Lead Opinion
delivered the opinion of the Court.
This еase presents the question whether a federal district court may entertain a complaint of allegedly discriminatory state taxation, framed as a request to increase a commercial competitor’s tax burden. Relevant to our inquiry is the Tax Injunction Act (TLA or Act), 28 U. S. C. § 1841, which prohibits 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.” More embracive than the TIA, the comity doctrine applicable in state taxation cases restrains federal courts from entertaining claims for relief that risk disrupting state tax administration. See Fair Assessment in Real Estate Assn., Inc. v. McNary,
I
A
Historically, all natural gas consumers in Ohio purchased gas from the public utility, known as a local distribution company (LDC), serving their geographic area. In addition to selling gas as a commodity, LDCs own and operate networks of distribution pipelines to transport and deliver gas to cоnsumers. LDCs offer customers a single, bundled product comprising both gas and delivery.
Today, consumers in Ohio’s major metropolitan areas can alternatively contract with an independent marketer (IM) that competes with LDCs for retail sales of natural gas. IMs do not own or operate distribution pipelines; they use LDCs’ pipelines. When a customer goes with an IM, therefore, she purchases two “unbundled” products: gas (from the IM) and delivery (from the LDC).
Ohio treats LDCs and IMs differently for tax purposes. Relevant here, Ohio affords LDCs three tax exemptions that IMs do not receive. First, LDCs’ natural gas sales are exempt from sales and use taxes. Ohio Rev. Code Ann. § 5739.02(B)(7) (Lexis Supp. 2010); §§ 5739.021(E), .023(G), .026(F) (Lеxis 2008); §§5741.02(0, .021(A), .022(A), .023(A) (Lexis 2008). LDCs owe instead a gross receipts excise tax, § 5727.24, which is lower than the sales and use taxes IMs must collect. Second, LDCs are not subject to the commercial activities tax imposed on IMs’ taxable gross receipts. §§ 5751.01(E)(2), .02 (Lexis Supp. 2010). Finally, Ohio law excludes inter-LDC natural gas sales from the gross receipts tax, which IMs must pay when they purchase gas from LDCs. § 5727.33(B)(4) (Lexis 2008).
Plaintiffs-respondents Commerce Energy, Inc., a California corporation, and Interstate Gas Supply, Inc., an Ohio company, are IMs that market and sell natural gas to Ohio consumers. Plaintiff-respondent Gregory Slone is an Ohio citizen who has purchased natural gas from Interstate Gas Supply since 1999. Alleging discriminatory taxation of IMs and their patrons in violation of the Commerce and Equal Protection Clauses, Complaint ¶¶ 35-39, App. 11-13, respondents sued Richard A. Levin, Tax Commissioner of Ohio (Commissioner), in the U. S. District Court for the Southern District of Ohio. Invoking that court’s federal-question jurisdiction under 28 U. S. C. § 1331, Complaint ¶ 6, App. 3, respondents sought declaratory and injunctive relief invalidating the three tax exemptions LDCs enjoy and ordering the Commissioner to stop “recognizing and/or enforcing” the exemptions. Id., at 20-21. Respondents named the Commissioner as sole defendant; they did not extend the litigation to include the LDCs whose tax burden their suit aimed to increase.
The District Court granted the Commissioner’s motion to dismiss the complaint. The TIA did not block the suit, the District Court initially held, because respondents, like the plaintiffs in Hibbs, were “third-parties challenging the constitutionality of [another’s] tax benefit,” and their requested relief “would not disrupt the flow of tax revenue” to the State. App. to Pet. for Cert. 24a.
Nevertheless, the District Court “deeline[d] to exercise jurisdiction” as a matter of comity. Id., at 32a. Ohio’s Legislature, the District Court observed, chose to provide the challenged tax exemptions to LDCs. Respondents re
The U. S. Court of Appeals for the Sixth Circuit reversed.
