Counties: Interest Payments on Refund Claims Should Continue to be Paid by the State

MACo Associate Director Barbara Zektick testified before the Senate Budget and Taxation Committee with a proposed amendment to Senate Bill 428. The bill would require the Comptroller to pay interest on tax refund claims at the end of a 45-day grace period, or from the date of an overpayment if there was an error on the part of the State.

The fiscal note for this bill indicated that local revenues would decrease significantly despite the fact that the State is responsible for administering income taxes. Therefore, MACo offered an amendment that the bill should continue to exclude counties and county revenues from this process.

From MACo Testimony:

MACo had not previously taken positions on prior introductions of this legislation because it was not believed to have any fiscal effect on counties. Counties understandably believed that any obligation for interest payments would come from state money, as the State is fully responsible for administering income taxes.

However, the fiscal note for SB 428 states, “local income tax revenues may decrease significantly beginning in FY 2019 due to additional interest payments paid on individual income tax refunds.” To the extent that the law allows the Comptroller to pay this interest from local income tax revenues or otherwise hold counties accountable for these costs, MACo respectfully requests an amendment clarifying interest arising from such a circumstance should be paid using state funds. As the Comptroller administers all income taxes and has control for when and how refunds are paid, the State should similarly be the party responsible for paying interest on late and corrective payments.”

Follow MACo’s advocacy efforts during the 2018 legislative session here.