Paul L. Caron

Tuesday, June 1, 2010

Supreme Court: Challenge to Ohio's Tax System Must First be Brought in State Court

A unanimous Supreme Court today reversed the Sixth Circuit and held that "[u]nder the comity doctrine, a taxpayer’s complaint of allegedly discriminatory state taxation, even when framed as a request to increase a competitors's tax burden, must proceed originally in state court." Levin v. Commerce Energy, Inc., No. 09-223 (U.S. June 1, 2010). From SCOTUSBlog:

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I found this opinion mystifying. First, I take it that the idea is that essentially all constitutional challenges to state tax schemes must be brought in state court -- yet Hibbs remains good law. On what grounds Hibbs remains good law is entirely unclear. The opinion offers a variety of justifications: at one point, the Court points out that Hibbs was an establishment clause case; at another, it mentions that in Hibbs the vehicle of challenge was the only available option, while in this case the challenging corporation chose to argue it as a third-party challenge to someone else's tax scheme, while they could have (and but for comity/the TIA, would have) brought it as a direct challenge to their own taxes; and finally, the Court also pointed to the level of intrusion, noting that while in Hibbs fixing the tax credit was simple whereas here the Ohio legislature might have to get involved. Which, if any, of these factors was dispositive was left unresolved.

Indeed, the majority went out of its way to say that while Hibbs was a decision permissible under comity as well as the TIA, this case was nevertheless barred by comity. Yet the only circuit to have be affirmed today, the fourth circuit (three other circuits had joined the Sixth), had based its decision on the fact that "comity was not before the Court in Hibbs."

So in that sense I guess I agree with Thomas, Scalia, and Alito (and to a lesser extent Kennedy) that this case is not really distinguishable from Hibbs. That said, I went into this agreeing with the majority view of the Circuits, and the only reason I can see for Ginsburg, et. al.'s hostility to applying the Hibbs rationale beyond Hibbs's context is that a bolder move might have seen the conservative justices flat out overrule Hibbs.

Barring that, the only other alternative view is more cynical: That in Hibbs, the plaintiffs were sympathetic because it was an establishment clause challenge to tax credits, whereas here -- although the rule ought to be the same, as the Courts of Appeals had held -- the plaintiffs were businesses essentially challenging what they viewed as unfair taxes, and thus were not sympathetic. But that's a cynical view.

Posted by: Gregory | Jun 1, 2010 12:14:35 PM