SOUTH CAROLINA v. REGAN, SECRETARY OF THE TREASURY
No. 94, Orig.
Supreme Court of the United States
Argued October 5, 1983—Decided February 22, 1984
465 U.S. 367
Huger Sinkler argued the cause for plaintiff. With him on the briefs were Karen LeCraft Henderson, T. Travis
Susan Lee Voss, Assistant Attorney General of Texas, argued the cause for the State of Texas et al. as amici curiae. With her on the brief were Jim Mattox, Attorney General of Texas, David R. Richards, Executive Assistant Attorney General, and Robert T. Lewis and Michael Cafiso, Assistant Attorneys General, and the Attorneys General for their respective States as follows: Norman C. Gorsuch of Alaska, Robert K. Corbin of Arizona, Michael J. Bowers of Georgia, Linley E. Pearson of Indiana, Thomas J. Miller of Iowa, William J. Guste, Jr., of Louisiana, Stephen H. Sachs of Maryland, William A. Allain of Mississippi, John D. Ashcroft of Missouri, Michael T. Greely of Montana, Brian McKay of Nevada, Gregory H. Smith of New Hampshire, Rufus L. Edmisten of North Carolina, Robert Wefald of North Dakota, Anthony Celebrezze of Ohio, Michael K. Turpin of Oklahoma, LeRoy S. Zimmerman of Pennsylvania, Dennis J. Roberts II of Rhode Island, William L. Leech, Jr., of Tennessee, John J. Easton, Jr., of Vermont, Gerald L. Baliles of Virginia, Bronson C. La Follette of Wisconsin, and Archie G. McClintock of Wyoming.
Deputy Solicitor General Claiborne argued the cause for defendant. With him on the briefs were Solicitor General Lee, Assistant Attorney General Archer, Stuart A. Smith, Michael L. Paup, and Ernest J. Brown.*
*Briefs of amici curiae were filed for the City of Baltimore et al. by Benjamin Brown, J. Lamar Shelley, John W. Witt, Roger F. Cutler, Roy D. Bates, George Agnost, Robert J. Alfton, Mark Aronchick, James K. Baker, James P. McGuire, Clifford D. Pierce, Jr., William H. Taube, William I. Thornton, Jr., Henry W. Underhill, Jr., and Charles S. Rhyne; and for the National Association of Counties et al. by Lawrence R. Velvel and Dennis A. Dutterer.
South Carolina invokes the Court‘s original jurisdiction¹ and asks leave to file a complaint against Donald T. Regan, the Secretary of the Treasury of the United States. The State seeks an injunction and other relief, on the ground that
The Secretary objects to the motion on the ground that the Anti-Injunction Act,
I
Section 103(a) of the Internal Revenue Code (IRC) exempts from a taxpayer‘s gross income the interest earned on the obligations of any State.³ In 1982, however, as part of
Because the imposition of a tax on bearer bonds would require a State to pay its bondholders a higher rate of interest on such bonds, South Carolina argues that the practical effect of
The Secretary does not address the merits of the State‘s constitutional claims. Rather, he argues that we may not grant the motion to file because this action is barred by the Anti-Injunction Act. The Act provides, in pertinent part, that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.“⁸ Characterizing this action as a suit to “restrai[n] the assessment or collection of” a tax, the Secretary contends that this suit is barred by the statute. The Secretary argues that Enochs v. Williams Packing & Navigation Co., 370 U. S. 1 (1962), establishes the single judicially created exception to the Act and that this action does not fall within that exception. We need not address
II
When enacted in 1867, the forerunner of the current Anti-Injunction Act provided that “no suit for the purpose of restraining the assessment or collection of tax shall be maintained in any court.” Act of Mar. 2, 1867, § 10, 14 Stat. 475.¹⁰ Although the Act apparently has no recorded legislative history, Bob Jones University v. Simon, 416 U. S. 725, 736 (1974), the circumstances of its enactment strongly suggest that Congress intended the Act to bar a suit only in situations in which Congress had provided the aggrieved party with an alternative legal avenue by which to contest the legality of a particular tax.
The Act originated as an amendment to a statute that provided that
“[n]o suit shall be maintained in any court for the recovery of any tax alleged to have been erroneously or illegally assessed or collected, until appeal shall have been duly made to the commissioner of internal revenue . . . and a decision of said commissioner shall be had thereon, unless such suit shall be brought within six months from the time of said decision. . . .” Internal Revenue Act of July 13, 1866, § 19, 14 Stat. 152.
The Anti-Injunction Act amended this statute by adding the prohibition against injunctions. Act of Mar. 2, 1867, § 10, 14
The Secretary argues that, regardless of whether other remedies are available, a plaintiff may only sue to restrain the collection of taxes if it satisfies the narrow exception to the Act enunciated in Williams Packing, supra. Williams Packing did not, however, ever address, let alone decide, the question whether the Act applies when Congress has provided no alternative remedy. Indeed, as we shall see, a careful reading of Williams Packing and its progeny supports our conclusion that the Act was not intended to apply in the absence of such a remedy.
Williams Packing was a taxpayer‘s suit to enjoin the District Director of the Internal Revenue Service from collecting allegedly past-due social security and unemployment taxes. The Court concluded that the Anti-Injunction Act would not apply if the taxpayer (1) was certain to succeed on the merits, and (2) could demonstrate that collection would cause him irreparable harm. 370 U. S., at 6-7. Finding that the first condition had not been met, the Court concluded that the Act barred the suit. Significantly, however, Congress had provided the plaintiff in Williams Packing with the alternative remedy of a suit for a refund. Id., at 7.
In each of this Court‘s subsequent cases that have applied the Williams Packing rule, the plaintiff had the option of paying the tax and bringing a suit for a refund. Moreover, these cases make clear that the Court in Williams Packing and its progeny did not intend to decide whether the Act would apply to an aggrieved party who could not bring a suit for a refund.
