Provenza v. Comptroller of the Treasury

BISHOP, Judge. After the Maryland Tax Court affirmed the assessment of the Comptroller of the Treasury for additional income tax for the years 1980 and 1981, appellant, Anna M. Provenza appealed to the Circuit Court for Baltimore City where Judge Robert I.H. Hammerman affirmed the order of the Tax Court. Appellant asks whether the Tax Court and the Circuit Court correctly sustained the Comptroller’s assessments. FACTS Pursuant to Maryland Rule 1028g, the parties agreed to proceed upon a statement of undisputed facts which in ⁵⁶⁶ summary states that appellant’s sole source of income for 1980 and 1981 was from the Maryland State Teacher’s Retirement System; that appellant failed to file Maryland Income Tax Returns for 1980 and 1981; and was assessed $1,418.29 for 1980 and $1,382.31 for 1981 in taxes and penalties.

Appellant does not question the amount of the computation of the assessment, but rather sets forth constitutional and statutory arguments attacking the validity of the Maryland income tax. Appellant raises two issues: 1) that the Maryland income tax is unconstitutional because it impermissibly burdens interstate travel; and 2) that the Maryland income tax violates statutory provisions by taxing obligations of the United States. 1. Appellant bases her constitutional argument on the following statement by the Court of Appeals in Fax v. State Tax Comm., 212 Md. 296, 299 , 129 A.2d 167, 168 (1956): The Maryland income tax is imposed upon a resident of the State for the privilege and opportunities of residence in Maryland, and not upon the source that generates or pays the income, which is the measure of the tax. Appellant asserts that since “income tax is imposed upon a resident of the State for the privilege and opportunities of residence in Maryland,” the fundamental right to interstate travel is restricted and that this results in violation of her constitutional equal protection and due process rights because it creates “impermissible classifications.” Appellant’s argument is flawed in its basic premise.

The Fax language quoted above explains the fundamental rationale of the income tax, and not the method by which the State imposes the tax. Fax, 212 Md. at 299 , 129 A.2d at 168 . The tax itself is on income, Md.Ann.Code Art. 81, § 280 (1957, 1980 Repl.Vol.), with residency providing the constitutional nexus to allow the tax. Evans v. Comptroller, 273 Md. 172, 174 , 328 A.2d 272, 274 (1974); Wood v. ⁵⁶⁷ Tawes, 181 Md. 155, 160-61 , 28 A.2d 850, 853 (1942), cert. denied, 318 U.S. 788 , 63 S.Ct. 982 , 87 L.Ed. 1154 (1943).

It is significant that nonresidents are subject to the income tax for income from sources within Maryland. Md.Ann. Code Art. 81, § 287 (1957, 1980 Repl.Vol.). No tax is imposed on persons entering or travelling through Maryland, only on income earned in Maryland. 2. Appellant’s second argument is based on Federal and state statutory provisions which, she contends, prevent state taxation of obligations of the United States.

Title 31 U.S.C. § 3124 (a) (1983) (formerly 31 U.S.C. § 742 ) provides: Stocks and obligations of the United States Government are exempt from taxation by a state or political subdivision of a state. The exemption applies to each form of taxation that