Taxes and Revenues

Let the Sunshine In – Register Now For MACo Solar Symposium

Les Knapp Agriculture, Environment, MACo Events, Planning and Zoning, Taxes and Revenues

 

MACo, in partnership with the Sierra Club of Maryland and Solar United Neighbors, is offering a free one-day symposium to county officials (elected and non-elected) on the benefits and challenges of siting community and utility-scale solar generation facilities within your county.

The symposium, titled Let the Sunshine In: Solar Siting in Maryland, will provide an overview of solar’s role in Maryland, including existing laws; offer perspectives from different stakeholders, such as agriculture, community/health, and the environmental community; discuss local zoning and taxation best practices; and showcase several solar “success stories.” The symposium will be concluded with an open facilitated discussion where attendees can raise solar-related issues and questions important to their local jurisdiction.

 

Let the Sunshine In: Solar Siting in Maryland

  • Date: Thursday, October 11, 2018
  • Time: 10:00 am – 3:45 pm (morning coffee and lunch provided)
  • Location: North Laurel Community Center, 9411 Whiskey Bottom Road, Laurel MD 20723
  • Eligible Attendees: County elected and non-elected officials
  • Cost: Free but registration is required

Session Objectives

  • Provide key information on factors affecting solar energy development in Maryland relevant to the needs and policy decisions of county officials
  • Present examples of Best Practices in solar development
  • Offer opportunity for dialogue among county officials and experts engaged in specific technical and policy areas relevant to solar development

Space is limited and registrations are accepted on a first come, first serve basis. A full agenda will be released shortly. For further questions about the symposium, please contact Les Knapp at lknapp@mdcounites.org or 410.269.0043.

Useful Links

Register for Let the Sunshine In: Solar Siting in Maryland 

Sierra Club of Maryland Website

Solar United Neighbors Website

 

 

Conduit Street Podcast: Pondering Potential “Pay-Fors”

Kevin Kinnally County News, General Assembly News, News You Can Use, State Budget and Fiscal Issues, Taxes and Revenues

On the latest episode of the Conduit Street Podcast, Michael Sanderson and Kevin Kinnally discuss ways in which Maryland could increase state revenues. A lingering structural deficit, coupled with new and expensive funding proposals, could bring forth a plethora of revenue-generating policy proposals, sometimes known as “pay-fors” — literally, paying for something that the government wants to buy.

Listen here:

MACo has made the podcast available through both iTunes and Google Play Music by searching Conduit Street Podcast. You can also listen on our Conduit Street blog with a recap and link to the podcast.

You can listen to previous episodes of the Conduit Street Podcast on our website.

Useful Links

Previous Conduit Street Coverage: Tax Foundation: Wayfair Q&A

Previous Conduit Street Coverage: Fiscal Briefing: Budget Outlook & Local Aid Loss

DHCD Grants Wash Co $50K for After School Programming

Nicolette Querry County Budgets, County News, Education, Taxes and Revenues

The Maryland Department of Housing & Community Development has granted Washington County $51,455 for after-school youth programming. 

The grant, a part of the Community Development Block Grant Funds, will enable the Hagerstown YMCA to provide affordable after-school programming to families in the county.

The Washington County press release reports:

The Hagerstown Y believes that all kids have great potential. Our staff work hard every day to help them set and achieve personal and educational goals. With so many demands on today’s families, they need all the support they can get to nurture the potential of each and every child. Our after-school enrichment programs, such as the one started this school year in Hancock, focus on nurturing children’s development by providing a safe and healthy place to learn, develop healthy relationships and build confidence.

– Maria Rubeling, CEO of the Hagerstown YMCA

With the grant, the YMCA will be able to provide a subsidy for families in need, based on household income. The YMCA’s goal is to provide a “meaningful experience” for families with children that cannot afford quality after-school programming.

Revenues, Taxes, and Wynne — Updates from State’s Chief Economist

Natasha Mehu MACo Events, State Budget and Fiscal Issues, Taxes and Revenues

Andrew Schaufele, Director of the Bureau of Revenue Estimates, briefed MACo’s Legislative Committee Wednesday, September 12, 2018 on the state of the State’s economy. 

