Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, June 21, 2019

SCOTUS Decides North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust

SCOTUSEarlier today, June 21, 2019, the Supreme Court of the United States decided North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust. By a 9-0 margin (7 joining the majority and 2 strong concurring opinions), the court decided that North Carolina cannot tax nonresident trust payments.

Here is an excerpt from the opinion:

This case is about the limits of a State’s power to tax a trust. North Carolina imposes a tax on any trust income that “is for the benefit of ” a North Carolina resident. N. C. Gen. Stat. Ann. §105–160.2 (2017). The North Carolina courts interpret this law to mean that a trust owes income tax to North Carolina whenever the trust’s beneficiaries live in the State, even if—as is the case here—those beneficiaries received no income from the trust in the relevant tax year, had no right to demand income from the trust in that year, and could not count on ever receiving income from the trust. The North Carolina courts held the tax to be unconstitutional when assessed in such a case because the State lacks the minimum connection with the object of its tax that the Constitution requires. We agree and affirm. As applied in these circumstances, the State’s tax violates the Due Process Clause of the Fourteenth Amendment.


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