Close
Close

U.S. Supreme Court Holds Lack of County Personal Income Tax Credit for Taxes Paid to Other States Violates Commerce Clause

On May 18, the U.S. Supreme Court held in Comptroller of the Treasury v. Wynne that the failure of Maryland law to allow a credit against county personal income tax for Maryland residents for their pass-through income from an S corporation’s out-of-state activities that was taxed by other states was unconstitutional.  In affirming the judgment of the Maryland Court of Appeals by a 5-4 decision, the U.S. Supreme Court held that the Maryland tax system impermissibly exposed taxpayers to the possibility of double taxation.  Also, the Maryland tax system was held to violate the fair apportionment requirement of the dormant Commerce Clause because it failed the internal consistency test.  This test supported the conclusion that Maryland’s tax method was inherently discriminatory and operated as a tariff.

Download the PDF.