Court Opinion

ID: 4302057
Source: CourtListenerOpinion
Date Created: 2018-08-08 20:08:17.303256+00
Date Added: 2024-06-11T07:49:00.760338
License: Public Domain

MAINE	SUPREME	JUDICIAL	COURT	                                       Reporter	of	Decisions	
Decision:	 2018	ME	111	
Docket:	   BCD-17-459	
Argued:	   May	15,	2018	
Decided:	  August	2,	2018	
	
Panel:	    SAUFLEY,	C.J.,	and	ALEXANDER,	MEAD,	GORMAN,	JABAR,	HJELM,	and	HUMPHREY,	JJ.	
	
	
                                JAMES	GOGGIN	et	al.	
                                         	
                                        v.	
                                         	
                               STATE	TAX	ASSESSOR	
	
	
SAUFLEY,	C.J.	

	     [¶1]	 	 The	 question	 presented	 in	 this	 appeal	 is	 whether	 an	 individual	

resident	of	Maine	is	entitled	to	a	Maine	income	tax	credit	for	any	portion	of	the	

business	 taxes	 imposed	 by	 New	 Hampshire	 on	 a	 New	 Hampshire	 limited	

liability	 company	 of	 which	 the	 Maine	 resident	 is	 a	 member.	 	 In	 its	 judgment	

entered	 in	 the	 Business	 and	 Consumer	 Docket,	 the	 court	 (Murphy,	 J.)	

determined	that	the	Maine	resident’s	proportion	of	business	taxes	paid	in	New	

Hampshire	by	the	LLC	did	not	qualify	that	resident	for	a	tax	credit	against	her	

individual	Maine	income	taxes.		We	affirm	that	judgment.	

                                   I.		BACKGROUND	

	     [¶2]		James	and	Ann	Goggin	appeal	from	a	judgment	affirming	the	State	

Tax	 Assessor’s	 denial	 of	 a	 tax	 credit	 for	 a	 share	 of	 New	 Hampshire	 business	
2	

taxes	paid	by	a	New	Hampshire	LLC	proportional	to	the	membership	interest	

that	Ann	had	in	the	LLC.		They	argue	that	the	court	erred	in	interpreting	Maine’s	

individual	income	tax	statutes	and	that,	as	applied,	Maine’s	income	tax	statutes	

discriminate	against	interstate	commerce	in	violation	of	the	Commerce	Clause	

of	the	United	States	Constitution.			

       [¶3]		The	facts	are	drawn	from	the	parties’	stipulations	of	fact	and	their	

joint	 exhibits.	 	 The	 joint	 exhibits	 consist,	 primarily,	 of	 Maine	 and	 New	

Hampshire	tax	documents.		James	and	Ann	Goggin	lived	in	Maine	at	all	relevant	

times,	and	they	filed	joint	federal	and	State	income	tax	returns.		GHK	Company,	

LLC,	is	a	limited	liability	company	formed	in	New	Hampshire	in	1994	to	own,	

develop,	 maintain,	 and	 lease	 a	 parcel	 of	 commercial	 real	 estate	 in	 New	

Hampshire.	 	 For	 federal	 income	 tax	 purposes,	 the	 LLC	 was	 classified	 as	 a	

partnership	for	the	2012	through	2014	tax	years,	which	are	the	years	at	issue	

here.	 	 In	 each	 of	 those	 three	 years,	 the	 LLC	 received	 rental	 income	 from	 its	

property.		For	each	of	those	years,	Ann	was	allocated	a	percentage	interest	in	

the	profits	and	losses	of	the	LLC.			

