SUPREME COURT TAX CASES MONDAY, JUNE 22, :00 PM ET/NOON CT/ 11:00 AM MT/10:00 AM PT

Supreme Court Tax Cases Presented by the State and Local Legal Center Featuring Andrew Brasher, Alabama Solicitor General John Neiman, Maynard, Cooper & Gale Ron Parsons, Johnson, Abdallah, Bollweg & Parsons

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About the SLLC Members: National Governors Association National Conference of State Legislatures Council for State Governments National Association of Counties National League of Cities U.S. Conference of Mayors International City/County Management Association Associate members: International Municipal Lawyers Association and Government Finance Officers Association

About the SLLC Since 1983 the SLLC has filed over 300 briefs The SLLC filed 12 briefs before the Supreme Court this term—including the cases discussed in this webinar The SLLC is a resource for Big Seven members on the Supreme Court— this webinar is an example

About our Speaker Andrew Brasher, Alabama Solicitor General, argued Alabama v. CSX John Neiman, Maynard, Cooper & Gale, co-write the SLLC’s amicus brief in Comptroller v. Wynne Ron Parsons, Johnson, Abdallah, Bollweg & Parsons, wrote the SLLC’s amicus brief in DMA v. Brohl

Andrew L. Brasher Alabama Solicitor General Alabama Dept. Revenue v. CSX Trans. Inc, No (March 4, 2015)

(b) The following acts unreasonably burden and discriminate against interstate commerce, and a State, subdivision of a State, or authority acting for a State or subdivision of a State may not do any of them: (1)Assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property. (2)Levy or collect a tax on an assessment that may not be made under paragraph (1) of this subsection. (3)Levy or collect an ad valorem property tax on rail transportation property at a tax rate that exceeds the tax rate applicable to commercial and industrial property in the same assessment jurisdiction. (4)Impose another tax that discriminates against a rail carrier providing transportation subject to the jurisdiction of the Board under this part. 4-R Act 49 U.S.C. §11501

On-road fuel is taxed by federal government; off-road fuel is not Off-road includes farming, trains, boats, etc. Many states, like feds, tax on-road fuel and off-road fuel differently Alabama imposes generally applicable sales tax on off-road fuel On-road fuel is except from sales tax and pays higher per gallon tax similar to fed tax Fuel used in interstate water commerce is also exempt from sales tax Diesel Taxes

Does a tax “discriminate against a railroad” if the railroad is denied an exemption that another group receives? Department of Revenue of Oregon v. ACF Industries, Inc (1994): Railroads could not sue over being denied property tax exemptions Court holds that ACF is limited to property taxes: “Discrimination” includes denying railroads an exemption such that railroads have to pay a tax that a similarly situated group does not have to pay. Discrimination is making similarly situated taxpayers pay different taxes without a justification. CSX v. Alabama (CSX I)

Expressly leave two questions open on remand: Are competitors, such as truckers, a similarly situated group that railroads can compare themselves to under the 4-R Act? Or must they allege discrimination compared to the class of “general commercial and industrial” taxpayers more broadly? Can a state justify treating railroads differently based on the fact that some other business or group must pay a similar tax? Alabama loses on both questions on remand from CSX I. CSX v. Alabama (CSX I)

Court resolves first question 7-2 against Alabama Competitors like truckers and water carriers may be a proper class against which to compare the taxation of railroads. But general commercial taxpayers may also be a proper class. Refuses to apply tax-specific doctrines of statutory interpretation. Refuses to read (b)(4) of the statute in line with the other sections, which expressly used comparison class of all commercial and industrial taxpayers. Instead, the Court invokes the common meaning of discrimination: The question is whether the favored taxpayer is similarly situated to railroads. Alabama v. CSX (CSX II)

Court resolves second question 9-0 in favor of Alabama Discrimination only exists if the state cannot justify the favorable or unfavorable treatment. An offsetting “roughly equivalent” tax can justify a tax that is imposed on a railroad Remands for determination whether Alabama’s tax scheme is justified. Alabama v. CSX (CSX II)

The Court wants lower courts to work CSX I: lower courts said railroads lost because evaluating tax exemptions is too hard CSX II: lower courts said railroads won because evaluating justifications is too hard The Court is nationalist in outlook Refused to read an ambiguous statute in favor of state taxing power The Court is incrementalist The Court left two questions open in CSX I. In CSX II, the Court still did not resolve whether Alabama’s taxes were invalid. Takeaways from CSX II

More litigation over how the state justifies treating railroads differently The phrase “roughly equivalent” comes from Dormant Commerce Clause doctrine. What, if any, of that doctrine is incorporated into 4-R Act? What other kinds of reasons might justify treating railroads differently? Is there a standard of scrutiny that applies? Alabama’s water carriers? Does the Court’s reasoning about the meaning of “discrimination” have any salience in other contexts? E.g. employment. CSX III????

Comptroller v. Wynne Maryland’s tax --Tax MARYLAND residents’ Maryland income --Tax non-residents’ Maryland income --Tax MARYLAND residents’ non-Maryland income (no credit) Smith Bethesda resident $1 million in income – all in Maryland Jones Smith’s next-door neighbor in Bethesda $1 million in income – job in Arlington, Virginia

Direct Marketing Association v. Brohl 135 S. Ct (March 3, 2015)

The Problem The rise of internet sales The nature of sales and use taxes The Quill effect on state and local revenues The Marketplace Fairness Act State efforts to recapture remote sales tax revenues

The Decision The Court’s holding on the Tax Injunction Act jurisdictional issue Bombshell: Justice Kennedy’s concurrence calling for Quill’s reconsideration Justice Ginsburg’s concurrence

The Remand Is comity still in play? The merits of the Dormant Commerce Clause issue Is Quill in jeopardy?

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