State tax agency seeks to tighten processes as tax‑credit backlogs and IT modernization press on

The Subcommittee for Health and Human Services heard from the Department of Legislative Services and the State Department of Assessments and Taxation on the agency’s fiscal 2027 allowance and program operations, with lawmakers focusing on tax‑credit payment backlogs, an IT modernization project and internal controls.

DLS reported the SDAT allowance decreases by 2.5% to $185,200,000 for fiscal 2027, citing about $15,000,000 in proposed fiscal 2026 efficiencies and a shift toward special‑fund financing for several programs. The DLS presentation also noted that the residential assessment-to-sales ratio remained near 92% and that the assessable base rose 6.7% to just over $1 trillion, driving roughly $3 billion (about 35%) growth in property tax revenues from FY2019 to FY2025.

The DLS analyst flagged recurring shortfalls in the Homeowners Tax Credit (HTC) program: "In 3 out of the last 4 fiscal years, deficiencies have been needed to fund this program at the required level, including a $16,200,000 deficiency in fiscal 2025," and attributed much of the most recent $7,000,000 deficiency to Baltimore County’s delayed certification paperwork. DLS said delays in receiving required forms from local jurisdictions were the primary cause of overdue disbursements.

The Office of Legislative Audits (OLA) uncovered misuse of an SDAT corporate purchasing card over multiple years, reporting the agency "was unable to provide documentation such as itemized receipts to support the cardholder's payments for at least 230 payments totaling $41,400." DLS said OLA recommended corrective actions including better processing of terminations, referral to the attorney general’s criminal division when appropriate, and stricter compliance with comptroller regulations for purchasing‑card programs. The SDAT director told the committee the agency agreed with the findings and had terminated the employee involved but acknowledged some process lapses.

On modernization, SDAT Director Bob Yeager said the Cloud Revenue Integrated System (CRIS) — intended to modernize tax‑credit application administration and business filing systems — has several parts deployed and others in procurement. "This project will enable us to dramatically improve our services to Maryland business owners and entrepreneurs," Yeager said. DLS and SDAT staff noted a discrepancy in the IT appendix: SDAT reported a $39,600,000 estimated project cost, while the IT appendix listed $47,100,000; DLS recommended updating future submissions to account for canceled and reappropriated funds.

Lawmakers also pressed SDAT about the expedited service fund, which DLS projected would close FY2026 at approximately $14,600,000 after outflows tied to major IT projects and a $10,000,000 fund swap; SDAT's chief financial officer said the account balance was roughly $30,000,000 at the time of testimony but forecasted net outflows could reduce the balance by year end.

On staffing, DLS recommended deleting one long‑term vacant position; the director replied SDAT disagreed and plans to reclassify the role as an accountant funded from special funds to help reconcile roughly $363,000,000 in annual revenue. SDAT described planned process changes — automated reminders to counties and a real‑time tracking dashboard — intended to reduce future documentation delays and avoid recurring HTC deficiencies.

The committee requested additional detail on timelines for final CRIS transfers, county certification turnaround times for reimbursements, and a written synopsis of fund projections. The SDAT portion of the hearing concluded with committee members asking SDAT to provide follow‑up materials and to work with the Department of Budget and Management and the Department of Information Technology to reconcile IT appendix figures.

What happens next: lawmakers requested SDAT submit clarified IT cost estimates, a timeline for final CRIS transfer and additional detail on county certification turnaround times and outreach metrics.