In addition, in Alexander v. “Americans United” Inc., 416 U. S. 752 (1974), decided the same day as Bob Jones, the Court considered a taxpayer‘s action to require the Service to reinstate its tax-exempt status.¹² The Court applied the Williams Packing test and held that the action was barred
The analysis in Williams Packing and its progeny of the purposes of the Act provides significant support for our holding today. Williams Packing expressly stated that the Act was intended to protect tax revenues from judicial interference “and to require that the legal right to the disputed sums be determined in a suit for refund.” 370 U. S., at 7 (emphasis added). Similarly, the Court concluded that the Act was also designed as “protection of the collector from litigation pending a suit for refund,” id., at 7-8 (emphasis added). The Court‘s concerns with protecting the expeditious collection of revenue and protecting the collector from litigation were expressed in the context of a procedure that afforded the taxpayer the remedy of a refund suit.¹³
Nor is our conclusion inconsistent with the 1966 amendment to the Anti-Injunction Act. In 1966, in § 110(c) of the Federal Tax Lien Act, Pub. L. 89-719, 80 Stat. 1144, Congress amended the Anti-Injunction Act to read, in pertinent
amendment was also intended as a reaffirmation of the plain language of the Act. 416 U. S., at 732, n. 6. In that sense, we found the statute to be “declaratory” rather than “innovative.” Ibid. Because the Act, as originally enacted, did not cover third parties who were not given an alternative action in which to press their claims, our construction of the 1966 amendment in Bob Jones is entirely consistent with our holding today.
Similarly, we stated in “Americans United” that “a suit to enjoin the assessment or collection of anyone‘s taxes triggers the literal terms” of the Act. 416 U. S., at 760. Of course, this statement was meant to apply only if the aggrieved party has an alternative remedy.
JUSTICE O‘CONNOR relies heavily on Assistant Treasury Secretary Surrey‘s statement to the House Ways and Means Committee to support her view that the 1966 amendment to the Anti-Injunction Act was intended to prohibit third parties from suing to restrain the collection of taxes regardless of whether Congress has provided them with an alternative remedy. Post, at 389-390. This reliance is misplaced.
Although the Assistant Secretary described the amendment as a restriction on third-party suits, when read in context, it is unclear whether he was referring to all third parties, including those without alternative remedies, as JUSTICE O‘CONNOR believes, or only to those third parties who were granted a right of action by § 110(a) of the Federal Tax Lien Act. See Statement by the Hon. Stanley S. Surrey, Assistant Secretary of the Treasury, reprinted in Hearings on H. R. 11256 and H. R. 11290, supra, at 58.
Even if Assistant Secretary Surrey viewed the 1966 amendment as prohibiting suits by third parties who had no alternative remedies, there is nothing in the legislative history of that amendment to support the view that Congress shared that belief. JUSTICE O‘CONNOR relies on the statements in the House and Senate Reports that “[u]nder present law . . . the United States cannot be sued by third persons where its collection activities interfere with their property rights,” post, at 389, quoting H. R. Rep. No. 1884, 89th Cong., 2d Sess., 27 (1966); S. Rep. No. 1708, 89th Cong., 2d Sess., 29 (1966). Since the Anti-Injunction Act had been widely construed not to bar such suits, see n. 14, supra, however, this statement simply could not have been intended as a description of the effect of that Act.
tion permits the Tax Court to “make a declaration whether . . . prospective obligations are described in section 103(a).” The issue in this case involves the constitutionality of
JUSTICE O‘CONNOR relies on statements in the legislative history of
We find these statements unpersuasive. To the extent that these statements, which do not even refer to the Anti-Injunction Act, may be read as expressing the view that the Act should be construed to bar suits regardless of the availability of alternative remedies, they are the views of a subsequent Congress and, therefore, at best, “form a hazardous basis for inferring the intent of an earlier one.” Consumer Product Safety Comm‘n v. GTE Sylvania, Inc., 447 U. S. 102, 117 (1980), quoting United States v. Price, 361 U. S. 304, 313 (1960).
JUSTICE O‘CONNOR, relying on Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 380-381 (1969), and FHA v. The Darlington, Inc., 358 U. S. 84, 90 (1958), argues that these statements should be given “‘great weight‘” in construing the Anti-Injunction Act. This reliance is misplaced. In Red Lion we stated that “[s]ubsequent legislation declaring the intent of an earlier statute is entitled to great weight.” 395 U. S., at 380 (emphasis added). The Darlington stands for the same proposition. We have previously rejected the argument that the Red Lion rule should be applicable to the Committee Reports that accompany subsequent legislation. In Consumer Product Safety Comm‘n, supra, at 118, n. 13, we stated: “With respect to subsequent legislation . . . Congress has proceeded formally through the legislative process. A mere statement in a conference report of such legislation as to what the Committee believes an earlier statute meant is obviously less weighty.”
Indeed, JUSTICE O‘CONNOR does not consistently accord “great weight” to the legislative history of
The Secretary suggests that the State may obtain judicial review of its claims by issuing bearer bonds and urging a purchaser of those bonds to bring a suit contesting the legality of
Anti-Injunction Act generally bars nontaxpayers from bringing the kind of injunctive action the State of South Carolina asks leave to file today.” Post, at 392. Under this view, the statement in the Senate Report accompanying
For similar reasons, we find the remaining postenactment history upon which JUSTICE O‘CONNOR relies, post, at 390-391, to be unconvincing. Whatever the weight to which these statements are entitled, they are ultimately unpersuasive in light of the other evidence of congressional intent discussed above.
III
The Secretary argues that if we conclude that the Anti-Injunction Act is not a bar to this suit, we should in any event exercise our discretion to deny leave to file. He notes that the Court‘s jurisdiction over this suit is not exclusive and that the Court exercises its “original jurisdiction sparingly and [is] particularly reluctant to take jurisdiction of a suit where the
Accordingly, plaintiff‘s motion for leave to file a complaint is granted and a Special Master will be appointed.
It is so ordered.
JUSTICE BLACKMUN, concurring in the judgment.
