court in this case involves a statute that taxes trust in common in proportion to the interests of in state beneficiaries now trust beneficiaries it bears remembering are the true owners of trust in under trust law because of all the benefits and protections that states extended to their residents the state's pro rata tax on trusting com comports with due process but you couldn't you couldn't pennsylvania supreme court that was affirmed doesn't reciting any receipt of actual in column and yet the quarter farmed a tax on the fee beneficial in doesn't have a connection so your honor the point that connects them is that the beneficiary is part of the trust indeed under trust law she is the key part of the trust it's very hard and  cause of that the hole isn't the trusts for her and her children she is the name beneficiary however under section one point two of the trust instrument the children may also receive distributions so we've already said through prior cases and you distinguish them as being in opposites to day that you can't tax the whole trust you got to chop only tax that which the beneficiary is an owner of so how do we know she's going to receive anything any time she could leave her for her kids she in the event of this case consultation it was alone two hundred fifty thousand after this tax year immediately after there was a loan but in addition but it still begs the question what makes it your right under any circumstance to tax all of the trust income where there is no guarantee that she is going to receive all of it at any point several points one is during the entire period when the income is an accumulating the state is providing her with protection and benefits the trustee doesn't have to pay for that he's not required to the trust doesn't require it has some discretion to pay for some of her expenses but nothing in the trust says that she has to pay for the benefits that you are giving her as a state but it is the very fact that those benefits and protections are being extended that enables the discretion is qualified by the need to look out for the needs of the beneficiaries and that's actually an expressed term of the trust instrument here i probably should know that i probably should know this but where is the trust located how do you decide that be so the trust has no sight since quil and other decisions the focus really is on where our benefits and protections being extended and also in  this court greeno as well the court noted that a trust is a mere extraction and that's why that's really what brings us here so you would you would say there is no state there could say we are the home state of the trust and we're the ones that have the primary claim on the taxation of this income so this under trust law a trust has something called the principal place of administration and one of the arguments my friend is making is that that and or where the trustee lives are the only contacts that can all but that first of all i would point out that page fifty one of the red brief is where they make that argument that would have the effect adopting that rule as my friend is asking would have the effect new york there is one thing that's going to happen in north carolina the thing that's going to happen in north carolina is if she is there when it's distributed she'll get some money ok which you're totally free to tax but that isn't what you want to tax you want to tax all these things which are everyone except her is in new york and moreover we don't even know if she'll ever get the money now there's something wrong with that i don't know it doesn't say specifically about trusts in the constitution but thus i mean lots of trust say there are ten beneficiaries each one lives in a different state and i the trustee have total discretion as to who give this money to and maybe i'll give it to none of them so here's a woman who might get none of it and you want to tax that is that right do i have the facts right i would i would point out some additional f kester did actually receive this money well it's that is that i'm talking about the law of north carolina and i'd only add to this that by the way if the trust has a million dollars extra income in year four and if you say she's entitled to that she isn't going to get it till year fourteen at most you discount the increased value of the trust by the time she has to wait because she has nothing that increased in value more than the million discounted by the probability that she will ever get it and when so law works in north carolina is what i'm asking and i course i suspect the answer is no but go ahead first of all this is a case in which one hundred percent of the beneficiaries the current beneficiaries as well as the complaint itself says are north carolinians so these questions of attenuated relationships are presented about only north carolinians and there are other people in the trust who live in california and the north carolinian may or may not get some money in year fourteen th at's the hypothesis ok and i'm saying under this law do you you tax that what do you tax the million dollars in extra value that came into the trust in your four and what percent and do you discount it and might she not well how does it work that law in north carolina that you are defending so the income is defined with reference to the federal definition of income the taxing statute in north carolina essentially polls in the federal definition of distributable net income and that is going to be done on essentially at a crew or a cash basis depending on how you get her so it goes in one million dollars goes into the trust in year four she will not see a penny of it at best two year fourteen and not only that she may never see a penny of it so what you're saying is the