May 22, 2015
United States Supreme Court
Decision in Maryland v. Wynne
On May 18, 2015, the U.S. Supreme Court ruled in a 5-4
decision that Maryland's
personal income tax scheme violates the Commerce Clause of the U.S. Constitution
by denying residents a full credit for personal income taxes paid to other states
while subjecting nonresidents to personal income tax on all income derived from
- The dormant Commerce Clause protects individual taxpayers in the same manner
as it does corporate taxpayers.
- If a state’s tax unconstitutionally discriminates against interstate commerce,
it is invalid regardless of whether it is imposed on residents or nonresidents.
- Maryland’s income tax scheme failed the internal consistency test because Maryland
residents that earn income from out-of-state will pay more total state taxes than
Maryland residents that earn income solely from Maryland sources.
- The majority opinion rejected a strict rule of priority for source-based taxation over
residency-based taxation, noting that Maryland could remedy the infirmity in its tax scheme
by offering a credit against income taxes paid to other states.
- In dissent, Justice Ginsburg stated that it should simply be a matter of state policy
to offer residents a credit for taxes paid to other states, and that the Court’s ruling
did establish a preference for source-based taxation over residency-based taxation
contrary to a principle repeatedly acknowledged by the Court that a “nation or State
may tax all the income of its residents, even income earned outside the taxing
For further information please contact
Michael J. Cataldo
in San Francisco.
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