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Supreme Court Rules Maryland May Not Double Tax

Posted in Case Notes IMLA Briefs on May 22, 2015 By Lisa Soronen, Executive Director, SLLC

In a 5-4 decision in Comptroller v. Wynne the Supreme Court held that Maryland’s failure to offer residents a full credit against income taxes paid to other states is unconstitutional. The State and Local Legal Center (SLLC)/International Municipal Lawyers Association (IMLA) filed an amicus brief in support of Maryland.

Maryland taxes residents’ income earned in- and out-of-state. If Maryland residents pay income tax to another state for income earned there, Maryland allows them a credit against Maryland’s “state” tax but not its “county” tax. Maryland also taxes nonresident income earned in the state. Nonresidents pay Maryland “state” tax and a “special nonresident tax” equivalent to Maryland’s lowest “county” tax.

The Wynne’s of Howard County, Maryland, received S-corporation income that was earned and taxed in numerous other states. They challenged Maryland’s failure to allow them to claim a credit against their Maryland county taxes as violating the dormant Commerce Clause, which prevents states from discriminating against or excessively burdening interstate commerce. Continue reading →

Supreme Court Ruling in Railroad 4-R Act Case Mixed for State and Local Government

Posted in Case Notes Commentary IMLA Briefs on March 13, 2015 By Lisa Soronen, Executive Director, SLLC

In Alabama Department of Revenue v. CSX Transportation the Supreme Court held 7-2 that railroads can be compared to their competitors when determining whether a tax is discriminatory in violation of the Railroad Revitalization and Regulatory Reform Act (4-R Act). Different taxes paid by railroads and their competitors must be compared with determining whether a tax railroads pay is discriminatory. The State and Local Legal Center (SLLC) filed an amicus brief in this case disagreeing with the Court’s first holding and agreeing with its second holding.

The 4-R Act prohibits state and local governments from imposing taxes that discriminate against rail carriers (railroads). Railroads in Alabama pay a four percent sales tax on diesel fuel as do other commercial and industrial purchasers. Motor carriers (trucks) pay an excise tax of 19-cents per gallon and no sales tax. Water carriers pay no sales or excise tax on diesel fuel. Continue reading →

The Supreme Court and Simple Math

Posted in IMLA Briefs on September 23, 2014 By Lisa Soronen, Executive Director, SLLC

Its simple math. Really. But will the Supreme Court do it? The Eleventh Circuit refused.

The question in Alabama Department of Revenue v. CSX Transportation is whether a state discriminates against rail carriers in violation of federal law even when rail carriers pay less in total state taxes than motor carriers? No, argues the State and Local Legal Center (SLLC) in an amicus brief. Forty-two states exempt motor carriers from sales tax on diesel fuel. This case is relevant to local government because a number of cities and counties in Alabama impose an additional sales tax on railroad diesel fuel.

Rail carriers (railroads) in Alabama pay a four percent sales tax on diesel fuel. Motor carriers (trucks) pay an excise tax of 19-cents per gallon and no sales tax. The Railroad Revitalization and Regulatory Reform Act (4-R) prohibits state and local governments from imposing taxes that discriminate against railroads. Since CSX filed its complaint, railroads paid less in sales tax than trucks paid in excise tax. But, the Eleventh Circuit refused to compare the total taxation of railroads and trucks to avoid the “Sisyphean burden of evaluating the fairness of the State’s overall tax structure.” Instead it concluded Alabama’s sales tax on railroads violates 4-R because Alabama’s competitors don’t pay it.

The SLLC brief argues that given state’s traditional power to tax the Court should interpret 4-R narrowly. The brief suggests the Court could take three approaches to rule in favor of Alabama. Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on September 3, 2014 By Kira Klatchko

Here are last week’s published decisions involving local governments:

First Circuit

Town of Johnston v. Fed. Housing Finance Agency, No. 13-2034 (Aug. 27, 2014): The court affirmed the dismissal of the municipalities’ claim that Fannie Mae and Freddie Mac failed to pay taxes on property transfers; the court found that statutory exemptions from taxation applied. As the court put it: “Six other circuits have recently considered this attempt to shoe-horn a transfer tax into a real property tax, and they have unanimously rejected the argument.”

Second Circuit

Holt v. Town of Stonington, No. 12-4878 (Aug. 29, 2014): The court found that plaintiff who challenged Town’s restrictions on her ability to build on her property failed to exhaust administrative remedies as required by Connecticut law.

Third Circuit Continue reading →

Supreme Court Preview for Local Governments

Posted in Case Notes Commentary on August 26, 2014 By Lisa Soronen, Executive Director, SLLC

Even though the Supreme Court’s next term won’t officially begin until October 6, the Court has already accepted about 40 of the 70 or so cases it will decide in the upcoming months.

For a more detailed summary of all the cases the Court has accepted so far affecting local government, read the State and Local Legal Center’s Supreme Court Preview for Local Governments.

Here is a quick highlight of what is on the Court’s docket right now that will affect local government: Continue reading →

Overtaxed? The SLLC and IMLA File Supreme Court Amicus Brief in Comptroller v. Wynne

Posted in IMLA Briefs on August 8, 2014 By Lisa Soronen, Executive Director, SLLC

Every Supreme Court tax case comes down to an argument perhaps most familiar to small children:

“It isn’t fair.”

The State and Local Legal Center (SLLC)/International Municipal Lawyers Association (IMLA) amicus brief in Comptroller v. Wynne argues that the tax policy choice the Maryland legislature made is fair (or at least fair enough) and that state and local governments should be able to devise tax schemes without judicial interference.

