Comptroller of Treasury of Md. v. Wynne
135 S. Ct. 1787
| SCOTUS | 2015Background
- Maryland’s personal income tax splits into a "state" tax (credit for taxes paid to other states) and a separate "county" tax (no credit for taxes paid to other states); nonresidents pay a state tax and a “special nonresident” county-equivalent tax.
- Brian and Karen Wynne (Maryland residents) received pass-through S‑corp income taxed by other states and claimed credits on their Maryland return; Maryland allowed a credit only against the state portion, not the county portion.
- Comptroller assessed a deficiency; administrative bodies and the Maryland Tax Court upheld the assessment; the Howard County Circuit Court reversed on Commerce Clause grounds.
- Maryland Court of Appeals affirmed, holding the scheme discriminated against interstate commerce (failed fair apportionment and nondiscrimination prongs of Complete Auto).
- The U.S. Supreme Court granted certiorari and affirmed: it held Maryland’s scheme violates the dormant Commerce Clause because it discriminates against interstate commerce (fails the internal consistency test and operates like a tariff).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Maryland’s treatment of credits for taxes paid to other States violates the dormant Commerce Clause by discriminating against interstate commerce | Wynne: Denial of county‑tax credit burdens interstate commerce and risks double taxation, disadvantaging interstate activity | Comptroller: Maryland may tax residents’ worldwide income; the state/ county labels and partial credit avoid discrimination; residents can seek political remedy | Court: Violates dormant Commerce Clause—scheme discriminates against interstate commerce (fails internal consistency); invalid as a tariff |
| Whether the internal consistency test applies and is dispositive | Wynne: Internal consistency shows Maryland’s scheme would tax interstate commerce more if every State used it, proving discrimination | Comptroller: Test misapplied; many permissible residence/source regimes might produce double taxation; Maryland’s scheme is neutral in appearance and reduces state revenue from interstate income | Court: Internal consistency is appropriate here; Maryland’s structure is inherently discriminatory and fails the test |
| Whether distinction between gross‑receipts and net‑income taxes changes analysis | Wynne: Economic effect, not form, controls; prior cases rejecting formal distinctions support invalidation | Comptroller: Precedent treated net‑income taxes differently from gross‑receipts taxes; those cases are distinguishable | Court: Formal gross/net distinction is rejected for Commerce Clause analysis; practical economic effect governs |
| Whether Due Process residence‑based taxing power insulates Maryland from Commerce Clause challenge | Comptroller: States have power under Due Process to tax residents’ worldwide income; Commerce Clause should not constrain that power | Wynne: Due Process jurisdiction does not immunize a tax that discriminates against interstate commerce | Court: Due Process authority does not defeat Commerce Clause limits; a state’s jurisdictional power can still violate the dormant Commerce Clause |
Key Cases Cited
- J. D. Adams Mfg. Co. v. Storen, 304 U.S. 307 (1938) (invalidating a state tax that risked double taxation of interstate receipts)
- Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434 (1939) (striking down a tax on interstate business that discriminated against interstate commerce)
- Central Greyhound Lines, Inc. v. Mealey, 334 U.S. 653 (1948) (invalidating a state tax burdening interstate services)
- Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) (establishing the four‑part test for state taxation under the Commerce Clause)
- Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175 (1995) (describing the internal consistency test for detecting discriminatory state taxes)
- West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994) (characterizing tariffs and laws that discriminate against interstate commerce as paradigmatic violations)
- Quill Corp. v. North Dakota, 504 U.S. 298 (1992) (explaining that Due Process jurisdictional authority does not negate Commerce Clause limits)
- Department of Revenue of Ky. v. Davis, 553 U.S. 328 (2008) (permitting dormant Commerce Clause challenges by in‑state actors and discussing exceptions/exemptions analysis)