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Federal Constitutional Limitations on State Taxation (Portfolio 1400)

Product Code: TPOR44
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Federal Constitutional Limitations on State Taxation provides an overview of the federal limitations imposed on state taxation by the United States Constitution and by the federal statutes. Written by Professor Walter Hellerstein, University of Georgia School of Law, this Portfolio focuses on the restraints on state taxation imposed by the various clauses—the Import-Export Clause, Commerce Clause, Due Process Clause, Equal Protection Clause, Privileges and Immunities Clause, and Supremacy Clause—and by the First Amendment.  As such, this Portfolio covers a range of legal issues and considerations, including: 

  • State taxation of imports and exports,
  • Early tax cases,
  • Theories applied in the early cases,
  • The Multiple Taxation Doctrine,
  • The contemporary analytical framework,
  • Telecommunications Excise Tax,
  • Discriminatory tax/subsidy scheme,
  • The “Internal Consistency” test
  • The “Complementary” or “Compensatory” tax doctrine,
  • The “One Voice” doctrine,
  • Prohibition against distortion,
  • General principles of equal protection analysis,
  • Discrimination in real property tax assessments,
  • The constitutionality of Proposition 13,
  • Taxes discriminating against the federal government,
  • The Free Exercise Clause issues, and
  • The Establishment Clause. 

This Portfolio also discusses taxpayer remedies for unconstitutional state taxes, examining such key cases as 1990’s McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, which held that a taxpayer who is compelled to pay a tax that is later held to be unconstitutional under established Commerce Clause principles is entitled to meaningful retroactive relief.  Federal Constitutional Limitations on State Taxation also discussesAmerican Trucking Associations Inc. v. Smith, which held that the taxpayers were entitled to meaningful retroactive relief only from the date of their earlier decision, which overturned past precedent in establishing the taxpayers' substantive claim under the Commerce Clause. The ramifications of these decisions are discussed in detail. 

Federal Constitutional Limitations on State Taxation allows you to benefit from: 

  • Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
  • Invaluable practice documents including tables, charts and lists.
  • Plain-English guidance from world-class experts.
  • Real-world and in-depth analysis that lets you explore various options.
  • Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
  • Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

 

Detailed Analysis

1400.01. INTRODUCTION

1400.02. THE IMPORT–EXPORT CLAUSE

Introductory Material

A. State Taxation of Imports

B. State Taxation of Exports

1400.03. THE DUTY–OF–TONNAGE PROHIBITION

1400.04. THE COMMERCE CLAUSE

A. Doctrinal Background

B. The Early Tax Cases

1. Theories Applied in the Early Cases

C. The Multiple Taxation Doctrine

D. The Contemporary Analytical Framework

E. Complete Auto Transit Inc. v. Brady

1. Nexus (First Prong of Complete Auto Transit Test)

2. Fair Apportionment (Second Prong of Complete Auto Transit Test)

a. Differing Formulas Between States

b. Dividend Income

c. Telecommunications Excise Tax: Internal and External Consistency

d. Nondeductibility of Out-of-State Expenses (Windfall Profit Tax)

e. Michigan Single Business Tax (Value Added Tax)

