Constitutional Limitations: Taxation of Trust Income: What Are the Constitutional Limitations to Impose Tax, and Are States Adhering to Them?

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

 Taxpayers and their advocates must know the limitations of a state's authority to impose tax on trust income. In this second of a two-part series, Thomas W. “TJ” Aldous of Williams Mullen reviews constitutional principles related to imposing income tax on trusts and discusses how to reconcile seemingly divergent court decisions. Last week, in part one of the series, Aldous used Virginia law as a lens through which to review basic principles regarding the nature of trusts and trust income, including triggers of trust income tax liability.