Except as otherwise provided in this section, if a person or governmental unit fails to pay a tax imposed under this article on or before the date on which the tax is due, the tax collector shall assess interest on the unpaid tax from the due date to the date on which the tax is paid. Except as provided in subsections (c)(2) and (d) of this section, the date on which the tax is due is determined without regard to any extension of time to file a return. Interest on unpaid inheritance tax begins: 30 days after the date on which the tax is determined; on the original due date, if there is no formal administration of the estate and the tax is not paid within 30 days after the date on which the tax bill is mailed; or 30 days after the original due date, if an alternative payment schedule for inheritance tax is allowed. Interest on unpaid Maryland estate tax begins 9 months after the date of the death of a decedent and applies to all Maryland estate tax that is not paid by that date, including a payment made in accordance with an alternative payment schedule. Interest on unpaid Maryland generation-skipping transfer tax begins on the date the Maryland generation-skipping transfer tax return is due and applies to tax that is not paid by that date, including an increase in Maryland generation-skipping transfer tax due to a change in federal generation-skipping transfer tax made after a payment of Maryland generation-skipping transfer tax. An overpayment of sales and use tax stops the accrual of interest on a sales and use tax deficiency to the extent of the overpayment as of the date the overpayment is made.

Except as provided in subsections (b) and (c) of this section, a tax collector shall assess interest on unpaid tax from the due date to the date on which the tax is paid if a person who is required to estimate and pay digital advertising gross revenues tax, financial institution franchise tax, public service company franchise tax, or income tax under § 7.5–301, § 8–210(b), § 8–405(b), or § 10–902 of this article: fails to pay an installment when due; or estimates a tax that is: less than 90% of the tax required to be shown on the return for the current taxable year; and less than 110% of the tax paid for the prior taxable year, reduced by the credit allowed under § 10–703 of this article. Interest may not be assessed on the underestimation of individual income tax if: at least 90% of the individual’s taxable income is also taxable by another state; and the underestimation is of the county income tax only. A tax collector may not assess interest on unpaid individual income tax under subsection (a) of this section if the amount of unpaid income tax is less than one-half the amount specified in § 6654(e)(1) of the Internal Revenue Code.

Except as otherwise provided in this section, if a claim for refund under § 13-901(a)(1) or (2) or (d)(1)(i) or (2) of this title is approved, the tax collector shall pay interest on the refund from the 45th day after the claim is filed in the manner required in Subtitle 9 of this title to the date on which the refund is paid. A tax collector may not pay interest on a refund if the claim for refund is: made under any provision other than § 13-901(a)(1) or (2) or (d)(1)(i) or (2) of this title; based on: an error or mistake of the claimant not attributable to the State or a unit of the State government; withholding excess income tax; an overpayment of estimated financial institution franchise tax or estimated income tax; or an overpayment of Maryland estate tax based on an inheritance tax payment made after payment of Maryland estate tax; or made for Maryland estate tax or Maryland generation-skipping transfer tax more than 1 year after the event on which the claim is based.

The rate of interest for each month or fraction of a month is the percent equal to one–twelfth of the annual interest rate that the Comptroller sets for the calendar year under subsection (b) of this section. On or before October 1 of each year, the Comptroller shall set the annual interest rate for the next calendar year on refunds and money owed to the State as the percent that equals the greater of: 13% for 2016; 12% for 2017; 5% for 2018; 11% for 2019; 5% for 2020; 10% for 2021; 5% for 2022; and 9% for 2023 and each year thereafter; or 3 percentage points above the average prime rate of interest quoted by commercial banks to large businesses during the State’s previous fiscal year, based on determination by the Board of Governors of the Federal Reserve Bank.

Interest may not be assessed on a penalty.

For reasonable cause, a tax collector may waive interest on unpaid tax. The Comptroller shall waive the amount of any interest assessed on unpaid income tax due under this article if: the unpaid income tax is due for a taxable year during which the person owing is incarcerated; and the person applies for and is placed on an installment payment plan under the Income Tax Reconciliation Program established under § 2–120 of this article.