ConLaw: Federalism

Limitations on the Powers of States: Express

The Constitution limits or prohibits the use of many powers by states, such as treaty or coinage,

Inherent Federal Powers

State power can also be limited because the nature of the power makes it exclusively a federal power, such as declarations of war and federal citizenship

Exclusive State Powers

All powers not delegated to the federal government are reserved to the states. However, federal powers are given expansive interpretation and very few state powers are exclusive

Preemption generally

The Supremacy Clause of Article VI provides that the Constitution and the laws and treaties made pursuant to it are the supreme law of the land. If there is a conflict between federal law and state/local law, the federal law preempts.

Express Preemption

If a federal statute explicitly says that federal law is exclusive in a field, there is express preemption

Implied Preemption

Preemption can also arise from: (1) conflict between state law and federal law requirements; (2) a state law preventing or impeding a federal objective; and (3) field preemption

Conflict between State and Federal Requirements

If federal law and state laws are mutually exclusive, the federal law preempts

State Law Impedes/Prevents Objective

If a state law impedes the achievement of a federal objective, the federal law preempts

Field Preemption

If Congress shows a clear intent to preempt state law in a certain field, the federal law will preempt even if the state law does not conflict with the federal scheme. Courts usually find field preemption if: (1) federal laws are comprehensive on the topic; or (2) Congress created an agency to oversee the area

Presumption against Preemption

In all preemption cases, but especially in cases involving a field traditionally within the power of the states, the courts will start with the presumption that the historic state powers are not to be superseded unless that was the clear and manifest purpose of Congress

Intergovernmental Immunity doctrine

Based on the Supremacy Clause, states cannot interfere with or control operations of the federal government. States can’t regulate the federal government or its agents while performing their federal functions, and can’t directly tax federal instrumentalities without consent of Congress. However, nondiscriminatory indirect taxes, such as state income tax on federal employees, are permissible if they do not unreasonably burden the federal government

Tax or Regulation Applying to a State

Congress cannot commandeer the states by requiring them to enact state laws or to enforce federal laws. Congress cannot pass a tax that does not apply to private businesses but merely taxes state governmental entities

Non-Coercive Spending Conditions

Non-coercive spending conditions do not violate the anticommandeering principle

Anticommandeering Civil Rights Exception

Per 14A Section 5, Congress may restrict states from discriminating in violation of the 14th Amendment’s EPC and DPC.

Tax or Regulation Applying to State and Private Entities

The anti-commandeering rule does not apply when Congress regulates an activity in which both state and private entities engage, such as minimum wage laws.

Full Faith and Credit Clause

Certain state court judgments must be recognized in other states. This rule only applies if: (1) the court that rendered the judgment had Jx over the parties and the subject matter; (2) the judgment was on the merits; and (3) the judgment is final

Dormant Commerce Clause

State and local laws can be unconstitutional violations of the Commerce Clause if they place an undue burden on interstate commerce

Privileges AND Immunities Clause of Article IV

States may not deprive citizens of other states of privileges and immunities it accords its own citizens. Corporations and aliens are not protected by this clause.

Privileges OR Immunities Clause of 14A

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States. The only practical application of this is that state laws cannot interfere with the right to travel

Dormant Commerce Clause Standard: No OOS Discrimination

If a state law burdens interstate commerce but does not discriminate against out-of-staters, it violates the dormant commerce clause if its burdens exceed its benefits

State Control of Corporations

State statutes that regulate the internal governance of corporations incorporated within the state may be upheld even if they heavily burden ISC

DCC: OOS Discrimination

A law that discriminates against OOS violates the DCC unless it is necessary to achieve an important government purpose. Protectionist purposes are almost always invalid. To be valid, the state/local government must show that no less-discriminatory alternatives are available to achieve the important purpose

DCC OOS Exception: State as Market Participant

A state or local government may prefer its own citizens in receiving benefits from government programs or in dealing with government-owned businesses.

DCC Lenience: Traditional Government Functions

SCOTUS applies a more lenient standard when a law favors government action that involves the performance of a traditional government function, such as waste disposal. Discrimination against ISC in such cases is permissible because it is likely motivated by legitimate objectives rather than protectionism

OOS Discrimination: Ability to Earn a Livelihood

If a law discriminates against OOS regarding their ability to earn their livelihood, it violates the PaIC unless it is necessary to achieve an important government purpose. In such cases, establish that: (1) the law discriminates against OOS; (2) the discrimination is with regard to fundamental rights or important economic activities; (3) the party is a natural person; and (4) the discrimination is necessary to achieve an important government purpose

Powers of States to Tax ISC

Congress has complete power to authorize or forbid state taxation that affects ISC

ISC Taxes: Discrimination

States may not use their tax systems to help in-state businesses

ISC Taxes: Substantial Nexus

A state may tax activities if there is a substantial nexus to the state. A substantial nexus exists when a business avails itself of the privilege of doing business in the state. Physical presence in the state is not necessary

ISC Taxes: Apportionment

State taxation of ISC must be fairly apportioned. The taxpayer has the burden of proving unfair apportionment

Use Taxes

Use taxes are imposed on goods purchased outside the state but used within it. They are valid

Use Tax and Sellers

An interstate seller may be required to collect a use tax if the seller has a substantial nexus with the taxing state. Physical presence is not required.

Sales Taxes

Sales taxes are taxes imposed on the seller of goods for sales consummated within the state. They generally do not discriminate against ISC. There must be a substantial nexus between the taxpayer and the taxing state, and tax must be fairly apportioned

Ad Valorem Property Taxes

Ad valorem property taxes are based on the assessed value of the property in question

Taxes on Commodities in the Course of ISC

Commodities in interstate transit are exempt from state taxation. Interstate transportation begins when the cargo is delivered to an interstate carrier or actually starts its interstate journey. A break in the continuity of transit does not destroy the interstate character of the shipment unless the break was intended to end or suspend the shipment. The shipment ends when the cargo reaches its destination. Thereafter the goods are subject to local taxes

Taxes on Instrumentalities Used in ISC

The validity of ad valorem property taxes on instrumentalities of commerce depends on whether (1) the instrumentality has acquired a taxable situs in the taxing state; and (2) the value of the instrumentality has been fairly apportioned according to the amount of contacts with each taxing state

Taxable Situs

An instrumentality has a taxable situs in a state if it receives benefits or protection from the state.

Ad Valorem Property Taxes on Instrumentalities: Apportionment

A tax apportioned on the value of the instrumentality will be upheld if it fairly approximates the average physical presence of the instrumentality in the taxing state. The taxpayer’s domiciliary state can tax the full value of instrumentalities used in ISC unless the taxpayer can prove that a defined part of the instrumentality has acquired a taxable situs elsewhere

Privilege, License, Franchise, or Occupational Taxes

These “doing business” taxes are generally permitted. They can be flat or proportional based on contact with the taxing state. The following basic requirements must be met: (1) the activity taxed must have a substantial nexus with the taxing state; (2) the tax must be fairly apportioned; (3) the taxes must not discriminate against ISC, and (4) the tax must fairly relate to services provided by the state

Powers of States to Tax Foreign Commerce

The Import-Export Clause and the Commerce Clause greatly limit the states’ power to tax foreign commerce

21st Amendment

State government have a wide latitude over the importation of liquor and the conditions under which it is sold or used within the state. However, regulations that constitute an economic preference for local liquor manufacturers may violate the Commerce Clause. Liquor in ISC is subject to the Commerce Clause. Congress may regulate economic transactions involving liquor through federal commerce power or by conditioning grants of money