In so ruling, the Sixth Circuit agreed with the Seventh and Ninth Circuits, which had similarly read Hibbs to rein in the comity doctrine, see Levy v. Pappas,
After unsuccessfully moving for rehearing en banc, App. to Pet. for Cert. la-2a, the Commissioner petitioned for certiorari. By then, the First Circuit had joined the Sixth, Seventh, and Ninth Circuits in holding that Hibbs sharply limited the scope of the comity bar. Coors Brewing Co. v. Méndez-Torres,
II
A
Comity considerations, the Commissioner dominantly urges, preclude the exercise of lower federal-court adjudicatory authority over this controversy, given that an adequate state-court forum is available to hear and decide respondents’ constitutional clаims. We agree.
The comity doctrine counsels lower federal courts to resist engagement in certain cases falling within their jurisdiction. The doctrine reflects
“a proper respect for state functions, a recognition of the fact that the entire country is made up of a Union of separate state governments, and a continuance of the belief that the National Government will fare best if the States and their institutions are left free to perform their separate functions in separate ways.” Fair Assessment,454 U. S., at 112 (quoting Younger v. Harris,401 U. S. 37 , 44 (1971)).
Comity’s constraint has particular force when lower federal courts are asked to pass on the constitutionality of state taxаtion of commercial activity. For “[i]t is upon taxation that the several States chiefly rely to obtain the means to carry
“An examination of [our] decisions,” this Court wrote more than a century ago, “shows that a proper reluctance to interfere by prevention with the fiscal operations of the state governments has caused [us] to refrain from so doing in all cases where the Federal rights of the persons could otherwise be preserved unimpaired.” Boise Artesian Hot & Cold Water Co. v. Boise City,
Our post-Act decisions, however, confirm the continuing sway of comity considerations, independent of the Act. Plaintiffs in Great Lakes Dredge & Dock Co. v. Huffman,
Decades later, in Fair Assessment, we ruled, based on comity concerns, that 42 U. S. C. § 1983 does not permit federal courts to award damages in state taxation cases when state law provides an adequate remedy.
B
Although our precedents affirm that the comity doctrine is more embracive than the TIA, several Courts of Appeals, including the Sixth Circuit in the instant case, have comprehended Hibbs to restrict comity’s compass. See supra, at 420-421. Hibbs, however, has a more modest reach.
Plaintiffs in Hibbs were Arizona taxpayers who challenged a state law authorizing tax credits for payments to organizations that disbursed scholarship grants to children attending private schools.
Arizona’s Revenue Director also invoked comity as cause for dismissing the action. We dispatched the Director’s comity argument in a spare footnote that moved the Sixth Circuit here to reverse the District Court’s comity-based dismissal. As earlier set out, see supra, at 420, the footnote stated: “[T]his Court has relied upon ‘principles of comity’ to preclude original federal-court jurisdiction only when plaintiffs have sought district-court aid in order to arrest or countermand state tax collection.”
Relying heavily on our footnote in Hibbs, respondents urge that “comity should no more bar this action than it did the action in Hibbs.” Brief for Respondents 42. As we explain below, however, the two cases differ markedly in ways bearing on the comity calculus. We have had no prior occasion to consider, under the comity doctrine, a taxpayer’s com
Ill
A
Respondents complain that they are taxed unevenly in comparison to LDCs and their customers. Under either an equal protection or dormant Commerce Clause theory, respondents’ root objection is the same: State action, respondents contend, “selects [them] out for discriminatory treatment by subjecting [them] to taxes not impоsed on others of the same class.” Hillsborough v. Cromwell,
When economic legislation does not employ classifications subject to heightened scrutiny or impinge on fundamental rights,
Of key importance, when unlawful discrimination infects tax classifications or other legislative prescriptions, the Constitution simply calls for equal treatment. How equality is accomplished — by extension or invalidation of the unequally distributed benefit or burden, or some other measurе — is a
On finding unlawful discrimination, we have affirmed, courts may attempt, within the bounds of their institutional competence, to implement what the legislature would have willed had it been apprised of the constitutional infirmity. Mathews,
In particular, when this Court — on review of a state high court’s decision — finds a tax measure constitutionally infirm, “it has been our practice,” for reasons of “federal-state comity,” “to abstain from deciding the remedial effects of such a holding.” American Trucking Assns., Inc. v. Smith, 496
If lower federal courts were to give audience to the merits of suits alleging uneven state tax burdens, however, recourse to state eourt for the interim remedial determination would be unavailable. That is so because federal tribunals lack authority to remand to the state court system an action initiated in federal court. Federal judges, moreover, are bound by the TIA; absent certain exceptions, see, e. g., Department of Employment v. United States,
Comity considerations, as the District Court determined, warrant dismissal of respondents’ suit. Assuming, arguendo, that respondents could prevail on the merits of the suit,
Hibbs held that the TIA did not preclude a federal challenge by a third party who objected to a tax credit received by others, but in no way objected to her own liability under any revenue-raising tax provision. In context, we clarify, the Hibbs footnote comment on comity is most sensibly read to affirm that, just as the case was a poor fit under the TIA, so it was a poor fit for comity. The Court, in other words, did not deploy the footnote to recast the comity doctrine; it intended the note to convey only that the Establishment Clause-grounded case cleared both the TIA аnd comity hurdles.
