U.S. Supreme Court

Can Maryland tax income earned and taxed in another state? SCOTUS to decide

The U.S. Supreme Court on Tuesday agreed to decide whether Maryland’s tax system places an unconstitutional burden on interstate commerce.

At issue is whether Maryland may tax income earned and taxed in another state. According to Reuters, the case “could have broad consequences for state and local governments nationwide.” Other publications with stories include the Baltimore Sun, the Associated Press, the Washington Post, the Wall Street Journal (sub. req.) and Courthouse News Service.

Maryland residents may deduct income taxes paid to other states, but not income taxes collected by other states on behalf of counties or municipalities. The Maryland Court of Appeals ruled the tax system is unconstitutional because it creates a disincentive for state taxpayers to conduct income-generating activities in other states.

The taxpayers contesting Maryland’s tax system are Brian and Karen Wynne. Brian Wynne, a 2.4 percent owner of a subchapter S corporation, Maxim Healthcare Services, sought a credit in 2006 for about $85,000, representing his share of Maxim’s taxes paid in 39 other states.

The case is Maryland State Comptroller of the Treasury v. Wynne. SCOTUSblog has links to case documents here.

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