5 firms seeking change in tax 5 counties, city could lose millions


In a case that could cost five Maryland counties and Baltimore millions in lost revenue, five companies today were to present their case to change the way their use of industrial electricity is taxed.

"This puts all the electricity taxes at risk," said Michael McMahon, an assistant Baltimore County attorney representing the county in the case, said of the companies' action.

The case comes before Baltimore County Circuit Court Judge Robert E. Cahill Sr. today in Towson.

At risk in Baltimore County alone is between $866,000 and $3 million that the jurisdiction got from the companies from 1986 through 1989. More could possibly be lost in the future.

For years, various jurisdictions have charged a usage tax on electricity for industrial companies, basing the tax on the firms' gross monthly electric bills.

In 1989, Montgomery, Baltimore, Prince George's, St. Mary's, and Anne Arundel counties and Baltimore together generated $50 million in revenues from the tax.

But the five firms, all in Baltimore County and including Eastern Stainless Corp., claim that they are being overtaxed.

At the heart of the matter is the way the Baltimore Gas and Electric Co. bills large industrial users of electricity. Besides charging for each kilowatt used, BG&E; assesses two service charges -- a "demand charge" and a "customer charge."

The firms contend that they should not be taxed on those two fixed charges, since they have nothing to do with how much electricity is used in any given month.

In a decision issued last August, the Maryland Tax Court agreed, saying the intent of the Baltimore County law was to charge only for electricity actually consumed.

The Tax Court ordered refunds for the firms, but the county appealed to Circuit Court.

McMahon pointed out that in Baltimore County and Baltimore, the tax has been computed the same way since the 1940s -- on the total monthly bills.

"The statue clearly says it's to be levied on 'gross sales,' " said McMahon.

Baltimore County charges a 7.5 percent tax on industrial users of electricity; Baltimore's rate is 8 percent; Anne Arundel's is 5.15 percent.

Robert R. Bair, the attorney representing Eastern Stainless, Genstar, Blue Circle Atlantic, House of Seagrams and A.M.G. Resources Corp., could not be reached for comment. An attorney in Bair's law firm, Emried D. Cole Jr., said the firm would not comment on a pending case.

The Baltimore County electricity tax has existed for more than 40 years, but it never has been challenged until now.

The five firms that did attack it did so not long after the Baltimore County Council, at the request of former County Executive Dennis F. Rasmussen, seriously reduced the tax burden for Bethlehem Steel Corp., the county's largest user, in exchange for land at Sparrows Point.

However, although Bethlehem Steel has seen its electricity tax burden reduced from $3.8 million in 1987 to $600,000 this fiscal year, the county still does not own the land it was supposed to get as part of the deal.

The 388 acres, which Rasmussen wanted for an industrial park that would create thousands of jobs, has come under close scrutiny because of pollution concerns.

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