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June 2, 2014
The Resident Income Tax Credit: Did Maryland Misapply the Commerce Clause?
by Robert J. Firestone

Full Text Published by Tax Analysts®

Robert J. Firestone is a commissioner on the New York City Tax Appeals Tribunal and an adjunct professor of law in the graduate tax program at New York Law School. The views expressed are strictly the author's.

In this article, Firestone argues that the Maryland Court of Appeals erred in its decision in Wynne v. Treasury and that the court's rationale, if applied throughout the country, would undermine the privileges and immunities clause and states' authority to tax their residents.

* * * * *

I. Introduction

If a resident individual of State A seeks employment in State B, or owns income-producing property or opens a business in State B, does that individual's status as nonresident, standing alone, constitute interstate commerce subjecting State B's nonresident income tax to the strictest scrutiny under the U.S. Constitution's dormant commerce clause?1 Or does the privileges and immunities clause of Article IV apply, with its heightened "substantial equality" level of scrutiny?2

It is clear that both constitutional provisions cannot apply in that instance. If the mere status of an individual as a nonresident constitutes interstate commerce and invokes the stricter protections of the dormant commerce clause, then the privileges and immunities clause would be eclipsed and effectively nullified in every instance. The substantial equality standard of review would never apply when the issue involves discrimination against nonresident individuals.

Under basic principles of legal construction, express language generally controls over language that is implied.3 The dormant commerce clause is not an express constitutional provision, but has been implied4 as a means of delineating the federal and state powers to regulate interstate commerce.5 The dormant commerce clause, therefore, shouldn't be construed so broadly as to nullify the privileges and immunities clause,6 an express constitutional provision long construed to protect nonresident individuals.7

Also, do the two constitutional provisions really cover the same subjects? Does the scope of the dormant commerce clause, which protects an interstate business in its choice of where to locate its business operations,8 also extend to the personal choices of nonresident individuals who choose to work, or otherwise earn their income, in a state different from where they live?9

It is well established that the dormant commerce clause protects from discrimination interstate business transactions and business location decisions, that is, "a State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State."10 By contrast, an individual's choice of where to live is a personal decision.11 Federal income tax rules, for instance, treat the cost of commuting from home to work as a personal and not a deductible business expense.12

Thus, while the decision to locate manufacturing operations in one state instead of another is protected by the dormant commerce clause,13 the privileges and immunities clause of Article IV protects nonresident individuals from discrimination, that is, the personal choice to live in one state and work in another.

In Maryland v. Wynne,14 the Maryland Court of Appeals held that when an individual, a resident of Maryland, earns income in other states, the mere status of being a nonresident in those other states, within the jurisdiction of those other states' nonresident income tax laws, constitutes interstate commerce, implicating the dormant commerce clause. Although Wynne concerned the taxpayer's investment in an S corporation, its reasoning extends to all income within the scope of a nonresident income tax, including wages and salaries earned in the course of commuting from home to work.

On May 27 the U.S. Supreme Court granted the state's petition for writ of certiorari. If the Court upholds Wynne, it will essentially nullify the privileges and immunities clause of Article IV. Every discrimination claim based on nonresidency will be easily restated as a dormant commerce clause claim.15 States will have far less latitude in structuring their personal income tax laws, which will no longer be subject to the substantial equality standard, but to the strictest scrutiny. The federal-state balance will significantly change.

Although the issue in Wynne concerns tax credits, it has far broader implications. Most states grant their residents personal income tax credits for other states' nonresident income taxes. They do so for political reasons, so their voting residents will not see their incomes and personal wealth diminished by two separate tax jurisdictions with equally defensible claims to that income.

