Income Tax: Guidance Provided on Impact of Wynne


To all of our friends, but especially to those of you in OH, the Wynne case from MD is beginning to gain traction in many tax advocacy groups around the country.  In the Wynne case the Supreme Court held that a state tax system that did not allow for an offset of income tax paid in another state against the resident state tax was unconstitutional.  Although this guidance is directed at IN taxpayers, it is good to note this case should help fix many issues in other states, but it will take time.  Our OH clients are especially hard hit by municipal taxes on income derived in a nonresident municipality as their local municipalities do not allow for a credit for the tax paid against this same income.  Pure double taxation, if I were the Don of municipality taxes it would be a beautiful thing!  Note, the Supreme Court case did not go as far down to the municipality level of taxation.

From CCH State Tax Review, Vol 77, Issue 35:

The Indiana Department of Revenue has issued a Commissioner’s Directive providing guidance on the impact of Comptroller of the Treasury of Maryland v. Wynne, U.S. Supreme Court, Dkt. 13-485, May 18, 2015, to personal income taxpayers and to demonstrate why Indiana is not in a similar situation to Maryland. The Wynne decision holds that under a Maryland law an income tax credit for taxes paid to a different state should recognize both income or earnings taxes imposed by the other state and local governments of the other state. Unlike Maryland, Indiana allows credits for out-of-state taxes at both the state and local levels. Indiana allows a credit for out-of-state income taxes against Indiana’s state income tax and a credit for out-of-state local income taxes against local income taxes owed in Indiana. According to the Supreme Court, had Maryland offered credits for out-of-state taxes, Maryland’s tax system would have survived constitutional scrutiny. Further, Indiana allows credits at both the state-to-state level and the county-to-county level. Finally, Indiana does not permit out-of-state state income taxes to offset Indiana county income taxes or allow out-of-state local income taxes to offset Indiana state income taxes. Thus, the department reasons that Indiana’s tax regime meets the internal consistency test set forth in Wynne.

If you have any questions or would like to discuss this further, please give us a call at our office, 314-993-4285.

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