Maryland Taxpayers to Begin Receiving Refunds on Previously Disallowed Out-of State Income Tax Credits
The Supreme Court ruled against a Maryland law that disallowed a full credit to residents on the income taxes paid to other states. Maryland previously allowed a credit on income that was earned and taxed in another state, but the credit was only allowed to be claimed against Maryland state income tax and not against the local tax to counties. The Supreme Court Justices, in a 5-4 decision, ruled that it was unconstitutional for Maryland to tax resident income that was earned elsewhere and already taxed because it interferes with the interstate commerce clause of the Constitution.
For the past several years as the Wynne case made its way through the court system, many Maryland taxpayers have filed protective refund claims for the credit for taxes paid to other states against their local tax. Now that the Supreme Court has ruled in favor of Maryland taxpayers, these claims will be refunded along with interest at 3%.
Hertzbach will be monitoring the situation and will post new information as it becomes available, including information on how refunds will be issued and how to file returns going forward to apply the new provision.
If you have any questions, please call your Hertzbach Tax Advisor at 410-363-3200 or 800-899-3633. We look forward to speaking with you.