A state's taxing jurisdiction over its residents, based on the special privileges of citizenship, is over the person, and extends to all of the resident's income, regardless of where it is earned.16 A state's taxing jurisdiction over nonresidents is narrower -- limited to the nonresidents' income-producing activities and property within the state.17 A resident who earns income in another state that imposes a nonresident income tax will always be taxed twice, by the state of residence and by the state in which the income was earned. Neither state's jurisdictional claim is superior to the other, nor would favoring one state over the other be fair. For example, requiring the state of residence to credit taxes paid to other states would forfeit the state of residence's just claim to that revenue, and would treat the state of residence unfairly.18

The due process clause of the 14th Amendment does not bar the double taxation of income.19 In sum, the dormant commerce clause does not apply here because (1) it would be an unprecedented expansion of its scope, from protecting interstate business transactions and business location decisions, to protecting the personal choices of individuals who earn income in a state different from where they live, and (2) it would completely eclipse the privileges and immunities clause of Article IV, rendering it a nullity, and change the federal-state balance in favor of lessening the states' power to tax nonresidents.

II. The Facts of Wynne

The Wynnes were 2.4 percent shareholders in a corporation, Maxim Healthcare Services Inc., which was engaged in a multistate healthcare business. Maxim made an election under the Internal Revenue Code to be taxed as an S corporation. As a result, Maxim paid no federal income tax, and its income was passed through to its shareholders and subject to federal income tax at the shareholder level.

For the 2006 tax year, Maxim filed state corporate income tax returns in 39 states, and it allocated to each shareholder a pro rata share of the taxes paid to each of those states. The Wynnes claimed their pro rata share of Maxim's corporate income taxes paid to other states as a credit against their Maryland resident state and county income taxes. The Maryland comptroller denied the portion of the Wynnes' credit that applied to the resident county income tax. The resulting tax deficiency was affirmed by the Hearings and Appeals Bureau of the Comptroller's Office.

The Wynnes appealed to the Maryland Tax Court, where they argued that the failure to grant a credit for income taxes paid to other states against the county income tax discriminated against interstate commerce, in violation of the dormant commerce clause. The tax court rejected that argument and affirmed the assessment. The Wynnes appealed to the circuit court, which reversed the tax court. The case was eventually appealed to the Maryland Court of Appeals.

III. The Maryland Appeals Court Decision

The Wynnes conceded Maryland's jurisdiction, under the due process clause, to tax all of their income, regardless of where it was earned.20 The sole issue before the Maryland Appeals Court was whether Maryland's failure to grant a tax credit against its county income tax for taxes paid to other states violated the dormant commerce clause.

As an initial matter, the court considered whether the dormant commerce clause applies to individuals who maintain their personal residences in Maryland, but earn income in other states that impose nonresident income taxes. The comptroller argued that the Wynnes were subject to the Maryland income tax on individuals because of their status as Maryland residents, and not because of their activities in Maryland or in other states.

The court rejected that argument, holding that the Wynnes were subject to the Maryland income tax both because they were Maryland residents and "because they have income derived from intrastate and interstate activities." Because of their interstate activities, "other states may also tax some of that income because it derives from activities in those states." However, it is well established that a state's power to tax persons residing within the state is based solely on their status as citizens or residents and is without regard to their activities or to the source of their income.21

The Maryland court thus mischaracterized the Maryland resident income tax on individuals as a tax on the individual's activities. To the contrary, Maryland's taxing power over persons residing within its jurisdiction is based only on their residency status. When Maryland taxes its residents, it is taxing them in their person, not their activities, whether conducted out-of-state or otherwise. If not for the Wynnes' status as residents, Maryland would be powerless to tax them on their out-of-state activities, which would be outside of Maryland's taxing jurisdiction. To the extent that the Maryland court's reasoning depended on its characterization of the resident income tax as a tax on interstate activities, its conclusion that the resident tax implicates interstate commerce was erroneous.

