Last year, the United States Supreme Court issued a landmark state taxation decision in South Dakota v. Wayfair, 585 U.S. ___ (2018), overturning the “physical presence” test under Quill Corp. v. North Dakota, 504 U.S. 298 (1992). On June 21, 2019, the one-year anniversary of Wayfair, SCOTUS held that part of Quill lives on. In N.C. Dep’t of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust, 588 U.S. ___ (2019), the court unanimously upheld the “minimum contacts” test under Quill as it applies to state taxation of income earned by a trust.

The facts of Kaestner are fairly straightforward. In 1992, Joseph Lee Rice III, a New York resident, established a trust for the collective benefit of his three children. Rice initially appointed a New York trustee who, in 2002, divided the trust into separate shares, or “sub-trusts,” for each child. In 2005, the New York trustee was replaced by a Connecticut trustee. In 2006, the new trustee severed the sub-trusts and established three separate and distinct trusts. As a result, the Kimberly Rice Kaestner 1992 Family Trust was established for Rice’s daughter, Kimberly Rice Kaestner, a North Carolina resident, and her children.

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