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If the World is Flat -- Does the Foreign Commerce Clause Need a Better Compass? |
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| The article was authored by Sarah L. McGahan and Timothy H. Gillis and is 28 pages in length. It was originally published in the State and Local Tax Lawyer 2007 Symposium Edition. |
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In the field of state and local taxation, no other clause of -- or silence within -- the Constitution has as much significance as the Commerce Clause. It yields the fundamental limitations on state taxing power with which professionals in our field grapple daily -- nexus, discrimination, and fair apportionment to name a few. This compilation of articles and essays presents analyses by preeminent authorities of not only the intricacies of these "day-to-day" issues, but also the theoretical underpinnings of Commerce Clause jurisprudence. The day-long program from which these pieces are adapted was held at Georgetown University Law Center on May 16th, 2007.
For information on the State and Local Tax Lawyer 2007 Symposium Edition, click here.
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For 190 years following the ratification of the United States Constitution, there were no landmark U.S. Supreme Court decisions delineating the requirements of the Foreign Commerce Clause as it applied to state taxation. In 1979, however, this proverbial Gulliver washed up on the Supreme Court's shore and was awakened by what some might consider relatively minor disputes between a taxpayer and taxing authorities, which were made substantial by the complexities of foreign commerce interacting with the tax policy of competing jurisdictions.
Since Gulliver's awakening in 1979, however, considerable judicial activity has ensued. In less than thirty years following the U.S. Supreme Court's decision in Japan Line, the High Court has thoroughly considered at least six other state tax disputes implicating the Foreign Commerce Clause. The Court also denied consideration of several other cases. However, since Japan Line, there have been no state taxing schemes invalidated by the High Court under the heightened degree of constitutional scrutiny applied to state laws that affect foreign commerce, thus leaving the authors to wonder if Gulliver awakened, only to go right back down for a nap.
Part II of this article offers a brief history of the Foreign Commerce Clause, from 1889 through 1979, including the development of the two additional tests used to consider cases implicating the Foreign Commerce Clause. Parts III and IV of this article then discuss how the two additional tests have been applied by the United States Supreme Court and state courts in cases from 1979 through 2007. Part V posits that the "more extensive" scrutiny required when analyzing state laws that affect foreign commerce has possibly become less extensive post-Japan Line. Part VI discusses why we need a better Foreign Commerce Clause. Finally, Part VII describes examples of subnational tax provisions that may be constitutionally suspect under the Foreign Commerce Clause. The authors' thesis is simple: since Japan Line, the enhanced protections to be applied when analyzing whether a state tax impermissibly interferes with foreign commerce have had little meaningful application, but the globalization of the worldwide economy suggests that heightened scrutiny by the federal legislative and judicial branches is warranted.
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