Justice Stevens Established Important Precedent for Estate Planners

Many were saddened to learn of the death of former U.S. Supreme Court Justice John Paul Stevens on July 16 at the age of 99.

He dealt with many important issues during his tenure from 1975 to 2010 and established various legal precedents. But, those in the estate-planning world may not realize a decision by Justice Stevens paved the way for the critical recent Supreme Court ruling in North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, 586 U.S. ___ (2019), which ruled that North Carolina can’t tax trust income based solely on the presence of in-state beneficiaries, when the beneficiaries had no right to demand the income and weren’t certain to receive it. We recently covered that ruling.

Justice Stevens wrote the majority opinion in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which was referenced by the Kaestner Court when it noted that due process requires “some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax.” 

In Quill, a mail-order office-supply company sued the state of North Dakota after North Dakota enacted a use tax on products purchased from out of state and tried to compel Quill Corp. to collect the tax from North Dakota customers. Quill Corp. was a Delaware corporation with offices and warehouses in Illinois, California and Georgia. None of its employees worked or resided in North Dakota, and it didn’t own tangible property in North Dakota.

Justice Stevens concluded that because Quill Corp. lacked a physical presence in the state of North Dakota, it wasn’t subject to North Dakota tax laws.

However, in 2018, the Supreme Court overturned Quill on other grounds, ruling that internet retailers can be required to collect sales taxes even in states where they have no physical presence.