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Comptroller of Treasury of Maryland v. Wynne, 575 U.S. 542, 135 S.Ct. 1787, 191 L.Ed.2d 813, 83 USLW 4309, 15 Cal. Daily Op. Serv. 4798, 2015 Daily Journal D.A.R. 5402, 25 Fla. L. Weekly Fed. S 233

Facts

The respondents, Brian and Karen Wynne, are Maryland residents who earned pass-through income from a Subchapter S corporation that generated income in multiple states. They claimed a credit on their Maryland income tax return for taxes paid to other states, but the Maryland State Comptroller allowed a credit only against the state income tax, not the county income tax, resulting in a tax deficiency. The Circuit Court for Howard County reversed the Comptroller's decision, stating that the tax system violated the Commerce Clause, and this was affirmed by the Maryland Court of Appeals.

The respondents, Brian and Karen Wynne, are Maryland residents who earned pass-through income from a Subchapter S corporation that generated income in multiple states. They claimed a credit on their Maryland income tax return for taxes paid to other states, but the Maryland State Comptroller allowed a credit only against the state income tax, not the county income tax, resulting in a tax deficiency.

Issue

Does Maryland's personal income tax scheme, which does not allow a credit for out-of-state income taxes against the county income tax, violate the dormant Commerce Clause?

Does Maryland's personal income tax scheme, which does not allow a credit for out-of-state income taxes against the county income tax, violate the dormant Commerce Clause?

Rule

The dormant Commerce Clause prohibits states from discriminating against interstate commerce, including imposing taxes that create a higher burden on interstate transactions compared to intrastate transactions.

The dormant Commerce Clause prohibits states from discriminating against interstate commerce, including imposing taxes that create a higher burden on interstate transactions compared to intrastate transactions.

Analysis

The Supreme Court applied the dormant Commerce Clause principles to determine that Maryland's tax scheme discriminated against interstate commerce. The Court noted that if every state adopted Maryland's tax structure, interstate commerce would be taxed at a higher rate than intrastate commerce, thus failing the internal consistency test. The Court emphasized that the tax scheme effectively operated as a tariff, which is inherently discriminatory against interstate commerce.

The Supreme Court applied the dormant Commerce Clause principles to determine that Maryland's tax scheme discriminated against interstate commerce. The Court noted that if every state adopted Maryland's tax structure, interstate commerce would be taxed at a higher rate than intrastate commerce, thus failing the internal consistency test.

Conclusion

The Supreme Court affirmed the decision of the Maryland Court of Appeals, holding that Maryland's personal income tax scheme violated the dormant Commerce Clause.

The Supreme Court affirmed the decision of the Maryland Court of Appeals, holding that Maryland's personal income tax scheme violated the dormant Commerce Clause.

Who won?

The respondents, Brian and Karen Wynne, prevailed in the case because the Supreme Court found that Maryland's tax scheme discriminated against interstate commerce, leading to an unconstitutional burden on their out-of-state income.

The respondents, Brian and Karen Wynne, prevailed in the case because the Supreme Court found that Maryland's tax scheme discriminated against interstate commerce, leading to an unconstitutional burden on their out-of-state income.

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