At today’s meeting of the Maryland General Assembly’s Joint Committee on the Management of Public Funds, Comptroller Peter Franchot shared the results of a comprehensive independent audit of income tax distributions made by the Comptroller’s Office to counties and municipalities for tax years 2010-2014.

The audit identified that $12.7 million in local income taxes were distributed incorrectly to counties and municipalities throughout the State. This is in addition to the $8.7 million previously identified as distributed incorrectly to municipalities within Montgomery County.  Unlike in that situation, however, the recently identified erroneous distributions resulted in some overpayments to county governments. 

The Comptroller has issued the following statement:

We are currently contacting the affected jurisdictions directly, and those jurisdictions that are owed money will receive payment within days. For those jurisdictions that owe money as a result of this reconciliation process, we are mitigating the financial impacts by providing ample time for long-term budget planning. Those jurisdictions will not have to begin repaying what is owed until 2024, and they will have the flexibility to repay the funds over the course of ten years from that point forward.

The long-term repayment option results from the passage of Senate Bill 766 last session, “Local Income Tax – Overpayments, Underpayments, and Wynne Repayments – Local Reserve Account Repayment.” MACo supported the bill.

The erroneous distributions resulted from failures to ensure that every single tax return went through a geocoding process with the appropriate software to ensure that it was assigned to the correct jurisdiction.  The Comptroller’s Office is making necessary technological and procedural upgrades to ensure that all tax returns will be adequately geocoded moving forward. In addition, the Office will ensure that all of its geocoding and distribution processes are audited once every two years.

The Comptroller stressed that the audit indicated that 99.9 percent of local income taxes were distributed correctly. However, to get to 100 percent perfect, the Comptroller’s Office is making the above-mentioned improvements through its “Project Perfect” initiative.

The Comptroller’s staff has been in direct contact to coordinate with MACo, and has nearly completed their process of reaching out to the fiscal authority in each jurisdiction to detail their exact fiscal effects.

Questions about the distributions may be directed to Andrew Schaufele, Director of the Bureau of Revenue Estimates within the Comptroller’s Office, at ASchaufele@comp.state.md.us or 410-260-7450.