Amicus Curiae Brief — James Dawson, et ux., Petitioners v. Dale W. Steager, West Virginia State Tax Commissioner

Supreme Court briefMay 15, 2018

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No. 17-419

In the Supreme Court of the United States

JAMES DAWSON AND ELAINE DAWSON, PETITIONERS

DALE W. STEAGER, WEST VIRGINIA STATE TAX

COMMISSIONER

ON PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

JEFFREY B. WALL

Acting Solicitor General

Counsel of Record

RICHARD E. ZUCKERMAN

Principal Deputy Assistant

Attorney General

MALCOLM L. STEWART

Deputy Solicitor General

ERICA L. ROSS

Assistant to the Solicitor

General

GILBERT S. ROTHENBERG

BRUCE R. ELLISEN

NATHANIEL S. POLLOCK

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTION PRESENTED

Whether the doctrine of intergovernmental tax

immunity, as codified in 4 U.S.C. 111, prohibits the

State of West Virginia from exempting from state

taxation the retirement benefits of certain former state

law-enforcement officers, without providing the same

exemption for the retirement benefits of former

employees of the United States Marshals Service.

(I)

TABLE OF CONTENTS

Page

Interest of the United States....................................................... 1

Statement ...................................................................................... 1

Discussion ...................................................................................... 6

Conclusion ................................................................................... 21

TABLE OF AUTHORITIES

Cases:

Alarid v. Secretary, 513 U.S. 1081 (1995) ....................... 7, 18

Alarid v. Secretary of N.M. Dep’t of Taxation

& Revenue, 878 P.2d 341 (N.M. Ct. App.),

cert. denied, 879 P.2d 91 (N.M 1994), and

513 U.S. 1081 (1995)................................................ 16, 17, 19

Barker v. Kansas, 503 U.S. 594 (1992) .........7, 8, 9, 10, 11, 17

Brown v. Mierke, 443 S.E.2d 462 (W. Va),

cert. denied, 513 U.S. 877 (1994) ..............5, 9, 10, 15, 16, 18

Brown v. Paige, 513 U.S. 877 (1994) ................................ 7, 18

Cooper v. Commissioner of Revenue, 658 N.E.2d 963

(Mass. 1995), cert. denied 517 U.S. 1221 (1996) ............... 17

Cooper v. Massachusetts Comm’r of Revenue,

517 U.S. 1221 (1996)........................................................ 7, 20

Davis v. Michigan Dep’t of the Treasury,

489 U.S. 803 (1989)..................................................... passim

Graves v. New York, 306 U.S. 466 (1939) .............................. 2

Hackman v. Director of Revenue, 771 S.W.2d 77

(Mo. 1989), cert. denied, 493 U.S. 1019 (1990) ................. 15

Helvering v. Gerhardt, 304 U.S. 405 (1938) .......................... 2

Jefferson Cnty. v. Acker, 527 U.S. 423

(1999) ........................................................................... passim

Kuhn v. State Dep’t of Revenue, 817 P.2d 101

(Colo. 1991), cert. denied, 504 U.S. 901 (1992) ................. 15

(III)

Cases—Continued:

Page

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316

(1819) ...................................................................................... 1

Phillips Chem. Co. v. Dumas Indep. Sch. Dist.,

361 U.S. 376 (1960)........................................................ 3, 7, 8

Pledger v. Bosnick, 811 S.W.2d 286 (Ark. 1991),

cert. denied, 509 U.S. 921 (1993) ....................................... 15

Constitution and statutes:

U.S. Const. Art. IV, Cl. 2 (Supremacy Clause) .................... 1

Civil Rights Act of 1964, Tit. VII, 42 U.S.C. 2000e

et seq. .................................................................................... 13

Public Salary Tax Act of 1939, ch. 59, § 4, 53 Stat. 575........ 2

4 U.S.C. 111 ................................................................... passim

W. Va. Code Ann. (LexisNexis 2016):

§ 15-9-1 ............................................................................... 3

§ 16-5V-4 ............................................................................. 3

W. Va. Code Ann. (LexisNexis 2017):

§ 11-21-12(c) ....................................................................... 3

§ 11-21-12(c)(5)............................................................... 3, 4