If Maryland isn't taxing activities in other states, but merely the persons within its power, it is difficult to see how the resident income tax implicates interstate commerce. In concluding that it does, the Maryland court compared a Maryland resident "who earns substantial income from out-of-state activities" with "an otherwise identical taxpayer" who earns all of his income in Maryland. The court explained that "the first taxpayer may pay more state and local income taxes than the second. That creates a disincentive for the taxpayer -- or the S Corporation of which the taxpayer is an owner -- to conduct income-generating activities in other states with income taxes."22

The Maryland Court of Appeals makes several assumptions here that are speculative at best and that raise several concerns. In comparing a Maryland resident individual who earns substantial income from out of state with an identical taxpayer who earns income entirely from Maryland activities, even the court realizes, by its use of the word "may," that the first taxpayer will not necessarily pay more in state and local taxes than the second taxpayer. Not every state imposes a personal income tax. Thus, if the first taxpayer earns substantial income in a state that does not impose a nonresident income tax, then it will pay the same amount of state and local taxes as the taxpayer who earns income entirely from Maryland activities.

While the factual basis for that comparison is speculative, it raises a greater concern -- the comparison between the two hypothetical taxpayers residing in Maryland depends entirely on another state's tax law, which is beyond the control of the Maryland General Assembly and in which Maryland has no sovereign interest. The U.S. Supreme Court has made it clear that the constitutionality of one state's tax laws can never depend on the tax laws in other states.23 If Maryland has full jurisdiction to tax its individual residents in their person on all of their income, regardless of where it was earned, does Maryland have to forfeit that power to another state having an equally founded jurisdiction over their activities, if that state imposes a nonresident income tax? Under the court's reasoning, the state of residency and the source state would not be treated as coequal sovereigns, elevating the power of the source state to the detriment of the state of residency. Moreover, the tax laws of the state of residency would be dependent on the tax laws of the source state. The state of residency would forfeit its taxing power if that other state's legislature enacts a nonresident income tax.

IV. The Maryland Resident Income Tax Credit
Doesn't Affect Interstate Commerce

In concluding that Maryland's resident income tax creates a disincentive for the taxpayer to conduct income-generating activities in other states with income taxes, the Maryland court relied on Fulton Corp. v. Faulkner.24 Fulton involved a credit under North Carolina's intangibles property tax that decreased as the stock issuer did a greater proportion of its business outside the state. The Fulton Court held that "the intangibles tax facially discriminates against interstate commerce" because a "regime that taxes stock only to the degree that its issuing corporation participates in interstate commerce favors domestic corporations over their foreign competitors in raising capital among North Carolina residents and tends, at least, to discourage domestic corporations from plying their trades in interstate commerce."25

The tax credit in Fulton operated as a classic tariff, benefiting corporate stock issuers that do most of their business within North Carolina by burdening issuers that do most of their business outside of the state. The Maryland court erred by comparing Maryland's individual income tax on residents to the intangibles tax in Fulton. Unlike the intangibles tax credit, which decreased as the issuer corporation expanded its business in interstate commerce, the resident income tax remains the same, regardless of whether a Maryland resident earns $100,000 of income in Maryland or the same amount of income in another state.

In order to conclude that a Maryland resident pays a higher tax if it earns income in another state, the Maryland court had to look past the Maryland resident income tax to the nonresident income tax imposed by another jurisdiction. Again, the constitutionality of Maryland's tax laws can't depend on the tax laws of other states.26

Unlike the intangibles tax in Fulton, the Maryland resident income tax doesn't create a disincentive for the taxpayer to conduct income-generating activities in other states. The result in Fulton didn't depend on the tax laws in effect in other states, but only on the discriminatory effect of North Carolina's intangibles tax standing alone. Standing alone, Maryland's resident income tax doesn't affect interstate commerce. The court's contrary conclusion was based on a reading of the dormant commerce clause long rejected by the U.S. Supreme Court.

V. The Maryland Resident Income Tax
Doesn't Affect Interstate Travel

A Maryland resident who travels to another state to earn income pays the same amount of Maryland resident income tax as a Maryland resident who earns all of his income in Maryland. Notwithstanding the Maryland court's contrary conclusion, Maryland's resident income tax, standing alone, doesn't implicate "the movement of people across state borders for economic purposes."

