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Federal Constitutional Limitations on State Taxation (Portfolio 1400)

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DESCRIPTION

The Federal Constitutional Limitations on State Taxation Portfolio analyzes the restraints on state taxation imposed by the Import–Export, Commerce, Due Process, Equal Protection, Privileges and Immunities, and Supremacy Clauses, and by the First Amendment.


This Portfolio also discusses taxpayer remedies for unconstitutional state taxes. In 1990, the United States Supreme Court, in McKesson Corp. v. Division of Alcoholic Beverages and Tobacco496 U.S. 18 (1990), 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. That same year, a sharply divided Court, in American Trucking Associations, Inc. v. Smith496 U.S. 167 (1990), 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 this Portfolio.


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AUTHORS

PROFESSOR WALTER HELLERSTEIN

Walter Hellerstein is a Professor of Law at the University of Georgia School of Law and a partner in the law firm of Sutherland, Asbill & Brennan. He is formerly Of Counsel to the law firm of Morrison & Foerster. Walter taught at the University of Chicago Law School before joining the University of Georgia law faculty in 1978.


Walter has written and practiced extensively in the state tax field. He is 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 (2d. ed. 1993) State and Local Taxation (West Publishing Co., 5th ed. 1988, Supp. 1993) and 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. Walter 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.

 

Credentials / Walter 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, Walter 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. 


TABLE OF CONTENTS

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

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