Comptroller Swiftly Proposes Online Sales Tax Regs

Following the Supreme Court’s June decision in the Wayfair case allowing states to collect sales and use taxes on purchases made online, the Comptroller’s office swiftly submitted draft emergency regulations providing a conceptual framework for what would trigger collection of such taxes here in Maryland. The regulations could take effect as early as the end of this month.

The regulations would subject online sales transactions to the State’s 6 percent sales and use tax if the sale is made by a retailer who, either within the previous or current calendar year, made at least 200 sales transactions within the state, or the retailer earned at least $100,000 in gross revenue on sales in Maryland.

South Dakota v. Wayfair – a much-followed case by jurisdictions depending on sales tax revenue for their general funds – overturned Quill Corp. v. North Dakota. In Quill, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. Now, they can – but first, states must enact regulations similar to North Dakota’s in order to ensure that tax collections and remittance are not overly burdensome on retailers.

The Comptroller’s Office indicated that they “looked … very carefully” at the North Dakota regulations first.

The State’s head tax collector filed both emergency and proposed regulations with the General Assembly’s Joint Committee on Administrative, Executive, and Legislative Review (AELR),  which reviews draft regulations for conformity with statutory authority and legislative intent.

Emergency regulations bypass the normal public notice and comment period, and only remain in effect for 180 days or less, to provide time for the regulating agency to submit regular proposed regulations. Emergency regulations are not published in the Maryland Register before adoption, like regular proposed regulations are. However, notice of AELR’s receipt of the draft emergency regulation are posted on the Maryland General Assembly website. In addition, the requesting agency must post the draft regulations on its website within three business days of submission to the committee.

If an AELR member requests a public hearing on the emergency adoption of a regulation, the committee must hold the hearing. If no member makes such a request, committee staff may “poll on the emergency regulation” 10 business days after the draft’s receipt, and it takes effect at that time.

The regulations could result in the State’s General Fund receiving a significant, yet indeterminable, influx of funds. A recent Department of Legislative Services analysis estimated that uncollected sales taxes from remote sales to Maryland residents (including online sales, as well as catalog and mail order sales) could have totaled approximately $320 million in fiscal 2017.



Judge Adkins Announces Retirement From Court of Appeals

Judge Sally Adkins (Source: Maryland Manual Online)

A Daily Record article (2018-07-30, subscriber access only) reported that Maryland Court of Appeals Judge Sally Adkins has announced she will retire on October 31, leaving a vacancy on the seven-member court. Adkins represents the 1st Appellate Judicial Circuit and her replacement must be a judge or attorney living on the Eastern Shore. Adkins, who is 68, announced her retirement prior to reaching the mandatory retirement age of 70.

A native of Salisbury, Maryland, Adkins graduated from the University of Maryland Francis King Carey School of Law in 1975. After interning under Court of Appeals Judge Marvin Smith, Adkins spent roughly 20 years in private practice before becoming a Wicomico County Circuit Court Judge in 1996. Adkins was appointed to the Maryland Court of Special Appeals in 1998 and former Governor Martin O’Malley appointed her to the Court of Appeals in 2008. Adkins has also served as the President of the Wicomico County Bar Association and the Eastern Shore Chapter of the Women’s Bar Association of Maryland.

From the article:

“In a year and four months, they’re going to kick me out,” said Adkins, 68, who has served on the state’s top court since June 25, 2008. “No reason to wait until I get kicked out.”

But Adkins said she will miss being a judge, particularly “being a part of the discussion and the debate and writing about the cutting-edge legal issues” that come before the high court.

The article stated that the Appellate Judicial Nominating Commission will be accepting applications for the vacancy through August 22. The Commission will then review submissions in mid-October and then send a list of recommended candidates to Governor Larry Hogan. While Hogan is not required to nominate a candidate from the Commission’s list, that has been the standard practice for decades. Hogan’s nomination could immediately take their seat on the Court of Appeals but would be subject to a final confirmation process by the Maryland Senate in January, 2019.