I, too, agree with all those who have written opinions in this case that the Anti-Injunction Act,
In Bob Jones University v. Simon, 416 U. S. 725 (1974), the Court stressed the broad sweep of the Anti-Injunction Act. The Court noted that the language added in 1966, prohibiting any suit for the purpose of restraining the assessment or collection of any tax “by any person, whether or not such person is the person against whom such tax was assessed,” see § 110(c) of the Federal Tax Lien Act of 1966,
Unlike JUSTICE O‘CONNOR, I see no need to decide whether Congress intended the Anti-Injunction Act to apply to suits invoking this Court‘s original jurisdiction. I would decide this case on the narrower ground set forth in my dissenting opinion in “Americans United,” 416 U. S., at 763. I there expressed concern that the Court was overlooking a necessary first step in applying the Anti-Injunction Act, that is, the determination whether the litigation is a “‘suit for the purpose of restraining‘” any tax. Id., at 767, quoting
*According to the affidavit of the Treasurer of South Carolina, the issuance of registered bonds will increase South Carolina‘s interest costs by 0.25%. If the State were to continue to issue unregistered bonds, in the face of a ruling that
The acknowledged purpose of Congress in enacting § 310(b)(1) of TEFRA in 1982 so as to add a new § 103(j) to the Internal Revenue Code of 1954 was to encourage the States to issue securities in registered form. See Staff of Joint Committee on Taxation, General Explanation of the Revenue Provisions of the Tax Equity and Fiscal Responsibility Act of 1982, 97th Cong., 2d Sess., 190 (Comm. Print 1982). In a case such as this, where it is evident that the challenged governmental action is one to “accomplish a broad-based policy objective” rather than to produce revenue, see “Americans United,” 416 U. S., at 771 (dissenting opinion), and the disposition of the challenge will have no effect on federal revenues, I conclude that the suit is not one “for the purpose of restraining the assessment or collection of any tax,” within the words of
Although I would not hold the Anti-Injunction Act to be a bar to South Carolina‘s ability to bring this suit in another court, I agree that we should hear this case. Exercise of our original jurisdiction is discretionary and, though the Court has exercised it sparingly, we are not prohibited from doing so by the fact that the original party may have an alternative forum. See Georgia v. Pennsylvania R. Co., 324 U. S. 439, 465 (1945). The issue presented is a substantial one, and is of concern to a number of States. I am satisfied that prompt resolution of the issue here will benefit all concerned and that the decision to grant leave to file is a proper exercise of our discretion.
JUSTICE O‘CONNOR, with whom JUSTICE POWELL, and JUSTICE REHNQUIST join, concurring in the judgment.
The motion of South Carolina for leave to file a complaint in our original jurisdiction raises three questions. First, the Court must decide whether Congress intended by the
In answering the first question, the Court reaches the unwarranted conclusion that the Tax Anti-Injunction Act proscribes only those suits in which the complaining party, usually a taxpayer, can challenge the validity of a taxing measure in an alternative forum. The Court holds that suits by nontaxpayers generally are not barred. In my opinion, the Court‘s interpretation fundamentally misconstrues the congressional anti-injunction policy. Accordingly, I cannot join its opinion.
I
A
The Tax Anti-Injunction Act provides, in pertinent part, that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.”
In depriving courts of jurisdiction to resolve abstract tax controversies, Congress has determined that the United States must be able “to assess and collect taxes alleged to be due without judicial intervention . . . .” Enochs v. Williams Packing & Navigation Co., 370 U. S. 1, 7 (1962). “[T]axes are the life-blood of government,” Bull v. United States, 295 U. S. 247, 259 (1935), and the anti-injunction prohibition is Congress’ recognition that “the tenacity of the American taxpayer” constantly threatens to drain the Nation of a life-sustaining infusion of revenues. See Gorovitz, Federal Tax Injunctions and the Standard Nut Cases, 10 Taxes 446, 446 (1932). The Act‘s proscription literally extends to nontaxpayer as well as taxpayer suits, if only to prevent taxpayers from sidestepping the anti-injunction policy by bringing suit through nontaxpaying associations of taxpayers.²
B
The Act‘s history expressly reflects the congressional desire that all injunctive suits against the tax collector be prohibited. First enacted in 1867,3 it apparently was designed to protect the federal tax system from being inundated with the same type of injunctive suits that were then sweeping over the state tax systems. See State Railroad Tax Cases, 92 U. S. 575, 613 (1876); Snyder v. Marks, 109 U. S. 189, 193-194 (1883). There is little contemporaneous documentation,4 but this Court‘s decisions indicate that the 39th Congress acted with a
“... sense of ... the evils to be feared if courts of justice could, in any case, interfere with the process of collect-
year-end deductions); McGlotten v. Connally, 338 F. Supp. 448, 453, n. 25 (DC 1972) (nontaxpayer challenge to tax-exempt status of racially discriminatory fraternal organization), disapproved in Bob Jones University v. Simon, 416 U. S. 725, 732, and n. 6 (1974).
ing the taxes on which the government depends for its continued existence.” State Railroad Tax Cases, supra, at 613.
The experience in the States demonstrated the grave dangers which accompany intrusion of the injunctive power of the courts into the administration of the revenue:
“If there existed in the courts ... any general power of impeding or controlling the collection of taxes, or relieving the hardship incident to taxation, the very existence of the government might be placed in the power of a hostile judiciary.” Cheatham v. United States, 92 U. S. 85, 89 (1876).
To avoid these evils and to safeguard the federal tax system, the 39th Congress committed administration of the Code to the discretion of the Secretary of the Treasury.5
This broad anti-injunction ban remained essentially untouched for almost a century.6 In 1966, however, Congress
joining the Assessment and Collection of Federal Taxes Despite Statutory Prohibition, 49 Harv. L. Rev. 109, and n. 9 (1935).
“Subsection (c) of section 110 of the bill amends section 7421(a) of the code. That section presently prohibits injunctions against the assessment or collection of tax. The cases decided under this provision raise a question as to whether this prohibition applies against actions by persons other than the taxpayer. New section 7426 will specifically allow actions by third parties to enjoin the enforcement of a levy or sale of property. The amendment to section 7421 makes clear that third parties may bring injunction suits only under the circumstances provided in new section 7426(b)(1) of the code.” Statement by the Hon. Stanley S. Surrey, Assistant Secretary of the Treasury, reprinted in Hearings on H. R. 11256 and H. R. 11290, before the House Committee on Ways and Means, 89th Cong., 2d Sess., 58 (1966).
The House Committee on Ways and Means and the Senate Committee on Finance apparently shared Mr. Surrey‘s understanding of the rights of nontaxpayers under prior law, for their Reports both state:
“Under present law, ... the United States cannot be sued by third persons where its collection activities interfere with their property rights. This includes cases where the Government wrongfully levies on one person‘s property in attempting to collect from a taxpayer. However, some courts allow suits to be brought against
district directors of Internal Revenue where this occurs.” H. R. Rep. No. 1884, 89th Cong., 2d Sess., 27 (1966); S. Rep. No. 1708, 89th Cong., 2d Sess., 29 (1966).