The court of appeals appears to have read Camps Newfound v. Town of Harrison27 as a case that applies the dormant commerce clause to individuals who travel or commute across state lines to earn income in another state. Camps Newfound, however, wasn't a right of travel case but concerned an export tariff on services. In Camps Newfound, Maine's real property tax exemption for charitable organizations was limited to charities that principally served Maine residents. The taxpayer, a Christian Science summer camp that aggressively marketed its picturesque Maine facilities around the country, generated 95 percent of its business from campers residing in other states. Because the camp mainly served nonresidents, Maine denied the camp's property tax exemption.

The U.S. Supreme Court invalidated Maine's property tax exemption on the grounds that "it functionally serves as an export tariff that targets out-of-state consumers by taxing the businesses that principally serve them."28 The camp had aggressively reached out to consumers in other states, from which it received practically all of its campers; the discriminatory exemption had the practical effect of an export tariff on services, sharing the same fate as an export tariff on goods.29

In concluding that Camps Newfound is a right of travel case, the Maryland Court of Appeals apparently focused on a single sentence responding to an argument made by the town of Harrison that the property tax exemption does not affect interstate commerce. Referring to the nonresident campers who attended the camp, the U.S. Supreme Court observed that "[t]he attendance of these campers necessarily generates the transportation of persons across state lines that has long been recognized as a form of 'commerce.'"30

Camps Newfound, however, does not hold that Maine's property tax exemption interfered with the campers' right to freely enter and leave the state, burdening the campers' right of travel.31 That wasn't the issue before the Court. The Court concluded that Maine's property tax exemption was functionally equivalent to an "export tariff" and that its practical effect was to discriminate against the interstate sale of camp services to nonresident consumers. The Court's reference to the interstate travel of the campers was one of several facts identified by the Court to underscore the interstate nature of the transactions burdened by the exemption.

The Maryland court's reading of Camps Newfound as a right of travel case conflicts with U.S. Supreme Court precedent holding that the right isn't protected by the dormant commerce clause. In Bray v. Alexandria Women's Health Clinic,32 the Court held that the individual right of interstate travel "does not derive from the negative commerce clause, or else it could be eliminated by Congress."

Saenz v. Roe divided the right of travel into three components: (1) the right to enter and leave the state; (2) the right of a citizen of one state who travels to another state intending to return home, to enjoy the same "Privileges and Immunities of the Citizens of the several States" that she visits; and (3) when the traveler doesn't intend to return home, the right to be treated like other citizens of that state.

It is the second component of the right of travel that is at issue in Wynne. Saenz stated that right isn't subject to the strict scrutiny of the dormant commerce clause, but to the lesser substantial equality standard under the privileges and immunities clause.33

The Maryland court, therefore, was incorrect in holding that the fact that an individual resident of one state earns income in another state that imposes a nonresident income tax implicates the dormant commerce clause. Rather, the privileges and immunities clause protects from discrimination nonresident individuals who seek employment or otherwise seek to earn income in another state. The court's holding to the contrary is an unwarranted expansion of the dormant commerce clause beyond its present scope, which changes the federal-state balance under our system of federalism to the detriment of the states, subjecting state individual income tax laws to the strictest scrutiny, while lessening the states' authority to tax nonresident individuals.

