Background
Tax incentives and taxpayer lawsuit
On November 12, 1998, the city of Toledo, Ohio entered into a development agreement with auto manufacturer DaimlerChrysler, for it to construct a new Jeep assembly plant near its existing facility in exchange for various tax incentives. DaimlerChrysler was to receive approximately $280,000,000 in tax benefits, in the form of a ten-year exemption from certain property taxes and a credit applied against its state corporate franchise tax for certain investments. The Toledo Public and Washington Local school districts, in which the facilities were located, consented to the exemption.
Eighteen taxpayers subsequently filed suit in Lucas County Court of Common Pleas against DaimlerChrysler, the city and school districts, and other State of Ohio defendants, claiming that the state statutes that permitted the property tax exemption [2] and the investment tax credit [3] violated the Commerce Clause in Article One of the United States Constitution and provisions of the Ohio Constitution by granting preferential treatment to in-state investment and activity. [4] The plaintiffs claimed that their personal injury resulted from the tax breaks diminishing the funds available to the city and State, which imposed a "disproportionate burden" on the plaintiffs.
Federal court proceedings
The case was then removed to the U.S. District Court for the Northern District of Ohio by the defendants on the basis of the federal question raised by the Commerce Clause claims. [5] The plaintiffs filed a motion to remand the case back to state court, in part because of concerns that they could not meet the standing requirements of federal court. The District Court denied the motion, finding that at a minimum the taxpayer plaintiffs could proceed under the "municipal taxpayer standing" rule articulated in Massachusetts v. Mellon , 262 U.S. 447 (1923). [6]
The District Court then granted the defendants' motions to dismiss. [7] The claims against the State defendants were barred by their Eleventh Amendment immunity, but were dismissed without prejudice so the plaintiffs could refile the claims in state court. The District Court ruled that the remaining claims all failed to establish that the tax statutes violated either the Ohio or U.S. Constitutions, and were accordingly dismissed with prejudice.
On appeal to the United States Court of Appeals for the Sixth Circuit, the dismissal was affirmed in part, and reversed as to the claims regarding the investment tax credit. [8] The court ruled that the tax credit violated the Commerce Clause and enjoined its enforcement, because it coerced businesses that were already subject to Ohio's franchise tax to expand locally rather than out-of-state, at the expense of interstate commerce.
Opinion of the Court
The Supreme Court granted certiorari to review the Sixth Circuit's decision, and additionally directed the parties to brief and argue on the issue of whether the plaintiff had the standing to challenge the investment tax credit in federal court. [9] The Court unanimously vacated the Sixth Circuit in part, ruling that it had improperly reached the merits of the case without first determining the issue of standing. In a decision delivered by Chief Justice John Roberts and joined by seven justices, the Court held that the status of an individual as a state taxpayer does not establish the standing required by Article III of the United States Constitution for a challenge to state tax laws to be heard in federal court. Justice Ruth Bader Ginsburg filed a separate concurring opinion.
Roberts' majority opinion
The Court stated that the power of federal courts to engage in judicial review was limited by the requirement that the case be an actual case or controversy under Article III. "If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so." Despite the plaintiffs' previous position regarding standing and the propriety of the federal court forum for their case, the Court furthermore stated that because the plaintiffs were now asserting standing, the burden was on them to establish it.
Injury as taxpayers
The plaintiffs had principally claimed that they had standing by virtue of their status as Ohio taxpayers, alleging that the investment tax credit injured them by "deplet[ing] the funds of the State of Ohio to which the Plaintiffs contribute through their tax payments" and thus "diminish[ing] the total funds available for lawful uses and impos[ing] disproportionate burdens on" them. The Court had in several prior cases denied federal taxpayers standing under Article III to object to a particular expenditure of federal funds simply because they are taxpayers. The Court believed that the rationales for rejecting federal taxpayer standing applied with equal force to state taxpayers, as a prior case had indicated. [10] The municipal taxpayer standing established by Mellon was not available in claims that did not involve municipal action, where the plaintiffs challenged a state law and state tax credit.
The Court also observed that there was no standing where the alleged injury was not "concrete and particularized," but was instead suffered "in some indefinite way in common with people generally." [11] In addition, there is also no standing where the injury is not "actual or imminent," but is instead "conjectural or hypothetical." [12] The court believed that the plaintiffs' alleged injury was "conjectural or hypothetical," because it required speculation that state legislators would respond to a reduction in revenue caused by the credit (a consequence the Court also found speculative, and unlikely) by increasing the plaintiffs' taxes. Establishing that this injury is redressable would furthermore require speculation that legislators would pass along the increase in revenue resulting from the abolition of the tax credit in the form of tax reductions to the plaintiffs. "Neither sort of speculation suffices to support standing."
