Department of Revenue of Kentucky, et al. v. George W. Davis, et Ux (553 U.S. 328)
U.S. Supreme Court · decided May 19, 2008 · Supreme Court Database (Spaeth)
- Citation
- 553 U.S. 328 · 128 S. Ct. 1801
- Decided
- May 19, 2008
- Term
- October Term 2007
- Vote
- 7–2
- Majority author
- Justice Souter
- Issue area
- Economic Activity
- Disposition
- Reversed
- Outcome
- Petitioning party won
- Ideological direction
- Liberal
Opinion excerpt
Justice Souter delivered the opinion of the Court, except as to Part III-B. For the better part of two centuries States and their political subdivisions have issued bonds for public purposes, and for nearly half that time some States have exempted interest on their own bonds from their state income taxes, which are imposed on bond interest from other States. The question here is whether Kentucky’s version of this differential tax scheme offends the Commerce Clause. We hold that it does not. I A Like most other States, the Commonwealth of Kentucky taxes its residents’ income. See Ky. Rev. Stat. Ann. §141.020(1) (West 2006). The tax is assessed on “net income,” see ibid., calculated by reference to “gross income” as defined by the Internal Revenue Code, see §§ 141.010(9)-(11) (West Supp. 2007), which excludes “interest on any State or local bond” (“municipal bond,” for short), 26 U. S. C. § 103(a). Kentucky piggybacks on this exclusion, but only up to a point: it adds “interest income derived from obligations of sister states and political subdivisions thereof” back into the taxable net. Ky. Rev. Stat. Ann. § 141.010(10)(c). Interest on bonds issued by Kentucky and its political subdivisions is thus entirely exempt, whereas interest on municipal bonds of other States and their subdivisions is taxable. (Interest on bonds issued by private entities is taxed by Kentucky regardless…
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