Maryland is launching a new program aimed at bringing physicians to underserved areas of the state. As of June 1, 2016, Maryland physicians can earn a credit reducing state income tax from $1,000 up to $10,000 by serving as a preceptor to medical students in areas with health care workforce shortages. According to the American Association of Family Practitioners, primary care physicians are one area where there are workforce shortages. See full article.
Physician preceptors must work with an approved preceptorship program in an area of the state with health care workforce shortages. Funding of the credit is limited – participation through the Maryland Department of Health and Mental Hygiene is on a first-come, first-served basis.
If you have questions regarding the Maryland tax credit or to discuss your particular situation, please call your Aronson Tax Advisor at 301-231-6200. Our medical practice specialists provide valuable guidance in all aspects of federal and state tax matters.
Maryland taxpayers that have received refunds or filed refund claims because of the decision in Comptroller v. Wynne can preserve their right to receive the full 13% interest taxpayers are typically paid on refunds. Last year, Maryland enacted legislation stating taxpayers receiving Wynne-related refund claims would only be paid the prime interest rate rounded to the nearest whole number, instead of the general rate of 13%. Thus, the current interest rate being paid on Wynne refund claims is only 3%; the legislation is expected to be challenged in court on constitutional grounds. A number of taxpayers seeking the full 13% interest rate have already filed appeals with the Comptroller.
In anticipation of litigation on this issue, the Comptroller has established a procedure whereby taxpayers can challenge the interest they received on their Wynne refunds. A summary of the procedure is below.
The Comptroller has indicated that it is currently processing protective refund claims filed in 2014. All protective claims (i.e., claim filed before the Wynne decision was issued in May of 2015) are expected to be processed by the end of the year. This means that most of the refund claims that have been submitted since the Wynne decision was issued will likely not be processed until 2016.
If you have questions related to a Wynne refund claim or another Maryland tax issue, please contact your Aronson tax advisor or Michael L. Colavito, Jr.at 301-231-6200.
On August 4, 2015, the Maryland Comptroller’s office hosted an informal gathering for tax practitioners to ask questions of the Comptroller’s staff regarding the upcoming Maryland tax amnesty program, as well as the processing of refund claims related to the Wynne decision.
The tax amnesty program, which will take place from September 1, 2015 to October 30, 2015, gives Maryland taxpayers the opportunity to come clean on any outstanding tax liabilities. The program allows for the waiver of civil penalties and one-half of any outstanding interest due to the nonreporting, underreporting, and/or nonpayment of Maryland state and local income tax, withholding taxes, sales and use taxes, and admissions and amusement taxes.
In the August 4th meeting, the Comptroller’s staff clarified that the amnesty program does not apply to tax year 2014, as amnesty is only being offered for tax liabilities arising from returns due on or before December 31, 2014. It was further stated that the Comptroller’s expectation is that taxpayers participating in the program will disclose their tax liabilities for all back tax years. Thus, taxpayers with unfiled returns for more than three prior years should consider participating in the Comptroller’s voluntary disclosure program, which typically limits a taxpayer’s disclosure and payment of outstanding tax liabilities to the most recent three-year period while foreclosing the Comptroller’s ability to assess the taxpayer for any year prior to such period. The Comptroller anticipates that the applications for participation in the amnesty program will be available on its website by August 28, 2015. Taxpayers that have significant outstanding Maryland tax liabilities can benefit from entering into the amnesty program, but they should consider whether the voluntary disclosure program is a better option.
The Comptroller’s staff also updated practitioners on its processing of Wynne-related refund claims. For readers not familiar with the decision issued by the U.S. Supreme Court in Wynne, please see Aronson’s blog on the Court’s ruling. The Comptroller has set a goal of processing all of the approximately 10,000 protective refund claims by the end of 2015. It is unclear, however, how long it will take the Comptroller to process all of the refund claims currently being filed by taxpayers that, rather than filing protective claims for 2012 and 2013, waited until the decision in Wynne was issued in May of 2015. The Comptroller is receiving these types of refund claims on a daily basis.
The Comptroller estimates that approximately 55,000 Maryland residents are due a refund. Even assuming that a significant portion of those taxpayers will not file refund claims because their refunds are of an insignificant amount, the additional claims could easily number in the tens of thousands. The Comptroller is processing the refund claims in the order in which they were received, so taxpayers that filed separate protective claims (based on the applicable year’s statute of limitations) will be receiving separate refund checks for each year at different times. The Comptroller fully expects the processing of the more recently filed refund claims to overlap with the 2015 filing season, which is expected to delay the completion of processing all of the Wynne refund claims.
Breaking News: The U.S. Supreme Court has ruled in favor of the taxpayer in Comptroller v. Wynne, an important case for Maryland residents paying taxes to other states. The Court issued its 5-4 decision on May 18, 2015, holding that the state’s failure to allow resident individuals a credit for the county income tax against taxes paid to other states on pass-through income from an S Corporation is unconstitutional because it is inherently discriminatory and operates a tariff. The decision by the Court means that many Maryland residents earning income from other states can receive income tax refunds as a result of being able to claim a larger credit for taxes paid on their Maryland income tax returns.
The decision by the Court upheld the ruling issued by the Maryland Court of Appeals in May of 2013. Specifically, the U.S. Supreme Court concluded that Maryland’s tax scheme violated the dormant Commerce Clause’s internal consistency test because if all states adopted Maryland’s rule, interstate commerce would be taxed at a higher rate than intrastate commerce. The Court reasoned that the lack of a credit for the county portion of Maryland’s income tax subjected income earned from interstate commerce to a double tax burden to which intrastate commerce is not exposed.
The Court rejected assertions that prior Supreme Court decisions were not applicable because those cases involved corporate gross receipts taxes as opposed to net income taxes imposed on individuals. The Court saw no reason why there should be a distinction between gross receipts and net income taxes, reasoning that the focal point should be on the economic impact of a particular tax. The Court also rejected the argument that the dormant Commerce Clause should offer less protection to individuals because they can remedy any discrimination through their right to vote, calling the notion both “fanciful” and “farfetched.”
It’s likely that the Comptroller will speak out on the decision, and hopefully provide taxpayers with information on the timing and manner of issuing taxpayers refunds. Based on the favorable taxpayer decision issue by the Court, there may also be a challenge to Maryland’s recently-passed legislation that reduces the interest rate on Wynne-based refund claims. Taxpayers that have not filed protective claims should contact their tax advisor about filing refund claims related to the Wynne decision for all open tax years.
If you have any questions regarding the Court’s decision or filing a refund claim in Maryland please contact your Aronson tax advisor or Michael L. Colavito, Jr. at 301.231.6200.
Related: To read previous reporting on the history of this case, click here.
If you plan on making a purchase from Amazon.com in the near future and you are located in Maryland, you might want to consider executing that transaction today if you were hoping to avoid sales tax. Starting tomorrow, October 1, 2014, Amazon.com will begin collecting the state’s 6% sales tax on purchases made on its website by Maryland customers.
Amazon.com’s collection of Maryland’s sales tax coincides with the opening of two in-state fulfillment facilities being constructed on the south side of Baltimore. Generally, a retailer only has to collect a state’s sales tax if it has a physical presence in the state where the product is delivered. For a number of years, paying no sales tax was one of the major advantages from buying products from Amazon.com. Now Amazon.com collects sales tax in over 20 states.
The Maryland Board of Revenue has estimated that Amazon.com’s collection of sales tax will bring in approximately $50 million in new revenue annually. October 1st also marks when Amazon.com will also begin collecting sales tax in Minnesota.