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

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

 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.