Andy
Director of the Bureau of Revenue Estimates, Andrew Schaufele

Schaufele delivered good news regarding the state’s revenues — there’s a $504 million surplus! This was 2% more than estimated, much of which has been attributed to capital gains. Of that surplus $200 million has been set aside to help fund changes anticipated to occur as a result of the Kirwan Commission. The state also beat sales tax estimates.

Schaufele also provided updates on:

  • The Wynne Case. Challenges are ongoing with three separate cases in the courts. As was reported on Conduit Street, 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. County attorneys have been engaged on this issue filing amicus briefs and working with the Attorney General’s office.
  • Federal Tax Reform. Tax payer reactions to federal tax reforms add a level of uncertainty to estimates. However early data shows that shifts in tax payments and deductions have impacted the flow of money into the state and counties to the tune of tens of millions of dollars in the immediate years to forecasts of hundreds of millions of dollars in future years.

Members of the MACo Legislative Committee include representatives from Maryland’s 23 counties and Baltimore City. The committee meets regularly on Wednesdays at the MACo office during the general assembly session. During the interim, the committee meets quarterly to develop legislative priorities for the coming year.

For more information:

MD AG Seeks Judicial Review of Wynne Whammy (Conduit Street)

Court Strikes Wynne Interest Rate, Costing Counties $30 Million (Conduit Street)

First Quarter Income Tax Distributions: Tax Reform Impacts Materialize (Conduit Street)

‘Tax Reform 2.0’ Would Permanently Curtail State and Local Deduction

Kevin Kinnally County Budgets, County News, Taxes and Revenues

Tax legislation released Monday would make permanent a limit on state and local tax deductions (SALT) put in place as part of last year’s revamp of the federal tax code.

The tax reform bill signed into law in 2017 caps the federal tax deduction that homeowners can take for their state and local taxes at $10,000. The cap is set to sunset in 2026.

According to Route Fifty:

House Ways & Means Chairman Kevin Brady, of Texas, unveiled a package of three bills dubbed “Tax Reform 2.0.” A provision in one of the bills would remove the Jan. 1, 2026 expiration date for a $10,000 cap on the deduction individual taxpayers can claim on their federal tax returns for certain state and local tax payments.

The cap imposed on the so-called SALT deduction was among the more controversial aspects of last year’s tax overhaul and elicited strong push back from local government groups and some state officials. But it also provided one of the heftiest offsets for the corporate and individual tax cuts that are central to the tax law.

…

But the tax proposals face long odds in the Senate.

Sen. John Thune, a South Dakota Republican who is a member of the Republican leadership said last week that the chances are “probably slim to none” that the Senate will take up sweeping tax legislation ahead of the November elections, the National Journal reported.

By capping the SALT deduction, revenues shift from state and local governments to the federal government, constraining local policy options. Furthermore, the cap impacts Marylanders more than the residents in any other state – and consequently, Maryland counties, according to The Government Finance Officers Association (GFOA) in The Impact of Eliminating the State and Local Tax Deduction Report.

Maryland 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.

Stay tuned to Conduit Street for more information.

Useful Links

Previous Conduit Street Coverage: House Tax Plan Partially Eliminates #SALT Deduction

Previous Conduit Street Coverage: Maryland Joins Three States In SALT Suit

Read the full Article from Route Fifty

County Income Tax Distributions Down Nearly 50%

Barbara Zektick County Budgets, County News, Taxes and Revenues

The Comptroller’s Office has released its August local income tax distributions – which have decreased from last year by 47.7 percent.

This is primarily because the number of relevant pay periods for significant withholders has differed in previous years, says Pharita (Jan) Akbhavasut of the Revenue Administration Division – indicating that this decrease is, effectually, “artificial.”

From her email:

The August local income tax distribution for counties totals $54.7 million, a decrease of 47.7%.  This distribution includes two reconciling distributions–the balance of second quarter 2018 withholding and estimated payments and the reconciling distribution for tax year 2017.  Year over year withholding growth in the second quarter, ignoring complexities related to this distribution, was 4.1%, consistent with recent trends.  Timing issues related to the number of pay periods in past quarters had caused volatility in the year over year withholding numbers.  However, those timing issues appear to have passed.   This is likely the cause of a significant portion of the decline in the distribution; last year’s reported withholding growth for the August distribution was artificially elevated by the aforementioned timing issues.

