The U.S. Supreme Court will review whether due process allows North Carolina to tax the income of out-of-state trusts based only on beneficiaries who live in the state.
New York Trust Beneficiaries Living in North Carolina
North Carolina law permits it to collect tax on the income of a trust that is for the benefit of a state resident. A New York trust whose only contact with North Carolina was its resident beneficiaries challenged the law. The North Carolina Supreme Court upheld lower court decisions and concluded the law violated the trust’s due process.
Due Process Question
North Carolina is one of several states that tax trust income based on a trust’s in-state beneficiaries. Courts have reached different results about whether due process prohibits these taxes. North Carolina asked the U.S. Supreme Court to resolve the dispute.
North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, U.S. Supreme Court, Dkt. 18-457, petition for certiorari granted January 11, 2019