§ 11-21-12(c)(6)........................................................ passim

§ 11-21-12(c)(7)(B) ............................................................. 4

§ 11-21-12(c)(8)................................................................... 4

W. Va. Code (2018):

§ 11-21-12(c)(7)(C) ............................................................. 4

In the Supreme Court of the United States

No. 17-419

JAMES DAWSON AND ELAINE DAWSON, PETITIONERS

DALE W. STEAGER, WEST VIRGINIA STATE TAX

COMMISSIONER

ON PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

INTEREST OF THE UNITED STATES

This brief is submitted in response to the Court’s order inviting the Solicitor General to express the views

of the United States. In the view of the United States,

the petition for a writ of certiorari should be granted.

STATEMENT

1. In McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316

(1819), this Court held that the Supremacy Clause, U.S.

Const. Art. VI, Cl. 2, barred the State of Maryland from

imposing a discriminatory tax on the Bank of the United

States. “For a time, McCulloch was read broadly to bar

most taxation by one sovereign of the employees of another,” on the theory that “ ‘any tax on income a party

received under a contract with the government was a

tax on the contract and thus a tax on the government

because it burdened the government’s power to enter

the contract.’ ” Davis v. Michigan Dep’t of the Treasury, 489 U.S. 803, 810-811 (1989) (citation and internal

(1)

quotation marks omitted); see Jefferson Cnty. v. Acker,

527 U.S. 423, 436 (1999). In the late 1930s, however,

“the Court began to turn away from its more expansive

applications of the immunity doctrine,” holding that “intergovernmental tax immunity barred only those taxes

that were imposed directly on one sovereign by the

other or that discriminated against a sovereign or those

with whom it dealt.” Davis, 489 U.S. at 811 (citing

Helvering v. Gerhardt, 304 U.S. 405 (1938), and Graves

v. New York, 306 U.S. 466 (1939)); see Jefferson Cnty.,

527 U.S. at 436-437.

“[C]ongressional action coincided” with that shift in

this Court’s jurisprudence. Jefferson Cnty., 527 U.S. at

437. When “Congress decided to extend the federal income tax to state and local government employees,” it

sought to “ensure that federal employees would not remain immune from state taxation.” Davis, 489 U.S. at

811-812. To achieve that goal, Congress enacted Section 4

of the Public Salary Tax Act of 1939, ch. 59, 53 Stat. 575,

the predecessor to 4 U.S.C. 111. Today, that provision

states:

The United States consents to the taxation of pay or

compensation for personal service as an officer or

employee of the United States, * * * by a duly constituted taxing authority having jurisdiction, if the

taxation does not discriminate against the officer or

employee because of the source of the pay or compensation.

4 U.S.C. 111.

This Court has held that “the retention of immunity”

in Section 111’s last clause “is coextensive with the prohibition against discriminatory taxes embodied in the

modern constitutional doctrine of intergovernmental

tax immunity.” Davis, 489 U.S. at 813; see Jefferson

Cnty., 527 U.S. at 437. 1 To determine whether a state

tax complies with Section 111, “the relevant inquiry is

whether” the imposition of a heavier tax burden on federal employees “is directly related to, and justified by,

‘significant differences between the two classes.’ ” Davis,

489 U.S. at 816 (quoting Phillips Chem. Co. v. Dumas

Indep. Sch. Dist., 361 U.S. 376, 383 (1960)).

2. West Virginia provides a total exemption from

state income taxation for benefits from four retirement

plans: (1) the Municipal Police Officer and Firefighter

Retirement System (MPFRS); (2) the Deputy Sheriff

Retirement System (DSRS); (3) the State Police Death,

Disability and Retirement Fund (Trooper Plan A); and

(4) the West Virginia State Police Retirement System

(Trooper Plan B). Pet. App. 3a & n.3; see W. Va. Code

Ann. § 11-21-12(c)(6) (LexisNexis 2017) (Section 12(c)(6)).

West Virginia also exempts from taxation the first

$2000 in benefits received each year under the West

Virginia Public Employees Retirement System, the

West Virginia State Teachers Retirement System, or

“any federal retirement system to which Title 4 U.S.C.