In Comptroller v. Wynne the Supreme Court will determine whether the U.S. Constitution requires states to give a credit for taxes paid on income earned out-of-state.

Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on July 16, 2014 By Kira Klatchko

Here are last week’s published decisions involving local governments, a couple days late this week:

Second Circuit

E.M. v. New York City Dept. of Ed., No. 11-1427 (July 11, 2014) (in IDEA case, concluding that district court improperly concluded that IEP was adequate by relying on retrospective evidence extrinsic to the IEP).

Fourth Circuit

Lefemine v. Wideman, No. 13-1629 (July 11, 2014) (reversing determination that successful plaintiff in 1983 First-Amendment case was not entitled to attorney’s fees). Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on June 16, 2014 By Kira Klatchko

Here are last week’s published decisions involving local governments:

Third Circuit

Rosano v. Township of Teaneck, No. 13-1263 (June 10, 2014) (in action by current and former police officers against Township alleging violation of Fair Labor Standards Act because it did not pay proper overtime and provide compensation for attending daily roll calls and putting on and taking off uniforms, affirming grant of summary judgment for Township).

Seventh Circuit

Garofalo v. Village of Hazel Crest, No. 12-668 (June 12, 2014) (in action by former police sergeants, both white, alleging that the Village discriminated against them based on race by promoting a black officer to police chief, affirming summary judgment for Village).

Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on February 10, 2014 By Kira Klatchko

Here are last week’s published decisions involving local governments:

Second Circuit

Rosu v. City of New York, No. 13-243 (Feb. 7, 2014) (finding that the procedures of the New York City Commission on Human Rights satisfy due process).

Sixth Circuit

Reed v. Franklin County, No. 13-3119 (Feb. 6, 2014) (affirming summary judgment for County and county-jail officers in case alleging that officers used excessive force and violated privacy rights).

Seventh Circuit Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on February 5, 2014 By Kira Klatchko

Here are last week’s published decisions involving local governments*:

First Circuit

Pierce v. Cotuit Fire Department, No. 1301428 (Jan. 28, 2014) (affirming summary judgment against former employee who had claimed, among other things, that he was terminated in retaliation for First-Amendment activity).

Fourth Circuit

Montgomery County v. Federal National Mortgate Association, No. 13-1691 (Jan. 27, 2014) (affirming district court’s decision that general-tax exemptions applicable to Fannie Mae and Freddie Mac cover real-property transfer taxes, and that Congress had authority under the Commerce Clause to adopt the exemption). The Seventh Circuit addressed a related question in December.

Fifth Circuit Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on January 27, 2014 By Kira Klatchko

Here are last week’s published decisions involving local governments:

Second Circuit

McColley v. County of Rensselaer, No. 12-2220 (Jan. 21, 2014) (affirming that whether officer and County were entitled to qualified immunity for alleged Fourth-Amendment violation arising out of search-warrant-application omissions turned on genuine issues of material fact, and concluding therefore that the court lacked subject matter jurisdiction).

Fourth Circuit

Corr v. Metropolitan Washington Airports Authority, No. 13-1076 (Jan. 21, 2014) (finding that tolls paid by drivers on the Dulles Toll Road are user fees not taxes, and that their collection by airport authority does not violate Virginia Constitution and motorists’ due-process rights).

Seventh Circuit Continue reading →

Monday Morning Review: Local Governments in the Federal Appellate Courts

Posted in Monday Morning Review on December 29, 2013 By Kira Klatchko

Here are published decisions involving local governments from the federal appellate courts from December 23, 2013, through December 27, 2013:

Seventh Circuit

Swetlik v. Crawford, No. 12-2675 (Dec. 23, 2013) (affirming grant of summary judgment against police detective who sued City and officers alleging that they violated his First-Amendment rights by voting to file a termination charge against him).
DeKalb County v. Federal Housing Finance Authority, No. 1301558 (Dec. 23, 2013) (holding that Fannie Mae is exempt by statute from real-estate transfer taxes levied by state or local governments).

Ninth Circuit

Patel v. City of Los Angeles, No. 08-56567 (Dec. 24, 2013) (en banc) (finding that City requirement that hotel guest records be made available for police inspection is facially invalid under the Fourth Amendment).

Eleventh Circuit

Franklin v. Gay, No. 13-10129 (Dec. 23, 2013) (finding that officers accused of sexually assaulting detainee were entitled to qualified immunity because Franklin has failed to plead a constitutional violation).

Does the Dormant Commerce Clause Prohibit a State from Taxing All of Its Residents’ Income?

Posted in IMLA Briefs on November 22, 2013 By Kira Klatchko

A recent cert petition raises an important question about how the federal Constitution limits State and local taxing authority.

In Maryland State Comptroller of the Treasury v. Wynne, the Maryland Court of Appeals held that the dormant Commerce Clause requires every state and subdivision to give its residents a full tax credit for all income taxes that they pay in another state or subdivision. The U.S. Supreme Court has never applied the dormant Commerce Clause to reach that result, and it appears to conflict with cases in other states. Not surprisngly then, the Maryland State Comptroller of the Treasury has asked the Supreme Court to take the case.

This week, IMLA joined the United States Conference of Mayors, the National Association of Counties, the International City/County Management Association, and the Maryland Association of Counties in filing an amicus brief supporting the petition. The brief argues that the decision violates basic principles of federalism, and is inconsistent with the State’s sovereign powers to tax its residents.

We’ll continue to monitor the case and will bring you any updates.