	      [¶4]	 	 The	 State	 of	 New	 Hampshire	 does	 not	 impose	 income	 taxes	 on	

individuals	 except	 on	 certain	 “income	 received	 from	 interest	 and	 dividends”	

not	 at	 issue	 here.	 	 N.H.	Rev.	 Stat.	 Ann.	 §	 77:3(I)(a)	 (2012).	 	 The	 State	 of	New	
                                                                                                                   3	

Hampshire	imposed	on	the	LLC,	however,	both	a	“business	profits	tax”	and	a	

“business	enterprise	tax.”		See	N.H.	Rev.	Stat.	Ann.	§§	77-A:2,	77-E:2	(2012).1		On	

its	federal	“Return	of	Partnership	Income”	forms,	the	LLC	took	deductions	for	

the	 New	 Hampshire	 business	 taxes	 it	 paid.	 	 Specifically,	 among	 other	

deductions,	it	deducted	the	amount	of	the	New	Hampshire	business	taxes	from	

the	amounts	of	rental	real	estate	income	that	the	LLC	reported	to	the	federal	

government.	 	 Ann	 Goggin’s	 share	 of	 the	 rental	 income	 was	 determined	 as	 a	

percentage	 of	 those	 reduced	 amounts	 for	 purposes	 of	 the	 LLC’s	 attached	

Schedule	K-1	forms	stating	her	“Partner’s	Share	of	Income,	Deductions,	Credits,	

etc.”			

	          [¶5]		For	each	of	the	2012	to	2014	years,	the	Goggins	reported	in	their	

joint	 federal	 income	 tax	 return	 an	 amount	 of	 income	 from	 the	 LLC	 that	 was	

similar	 to	 the	 amount	 stated	 in	 the	 corresponding	 year’s	 federal	 LLC	 form	

reporting	Ann	Goggin’s	share	of	the	LLC’s	rental	income.			

	          [¶6]		When	the	Goggins	filed	their	joint	Maine	income	tax	returns	for	the	

2012	through	2014	tax	years,	they	did	not	claim	a	credit	for	the	New	Hampshire	

business	 taxes	 paid	 by	 the	 LLC.	 	 Because	 the	 calculation	 of	 the	 Maine	 tax	

    1	 	 Both	 statutes	 have	 since	 been	 amended	 to	 adjust	 rates	 of	 taxation.	 	 See	 N.H.	 Rev.	 Stat.	 Ann.	

§§	77-A:2,	77-E:2	(Supp.	2017)	(codifying	subsequent	amendments).	
4	

obligation	was	based	on	the	Goggins’	federal	adjusted	gross	income,	the	income	

that	they	reported	in	their	Maine	tax	returns	also	did	not	include	any	income	

that	the	LLC	had	received	but	then	paid	in	New	Hampshire	business	taxes.			

	     [¶7]	 	 In	 January	 2016,	 the	 Goggins	 filed	 an	 amended	 Maine	 return	 for	

each	of	the	2012,	2013,	and	2014	tax	years	seeking	a	personal	income	tax	credit,	

and	corresponding	refund,	for	the	portion	of	the	New	Hampshire	business	tax	

paid	 by	 the	 LLC	 that	 was	 proportional	 to	 Ann’s	 membership	 interest.	 	 The	

amended	Maine	returns	did	not,	however,	add	to	the	Goggins’	Maine	adjusted	

gross	 income	 any	 amount	 of	 the	 LLC’s	 income	 that	 went	 to	 pay	 the	 New	

Hampshire	LLC	taxes.			

	     [¶8]	 	 Maine	 Revenue	 Services	 denied	 the	 refund	 by	 letter	 dated	

May	9,	2016,	 and	 the	 Goggins	 requested	 reconsideration.	 	 See	 36	 M.R.S.	

§	151(1)	(2017).		In	a	written	decision	dated	September	21,	2016,	the	State	Tax	

Assessor	upheld	the	denial	of	their	claims	for	refunds.			