VI. Distinguishing Commercial Domicile
From Individual Residency

Under the unitary business principle, a state may not tax a corporation engaged in a multistate business on 100 percent of the corporation's income.34 The requirement that a state must apportion the income of a corporation derived from business conducted in other states is grounded in both the due process and commerce clauses of the U.S. Constitution.35

Although the commerce clause plays a role in apportionment, limiting multiple taxation by requiring a state's apportionment formula to be internally consistent,36 it is plain that the constitutional restrictions on apportionability are almost entirely described in due process terms.37 In formulary apportionment cases, the commerce clause generally plays a secondary role to due process, in the sense that a formula that taxes extraterritorial values and thus violates due process, also results in multiple taxation violating the commerce clause.38

In limited circumstances, a corporation's state of commercial domicile may tax the corporation on 100 percent of its income, but only if that income was earned in activities unrelated to its unitary business.39 Otherwise, the income of a multistate corporation derived from a unitary business must be apportioned "on the basis of a formula taking into account objective measures of the corporation's activities within and without the jurisdiction."40

It might be tempting to extend the limitation on a state's power to tax corporate income to the personal income tax, thus prohibiting states from taxing the income of individuals who reside there but earn their living in another state.41 Proponents of this approach believe it is consistent with the dormant commerce clause. This reading of the clause requires that when two states have jurisdiction to tax an individual, the state of residence over the person and another state over the individual's activities, the state having jurisdiction over the activities should take precedent.42

The rationale for requiring the state where an individual resides to yield its taxing power to the state where the individual earns his income appears to be based on three assumptions: (1) that there is no reason to treat the taxation of individuals based on personal residence differently from the taxation of corporations based on commercial domicile;43 (2) that individuals who work or otherwise earn income in other states acquire the equivalent of a business situs there, which should prevail in any conflict with the individual's domicile;44 and (3) although the due process clause doesn't prohibit the double taxation of income, the requirement that a multistate corporation apportion its income to other states is dictated by the commerce clause.45 I will consider each in turn.

The notion that a corporation is a person capable of acquiring a domicile within a particular state is a legal fiction that is given relatively little weight under the corporate income tax, generally yielding to the state in which the income is earned under the unitary business principle.46 Consistent with that legal fiction is the reality that a corporation is, in every respect, a business and no aspect of its legal existence can be deemed personal.47

Individuals, on the other hand, are real persons. When a state exercises its jurisdiction to tax individuals who maintain their homes within the state, send their children to schools, and receive the benefits of "police and fire protection . . . and the advantages of living in a civilized society,"48 the state justifiably calls on those individuals in their strictly personal aspect to share the cost of providing those services. If those individuals happen to commute to work in other states, which also have a just claim to tax a portion of their income, that should not relieve those individuals of their obligation to pay for all of the many services they receive as citizens and residents of their home state.

As explained above, extending the dormant commerce clause to the individual income tax would completely eclipse the privileges and immunities clause of Article IV and render it a nullity. That issue does not arise in the area of corporate income taxation because the privileges and immunities clause does not apply to corporations, which are not citizens.49

The legal fiction that a corporation is a person capable of having a domicile within a state derives from the property tax.50 Under the doctrine mobilia sequuntur personam, intangible property is assigned a situs at the place of the owner's domicile under the assumption that the owner controls the property from that location.51 Nevertheless, once the intangible acquires a business situs in another state, that other state also has jurisdiction to tax the intangible. Invoking the commerce clause, it is argued that the state where the property acquired a business situs has the superior claim.52

That may be, but the reasoning doesn't extend to the personal income taxation of individual residents who commute to work, or otherwise earn income, in other states. A state's power to tax an individual citizen or resident in his person isn't a legal fiction but one of three jurisdictional bases for a state to exert its taxing power -- over the persons, property, or activities within its borders. When an individual maintains a home in one state and works in another, the home state retains its power to demand that the individual contribute to the cost of government, regardless of the source of his income.

As explained above, the requirement that a multistate corporation apportion its income is dictated primarily by the due process clause. That is evident by the "minimal connection" and "rational relationship" language, which is exclusively due process language53 that appears in every unitary business case.54 The only additional limitation, derived exclusively from the commerce clause, is the requirement that an apportionment formula be internally consistent to avoid multiple taxation.55

The commerce clause does not restrict state apportionment formulas, except to require that they must be internally consistent. The main restriction on state apportionment formulas derives from due process, which requires that the income apportioned to a state must be rationally related to in-state activity. When two states have equal jurisdiction, one over the individual, the other over the individual's activity, the commerce clause does not pose an additional barrier to the home state's jurisdiction over its individual residents. Any other rule would deprive the home state of its ability to call on resident individuals to contribute their fair share to the cost of schools, police and fire protection, sanitation, and other services they benefit from as citizens and residents of their home state.

