Maryland State Comptroller of the Treasury v. Wynne
Issues
Does a state tax scheme violate the United States Constitution by taxing all resident income earned in-state and out-of-state and requiring residents to take out a credit against taxes paid on income earned in other states?
In this case, the Supreme Court will have the opportunity to address whether a state may tax its residents’ out-of-state income where the state in which the resident earned the income has already taxed the resident’s income earned in that state. The Maryland State Comptroller of the Treasury claims that the Supreme Court has recognized a state’s right to tax all of its residents’ income, whether earned inside or outside of the state, and even where the result is multiple taxation of the same income. Notwithstanding that, the Wynnes argue that Maryland’s tax scheme unduly burdens interstate commerce—and thereby violates the Commerce Clause—because it does not offset that multiple taxation through a credit, or otherwise. The Court’s ruling will determine the constitutionality of so-called “double taxation” schemes in light of a state’s sovereign power to tax its residents as well as constitutional requirements against discriminatory tax schemes.
Questions as Framed for the Court by the Parties
Does the United States Constitution prohibit a state from taxing all the income of its residents-wherever earned-by mandating a credit for taxes paid on income earned in other states?
In 2006, Respondents Brian and Karen Wynne owned 2.4% of the stock in Maxim Healthcare Services, Inc. (“Maxim”), a national healthcare services company classified as an S corporation in Maryland. See Maryland State Comptroller of the Treasury v. Wynne, 431 Md. 147, 158 (Md. Ct. App.
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Additional Resources
- Joseph Henchman: Supreme Court to Hear Maryland Double Taxation Case, Tax Foundation (May 27, 2014).
- Ashley S. Westerman: Supreme Court to Hear Case on Right of States to Tax Out-of-State Income, Capital News Service (Oct. 2, 2014).