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Attorney General Jason R. Ravnsborg

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UNITED STATES SUPREME COURT RULES WITH SOUTH DAKOTA TO STOP UNDUE TAXATION OF TRUSTS

 

FOR IMMEDIATE RELEASE:  Friday, June 21, 2019

CONTACT:  Tim Bormann  (605) 773-3215

 

PIERRE, S.D. – Today the United States Supreme Court issued its decision in North Carolina Department of Revenue v. Kaestner 1992 Family Trust.  The case examined whether North Carolina could tax the gains of a trust located in New York because one beneficiary of the trust was a North Carolina resident, even though the beneficiary had no control over the trust assets and none of the gains were paid as income to the beneficiary.

 

The South Dakota Attorney General filed a brief in support of the North Carolina Supreme Court’s decision striking down the tax.  The United States Supreme Court also struck down the tax, 9-0, with a decision written by Justice Sonia Sotomayor, saying that North Carolina’s attempt to tax the New York trust violated the Due Process clause of the United States Constitution.

 

The decision comes on the one-year anniversary of the Court’s decision in South Dakota v. Wayfair, which upheld the state’s imposition of a sales tax on out-of-state internet retailers who marketed and sold goods in South Dakota.  The Wayfair court ruled that these sales were subject to taxation because they depended on and made use of infrastructure provided by the State of South Dakota.

 

“Unlike internet retail sales, the activities of a South Dakota trust do not impose on the infrastructure of another state,” said Ravnsborg.  “The Kaestner decision affirms that South Dakota trusts should not be subject to taxation in North Carolina or another state simply because a beneficiary resides there.”

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