United States: Kansas Department Of Revenue Provides Post-Wynne Guidance On Credits For Taxes Paid To Other States

On August 10, 2015, the Kansas Department of Revenue became the first state tax authority to directly respond to the U.S. Supreme Court's decision in Comptroller of the Treasury v. Wynne.1 The Department's issuance of a notice acquiesces to the Wynne decision and allows Kansas residents the ability to take a credit for taxes paid to other states and localities within those states, both on a prospective and retroactive basis.2

The Wynne Decision

On May 18, 2015, the U.S. Supreme Court affirmed a Maryland Court of Appeals decision concluding that the Maryland tax system (comprised of state-level and county-level components) was unconstitutional to the extent that it denied Maryland resident taxpayers a credit against the county-level tax for income taxes they paid to other states.3 Based on this decision, the taxpayer and similarly situated residents are now afforded the credit against both components of the Maryland tax. While the full reach of the Wynne decision is not yet known, several states have been compelled to consider whether their state tax credits offered to residents may run into similar constitutional issues without explicit inclusion of local taxes within the scope of such credits.

Kansas' Credit Statute

For purposes of the Kansas individual income tax, a credit historically has been available to Kansas resident individuals, estates and trusts for taxes paid to other states on income derived from outside the state, and included in Kansas adjusted gross income.4 The credit cannot be greater in proportion to the Kansas tax than the Kansas adjusted gross income derived outside Kansas by a Kansas resident taxpayer is to the total Kansas adjusted gross income of the taxpayer.5 For purposes of the credit, the term "state" is defined as "any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof."6

Kansas Department's Response to Wynne

The Department's notice states that while the Wynne case did not specifically address Kansas law, the Department decided to follow "the Court's direction" on a prospective basis and allow for income or earnings taxes imposed by local jurisdictions within a state to be included within the scope of the state tax credit.7 In addition, the Department will accept refund claims from Kansas residents (for periods still open under the statute of limitations) resulting from the expanded scope of the state tax credit to locality taxes. To claim the expanded credit on a prospective or retroactive basis, a Kansas resident is required to include the following documentation with the Kansas return:

  • A copy of the income tax return filed with the other state;
  • A copy of the income or earnings tax return filed with the local jurisdiction (or paid to the local jurisdiction if a filing with the locality is not required);
  • A copy of the Worksheet for Credit Calculation (contained in the Kansas Form K-40 instructions); and
  • A copy of the federal W-2 form.


Kansas is the first state that has spoken directly to the Wynne decision through issued guidance. While the positive guidance will be appreciated by Kansas residents that may have a refund claim or a prospective benefit, there are some informational gaps that will need to be resolved. For example, while the Department explained that income or earnings taxes imposed by local jurisdictions would be includible taxes for purposes of calculating the state tax credit, the Department did not specifically list the most significant local taxes that would qualify. Presumably a tax like the Metropolitan County Transportation Mobility Tax, which is a tax imposed on employers and self-employed individuals doing business in New York City and the surrounding New York suburbs with payroll over a certain threshold amount, would qualify as an earnings tax.8 It remains to be seen whether the Department will agree with this interpretation.

Now that Kansas has spoken on the effect of Wynne on its state tax credit mechanism, one would hope that the Department's notice spurs other states to follow suit. To the extent that other states have similar income tax systems and have not addressed the need to change the scope of the state tax credit to include locality taxes, residents that pay a significant amount of taxes to non-resident states should closely examine the existing state tax credit statute and consider protective refund claims where relevant and material.

1 U.S. Supreme Court, No. 13-485, May 18, 2015. For a detailed discussion of this case, see GT SALT Alert: U.S. Supreme Court Holds Lack of County Personal Income Tax Credit for Taxes Paid to Other States Violates Commerce Clause.

2 Notice 15-15, "Credit for Taxes Paid to Another State," Kansas Department of Revenue, Aug. 10, 2015.

3 Maryland State Comptroller v. Wynne, 64 A.3d 453 (Md. 2013). For a detailed discussion of this case, see GT SALT Alert: Maryland Court of Appeals Rules Denial of County-Level Tax Credit for Taxes Paid to Other States Violates Commerce Clause.

4 KAN. STAT. ANN. § 79-32,111(a).

5 Id.

6 KAN. STAT. ANN. §§ 79-32,111(a); 79-3271(i). In addition, the statute allows for a credit for income tax paid to a foreign country or political subdivision.

7 Likewise, the Department will allow Kansas residents the credit for taxes paid to a locality in a foreign country.

8 N.Y. TAX LAW § 800 et seq.

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