Potential Refund for Maryland Residents as the Supreme Court Rules in Favor of the Taxpayer in Comptroller of the Treasury of Maryland v. Wynne

In the case of the Comptroller of the Treasury of Maryland v. Wynne, the U.S. Supreme Court ruled that Maryland resident taxpayers are now able to take a credit for income taxes paid to other states against both the Maryland state income tax and the Maryland local tax. Prior to the Supreme Court decision in the Wynne case, Maryland residents who paid income taxes to another jurisdiction were allowed a credit for taxes paid only against the Maryland state tax, but not the Maryland local tax. The Court concluded that the Maryland income tax system acted in favor of intrastate economic activity and discriminated against interstate economic activity.

Maryland resident taxpayers who paid income taxes to other jurisdictions in prior years on income earned in those states or localities may be affected by this ruling. The Maryland Comptroller’s Office has provided the following guidance regarding refund requests:

A formal request is required to be filed for each tax year a refund is requested, as refunds will not be automatic as a result of this decision. The comptroller will consider refund requests for protective claims, amended returns and original returns. Furthermore, a taxpayer is not required to file additional forms for any year in which a protective claim for one or more years pending the outcome of this case has already been filed.

Maryland Form 502LC has been created to assist taxpayers in calculating the credit for local tax. This form is available on the comptroller’s website.

An amended return must be filed within three years from the time the return was filed, or two years from the time the tax was paid, whichever is later. Thus, affected Maryland returns for tax year 2011 that were filed in 2012 are the ones that are most time-sensitive and need to be addressed for statute limitation purposes.

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