In a landmark case (Comptroller v. Wynne), the United States Supreme Court issued a ruling on May 18, 2015 that allows Maryland taxpayers to receive an increased Maryland tax credit for income taxes paid to other states.  Maryland residents who paid income taxes to other states can amend their tax return(s) and receive a refund for previously filed returns.


Maryland’s personal income tax on state residents consists of a state income tax and a local income tax.  Prior to the ruling of the Wynne case, Maryland residents who paid income tax to another state were only allowed a credit against their Maryland State income tax but not against their local tax.

The Supreme Court determined that this taxing scheme was unconstitutional for it discriminated in favor of intrastate over interstate economic activity in violation of the Dormant Commerce Clause. The Court found this inherently discriminatory as it operates as an impermissible tariff against residents who earn income in interstate commerce.


Joe is a Maryland (“MD”) resident who earned a total of $50,000 of which $20,000 was sourced in New York (“NY”) [1].  Joe’s Maryland tax before credits was $1,500[2] - consisting of $1,000 State tax and $500 local tax[3]. Since Joe is a Maryland resident, this tax is calculated based on Joe’s total earned income of $50,000.  Joe also paid $1,100 in tax to New York based on his $20,000 of income sourced in NY.  As you can see, the NY sourced income is effectively taxed twice – both by MD and NY.

Under the old law, Joe could claim a credit for the lesser of: (1) the actual tax paid to the other state ($1,100 in Joe’s case), or (2) the actual MD state tax (not local tax) calculated on Joe’s NY sourced income. Let’s assume that the MD state tax on Joe’s NY sourced income was $750.  In this case, Joe’s tax credit would be $750 (the lesser of $750 or $1,100).   Essentially, the state of Maryland is saying “had you earned that income in MD you would have only paid $750 in tax. The fact that NY charges you $1,100 on the same income is “the cost of doing business in NY.”

The issue at hand in the Wynne case relates to the Maryland local tax that was calculated on Joe’s New York sourced income. That is, Joe was taxed more than $750 by Maryland on his $20,000 of New York sourced income. This $750 is only the state portion of the tax and fails to include the local tax portion. Let’s assume that Joe’s Maryland local tax on his $20,000 of NY sourced income amounts to $300. Therefore, Joe’s total Maryland State and local tax is $1,050 ($750 + $300) on his New York Sourced income.  Based on the Supreme Court’s ruling Joe is entitled to an increased credit equal to $1,050.  This credit is figured based on the lesser of (1) his NY state tax paid ($1,100) or (2) the combined Maryland State and local tax calculated on Joe’s NY sourced income (in our case $1,050).


What to do now?

Can you take advantage of this ruling and get money back from the state?  It depends. Here are a few considerations to bear in mind:

  • If you completed the proper tax forms and filed a protective claim pending the outcome of this case, nothing needs to be done. The Comptroller will process and forward your refund.
  • If you did not file a protective claim, you will need to fill out the NEW Maryland form 502LC and submit it along with forms 502, 502CR, and 502X (assuming you already filed a tax return for which a refund claim is being made).
  • You have 3 years from the time your original return was filed or 2 years from the time the tax was paid (whichever is later) to file for any refunds.
  • There is an informative FAQ which elaborates more on this topic available here.



This new ruling assures Maryland taxpayers receive fair treatment for taxes paid to other states. Many Maryland taxpayers who take advantage of this new ruling will receive substantial tax refunds based on previously filed returns.

Although this ruling was specific to Maryland, there are other states that follow the practice of the (now) old Maryland rules. This case will likely impact their tax law regarding how they allow credit for taxes paid to nonresident states. If you are a nonresident of MD and conduct out of state business, be sure to speak with your tax practitioner to determine how those payments are treated by your home state to insure you receive the maximum benefit.


[1] Although beyond the scope of this article, “sourced” refers to the fact that Joe had some physical presence, or “nexus,” in NY and therefore filed a NY tax return and paid taxes to NY.

[2] Tax amounts are for example purposes only, and they do not reflect what the actual tax would be.

[3] These are the 2 components to MD State income taxes as mentioned above.








Post authored by Daniel Spetner, CPA

For questions or comments, Daniel can be reached at or 410-358-5455 Ext. 2.