VII. Conclusion

Wynne represents a significant and unwarranted expansion of the dormant commerce clause. Currently, it protects from discrimination interstate business transactions and business location decisions. Wynne extends this protection to new territory previously the domain of the privileges and immunities clause of Article IV -- protecting the personal choices of individuals who earn income in a state different from where they reside. If the dormant commerce clause is extended to the personal income taxation of resident individuals, it would completely eclipse the privileges and immunities clause of Article IV, render it a nullity, and change the federal-state balance by reducing the states' power to tax nonresidents. It would also deprive the home state of its ability to call on its residents to pay their fair share of the cost of government and for the many services they enjoy as state residents.


1 Camps Newfound v. Town of Harrison, 520 U.S. 564, 582 (1997) (quoting Chemical Waste Mgmt. Inc. v. Hunt, 504 U.S. 334, 342 (1992)) ("Once a state tax is found to discriminate against out-of-state commerce, it is typically struck down without further inquiry"); Associated Industries of Missouri v. Lohman, 511 U.S. 641, 649-650 (1994) (applying a "strict rule of equality," the Court held that "actual discrimination, wherever it is found, is impermissible, and the magnitude and scope of the discrimination have no bearing on the determinative questions whether the discrimination has occurred").

2 Austin v. New Hampshire, 420 U.S. 656, 663-665 (1975) (applying the substantial equality standard as one of rough approximation when comparing resident and nonresident taxes and explaining the scope of that standard); Toomer v. Witsell, 334 U.S. 385, 396-399 (1948) (requirement that shrimp boats operated by nonresidents of South Carolina pay 100 times the license fees of residents, without a substantial reason for the difference in treatment, violates the privileges and immunities clause). See also Saenz v. Roe, 526 U.S. 489, 502 (1999) (nonresidents may be treated differently from residents if there is a substantial reason for the difference in treatment).

3 United States v. Stanley Ferryman, 897 F.2d 584, 589 (1st Cir. 1990) ("The usual canons of construction also require that we prefer the specific over the general, what is expressed over what might be implied").

4 H.P. Hood & Sons Inc. v. Du Mond, 336 U.S. 525, 534-535 (1949) ("While the Constitution vests in Congress the power to regulate commerce among the states, it doesn't say what the states may or may not do in the absence of congressional action, nor how to draw the line between what is and what isn't commerce among the states. Perhaps even more than by interpretation of its written word, this Court has advanced the solidarity and prosperity of this Nation by the meaning it has given to these great silences of the Constitution").

5 Gibbons v. Ogden, 22 U.S. 1, 194, 208 (1824); Cooley v. Board of Wardens, 53 U.S. 299, 319 (1851) (holding that states can regulate local incidents of interstate commerce that don't require a uniform national rule).

6 See Robert J. Firestone, "Does a Commuter's Choice of Where to Reside Implicate the Dormant Commerce Clause?" 49 N.Y. L. Sch. L. Rev. 943, 947-951 (2005).

7 Ward v. Maryland, 12 Wall. 418 (1871); see also Saenz, 526 U.S. at 501-502 (explaining that nonresidents are protected against discrimination by the privileges and immunities clause of Article IV, and that the protection "is not absolute").

8 Pike v. Bruce Church Inc., 397 U.S. 137 (1970) ("state statutes requiring business operations to be performed in the home state . . . [are] virtually per se illegal"); Toomer v. Witsell, 334 U.S. 385, 403-406 (requirement that shrimp boats operating in South Carolina must unload and package shrimp there before shipping or transporting to another state violates the dormant commerce clause).