	     [¶9]		The	Goggins	then	filed,	in	the	Superior	Court,	a	petition	for	judicial	

review	of	the	Assessor’s	final	agency	action	and	de	novo	determination	of	all	

facts	 and	 law.	 	 See	 36	 M.R.S.	 §	151(2)(F)(2),	 (G)	 (2017).	 	 Upon	 the	 parties’	

agreement	and	the	Goggins’	application,	the	matter	was	accepted	for	transfer	

to	 the	 Business	 and	 Consumer	 Docket.	 	 The	 court	 received	 briefs	 and	 heard	
                                                                                      5	

arguments	 from	 the	 parties	 regarding	 their	 jointly	 stipulated	 facts	 and	

supporting	 exhibits.	 	 The	 court	 affirmed	 the	 judgment	 of	 the	 Assessor,	

reasoning	that	no	income	tax	credit	applied	because	(1)	the	New	Hampshire	

business	taxes	were	imposed	on	the	LLC	and	were	not	an	“amount	of	income	

tax	imposed	on	[an]	individual,”	36	M.R.S.	§	5217-A	(2017),	and	(2)	Maine’s	tax	

statutes	do	not	violate	the	Commerce	Clause	of	the	United	States	Constitution.		

The	 Goggins	 timely	 appealed.	 	 See	 5	 M.R.S.	 §	11008	 (2017);	 M.R.	 App.	P.	 2A,	

2B(a)(1),	(c)(1).	

                                   II.		DISCUSSION	

A.	   Interpretation	of	Maine’s	Income	Tax	Statutes	

	     [¶10]		When	a	taxpayer	appeals	to	the	Superior	Court	from	a	decision	of	

the	State	Tax	Assessor,	the	Superior	Court	“conduct[s]	a	de	novo	hearing	and	

make[s]	 a	 de	 novo	 determination	 of	 the	 merits	 of	 the	 case.”	 	 36	 M.R.S.	

§	151(2)(G).		“Because	the	Superior	Court	is	not	acting	in	an	appellate	capacity,	

we	review	its	determinations	directly.”		Linnehan	Leasing	v.	State	Tax	Assessor,	

2006	ME	33,	¶	16,	898	A.2d	408.	

	     [¶11]	 	 The	 Goggins	 contend	 that	 the	 court	 erred	 in	 rejecting	 their	

argument	that	the	business	taxes	imposed	on	the	LLC	are	functionally	income	

taxes	on	the	individual	holders	because	of	the	“flow-through”	nature	of	income	
6	

realized	by	an	LLC.		They	argue	that	the	court’s,	and	the	Assessor’s,	formalistic	

interpretation	 of	 the	 statute	 results	 in	 the	 “double	 taxation”	 of	 Maine	

entrepreneurs.			

	     [¶12]		“In	interpreting	a	tax	statute,	we	look	first	to	its	plain	meaning	to	

give	 effect	 to	 the	 Legislature’s	 intent.”	 	 State	 Tax	 Assessor	 v.	 MCI	 Commc’ns	

Servs.,	Inc.,	 2017	 ME	 119,	 ¶	 7,	 164	 A.3d	 952.	 	 We	 endeavor	 to	 “avoid	 absurd,	

illogical	 or	 inconsistent	 results	 and	 will	 not	 read	 additional	 language	 into	 a	

statute	 or	 treat	 words	 in	 a	 statute	 as	 meaningless	 and	 superfluous.”	 	 Id.	

(quotation	marks	omitted).	

	     [¶13]	 	 A	 taxation	 statute	 is	 construed	 “most	 strongly	 against	 the	

government	 and	 in	 the	 [taxpayer’s]	 favor,”	 and	 we	 “will	 not	 extend	 its	 reach	

beyond	the	clear	import	of	the	language	used.”		Id.	(quotation	marks	omitted).		

“Statutory	exemptions	to	taxes	are	construed	narrowly,	however,”	and	we	will	

not	apply	an	exemption	“to	situations	not	clearly	coming	within	the	scope	of	the	

exemption	provisions.”		Id.	(quotation	marks	omitted).	