Adkins plans to keep busy by traveling, doing charity work, and becoming a mediator.

Useful Links

Judge Sally Adkins Web Page

Feds Go Silent Following Airplane Noise Complaints

In response to two petitions filed by the State of Maryland against them regarding flight path issues, the Federal Aviation Administration (FAA) has cut off all communication with the DC Metroplex BWI Community Roundtable and the Maryland Aviation Administration.

The petitions, announced late June, seek judicial and administrative review over changes to flight paths which have resulted in many Marylanders agitated over added noise.

From the Attorney General’s release:

The first action is a petition for review in the United States Court of Appeals for the District of Columbia Circuit regarding the Federal Aviation Administration’s (FAA) implementation changes to the approach flight path for Runway 19 at DCA. The second is an administrative petition, filed with the FAA, that requests a supplemental environmental assessment as well as revisions to area navigation routes and procedures for BWI. Attorney General Frosh noted that the FAA failed to conduct the necessary environmental reviews prior to implementing the new flight paths.

WBAL reports:

“If the government will routinely stop communicating with the citizens as soon as they petition the government, it seems something is wrong with that,” said Jesse Chancellor, vice chair of the roundtable. …

Chancellor described the noise as a highway in the sky.


Maryland Joins Three States In SALT Suit

Attorney General Brian Frosh has joined Maryland with Connecticut, New Jersey and New York in suing the federal government over capping the state and local tax (SALT) deduction through last year’s tax reform. The claim alleges that the new $10,000 SALT cap violates the U.S. Constitution’s Equal Protection Clause and the 10th Amendment, which protects states’ rights, according to Governing.

From that coverage:

Calling the deduction cap an “unconstitutional assault” on state governance, the lawsuit accuses the federal government of meddling in state taxation and fiscal policies by making it more difficult for them, politically, to raise revenue if needed.

“The new cap disregards Congress’ hitherto unbroken respect for the states’ distinct and inviolable role in our federalist scheme,” the lawsuit says. “And, as many members of Congress transparently admitted, it deliberately seeks to compel certain states to reduce their public spending.”

In January, Governing interviewed tax law experts who opined that winning a lawsuit just like this would be very difficult.

The New York Times article expresses similar sentiments:

The lawsuit, filed in the Southern District of New York, was dismissed as a long-shot political stunt by supporters of the new tax code, but New York Gov. Andrew Cuomo said it is a practical act of self-defense against an adversarial federal government. …

When it comes to taxing Americans, “Congress can really do what it wants,” said Tax Foundation executive vice president Joseph Bishop-Henchman. “It’s really not much of a case.”

Attorney General Frosh stated:

Eliminating the SALT deduction will jack up taxes for more than half a million Marylanders. It is an attack on state sovereignty. It will reduce funding for local law enforcement and for construction of infrastructure statewide, and it will cripple our ability to educate our kids.

Helpful Links


Maryland Attorney General’s press release

Bethesda Magazine coverage

Governing coverage

New York Times coverage

MACo Submits Amicus Brief on Montgomery Pesticide Ban Appeal

MACo and the Maryland Municipal League have jointly submitted an amicus curiae brief (2018-06-21) to the Maryland Court of Special Appeals in a Montgomery County case involving a local ban on the use of lawn-care pesticides. The issues raised by the case concern local government autonomy and preemption.

As previously reported on Conduit Street, the Montgomery County Council passed a ban on the use of EPA-registered lawn-care pesticides for public and private property. The ban  covered areas such as lawns, playgrounds, recreation areas, and child  care centers but exempted agricultural usage. The ban also contained exceptions for treating noxious or invasive weed species, addressing human health concerns, or preventing significant economic damage.

