Kaestner 1992 Family Trust v. North Carolina Department of RevenueAnnotate this Case
The North Carolina Department of Revenue (Defendant) unconstitutionally taxed the income of The Kimberley Rice Kaestner 1992 Family Trust (Plaintiff) pursuant to N.C. Gen. Stat. 105-160.2 based solely on the North Carolina residence of the beneficiaries during certain tax years because Plaintiff did not have sufficient minimum contacts with the State of North Carolina to satisfy the due process requirements of the state and federal Constitutions.
Plaintiff filed a complaint alleging that Defendant wrongfully denied Plaintiff’s request for a refund because the taxes collected pursuant to section 105-160.2 violate the due process clause. The North Carolina Business Court concluded that the provision of section 105-160.2 allowing taxation of a trust income “that is for the benefit of a resident of this State” violated both the Due Process Clause and N.C. Const. art. I, 19, as applied to Plaintiff. The court therefore granted Plaintiff’s motion for summary judgment. The court of appeals affirmed. The Supreme Court affirmed, holding (1) section 105-160.2 is unconstitutional as applied to collect income taxes from Plaintiff for the tax years at issue; and (2) therefore, summary judgment was properly granted for Plaintiff.