Constitutional Law: Intergovernmental Tax and Regulation Immunities Flashcards
Federal Taxation and Regulation of State or Local Governments
The Tenth Amendment provides that powers not delegated to the United States by the
Constitution, nor prohibited to the states, are reserved to the states. This reservation of power is
often cited as a restriction on Congress’s power to regulate the states.
Federal Taxation and Regulation of State or Local Governments: Tax or Regulation Applying to State and Private Entities - Valid
The Supreme Court will not likely strike down on Tenth Amendment grounds a tax or
regulation that subjects states or local governments to regulations or taxes that apply to both
the public sector and the private sector. It has held that in such cases, the states’ interests are
best protected by the states’ representation in Congress. [Garcia v. San Antonio Metropolitan
Transit Authority, 469 U.S. 528 (1985)]
Federal Taxation and Regulation of State or Local Governments: Tax or Regulation that Applies Only to States
However, the Tenth Amendment does limit Congress’s power to regulate the states alone
by requiring the states to act in a particular way. Congress may not compel states to enact
or enforce a regulatory program. [New York v. United States, 505 U.S. 144 (1992)—
federal statute requiring states to either regulate radioactive waste or take title to it is beyond Congress’s power] Similarly, if Congress passes a tax that does not apply to private businesses but merely taxes state government entities, there is a possibility that the Court would use the Tenth Amendment to prohibit the tax.
Federal Taxation and Regulation of State or Local Governments: Tax or Regulation that Applies Only to States
(a) Exception - Civil Rights
Congress may use its power under the 14th and 15th Amendments to restrict state activities that it determines would violate the civil liberties of persons within the state.
Federal Taxation and Regulation of State or Local Governments: Tax or Regulation that Applies Only to States
(b) Exception - Spending Power Conditions
Congress may also “regulate” state through the spending power by imposing conditions on the grant of money to state or local governments (sometimes referred to as grants with strings attached). Such conditions will not violate the 10th Amendment merely because Congress lacked the power to directly regulate the activity that is the subject of the spending program if the conditions:
(i) are clearly stated;
(ii) related to the purpose of the program; and
(iii) are not unduly coercive.
Federal Taxation and Regulation of State or Local Governments: Tax or Regulation that Applies Only to States
(b) Exception - Spending Power Conditions
1. What is “unduly coercive”?
There is a limit to the conditions the Supreme Court will tolerate. A condition that
goes beyond mere “incentive” and turns into “compulsion” or “undue influence”
violates principles of federalism. However, the Court has not set out a brightline
test for making this determination. [National Federation of Independent Business
v. Sebelius, II.A.2.a., supra—law that threatens to withhold from states current
Medicare funding if they do not greatly expand Medicare programs amounts to
a “gun to the head,” given that the law threatens to withhold about 10% of an
average state’s total budget]
Federal Taxation and Regulation of State or Local Governments: Commandeering State Officials
The Supreme Court has held that the Tenth Amendment prohibits Congress from adopting
a statute that “commandeers” state officials by requiring states to regulate their own
citizens. [Printz v. United States, 521 U.S. 898 (1997)—striking portions of a federal gun
law that required state law enforcement officers to collect from gun dealers reports regarding
prospective handgun purchasers and to conduct background checks on them] However, the
Court has allowed Congress to regulate the states by prohibiting them from performing
certain acts. [See Reno v. Condon, 528 U.S. 141 (2000)—upholding federal act that bars
states (as well as private resellers) from disclosing personal information required on drivers’
license applications]
State Taxation and Regulation of Federal Government: (1) no direct tax on federal instrumentalities
A state tax levied directly against the property or operation of the federal government without the consent of Congress is invalid.
State Taxation and Regulation of Federal Government: (2) Nondiscriminatory, Indirect Taxes
Nondiscriminatory, indirect taxes on the federal government or its property are permissible if they do not unreasonably burden the federal government.
State Taxation and Regulation of Federal Government: (3) State Regulation of Federal Government
The states have no power to regulate the activities of the federal government unless Congress
consents to the regulation. Thus, instrumentalities and agents of the federal government are
immune from state regulations relating to performance of their federal functions.
