SALT Strategies

Is the U.S. Supreme Court Wynne Decision A Winner For You – Not Just For Maryland Residents?

maryland.seal_In a recent decision, the U.S. Supreme Court held that Maryland’s failure to allow a credit against the local portion of Maryland personal income tax for taxes paid to another state was unconstitutional.

The decision, Comptroller of the Treasury of Maryland v. Wynne, May 18, 2015, lay the groundwork for potential refund opportunities for residents other than Maryland, including New York City residents who have paid personal income taxes to other states on income that was also subject to New York City personal income tax.

Wynne Facts and Holding Summary

In a 5-4 decision, the Supreme Court in Wynne held that the failure of Maryland’s personal income tax provisions for residents to permit a credit against the County portion of the State’s personal income tax for taxes paid to other states on pass-through income from an S Corporation was unconstitutional.  It should be noted that the County portion of the Maryland’s personal income tax may be applicable to both residents as well as non-residents of the State.

Wynne Decision’s Potential Benefit To New York City Residents

New York City personal income tax provisions do not allow a credit for personal income taxes paid to other states.  For example, if a New York City resident pays California personal income tax on a portion of their income, New York City’s personal income tax provisions do not permit any credit for the tax paid to California.  Since California’s top tax bracket has consistently been higher than the top New York State tax rate, New York City residents are effectively paying the California tax on California source income plus New York City tax on the same income.  The New York State tax would have been eliminated by a partial credit of the California tax paid.


As in auto racing and life, timely action is the key to success.  We are closely monitoring New York’s response to the Wynne decision.  It  may prudent for taxpayers who are New York City residents to file protective refund claims for the appropriate credit for personal income taxes paid to other states that have higher tax rates than New York State (such as California).  In particular, the statute of limitations for those who may wish to pursue a refund claim should consider that the New York City personal income tax return statute for claiming a refund of 2011 taxes paid generally expires no later than October 15, 2015 for clients who extended their 2011 individual tax return.  Therefore, protective refund claims may be advisable prior to that time in order to preserve potential refund claims for the 2011 year.

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