The second quarterly distribution is based on withholding and estimated tax collections attributable to the second quarter of 2018 less amounts already distributed (projected April/May withholding and estimated payments distributed in June and projected June withholding distributed in July).  This component of the distribution is effectively one-third of projected estimated payments for the second quarter, and a reconciliation of actual withholding and actual estimated payments for the entire quarter to projections from May and June.  This means the size the component depends on the variance of actuals from the estimate, and the amounts already distributed.  While this component decreased 49.4%, to $44.2 million from last year (Table 2), the cumulative distribution so far for tax year 2018 grew 2.3%, to $2.111 billion, from the same point in time last year (Table 3).

If you have any questions about the distribution, please contact Debora Gorman of the Revenue Administration Division at (410) 260-7451 or Pharita (Jan) Akbhavasut at (410) 260-7501.

Here is her email from last year:

The August local income tax distribution for counties totals $104.6 million, an increase of 40.9%.  This distribution includes two reconciling distributions–the balance of second quarter 2017 withholding and estimated payments and the reconciling distribution for tax year 2016.  Year over year withholding growth in the second quarter, ignoring complexities related to this distribution, was a relatively strong 5.7%.  This is likely due to timing issues related to the number of pay periods in a quarter for some large withholding payers.  The number of pay days in a given quarter can change from year to year.  This is likely the cause of the high growth rate for 2017Q2. While we cannot be certain, we believe that pay period timing has served to distort quarterly growth rates relative to true underlying growth for all quarters from 2015Q4 to 2016Q3.  As a result of those anomalous periods, each subsequent year-over-year comparative period is impacted. Withholding growth in 2016 Q2 was weak, at 1.7%, and has served to boost the growth figure for 2017 Q2 by comparison.

The second quarterly distribution is based on withholding and estimated tax collections attributable to the second quarter of 2017 less amounts already distributed (projected April/May withholding and estimated payments distributed in June and projected June withholding distributed in July).  This component of the distribution is effectively one-third of projected estimated payments for the second quarter, and a reconciliation of actual withholding and actual estimated payments for the entire quarter to projections from May and June.  This means the size the component depends on the variance of actuals from the estimate, and the amounts already distributed.  While this component increased 55.2%, to $87.5 million from last year (Table 2), the cumulative distribution so far for tax year 2017 grew 5.0%, to $2.063 billion, from the same point in time last year (Table 3).

Links to Income Tax Distribution Tables for Counties

August 2018 Counties Tables

August 2017 Counties Tables

August 2016 Counties Tables

State Enjoys $339M Windfall, Leaders Advised to Save

Barbara Zektick County Budgets, State Budget and Fiscal Issues, Taxes and Revenues

Attendees at the MACo Summer Conference session, Navigating Murky Waters: Predicting Unpredictable Revenue Streams heard the State’s top revenue estimator Andrew Schaufele discuss how difficult estimating revenues has become – and how much of that has to do with the top 1 percent having most of the money, and earning much of it through capital gains.

This week, the State announced that as it closes out fiscal 2018, it has received 2 percent in revenues above estimates – a total of $339 million in unanticipated dollars for public services. A large chunk of that – $218.7 million – came from the personal income tax, which came in at 2.4 percent above revenue estimates. The latter matters for counties, which receive their own “piggy back” local personal income tax.

The windfall, Schaufele states, largely results from capital gains realizations – a revenue source which is basically unestimatable:

In this era of extraordinary volatility, we have estimated no growth in capital gains to deter large negative variances, opting for the lesser of two evils.

Comptroller Peter Franchot urges State leaders to pocket the extra cash:

I urge our state’s leaders to regard this year-end boost like an unexpected bonus to be saved for future use, not to be spent immediately.

Sure enough, in his closeout report, Schaufele provides a foreboding prediction:

….surely in the future there will be an unpredictable correction that will reverse these good fortunes.

Of course, that future period will most certainly take place after the November election.

IRS: A SALT Payment’s Still a SALT Payment

Barbara Zektick County News, NACo and Federal Issues, Taxes and Revenues

The Internal Revenue Service (IRS) has proposed regulations for implementing the Tax Cuts and Jobs Act – and they specifically target state attempts to reclassify state and local tax (SALT) payments as charitable contributions.

Tax reform capped the amount of SALT deductions taxpayers can take to $10,000 – a move of particular import in States like Maryland. Some states have considered workarounds which allow taxpayers to classify payments for state and local government services as charitable contributions, which remain deductible, with no cap.

