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May 28
Supreme Court Rules on Maryland's Tax System


SUPREME COURT RULES ON MARYLAND'S TAX SYSTEM


On May 18, the Supreme Court ruled that Maryland violated the Constitution by collecting local taxes from its residents on out-of-state income without granting a credit for taxes paid to those states. Justices said that the tax violated the Interstate Commerce Clause and concluded that Maryland's tax scheme "operates as a tariff" and the tax exposes some residents to double taxation. The decision confirms that a state's income tax laws cannot unfairly discriminate against interstate commerce.

The decision in Comptroller of the Treasury of Maryland v. Wynne will cause the state's counties to owe an estimated $200 million in retrospective tax refunds and interest to taxpayers in the state and could reduce the state's tax collections by approximately $42 million annually. The impact of the ruling on localities in other states is still unclear but more than a dozen other states have localities, including Detroit, that also levy local income taxes for income earned out-of-state.

For more information or questions on this ruling, please contact your professional at UHY LLP in Detroit 313 964 1040, Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040.