In response, Complete Lawn Care and other several other businesses and county residents filed suit in Maryland Circuit Court challenging the ban. Circuit Court Judge Terrence McGann issued a decision on August 3, 2017, finding that state law preempted the Montgomery County ordinance. From Judge McGann’s opinion:

By generally banning the use of registered pesticides, the Ordinance prohibits and frustrates activity that is intended to be permitted by State law. The County’s Ordinance flouts decades of State primacy in ensuring safe and proper pesticide use, undermines the State’s system of comprehensive and uniform product approval and regulation, and prohibits products and conduct that have been affirmatively approved and licensed by the State.

The County appealed the Circuit Court’s decision to the Maryland Court of Special Appeals. MACo and MML, concerned about the broader local preemption issues posed by the holding, submitted an amicus brief to the Court of Special Appeals on June 21, 2018. The brief argued that local governments should not be preempted in enacting public health and safety measures that go beyond state minimums.  From the amicus brief:

The [circuit court’s ruling] gives insufficient deference to Maryland’s longstanding recognition of concurrent State-local authority, and its reluctance to preempt local safeguards that augment State health and safety protections.

In finding Montgomery County Bill 52-14 (“the Ordinance”) preempted, the circuit court failed to fully credit the latitude Maryland long has afforded local legislation that provides residents with additional health and welfare safeguards above and beyond those of State law. A proper respect for the role of county and municipal authority, asserted by the People over themselves through this amici and their constituent members, requires reversal of the court’s preemption ruling.

Useful Links

Circuit Court Decision – Complete Law Care v. Montgomery County (2017)

Prior Conduit Street Coverage of Montgomery Pesticide Ban

Tax Foundation: Wayfair Q&A

Confused about the impacts of the Supreme Court’s Wayfair decision?  That’s ok: the Tax Foundation has you covered.

Their helpful Q&A answers questions like, “I thought states were prohibited by law from Supreme Court Buildingtaxing the internet?” (they are – they are prohibited from taxing access to the internet, not sales of things over the internet), and “Is my state going to receive a ton of revenue?” (Probably not; but, there will be some. The Government Accountability Office (GAO) estimates uncollected e-commerce revenue nationwide to be about $8-$13 billion.)

What will the landscape look like in one to two years because of this decision, versus 10 years from now?

If states simplify their tax systems as set out by Wayfair, there will likely be only small changes in the e-commerce landscape. Sellers may need to monitor their new compliance requirements and seek a new software solution, but these costs can be minimized if states provide the necessary simplifications and protections. However, if some states ignore the features of the South Dakota law in crafting their own laws, and put crushing burdens on interstate sellers, there will be more litigation and a higher potential for action by Congress.

The Tax Foundation will be working with states to include seller protections in their laws and will help challenge laws that ignore the Wayfair rules, and educating policymakers on the value of congressional action to codify seller protections in federal law.

In short, the Tax Foundation advises state legislators to craft their own states’ e-commerce sales tax laws closely like South Dakota’s – or risk legal scrutiny and federal preemption.

Howard Moves Forward With P3 Deal For New Courthouse

Baltimore Sun article (2018-06-18) reported that Howard County has selected Edgemoor-Star America Judicial Partners to design, build, and operate a new 237,000 square-foot courthouse in Columbia. The new building will replace the County’s current Ellicott City courthouse, which is 175 years old. The article outlined how the public-private partnership (P3) agreement would work:

The project’s development group will finance the construction and also be responsible for designing the building and handling operations and maintenance under a 30-year contract using what the county has called “a hybrid financing solution.”

After 30 years, the county will take over the building, according to terms of the deal.
The article noted that the agreement has requires Edgemoor-Star America to use minority- and veteran-owned businesses for at least 15 percent of the work. Construction is scheduled to begin in August of 2019 and the building will open in the summer of 2021.

Battles for Baltimore’s Top Courthouse Posts

State’s Attorney

Incumbent Marilyn Mosby won the Democratic nomination, receiving 36,633 votes or 49.2 percent of the vote.