trust which is in new york has to pay carolina tax on a million dollars because there is a beneficiary there who might never receive it or if they do receive it will receive a far  you know you could tax the no that is my got the facts right so she's the facts or perhaps at some variance with what we're discussing first of all she had to do that is what i said right that's why i want to think about this case and i can't think about it unless i get the facts right let me lay i have the facts right i would lay out some additional facts that might be helpful is that a yes she's currently proportion of this constitute her needs north carolina the statute is a pro rata statute according to the interests of the beneficiaries so if there are two beneficiaries for example one in state and one out of state north carolina will first of all follow any allocation that's made in the trust instrument but failing that will go strictly  tax the children if they are eligible to receive distributions so tax based on the children your honor or tax them time excuse me tax them they might get the money so stuart upholds a property tax levy directly to the beneficiaries and what all of this is really reinforcing is that under a trust law the true owners  put other states don't do it this way right time to see what they're ending the income tax maybe georgia where the tax is based on a contingent beneficiary in your state which is all we have here right the only other states that do it that way or tennessee and maybe georgia's correct not quite iran or in this respect fifteen states total based on a contingent beneficiary in the state where you tax the trust or the trustee another state no your honor let me point out that first of all fifteen states used beneficially residency as at least a criterion second is now distributed only in relation to the shares of any in state beneficiaries and just as kavanagh if i may i want to follow up on one point it is a misconception by my friends to say that the castner's are contingent beneficiaries the state supreme court for example called mrs kastner the primary beneficiary so how can the trustee change the beneficiary status what is the trustee have to do if the trustee wants to say you're not no longer a beneficiary when can the trustee say that under this trust i'm not sure that the trustee can do that but i thought i mean maybe i should know this but when people say contingent beneficiary i'm assuming that that means that she might never get the money because the trustee my reader out of the trust your honor no i think the term contingent beneficiary is more often used to describe a situation where someone needs to die or some other wife event needs to occur before the person becomes eligible what do you understand the contingency to be with respect to this particular trust what is the contingency there is not and that is that is very much our point is that the castner's euro that the customers were perfectly eligible for distributions is what what what if anything can happen to make the customer not get that distribution or do you think the customers are just going to get that distribution so the customers could have died during the years in question but living long enough to receive distributions is not seen as a contingency the trainee cannot change the beneficiaries correct can the settler change the beneficiaries no my understanding is not the beneficiaries are the beneficiaries in your view right and there are in the q one less they die they're going to get this money they are they're going to get this money eventually unless they die that's why so in the in what chairs is there or do they get it is there a definite share that they now get no matter what in the future or can the trustee change the shares hearing anyone change the shares there's not a recital in the trust agreement of any shares look there are five people two of them live in north carolina the trust earns a million dollars in a particular year are the two in north carolina each entitle to two hundred thousand dollars eventuality or is it possible they'll get less or is it possible they'll get more it is possible that they'll get less or more there is not a pro rata then how do you know how much of the share of the trust income in that year the million dollars north carolina should tax pro rata what do you mean pro rata if there are five beneficiaries for example and two of them are north carolinian no assuming that the trust in government doesn't include any division there  forty percent would be lost so then if in fact there are one hundred beneficiaries and there is a person who lives in north carolina who eventually will get one millionth of one percent north carolina is intitled to tax one percent that sure that's your view is that right that you're i'm not sure where you're getting the money for there are five beneficiaries one lives in north carolina as it turns out that one in north carolina gets three dollars the others get nine hundred ninety nine thousand nine hundred ninety seven dollars but north carolina does not tax three dollars what it taxes is twenty percent or two hundred dollars do i have my facts right you do have those facts right and what makes that fair remembering that the standard here is fundamental fairness under the due process part of pool is that during that period those beneficial years were eligible for distributions and all the while which are changing the trust instrument because us a state are saying the trust must give them twenty percent each because regardless of what the terms of the trust are i'm going to tax you on that twenty percent even though no you might get none even though you might get more you're still trust you're being charged for twenty percent be close you