Alert May 20, 2008

U.S. Supreme Court Rejects Challenge to States’ Income Tax Exemption for Interest from Their Own Bonds

In a 7-2 decision, the United States Supreme Court held that the State of Kentucky’s practice of providing a state income exemption for interest from bonds it and its political subdivisions issue, while taxing the interest on bonds issued by other states and their political subdivisions, was not a violation of the Commerce Clause of the U.S. Constitution.  (Department of Revenue of Kentucky v. Davis, No. 06-666 (May 19, 2008).)