§ 111 applies.” W. Va. Code Ann. § 11-21-12(c)(5)

(LexisNexis 2017). 2 In addition, at all relevant times,

West Virginia exempted from taxation “the first

For that reason, this brief refers to the constitutional and statutory nondiscrimination requirements interchangeably. See Pet. 8 n.2;

Br. in Opp. 5.

West Virginia does not exempt from state income taxation any

benefits received under the State’s Emergency Medical Services

Retirement System or its Judges’ Retirement System. See W. Va.

Code Ann. § 11-21-12(c) (LexisNexis 2017); id. §§ 16-5V-4, 51-9-1

(LexisNexis 2016); Pet. App. 13a, 15a & n.11.

[$20,000] of military retirement income,” i.e., “retirement income from the regular armed forces, reserves

and National Guard.” Id. § 11-21-12(c)(7)(B); Pet. App.

3a. 3 And West Virginia exempts from taxation $8000 of

income “received from any source” by individuals who

are age 65 or older, or who are “permanently and totally

disabled.” W. Va. Code Ann. § 11-21-12(c)(8) (LexisNexis

2017). See generally Pet. App. 2a-4a.

3. In 2008, petitioner James Dawson retired from

the United States Marshals Service. Pet. App. 4a. Mr.

Dawson had served for most of his career as a Deputy

U.S. Marshal before the President appointed him as the

U.S. Marshal for the Southern District of West Virginia.

Ibid. During his tenure with the Marshals Service, Mr.

Dawson was enrolled exclusively in the Federal Employee Retirement System (FERS), and he currently

receives benefits from FERS. Ibid. Under West Virginia law, Mr. Dawson may exempt at least $2000 of his

FERS income from his state taxable income. W. Va. Code

Ann. § 11-21-12(c)(5) (LexisNexis 2017); Pet. App. 4a.

In October 2013, Mr. Dawson and his wife, petitioner

Elaine Dawson, filed amended tax returns for 2010 and

2011. Pet. App. 4a. Petitioners claimed an adjustment

exempting all of Mr. Dawson’s FERS retirement income from state taxation pursuant to Section 12(c)(6),

the provision that fully exempts state retirement benefits under MPFRS, DSRS, Trooper Plan A, and Trooper

Plan B. Ibid.; see Pet. 2-3. The Tax Commissioner disallowed the exemption. Pet. App. 4a.

Petitioners appealed to the West Virginia Office of

Tax Appeals. Petitioners contended that West Virginia’s

For taxable years beginning after December 31, 2017, West Virginia has exempted from state income taxation all military retirement income. W. Va. Code § 11-21-12(c)(7)(C) (2018).

differential treatment of Mr. Dawson’s retirement benefits violated 4 U.S.C. 111 because no significant differences exist between Mr. Dawson’s law-enforcement

duties at the U.S. Marshals Service and the duties of

state law-enforcement personnel whose retirement benefits are fully exempt from taxation under Section 12(c)(6).

Pet. App. 4a-5a. The Office of Tax Appeals rejected

petitioners’ argument. Id. at 5a.

The Circuit Court of Mercer County reversed. Pet.

App. 17a-25a. The court acknowledged that in Brown v.

Mierke, 443 S.E.2d 462, cert. denied, 513 U.S. 877

(1994), the West Virginia Supreme Court of Appeals

had held that military retirees were not entitled to claim

the state tax exemption under Section 12(c)(6). Pet.

App. 21a. The court found Brown distinguishable, however, because the military retirees who had brought

that suit “did not have a state counterpart identified” in

Section 12(c)(6). Ibid.; see id. at 23a. Here, by contrast,

the Circuit Court found it “undisputed * * * that there

are no significant differences between Mr. Dawson’s

powers and duties as a US Marshal and the powers and

duties of the state and local law enforcement officers”

who receive the full tax exemption. Id. at 22a. Applying

Davis to this case, the court held that Section 12(c)(6)

imposes “inconsistent tax treatment * * * based on the

source of one’s retirement income”—“precisely the type

of favoritism the doctrine of intergovernmental tax immunity prohibits.” Id. at 23a.