Analogy to Establishment Clause challenges
The Court rejected the argument that an exception for Commerce Clause challenges to state tax or spending decisions should exist, as an analogy to the Establishment Clause taxation challenge the Court had permitted in Flast v. Cohen , 392 U.S. 83 (1968), because both constitutional clauses operate as a specific limit on the Taxing and Spending Clause. [13] The Court explained that the right not to contribute money for the support of a religious establishment was "fundamentally unlike" whatever rights the plaintiffs may have under the Commerce Clause, and the comparison the plaintiffs attempted was "at such a high level of generality that almost any constitutional constraint on government power would 'specifically limit' a State's taxing and spending power for Flast purposes." The injury alleged in Flast was instead the specific extraction of money from the plaintiff to spend in aid of a religion, an injury that could be redressed by an injunction, in contrast to that alleged in this case.
Ginsburg's concurrence
Justice Ruth Bader Ginsburg filed a separate concurring opinion, in which she concurred in the Court's judgment, which she believed to be based on longstanding precedent, and in the balance of its opinion. However, she wrote separately to express a "large reservation" to the further limitations on standing that the Court had adopted in decisions dating from the late 1970s through the early 1990s, [14] which she believed were not necessary to support the Court's ruling.
In law, standing or locus standi is a condition that a party seeking a legal remedy must show they have, by demonstrating to the court, sufficient connection to and harm from the law or action challenged to support that party's participation in the case. A party has standing in the following situations:
The Dormant Commerce Clause, or Negative Commerce Clause, in American constitutional law, is a legal doctrine that courts in the United States have inferred from the Commerce Clause in Article I of the US Constitution. The primary focus of the doctrine is barring state protectionism. The Dormant Commerce Clause is used to prohibit state legislation that discriminates against, or unduly burdens, interstate or international commerce. Courts first determine whether a state regulation discriminates on its face against interstate commerce or whether it has the purpose or effect of discriminating against interstate commerce. If the statute is discriminatory, the state has the burden to justify both the local benefits flowing from the statute and to show the state has no other means of advancing the legitimate local purpose.
Flast v. Cohen, 392 U.S. 83 (1968), was a United States Supreme Court case holding that a taxpayer has standing to sue the government to prevent an unconstitutional use of taxpayer funds.
The Supreme Court of the United States has interpreted the Case or Controversy Clause of Article III of the United States Constitution as embodying two distinct limitations on exercise of judicial review: a bar on the issuance of advisory opinions, and a requirement that parties must have standing.
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), was a landmark Supreme Court of the United States decision, handed down on June 12, 1992, that heightened standing requirements under Article III of the United States Constitution. It is "one of the most influential cases in modern environmental standing jurisprudence." Lily Henning of the Legal Times stated that:
Milan Dale Smith Jr. is an American attorney and jurist serving as a United States circuit judge of the United States Court of Appeals for the Ninth Circuit. Smith's brother, Gordon H. Smith, was a Republican U.S. Senator from 1997 to 2009. Milan Smith is neither a Republican nor a Democrat, and considers himself to be a political independent.
C&A Carbone, Inc. v. Town of Clarkstown, New York, 511 U.S. 383 (1994), was a case before the United States Supreme Court in which the plaintiff, a private recycler with business in Clarkstown, New York, sought to ship its non-recyclable waste to cheaper waste processors out-of-state. Clarkstown opposed the move, and the company then brought suit, raising the unconstitutionality of Clarkstown's "flow control ordinance," which required solid wastes that were not recyclable or hazardous to be deposited at a particular private company's transfer facility. The ordinance involved fees that were above market rates. The Supreme Court sided with the plaintiff, concluding that Clarkstown's ordinance violated the Dormant Commerce Clause.
Hein v. Freedom From Religion Foundation, 551 U.S. 587 (2007), was a decision by the United States Supreme Court which ruled that taxpayers do not have the right to challenge the constitutionality of expenditures by the executive branch of the government. The issue was whether taxpayers have the right to challenge the existence of the White House Office of Faith-Based and Community Initiatives. The case centered on three Supreme Court precedents: Flast v. Cohen, Bowen v. Kendrick, and Valley Forge Christian College v. Americans United for Separation of Church & State.