Respondents steadfastly maintain that this case is fit for federal-court adjudication because of the simplicity of the relief they seek, i. e., invalidation of exemptions accorded the
Comity, in sum, serves to ensure that “the National Government, anxious though it may be to vindicate and protect federal rights and federal interests, always endeavors to do so in ways that will not unduly interfere with the legitimate activities of the States.” Younger,
C
The Sixth Circuit expressed concern that application of the comity doctrine here would render the TIA “effectively superfluous.”
IV
Because we conclude that the comity doctrine justifies dismissal of respondents' federal-court action, we need not decide whether the TIA would itself block the suit. See Great Lakes,
For the reasons stated, the Sixth Circuit’s judgment is reversed, and the case is remanded for further proceedings consistent -with this opinion.'
It is so ordered.
Notes
In moving to dismiss the complaint, the Commissioner urged, inter alia, that the LDCs were parties necessary to a just adjudiсation. See Fed. Rule Civ. Proc. 19. Ruling for the Commissioner on comity grounds, the District Court did not reach the question whether the LDCs were indispensable parties. App. to Pet. for Cert. 21a, 32a-33a.
Justice Brennan cogently explained, in practical terms, “[t]he special reasons justifying the policy of federal noninterference with state tax collection”:
“The procedures for mass assessment and collection of state taxes and for administration and adjudication of taxpayers’ disputes with tax officials are generally complex and necessarily designed to operate according to established rules. State tax agencies arе organized to discharge their responsibilities in accordance with the state procedures. If federal declaratory relief were available to test state tax assessments, state tax administration might be thrown into disarray, and taxpayers might escape the ordinary procedural requirements imposed by state law. During the pendency of the federal suit the collection of revenue under the challenged law might be obstructed, with consequent damage to the State’s budget, and perhaps a shift to the State of the risk of taxpayer insolvency. Moreover, federal constitutional issues are likely to turn on questions of state tax law, which, like issues of state regulatory law, are more properly heard in the state courts.” Perez v. Ledesma,401 U. S. 82 , 128, n. 17 (1971) (opinion concurring in part and dissenting in part).
Two features of federal equity practice accounted for the courts’ willingness to grant injunctive relief. First, the Court had held that, although “equity jurisdiction does not lie where there exists an adequate legal remedyE,}... the ‘adequate legal remedy’ must be one cognizable in federal court." Fair Assessment in Real Estate Assn., Inc. v. McNary,
We later held that the Act indeed does proscribe suits for declaratory relief that would thwart state tax collection. California v. Grace Brethren Church,
Cf., e.g., Loving v. Virginia,
See, e. g., Harper v. Virginia Dept. of Taxation,
State courts also have greater leeway to avoid constitutional holdings by adopting “narrowing constructions that might obviate the constitutional problem and intelligently mediate federal constitutional concerns and state interests.” Moore v. Sims,
Any substantial federal question, of course, “could be reviewed when the case [comes to this Court] through the hierarchy of state courts.” McNeese,
But see General Motors Corp. v. Tracy,
Previous language restricting the district courts’ “jurisdiction” was removed in the 1948 revision of Title 28. Compare 28 U. S. C. § 41(1) (1940 ed.) with § 1341, 62 Stat. 932. This Court and others have continued to regard the Act as jurisdictional. See, e. g., post, at 433 (Thomas, J., concurring in judgment).