To accommodate these conflicting rights, both Committees recommended that Congress enact
Congress has since relaxed the statutory proscription against third-party suits on several occasions. For example, in 1974, it provided that certain designated persons could obtain declaratory judgments in the Tax Court with respect to the tax status of pension plans. See
“As a practical matter, there is no effective appeal from a Service private letter ruling (or failure to issue a private letter ruling) that a proposed issue of municipal bonds is taxable. In those cases, although there may be a real controversy between a State or local government and the Service, present law does not allow the State or local government to go to court. The controversy can be resolved only if the bonds are issued, a bondholder excludes interest on the bonds from income, the exclusion is disallowed, and the Service asserts a deficiency in its statutory notice of deficiency. This uncertainty coupled with the threat of the ultimate loss of the exclusion, invariably makes it impossible to market the bonds. In addition, it is impossible for a State or local government to question the Service rulings and regulations directly.
“[S]tate and local government[s] should have a right to court adjudication in the situation described above. The bill deals with the problem by providing ... for a declaratory judgment as to the tax status of a pro-
posed issue of municipal bonds.” S. Rep. No. 95-1263, pp. 150-151 (1978).
The Conference Report reflects a similar view of prevailing law. See H. R. Conf. Rep. No. 95-1800, p. 240 (1978). Thus, in 1974, 1976, and again in 1978, Congress expressed its belief that the Tax Anti-Injunction Act generally bars nontaxpayers from bringing the kind of injunctive action the State of South Carolina asks leave to file today.9
These subsequently enacted provisions and the legislative understanding of them are entitled to “great weight” in construing earlier, related legislation. See, e. g., Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 380-381 (1969); FHA v. The Darlington, Inc., 358 U. S. 84, 90 (1958). Combined with the legislative purposes obviously motivating the 39th and 89th Congresses, these provisions conclusively demonstrate that, absent express exemption, the Act generally precludes judicial resolution of all abstract tax controversies, even if the complaining parties would have no other forum in which to bring their challenges.
C
The Court drew these same conclusions in Bob Jones University v. Simon. See 416 U. S., at 736-746. In that case, the Court rejected a private institution‘s request that an additional exception beyond the one created in Enochs v. Williams Packing & Navigation Co., 370 U. S. 1 (1962) (equity court may issue injunction where it is clear that under no cir-
“was meant to be the capstone to judicial construction of the Act. It spells an end to a cyclical pattern of allegiance to the plain meaning of the Act, followed by periods of uncertainty caused by a judicial departure from that meaning, and followed in turn by the Court‘s rediscovery of the Act‘s purpose.” 416 U. S., at 742.
Bob Jones University, supra then reaffirmed that, except where a litigant can show both that the Government would “under no circumstances... prevail” and that equity jurisdiction is otherwise present, the Act would be given its “literal effect.” Id., at 737, 742-745.
Because the plaintiffs in Bob Jones University, supra were assured ultimately of having access to a judicial forum, the Court did not definitively resolve whether Congress could bar a tax suit in which the complaining party would be denied all access to judicial review. See id., at 746. But the Court‘s reference to “a case in which an aggrieved party has no access at all to judicial review” came in the context of its discussion of the taxpayer‘s claim that postponement of its challenge to the revocation of its tax-exempt status would violate due process. Bob Jones University‘s dictum, therefore, should be interpreted only as reflecting the established rule that Congress cannot, consistently with due process, deny a taxpayer with property rights at stake all opportunity for an ultimate judicial determination of the legality of a tax assessment against him. See Phillips v. Commissioner, 283 U. S. 589, 596-597 (1931).
In holding that the Act does not bar suits by nontaxpayers with no other remedies, the Court today has created a “breach in the general scheme of taxation [that] gives an opening for the disorganization of the whole plan ....” Allen v. Regents of University System of Ga., 304 U. S. 439, 454 (1938) (Reed, J., concurring in result). Nontaxpaying associations of taxpayers, and most other nontaxpayers, will now be allowed to sidestep Congress’ policy against judicial resolution of abstract tax controversies. They can now challenge both Congress’ tax statutes and the Internal Revenue Service‘s regulations, Revenue Rulings, and private letter decisions. In doing so, they can impede
II
The Act‘s language, purpose, and history should leave no doubt that Congress intended to preclude both taxpayer and nontaxpayer suits, regardless of the availability of an alternative forum. The Solicitor General agrees and contends that, since the anti-injunction prohibition extends to “any court,” it should be read to bar this Court from acting in its original jurisdiction as well. The Solicitor General‘s contention raises a grave constitutional question: namely, whether Congress constitutionally can impose remedial limitations so jurisdictional in nature that they effectively withdraw the original jurisdiction of this Court.
A
Under the language used in
Though the original history of
“In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.”
Our cases have long paid tribute to the foreign sovereignty and federalism concerns forming the basis of the original jurisdiction. See Ames v. Kansas, supra, at 464-465; Maryland v. Louisiana, 451 U. S. 725, 743 (1981). Out of respect for these concerns, the Court has held that Congress is without power to add parties not within the initial grant of original jurisdiction, see Marbury v. Madison, 1 Cranch 137, 174 (1803), and has indicated, in dicta, that Congress may not withdraw that jurisdiction either. See, e. g., California v. Arizona, 440 U. S. 59, 65-66 (1979); California v. Southern Pacific Co., 157 U. S. 229, 261 (1895); Wisconsin v. Pelican Insurance Co., 127 U. S. 265, 300 (1888); Ames v. Kansas, supra, at 464; Martin v. Hunter‘s Lessee, 1 Wheat. 304, 332 (1816); Marbury v. Madison, supra, at 174. Enlarging the original jurisdiction would require the sovereigns for whom the provision was made to compete with other, less dignified,
To be sure, the Tax Anti-Injunction Act does not expressly withdraw the original jurisdiction of this Court. Rather, it merely prohibits “any court” from “maintain[ing]” a suit that has “the purpose of restraining the assessment or collection” of federal taxes. See
B
Nevertheless, it is this Court‘s longstanding practice to avoid resolution of constitutional questions except when absolutely necessary. Ibid. “When the validity of an act of the Congress is drawn in question, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be
The manifest purpose of the Tax Anti-Injunction Act is simply to permit the United States to assess and collect taxes without undue judicial interference and to require that legal challenges be raised in certain designated forums. The language and history of the Act evidence a congressional desire generally to bar both taxpayer and nontaxpayer suits, since both can substantially interrupt “the process of collecting the taxes on which the government depends for its continued existence” if left uncontrolled. State Railroad Tax Cases, 92 U. S., at 613. Similarly, the language and history evidence a congressional desire to prohibit courts from restraining any aspect of the tax laws’ administration, since the prohibition against injunctions should not depend upon the alleged legality or character of a particular assessment. See Snyder v. Marks, 109 U. S., at 192-194. Yet the statute was enacted against a settled history in which foreign and state sovereigns had a unique right to seek refuge in the original jurisdiction of this Court. Nothing in the legislative history of the Act of 1867, of the later amendments, or of the related declaratory judgment provisions enacted in 1974, 1976, or 1978, mentions any intent to alter these sovereign parties’ unique right occasionally to seek injunctive relief by original action in this Court, even with regard to tax matters.
