Tax Law Commons^™

State Taxation Of Nonresidents' Pension Income, Walter Hellerstein

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This article examines the issues raised by the efforts of some states to tax the pension income of their former residents and of the proposed congressional legislation to forbid such taxation. While there may be sound policy reasons for forbidding state taxation of nonresident pension income, they have yet to emerge clearly from the rhetoric that has thus far dominated the debate over the pension tax issue. The goal of the article is to examine the questions raised by the controversy over state taxation of nonresident pensions in the hope that dispassionate analysis of the problem may contribute to a …

Justice Scalia And The Commerce Clause: Reflections Of A State Tax Lawyer, Walter Hellerstein

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This paper considers Justice Scalia's substantive views of the restraints that the commerce clause imposes on state taxation. My purpose is to examine critically Justice Scalia's dormant or "negative" commerce clause analysis of the state tax issues on which he has opined and to draw from that examination some general conclusions about Justice Scalia's commerce clause jurisprudence.

The Finnigan Case: A Reply To Vogelenzang's Second Stage Apportionment Of Unitary Income, Walter Hellerstein, Jerome R. Hellerstein

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In this article J. Hellerstein and W. Hellerstein take issue with arguments made by Pierre Vogelenzang in a special report in Tax Notes that California’s second-stage apportionment of the income of a unitary business amounts to unconstitutional extraterritorial taxation. In the Finnigan case, the California State Board of Equalization held that sales made into California by a corporation that is not itself taxable in California, but is a member of a unitary group that is taxable there, are includable in the numerator of the state’s sales factor in apportioning income. The authors defend this result, arguing that the separate identity …

Broken Promises Revisited: The Window Of Vulnerability For Surviving Spouses Under Erisa, Camilla E. Watson

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While there are pervasive problems with the current ERISA legislation, this Article will focus only on survivor benefits and will concentrate in particular on the short-term marriage provision. This Article will maintain that facial neutrality notwithstanding, the short-term marriage provision is discriminatory in effect, grounded in dubious logic, and unsupportable from a historical perspective. In order to demonstrate this, this Article will delve thoroughly into the historical development of ERISA, with particular emphasis on the survivor benefit provisions. The depth to which this Article plumbs the general development of ERISA is intended to demonstrate the weak historical foundation on which …

Preliminary Reflections On Mckesson And American Trucking Associations, Walter Hellerstein

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On June 4, 1990, the Supreme Court issued its long awaited decisions in McKesson Corp v. Division of Alcoholic Beverages and Tobacco and American Trucking Associations, Inc. v. Smith. Both cases raised the question of whether a taxpayer has a right to a refund of unconstitutional state taxes. This article analyzes these decisions separately and considers the implications of these decisions on future state tax litigation. The article has two purposes: first, to analyze the McKesson and American Trucking Association cases; and second, to consider their implications for future constitutional challenges to state taxes. The article concludes by stating …

Installment Method Asset Sales By S Corporations, Mary Lafrance

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This Article examines the impact of recent developments on a particular category of taxpayer: the S corporation whose shareholders desire to sell some or all of the corporation's assets. While an installment sale of assets has, for many taxpayers, lost much of its previous allure, such sales may still be commercially desirable under certain circumstances—e.g., where a buyer lacks ready cash or adequate borrowing power. In such a case, some S corporations may be able to achieve significant tax savings through proper planning and documentation of an installment sale. Until Congress or the Treasury provides needed clarification, however, …

Equal Protection Run Amok? An Analysis Of The Nebraska Supreme Court's Decision In The Northern Natural Gas Case, Walter Hellerstein

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In Northern Natural Gas Co. v. State Board of Equalization and Assessment, the Nebraska Supreme Court held that the state could not constitutionally tax the personal property of one taxpayer while exempting the personal property of other taxpayers. Specifically, the court held that pipelines were entitled to an exemption of their personal property because the personal property of railroads and car-lines had been exempted from taxation pursuant to the provisions of the Railroad revitalization and Regulatory Reform Act of 1976 (the 4-R Act), which requires that the railroad and car-line property be taxed in the same way as other commercial …

Administrative Procedure And The Internal Revenue Service: Delimiting The Substantial Understatement Penalty, Peter A. Appel

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In the early 1980's, Congress faced the mounting problems of tax shelters and other forms of tax avoidance. It responded by passing a series of laws.1 One of these provisions, section 6661 of the Internal Revenue Code, penalizes "substantial understatement" of tax liability.2 While section 6661 may appear to be a typical, innocuous tax code provision, close examination reveals that the substantial understatement penalty threatens to expand quietly the power of the Internal Revenue Service (IRS) over taxpayers, violating the spirit of the Administrative Procedure Act (APA) in the process.

