The Wynne Decision is a Win for Maryland Taxpayers
Last week, the Supreme Court of the United State of America issued a significant ruling in favor of Maryland taxpayers. In the case of Comptroller of the Treasury of Maryland v. Wynne et ux., the Court ruled thattaxpayers must be given a credit for taxes paid as out-of-state residents to other states for local and county taxes. This decision affects taxpayers that receive income from companies that are located in numerous states. A taxpayer that owns an interest in a company that is located in numerous states is required to pay taxes to those states where the company is located and receiving income. In that multi-state tax situation, taxpayers are allowed a credit for taxes to state they pay where they are not a resident on their state resident taxes.
The Wynne dispute arose because the State of Maryland was allowing residents a credit for taxes that they pay to other states on their state income; however, it was not allowing a credit on the local and county taxes. In Wynne, the Supreme Court ruled that this form of double taxation was unconstitutional and that a full credit must be allowed. Five of the Supreme Court Justices agreed finding the state tax law discriminatory and burdensome to interstate commerce.
Justice Ginsberg dissented, noting the Constitution does not prohibit states from assessing a tax just because another state has a similar tax on the same income. Justice Scalia, also dissenting, wrote separately to highlight his opposition to judges being allowed to declare state laws impose too much of a burden on interstate commerce.
Authorities for the State of Maryland are concerned about the ruling and estimate it will cost the state approximately $200 million in refunds to residents. Tax analysts noted that other jurisdictions that have similarly situated residents and impose similar income tax laws could be impacted.
In order to obtain those refunds, Maryland taxpayers need to submit amended tax returns, if their previous tax returns did not already take into account a tax credit. Maryland residents have the right to obtain a refund for up to either (1) three years after the filing date of a tax returns if the return was paid in full or (2) two years from the date of payment. It is important that taxpayers act quickly to ensure that they will obtain their tax refunds based upon this new decision.
The tax attorneys at Longman & Van Grack are always up to date with the most recent tax laws and and will help make sure you or your business does not pay more local, state or federal taxes than your fair share. Our offices are in Bethesda and Rockville, Maryland. Call us at (301) 291-5027 today.
