Refunds – disabled active-duty service members, disabled veterans, and surviving spouses

Tax-property article, § 7-208(g) provides for mandatory refunds of state, county, and municipal taxes for the period when an exemption was authorized but not granted for disabled active-duty service members, disabled veterans and surviving spouses.  The refunds start with the 2018-2019 tax year.  Refunds for years prior to 2018-2019 are prohibited.​^[1] the request for refund must be made during the 3-year period beginning with the calendar year in which the disabled active-duty service member, disabled veteran, or surviving spouse initially became eligible for the exemption.

A disabled veteran becomes initially eligible for the exemption as of the date of the veterans' administration (VA) rating decision establishing the 100% service-connected permanent and total disability.

A disabled active-duty service member becomes initially eligible as of the date the VA or the member's physician determined that they had a physical disability.  

A surviving spouse becomes initially eligible for the exemption on the date the disabled veteran died. 

If a disabled veteran timely applies based on the date of the rating decision establishing the 100% permanent and total disability, or a disabled active-duty service member timely applies based on the date the VA or the member's physician determination that they had a physical disability, they can obtain a refund from the effective date of the disability.

However, the refunds start with tax year 2018-2019.  No refunds can be provided for tax years prior to 2018-2019.     

Example 1.

 a disabled veteran applies for the exemption on July 15, 2022.  They were initially eligible for the exemption on July 15, 2019, which is the date of the disability rating decision wherein the veterans' administration determined that the veteran had a 100% service-connected, permanent and total disability.  The rating decision states that the disability is effective July 25, 2017.  The disabled veteran requests any refunds to which they are entitled.  They receive the exemption effective July 15, 2022. The disabled veteran is eligible for refunds beginning with the 2018-2019 tax year because they applied within 3 years from the calendar year, 2019, in which they were first eligible for the exemption. (Three years from calendar year 2019 is 2022). See footnote 1 below that explains why the disabled veteran is not eligible for a refund for the 2017-2018 tax year.)

Example 2.

A surviving spouse of a disabled veteran applies for the surviving spouse exemption on July 15, 2022. The surviving spouse was eligible for the exemption on July 15, 2020, the date the disabled veteran died.  The surviving spouse requests any refunds to which they are entitled.  They receive the exemption effective July 15, 2022.  The surviving spouse is eligible for a refund from July 15, 2020 to July 14, 2022 because they applied within 3 years from the calendar year, 2020, that they were first eligible for the exemption.  (Three years from the calendar year 2020 is 2023)

Example 3.

A disabled active-duty service member (“member") applies for an exemption on July 15, 2022.  The member was eligible for the exemption on July 15, 2019, which is the date the VA determined that the member had a physical disability.   The disability was effective July 15, 2018. They receive the exemption effective July 15, 2022. The member is eligible for a refund from July 15, 2018 to July 14, 2022, because the member applied within 3 years from the calendar year, 2019, that the member was first eligible for the exemption, and the disability was effective July 15, 2018. (Three years from calendar year 2019 is 2022)​

[1]​ THIS LIMITATION IS NOT IN THE TEXT OF SECTION 7-208(G), BUT IN THE UNCODIFIED SECTION 2 OF THE 2021 MD. LAWS CHAPTER 726 & 727, WHICH PROVIDES THAT “THIS ACT SHALL BE CONSTURED TO APPLY RETROACTIVELY AND SHALL BE APPLIED TO AND INTERPRETED TO AFFECT ALL TAXABLE YEARS BEGINNING AFTER JUNE 30, 2018."