Federal adjudication of state tax litigation
on Mar 24, 2010 at 10:02 am
Below, Josh Branson of Harvard Law School recaps Monday’s oral argument in Levin, Tax Commissioner of Ohio v. Commerce Energy, Inc. (09-223).Â Josh’s earlier preview of the proceedings is available here.Â Check the Levin v. Commerce Energy SCOTUSwiki page for additional updates.
At oral argument Monday in Levin v. Commerce Energy, the Court debated the scope of federal jurisdiction over challenges to state tax credits. In particular, it focused on the mechanics of the suppliersâ€™ lawsuit and the extent to which the relief sought by the suppliers paralleled that sought in Hibbs.
Justice Breyer began by pressing Ohioâ€™s Solicitor General, Benjamin Mizer, on the issue of standing, asserting that he had been unable to find any cases conferring standing upon businesses to challenge their competitorsâ€™ tax treatment. But Mr. Mizer displayed little interest in exploiting Justice Breyerâ€™s doubts about the suppliersâ€™ standing, quickly shifting the discussion to the scope of the comity doctrine as applied to state tax litigation.
On that point, the Justices seemed particularly interested in the similarity between the suppliersâ€™ claim and that litigated in Hibbs. Justice Ginsburg in particular seemed to believe that both the complexity of the state law at issue and the intrusiveness of the proposed remedy distinguished the suppliersâ€™ claim from those at issue in Hibbs. On the other hand, Justice Alito countered that the remedy sought in Hibbs may have been deceptively complicated, and that it too might have required significant federal interpretation of state law. Mr. Mizer also emphasized the complexity of the suppliersâ€™ proposed remedy; an injunction striking down the Ohio tax credit, he argued, would in effect force Ohio to overhaul its tax code. But Justice Scalia found that point unpersuasive because, in his view, the comity doctrine at issue pertained only to tax collection, not general state regulation.
Arguing on behalf of the suppliers, Mr. Stephen Fitch responded that the suppliersâ€™ suit would require only minor interpretations of state law and minimal intrusion upon Ohioâ€™s tax scheme. After pressing Mr. Fitch about the suppliersâ€™ standing (Mr. Fitch countered that the issue had not been raised below), Justice Breyer focused on the suppliersâ€™ request for â€œall other appropriate relief.â€ Several of the Justices wondered if the suppliersâ€™ lawsuit would ultimately require a judicial injunction barring unequal tax collection from the suppliers themselvesâ€”a form of relief definitively barred by the Tax Injunction Act.
During Mr. Mizerâ€™s rebuttal, Justice Scalia questioned whether Ohioâ€™s motion to dismiss under Rule 12(b)(1), for lack of subject-matter jurisdiction, was appropriate given the equitable nature of the comity doctrine. Finally, Justice Breyer pressed again on the possible scope of the ultimate remedy, expressing concern that a ruling for the suppliers would provide firms with an incentive to regularly sue their competitors for tax evasion.