Municipal Bond Exemptions OK: Supreme Court

Law360, New York (May 19, 2008, 12:00 AM EDT) -- The U.S. Supreme Court has decided that states can tax their own municipal bonds more favorably than out-of-state bonds and that the practice does not violate the U.S. Constitution.

In a 7-2 opinion handed down Monday, the Supreme Court reversed an earlier ruling that Kentucky impermissibly discriminated against interstate commerce through its differential tax by exempting from state income taxes interest on bonds issued by it or its political subdivisions but not on bonds issued by other states.

The ruling leaves intact the current structure and...
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