You hear those little whoops and cheers in the background? Those are me, ecstatic that the Supreme Court appears to be on a tax tear.

Next on the agenda is Levin, Tax Commissioner of Ohio v. Commerce Energy, Inc., which was argued back in March and decided on yesterday.

Levin is mostly a procedural case. Here’s what happened:

Commerce Energy was one of a number of independent marketers that sold natural gas to consumers in Ohio. If this scenario sounds familiar, it’s more or less that “energy choice” offer that you might have seen in the mail. We’ve had them in Pennsylvania; it gives you the option of getting your energy (in this case, natural gas) from someone other than your local provider.

Commerce believed that the tax laws in Ohio were written so as to give local distributors an unfair advantage. So Commerce sued the Ohio Tax Commissioner in federal court, alleging tax discrimination in violation of the Commerce and Equal Protection Clauses. Ohio’s response was that Commerce sued in the wrong court: the proper venue for these kinds of suits was in state court. They argued that the Tax Injunction Act (TIA) bars lower federal courts from restraining “the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” The court disagreed but dismissed the lawsuit suit anyway based on a different comity doctrine. Comity is the legal term for the notion of reciprocity. In its most simple form, it’s the idea that one jurisdiction should respect the rules of another.

The Sixth Circuit (appellate court) agreed with the lower court’s finding with respect to the TIA but reversed the court’s comity ruling.

The Supreme Court agreed to hear the matter. If you’re interested in the details, you can read the petitioner’s brief as well as the respondent’s brief and supplement (all download as pdf). The appellate court’s opinion can also be found online (downloads as a pdf). And if you’re a serious tax geek, you can also browse the transcript of the oral arguments before the Supreme Court (downloads as a pdf).

Eventually, the decision was reversed and remanded by the Supreme Court (their unanimous opinion is here – also downloads as a pdf); that means that it goes back to the lower courts so that they can fix their decision. The Justices held, over a couple of pages, that a taxpayer’s discrimination complaint has to proceed originally in state court. They also made a point of saying that “courts generally view constitutional challenges with the skepticism due respect for legislative choices demands.” In other words, the courts want to give the legislature the benefit of the doubt and the interpretation of the rules starts in state courts and not federal courts. Perhaps even more important, the remedy for any problems would begin in state courts which are better positioned to propose the most rational fix.

It feels like a lot of drama for a simple ruling. In case you’re wondering, it does actually mean something. The real result? Federal court dockets just got a little lighter (and boy are they relieved since I wouldn’t class most judges as fans of tax law).

You can read what else the Supreme Court has been up to in the tax world here:


Kelly Erb is a tax attorney, tax writer and podcaster.

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