Worcester County LCB Accepts Comptroller’s Findings

$16K Cash Settlement Reached in Lieu of Suspension

Annapolis, Md. (December 20, 2010) – Comptroller Peter Franchot today announced a settlement in his agency’s investigation of the Worcester County Liquor Control Board (LCB) for statutory and regulatory violations. The LCB accepted investigator’s findings of price discrimination, below cost sales, illegal purchasing and illegally providing some retailers with items of value. In lieu of license suspension, the LCB made an offer in compromise, which was accepted and paid a $16,000 fine.

“My agency is committed to protecting small businesses and consumers. Leveling the playing field so that everyone follows the same rules is a task we take seriously. I am proud of the efforts of my agents in both the investigation of the LCB and the swift handling of a settlement,” said Comptroller Franchot.

Based on tips of improper operations by the LCB, field enforcement agents for the Comptroller began investigating the LCB in May. Investigators uncovered clear evidence of violations including selling the same product on the same day at different prices; selling products to some retailers below the cost allowable under the law; purchasing alcohol from a Washington-DC based retailer in direct violation of state law and providing select retailers with equipment at no cost.

After the release of the agency’s summary of findings and proposed suspension of the LCB’s operations, representatives from the LCB contacted field enforcement agents requesting a meeting to settle the case. In lieu of an eight-day license suspension, the LCB offered to pay a fine in the amount of $16,000. As a license suspension would hurt not only the wholesaler but also the small businesses served by the wholesaler, a settlement is the typical manner in which these type of cases are handled. The Comptroller determined that the payment of the fine was acceptable in accordance with the provisions of Article 2B, Section 10-402.

The agency’s summary of findings in the LCB investigation can be found here.

Media Contact: Christine Feldmann, 410-260-6346 (office), 443-336-0215 (cell)

Comptroller Presents Findings in Worcester County Liquor Board Investigation

Evidence of Price Discrimination, Illegal Sales and Purchases, Trade Violations

Ocean City, MD (December 8, 2010) –Comptroller Peter Franchot today announced the results of his agency’s extensive investigation of the Worcester County Liquor Control Board (LCB). During the seven-month inquiry, law enforcement agents for the agency found significant evidence of price discrimination, below cost sales, illegal purchasing and illegally providing some retailers with items of value. Comptroller Franchot is the chief regulator of alcoholic products in the state of Maryland.

“These are very serious issues and cut right to the heart of Worcester County’s hard-earned reputation as a good place to invest and do business. Left unaddressed, I believe they would severely jeopardize the public’s confidence in their state and local governments,” said Comptroller Franchot.

The investigation stemmed from numerous complaints of improper actions by the LCB from the public. Additionally, Senator-Elect James Mathias called for a review of the LCB’s activities.

Enforcement agents from the Comptroller’s Office conducted more than 50-in person interviews with a wide range of stakeholders, including retail business owners, former and current LCB employees, members of the Liquor Control Board and any other individual who had information pertaining to the investigation. Additionally, agents examined invoices, receipts, newsletters, promotional materials and Websites to determine what products were sold for, when they were sold, who they were sold to and where they were purchased.

Investigators determined clear evidence of violations including selling the same product on the same day at different prices; selling products to some retailers below the cost allowable under the law; purchasing alcohol from a Washington-DC based retailer in direct violation of state law and providing select retailers with equipment at no cost. These charges are statutory and regulatory violations of Article 2B of state law and the Code of Maryland Regulations respectively.

In response to investigation’s findings, the comptroller is initiating a formal administrative hearing to be held within 30-45 days.

Contact: Christine Feldmann, 443-336-0212 (cell)

Tax Court Upholds Comptroller’s $25M Assessment of W.L. Gore Subsidiaries

Another Victory In Delaware Holding Company Action

Annapolis, MD (November 17, 2010) -Comptroller Peter Franchot announced another victory today in his pursuit to make sure large corporations pay their fare share as the Maryland Tax Court upheld the agency’s tax assessments in the case of W.L. Gore, et al. v. Comptroller. Gore vigorously contested two separate assessments totaling more than $25 million in a case with hundreds of exhibits, several experts and more than five days of hearings. Ultimately, the Tax Court accepted the Comptroller’s argument that Gore’s Delaware Holding Companies (DHC) are taxable by Maryland because of the direct connection between the intangible royalties at issue and Gore’s Maryland activities, such as manufacturing, sales, and continuing research and development of new products.

