State Tax Notes

Authors: Stephen J. Blazick

It is reasonable for state tax authorities to assess interest when tax is lawfully due because interest is intended to represent to a taxpayer the price for the use of borrowed money. However, when the interest rate associated with a tax deficiency is unusually high or punitive, particularly as compared with prevailing market rates or the rate for interest paid to taxpayers, fairness dictates that taxpayers be given a reasonable opportunity to request an abatement of interest in appropriate circumstances.

It is no secret that Maryland’s 13 percent interest rate on tax deficiencies is one of the highest in the country. However, many taxpayers are unaware that both the comptroller and the Maryland Tax Court have the authority to abate interest. Although prior trends may make getting an abatement seem like an impossible task, taxpayers should be aware of recent Maryland case law, as well as guidance from other states, that may provide avenues to successfully seek an abatement of interest.

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