The campaign got particularly contentious on the eve of the primary, when challenger Ivan Bates threatened to sue Mosby and challenger Thiru Vignarajah for defamation. Bates had been campaigning on the claim that he had never lost a homicide case. Mosby and Vignarajah both counterclaimed that this was untrue; or, as Vignarajah told WMAR, that he had never even tried a murder case.

No Republican candidates are competing for the Baltimore City State’s Attorney position, essentially ensuring the Democratic candidate will win the general election in November.

Clerk of the Court

Marilyn Bentley won a bizarrely interesting race for clerk of the court, with only 11,347 votes or 19.2 percent of the vote.

The seat became open after the passing of longtime former clerk Frank Conaway, Sr. in 2015. Former deputy clerk Marilyn Bentley has filled the role since, making this the first real contest for the clerk of the court seat in decades. Conaway had held the seat since the late 1990’s. The race for the court boss job – which oversees a $22 million budget and leads a staff of 280 courthouse employees, according to The Baltimore Sun  – had 11 candidates, including MACo Board Member, Baltimore City Council Member Sharon Middleton’s stepdaughter, Anika Middleton.

MACo’s election coverage and analysis relies, as always, on unofficial results published by the State Board of Elections. Official results will follow, after a full accounting of pending ballots. Given the larger-than-usual expected number of provisional ballots (which would not be included in the unofficial vote total), readers are advised that any close unofficial results are subject to realignment in the days ahead.

MD AG Seeks Judicial Review of Wynne Whammy

The Office of the Attorney General has formally requested the Circuit Court of Anne Arundel County to review the Maryland Tax Court’s ruling which essentially raises the Wynne Case refund interest rate from three to 13 percent – a decision which would likely cost Maryland counties $30 to $40 million.

On May 23, 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. 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.

MACo President Jerry Walker, Council Vice Chairman, Anne Arundel County submitted a letter to Attorney General Brian Frosh on June 11, 2018 requesting that his office seek judicial review of the tax court’s opinion. From that letter:

On behalf of Maryland’s 24 county jurisdictions, the Maryland Association of Counties (MACo) respectfully requests that your office appeal the Maryland Tax Court’s May 23, 2018, decision …. Counties stand at the ready to assist on this front however deemed most helpful and appropriate.

We hope that you can represent the Comptroller, and practically, all of Maryland’s counties, by distinguishing the matter of how the refund interest rate is set from the fundamental Commerce Clause issues inherent in the Wynne case.

[Emphasis added.]

Four days later, the Attorney General’s Office filed its Petition for Judicial Review, and Counsel to the Comptroller Brian Oliner sent MACo this response.

From that letter:

We would like to thank the Counties for offering assistance.

To this end, county attorneys willing to lend their expertise on this matter should contact MACo Associate Director Barbara Zektick, Esquire at

The case number for this matter is C-02-CV-18-001788. For the most recent information on this case, visit the Maryland Judiciary Case Search website and search this case number in the Anne Arundel County Circuit Court.

Prior Conduit Street coverage on Wynne is available here.

See Attorney General Brian Frosh moderate the panel, Like a Bridge Over Troubled Water: Know Your Water Lawat the MACo Summer Conference. The MACo Summer Conference will be held August 15-18, 2018 at the Rowland Powell Convention Center in Ocean City, Maryland. This year the conference’s theme is “Water, Water Everywhere.”

Learn more about MACo’s Summer Conference:

Environmental Groups Appeal Maryland’s Conowingo Dam Certification

A joint press release (2018-06-12) issued by Waterkeepers Chesapeake, the Lower Susquehanna Riverkeeper Association, and Earthjustice announced that several of the environmental groups have filed an administrative appeal challenging the Maryland Department of the Environment’s (MDE’s) recent decision to grant Exelon a Water Quality Certification for the relicensing of the Conowingo Dam with special conditions requiring Exelon to address the nutrient and sediment pollution generated by the dam and its reservoir. As previously reported on Conduit Street, Exelon has appealed the special conditions of the certification, arguing that the Dam does not actually create the water pollution that is being released by it. The environmental groups are arguing the opposite – that the special conditions do not go far enough to address water quality concerns.

