North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust


Debevoise & Plimpton presented oral argument this week in a U.S. Supreme Court case addressing constitutional limits of state taxation.

The case, North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, involves an attempt by North Carolina to tax the entire income of a nonresident trustee based solely on the fact that a beneficiary of the trust moved to that State. Noting that the beneficiary had received no distributions during the tax years, the North Carolina Supreme Court ruled last year that North Carolina’s taxation of the trust based only on the beneficiary’s residence was unconstitutional. The Supreme Court granted certiorari in January.

David A. O’Neil, the partner leading the Debevoise team, argued that the trustee had no ties to North Carolina and therefore that, under bedrock principles of due process, the trust income was not within the State’s taxing power. Mr. O’Neil explained that the tax was “premised on the prediction” that the beneficiary would receive the trust fund, “but, in fact, at the time the State imposed the tax,” that was “unknown and unknowable.” Mr. O’Neil concluded by arguing that the case presents a “textbook application of the settled rule that the unilateral activity of a third party does not create jurisdiction.”

The Debevoise team representing the Kaestner Family Trust is led by partner David A. O’Neil (Picture) and counsel Anna A. Moody. It also includes associates Laura E. O’Neill, Katherine L. Nelson and Joshua B. Pickar. Debevoise partner David H. Bernstein has been trustee of the Kaestner Family Trust since 2005.

Involved fees earner: David Bernstein – Debevoise & Plimpton; Anna Moody – Debevoise & Plimpton; Katherine Nelson – Debevoise & Plimpton; David O’Neil – Debevoise & Plimpton; Laura O’Neill – Debevoise & Plimpton; Joshua Pickar – Debevoise & Plimpton;

Law Firms: Debevoise & Plimpton;

Clients: Kaestner Family 1982 Trust;

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Author: Ambrogio Visconti