High Court Denies Ocean City’s Tax Differential Appeal

OCEAN CITY — Maryland’s highest court denied Ocean City’s appeal in its long-standing dispute with Worcester County over the tax differential issue.

In January 2019, after years of veiled threats over the tax differential, or tax setoff, Ocean City filed a petition for declaratory judgment against Worcester County on the long-standing matter. In its simplest terms, tax differential may be granted by a county to a municipality within its borders for services such as police, fire, recreation and tourism, for example, that are duplicated by both governmental entities.

For example, Ocean City residents pay the same property tax rate as property owners in the county at-large, while their municipal property taxes pay for services and programs the county does not have to provide. Worcester County does provide annual discretionary grants to Ocean City to offset the cost of services and programs, along with recent grants specifically earmarked to offset fire and ambulance service to unincorporated West Ocean City.

There has been a détente of sorts in recent years with the county grant funding to the resort increasing. However, in 2019, after Ocean City took the county to court, the Worcester County Circuit Court first granted the county’s motion for summary judgment, denying the town’s request for a mandated tax setoff from the county.

At the heart of the issue is a portion of the state law under the Municipal Home Rule Amendment of the Maryland Constitution that designates some counties in Maryland as “shall” counties, which require those counties to provide tax set-offs for services provided or duplicated by its municipalities.

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