Admittedly, the Act precludes “any court” from maintaining a suit initiated for the purpose of restraining the assessment or collection of federal taxes. See
III
Interpreting the Tax Anti-Injunction Act to bar both taxpayer and nontaxpayer claims in “any court” but this Court requires a determination whether this case is “appropriate” for the Court‘s obligatory original jurisdiction. Illinois v. City of Milwaukee, 406 U. S. 91, 93 (1972). “[A]lthough it may initially have been contemplated that this Court would always exercise its original jurisdiction when properly called upon to do so,” Ohio v. Wyandotte Chemicals Corp., 401 U. S. 493, 497 (1971), our cases recognize “the need [for] exercise of a sound discretion in order to protect this Court from an abuse of the opportunity to resort to its original jurisdiction....” Massachusetts v. Missouri, 308 U. S. 1, 19 (1939). An original party establishes that a case is “appropriate” for obligatory jurisdiction by demonstrating, through “clear and convincing evidence,” that it has suffered an injury
The State has demonstrated injury of “serious magnitude.” It contends, and provides uncontroverted affidavits to support, that application of § 103(j)(1) will “materially interfere with and infringe upon the authority of South Carolina to borrow funds.” Complaint 16. The authority the State claims has significant historical basis, see Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429 (1895), and the injury the State alleges could deprive it of a meaningful political choice. See Colorado v. Kansas, 320 U. S. 383, 393, and n. 8 (1943). Twenty-four States have filed a joint brief amici curiae in support of South Carolina‘s motion, which further attests to the “serious magnitude” of the federalism concerns at issue.
Similarly, the State qua State has demonstrated that it has no adequate alternative forum in which to raise its unique Tenth and Sixteenth Amendment claims. See Maryland v. Louisiana, supra, at 743, and n. 19. If the State issues bearer bonds and urges its purchasers to contest the legality of § 103(j)(1), it will suffer irremedial injury. The purchasers will inevitably demand higher interest rates as compensation for bearing the risk of future potential federal taxes. Conversely, if the State forsakes bearer bonds in favor of registered ones, it will bear the increased expense that issuers of registered bonds incur, and it will be unable ever to contest the constitutionality of § 103(j)(1). In short, the State will
Therefore, although great deference is due the longstanding congressional policy against premature judicial interference with federal taxes, I believe it is proper to exercise the Court‘s original jurisdiction under these unique circumstances. I emphasize both the unique circumstances of this case and the congressional policy against premature judicial interference because original litigants should not be misled into believing that this Court will become a haven for suits that cannot be entertained in lower courts with concurrent jurisdiction. The original jurisdiction is not a forum for litigating everyday tax concerns. Rather, it must be “sparingly” invoked. United States v. Nevada, 412 U. S. 534, 538 (1973). Moreover, the legislative policy against premature judicial interference embodied in the Act must be paid the highest deference by this Court. Thus, where the original party does not present a clear and convincing case that the tax at issue will impair its ability to structure integral operations of its government and that irremedial injury is likely to occur absent review in the original jurisdiction, I would defer to the legislative directive against premature judicial interference.18 But since South Carolina‘s claims meet these stringent requirements, its motion for leave to file should be granted.
IV
I agree with the Court that the record is not sufficiently developed to permit us to address the merits and that a Special Master should be appointed. But I do not share its view
JUSTICE STEVENS, concurring in part and dissenting in part.
While I join Parts I and II of the Court‘s opinion, I disagree with Part III. The Solicitor General has persuaded me that the Court should exercise its discretion to deny leave to file this complaint. We should do so not only because the proceeding can be conducted more expeditiously in another forum,1 but also because it is so plain that even if we read the complaint liberally in favor of the State of South Carolina, there is simply no merit to the claim the State has advanced. I do not believe the Court does a sovereign State a favor by giving it an opportunity to expend resources in litigation that has no chance of success. I would therefore deny leave to file.
South Carolina claims that
Although the State‘s constitutional arguments are not stated in precisely this form, in essence it claims that the statute is invalid because it violates: (1) the doctrine of intergovernmental tax immunity; (2) the Tenth Amendment; and (3) the doctrine of National League of Cities v. Usery, 426 U. S. 833 (1976). A long line of cases plainly forecloses the first claim; the other two are frivolous.
I
The origins of intergovernmental taxation immunity are found in McCulloch v. Maryland, 4 Wheat. 316 (1819). Of course, McCulloch dealt not with the immunity of the States, but rather with that of the United States. The Court held that the State of Maryland could not constitutionally tax the Bank of the United States because the power to tax the bank could be used to destroy it, thereby undermining the constitutionally guaranteed supremacy of the Federal Government. See id., at 425-437. The Court‘s argument was premised explicitly upon the Supremacy Clause of the Constitution, and thus its holding did not require that any immunity from taxation be accorded the States.2
Therefore, the case upon which South Carolina relies is not McCulloch but Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429 (1895). There the Court specifically held that a
“It is contended that although the property or revenues of the States or their instrumentalities cannot be taxed, nevertheless the income derived from state, county, and municipal securities can be taxed. But we think the same want of power to tax the property or revenues of the States or their instrumentalities exists in relation to a tax on the income from their securities, and for the same reason, and that reason is given by Chief Justice Marshall in Weston v. Charleston, 2 Pet. 449, 468, where he said: ‘The right to tax the contract to any extent, when made, must operate upon the power to borrow before it is exercised, and have a sensible influence on the contract. The extent of this influence, depends on the will of a distinct government. To any extent, however inconsiderable, it is a burthen on the operations of government. It may be carried to an extent which shall arrest them entirely. . . . The tax on government stock is thought by this court to be a tax on the contract, a tax on the power to borrow money on the credit of the United States, and consequently to be repugnant to the Constitution.’ Applying this language to these municipal securities, it is obvious that taxation on the interest therefrom would operate on the power to borrow before
it is exercised, and would have a sensible influence on the contract, and that the tax in question is a tax on the power of the States and their instrumentalities to borrow money, and consequently repugnant to the Constitution.” 157 U. S., at 585-586 (ellipsis in original).
