Court Strikes Wynne Interest Rate, Costing Counties $30 Million

Last week, in the latest twist in the Wynne saga, the Maryland Tax Court ruled that providing taxpayers lower interest rate payments on Wynne refunds than on other refunds is unconstitutional, because it violates the Commerce Clause.

The new interest rate, according to the Comptroller’s Office and the court, would be 13 percent.

From the opinion:

The Wynne refunds are the result of income tax provisions relating to income earned in other states by Maryland residents that only allow credits against the state income tax and not against county “piggyback” taxes. The U.S. Supreme Court ruled this was unconstitutional.

Following the exact same logic, granting interest at a lower rate must also be unconstitutional.

The Budget Reconciliation and Financing Act of 2014 altered the annual interest rate paid for income tax refunds resulting from Wynne, requiring the Comptroller’s Office to use an annual interest rate equal to the average prime rate of interest during fiscal 2015: three percent.

The court opinion is estimated to cost counties approximately $30 million, beginning in February 2021.

Last session, MACo succeeded in advocating for delaying counties’ required repayments for Wynne refunds to the Local Income Tax Reserve Account by two years. MACo also successfully fought against a bill which would have raised the interest rate on Wynne refunds to 13 percent, just as the Tax Court just did.

Neither the Attorney General’s Office nor the Comptroller’s Office have indicated yet whether they intend to file an appeal.