	     [¶14]	 	 A	 tax	 credit,	 like	 a	 tax	 exemption,	 must	 be	 construed	 narrowly	

because	“[s]uch	special	privileges	are	in	conflict	with	the	universal	obligation	

of	all	to	contribute	a	just	proportion	toward	the	public	burdens.”		City	of	Bangor	

v.	Rising	Virtue	Lodge,	No.	10,	Free	&	Accepted	Masons,	73	Me.	428,	433	(1882)	
                                                                                          7	

(quotation	 marks	 omitted).	 	 Tax	 credits,	 like	 tax	 exemptions,	 diminish	

taxpayers’	contributions	as	a	matter	of	limited	legislative	allowance.		See	Gen.	

Motors	Corp.	v.	Franchise	Tax	Bd.,	139	P.3d	1183,	1193	(Cal.	2006)	(holding	that	

a	tax	credit,	which	is	a	matter	of	legislative	grace,	must	be	strictly	construed);	

Dep’t	of	Revenue,	Fin.	&	Admin.	Cabinet	v.	Roanoke	Cement	Co.,	443	S.W.3d	1,	3	

(Ky.	 Ct.	 App.	 2014)	 (holding	 that	 a	 tax	 credit—like	 a	 tax	 exemption—is	

narrowly	construed);	Centex	Int’l,	Inc.	v.	S.C.	Dep’t	of	Revenue,	750	S.E.2d	65,	69	

(S.C.	2013)	(strictly	construing	“a	tax	credit	against	the	taxpayer	as	it	is	a	matter	

of	legislative	grace”);	see	also	MedChem	(P.R.),	Inc.	v.	Comm’r	of	Internal	Revenue,	

295	F.3d	118,	123	&	n.6	(1st	Cir.	2002)	(stating	that	a	federal	tax	credit	applies	

only	if	“there	is	clear	provision	therefor,”	and	that	a	tax	credit	statute	will	not	

be	 interpreted	 with	 all	 doubts	 resolved	 in	 favor	 of	 the	 taxpayer	 (quotation	

marks	omitted)).	

	     [¶15]	 	 Here,	 the	 Maine	 tax	 credit	 at	 issue	 applies	 to	 income	 tax	 that	 a	

resident	individual	has	paid	in	another	state:	

      	     A	 resident	 individual	 is	 allowed	 a	 credit	 against	 the	 tax	
      otherwise	 due	 under	 this	 Part,	 excluding	 the	 tax	 imposed	 by	
      section	 5203-C	 [alternative	 minimum	 tax],	 for	 the	 amount	 of	
      income	 tax	 imposed	 on	 that	 individual	 for	 the	 taxable	 year	 by	
      another	 state	 of	 the	 United	 States,	 a	 political	 subdivision	 of	 any	
      such	state,	the	District	of	Columbia	or	any	political	subdivision	of	a	
      foreign	country	that	is	analogous	to	a	state	of	the	United	States	with	
8	

      respect	to	income	subject	to	tax	under	this	Part	that	is	derived	from	
      sources	in	that	taxing	jurisdiction.	.	.	.	
      	
36	 M.R.S.	 §	 5217-A	 (emphasis	 added).	 	 The	 question	 is	 whether	 the	 New	

Hampshire	business	taxes	paid	by	the	LLC	constitute	an	“income	tax”	imposed	

on	Ann	by	another	state.		See	id.		Although	we	considered	this	exact	question	of	

statutory	interpretation	in	2008,	we	affirmed	the	decision	of	the	Superior	Court	

in	 the	 Assessor’s	 favor	 without	 discussion	 because	 the	 Court	 was	 evenly	

divided.	 	 See	 Day	 v.	 State	 Tax	 Assessor,	 2008	 ME	 39,	 942	 A.2d	 685;	 Day	 v.	

State	Tax	 Assessor,	 Nos.	 AP-04-58,	 AP-04-59,	 2006	 Me.	 Super.	 LEXIS	 284	

(July	21,	2006).		Accordingly,	we	now	address	the	issue	for	the	first	time	on	its	

merits.	