The theory employed in Pollock is what I shall refer to as the “intergovernmental burden” theory: even though a tax is not laid directly upon another government, if it has a “sensible influence” on the costs incurred by that government, it must fall. This theory is the only rationale offered by the Pollock Court for its decision, and it is on this theory that Pollock must stand or fall.
The precedential weight of Pollock was doubtful almost from the start. Within a generation Pollock was seemingly overruled by constitutional amendment. The Sixteenth Amendment, ratified in 1913, states: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” (Emphasis supplied.) This clear language makes the fact that income is derived from interest on state or local obligations constitutionally irrelevant.
Any doubt about the vitality of Pollock is dispelled by our subsequent cases. At every opportunity, this Court has rejected the intergovernmental burden theory.
In Metcalf & Eddy v. Mitchell, 269 U. S. 514 (1926), the Court first rejected the theory. It held that the United States could tax the income derived by an independent contractor from its contracts with a State. The Court recognized that the federal tax increased costs incurred by the State,3 but nevertheless upheld the tax:
Thus, the conceptual basis for Pollock had been undermined. A burden on the State imposed by taxing those who contract with it was no longer sufficient to invalidate a tax; the theory that a State‘s contracts could not be taxed which the Court had relied upon in Pollock was no longer good law.5
proper, unavoidably has some effect upon the other. The burden of federal taxation necessarily sets an economic limit to the practical operation of the taxing power of the states, and vice versa. Taxation by either the state or the federal government affects in some measure the cost of operation of the other.” 269 U.S., at 523.
“any allowance of a tax immunity for the protection of state sovereignty is at the expense of the sovereign power of the nation to tax. Enlargement of the one involves diminution of the other. When enlargement proceeds beyond the necessity of protecting the state, the burden of the immunity is thrown upon the national government with benefit only to a privileged class of taxpayers.... [I]f every federal tax which is laid on some new form of state activity, or whose economic burden reaches in some measure the state or those who serve it, were to be set aside as an infringement of state sovereignty, it is evident that a restriction on the national power, devised only as a shield to protect the states from curtailment of the essential operations of government which they have exercised from the beginning, would become a ready means for striking down the taxing power of the nation.” Id., at 416-417.
The Court concluded by explicitly rejecting the intergovernmental burden theory:
“The state and national governments must co-exist. Each must be supported by taxation of those who are citizens of both. The mere fact that the economic burden of such taxes may be passed on to a state government and thus increase to some extent, here wholly conjectural, the expense of its operation, infringes no constitutional immunity. Such burdens are but normal incidents of the organization within the same territory of two governments, each possessed of the taxing power.” Id., at 422.
In Graves v. New York ex rel. O‘Keefe, 306 U.S. 466 (1939), the Court held that a State could tax the salary of a
“So much of the burden of a non-discriminatory general tax upon the incomes of employees of a government, state or national, as may be passed on economically to that government, through the effect of the tax on the price level of labor or materials, is but the normal incident of the organization within the same territory of two governments, each possessing the taxing power. The burden, so far as it can be said to exist or to affect the government in any indirect or incidental way, is one which the Constitution presupposes, and hence it cannot rightly be deemed to be within an implied restriction upon the taxing power of the national and state governments which the Constitution has expressly granted to one and has confirmed to the other.” Id., at 487.8
The intergovernmental burden theory was rejected about as clearly as possible in Alabama v. King & Boozer, 314 U.S. 1 (1941), in which the Court upheld a state sales tax levied on the cost of material used by a federal contractor in performing a cost-plus contract, despite the fact that under the contract the economic burden of the tax fell exclusively on the United States.9 Subsequently, the Court has consistently adhered to its repudiation of the intergovernmental
Perhaps the plainest explication of this Court‘s position on state tax immunity is found in New York v. United States, 326 U.S. 572 (1946), a case holding that the United States could tax New York‘s income from its sale of state-owned mineral waters. Justice Frankfurter, joined by Justice Rutledge, wrote that in his view any nondiscriminatory tax on
S. R. A., Inc. v. Minnesota, 327 U.S. 558 (1946), was decided during the same Term. There, land owned by the United States was occupied by S. R. A., which had bought the land under a conditional sales contract that left title in the United States pending full payment of the purchase price. Nevertheless, the Court held that state property taxes could be assessed against the land, since in reality the private
Our cases thus demonstrate the insubstantiality of South Carolina‘s claim. Under
Even if there were enough left of Pollock to invalidate a federal tax that might cripple traditional state functions, the burden imposed on the State here is far from crushing. South Carolina estimates that if it must issue its bonds in registered form it will have to pay an additional one quarter of one percent interest on its bonds.16 It identifies in its offer of
“Public bonds will not be put in an unfavorable position relatively by being subjected to taxes on the income. They will merely be deprived of an artificial advantage heretofore enjoyed, which however is not strictly necessary in all probability in order to give them a practical success on the financial markets of the country when offered at the same rates of interest that have usually been offered in the past.” Powell, Intergovernmental Tax Immunities, 8 Geo. Wash. L. Rev. 1213, 1214-1215 (1940).
In contrast to the slight burden alleged by South Carolina, the Federal Government‘s interest in encouraging bearer bonds to be issued in registered form is substantial, as the Senate Report on this provision makes clear.
“The Committee believes that a fair and efficient system of information reporting and withholding cannot be achieved with respect to interest-bearing obligations as long as a significant volume of long-term bearer instruments is issued. A system of book-entry registration will preserve the liquidity of obligations while requiring the creation of ownership records that can produce useful information reports with respect to both the payment of interest and the sale of obligations prior to maturity through brokers. Furthermore, registration will reduce the ability of noncompliant taxpayers to conceal income and property from the reach of the income, estate, and gift taxes. Finally, the registration requirement may reduce the volume of readily negotiable substitutes for cash available to persons engaged in illegal activities.” S. Rep. No. 97-494, pt. 1, p. 242 (1982).
As this Court has previously held, the Constitution does not invalidate every burden on a State or locality created by federal taxation because such burdens are the “normal incident” of a system of dual sovereigns with dual taxing powers, which the Constitution envisions will coexist. Surely it follows that the Constitution intended that the taxing power it gave the Federal Government not be undermined through the abuse engendered by bearer instruments. The burden imposed upon States and localities by efforts to eliminate such abuse is one necessary in a system committed to the efficacy of dual taxing authorities.
The fairness of this requirement is highlighted by the fact that
South Carolina‘s complaint alleges that
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
In order to bring its challenge within the terms of that Amendment, South Carolina alleges:
“The Congress of the United States has no power whatsoever to impose an income tax upon the interest paid by South Carolina to its lenders.” Complaint ¶ 9.
