52 [86 Op. Att’y

COUNTIES

TAXATION – RECORDATION AND TRANSFER TAXES – REFERENDA

– ABSENT AUTHORITY FROM GENERALASSEMBLY,COUNTY MAY

NOT REFUND TAX REVENUES PAID UNDER EMERGENCY TAX

REJECTED BY REFERENDUM

February 15, 2001

L. Russell Molnar

President, Wicomico County Council

On behalf of the Wicomico County Council, you have inquired

whether the Council has the power to refund a transfer tax assessed

and collected under emergency legislation that was subsequently

rejected by the voters in a referendum. Included with your request

was a copy of the opinion of the County Attorney that the County

may not legally refund the taxes that were collected. 

We have carefully reviewed the opinion of the County

Attorney. We agree that the Council lacks authority to enact a tax

refund. In our view, a reasonable argument may be made that the

General Assembly could provide authority for a refund if it were to

amend the County’s taxing authority to permit refunds or tax credits

related to those payments.

I

Background

A. County Transfer Tax

Wicomico County has adopted charter home rule under Article

XI-A of the Maryland Constitution. As a charter county, Wicomico

County has broad legislative authority under the Express Powers

Act. See Annotated Code of Maryland, Article 25A, §§4, 5.
Gen. 52] 53

 Charter and code home rule counties have authority under the 1

Express Powers Act to impose property taxes. Annotated Code of

Maryland, Article 25A, §5(O); Article 25B, §13.

 There were a number of exemptions to the tax. In authorizing the 2

County to impose the tax, the Legislature exempted transfers that are

exempt from the State transfer tax under Annotated Code of Maryland,

Tax-Property Article (“TP”), §13-207. Consistent with TP §13-407(b),

land transfers subject to the agricultural land transfer tax under TP §13-

301 et. seq. were also exempted. WCC §203-23(c)(3). 

In addition to the exemptions provided in the enabling legislation,

the Council provided an exemption for the first $50,000 payable toward

qualifying owner-occupied real property, consistent with State law. Bill

No. 2000-5, Section I, WCC §203-24(b)(3). The Council also

grandfathered property transfers pursuant to sales contracts that were fully

executed on or before June 15, 2000. WCC §203-29.

However, while the Express Powers Act authorizes the County to

impose property taxes, it does not grant general taxing authority. 

1

In 1992, the General Assembly enacted a public local law

enabling the Wicomico County Council to impose development

impact fees and a transfer tax. Chapter 399, Laws of Maryland 1992,

now codified as Wicomico County Code (“WCC”), §§203-22, 203-

23. The maximum rate of the authorized transfer tax is 1%. WCC

§203-23. 

Under the authority of WCC §203-23, the County Council

passed a 1% local transfer tax on May 31, 2000. See Wicomico

County Council Bill No. 2000-5 (enrolled bill). Revenue from the 2

tax was dedicated to school construction or to reduction of debt

incurred in connection with school capital projects. Id., Section I

(enacting WCC §203-27). The tax was enacted as an emergency

measure and took effect on the date of its enactment. Id., Section II.

B. Referendum

The bill enacting the transfer tax was petitioned to referendum

pursuant to §309-1 of the Wicomico County Charter. At the election

held on November 7, 2000, the transfer tax ordinance was rejected

by the voters. Because the ordinance had been enacted as an

emergency measure, the transfer tax remained in effect until 30 days

after the election. See Wicomico County Charter §309-1(d). Had

the ordinance not been enacted as an emergency measure, however,

a valid referendum petition would have delayed effectiveness of the
54 [86 Op. Att’y

 If, in a particular case, the tax was erroneously or illegally assessed 3

or collected, the taxpayer could seek a refund administratively. See

Annotated Code of Maryland, Article 24, §9-710 et seq.; TP §14-908.

 In another context, the Court of Appeals has recognized a 4

distinction between a county’s power to tax and its inherent power to

appropriate public money. City of Annapolis v. Anne Arundel County, 347

Md. 1, 698 A.2d 523 (1997). However, whether the County could invoke

(continued...)

tax until approval of the measure by the voters. Wicomico County

Charter §§308-1(g), 309-1(d). 