	     [¶16]		The	plain	meaning	of	an	“income	tax	imposed	on	[an]	individual”	

excludes	taxes	that	are	 imposed	on,	and	paid	by,	business	 entities.		36	M.R.S.	

§	5217-A.	 	 Unlike	 in	 the	 cases	 in	 some	 other	 jurisdictions	 in	 which	 an	

out-of-state	 tax	 was	 held	 to	 generate	 a	 credit,	 the	 New	 Hampshire	 business	

taxes	imposed	here	were	not	taxes	imposed	on	individuals	for	unincorporated	

businesses.		Cf.	District	of	Columbia	v.	Califano,	647	A.2d	761,	765	(D.C.	1994)	

(holding,	in	concluding	that	an	individual	was	entitled	to	a	credit	for	paying	an	

unincorporated	 business	 tax,	 that	 “the	 term	 ‘individual	 income	 tax’	 cannot	

rationally	 denote	 anything	 other	 than	 an	 income	 tax	 paid	 by	 an	 individual”);	
                                                                                                        9	

Mathy	v.	Commonwealth	Dep’t	of	Taxation,	483	S.E.2d	802,	802-04	(Va.	1997)	

(holding	that	the	District	of	Columbia’s	unincorporated	business	tax	is	a	tax	on	

income).	 	 Rather,	 the	 New	 Hampshire	 taxes	 were	 imposed	 on	 the	 LLC’s	

statutorily	defined	“taxable	business	profits,”	N.H.	Rev.	Stat.	Ann.	§§	77-A:1(IV),	

77-A:2,	77-A:4	(2012),	and	the	“taxable	enterprise	value	tax	base	of	[a]	business	

enterprise,”	N.H.	Rev.	Stat.	Ann.	§§	77-E:1(III),	(IX),	77-E:2	(2012).2	

	       [¶17]		The	Goggins	focus	on	the	Vermont	Supreme	Court’s	holding	that	

Vermont’s	statute	authorizing	a	tax	credit	for	taxes	paid	to	another	state	upon	

“income	earned	or	received	from	sources	within	that	state”	included	a	credit	

for	out-of-state	business	taxes	paid	by	a	“pass-through”	entity	incorporated	in	

Vermont.	 	 Tarrant	 v.	 Dep’t	 of	 Taxes,	 733	 A.2d	 733,	 735,	 744	 (Vt.	 1999)	

(quotation	marks	omitted).		That	case	is	distinguishable	on	two	bases,	however.		

First,	the	LLC	at	issue	here	is	an	out-of-state	LLC	and	is	therefore	bound	by	that	

state’s—New	Hampshire’s—laws	governing	the	taxation	of	LLCs.		Cf.	id.	at	735.		

Second,	 the	 term	 “income	 tax”	 in	 Maine’s	 statute	 is	 a	 term	 of	 art;	 the	 statute	

does	 not	use	broad	terminology	to	provide	 a	credit	for	 all	taxes	“on	income”	

imposed	 by	 other	 states,	 including	 taxes	 on	 other	 states’	 business	 entities’	

    2		Sections	77-A:2,	77-A:4,	77-E:1(III),	and	77-E:2	have	since	been	amended	in	ways	that	do	not	

affect	the	issues	on	appeal.		See	N.H.	Rev.	Stat.	Ann.	§§	77-A:2,	77-A:4,	77-E:1(III),	77-E:2	(Supp.	2017)	
(codifying	subsequent	amendments).	
10	

income,	but	instead	provides	a	credit	only	for	income	taxes	paid	by	individuals	

on	 income	 derived	 from	 other	 states.	 	 Cf.	 id.;	 MacFarlane	 v.	 Utah	 State	 Tax	

Comm’n,	 134	 P.3d	 1116,	 1119	 (Utah	 2006)	 (“Had	 the	 Legislature	 intended	 a	

restrictive	meaning	it	could	have	used	the	term	of	art	‘income	tax’	in	place	of	

the	term	‘on	income.’”).	

