Maryland Department of Assessments and Taxation has cost the state and counties millions of dollars in property taxes by undervaluing commercial properties in eight jurisdictions and by not adequately pursuing filing fees from out-of- state corporations, according to an audit obtained by The Examiner.
Department officials said there was often a lack of information about commercial buildings because most are being sold as part of sales of “controlling interest” in corporations, rather than as direct real estate transfers.
“We?re talking about properties that are completely unique to the area,” department Associate Director James Wallace said. “We certainly don?t like undervaluing, but we don?t like overvaluing. We like them to be closer.”
Bruce Myers, a legislative auditor, discounted the assessor?s explanation of why 402 properties in eight jurisdictions were valued for tax purposes at 69 percent of their sales price, while in the other 16 jurisdictions the commercial assessments were 88 percent of the sales price.
“We had 16 jurisdictions that were pretty close to the mark,” Myers said. “If 16 can do it, why couldn?t the other eight?”
Deputy Assessments Director Bill Stansbury said the report reflects assessments as of June 2005 and the sales occurred throughout the next year, as real estate prices continued to rise. “In an appreciating market, that?s going to happen,” Stansbury said.
The eight jurisdictions with low assessments were Anne Arundel and Baltimore counties, Baltimore City and five counties on the Eastern Shore.
Wallace said some of the problems assessing commercial real estate could be solved if the legislature finally passed a billing requiring corporations to supply the data after a sale of controlling interest.
On another issue in the audit, the department already was more aggressively trying to track down out-of-state corporations doing business in Maryland that had not filed their annual $300 filing fees. Auditors said it could be as much $1.1 million owed by these corporations.
“I don?t think it amounts to that much,” Wallace said, because some of the corporations that collect sales tax or income tax or do business with the state do not have actual operations in Maryland.