The transfer tax established by the emergency ordinance was

thus in effect for approximately six months from its passage at the

end of May until the beginning of December. You state that,

following rejection of the transfer tax ordinance by the voters, the

County Council is “of the unanimous view that the taxes collected

pursuant to the ordinance should be refunded.”

II

Analysis

A. Authority to Refund Taxes

No question has apparently been raised as to whether the

ordinance establishing the transfer tax was validly enacted or

whether the taxes were properly collected. Accordingly, your 3

question is whether the County may voluntarily return the funds

collected under a validly enacted tax that is later overturned by

referendum.

We agree with the County Attorney that the County lacks

authority simply to refund the monies collected or to enact a tax

exemption for the benefit of those taxpayers who paid the transfer

tax. Notwithstanding charter home rule, Wicomico County does not

have general taxing authority. As the County Attorney’s opinion

points out, neither WCC §203-23 nor the Tax-Property Article of the

Annotated Code of Maryland gives the County plenary power to

enact tax exemptions. Nor does the power to tax delegated to a

political subdivision necessarily include the power to create

exemptions from a tax. Church Home and Infirmary v. Mayor and 4
Gen. 52] 55

 (...continued) 4

that inherent authority to make a refund not otherwise authorized is open

to question. 

 The constitutions of most states prohibit the gift of public funds to 5

private persons. Stevenson, Antieau on Local Government §67.02[2] (2d

ed. 2000). 

City Council of Baltimore, 178 Md. 326, 330-32, 13 A.2d 596

(1940). 

The County could, of course, ask the General Assembly to

amend the taxing authority granted by WCC §203-23 to give the

County express authority to return amounts collected out of the

County’s general funds. The Court of Appeals has noted that,

because the General Assembly has authority to authorize a tax, it has

the power “by retroactive legislation to ... insure equality of

treatment” by enacting a retroactive exemption. Baltimore County

v. Churchill, Ltd., 271 Md. 1, 313 A.2d 869 (1974). Whether that

course of action is permissible depends upon whether granting a

refund in these circumstances serves a public purpose.

B. The Public Purpose Requirement 

It is beyond dispute that public money may not generally be

devoted to a private purpose. “By the Declaration of Rights, Art. 5

15, as well as the fundamental maxims of a free government, taxes

can only be imposed to raise money for public purposes.” Snowden

v. Anne Arundel County, 295 Md. 429, 434, 456 A. 2d 380 (1983),

quoting Balto. & E.S.R.R. Co. v. Spring, 80 Md. 510, 31 A. 208

(1895); see also City of Frostburg v. Jenkins, 215 Md. 9, 14, 136 A.

2d 852 (1957) (“It is a general rule that the public funds of

municipalities cannot properly be devoted to private use, even when

expressly authorized by the Legislature”). 

On the other hand, payment of public funds to individuals or

private institutions is not improper if a public purpose is served.

Snowden, 295 Md. at 435. Determination of a “public purpose”

defies creation of a bright line test: “the line of demarcation is not

immutable or incapable of adjustment to changing social and

economic conditions that are properly of public concern.” City of

Frostburg, 215 Md. at 16; see also Finan v. Mayor and City Council
56 [86 Op. Att’y

of Cumberland, 154 Md. 563, 565, 141 A. 269 (1928) (what

constitutes a “public purpose” is “not a matter of exact definition; it

is almost entirely a matter of general acceptance”). 

“Public purpose” has been described generally as a purpose

that “has for its objective the promotion of the public health, safety,

morals, general welfare, security, prosperity, and contentment of all

the inhabitants or residents” of a jurisdiction. Bowling v. Brown, 57

Md. App. 248, 259, 469 A. 2d 896 (1984). In reviewing legislative

action, “ it is only necessary that the legislative determination to

spend a particular amount of public funds be reasonable and based

on an honest judgment of those officials charged with the care of the

public purse that the expenditure is for the best interests of the

[jurisdiction.]” Town of Williamsport v. Washington County

Sanitary District, 247 Md. 326, 231 A. 2d 40 (1967). 