should've given her twenty percent that's really what you're saying is that you're right roger to say there is a if assuming nothing's in the trust instrument there would be no there is something in the trust instrument here choses the schuman says that the trustee has absolute discretion to give her something or nothing to give three people i think there's two or three children i don't know how many there are here but let's assume there's four of them her and three children for using even numbers the trustee could choose to if she had a disabled child to give it all to the disabled child or to divide it among the three because she's very rich and they're not trustee has a lot of discretion but you the state are changing the charms of the trust instrument in saying each of them must still pay twenty five percent that is correct that nothing else appearing we make the pro rata and here's why that fair first of all throughout the period in question those people had true ownership of the cumulating assets secondly also essentially on a pro rata basis north carolina is protecting each of them you're not taxing any of those people your tax to the trust right we are taxing at the trust level of course the trust in palm fundamentally under trust law belongs to them what do you do about the problem  priors question to be getting at with it which is other jurisdictions is various it established way of allocating the tax burden you know if you have income from two states they usually you know divvy it up according to some formula in  situation where you get three it's three dollars goes to north carolina and the other number goes somewhere else and if those other jurisdictions want to tax the trust on those same funds is there a mechanism for allocating that there is you honor under section one hundred five dash one sixty point four in north carolina which is the credit statute north carolina accords a credit for taxes paid to other states and i just have to i'm sorry if that had to it there would come up a way where the second element of quill could become prob matic in the absence of a credit i'd like to point out what the propositions are on the other side the chief question i mean yes you  take if it's all the states now it happens that each state each state wants to tax the same way you do and what happens the pro rata would come directly in a situation where imagine all fifty states have the same scheme and obviously there would be benefit they don't all have the same scheme one of them taxes on the basis of the money that the person who lives in their state actually gets and it turns out that that person gets eighty percent of the income but the north carolina person gets three percent what happens in a situation where are you assuming your question right of the district actual distributions have occurred some states take on the basis of actual distributions of the states have other ways of doing it some might tax the trust on the basis of the fact that all the administrators in the tax prosti and everybody else is in new york ok there are many different ways how do they figure it out that they all meet and figure it out what happens i'm just curious they don't need to figure it out there are credit statutes in most of the states that accorded credit i point out also where actual distributions occur the trust level itself gets a deduction this is through the incorporation of section sixty two of the federal code for the distributed amounts i'd like to draw attention if i might to what the propositions are first of all that the state supreme court founded a song and secondly what my friend is arguing because part of the attraction of what north carolina is doing here is verified by the problems with with mandating under the due process clause a different approach first of all the state supreme court's reasoning was pages thirteen eighteen a the petition appendix beneficiary contacts categorically don't count beneficiaries are strangers to the trust income which they are the true owners under trusts law second page fifty one of the read brief my friend's proposition is that only trustee contacts or trustee related contacts in terms of the place of administration count that is a recipe for tax avoidance the fielding case that this court has on a petition one thousand nine hundred sixty four is a graphic example fair both foods was a major minnesota company was about to make huge distribution of profits to the beneficiaries on the eve of that distribution the trustee was replaced with a texas trustee a state which has no state income taxes i'm sure the court knows and the trust so far has successfully taken the position in fielding that trustee contacts are all the cow and council along those lines of if i'm understanding your position correctly  because you think that rules and equitable you have a so rule safe deposit and broke two decisions of this court that suggest that that's the correct set right not overrule them your honor but what would you have us do notwithstanding that fundamental fairness problem we shouldn't take into account no there are criteria overriding a criteria out there and every one of them that's more fundamentally fair than the existing rule this court it's almost one hundred years old so who are you whether that really is the existing rule first of all those are all right except for the fact that we have an overlap but we really have ok but soon we thought those were still precedents the united states supreme court let's just spot me that for them but you think it's more fair to overrule them and proceed down the track we just will eliminate it with justice briar than to maintain the yes your honor for several reasons first of all those are physical presence based cases which no