ANNAPOLIS – The Maryland Court of Appeals upheld two lower courts decisions Friday and ruled that the state comptroller’s office must repay a Washington County business nearly $1 million in overpaid corporate income taxes.
In 1987, Mack Trucks Inc. of Hagerstown overreported its federal and state income by $100 million.
Mack officials contacted the Internal Revenue Service in 1990, after realizing the error. The IRS gave the firm until 1993 to amend its federal tax returns.
In March 1993, Mack filed an amended state return, as well as a state refund claim for $936,763.
According to court documents, the comptroller’s office rejected the claim, saying Mack had missed the state filing deadline for a refund. An extension granted by the IRS, the comptroller said, had no impact on Maryland.
But Mack argued that, according to U.S. law, once granted a federal extension, it had six months from January 17, 1993 to file with the state for a refund.
Maryland’s highest court agreed with Mack. “A taxpayer who enters into a federal assessment extension agreement is not required to notify the comptroller of that fact at or about the time of the agreement,” Judge Lawrence F. Rodowsky wrote for the unanimous court.
Herman Rosenthal of Whiteford, Taylor & Preston, Mack’s Baltimore lawyers, said he had expected the decision.
“The court agreed that Mack filed the request in a timely manner and should be granted a refund,” Rosenthal said. “We are excited about that because Mack was within its right to file the request.”
The Maryland Tax Court initially heard the case in May 1994 and ruled in favor of Mack. Then the comptroller appealed to Anne Arundel County Circuit Court, which upheld the Tax Court’s ruling. Finally, the case was heard by the Court of Appeals last month.
“We appealed this case to the highest level to get final clarification on the law,” said Marvin Bond, assistant state comptroller. “This was not just about Mack, but it was about a law that applies to people across the board who pay corporate income taxes.”
“We were seeking to win or get a ruling that cleared things up. This hearing served that purpose,” Bond said. “I’m not sure when the money has to be paid, but we will adhere to the court’s ruling.”
Mack’s Hagerstown plant builds truck engines and transmissions. The company has been in Maryland since 1961 and has 1,170 employees. -30-