Inconsistency with the Internal Consistency Test
INTRODUCTION
Taxpayers, rejoice. Maryland, pay up. The Supreme Court’s recent
holding in Comptroller of the Trea sury of Maryland v. Wynne triggered
some harsh consequences, which included Maryland paying taxpayers
nearly $200 million in tax refunds.1 The implications of the Court’s
decision, however, were hidden underneath a murky analysis of the
constitutionality of a Maryland tax law.2 The Supreme Court ultimately
struck down the law for violating the dormant Commerce Clause,3 which
in turn caused the state to make large payouts of refunds to taxpaying
residents, who, the Court held, had collectively paid millions in
unconstitutional state taxes.4
Wynne has immediate practical consequences for states and taxpayers,
and a glimpse into the Maryland aftermath gives an indication of what
other states might encounter. After the Supreme Court struck down
Maryland’s partial tax credit law, determining that it violated the internal
consistency test, the state cured the unconstitutionality by amending the
law to now offer a full tax credit.5 Additionally, Maryland chose to apply
this change retroactively, thus offering a refund to any taxpayer who
Copyright 2017, by MACKENZIE CATHERINE SCHOTT.
1. Bill Turque, Court: Maryland has Been Wrongly Double-Taxing Residents
Who P ay I ncome Ta x to Other Sta tes, WASH. POST (May 18, 2015), https:
//www.washingtonpost.com/local/md-politics/supreme-court-rules-maryland-in
come-tax-law-is-unconstitutional/2015/05/18/1e92ee7a-d16f-11e4-ab77-9646eea6
a4c7_story.html [https://perma.cc/93DX-7SZH].
2. See infra Part II.C.
3. Comptroller of the Treasury of Md. v. Wynne, 135 S. Ct. 1787, 1795 (2015).
4. Although the Wynne decision pr ovided no discussion on whether the
decision would apply retroactively, the Court articulated its rule on retroactivity
when discussing the application of the Armco decision. See Armco, Inc. v.
Hardesty, 467 U.S. 638 (1984). See also Ashland Oil, Inc. v. Caryl, 497 U.S. 916
(1990). In Ashland, the Court stated the general rule that “constitutional decisions
apply retroactively to all cases on dir ect review.” Id . at 918. Exceptions to the
general rule exist, as articulated in Chevron Oil Co. v. Huson. 4 04 U.S. 97, 106
(1971). Because Wynne likely falls under the general rule and not an exception,
Maryland chose to apply Wynne retroactively, thus offering refunds.
5. H.B. 72, 2015 Leg., Reg. Sess. (Md. 2015), http://mgaleg.maryland
.gov/2015RS/bills/hb/hb0072f.pdf [https://perma.cc/24P7-KEDZ] (codified as
amended at MD. CODE ANN., TAX–GEN. § 10-703(a) (West 2016)). See Wynne, 135
S. Ct. at 1806.
948 LOUISIANA LAW REVIEW [Vol. 77
overpaid taxes under the unconstitutional law.6 This decision will cost
Maryland an estimated $200 million in refunds,7 and it also means that
Maryland will collect nearly $40 million less in tax revenue going
forward.8 This tax revenue decrease means budget cuts for Maryland
counties, which might result in cutting some services offered to residents.9
These changes in Maryland are just the beginning. Some commentators
have speculated that New York tax law might encounter a challenge
similar to the one in Wynne,10 while Kansas has already issued guidance
on its tax law changes under Wynne.11 The consequences in Maryland,
New York, and Kansas foreshadow what other states will likely suffer if
and when their similar tax laws are challenged.
Unfortunately, the broader legal implications of Wynne are far less
clear than its practical ones for the resident taxpayers of Maryland and
other states. Wynne presented the Court with the opportunity to clarify a
historically confusing and ambiguous area of dormant Commerce Clause
doctrine, but the Court’s opinion in Wynne failed to meet this challenge.12
6. Bill Turque, Maryland, Opponent of Wynne Tax Case, Now Encouraging
Residents to Seek Refunds, WASH. POST (Sept. 28, 2015), https://www.washington
post.com/local/md-politics/2015/09/28/657e4c4c-6613-11e5-8325-a42b5a459b1e
_story.html [https://perma.cc/44PK-45KW]. See supra note 4 and accompanying text.
7. Turque, supra note 6. See su pra note 4 and accompanying text. After
Maryland’s decision to apply its tax amendment retroactively, Maryland instructed
taxpayers to collect any authorized refunds for any taxes overpaid to Maryland. The
Maryland comptroller office issued a bulletin informing Maryland taxpayers of the
required action for collecting refunds. Comptroller of the Treasury of Maryland v.
Wynne: F requently Asked Questions, COMPTROLLER OF MD., http://taxes.maryland
taxes.com/Individual_Taxes/Individual_Tax_Types/Income_Tax/Tax_Information/
Wynne_Case/Initial_Wynne_FAQs.pdf [https://perma.cc/K7WF-PBCW] (last
updated Dec. 7, 2015).
8. Turque, supra note 1.
9. Bill Turque & Donna St. George, Leggett Proposes $50 Million in Cuts to
New Montgomery Budget, WASH. POST (July 9, 2015), https://www.washingtonpost
.com/local/md-politics/leggett-proposes-50-million-in-cuts-to-new-montgomery-
budget/2015/07/08/652fb730-25b8-11e5-b77f-eb13a215f593_story.html [https://per
ma.cc/8P2L-Z9AA].
10. Ashlea Ebeling, Wynne Decision Boon To NYC Pied -A-Terre Owners,
FORBES (May 21, 2015, 7:59 AM), http://www.forbes.com/sites/ashleaebeling/2015
/05/21/wynne-decision-boon-to-nyc-pied-a-terre-owners/#2715e4857a0b50a0d40f5
502 [https://perma.cc/ZKV6-QQUM].
11. Brian Kirkell, Kansas DOR P rovides Guida nce in Response to Wynne,
RSM (Aug. 11, 2015), http://rsmus.com/what-we-do/services/tax/tax-alerts/kansas-
dor-provides-guidance-in-response-to-wynne.html [https://perma.cc/7TRC-RZF4].
12. See, e.g., Bradley W. Joondeph, The Meaning of Fair Apportionment and
the Prohibition on Extra territoria l State Taxation, 71 FORDHAM L. REV. 149, 149