longer is the focus of due process analysis secondly the analysis in those cases is completely unfaithful to the know how you can tax somebody you have no jurisdiction and are especially if they haven't done anything like pay any money over or i have no contacts with the person in your state all the meetings were in new york so add a third case you want to overrule certainly there's no need to over war hanson here lies you so how do you the trustee is responsible for paying this tax you're dragging the trustee into your court that the adjudication by the way not taxing fell on the person of the trustee in this court in walden to same thing here you're making the trustee liable for paying the tax you're doing exactly what happened to us but it's not the trustees money the trustee is entirely wasn't inhance another hanson is not a tax case the under this court's decision in stone the ultimate incidence of the tax where it will land will be on the there would be an argument for that certainly but that's not this case if i may like to reserve the bells time before you additional rebuttal time thank you  mr o'neill thank you mr chief justice and may please the court actually like to begin where justice ginsburg began because i think it highlights one of the key features and critical aspects of this case that the state's position ignores and that dictates the outcome the first point is this was not really the beneficiary is money during the tax years she didn't possess it or control it she didn't access it she couldn't use it she couldn't buy anything with the promise it to someone else she couldn't have any say in how it was invested she didn't receive any end of it and she had no guarantee that she would ever receive a penny of it in north carolina or anywhere else was that the trustees money it was the trustees money he didn't do any of those things he is bound of course by a fiduciary duty but within those broad limits he does exercise the possession and control that as this court has recognized for decades as is it with a fiduciary duty to increase that money for her heap possesses it and controls it with the duty to act out of loyalty for a group of beneficiaries of which she is part and if we look at the actual control that he exercised over the property in contrast with the beneficiary it demonstrates why t him as the owner he can i property with it he can sell it he can incur liability based on how he uses it she one of the fundamental problems of this tax as the court noted in its previous questioning is that it's premised on the prediction that she will receive this money but in fact at the time this tax was imposed th unknown and unknowable it's not known how many beneficiaries there are it's not known who will actually receive the money it's not known where they will live when they receive the money how many people have shared with and so one of the trusts they know what she's getting or has gotten in a particular year she knows where where she lives in that year the hypotheticals that will she might not get any she might move somewhere else or hypotheticals for these tax years you know where she is you know what she's got she's gotten zero and that's a critical point for this case she received zero money during these tax years and she had no guarantee that she would ever receive them now if and when she actually does receive this process she's seeing a substantial asset of hers increase in value in the bank and even if she can't touch it right now she's getting richer and richer because of it and that's influencing her life choices because she knows she's eventually going to enjoy that money and if you compare her to i mean we're who are the three states that could tax this one is the state where the trustee lives one is the state where the trust administration is and one is the state where the beneficiary is the person who is  getting the benefit of this increase in the asset is only the beneficiary justice kagan the premise of the question is that this is a source of wealth for her that is not known at this point she does not have  current interest in this trust asset as the brief for the american college it would your position be different if she were if if that if the trustee did not have this discretion as to shares suppose that the the trust instrument simply said here are the five beneficiaries the trust will be distributed pro rata you know if one dies then it will be distributed pro rata as to the other four but  but but the beneficiaries all know that they're going to get a fifth of this money would your answer be different if the trust instrument gave her a vested current right to the income now i wouldn't write she's going to have to wait until  old thirty forty whatever she can't pull the money now but she's going to get the money one day i know that that case would not be different because it would still be based on the speculative possibility that she will ultimately receive the money if it weren't speculative but is imagine it's not all right i wonder and i'm asking this not as an argument or one way or the other i just wonder how it works  trust gets an extra million in your one she will get a distribution of say a million in your thirty's now just i think is justice kagan said she is now worth more money than she was before but she's not worth more money by a million she is worth more money by a million discounted by her getting it twenty or thirty years in the future that's why we have interest rates that's why we have bank accounts etc so how does it actually work she is only worth more money that's measured by the cumulate of sin of the trust if she is guaranteed to receive that income let's imagine she is i still have you may not know maybe nobody's ever looked into this questions