“Today’s victory speaks to the continued efforts of our agency and the Office of the Attorney General to aggressively crack down on corporations attempting to avoid paying taxes through Delaware Holding Company tax schemes,” said Comptroller Franchot.

Gore Enterprises, Inc. and Future Value, Inc., both DHC s and subsidiaries of W.L. Gore and Associates, Inc., appealed the income tax assessments for the taxable periods of 1983 through 2003 and 1996 through 2003. The Comptroller’s Office contended that both companies had substantial connections to the state of Maryland under the unitary business principle, but neither company had ever filed Maryland income tax returns or paid tax on royalty and interest income. The Gore DHCs argued that patent royalties were different from trademark royalties and were therefore exempt from the DHC analysis adopted by the Maryland Court of Appeals in the landmark 2003 case against SYL, Inc. In that case, the court found that Maryland had the right to tax a unitary subsidiary earning intangible royalties if the parent company did business in Maryland, and the royalties were directly connected to Maryland activity.

The issue in W.L. Gore was whether the two DHCs, which are wholly-owned subsidiaries of Gore and lack a physical presence in Maryland, can be constitutionally required to pay state income taxes on its income when W. L. Gore maintains a physical presence in this state. The Tax Court found that multiple connections between the companies and their reliance on one another created a unitary business with substantial connection to Maryland, and therefore Maryland had a right to tax a fair share of the intangible income.

During Comptroller Franchot’s first term, the agency made a hard-line effort to aggressively crack down on large corporations using tax avoidance strategies such as “captive” Real Estate Investment Trusts and Delaware Holding Company ploys. To date, these efforts have generated more than $110 million in money owed the state.

“This was an extensive trial involving one of the largest total assessments ever to come before the Tax Court,” said Franchot. “My agency took the lead in closing this tax loophole and is committed to ensuring that everyone pays their fair share.”

Contact: Caron Brace, (410) 260-7438 (office), (410) 212-9414 (cell)

Comptroller Franchot: MITS Returns $65M in Two Years

Aggressive Compliance Efforts Yield More Than $1.4B

Annapolis, Md. (October 19, 2010) – Approaching the two-year anniversary of its approval by the Board of Public Works, the state’s new Modernized Integrated Tax System (MITS) has netted nearly $65 million in back taxes, Comptroller Peter Franchot announced today. Using other innovative and aggressive strategies, the agency has collected more than $1.4 billion in delinquent taxes over the last four years.

The focal point of his efforts to modernize the agency’s resources, MITS is a state-of-the-art data warehousing and tax collection system intended to capture nearly $200 million in revenue owed the state in its initial four-year implementation phase. Following the phase-in period, the tax system is expected to generate $80 to $100 million per year in perpetuity. Employed only two years ago as an $87 million investment to the state, MITS has exceeded expectations and nearly paid for itself already.

“Through the implementation of MITS, my office has made impressive strides to ensure that Maryland is collecting tax revenues to which the state is entitled,” said Comptroller Franchot. “We expected that once fully implemented, MITS would bring in tens of millions annually and it has done just that and more, serving as a cornerstone for returning Maryland to a sound fiscal standing.”

In addition to the MITS collections, over the last four years, The Comptroller’s Office has returned more than $750 million in delinquent and deficient taxes from businesses to Maryland coffers; while, the agency has collected more than $620 million in personal income tax from individuals owing the state.

The Comptroller’s Office has also made a hard-line effort to aggressively crack down on large corporations using tax avoidance strategies such as “captive” Real Estate Investment Trusts and Delaware Holding Company ploys, generating more than $110 million in money owed the state.

“When I took office as Comptroller, I promised that one of my top priorities would be to ensure that we use every tool at our disposal and modernize the current compliance system to collect monies owed the state, especially in these tough economic times” said Franchot. “I am committed to making sure that everyone pays their fair share, whether an individual, small business or large corporation. The majority of Maryland businesses and residents abide by the tax laws and play by the rules. Therefore, we will not allow a few bad apples to gain an unfair advantage by using schemes and other measures to intentionally avoid paying their tax liabilities.”

In recognition of his work on behalf of Maryland taxpayers, Comptroller Franchot has been honored several times by his peers and national groups. In particular, the Maryland General Assembly commended him in 2007 for his significant administrative action in going after corporations utilizing “captive” REIT loopholes to evade taxes. Additionally, the Association of Government Accountants awarded Comptroller Franchot their highest honor, the William R. Snodgrass Distinguished Leadership award in 2008 for his efforts to secure the historic investment to upgrade the state’s tax compliance technology, which has bolstered recent tax collections.

