the Wynne decision, the Comptroller’s Office is working diligently to get your money back to you where it belongs,” Franchot said this week. “We have dedicated an enormous amount of resources, technology and staff to getting refunds out the door as quickly as possible. To date, my office has processed more than 4,000 claims, returning more than $53 million to Marylanders.”
While Maryland allowed residents who paid taxes in other states to deduct those payments from their Maryland tax return, the deduction wasn’t applied to the local piggyback taxes collected by the counties or municipalities in some cases. As a result, while the $200 million in tax refund relief comes from Maryland, the state will essentially end up docking the individual counties for the amount in future tax revenue distributions. However, it is uncertain at this point just what the economic impact will in counties such as Worcester and Wicomico, for example, where many residents cross state lines for their jobs.
Hogan and Franchot this week urged those potentially eligible for the refunds to visit the website www.WynneTaxRefund.Maryland.gov to get more information on whether they are eligible for a refund and how to apply for it. The refunds are not automatic and taxpayers who believe they may be entitled to a refund are encouraged to file as soon as possible.