but i imagine being that she is going to get it eventually maybe this is an easier case because she isn't but i imagine that she definitely is still there is a problem of course it will earn interest but they'll tax the interest each year so she's not worth now more try to sell it to somebody a million dollars in the future is twenty years from now is worth a lot less than a million dollars i think it's very difficult to deal with this tax law deals with it based on the principle of possession control and receipt that is how income tax works your tax when you receive the income so let me just what is the theoretical justification for saying all of these measures are imperfect and and you can say with respect to any of these states well why did they get to an undistributed income but what you are saying is that as between two states connecticut and north carolina we should put the taxing authority for that undistributed income growth in connecticut and and i have to say that just doesn't make a whole lot of sense to me the trustee is not going to be the beneficiary of that income growth whatever income growth it is and however much it's discounted the thing we know at time x when the taxes imposed is that the trustee possesses and controls the property as you pointed out he has a duty of loyalty so he can't spend it on himself and he can't give it to his friends but within those limits he is the owner of the property we do not know but the beneficiary will ever actually receive any i thought we didn't need to answer the question raised by justice kagan previous hypothetical and just raise for you which is if we did know in other words if it were guaranteed or certain that might or might not be a different case but this case is one where we don't know based on the nature of the trust contingent or discretionary beneficiary in for that case the answer i thought you were arguing should be that the state where the beneficiary resides cannot tax but we could leave open the question raised by justice kagan type cycles that not right you could the case here involves one in which a trust agreement in which the trustee has absolute discretion to distribute this property as he sees fit and he also has discretion to extend the trust into a new trust if he believes that th we under new york law would not require her consent in fact he did consult with her because it's part of his duties to ensure to determine whether she was prepared to receive the money he consulted with her but under new york law th loyalty with her for her and in good faith whether her interests were better served by an extension of that trust and a decamping of that property into a new trust what states do something like this in other words words discretionary or contingent beneficiary and impose the tax for the trusts trustees in another state so just cavanagh you are correct about that there are currently three states that use the presence of a beneficiary of a contingent beneficiary as the sole factor on which they will tax the accumulated income of the trust as you pointed out tennessee has eliminated its income tax as of twenty twenty one ga may or may not do it practitioners disagree about that so that leaves north carolina alone as the state that actually imposes a full tax on the accumulated income of a trust based on based only on the fact of a contingent beneficially ranting differently than i am in a c s then away with income tax which was the georgia and north carolina i thought there were fo income yes justice kagan and the state of the trustee can tax the that's correct and the only state that can't tax the income is the state that is providing services to the person who's going to benefit from the income growth the state where the beneficiary resides is really no differently situated from any other state the fact that the beneficiary lives there is just it's adventitious from the perspective of the trustee of the truck the beneficiary can move from state to state the state each of these years and nothing about the try to change it where if she moves from state to state to state then each state for those particular years where she lives in the state can tax it but eventually she's going and i  don't you say well maybe she won't and but you answered my hypothetical we're used even if there were no contingency the state of residency couldn't tax for these tax years north carolina is providing services to a person who and the only person who is going to benefit from the income growth of this trust first i was again nothing's perfect but as between those as among those three choices i would think north carolina has by far the greatest interest in taxation first i want to make sure i was clear that if there is no contingency if the beneficiary has an absolute right to be income in a particular year the state of residence absolutely can i wasn't talking about contingency in you keep changing late i have a right to the income but presuming that nobody can touch this corpus for a while for five years for ten years but eventually you said if somebody you know somebody was going to be able to access both the income and maybe the body of the trust and still north carolina couldn't tax it notwithstanding that connecticut and new york can tax it where you know they just have some officers who are pushing a lot of paper but all the benefit of this trust is going to this person who lives down in north carolina if you actually have to look at what benefits are being provided so during her term the tax years during the years and we she's living in north carolina she is paying income tax on all of the money she actually receives for the benefit of being a north carolina citizen just as every other citizen does know she of not being taxed on income