The Maryland Tax Court held that the Comptroller’s policy of not allowing carryforwards of unsubtracted exempt federal obligation interest violates the Supremacy Clause of the U.S. Constitution. Under the Comptroller’s policy, interest earned on Maryland obligations is subtracted in its entirety when computing Maryland taxable income. As a result, Maryland obligation interest is included in the taxpayer’s Maryland NOL and can be carried forward and deducted in later years. The same is not true for interest earned on federal obligations. The Comptroller allows the federal obligation interest to be deducted until there is no Maryland taxable income, but any excess may not be used to increase the taxpayer’s Maryland NOL carryforward. The Court determined that the Comptroller’s policy violates the Supremacy Clause by discriminating against those who hold federal obligations in favor of those who hold state obligations. As a result, the taxpayer was permitted to carryforward its excess federal obligation interest deductions. Branch Banking & Trust Co. v. Comptroller of the Treasury, No. 13-IN-OO-0076 (Md. Tax Ct. Aug. 12, 2016).