4. The West Virginia Supreme Court of Appeals reversed. Pet. App. 1a-16a. Applying Brown’s “totality of

the circumstances” approach, the court observed that

Mr. Dawson had “received more favorable tax treatment than state civilian retirees” and certain state

judges, and that he had received “the same tax treatment as the vast majority of all state retirees,” who also

may exempt $2000 of retirement benefits from their

taxable income. Id. at 14a-15a. The court further explained that “only some law enforcement officers * * *

are permitted to rely upon the Section 12(c)(6) exemption,” which covers only “two percent of all statepension recipients.” Id. at 15a-16a. Because “that benefit was not intended to discriminate against federal

marshals,” the court found it consistent with 4 U.S.C.

111. Pet. App. 16a. The court did not consider whether

there are any significant differences between U.S. Marshals and the state and local law-enforcement officers

who receive Section 12(c)(6)’s full exemption that could

justify their differential treatment.

DISCUSSION

The West Virginia Supreme Court of Appeals misapplied the doctrine of intergovernmental tax immunity,

as codified in 4 U.S.C. 111. Under the test articulated

in Davis v. Michigan Department of the Treasury, 489

U.S. 803 (1989), the court should have asked whether

the State’s inconsistent tax treatment of former federal

and state law-enforcement officers “is directly related to,

and justified by, ‘significant differences between the two

classes.’ ” Id. at 816 (citation omitted). Instead, the court

below engaged in a “totality of the circumstances” analysis, essentially holding that so long as Mr. Dawson was

treated better than most state and private employees, no

unlawful discrimination occurred. Pet. App. 14a-16a.

That reasoning is inconsistent with Davis and with this

Court’s other intergovernmental-tax-immunity decisions.

Whether this Court’s review is warranted presents a

closer question. Since this Court’s decision in Davis,

intergovernmental-tax-immunity issues have not arisen

with great frequency. Between 1994 and 1996, this Court

denied three petitions for certiorari seeking review of

state-court decisions that, in the view of the United

States, misapplied Davis. 4 This case appears, however,

to be a better vehicle than those cases for clarifying the

applicability of Davis to state taxation schemes that single out certain groups of state employees or retirees for

favorable tax treatment. On balance, we believe that

this issue has sufficient legal and practical importance

to warrant the Court’s review.

1. a. Section 111 permits state taxation of federal

officers’ or employees’ compensation—including retirement benefits, see Davis, 489 U.S. at 808-809—only “if

the taxation does not discriminate against the officer or

employee because of the source of the pay or compensation.” 4 U.S.C. 111. In Davis, this Court explained

that “ ‘[t]he imposition of a heavier tax burden’ ” on those

who deal with the federal government “ ‘than is imposed

on’ ” those who deal with the State “ ‘must be’ ” “directly

related to, and justified by, ‘significant differences between the two classes.’ ” 489 U.S. at 815-816 (quoting

Phillips Chem. Co. v. Dumas Indep. Sch. Dist., 361 U.S.

376, 383 (1960) (brackets in original)); see Barker v.

Kansas, 503 U.S. 594, 598 (1992). “In determining

whether this standard of justification has been met, it is

inappropriate to rely solely on the mode of analysis developed in [this Court’s] equal protection cases.” Davis,

489 U.S. at 816. When a State legislates concerning economic matters unrelated to the activities of the federal

government, the “power to classify is * * * extremely

See Cooper v. Massachusetts Comm’r of Revenue, 517 U.S. 1221

(1996) (No. 95-1542); Alarid v. Secretary, 513 U.S. 1081 (1995)

(No. 94-840); Brown v. Paige, 513 U.S. 877 (1994) (No. 94-246).

broad, and [the State’s] discretion is limited only by constitutional rights and by the doctrine that a classification

may not be” arbitrary. Phillips Chem. Co., 361 U.S. at

385. But when a State taxes “those who deal with the

[federal] Government,” it must treat those taxpayers “as

well as it treats those with whom it deals itself.” Ibid.