	     [¶18]		The	Goggins	did,	as	they	acknowledge,	realize	some	tax	benefit	due	

to	the	exclusion	of	a	portion	of	the	LLC’s	income	expended	on	New	Hampshire	

business	taxes	from	the	amount	of	the	Goggins’	federal	adjusted	gross	income	

for	each	of	the	tax	years	in	question.		If	the	tax	credit	were	also	applied	as	the	

Goggins	suggest,	it	would	result	in	a	small	windfall	to	them:	they	would	enjoy	

both	the	deduction	from	their	adjusted	gross	income	of	a	proportionate	amount	

of	 New	 Hampshire	 business	 taxes	 paid	 by	 the	 LLC	 and	 a	 credit	 for	 a	

proportionate	share	of	the	taxes	that	the	LLC	paid	to	New	Hampshire.		Given	

our	obligation	to	construe	tax	credits	narrowly,	we	cannot	interpret	the	income	

tax	 credit	 provision	 to	 provide	 such	 a	 windfall	 to	 those	 who	 pay	 the	 New	

Hampshire	 business	 taxes.	 	 See	 MCI	 Commc’ns	 Servs.,	 2017	ME	119,	 ¶	 7,	 164	

A.3d	952.	
                                                                                       11	

B.	   The	Commerce	Clause	

	     [¶19]		The	Goggins	further	argue	that	Maine’s	statute	is	unconstitutional	

as	applied	to	them	because	the	Commerce	Clause	prohibits	state	tax	schemes	

that	do	not	credit	individuals	for	their	income	taxes	paid	in	other	states.		They	

argue	that	the	trial	court	misapplied	the	applicable	four-part	constitutional	test	

that	was	established	in	Complete	Auto	Transit,	Inc.	v.	Brady,	430	U.S.	274,	279	

(1977),	and	applied	to	individual	income	taxes	in	Comptroller	of	the	Treasury	of	

Maryland	v.	Wynne,	575	U.S.	---,	135	S.	Ct.	1787,	1796-97	(2015).			

	     [¶20]	 	 “We	 review	 issues	 of	 constitutional	 interpretation	 de	 novo.”		

Bouchard	 v.	 Dep’t	 of	 Pub.	 Safety,	 2015	 ME	 50,	 ¶	 8,	 115	 A.3d	 92.	 	 “A	 person	

challenging	the	constitutionality	of	a	statute	bears	a	heavy	burden	of	proving	

unconstitutionality[,]	 since	 all	 acts	 of	 the	 Legislature	 are	 presumed	

constitutional.”	 	 Id.	 (alteration	 in	 original)	 (quotation	 marks	 omitted).	 	 To	

overcome	 the	 presumption	 of	 constitutionality,	 the	 party	 challenging	 the	

statute	“must	demonstrate	convincingly	that	the	statute	and	the	Constitution	

conflict.”	 	 Id.	 (quotation	 marks	 omitted).	 	 “[A]ll	 reasonable	 doubts	 must	 be	

resolved	in	favor	of	the	constitutionality	of	the	statute.”		Id.	(quotation	marks	

omitted).		
12	

	     [¶21]		“The	Congress	shall	have	Power	.	.	.	To	regulate	Commerce	with	

foreign	Nations,	and	among	the	several	States,	and	with	the	Indian	Tribes	.	.	.	.”		

U.S.	Const.	art.	I,	§	8.		“Although	the	[Commerce]	Clause	is	framed	as	a	positive	

grant	 of	 power	 to	 Congress,	 [the	 Supreme	 Court	 of	 the	 United	 States]	 ha[s]	

consistently	held	this	language	to	contain	a	further,	negative	command,	known	

as	the	dormant	Commerce	Clause,	prohibiting	certain	state	taxation	even	when	

Congress	has	failed	to	legislate	on	the	subject.”		Wynne,	575	U.S.	at	---,	135	S.	Ct.	

at	1794	(quotation	marks	omitted).	