that she doesn't have but she can demand that she has no right to mr o'neill if i can say i mean suppose she's making one hundred thousand dollars a year a person in north carolina who's making one hundred thousand dollars a year and a person in north carolina who's making that exact same amount of income and has a twenty million dollar trust a really in two different positions that rationale though it's not limited to trust of course you could have a child who's parent who has a very wealthy parent and it's another state and you could say well that child is differently situated from one that does not have family resources of that time but in the eyes of the law they are not in any different situation neither one of them can demand that money be the one of them actually gets and he would not allow the state where the beneficiary lives to go and  a parent who has a large amount of income because it would someday be destined for the kid i recall use case was simpler your argument seems to be making it i thought this was a case about a state imposing a tax on someone for our money that that person may never get and if and if the person ever get some money we have no idea how much that money would be isn't that what  this case is about so that's exactly right i was i think the answer then she has she has to stay alive the assets could be dissipated because of poor investments the trustee could decide that she's not ready to receive the money the trustee could decide that the money should go to some other beneficiary there number of ways in which i thought she was the first time and if the primary she is among group of primary beneficiaries that at that point in time the tax years included her and her children of course something could happen to her children and the money would then need to be devoted to that purpose but justice ginsburg even if it is very likely even if we assume it's very likely that this money will go to her it is not hers until it goes to work and when it goes to her and i think this is a critical part  of the response of the state here where when it goes to her the state is free to tax it and it can tax it not only for going to different state one goes to her let's party or point to she may well live in a different state and if she lives in a different state in other words when she gets the benefit of the money if she ever gets the benefit right if a beneficiary of perhaps the benefit it might not live in north carolina that's exactly right and if she no longer lives in north carolina the new north carolina with no legitimate basis whatsoever will have been have taken property from corpus of the trust do i understand you to say that the trust can be taxed in the years by north carolina in the years when it actually distributes money to the north carolinian that's correct but it won't happen that way because the north carolina carolina resident is going to be taxed on that money by north carolina as income so if the question is can the beneficiary be taxed on the distribution the year to tactfully made the insurers guess right and the trust know at that point it won't be a trust property at that point it will be the beneficiaries property and this you know the federal government has the same issue u s citizens can have trust that are located abroad and what the federal government does is impose a throwback tax so that when the beneficiary actually receives the money the beneficiary can be tax not only on that distribution but also on the income that had accumulated in previous years and the trustee did not pay tax in throwback taxes or are permissible constitutional you're not challenging those in any way we are not we believe throwback taxes are permissible because they are taxing the beneficiary resident on money in their hands at that point there are other instances in tax law where a resident of state  a is taxed by state a on the basis of an increase of value a property that is located in state b you know the words i own some properties piece of land in new hampshire or let's say maine and i am a resident of florida or north carolina and north carolina impose a tax upon me because the land that i now own in maine is worth more this year than it was last year the state where the where their owner lives in that hypothetical could tax on the income received from the property no i understand not asking yeah i'm asking whether to repeat what i said a north carolina resident owns a piece of land in maine this year that piece of land is worth more than it was last year can north carolina tax that increase in value if the north carolina resident has a current right  owns a stock portfolio yes so yes mostly people state mostly we wait until somebody sells the stock that's correct but we care and we could we could impose and otherwise a state could enact a wealth tax if the if the person in play or taxing has a current vested right to that and it's something that they could sell it alienable in that instance the state could impose a tax for the wealth that is in the residents hand and that's the situation in the commonwealth versus stewart case that the state relies on the one nine hundred forty pennsylvania's supreme court decision the state relies on that as a tax on the resident for property in the residents have and that is a fundamentally different situation from the tax here which is a tax on the trustee who is a nonresident for income but the beneficiary has not received so the short answer is i thought in your preferred conceded that if this trusts was a demand tru was on the question of what happens if she is a guaranteed distributor distribute meaning she can't call it today but it each forty or at the end of the truss life at some point she's going to be the one hundred percent