## Facts

- Brian and Karen Wynne were Maryland residents and shareholders in an S corporation doing business in many states, generating income taxed by multiple states.
- Maryland imposed two components of resident income tax: a statewide tax and a county (local) tax, both administered and collected by the state comptroller.
- Maryland granted residents a credit for income taxes paid to other states against the state tax, but not against the county tax.
- The Wynnes paid income taxes to other states on out-of-state income and claimed credits against both Maryland tax components.
- The Comptroller allowed the credit against the state tax but denied any credit against the county tax and assessed a deficiency.
- The Maryland Tax Court rejected the Wynnes’ dormant Commerce Clause challenge and upheld the assessment.
- Maryland state courts reversed, concluding the lack of a county-tax credit discriminated against interstate commerce and created a risk of double taxation.
- The U.S. Supreme Court granted review.

## Issues

1. Whether a state violates the dormant Commerce Clause by taxing residents on all income wherever earned while denying a credit against a local income-tax component for income taxes paid to other states.
2. Whether the tax scheme is discriminatory under the internal consistency test because it would impose a higher aggregate burden on interstate income if replicated by every state.

## Decision

- The Supreme Court affirmed the state court judgment in a 5–4 decision (Justice Alito for the Court).
- Maryland’s scheme violated the dormant Commerce Clause because it failed the internal consistency test and imposed a higher burden on interstate than intrastate income.
- The Court treated the structure as inherently discriminatory in effect, akin to a tariff on interstate commerce, due to the risk of double taxation on out-of-state earnings.
- The Court rejected the argument that discrimination was absent because Maryland could collect less revenue from residents earning out-of-state income; the relevant measure was the total burden on interstate activity.
- Dissents argued that the dormant Commerce Clause should not invalidate the scheme (Scalia and Thomas) and that a residence state may tax residents’ worldwide income without a constitutionally required full credit (Ginsburg, joined by Scalia and Kagan).

## Legal Principles

- The dormant Commerce Clause constrains state tax schemes that discriminate against interstate commerce, including in the personal income-tax context.
- Under the internal consistency test, a tax is invalid if, assuming every state adopted the same structure, interstate commerce would bear a higher tax burden than intrastate commerce.
- A resident tax that does not provide a sufficiently complete credit for taxes paid to source states can result in double taxation of interstate income and constitute unconstitutional discrimination.
- The constitutionality of a tax turns on the structure’s effect on interstate commerce, not on whether the taxing state’s net revenue rises or falls.

## Conclusion

The Court held that Maryland’s refusal to allow residents a credit against the county portion of its income tax for taxes paid to other states discriminatorily burdened interstate commerce because it failed internal consistency and exposed interstate income to heavier taxation than intrastate income.


Comptroller of the Treasury of Md. v. Wynne, 575 U.S. 542 (2015)