Kaestner Commentary: Scharf, Opinion analysis: Presence of in-state beneficiaries alone insufficient for state to assert jurisdiction to tax trust income (SCOTUS Blog, June 22, 2019).

Erin Scharff, Professor, Arizona State University, Sandra Day O’Connor College of Law, has published her commentary on the Kaestner case on the SCOTUS Blog. In a key part of Professor Scharff’s commentary, she notes the following:

In addressing the state’s concerns about existing tax regimes and tax avoidance, the court repeatedly emphasizes the narrowness of its holding. Furthermore, the opinion notes that if settlors wish to provide more certainty to beneficiaries, rather than entrusting distributions to the sole discretion of the trustee, tax-avoidance opportunities will be more limited. The opinion concludes that “mere speculation about negative consequences cannot conjure the ‘minimum connection’ missing between North Carolina and the object of its tax.”

When the Supreme Court agreed to review this case, many observers hoped that the court might use it as an opportunity to address tax jurisdiction and provide guidance to taxpayers and states, especially in the wake of last summer’s decision in South Dakota v. Wayfair to allow states to impose a sales tax obligation on vendors who lack a physical presence in the state. Oral argument made clear that the justices were more interested in the particularities of trust law, and this opinion is decided quite narrowly. At multiple points within the opinion and its footnotes, the opinion explicitly withholds judgment, both about states’ claims of jurisdiction over trusts on other bases and about states’ jurisdiction over trusts whose distribution regimes differ from that of the Kaestner trust.

See the full article by clicking Kaestner Commentary: Scharf, Opinion analysis: Presence of in-state beneficiaries alone insufficient for state to assert jurisdiction to tax trust income (SCOTUS Blog, June 22, 2019).

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal..

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