9 See Firestone, "Commuter Taxes: Refocusing the Constitutional Issues," State Tax Notes, Feb. 11, 2008, p. 435 .

10 Armco Inc. v. Hardesty, 467 U.S. 638, 642 (1984).

11 See Firestone, supra note 6.

12 Treas. reg. sections 1.162-2(e) and 1.262-1(b)(5).

13 Armco, 467 U.S. 638; New Energy Company of Indiana v. Limbach, 486 U.S. 269 (1988); see also Pike, 397 U.S. 137, and Toomer, 334 U.S. 385.

14 Maryland State Comptroller v. Wynne, No. 107 (Md. 2013) .

15 Sometimes, the two claims can overlap. For example, if State B taxes a State A resident at a higher rate than State B residents unless the State A resident relocates his business to State B, the State A resident can arguably make a claim under both the dormant commerce clause and the privileges and immunities clause. But the real claim is discrimination based on choice of business location, not residency.

16 A state's taxing power over its individual residents is not based on its jurisdiction over the taxpayer's income-producing activities or property. New York ex rel. Cohn v. Graves, 300 U.S. 308, 312-313 (1937) ("Domicile itself affords a basis for such taxation").

17 Shaffer v. Carter, 252 U.S. 37, 52 (1920) (The Court explained that a state's taxing power extends to the "persons, property and business" within its jurisdiction. Thus, "a state may impose general income taxes upon its own citizens and residents whose persons are subject to its control." As to nonresidents, a state may levy a tax "no more onerous in effect," but limited to the nonresident's income "from property or business within the state, or occupations carried on therein").

18 Assuming hypothetically that most of the residents of State A commute to work in State B, the Constitution does not prevent State A, where they maintain their homes, from looking to all of their earnings, from whatever source, to pay for "the cost of police and fire protection . . . and the advantages of living in a civilized society." See Commonwealth Edison v. Montana, 453 U.S. 609, 622-625 (1981). A state of residency's special relationship to its citizens and residents justifies its exercise of jurisdiction over them in their person, not just to the extent of their in-state earnings.

19 Guaranty Trust Co. v. Virginia, 305 U.S. 19, 59 (1938); Curry v. McCanless, 307 U.S. 357, 372-374 (1939).

20 Wynne, No. 107 at 4.

21 New York ex rel. Cohn v. Graves, 300 U.S. 308, 312-313 (1937) ("Domicile itself affords a basis for such taxation"); Shaffer v. Carter, 252 U.S. 37, 51 (1920) ("the states have full power to tax their own people and their own property"). The rationale for taxing resident individuals on all of their income, regardless of where it was earned, was explained in Lawrence v. State Tax Commission, 286 U.S. 276, 279 (1932):

    The obligation of one domiciled within a state to pay taxes there, arises from unilateral action of the state government in the exercise of the most plenary of sovereign powers, that to raise revenue to defray the expenses of government and to distribute its burdens equitably among those who enjoy its benefits. Hence, domicile in itself establishes a basis for taxation. Enjoyment of the privileges of residence within the state, and the attendant right to invoke the protection of its laws, are inseparable from the responsibility for sharing the cost of government.

22 Wynne, No. 107 at 5.

23 Austin v. New Hampshire, 420 U.S. 656, 667-668 (1975): New York has no authority to legislate for the adjoining states; and we must pass upon its statute with respect to its effect and operation in the existing situation. . . . Nor, may we add, can the constitutionality of one State's statutes affecting nonresidents depend upon the present configuration of the statutes of another State (internal quotations and citations omitted).

See also Armco, 467 U.S. 638, 644-645 (1984):

    Any other rule would mean that the constitutionality of West Virginia's tax laws would depend on the shifting complexities of the tax codes of 49 other States, and that the validity of the taxes imposed on each taxpayer would depend on the particular other States in which it operated.

24 516 U.S. 325 (1996).