	     [¶22]		Relying	on	Complete	Auto	Transit,	we	employ	 a	four-part	test	to	

determine	whether	a	tax	on	an	instrumentality	of	interstate	commerce	violates	

the	Commerce	Clause:	

      A	tax	on	instrumentalities	of	interstate	commerce	must	meet	four	
      requirements:	 (1)	 it	 can	 only	 be	 applied	 to	 an	 activity	 with	 a	
      substantial	 nexus	 with	 the	 taxing	 state;	 (2)	 it	 must	 be	 fairly	
      apportioned;	 (3)	 it	 cannot	 discriminate	 against	 interstate	
      commerce;	and	(4)	it	must	be	fairly	related	to	the	services	provided	
      by	the	state.	
      	
John	T.	Cyr	&	Sons,	Inc.	v.	State	Tax	Assessor,	2009	ME	52,	¶	23,	970	A.2d	299	

(quotation	marks	omitted);	see	Complete	Auto	Transit,	430	U.S.	at	279.	

	     [¶23]		The	Goggins	do	not	argue	the	absence	of	a	substantial	nexus	with	

Maine	or	the	lack	of	a	fair	relationship	to	the	services	provided	by	Maine;	they	

argue	only	that	refusal	to	allow	the	credit	violates	the	second	and	third	parts	of	
                                                                                         13	

the	test	pertaining	to	the	apportionment	of	the	tax	and	discrimination	against	

interstate	commerce.			

	      [¶24]	 	 A	 statute	 governing	 individual	 income	 tax	 may	 be	 unfairly	

apportioned	 and	 may	 unconstitutionally	 discriminate	 against	 interstate	

commerce	if	it	results	in	an	individual	paying	a	higher	overall	amount	of	income	

tax	on	out-of-state	income	than	on	in-state	income.		See	Wynne,	575	U.S.	at	---,	

135	S.	Ct.	at	1803-04.		For	instance,	the	United	States	Supreme	Court	held	that	

a	state	tax	imposed	on	individuals	by	Maryland	violated	the	Commerce	Clause	

because	it	did	not	include	a	credit	for	Maryland	taxpayers’	payment	of	income	

taxes	 to	 other	 states	 and	 therefore	 discriminated	 against	 residents	 who	

participated	in	interstate	commerce.		Id.	at	1792,	1803-04.		The	Court	held	that	

the	Maryland	tax	failed	the	“internal	consistency	test,”	which	asks	whether	the	

identical	application	of	a	tax	statute	“by	every	State	in	the	Union	would	place	

interstate	 commerce	 at	 a	 disadvantage	 as	 compared	 with	 commerce	

intrastate.”	 	 Id.	 at	 1803	 (quotation	 marks	 omitted).	 	 Applying	 that	 test,	 a	 tax	

scheme	that	failed	to	incorporate	a	tax	credit	or	other	mechanism	to	account	

for	 income	 tax	 payments	 to	 other	 states	 would	 result	 in	 the	 double	 income	

taxation	only	of	income	derived	from	interstate	commerce.		See	id.	
14	

	      [¶25]		Here,	the	Maine	statute	expressly	allows	a	credit	for	the	payment	

of	individual	income	taxes	to	other	states,	see	36	M.R.S.	§	5217-A,	and	therefore	

does	not	run	afoul	of	Wynne.		However,	neither	the	Supreme	Court	nor	we	have	

held	 that	 an	 individual	 must	 receive	 credit	 for	 taxes	 imposed	 on	 a	 business	

entity	formed	in	another	state	by	the	taxing	authority	of	that	state.		The	types	

of	state	business	taxes	that	are	treated	as	state	income	taxes	are	those	that	are	

actually	 imposed	 on	 individuals	 rather	 than	 on	 entities.	 	 See,	 e.g.,	 Califano,	

647	A.2d	at	765;	Mathy,	483	S.E.2d	at	802,	804.	

	      [¶26]		Applying	the	internal	consistency	test,	if	all	states	had	Maine’s	tax	

statutes—including	 its	 statutes	 regarding	 the	 taxation	 of	 pass-through	

entities—there	would	be	no	disproportionate	taxation	of	out-of-state	income.		