Smith v. Turner; Norris v. Boston, 48 U.S. 283 (1849), were two similar cases, argued together before the United States Supreme Court, which decided 5–4 that states do not have the right to impose a tax that is determined by the number of passengers of a designated category on board a ship and/or disembarking into the State. The cases are sometimes called the Passenger Case or Passenger Cases.
Massachusetts v. Mellon, 262 U.S. 447 (1923), was a United States Supreme Court case in which the Court rejected the concept of taxpayer standing. The case was consolidated with Frothingham v. Mellon. The plaintiffs in the cases, Frothingham and Massachusetts, sought to prevent certain federal government expenditures which they considered to violate the Tenth Amendment. The court rejected the suits on the basis that neither plaintiff suffered particularized harm, writing:
We have no power per se to review and annul acts of Congress on the ground that they are unconstitutional. The question may be considered only when the justification for some direct injury suffered or threatened, presenting a justiciable issue, is made to rest upon such an act. ... The party who invokes the power must be able to show not only that the statute is invalid but that he has sustained or is immediately in danger of sustaining some direct injury as the result of its enforcement, and not merely that he suffers in some indefinite way in common with people generally.
Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464 (1982), was a decision by the Supreme Court of the United States in which the court refused to expand the Flast v. Cohen exception to the taxpayer standing rule.
Ashwander v. Tennessee Valley Authority, 297 U.S. 288 (1936), was a United States Supreme Court case that provided the first elaboration of the doctrine of "Constitutional avoidance".
Arizona Christian School Tuition Organization v. Winn, 563 U.S. 125 (2011), is a decision by the Supreme Court of the United States involving taxpayer standing under Article Three of the United States Constitution.
National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), is a landmark United States Supreme Court decision in which the Court upheld Congress's power to enact most provisions of the Patient Protection and Affordable Care Act (ACA), commonly called Obamacare, and the Health Care and Education Reconciliation Act (HCERA), including a requirement for most Americans to pay a penalty for forgoing health insurance by 2014. The Acts represented a major set of changes to the American health care system that had been the subject of highly contentious debate, largely divided on political party lines.
Mueller v. Allen, 463 U.S. 388 (1983), was a United States Supreme Court case examining the constitutionality of a state tax deduction granted to taxpaying parents for school-related expenses, including expenses incurred from private secular and religious schools. The plaintiffs claimed that a Minnesota statute, allowing tax deductions for both public and private school expenses, had the effect of subsidizing religious instruction since parents who paid tuition to religious schools received a larger deduction than parents of public school students, who incurred no tuition expenses.
United States v. Richardson, 418 U.S. 166 (1974), was a United States Supreme Court case concerning standing in which the Court held a taxpayer's interest in government spending was generalized, and too "undifferentiated" to confer Article III standing to challenge a law which exempted Central Intelligence Agency funding from Article I, Section 9 requirements that such expenditures be audited and reported to the public.
In the United States, scholarship tax credits, also called tax credit scholarships, education tax credits or tuition tax credits, are a form of school choice that allows individuals or corporations to receive a tax credit from state taxes against donations made to non-profit organizations that grant private school scholarships. At the start of the 2014–2015 school year, fourteen states had scholarship tax credit programs.
King v. Burwell, 576 U.S. 473 (2015), was a 6–3 decision by the Supreme Court of the United States interpreting provisions of the Patient Protection and Affordable Care Act (ACA). The Court's decision upheld, as consistent with the statute, the outlay of premium tax credits to qualifying persons in all states, both those with exchanges established directly by a state, and those otherwise established by the Department of Health and Human Services.
Daimler AG v. Bauman, 571 U.S. 117 (2014), is a United States Supreme Court case in which the Court answered whether an American court may exercise jurisdiction over a foreign company based on the fact that a subsidiary of the company acts on its behalf in the jurisdictional state. The court held that an American company cannot be sued for conduct occurring outside the United States and American courts do not have jurisdiction of such a claim.
South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018), was a United States Supreme Court case that held by a 5–4 majority that states may charge tax on purchases made from out-of-state sellers even if the seller does not have a physical presence in the taxing state. The decision overturned Quill Corp. v. North Dakota (1992), which had held that the Dormant Commerce Clause barred states from compelling retailers to collect sales or use taxes in connection with mail order or Internet sales made to their residents unless those retailers have a physical presence in the taxing state.