25 Id. at 333.

26 See Austin, 420 U.S. 656, and Armco, 467 U.S. 638.

27 520 U.S. 564 (1997).

28 Id. at 580-581.

29 See Tyler Pipe Industries Inc. v. Washington, 483 U.S. 232 (1987) (invalidating an export tariff on locally manufactured goods). See Firestone, supra note 9, at 439.

30 Camps Newfound, 520 U.S. at 573.

31 See, e.g., Saenz, 526 U.S. 489, 501-502 (1999), in which the Court did not attribute the right to enter and leave the state to the commerce clause, but traced it back to the Articles of Confederation suggesting that it "may simply have been conceived from the beginning to be a necessary concomitant of the stronger union the Constitution created."

32 506 U.S. 263, 277 n.7 (1993).

33 526 U.S. 489, at 501-502:

    The second component of the right to travel is, however, expressly protected by the text of the Constitution. The first sentence of Article IV, section 2, provides: "The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States". . . . Those protections are not "absolute," but the Clause does bar discrimination against citizens of other states where there is no substantial reason for the discrimination beyond the mere fact that they are citizens of other States (internal quotations and citations omitted).

34 See, e.g., Container Corp. v. Franchise Tax Board, 463 U.S. 159 (1983); Hans Rees' Sons v. North Carolina, 283 U.S. 123 (1931); Mobil Oil Corp. v. Vermont, 445 U.S. 425 (1980).

35 Container, 463 U.S. 159, at 164 ("Under both the Due Process and the Commerce Clauses of the Constitution, a state may not, when imposing an income-based tax, 'tax value earned outside its borders'").

36 Container, 463 U.S. at 169.

37 Mobil, 445 U.S. at 437-438:

    For a state to tax income generated in interstate commerce, the due process clause of the Fourteenth Amendment imposes two requirements: a "minimal connection" between the interstate activities and the taxing State, and a rational relationship between the income attributed to the State and the intrastate values of the enterprise.

38 See, e.g., Armco, 467 U.S. at 644-645 ("A tax that unfairly apportions income from other states is a form of discrimination against interstate commerce").

39 Cf. Woolworth v. New Mexico Taxation Dept., 458 U.S. 354, 357-358 (1982); Mobil, 445 U.S. at 444-445. See also Wheeling Steel Corp. v. Fox, 298 U.S. 193 (1936) (recognizing a state's power to tax intangibles at corporation's domicile). The rationale for taxing the income from intangible property based on the owner's domicile derives from a legal fiction employed in the property tax, mobilia sequntuur personam (movables follow the person).

40 Container, 463 U.S. at 465.

41 Jerome R. Hellerstein and Walter Hellerstein, State Taxation section 20.04[1] [a] (2000).

42 Id.

43 Id. ("A state has no more power under the commerce clause to tax individuals on 100 percent of their income earned in commercial activities that are taxable in other states than it has to tax corporations on 100 percent of their income earned from commercial activities that are taxable in other states").

44 Id. at section 6.03.

45 Id. at sections 6.03, 8.02, and 20.04[1] [a].

46 Mobil, 445 U.S. at 445.

47 The real persons behind the corporate fiction are the employees, who carry out the corporation's business and who receive income in the form of wages and salaries, and the corporation's stockholders, who ultimately control the corporation and who receive income in the form of dividends.

48 Commonwealth Edison v. Montana, 453 U.S. 609, 622-625 (1981).

49 Hemphill v. Orloff, 277 U.S. 577 (1928).

50 See Mobil, 445 U.S. at 444-445.

51 Curry, 307 U.S. at 367-368.

52 Hellerstein and Hellerstein, supra note 41, at section 9.03[3] [b].

53 Quill v. North Dakota, 504 U.S. 298, 306 (1992).

54 See, e.g., Allied-Signal, 504 U.S. at 772; Mobil, 445 U.S. at 438.

55 See supra note 35.

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