Md. State Comptroller v. WynneAnnotate this Case
Taxpayer, a Maryland resident, appealed an assessment by the State Comptroller that did not allow a credit against the county income tax portion of the Maryland income tax. Taxpayer's income consisted of significant "pass-through" income generated by a Subchapter S corporation in other states, which was apportioned to Taxpayer and taxed by the states in which it was generated. The tax court affirmed the assessment. The circuit court reversed and remanded for further factual development and "an appropriate credit for out-of-state income taxes paid" on the corporation's income. The Court of Appeals affirmed, holding that the failure of the Maryland income tax law to allow a credit against the county tax for a Maryland resident taxpayer with respect to pass-through income of an S corporation that arises from activities in another state and that is taxed in that state violates the dormant Commerce Clause of the federal Constitution.