This allegation is inconsistent with the plain language of the Constitution itself.
Because the power to tax private income has been expressly delegated to Congress, the
III
Finally, South Carolina relies on National League of Cities v. Usery, 426 U.S. 833 (1976). In that case the Court held that a federal statute extending the provisions of the Fair Labor Standards Act to certain public employees was “not within the authority granted Congress by
“We express no view as to whether different results might obtain if Congress seeks to affect integral operations of state governments by exercising authority granted it under other sections of the Constitution such
as the spending power, Art. I, § 8, cl. 1 , or§ 5 of the Fourteenth Amendment .” Id., at 852, n. 17.
By its express terms, therefore, the National League of Cities case has no application to South Carolina‘s challenge to an exercise of the federal taxing power.18
In sum, I can see no basis on which South Carolina could prevail in this case, even accepting its allegations and offers of proof for all they are worth. We do South Carolina no favor by permitting it to file and litigate a claim on which it has no chance of prevailing. At the same time, the Court‘s decision to permit South Carolina to file this claim is an unwise use of its scarce resources. Accordingly, I respectfully dissent from the Court‘s decision to grant South Carolina‘s motion for leave to file its complaint.
Notes
“In a broad sense, the taxing power of either [the state or federal] government, even when exercised in a manner admittedly necessary and
In James v. Dravo Contracting Co., 302 U.S. 134 (1937), the Court followed Metcalf & Eddy in holding that a State could tax the income of an independent contractor of the United States. See also Atkinson v. Tax Comm‘n, 303 U.S. 20, 21 (1938) (per curiam); Silas Mason Co. v. Tax Comm‘n, 302 U.S. 186 (1937). Similarly, in Willcuts v. Bunn, 282 U.S. 216 (1931), the Court held that capital gains derived from sales of municipal bonds could be taxed by the United States, despite the fact that this tax would reduce the value of the bonds. See also Greiner v. Lewellyn, 258 U.S. 384 (1922) (federal estate tax may be levied upon the value of state bonds transferred upon death).
This was made even clearer in Helvering v. Mountain Producers Corp., 303 U.S. 376 (1938), where the Court upheld the power of the United States to tax income derived from property leased from a State.
“[I]mmunity from non-discriminatory taxation sought by a private person for his property or gains because he is engaged in operations under a government contract or lease cannot be supported by merely theoretical conceptions of interference with the functions of government. Regard must be had to substance and direct effects. And where it merely appears that one operating under a government contract or lease is subjected to a tax with respect to his profits on the same basis as others who are engaged in similar businesses, there is no sufficient ground for holding that the effect upon the Government is other than indirect and remote.” Id., at 386-387. See also Helvering v. Bankline Oil Co., 303 U.S. 362, 369-370 (1938).
“In sustaining the immunity from state taxation, the opinion of the Court, by Chief Justice Marshall, recognized a clear distinction between the extent of the power of a state to tax national banks and that of the national government to tax state instrumentalities. He was careful to point out not only that the taxing power of the national government is supreme, by reason of the constitutional grant, but that in laying a federal tax on state instrumentalities the people of the states, acting through their representatives, are laying a tax on their own institutions and consequently are subject to political restraints which can be counted on to prevent abuse. State taxation of national instrumentalities is subject to no such restraint, for the people outside the state have no representatives who participate in the legislation; and in a real sense, as to them, the taxation is without representation. The exercise of the national taxing power is thus subject to a safeguard which does not operate when a state undertakes to tax a national instrumentality.” 304 U.S., at 412 (footnote omitted).
Similarly, I do not believe, as the Court apparently does, see ante, at 377, n. 14, 377-378, n. 16, that statements in Bob Jones University v. Simon, supra, to the effect that the Act bars third-party suits, can or should be “disregarded.” Those statements were made after studious interpretation of both the original Act and its 1966 amendment. They reflect what I believe is the only faithful reading of the statute‘s language and history.
Justice Frankfurter, in his separate opinion, explained how state immunity from taxation had been derived incorrectly from dicta in McCulloch.
“Partly as a flourish of rhetoric and partly because the intellectual fashion of the times indulged a free use of absolutes, Chief Justice Marshall gave currency to the phrase that ‘the power to tax involves the power to destroy.’ This dictum was treated as though it were a constitutional mandate.... The seductive cliche that the power to tax involves the power to destroy was fused with another assumption, likewise not to be found in the Constitution itself, namely the doctrine that the immunities are correlative—because the existence of the national government implies immunities from state taxation, the existence of state governments implies equivalent immunities from federal taxation....
“All these doctrines of intergovernmental immunity have until recently been moving in the realm of what Lincoln called ‘pernicious abstractions.’ The web of unreality spun from Marshall‘s famous dictum was brushed away by one stroke of Mr. Justice Holmes‘s pen: ‘The power to tax is not the power to destroy while this Court sits.’ Panhandle Oil Co. v. Mississippi, 277 U.S. 218, 223 (1928) (dissent). Failure to exempt public functionaries from the universal duties of citizenship to pay for the costs of government was hypothetically transmuted into hostile action of one government against the other. A succession of decisions thereby withdrew from the taxing power of the States and Nation a very considerable range of wealth without regard to the actual workings of our federalism, and this, too, when the financial needs of all governments began steadily to mount.” 306 U.S., at 489-490 (concurring opinion) (citation and footnote omitted).
Justice Frankfurter later added: “Chief Justice Marshall spoke at a time when social complexities did not so clearly reveal as now the practical limitations of a rhetorical absolute. To press a juristic principle designed for the practical affairs of government to abstract extremes is neither sound logic nor good sense. And this Court is under no duty to make law less than sound logic and good sense.” New York v. United States, 326 U.S. 572, 576-577 (1946) (opinion of Frankfurter, J.).
See also Sims v. United States, 359 U.S. 108, 110-111 (1959); State Tax Comm‘n v. Van Cott, 306 U.S. 511 (1939).
“So far as such a non-discriminatory state tax upon the contractor enters into the cost of the materials to the Government, that is but a normal incident of the organization within the same territory of two independent taxing sovereignties. The asserted right of the one to be free of taxation by the other does not spell immunity from paying the added costs, attributable to the taxation of those who furnish supplies to the Government and who have been granted no tax immunity.” 314 U.S., at 8-9.
