Ocean City Today

Tax differential request could affect state

Code treats certain counties differently
By Brian Gilliland | Jan 25, 2018

(Jan. 26, 2018) Allegany, Anne Arundel, Baltimore, Garrett, Harford, Howard, Montgomery and Prince George’s counties are required to provide tax setoffs for similar services offered by municipalities and counties, while the rest of the counties and Baltimore City are not, and the action filed by the resort last week could change all that.

There are two operative words in consecutive sections of the state property tax code regarding tax setoffs for duplicated services: “may” and “shall.” In legal terms, “may” refers to something allowable, but not required and anything that “shall” be done is mandatory.

According to the complaint filed by City Solicitor Guy Ayres in Circuit Court, 19 of 23 counties that “may” provide tax setoffs have done so. The four that have not are Howard, Baltimore, Wicomico and Worcester counties. Of those four, Baltimore and Howard counties do not have municipalities.

Ayres cites the State Department of Legislative Services December 2016 report, the most recent at the time of the case filing, which noted that 136 Maryland municipalities receive a tax differential or tax rebate from their county. The state lists 157 municipalities in Maryland.

In lieu of tax rebates, Worcester County provides grants to its municipalities. According to Ayres’ complaint, the resort receives “a fluctuating annual amount of about $2 million.” Ayres also cites Ocean City’s internal study conducted a decade ago that determined there were about $17 million worth of duplicated services. Ayres states the county’s own study, completed in 2016, identified $7.8 million in potentially duplicated services.

Ayres uses these facts to ask the court to declare the section of code that separates the counties into “may” and “shall” subheadings to be in violation of the Maryland Constitution, in that it requires tax differential legislation “shall be in their terms and in their effect apply alike to all municipal corporations.”

With that section of the code out, and under the concept of “severability” where legislators can carve out problematic sections of laws while leaving the rest intact, “to the end that tax differentials or tax rebates are mandatory for every municipality in the state, including the town of Ocean City.

Therefore, under Ayres’ court action and should the judge concur, Worcester County would be required to provide a tax offset for duplicated services.

Kim Moses, public information officer for Worcester County, said the county has not yet been served with the lawsuit. A trial date has not been set.

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