Media Contact: Joseph Shapiro, (410) 260-7305 (office), (443) 871-2244 (cell)

Comptroller Reminds Taxpayers of October 15 Extension Deadline, Urges All to File Electronically

Free iFile Available at www.marylandtaxes.com

ANNAPOLIS, MD (October 7, 2010)- Comptroller Peter Franchot today reminded taxpayers who received a six-month extension on their 2009 personal income tax returns to file by the October 15 deadline. About 90,000 extension returns are expected to be filed this year by next Friday.

The Comptroller urged taxpayers to file for free by using his agency’s online filing service, iFile, available at www.marylandtaxes.com.

“Using iFile is fast, safe, easy and free,” said Comptroller Franchot. “In fact, taxpayers will receive their refund within a few days by filing electronically and choosing the direct deposit option.”

To qualify for the six-month extension, taxpayers who expected to owe a tax liability had to submit Form 502E with the projected amount due on that final return. However, if they anticipated a refund and filed a federal extension, no action had to be taken.

With approximately a week left to file before the extension deadline, more than 2.7 million tax returns have been filed for tax year 2009; approximately 1.7 million of them were filed electronically.

Media Contact: Joseph Shapiro, (410) 260-7305 (office), (443) 871-2244 (cell)

Comptroller Franchot Announces Federal Partnerships Return More Than $163 Million to Maryland

Innovative Initiatives Capture Millions of Dollars Owed the State

Annapolis, MD (October 5, 2010) – Emphasizing his commitment to enforce Maryland’s tax laws as effectively as possible, Comptroller Peter Franchot announced today that more than $162 million has been returned to Maryland’s coffers as a result of innovative partnerships with federal government agencies. The first-in-the-nation Federal Vendor Offset Program and the Federal Income Tax Refund Intercept Program are partnerships between Maryland and the federal government to collect back taxes and other monies owed the state from tax scofflaws.

“It has been one of my top priorities to ensure that my office is using every tool at our disposal and creating new innovative partnerships to collect monies that are owed the state,” said Comptroller Franchot. “I was very proud that Maryland was the first state in the country to join the Federal Vendor Offset program and that we have aggressively pursued the Income Tax Refund Intercept Program. During tough economic times, programs such as these that generate income for the state are vital. They also reward taxpayers who do the right thing by not allowing those who would cheat the state to get away with it. These are not new taxes, but taxes rightfully owed the state. We are also proving to tax scofflaws that they can run but can’t hide.”

The Federal Vendor Offset Program allows Maryland to intercept federal vendor payments to satisfy tax and other financial liabilities of the state. In 2007, Maryland became the first state in the nation to participate in the pilot reciprocal program with the U.S. Department of the Treasury’s Financial Management Service. Since its inception, Department of Labor, Licensing and Regulation (DLLR) and the Central Collections Unit (CCU) were added to the program and debts owed to those agencies are intercepted as well.

In total, $51,820,302.87 has been collected through this program over the past three years. Most of the collected debt has fulfilled tax liabilities totaling $26,008,450.88, while $8,193,231.19 has gone to DLLR and $17,618,620.80 to CCU to satisfy other financial liabilities.

In addition to this rewarding program with the U.S. Department of the Treasury, the Comptroller’s Office participates in the Federal Income Tax Refund Intercept Program. Through this initiative, federal income tax refunds are intercepted by the agency to satisfy individual state income tax liabilities. In turn, the Internal Revenue Service (IRS) intercepts Maryland income tax refunds of delinquent tax payers to satisfy individual federal income tax liabilities. Since 2008, the program has returned $111,444,972.09 in back taxes to Maryland.

“The refund offset program is one of the most successful in the nation,” said Comptroller Franchot. “It continues to grow because of our ability to quickly certify more accounts to intercept.”

While not federal partnerships, Maryland also has state reciprocal agreements with Connecticut, Delaware, New Jersey and New York.

In recognition of his work on behalf of Maryland taxpayers, Comptroller Franchot has been honored several times by his peers and national groups. In particular, for the innovative partnerships he has entered and the historic investment to upgrade the state’s tax compliance technology, the Association of Government Accountants awarded Comptroller Franchot their highest honor, the William R. Snodgrass Distinguished Leadership award in 2008.