While the Court, for a time, did continue to cite Pollock either in dicta, see Indian Motorcycle Co. v. United States, 283 U.S. 570, 577 (1931); Gillespie v. Oklahoma, 257 U.S. 501, 505 (1922); Farmers & Mechanics Savings Bank of Minneapolis v. Minnesota, 232 U.S. 516, 526-527 (1914); or only to distinguish it in the course of upholding federal taxes on state instrumentalities, see Helvering v. Gerhardt, 304 U.S. 405, 417 (1938); Helvering v. Mountain Producers Corp., 303 U.S., at 386; Choteau v. Burnet, 283 U.S. 691, 696 (1931); Willcuts v. Bunn, 282 U.S., at 225; Metcalf & Eddy v. Mitchell, 269 U.S. 514, 521 (1926); Greiner v. Lewellyn, 258 U.S., at 386; South Carolina v. United States, 199 U.S. 437, 453 (1905); see also New York ex rel. Cohn v. Graves, 300 U.S. 308, 315-316 (1937); it has long since stopped treating Pollock with even that much respect; the Court has not cited the holding of Pollock since Gerhardt, almost half a century ago. As I have suggested above, however, the rationale of Pollock had been repudiated at least as early as Metcalf & Eddy. Moreover, it appears that the Court has never relied on Pollock for a holding since the passage of the Sixteenth Amendment. Chief Justice Hughes once referred to Pollock, along with Scott v. Sandford, 19 How. 393 (1857), overruled by
These Justices made it clear that the immunity doctrine applies only when the State itself is the taxpayer.
“If the phrase ‘non-discriminatory tax’ is to be taken in its long accepted meaning as referring to a tax laid on a like subject matter, without regard to the personality of the taxpayer, whether a State, a corporation or a private individual, it is plain that there may be non-discriminatory taxes which, when laid on a State, would nevertheless impair the sovereign status of the State quite as much as a like tax imposed by a State on property or activities of the national government. This is not because the tax can be regarded as discriminatory but because a sovereign government is the taxpayer, and the tax, even though non-discriminatory, may be regarded as infringing its sovereignty.” 326 U.S., at 587 (emphasis supplied) (citation omitted).
In more recent cases we have found immunity only where the governmental entity itself is legally obligated to bear the costs of the tax. See United States v. New Mexico, 455 U.S. 720 (1982); United States v. County of Fresno, 429 U.S. 452 (1977); United States v. Mississippi Tax Comm‘n, 421 U.S. 599 (1975); Gurley v. Rhoden, 421 U.S. 200 (1975); First Agricultural National Bank of Berkshire County v. Tax Comm‘n, 392 U.S. 339, 346-348 (1968); Rohr Aircraft Corp. v. County of San Diego, 362 U.S. 628 (1960); Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110 (1954).
“Section. 1. The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.
“Section. 2. The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority; to all Cases affecting Ambassadors, other public Ministers and Consuls;... -to Controversies ... between a State and Citizens of another State ....
“To say that the payment of the purchase price is a necessary condition precedent to the loss of federal immunity is to make the rule too mechanical. It should be sufficiently flexible to subject real private rights, disentangled from federal policies, to state taxation.” 327 U.S., at 569.
The Court briefly disposed of the intergovernmental burden theory: “There is a suggestion that to hold United States property subject to state taxation pending the completion of payment will injuriously affect its salability and therefore interfere with the Government‘s handling of its affairs. Our recent cases have disposed of this economic argument in a way which is contrary to petitioner‘s contention.” Id., at 570.
“It is undoubtedly true, as the Government points out, that it will not be able to secure as high rentals if lessees are taxed for using its property. But ... the imposition of an increased financial burden on the Government does not, by itself, vitiate a state tax.” 355 U.S., at 472.
A host of commentators agree. See, e. g., Kirby, State and Local Bond Interest, in 1 House Committee on Ways and Means, Tax Revision Compendium 679 (Comm. Print 1959); Senate Special Committee on Taxation of Governmental Securities and Salaries, Taxation of Governmental Securities and Salaries, S. Rep. No. 2140, 76th Cong., 3d Sess., pt. 1, pp. 8-16, 25-28 (1940); U. S. Dept. of Justice, Taxation of Government Bondholders and Employees: The Immunity Rule and the Sixteenth Amendment (1938); Boudin, The Taxation of Governmental Instrumentalities, Part Two, 22 Geo. L. J. 254 (1934); Brown, Intergovernmental Tax Immunity: Do We Need a Constitutional Amendment?, 25 Wash. U. L. Q. 153 (1940); Gardner, Tax Immune Bonds, 8 Geo. Wash. L. Rev. 1200 (1940); Philipsborn & Cantrill, Immunity from Taxation of Governmental Instrumentalities, 26 Geo. L. J. 543 (1938); Rakestraw, The Reciprocal Rule of Governmental Tax Immunity—A Legal Myth, 11 Federal B. J. 3 (1950); Ratchford, Intergovernmental Tax Immunities in the United States, 6 National Tax J. 305 (1953); Watkins, The Power of the State and Federal Governments to Tax One Another, 24 Va. L. Rev. 475 (1938); Federal Legislation, Taxability of Government-Bond Interest, 27 Geo. L. J. 768 (1939); Note, The Passing of Intergovernmental Tax Immunity, 33 Ill. L. Rev. 962 (1939); Note, Constitutional and Legislative Bases of Intergovernmental Tax Immunities, 51 Yale L. J. 482 (1942).
As an example, South Carolina states that on November 9, 1982, it sold $115 million in general obligation bonds. Over the life of these bonds South Carolina will pay $97,247,668 in interest. If the bonds were issued in registered form, its interest costs would be increased only about $2,800,000—approximately three percent.
Amici Texas et al. have submitted affidavits which also indicate only that they will pay slightly higher interest charges if they must issue bonds in registered form. No allegations are made that serious disruptions in the ability of States and localities to provide essential services will result.
To come within that case, an exercise of Commerce Clause power must (1) regulate the States as States, (2) address indisputable attributes of state sovereignty, and (3) directly impair the traditional functions of the States. EEOC v. Wyoming, 460 U.S. 226, 236-237 (1983); FERC v. Mississippi, 456 U.S. 742, 764, n. 28 (1982); Hodel v. Virginia Surface Mining & Recl. Assn., 452 U.S. 264, 287-288 (1981). Even then, the claim fails if the federal interest outweighs those of the States. See EEOC v. Wyoming, supra, at 237; Hodel, supra, at 288, n. 29. Assuming National League of Cities were applicable here, South Carolina‘s claim would fail on all counts. First,