The second season of Wynne just reached its conclusion with the Maryland Court of Appeals’ June 5 decision in Wynne v. Comptroller of the Treasury (Wynne II). In Wynne II, the court of appeals held that Maryland did not violate the dormant commerce clause by statutorily reducing the overpayment interest due on refunds owed as a result of the holding in Wynne I.
However, Wynne II may not be the end of the story. As explained in more detail below, Maryland’s statutory reduction to overpayment interest likely violates due process as construed by the Supreme Court in Reich v. Collins. The Maryland Court of Appeals did not address this question in Wynne II, so there is a chance that Wynne will be renewed for a third season.
I. Recap of Wynne I: The Dormant Commerce Clause and Internal Consistency
Like the beginning of any good sequel, we begin with a brief recap. If you are well versed in the comptroller of Maryland/Brian and Karen Wynne saga, this is where you hit “skip recap” and move to Section 2. Otherwise, here is some historical perspective.
In 2006 two Maryland residents, Brian and Karen Wynne, filed a Maryland income tax return on which they claimed a credit for income taxes paid to other states. At the time, Maryland law allowed a credit against the state income tax for income taxes paid to other states, but it did not allow a similar credit against the county income tax.3
In response to the return, the comptroller assessed a tax deficiency, denying the Wynnes a credit against the county income. The Wynnes appealed the assessment but paid the assessed tax under protest during the pendency of the appeal. This put the Wynnes’ claim into a refund posture and began the accrual of statutory overpayment interest.4
The Maryland Tax Court affirmed the assessment, but that decision was eventually overturned when the Maryland Court of Appeals agreed with the Wynnes that the lack of a credit against the county tax for income taxes paid to other states under Maryland’s income tax regime discriminates against interstate commerce in violation of the commerce clause of the U.S. Constitution.5
The first season finale started with a shocking twist: While Maryland filed a certiorari petition as expected, the federal government filed an amicus brief in support of the state’s petition.6 In its amicus brief, the federal government posited a novel theory: Even though Maryland’s tax discriminated against interstate commerce, the dormant commerce clause does not protect a state’s own citizens from discrimination.7 Perhaps swayed by the federal government’s brief, the Supreme Court granted certiorari.
The finale concluded with a nail-biter: In a 5-4 decision, the Supreme Court held for the taxpayers and confirmed that Maryland’s tax violated the dormant commerce clause.8 The
decision in Wynne I was heralded for reinvigorating the internal consistency doctrine.9 However, the principal reason the viability of the doctrine was in any doubt was the Court’s decision to grant certiorari in the first place.
This article was originally published by Tax Analysts. To read the full article, download the PDF below.
- See Jonathan Berr, “Will the Coronavirus Kill the Daytime Soap Opera?” Forbes, Apr. 30, 2020.
- 2575 U.S. 542 (2015).
- Md. Code Ann. Tax-Gen. section 13-703(b).
- Md. Reg. section 03.01.01.04.H.(3)(a)(iii).
- Comptroller of the Treasury v. Wynne, 431 Md. 147, 169 (2013).
- Brief for the United States as Amicus Curiae, Comptroller of the Treasury v. Wynne, 575 U.S. 542 (Apr. 4, 2014).
- Id. at 9. In support of this theory, the federal government cited dicta from the Supreme Court’s decision in Chickasaw Nation for the proposition that a sovereign can tax “all income of their residents.” Id. (citing Oklahoma Tax Commission v. Chickasaw Nation, 515 U.S. 450, 463 n.12 (1995)). However, the language in Chickasaw Nation was inapposite: In Chickasaw Nation, the Court was addressing fully sovereign nations, not quasi-sovereign states that are bound by the commerce clause.
- 575 U.S. 542 (2015).
- See, e.g., David Sawyer and Amy Hamilton, “News Analysis: Wynne Answers 1 Question but Raises Many More,” State Tax Today, June 1, 2015.