From the press release:

Waterkeepers Chesapeake and the Lower Susquehanna Riverkeeper Association filed an administrative appeal on June 8, 2018, urging the Maryland Department of the Environment to reconsider its recent water quality certification for the Conowingo Dam, which is owned and operated by Exelon Corporation. Exelon has requested a new 50-year federal license to operate the dam, and, in order to receive that license, the State of Maryland must certify that the dam’s operations will not adversely impact water quality under the Clean Water Act.

“This is one of the most important decisions in the effort to clean up the Chesapeake Bay,” said Betsy Nicholas, executive director of Waterkeepers Chesapeake, a coalition of 19 independent waterkeeper organizations. “We shouldn’t be approving a 50-year license without a solid, accountable plan for removing sediment from behind the dam.”

The Conowingo Dam was completed in 1928 and, since that time, it has been trapping sediment and nutrient pollution from the Susquehanna River and its 27,000-square-mile drainage area. Sediment is one of the three key pollutants, along with nitrogen and phosphorus, that is regulated under the federal Chesapeake Bay cleanup plan, known as the TMDL.

Scientists have concluded that the reservoir behind the dam is now at capacity and cannot trap any more sediment. After large storms, powerful floodwaters can scoop out or “scour” the stored sediment behind the dam and send that downstream to the Chesapeake Bay in the form of pollution.

“Sediment runoff from agriculture and development has been stockpiling behind Conowingo dam for nearly 100 years,” said Ted Evgeniadis, Lower Susquehanna Riverkeeper. “The Susquehanna River is a public resource, and Exelon profits from operating a dam on it. Exelon therefore shares a responsibility to help prevent this sediment from polluting the Bay and we believe the State of Maryland must hold them accountable to do so.”

Waterkeepers Chesapeake, Lower Susquehanna Riverkeeper Association and Earthjustice submitted public comments during the relicensing process. The organizations say that the Maryland Department of the Environment has failed to address them.

The organizations also say that, for the certification to protect water quality, the State must understand the full potential of large flooding events that could cause dramatic harm to the Bay. The new license covers 50 years, but the State has yet to conduct a study or model how much sediment pollution would be scoured from behind the dam during a 50-year storm, or even a 25-year storm, which has an 83 percent chance of occurring during the license period. Scientists say large storms and heavy rain events are happening more frequently due to climate change, which means the risk of a catastrophic storm continues to increase.

“In just the last month, we’ve seen serious, damaging flooding throughout the region,” said Nicholas. “It’s irresponsible not to account for the increasingly likelihood that Conowingo Dam experiences a major flood during the next fifty years.”

The Maryland Department of the Environment issued its water quality certification for the Conowingo Dam on May 11, 2018. While the certification acknowledged the impact of the dam on water quality, including the threat posed by the accumulated sediment, it does not put specific measures in place to address the sediment.

“When Congress adopted the Clean Water Act, it purposefully gave states a very broad authority on federal permits,” said Jennifer Chavez, attorney for Earthjustice, which is serving as legal counsel for the appeal. “We’ve filed this request for reconsideration because we want to ensure that Maryland uses the best available science before exercising that critical authority.”

The Maryland Department of the Environment will review the appeal and either grant the request to reconsider and revise the certification or deny it. There is no deadline by which the Department must make its decision.

Useful Links

Prior Conduit Street article on Exelon Appealing MDE Conowingo Decision (2018-06-01)

Prior Conduit Street Coverage of Exelon and the Conowingo Dam

Waterkeepers Chesapeake Website

Earthjustice Website