The Commerce Clause vs. the Resident Trust Concept (McNeil v Commonwealth of Pennsylvania)

August 23, 2013

For some time, settlors and practitioners wanting to take advantage of the myriad benefits of Delaware trusts have had to contend with the sticky issue of state fiduciary taxation of “resident trusts.” While some jurisdictions specifically require a significant nexus between the trust and the jurisdiction for taxation of “resident trusts” to be permitted, other jurisdictions have taken what seem to be extreme positions on their ability to tax trusts’ accumulated income and capital gains, finding even the most slender of connections to the state to empower taxing authority. However, a recent Pennsylvania case, McNeil v. Commonwealthappears likely to have a significant impact on Pennsylvania’s ability to impose fiduciary income taxes on certain (properly structured and administered) trusts and, given that the basis for the decision lies in U.S. constitutional (rather than state) law, could prove persuasive to courts in other jurisdictions facing similar challenges.

To read the full article please click the following link McNeil v Commonwealth of Pennsylvania The Commerce Clause vs the Resident Trust Concept.