Respondents note that “[o]nce the district court grants the minimal relief requested — to disallow the exemptions — it will be up to the Ohio General Assembly tо balance its own interests and determine how best to recast the tax laws, within constitutional restraints.” Brief for Respondents 41. But the legislature may not be convened on the spot, and the
No refund suit (or other taxpayer mechanism) was open to the plaintiffs in Hibbs, who were financially disinterested “third parties”; they did not, therefore, improperly bypass any state procedure. Respondents here, however, could have asserted their federal rights by seeking a reduction in their tax bill in an Ohio refund suit.
The District Court and Court of Appeals concluded that our decision in Hibbs placed the controversy outside the TIA's domain. That conclusion, we note, bears reassessment in light of this opinion’s discussion of the significant differences between Hibbs and this case.
Concurrence Opinion
with whom Justice Scalia joins, concurring in the judgment.
Although I, too, remain skeptical of the Court’s decision in Hibbs v. Winn,
Congress enacted the TIA’s prohibition on federal jurisdiction over certain cases involving state tax issues because federal courts had proved unable to exercise jurisdiction over such cases in the restrained manner that comity requires. See ante, at 423. As the Court explains, Congress’ decision to prohibit federal jurisdiction over cases within the Act’s scope did not disturb that jurisdiction, or the comity
The Court posits that because comity is available as a ground for dismissal even where the Act is not, the Act’s application to this ease is irrelevant if comity would also support sending the case to state court. See ibid. The Court rests this analysis 'on our recent holding in Sinochem that a court may dismiss a case on a nonmerits ground such as comity without first resolving an accompanying jurisdictional issue. See ante, at 432 (citing
The TIA prohibits federal courts from exercising jurisdiction over any action that would “suspend or restrain the assessment, levy or collection of [a] tax under State law.” §1341. As the Court appears to agree, see ante, at 432, n. 13, this is such a case even under the crabbed construction of the Act in Hibbs, which the Court accurately describes as holding only that the Act does “not preclude a federal challenge by a third party who objectjs] to a tax credit received by others, but in no way object[s] to her own liability under any revenue-raising tax provision,” ante, at 430 (emphasiz
Because the Court appears to agree that even Hibbs does not endorse such a narrow view of the Act’s jurisdictional bar, see ante, at 430-432,432, n. 13, the “proper course” is to dismiss this suit under the statute and not reach the comity principles that the Court correctly holds independently support the same result, Sinochem, supra, at 436. Here, unlike in Sinochem, there is no economy to deciding the case on the nonjurisdictional ground: The same analysis that supports dismissal for comity reasons subjects this case to the Act’s jurisdictional prohibition, even as construed in Hibbs. Compare ante, at 421-433, with Sinochem, supra, at 435-436 (approving dismissal of a suit on forum non conveniens grounds because dismissal on personal jurisdiction grounds would
That is not a legitimate approach to this important area of the law, see ibid., and the Court’s assertion that our civil rights precedents require it does not withstand scrutiny. If it is indeed true (which it may have been in the civil rights cases) that federal jurisdiction is necessary to ensure a fair forum in which to litigate an allegedly unconstitutional state tax scheme, the Act itself permits federal courts to retain jurisdiction on the ground that “a plain, speedy and efficient remedy” cannot be had in state court. § 1341. But where, as here and in Hibbs, such a remedy can be had in state court, the Court should apply the Act as written. See
Because I believe the Act forbids the approach to federal jurisdiction over state tax issues that the Court adopted in Hibbs, I would not decide this case in a way that leaves the door open to it even if the Court could find a doorstop that accords with, rather than upends, the settlеd principle that judges presented with multiple nonmerits grounds for dismissal should dismiss on jurisdictional grounds first. But the tension the Court’s decision creates with this settled principle should be enough to convince even those who do not share my view of the TIA that the proper course here is to dismiss this case for lack of jurisdiction because Hibbs’ construction of the Act applies at most to the type of true third-party suit that Hibbs describes, and thus does not save this case from the statute’s jurisdictional bar.
Concurrence Opinion
concurring in the judgment.
I agree with the Court that principles of comity bar the present action. I am doubtful about the Court’s efforts to distinguish Hibbs v. Winn,
Concurrence Opinion
concurring.
The Court’s rationale in Hibbs v. Winn,