The IRS says that’s a no-go in its new proposed regulations. From the IRS news release:

Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.

For example, if a state grants a 70 percent state tax credit and the taxpayer pays $1,000 to an eligible entity, the taxpayer receives a $700 state tax credit. The taxpayer must reduce the $1,000 contribution by the $700 state tax credit, leaving an allowable contribution deduction of $300 on the taxpayer’s federal income tax return.

The proposed regulations are available here. The IRS is accepting public comment on the proposed changes through October 11, 2018. Comments can be sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-112176-18).  Alternatively, they can be sent by mail to:

Internal Revenue Service
CC:PA:LPD:PR (REG-112176-18)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Read the Tax Foundation’s coverage here.

See prior Conduit Street coverage on this issue here.

Revenue Forecasters Share Tricks to Their Trade at #MACoCon

Barbara Zektick County Budgets, County News, State Budget and Fiscal Issues, Summer Conference, Taxes and Revenues

County revenues generally come from property and income taxes – but how much should an administrator, elected official or budget officer expect to receive each year? This question has become increasingly difficult as counties still recover from the Great Recession, tax reform leads to uncertainty, and growth trends shift with an aging population and changing income sources. Even the State has modified its revenue projection processes, accounting for increased volatility. What’s a county to do?

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Andrew Schaufele, Director of Bureau of the Revenue Estimates: when more tax revenue comes from the top 1%, as it has, revenues become harder to estimate
.

MACo Summer Conference attendees learned how state revenue estimators and county budget officers predict the future in unpredictable environments at the session, “Navigating Murky Waters: Predicting Unpredictable Revenue Streams,” on Friday, August 17, 2018 at 2:15 pm.

The session began with Andrew Schaufele, Director of Bureau of the Revenue Estimates from the State Comptroller’s Office showing how his office anticipates state revenues during volatile times, and how he provides counties valuable information about county income tax revenues.

He spoke at length about the structural change that occurred to our economy after the Great Recession – and how his office quickly had to adjust its revenue estimating models to accommodate for this permanent change.

John Hammond, longtime Budget Officer for Anne Arundel County showed how he uses his magical crystal ball to inform county officials about how much revenue they can expect to receive in future years. He stressed the importance of maintaining a reserve fund balance to guard against volatility, and applying one-time revenue sources to capital expenditures, rather than operating.

Finally, Jonathan R. Seeman, Director, Budget, Finance & Information Technology, Queen Anne’s County provided perspective on how smaller counties must provide revenue projections with limited resources. He demonstrated how Eastern Shore counties experience some of the most volatile income tax receipts in the state- and why the November distribution of local income taxes is so important.

The session was moderated by The Honorable Kevin Hornberger of Maryland House of Delegates.

MACo’s 2018 Summer Conference was held August 15-18 at the Roland Powell Convention Center, in Ocean City, MD.

Median Home Values Surge Throughout Maryland

Barbara Zektick County News, Economic Development, Finance and Procurement, Summer Conference, Taxes and Revenues

Median home values are on the rise – and, in fact, are at their highest levels in 10 years, according to The Daily Record’s real estate blog, Ground Up.

For counties, which depend on property taxes more than any other revenue stream, this is a big deal.

When looking at median sales price increases this July as compared to July 2017, Prince George’s County’s increased by 1.1 percent, the Baltimore metro area’s increased by 2.6 percent, Montgomery’s increased by 6 percent, and Harford County’s increased the most, by 8.1 percent.

Howard’s was the only that fell, by 2.3 percent. Howard still maintains the highest home money-2724241__340values in the Baltimore metro area, however.

Anne Arundel saw the greatest surge in sales, which increased by 13.4 percent over the prior year.

The increases in sales activity and purchases prices is potentially attributable to tighter supply and uncertainty as to if and when interest rates will increase.

Curious how counties project property tax revenue increases? Join expert finance officers at the MACo Summer Conference session, Navigating Murky Waters: Predicting Unpredictable Revenue Streams.

MACo’s 2018 Summer Conference will be held this week, Aug. 15-18 at the Roland Powell Convention Center, in Ocean City, MD. This year’s conference is projected to have its highest attendance, ever!

Learn more about MACo’s Summer Conference: