Is the Dormant Commerce Clause in Jeopardy?

A case pending before the U.S. Supreme Court that has yet to grab the attention of the mainstream media is Maryland State Comptroller of Treasury v. Wynne. It’s a state tax case that is interesting because it could significantly change the scope of the dormant commerce clause. The dormant commerce clause is a principle inferred from the commerce clause, which restricts states from passing legislation that improperly discriminates against interstate commerce.

The facts in Wynne are not particularly complex. Brian Wynne and his wife are residents of Harris County, Maryland. They owned 2.4 percent of Maxim Healthcare Services Inc., an S corporation that was doing business in 39 states. In 2006, a substantial amount of income was passed through Maxim to the Wynnes. The Wynnes paid tax to most of the states in which Maxim did business.

As residents of Maryland, the Wynnes’ income was subject to Maryland income tax, which includes a state and county component. The county income tax is collected and administered by the state and is computed on the same tax base as the state income tax. For 2006, the Wynnes reported $2.7 million of income and $126,363 of Maryland state income tax. The state income tax rate was 4.75 percent. The Wynnes were also liable for county income tax at a rate of 3.2 percent. They claimed a credit of $84,550 for taxes paid to other states. The Maryland comptroller permitted the Wynnes to claim a credit against their state income taxes, but not against their county taxes. The Wynnes appealed.

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