(i). Challenge by Out-of-State Manufacturer

(ii). Indentification of Geographic Source of Added Value

(iii). Apportionability of Single Business Tax

(iv). Dissent Rejected Analogy Between Income Tax and Single Business Tax

f. Tax on Interstate Transportation

3. Discrimination Against Interstate Commerce (Third Prong of Complete Auto Transit Test)

a. Boston Stock Exchange

b. Maryland v. Louisiana

c. Bacchus

d. Westinghouse

e. Other Cases

4. Discriminatory Tax/Subsidy Scheme

5. Fair Relation Between a Tax and Services Provided by the State (Fourth Prong of Complete Auto Transit Test)

F. The “Internal Consistency” Test

G. The “Complementary” or “Compensatory” Tax Doctrine

1. Historical Treatment

2. Modern Treatment

a. Oregon Waste Systems Inc. v. Dept. of Envirn. Quality

b. Associated Industries of Missouri v. Lohman

c. Fulton Corp. v. Faulkner

d. South Central Bell Telephone Co. v. Alabama

H. The Foreign Commerce Clause

1. Discrimination Against Foreign Commerce

2. Worldwide Combined Reporting as Applied to a Foreign–Based Multinational: The Barclays Bank Case

a. Discrimination

b. Void–for–Vagueness

c. International Multiple Taxation

d. The “One Voice” Doctrine

1400.05. THE DUE PROCESS CLAUSE

A. General Principles

B. Prohibition Against Distortion

1400.06. THE EQUAL PROTECTION CLAUSE

A. General Principles of Equal Protection Analysis

B. Discrimination Against Out–of–State Interests Under the Equal Protection Clause

1. Metropolitan Life Insurance Co. v. Ward

2. Williams v. Vermont

3. Hooper v. Bernalillo County Assessor

C. Discrimination in Real Property Tax Assessments

1. The Constitutionality of Proposition 13

1400.07. THE PRIVILEGES AND IMMUNITIES CLAUSE

1400.08. THE SUPREMACY CLAUSE

Introductory Material

A. Taxes Discriminating Against the Federal Government

1400.09. THE FIRST AMENDMENT

Introductory Material

A. Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue

B. Arkansas Writers' Project v. Ragland

C. Texas Monthly Inc. v. Bullock

D. Jimmy Swaggart Ministries v. Board of Equalization

1. The Free Exercise Clause Issues

2. The Establishment Clause Issue

E. Leathers v. Medlock

1400.10. TAXPAYER REMEDIES FOR UNCONSTITUTIONAL STATE TAXES

Introductory Material

A. McKesson Corp. v. Division of Alcoholic Beverages & Tobacco

1. “Equitable Considerations,” “Windfalls,” and Other Defenses to Providing “Meaningful Backward–Looking Relief”

B. American Trucking Ass'ns, Inc. v. Smith

1. The Plurality's Opinion

2. The Dissenting Opinion

3. Justice Scalia's Concurring Opinion

C. Implications of McKesson and American Trucking Ass'ns

D. The Prohibition of “Selective Prospectivity”: James Beam and Harper

Working Papers

Table of Worksheets

Worksheet 1 McKESSON CORP. v. DIVISION OF ALCOHOLIC BEVERAGES & TOBACCO, 496 U.S. 18

Opinion

Worksheet 2 OKLAHOMA TAX COMMISSION v. JEFFERSON LINES, INC.

Opinion

Bibliography

Bibliography

Walter Hellerstein
Mr. Hellerstein is a Professor of Law at the University of Georgia School of Law and a partner in the firm of Sutherland, Asbill & Brennan. He is formerly Of Counsel to the law firm of Morrison & Foerster. He is a 1967 graduate of Harvard College, where he was elected to Phi Beta Kappa, and a 1970 graduate of the University of Chicago Law School, where he served as Editor–in–Chief of the University of Chicago Law Review. After graduation from law school, Mr. Hellerstein clerked for the Hon. Henry J. Friendly, served as an attorney in the Honors Program of the Air Force General Counsel's Office, and practiced law at Covington & Burling in Washington, D.C. Mr. Hellerstein taught at the University of Chicago Law School before joining the University of Georgia's law faculty in 1978. Mr. Hellerstein has written and practiced extensively in the state tax field. He is the author of State and Local Taxation of Natural Resources in the Federal System: Legal, Economic, and Political Perspectives (American Bar Association Section of Taxation 1986), co–author with Jerome R. Hellerstein of State Taxation, Vols. I & II, and State and Local Taxation (West Publishing Co.), and the author of numerous law review articles on state taxation that have appeared in The Michigan Law Review, The University of Chicago Law Review, The Supreme Court Review, The Tax Lawyer, The Journal of Taxation, The National Tax Journal, The Tax Law Review, the Virginia Law Review, and other journals. Mr. Hellerstein has spoken widely on state tax topics at conferences sponsored by Georgetown University Law Center, New York University Law School, the National Tax Association, the Heart of America Tax Institute, and other organizations. He is a member of the District of Columbia, Illinois, and New York bars.