The Federal System

Question 1

Concurrent Federal and State Powers

Answer 1

Federal powers are superior, even if concurrent with state powers.

Question 2

Federal Immunity from State Taxation

Answer 2

The federal government cannot be directly taxed by states.

Question 3

The Comity Clause of the Privileges and Immunity Clause

Answer 3

Comity Clause: Forbids discrimination against out of state individuals, unless there is substantial justification.

Rule: There can be no legal requirement of residency for private employment. States cannot require you to live in the state to work in the state.

Does not apply to businesses/corporations.

[Public employment may have residency requirements.]

Non-serious discrimination is ok: hunting licenses, state park access, etc.

Question 4

Dormant Commerce Clause

Answer 4

More significant that the Comity Clause as it applies to businesses as well as out-of-state individuals.

Rule: In the absence of federal regulation, state regulation of commerce is valid IF:

• There is no discrimination against out-of-state interests
• The regulation does not unduly burden interstate commerce AND
• The regulation does not apply to wholly extraterritorial activity.

[States can discriminate against out of state persons if Congress authorizes.]

Question 5

State as a Market Participant

Answer 5

An exception to the “no discrimination against out of state interests” in the Dormant Commerce Clause.

Rule: When the State is a market participant or is buying/selling goods or services, it can choose to deal with only in-state persons.

[Example would be state subsidies.]

Question 6

State Taxation on Interstate Commerce

Answer 6

General Rules:

• Discriminatory taxation will be struck down without Congressional authority.
• Non-discriminatory taxation will be upheld unless it is unduly burdensome.

Rule for Non-discriminatory Taxation:

A non-discriminatory taxation is valid IF:

1. A substantial nexus exists between the taxing state and the property/activity being taxed AND
2. The tax must be a fair apportionment if tax liability among the states. [May tax for activities related to state, but not for activities in Germany.]

Question 7

Ad Valorem Property Taxes (Value-Based Property Tax)

Answer 7

Levied against personal property.

Applies to: (1) Commodities and (2) Instrumentalities.

Commodities

Goods that move from state to state. States may tax commodities within their border on a specified date (tax day). Does not apply to goods in transit, they must be resting.

Rule: Pay the full tax to every state where goods are stopped for a business purpose on tax day (transit is not taxable).

Instrumentalities

The transportation equipment/infrastructure that moves commodities.

Rule:

Can tax if there is a fair apportionment if tax liability among the states with a substantial nexus to the instrumentality. (Think railroads).

Each state in which the instrumentality is used can tax the value of that instrumentality.

Question 8

Preemption

Answer 8

Rule: Federal law preempts (overrides) inconsistent state law. There must be an incompatibility or conflict between the two (concurrent laws are not preempted per se.)