Media Contact: Caron Brace, (410) 260-7438 (office), (410) 212-9414 (cell)

Statement of Comptroller Peter Franchot Regarding Today’s Washington Examiner Story

September 23, 2010

“In the past three and half years I have never felt the need to respond to an article or column written about me, or positions that I have taken on public policy issues. However, today’s Washington Examiner story is such a gross misrepresentation of my longtime position on Maryland’s Purple Line project that I feel compelled to set the record straight.

Over my career in public life, I have been a strong and consistent advocate for creating accessible mass transit options across the state, none more so than the Purple Line. I publicly advocated on behalf of this project as a member of the Maryland House of Delegates from the 20th District, which includes several communities that will be directly served by this vital rail line, and successfully fought to protect project funding as Chairman of the House Subcommittee on Transportation and the Environment.

I believe today, as I always have, that the Purple Line will substantially improve transportation mobility in one of the nation’s most congested regions. I believe that the Purple Line will provide reliable and convenient service to communities that are in urgent need of better transit options, and I believe that it will be a catalyst for environmentally sustainable, transit-oriented development that will ultimately enhance our State’s economy and quality of life. It is in that spirit that I restated my longstanding support for the project at yesterday’s Board of Public Works meeting, and expressed appreciation to Governor O’Malley for his support of the project, as well as the proposed Red Line that will serve the Baltimore region, and the Corridor Cities Transitway in the Washington region.

As Comptroller, I take my role as an advocate for the taxpayers very seriously. When items come up for approval before the Board of Public Works, I carefully review them and often ask the presenting agencies questions to ensure that we are managing taxpayer dollars as efficiently as possible. At Wednesday’s meeting, I did ask substantive questions about two general engineering consultant contracts with eight-year terms and a total cost of $160 million. Given the magnitude of this investment of taxpayer dollars, particularly at a time when so many other worthy projects around the State have been deferred due to budget constraints, I sought reassurance from Maryland Department of Transportation (MDOT) officials that these services “are absolutely vital to the goal of getting these projects funded and built” and that the State of Maryland would truly be getting $160 million worth of work from these consultants.

Given the complexity of these contracts and the large number of consulting firms that are included in the contracts, I also sought reassurance that there were proper management controls in place to ensure the work would be completed in accordance with our high standards. I received thoughtful and detailed responses from the MDOT officials at the meeting, and after being satisfied with the answers, I joined Governor O’Malley and Treasurer Kopp in voting for these contracts. At no point in the meeting did I criticize the projects or their projected costs, and at no point did I suggest that they “are a poor use of money.”

In closing, this story grossly misrepresents my longstanding position on a project that I consider very important. More important, this article does a disservice to the Purple Line project, as well as the Red Line and Corridor Cities Transitway projects, by unfairly questioning the unity and resolve of our state’s leaders at a time when the State of Maryland is preparing to compete for federal funding support. In reaffirming my support for the Purple Line, I am also reaffirming my commitment to work with Governor O’Malley, the General Assembly and our congressional delegation to ensure this project is funded and built in a timely manner. I would also invite the Washington Examiner to actually send a reporter to a Board of Public Works meeting in order to ensure accurate and fair coverage.”

MEDIA CONTACT: Joseph Shapiro, (443) 871-2244 (cell)

Comptroller’s Wheaton Office Open Saturday To Help Veterans, Disabled Taxpayers

All Invited to Stop In for Tax Assistance

Annapolis, MD (September 22, 2010) – Comptroller Peter Franchot announced today that his local branch office in Wheaton will be open this Saturday, September 25, from 9 a.m. to 2 p.m. to provide assistance to taxpayers, especially veterans and people with disabilities, in an effort to help people solve tax problems.

Following the lead of the Internal Revenue Service (IRS) who is hosting a nationwide Open House for Veterans and Persons with Disabilities, Comptroller employees will be on-site to assist taxpayers with outstanding liabilities and tax debt issues. Additionally, as the October 15 deadline approaches, the Comptroller’s trained professionals will be able to help those who filed for extensions prepare their state tax return.

“We have a great partnership with the IRS and like to accommodate Maryland taxpayers whenever possible,” said Comptroller Franchot. “Frequently, a person seeking help not only needs assistance with their federal taxes, but also with their state taxes. By opening our Wheaton office, which is near an IRS branch, taxpayers can receive assistance for both, state and federal tax returns, on the same day.”

