Chevy Chase officials have found income taxes were not correctly distributed in their municipality, which opened up an investigation into other county municipalities and the state.
Maryland Comptroller Peter Franchot is looking into how and why taxes in Montgomery County were incorrectly sent to municipalities and not the County.
“It’s important to recognize that this is an administrative issue between municipal, county and state levels of government and that taxpayers are not directly impacted by this,” said Andrew Friedson, spokesperson for Franchot.
Friedson said a small number of tax returns were not appropriately distributed, but the time period is unclear at this time.
The entire state will be looked at to make sure this has not happened anywhere else, Friedson said.
“Accuracy is our priority here, so we’re not prepared to conclude the review until the work is completed, but we are certainly aware of timelines related to fiscal and budgetary realities and are instructing the outside to finish its work as expeditiously as possible,” Friedson said.
The Revenue Working Group, created by Chevy Chase Mayor Al Lang, found the municipality was receiving more income tax revenue than the number of households accounted for.
Lang said records showed an increase in the number of households filing for income taxes.
He said from 2000 to 2009, the number increased from about 1,500 to 2,700 in 2010.
Lang said he wanted to verify the addresses, but officials said they could not do that.
He said Chevy Chase received $4.9 million more in income tax revenue between 2010 and 2015.
Lang said the municipality is “projected to lose $700,000 in fiscal year 2016 and into the future” because there is no way of getting revenue from the other 1,200 households.
Certain municipalities have received income tax revenue from those who do not live in those areas and should have gone to the County, said Steve Farber, County Council administrator.
Chevy Chase, Gaithersburg and Rockville seem to have been given the most between those years to “his understanding,” said Roger Berliner, D-1, County Council vice president.
Friedson said he cannot give an estimation of how much money was given to the municipalities because the investigation has not concluded.
Berliner said the estimated amount could be $14 million to $15 million and the County needs to be paid back.
There is no “definitive” answer regarding the actual amount at this moment, said Joe Beach, director of the County’s Department of Finance.
“This needs to get cleaned up,” Berliner said.
A company outside of the County has been hired to look at how and why this issue occurred, Friedson said.
He said the name of the prospective company performing the analysis cannot be revealed because a contract has not been signed.
The state imposes an income tax on state residents, and counties may impose income taxes on County residents, as well.
Montgomery County’s rate is 3.2 percent of Maryland taxable income, Farber said.
Municipalities receive 17 percent of the County income tax paid by the taxpayers, he said.
The County has 19 municipalities.
“It is up to the Comptroller’s Office to assure that (1) the County is made whole, and (2) a fair and workable repayment plan is developed for municipalities that received revenue that should have gone instead to the County,” said Farber.
Lang said there have been solutions suggested, but a solution has not been created yet.
The Comptroller’s office said an analysis is being conducted and it is waiting for the results to come back before a plan is created.