C. Whether a “Moral Obligation” Supports a Public Purpose 

A return of the revenues collected pursuant to the transfer tax

between the date of its enactment and its demise appears consistent

with the voters’ rejection of the authorizing ordinance. It is

understandable that the Council may feel that it has a “moral

obligation” to return the tax revenue collected during the very

limited period when the transfer tax was in effect. 

The County Attorney has accurately described in his opinion

two cases from other states in which appellate courts rejected

initiative ordinances that were designed in part to refund taxes levied

under prior valid ordinances. In those cases, the courts found that

the proposed tax refunds of validly collected taxes would lack a

public purpose. See City of Yakima v. Huza, 407 P.2d 815 (Wash.

1965) (proposed initiative ordinance that could result in refund of

past tax payments would constitute an unconstitutional gift, unless

taxing ordinances were themselves invalid or there was some duty

on the part of the city to refund the taxes); Utz v. City of Newport,

252 S.W. 2d 434 (Ky.Ct.App.1952) ( holding invalid taxpayers’

initiative that would have required the return of taxes paid under

previously enacted ordinances).

However, payment of a “moral obligation” may satisfy the

public purpose requirement. “By the weight of authority, local

government payments of moral obligations will not violate ...

constitutional bans upon gifts of public money.” Stevenson, Antieau
Gen. 52] 57

on Local Government § 67.04[10] (2d ed. 2000). See also State v.

Giessel, 266 Wis. 547, 64 N.W.2d 421 (1954) (inadvertent repeal of

a longstanding exemption established moral obligation that justified

tax refund, notwithstanding validity of the repeal); State ex rel.

Voelkel v. Thiessen, 232 Wis. 126, 286 N.W. 561 (1939) (upholding

return of special assessments validly collected over several years

based on moral obligation when others provided service were not

assessed). 

Given that the Council apparently believes it has a “moral

obligation” to refund the amount paid by taxpayers during the short

period in which the transfer tax was in effect, the prudent course to

achieve the Council’s current objective would be to obtain the

additional authority from the General Assembly. The preamble of

any such bill could recite that it is designed to reflect voters’

rejection of the tax in the referendum. The Council’s subsequent use

of such authority to support an appropriation of funds for a tax

refund would presumably be based on the same premise. Thus, two

legislative bodies – the General Assembly and the Council – would

have determined that reimbursement of those tax payments served

a public purpose. A reviewing court would likely defer to those

legislative determinations, particularly in these unique

circumstances. 

However, this conclusion is not free from doubt. Although the

Maryland courts generally defer to legislative determinations of

public purpose, “the courts have a duty to determine whether the

particular use [of public funds] is within the scope of the

constitutional power.” City of Frostburg, 215 Md. at 16. The

Maryland appellate courts have not had occasion to address the issue

whether a “moral obligation” such as illustrated by these

circumstances constitutes a public purpose. 

III

Conclusion

In our opinion, the County Council currently lacks authority to

enact a refund of taxes paid while the County transfer tax was briefly

in effect. However, a reasonable argument can be made that, if the

General Assembly were to provide the necessary authority, an

appropriation by the Council to reimburse those tax payments would

serve a public purpose by discharging a “moral obligation” of the

County. To pursue such a course, the County must seek enabling
58 [86 Op. Att’y

authority from the General Assembly that specifically empowers it

to refund the taxes. 

J. Joseph Curran, Jr.

Attorney General

William R. Varga

Assistant Attorney General

Robert N. McDonald*

Chief Counsel

 Opinions and Advice

*Assistant Attorney General Richard E. Israel contributed 

significantly to the preparation of this opinion. 

Editor’s Note:

Subsequent to this opinion, the General Assembly authorized

the Wicomico County Council to provide for refunds of the County

transfer tax. See Chapter 562, Laws of Maryland 2001.