The Internal Revenue Service (IRS) will open 100 offices nationwide this Saturday, at least one in each state, to handle issues involving notices and payments, return preparation, audits and a variety of other issues. The location of the Comptroller’s Wheaton branch office and its phone number can be found here.  

Free, state tax assistance is available at all of the agency’s 12 taxpayer service offices, Monday through Friday, 8 a.m. to 5 p.m.

Taxpayers can also download state tax forms, find helpful information and check the status of their refund by visiting the Comptroller’s Web site, www.marylandtaxes.com or by calling 1-800-MD-TAXES for free state tax help Monday through Friday from 8 a.m. – 5 p.m.

MEDIA CONTACT: Caron Brace, (410) 260-7438 (office), (410) 212-9414 (cell)

‘Ten Best Days of Summer’ Nets Big Money for Hundreds of Marylanders

-Comptroller’s Staff Helped Visitors Find More Than $250,000 at MD State Fair-

Annapolis, Md. (September 21, 2010) – Almost 500 people found more than $250,000 in unclaimed funds at Comptroller Peter Franchot’s booth at the Maryland State Fair. Comptroller employees were at the fair this year as part of a statewide initiative to help reunite Marylanders with lost money they are owed.

“In these tough economic times, it is our duty and our pleasure to return unclaimed property to its rightful owners,” said Comptroller Franchot. “Everyday, we work vigorously to locate the owners of the unclaimed property and to make sure they get what they are owed. This is just one of the ways we strive to serve the people of Maryland.”

This year, 3,439 fair attendees searched for unclaimed property, with 483 discovering money in their name. One individual found $29,975 with the help of Comptroller Franchot’s staff. In total, fair goers discovered $249,453.

Financial institutions, utilities, insurance companies and other corporations are required to report to the Comptroller any bank accounts, security deposits, wages, insurance benefits and contents of safe deposit boxes that have been unclaimed after three years.

In addition to his booth at the state fair, the Comptroller searches for owners of unclaimed funds by advertising in local newspapers and matching files with the IRS and the Maryland Department of Motor Vehicles.

After a summer filled with stops at county and local events, staff from the Comptroller’s unclaimed property unit will be at the Frederick County Great Fair until September 25.

The Comptroller encourages everyone to log onto his Web site, www.marylandtaxes.com, to search agency records for unclaimed funds, or call the office at 410-767-1700 in Central Maryland, or toll-free 1-800-782-7383 from elsewhere.

MEDIA CONTACT: Contact: Lisa Lester (410) 260-7210, office (410) 858-7868, cell

Thousands of Dollars Discovered at Montgomery County Fair

-Visitors Find Almost $62,000 at the Annual Event-

Annapolis, Md. (September 8, 2010) – More than one-hundred people found almost $62,000 in unclaimed funds at Comptroller Peter Franchot’s booth at this years Montgomery County Fair. Comptroller employees participated in the fair this year as part of a statewide initiative to help reunite Marylanders with money they are owed.

“In these tough economic times, it is our duty and our pleasure to return unclaimed funds to their rightful owners,” said Comptroller Franchot. “Everyday, we work vigorously to locate the owners of the unclaimed property and to make sure they get what they are owed. This is just one of the ways we strive to serve the people of Maryland.”

This year, 826 fair attendees searched for unclaimed property, with 112 discovering they had money in their name. One individual found $6,889 with the help of Comptroller Franchot’s staff. In total fair goers were reunited with $61,900 in unclaimed funds.

Financial institutions, utilities, insurance companies and other corporations are required to report to the Comptroller any bank accounts, security deposits, wages, insurance benefits and contents of safe deposit boxes that have been unclaimed after three years.

In addition to his booth at the fair, the Comptroller searches for owners of unclaimed funds by advertising in local newspapers and matching files with IRS and the Maryland Department of Motor Vehicles.

Staff of the Comptroller’s unclaimed property unit will be at the Prince George’s County fair from September 9-12.

The Comptroller encourages everyone to log onto his Web site, www.marylandtaxes.com, to search the agency’s records for unclaimed funds, or call the office at 410-767-1700 in Central Maryland, or toll-free 1-800-782-7383 from elsewhere.

MEDIA CONTACT: Contact: Lisa Lester (410) 260-7210, office (410) 858-7868, cell