Section I of this Note explores the background of section …

State Taxation Of Federally Deferred Income: The Interstate Dimension, James C. Smith, Walter Hellerstein

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Most states that impose income taxes conform their levies to the federal model. Consequently, when income is realized but not recognized at the federal level-for example, when a taxpayer reinvests the gain from the sale of her former residence in a new residence or when a taxpayer realizes gain from the exchange of like-kind property -- states typically follow the federal rule in deferring recognition of that income. On the assumption that state conformity to the federal nonrecognition rules reflects an implicit endorsement of the policies underlying those rules, state deferral ordinarily raises no issue independent of those raised by …

State Taxation And The Supreme Court, Walter Hellerstein

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The Supreme Court's outpouring of significant state tax decisions in recent years has elicited little more than a yawn from most constitutional scholars. The nation's preeminent law reviews, which once were filled with articles examining the Court's state tax opinions, pay scant attention to them today. Leading constitutional law casebooks make only passing reference to state taxation. Indeed, the Court itself has expressed ennui over the prospect of adjudicating a seemingly endless stream of state tax controversies. The lack of academic interest in the Court's state tax jurisprudence may be attributable to several factors. Matters of greater cosmic significance -- …

Is "Internal Consistency" Foolish?: Reflections On An Emerging Commerce Clause Restraint On State Taxation, Walter Hellerstein

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Before 1983, the Supreme Court had never uttered the phrase "internal consistency" in a state tax opinion. Since 1983, however, the Court has invoked the principle of "internal consistency" on four separate occasions in adjudicating the validity of state taxes under the commerce clause. Indeed, by 1987, the Court could refer almost casually to the "internal consistency" criterion as "the test ... we have applied in other contexts." The Court's talk of "internal consistency" cannot be dismissed as mere rhetoric. Three of the four taxes that have been put to the "internal consistency" test have flunked it; cases approving taxes …

Utility Gross Receipt Taxes And Inter-Exchange Telecommunications Carriers, Walter Hellerstein

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This article addresses whether there is any continuing justification for applying state utility gross receipts taxes to interexchange telecommunications carriers. First, the article explores the historical basis for imposing special taxes on utilities, including telecommunications companies, and observes that such levies were designed as a quid pro quo for the special rights and privileges the state granted to utilities. Next, it traces the evolution of the telecommunications industry and demonstrates that the historical rationale for imposing gross receipts taxes on the telecommunications industry no longer applies to the competitive segment of the industry in which interexchange carriers operate. The article …

Testamentary Substitutes—A Time For Statutory Clarification, Sidney Kwestel, Rena C. Seplowitz

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No abstract provided.

A Primer On Florida's Sales Tax On Services, Walter Hellerstein

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This special report is based on the Legal Study of Florida’s Sales Tax on Services prepared by Professor Hellerstein, Prentiss Wilson, Jr., and Morrison & Foerster for the Florida Department of Revenue. This special report deals with the issues arising from Florida’s extension of the sales tax to cover services. The report first discusses the issue of pyramiding of taxes and explores the question of how that issue should be treated in the context of sales services in light of the pre-existing treatment of the issue in the context of sales of tangible personal property. Next, the problem of defining …

Primer On Florida's Sales Tax On Services, Walter Hellerstein

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This special report describes the basic structure and operation of the Florida sales tax as adopted in its final form by the Florida Legislature on June 6, 1987 in order to clear up confusion about the tax. It begins by addressing the amount of controversy that the recently enacted sales and use tax on services has created and states that much of the controversy is based on confusion over what the law actually says and how it works. Next, the report goes into the operation of the statute and stresses that the tax applies only to services that are consumed …

Commerce Clause Restraints On State Taxation: Purposeful Economic Protectionism And Beyond, Walter Hellerstein

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Few questions in recent years have spawned as much controversy and as little academic interest as the scope of commerce clause restraints on state tax power. The Supreme Court has handed down an extraordinary number of significant decisions addressed to the limitations the commerce clause imposes on state taxation. Yet these decisions have barely caught the eye of the nation's leading law reviews or constitutional scholars. Even those observers who have recognized the Court's renaissance of interest in the dormant commerce clause have largely confined their attention to state regulation, as distinguished from state taxation, of interstate commerce. If there …

The Marriage Tax Revisited: An Analysis Of The Tax Consequences Of Marriage, Dan Subotnik

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No abstract provided.