owner or going to be fixed ten percent owner or whatever it might be they're saying we should reserve on that question i think that would be a different case i think i think the trust instrument here is important to the facts of this case and to the outcome here the trustee has absolute discretion and what that means is that she is not hearing to you ever so give me the argument the other way let's assume she was one hundred percent distribute the at the end of the truss life which will be in five or ten years or she's twenty percent or she's thirty percent whatever it is why do you think the state might have more purchased a ta if the beneficiary had a vested right in a certain percentage of the trust then we would treat her as having a current interest in that trust so i would say they still could not track her for the income but that's a situation which would implicate justice briar question where if she has a current right to that the state could if it wanted impose a wealth tax and tax her for that portion of it because that would be money that is in her hands currently and that she could sell she could promise to someone else but this trust agreement is critically different in two respects first her receipt of anything is dependent on the trustees decision to give it to her period second she had has no right to promise sell or do anything with the with the possibility that she may someday receive these assets this is a spendthrift trust and that means she has no right that she can sell or alienated and that makes it fundamentally different from a situation in which a beneficiary has a current vested right that the state could if it if it passed a law that allowed that that the state could tax through a through wealth tax i'd like to just focus if i could on the point of the throw back tax because i do think i do think it is an answer to why to the states concerned about all of the potential loss of revenue that it may receive made me lose out on here if and when this money is actually distributed to the beneficiary if she  carolina resident at that time the state can get all of this income tax back by taxing the beneficiary over there assuming she or people in that position are going to move for that happens states have to pick up on just  that's that's the issue right well take the real world issues she's not going to be around in north carolina or not i don't want to talk about particular people but people in this position won't be around in the state because they're going to florida texas or about it so states have all the tools they need to address that there and use doctrines in the tax laws that will look through and discount a sham change residency to share and change but a lot of people can change residence as you well know that's the i mean states actually advertise on that basis in come to our state don't pay the income tax right and in fact north carolina north carolina is worried that right north carolina itself advertises on the basis of its low tax burden if it's a true change in residency just coming out that is not intact a trust pacific issue people move from state to state all the time and when they do their tax cut went to us but we don't call that a judicial tax shelter we call that federalism that is basically the inner city the interesting question here i guess we don't and it's it doesn't happen it hasn't happened that way except maybe north carolina no not even north carolina state a decides that its current residents will be taxed on the basis of their wealth and it includes in we increased value of out of state property how we know that it's real property they can't do it but what about intangible property if and it could happen you know states could decide we're going to impose wealth tax they could and then we'll be faced with that problem but your view is that is not in this case because  this case we don't know exactly what the beneficiary will get when she'll get it or perhaps even if she will get it do i have to summarize that correctly so i can't reach the really interesting legal question you have that you have that correct it's also different from this case because you know and this is what another key point that the state overlooks the tax year was not on the beneficiary the tax year was on the trustee the say that but but that ignores the practical operation of the tax if this tax is not paid the state is going to come after the trustee not the beneficiary for the consequences if it happened here the trustee believes that the taxes on lawful than the trustee is to hire a lawyer to defend against the liabilities subject himself to discovery and in general as the brief for the chamber of commerce explained subject himself to all of the same burdens that a defendant does in a civil case it is the equivalent of receiving a summons in a civil action does it matter to the trustee and administration of the trust where the money's going to go the trustee has a duty of loyalty to act in the best interests of the trust of the trust beneficial but i mean let's say one of the children is in north carolina the others in pennsylvania are the it anyway treated differently by the trustee given their state of residence no no the trustee does not care where the beneficiaries live he has no control over where they live and that's another reason why the forum here in north carolina really just is not relevant to the operation of the trust the trustees duties or the way in which he administers it again the beneficiaries here could have moved to a whole range of different states and nothing about the operation of this trust or the relationship among the parties would change could could you just say a few words as to what the theoretical justification is for why new york and connecticut