When counties received the authority to shift the collection of recordation taxes to their county finance officers, several counties made the shift. It appears that during that time, a flaw in the system resulted in the five affected counties failing to receive their shares of State-collected recordation taxes. While the error was corrected after FY 2015, the taxes collected during a five year time period from FY 2010 to FY 2015 had been completely dispersed to the 19 other counties.

MACo Associate Director Barbara Zektick testified before the House Ways and Means Committee in support of House Bill 1371, which would return funds collected from recordation taxes to those five affected jurisdictions from that time period. The bill provides restitution to the counties to account for this error, and would help avoid similar errors in the future.

From MACo Testimony:

This bill requires the Office of the Comptroller, in consultation with the State Department of Assessments and Taxation (SDAT), to commission an independent audit of county recordation tax collections and remittance for fiscal years 2010 through 2016; repay any counties underpaid during that time from the Local Income Tax Reserve Account; and change collections and remittance of the recordation tax by the State to mirror county transfer tax collections and remittance moving forward.

During the interim, while working with county finance officers, SDAT, and the Office of the Comptroller, MACo learned that five counties – Baltimore City and Anne Arundel, Caroline, Cecil, and Howard Counties – had not received their distribution of State-collected recordation taxes from fiscal 2010 to fiscal 2015.

The funds owed these counties have been distributed to the other 19 counties, as the Comptroller fully distributed all of the State-collected recordation taxes each year. This bill compensates the five above-listed counties through the Local Income Tax Reserve Account, rather than clawing back funds from the overly-enriched counties. MACo estimates that approximately $10 to $15 million is owed these five counties.

This bill also changes the process moving forward so that the recordation tax is distributed according to where property is located, just like the county transfer tax. This simplification to the process eliminates unnecessary bureaucracy and streamlines these distributions to protect against the recurrence of this type of error.

MACo appreciates the consideration of this Committee to rectify this issue, both by providing these counties restitution, and by streamlining this process moving forward to avoid similar errors in the future.”

For more on this and other legislation, follow MACo’s advocacy efforts during the 2018 legislative session here.