Selected Issues In State Business Taxation, Walter Hellerstein

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This Article surveys selected issues in state business taxation. The topics were chosen with the hope that they would be of general interest to the conference for which this Article originally was prepared. The Article therefore eschews the detailed case analysis that typifies much of the law review writing about state and local taxation--including my own--and focuses instead on broader policy and economic questions that those concerned with state business taxation should find no less important. Part II of this Article considers business taxes and state tax incentives. Part III discusses federal and state tax conformity. Part IV addresses a …

Legal Perspectives On The Interstate Incidence And Shifting Of State And Local Taxes, Walter Hellerstein

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Lawyers, especially constitutional lawyers, have long been concerned with the problems associated with the interstate incidence and shifting of state and local taxes. The Constitution has frequently been invoked as a restraint on the states' power to levy taxes on persons, property, or activities outside their borders. Yet the lawyer's view of tax incidence embodied in these constitutional disputes often bears little resemblance to the economist's. In recent years, however, lawyers have sought to import economic concepts of shifting and incidence into the legal analysis of the constitutional limitations on the states' power to export tax burdens to residents of …

Political Perspectives On State And Local Taxation Of Natural Resources, Walter Hellerstein

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This article investigates the questions that have dominated the political debate over state and local taxation of natural resources in the federal system. It seeks to identify areas of consensus, clarify points of disagreement, and examine proposals that could provide a basis for reconciling the competing concerns. Part I briefly considers the issues as they arise within the framework of the individual state. Part II addresses interstate and interregional conflict. Part III turns to the dialogue over the role, if any, that the federal government should play in mediating the disputes.

State Income Taxation Of Multijurisdictional Corporations, Part Ii: Reflections On Asarco And Woolworth, Walter Hellerstein

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The first part of this Article, "State Income Taxation of Multijurisdictional Corporations: Reflections on Mobil, Exxon, and H.R. 5076" [79 Mich. L. Rev. 113], did not contemplate a sequel. The Supreme Court's decisions last term in two state corporate income tax cases, however, created an irresistible opportunity to write one. The Court's opinions in ASARCO and Woolworth picked up where its opinions in Mobil and Exxon left off. Yet the direction taken by these more recent decisions veers sharply from the course ostensibly set by their predecessors. This Article will consider the Court's latest pronouncements in this area in a …

State Income Taxation Of Multijurisdictional Corporations, Part Ii: Reflections On Asarco And Woolworth, Walter Hellerstein

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The first part of this Article, State Income Taxation of Multiurisdictional Corporations: Reflections on Mobil, Exxon, and H A 5076, did not contemplate a sequel. The Supreme Court's decisions last term in two state corporate income tax cases, however, created an irresistible opportunity to write one. The Court's opinions in ASARC0 and Woolworth picked up where its opinions in Mobil and Exxon left off. Yet the direction taken by these more recent decisions veers sharply from the course ostensibly set by their predecessors. This Article will consider the Court's latest pronouncements in this area in a continuing if quixotic effort …

Reflections On Commonwealth Edison Co. V. Montana, Mike Mcgrath, Walter Hellerstein

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On the final day of its 1980-81 term, the United States Supreme Court handed down its long-awaited decision in Commonwealth Edison Co. v. Montana, which sustained Montana's coal severance tax over commerce and supremacy clause objections. In a six-to-three decision, the Court upheld the right of the states to set their own tax rates without fear of judicial interference. The Court's conclusion was rooted in its recognition that the determination of the rate or amount of a state tax is fundamentally a political question, which "must be resolved through the political process . . . by state legislatures in …

