Montgomery Strikes Deal on Municipal Tax Setoffs

Montgomery County Executive Marc Elrich this week signed Expedited Bill 2-22, Montgomery County Municipal Revenue Program – Amendments. This bill will relieve County residents who live in incorporated cities and towns from paying duplicate taxes for services.

A property tax setoff arises when a county and municipal government recognize that the municipal government provides a particular service that is paid, in part, by county property taxes. When such a local agreement exists, the county may elect to reduce the county tax rate within the municipal area or furnish the municipal government with a rebate.

While Maryland laws vary (based on county-by-county legislation), the essence of this arrangement is a local recognition of the full range of services – both overlapping and entirely county-provided – that serve the residents within and outside the municipal boundaries.

Under the local Montgomery County bill, the County will reimburse municipalities for the County Executive’s approximation of the County’s costs for providing transportation, police, crossing guards, and park maintenance services. After almost 20 years of work and negotiations, the legislation will double the County’s reimbursement for municipally delivered services from $10.1 million for fiscal 2022 to $20.5 million. In addition, the bill requires an 80 percent phase-in for fiscal 2023, a 90 percent phase-in for fiscal 2024, and a complete phase-in for fiscal 2025.

In addition to codifying the calculation of property tax reimbursements to municipalities for eligible costs, the bill also alters the requirements for municipalities to participate in the program. In addition, It provides a timeline of certain reimbursement activities and eliminates the duplicative rebate program for the City of Takoma Park police services.

According to the Office of the County Executive:

“The codification of municipal tax duplication formulas is a long overdue request from our municipalities. Chapter 30A of the County Code creates a program that allows reimbursements to municipalities for those public services provided by municipalities that would otherwise be provided by the County. This reimbursement program addresses the issue of property tax duplication since both the County and the municipality levy a property tax, but only the municipality provides that service within its jurisdiction. The County Executive is proposing revised formulas after negotiations with municipal leaders.”

Visit the Montgomery County website for more information.

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