Parker, Waichman, Alonso LLP

Home » Topics » Other Topics » Municipal Bond Tax

Did Your State Tax Your Out-of-State Municipal Bond Interest?

If you own municipal bonds directly or through a mutual fund, and you have paid income tax on the interest income, you may be entitled to compensation. The state of Kentucky’s two highest courts, have declared that state’s policy of taxing out-of-state municipal bond interest unconstitutional. That case has national implications as the United States Supreme Court has been asked to decide if states have the right to tax out-of-state municipal bonds.

The Kentucky courts found that taxing only out-of-state bonds violates the U.S. Constitution's Commerce Clause, which gives Congress the power to regulate commerce The dormant commerce clause also prohibits states from favoring the economic interests of their own citizens and from impeding interstate commerce. Taken together these constitutional principles make the federal government the exclusive regulator of interstate commerce.

Implications
You may be entitled to a refund of taxes paid on interest on your out-of-state municipal bonds. While the current case is a state case, it is based on the federal constitution and could be applied uniformly in other states that tax interest on out-of-state municipal bond interest.

See if You Qualify for a Refund
Contact Parker & Waichman, LLP today to see if you may be entitled to a state tax refund. Parker & Waichman, LLP is currently evaluating cases on behalf of municipal bondholders and owners of municipal bonds mutual funds in all 50 states. To have your case evaluated today vro free, call us at 1-800-LAW-INFO (1-800-529-4636), or complete the for submission form on the right side of this page.