Rawls, Justice, And The Income Tax, Charles R.T. O'Kelley

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To the extent the primacy of justice is acknowledged in tax policy debate, such acknowledgment is coupled with the assertion that, of course, questions of justice cannot be meaningfully debated. The discussants then attempt to resolve the issue in question by use of ad hoc arguments of fairness and efficiency. The major purpose of this article is to show that not only is justice the primary issue, but that questions of justice can be meaningfully addressed. First, I will examine some of the ad hoc arguments of fairness and efficiency which have been made by proponents of a consumption base …

State Taxation In The Federal System: Perspectives On Louisiana's First Use Tax On Natural Gas, Walter Hellerstein

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The Louisiana First Use Tax is presently the subject of no less than eleven judicial proceedings in state and federal courts, including an original action pending before the Supreme Court and the Special Master to whom the case has been assigned. Any attempt to evaluate in detail the merits of these various challenges to the Louisiana levy in light of the myriad and complex issues they raise would hardly be possible in this forum. Indeed, at this junction, any such undertaking would probably be premature in light of the fact that many of the legal and evidentiary issues raised by …

Corporate Distributions And The Income Tax: A Consideration Of The Inconsistency Between Subchapter C And Its Underlying Policy, Charles R.T. O'Kelley

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This Article suggests that although one part of a corporate distribution may be analogous to a sale and the remainder to a dividend, there is no overlap of, or competition between, analogies. This lack of overlap is apparent when one realizes that a dividend and a sale are methods of realizing different types of gain, rather than alternative methods of realizing the same type of gain. This Article examines the basic conceptual model underlying the present system of taxing corporate distributions, describes the appropriate treatment of corporate distributions that is suggested by an understanding of the underlying concepts, and indicates …

State Income Taxation Of Multijurisdictional Corporations: Reflections On Mobil, Exxon, And H.R. 5076, Walter Hellerstein

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The state tax field is experiencing a renaissance of sorts. The Supreme court has displayed a renewed interest in the area, handing down an unusual number of significant decisions addressed to the constitutional restraints on state tax power. State courts have exhibited a similar revival of interest in these problems through an outpouring of uncharacteristically thoughtful opinions concerning state taxation of multistate and multinational enterprise. Congress, whose concern with state taxation of interstate and foreign commerce has been sporadic, is again considering legislation that would limit state taxing authority in these domains. Even the executive branch, which seldom intervenes in …

State Income Taxation Of Multijurisdictional Corporations: Reflections On Mobil, Exxon, And H.R. 5076, Walter Hellerstein

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The state tax field is enjoying a renaissance of sorts. The Supreme Court has displayed a renewed interest in the area, handing down an unusual number of significant decisions addressed to the constitutional restraints on state tax power. State courts have exhibited a similar revival of interest in these problems through an out-pouring of uncharacteristically thoughtful opinions concerning state taxation of multistate and multinational enterprise. Congress, whose concern with state taxation of interstate and foreign commerce has been sporadic, is again considering legislation that would limit state taxing authority in these domains.

Even the executive branch, which seldom intervenes in …

Hughes V. Oklahoma: The Court, The Commerce Clause, And State Control Of Natural Resources, Walter Hellerstein

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The Supreme Court's recent Commerce Clause opinions reflect an apparent effort to rationalize and modernize the analytical framework for delineating the implied restraints that the Clause imposes on state legislation. In the state tax field, the Court has articulated a coherent set of criteria controlling the validity of state taxes on interstate commerce and has discarded doctrine inconsistent with these standards. In the state regulatory context, the Court has likewise enunciated meaningful decisional principles governing the constitutionality of state regulations affecting interstate commerce and has applied them without substantial concern for their impact on its precedents of an earlier era. …

Construing The Uniform Division Of Income For Tax Purposes Act: Reflections On The Illinois Supreme Courts Reading Of The "Throwback" Rule, Walter Hellerstein

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Part I of this article examines the structure and underlying policy of the Uniform Division of income for Tax Purposes Act's provisions relating to the apportionment of income arising from economic activity conducted across state lines. In particular, it considers the Act's "throwback" rule, which reapportions income ordinarily apportioned to a state in which it is not taxable to one in which it is. Part II explores in detail the Illinois court's resolution of the problem raised by GTE, namely, how to assign sales of tangible personal property, which are used as a basis for apportioning income, when such sales …