can tax the growth of these assets this court supplied the theoretical basis for that in the green case and the basis is that for for tax purposes and for viewing who is the actual owner control of that it was ownership so the state where the trustee owns the property in this case connecticut protects the trustees ownership of those of that property and in addition states including north carolina provide that the courts are open to the trust in the state in which it's administered so the trustee has access to the courts the courts can adjudicate the rights among the parties and that is the state interest that justifies the taxation trust property that's a separate commerce clause problem whether there are there is allocation when they are internally inconsistent i would point out that in fact north carolina says it provides allocation to it it provides a credit only for source of income in a different state so in fact if another type of state taxes trust of the resident north carolina wouldn't credit that property what are your colleagues argument that the precedent which you say would have to be up ended here has already been overturned in some fashion or another can you respond to that safe deposit brooke guarantee trust all turned on the same principle of actual possession and control and look at the reality of the relationships among the tryst trust participant are every bit as valid today as they were then the argument in those cases was we can tax the beneficiary as if she owned the property because she really did and the and the court said using the same principles of trust law that apply today she really the beneficiary really isn't the owner of the property there so we're not going to allow taxation of that before i sit down i would like to respond very briefly to those states argument about wayfair wayfarer is irrelevant to this case except in one important respect an accurate analogy to the facts of wayfarer shows why the tax year is unconstitutional in wayfarer the state pointed to the tax payers own form directed contact and said that was sufficient in this case what the state is doing is pointing not to the taxpayer's own conduct but to the conduct of some other person and so if north carolina were right in its position today it would mean that any one of the c corporations in wayfarer could have been taxed anywhere that a beneficial shareholder lived based solely on the fact of their residence and that is not the rule this court has applied this case presents a straightforward and textbook application of the subtle rule that the unilateral activity of a third party does not create jurisdiction this court has resolved the question presented twice both in safe deposit and in the canonical case of hansen be thankful just so tomorrow as you pointed out and there is no reason to reconsider those cases here at the court should thank you counsel five minutes thank you are just to begin with first principles this is a due process challenge to a state tax on the proposition that beneficiary contacts beneficiary categorically doesn't count now as many members of the court have raised questions about the amount that can be taxed that's fundamentally a point under the second element of quail and is this court said in the  vaiko as long as there are minimum connections to the state whether the amount they can be taxed is a separate inquiry all that really the court might have occasion to do here is to reject the proposition of the state supreme court that beneficiary contacts don't count after all this is the first trust tax case since one thousand nine hundred seven it might be well to leave to the state courts to sort out out of state delaware trustee here are the kind of burden on the trust that with a fight between the sisters for the ownership of the trust deed is is rejected and here are the burden of taxation falls not on an out of state party the economic burden falls on an in state party one hundred percent of it the north carolina castillo's under stone they are the parties who ultimately feel the pinch of taxation and that's a fundamental distinction of hansen in addition i point out that on pages two forty seven and two fifty two the court in hansen twice distinguished between adjudicative jurisdiction and other forms of jurisdiction choice of law and also distinguishing the taxing cases so ha distinguishable both in terms of this fundamental reality of who is prudent and also concerning what the burden is so we've never suggested though the tax restriction exceeds a jew could have jurisdiction and we it's usually the other way around so the court i don't think has made a directional statement one way or the other the nature you wear of a case where we've said that tax i'm not on the other hand nor have i seen a case where the court has said the opposite thing but in hanson the court makes a bit of a distinguishing statement about tax jurisdiction when it's a justice course it's your question is the whole paradigm is different in tax jurisdiction cases the focus is on benefits and protections to conclude i might say this we're asking picking up on my colleagues federalism theme that north carolina is choice of tax increase to be respected we're not casting any doubt on any other states taxes or tyria fundamentally this is a due process challenge and i would i would drive home again that the point that my colleague is promoting in terms of a rule under the due process clause would invalidate the trust tax criteria in thirty three states that would be an aggressive deployment of the due process clause indeed we ask instead this court to take the approach called for by federalism and fundamental fairness truthfully and to reverse the judgment below thank you thank you counsel cases submitted