What the ruling means
Here are the key points about a ruling Monday by a divided Supreme Court that said Maryland’s income tax law is unconstitutional because it does not provide a full tax credit to residents for income tax paid outside the state.
1) Who is affected?
The Supreme Court’s decision in Comptroller of the Treasury of Maryland v. Wynne applies to Maryland residents who pay income tax on earnings from out of state.
2) What was the case about?
Maryland allowed such shareholders to claim a credit on some, but not all, of their Maryland income tax returns for taxes paid on earnings outside the state. It did not permit a credit on the segment of the income tax distributed back to the counties and Baltimore City.
3) Who brought the case?
A Howard County couple, Brian and Karen Wynne, challenged the law, arguing that to pay income tax in other states and then pay some of it again in Maryland amounted to illegal double taxation. The Supreme Court agreed, finding that Maryland’s law improperly penalized interstate commerce.
4) What happens now?
Maryland now owes about $200 million in refunds and interest to the Wynnes and other residents who claimed a credit on the county tax between 2006 and 2014. Going forward, residents who qualify can claim a deduction on both the state and county portions of their Maryland income tax to compensate for the income taxes that they pay out of state. The additional deductions could apply to 55,000 residents, the state comptroller’s office says, and will cost Maryland an estimated $42 million a year in tax revenue.
5) What about other states?
The ruling is also likely to affect thousands of other cities, counties and states with similar tax laws, including New York, Indiana, Pennsylvania and New York.