See	Wynne,	136	S.	Ct.	at	1803	&	n.8;	see	also	36	M.R.S.	§	5180	(2017)	(providing	

that,	for	tax	purposes,	a	limited	liability	company	formed	under	Maine	law	“or	

qualified	to	 do	business	in	this	State	as	 a	foreign	limited	liability	company	is	

classified	 as	a	 partnership,	 unless	classified	otherwise	for	federal	income	tax	

purposes”);	36	M.R.S.	§	5190	(2017)	(“A	partnership	as	such	shall	not	be	subject	

to	the	tax	imposed	by	this	Part.		Persons	carrying	on	business	as	partners	shall	

be	liable	for	the	tax	imposed	by	this	Part	only	in	their	separate	or	individual	

capacities.”).			
                                                                                         15	

	      [¶27]	 	 The	 difficulty	 for	 the	 Goggins	 arises	 from	 New	 Hampshire’s	

unusual	 scheme	 of	 taxing	 a	 pass-through	 entity	 on	 its	 profits	 and	 enterprise	

value,	making	New	Hampshire	LLCs	different	entities	for	tax	purposes	than	the	

LLCs	 of	 Maine.	 	 Although	 New	 Hampshire’s	 taxation	 scheme	 may	 create	 a	

disincentive	to	form	such	entities	in	New	Hampshire,	it	is	not	the	application	of	

Maine’s	 tax	 laws	 that	 creates	 that	 result.	 	 Maine’s	 income	 tax	 credit	 statute,	

36	M.R.S.	§	5217-A,	satisfies	the	internal	consistency	test.	

	      [¶28]	 	 The	 Goggins	 further	 contend	 that	 the	 external	 consistency	 test,	

which	focuses	on	fair	apportionment,	renders	Maine’s	statute	unconstitutional.		

That	 test	 examines	 “the	 economic	 justification	 for	 the	 State’s	 claim	 upon	 the	

value	taxed,	to	discover	whether	a	State’s	tax	reaches	beyond	that	portion	of	

value	 that	 is	 fairly	 attributable	 to	 economic	 activity	 within	 the	 taxing	 State.”		

Okla.	Tax	Comm’n	v.	Jefferson	Lines,	Inc.,	514	U.S.	175,	185	(1995).		This	test	has	

not	been	applied	for	purposes	of	individual	income	tax	inquiries,	likely	because	

of	the	established	legal	principle	that	residence	in	a	state	and	the	consequent	

enjoyment	 of	 the	 protection	 of	 its	 laws	 provide	 a	 basis	 for	 the	 taxation	 of	

individuals’	income.		See	Wynne,	575	U.S.	---,	135	S.	Ct.	1787;	Lawrence	v.	State	

Tax	Comm’n	of	Miss.,	286	U.S.	276,	279-80	(1932).	
16	

	        [¶29]		The	court	did	not	err	in	concluding	that	Maine’s	tax	statutes	are	

constitutionally	sound.	

	        The	entry	is:	

                            Judgment	affirmed.	
	
	      	      	       	    	     	
	
James	G.	Goggin,	Esq.	(orally),	Verrill	Dana,	LLP,	Portland,	for	appellants	James	
and	Ann	Goggin	
	
Janet	 T.	 Mills,	 Attorney	 General,	 and	 Thomas	 A.	 Knowlton,	 Asst.	 Atty.	 Gen.	
(orally),	Office	of	the	Attorney	General,	Augusta,	for	appellee	State	Tax	Assessor	
	
	
Business	and	Consumer	Docket	docket	number	AP-2017-01	
FOR	CLERK	REFERENCE	ONLY