The Court applied that principle in Davis and in Jefferson County v. Acker, 527 U.S. 423 (1999). In Davis,

the Court held that Michigan had violated Section 111

by exempting from state taxation all retirement benefits paid by the State or its political subdivisions, while

failing to extend the same exemption to retirement benefits paid to federal retirees. 489 U.S. at 805-806, 815817. In Jefferson County, by contrast, the Court held

that a county’s occupational tax on the gross receipts of

persons working within the county who were not otherwise subject to a license fee under state law did not violate Section 111. 527 U.S. at 429, 442-443. Federal

judges sitting in the county argued that the tax discriminated against them because they could never hold

other state or local licenses. Id. at 443. In rejecting that

challenge, the Court explained that, because “[t]he tax

is paid by all State District and Circuit judges in Jefferson County and the three State Supreme Court justices

who have satellite offices in that county,” there was “no

discrimination * * * between similarly situated federal

and state employees.” Ibid. The Court observed, however, that if the State or county adopted a tax regime

“exempting state officials while leaving federal officials

(or a subcategory of them) subject to the tax, that would

indeed present a starkly different case.” Ibid. 5

This Court also applied Section 111 in Barker, supra. That case

concerned whether military retirement benefits could be considered

The decision below is inconsistent with the most natural understanding of Davis and Jefferson County.

West Virginia fully exempts from its income tax the retirement benefits of certain state law-enforcement officers, while providing a lesser exemption for the retirement benefits received by federal law-enforcement officers like Mr. Dawson. The Circuit Court of Mercer

County found it “undisputed * * * that there are no

significant differences between Mr. Dawson’s powers

and duties as a US Marshal and the powers and duties

of the state and local law enforcement officers listed in

[Section 12(c)(6)].” Pet. App. 22a. The West Virginia

Supreme Court of Appeals did not cast doubt on that

view of the record. See id. at 12a-16a; p. 19, infra. If

that understanding of the facts is correct (but see Br. in

Opp. 29-30), West Virginia’s differential taxing scheme

impermissibly discriminates between “similarly situated federal and state employees” based on the “source

of their pay or compensation.” Jefferson Cnty., 527 U.S.

at 443 (emphasis omitted).

b. The West Virginia Supreme Court of Appeals

reached a contrary conclusion because it misconstrued

this Court’s precedents. As it had done in Brown v.

Mierke, 443 S.E.2d 462, cert. denied, 513 U.S. 877 (1994),

the court interpreted Davis to permit a totality-of-thecircumstances inquiry designed to “ascertain whether the

intent of the scheme is to discriminate against employees

“current compensation for reduced current services,” thus rendering them “significantly different” from the exempted benefits of

state retirees. 503 U.S. at 605. The Court concluded that, “[f ]or

purposes of 4 U.S.C. § 111, military retirement benefits are to be

considered deferred pay for past services,” and that “[i]n this respect they are not significantly different from the benefits paid to

Kansas state and local government retirees.” Ibid.

or former employees of the federal government” by

comparing the treatment of federal retirees to the

treatment of various classes of state, local, and private

retirees. Pet. App. 14a-15a. Because Section 12(c)(6)

grants preferential tax treatment to a relatively small

subset of state retirees—and because Mr. Dawson

received equal or better treatment than many other

state, local, and private retirees—the court below

concluded that the statute was enacted to benefit a

narrow class of former state employees, rather than to

discriminate against federal retirees. Id. at 14a-16a.

That approach is inconsistent with Davis. The court

in Brown read Davis as limited to its facts, i.e., a state

provision that “fully taxed all federal pensions while exempting all state pensions.” Brown, 443 S.E. 2d at 466;

see Pet. App. 9a (emphasizing that Davis concerned a

“blanket state tax exemption”); Br. in Opp. 11-12, 14, 25

(same). The result in Davis, however, turned not on the

number of retirees who received the tax exemption, but

on whether “significant differences between” the groups

that did and did not receive it “justified” the differential

treatment. 489 U.S. at 816; see Barker, 503 U.S. at 600.

In Jefferson County as well, the Court focused not on

the overall number of workers who might be exempt

from the tax at issue, but on whether the scheme

treated “similarly situated federal and state employees”

differently. 527 U.S. at 443.

To be sure, the Court in Davis described the challenged Michigan law as providing a “blanket exemption” for state retirement benefits. 489 U.S. at 817. The

Court made that observation, however, only to explain

its rejection of the State’s argument that “substantial

differences in the value” of state and federal benefits

justified the differential tax treatment. Id. at 816. The

Court observed that, “[w]hile the average retired federal civil servant receives a larger pension than his state

counterpart, there are undoubtedly many individual instances in which the opposite holds true.” Id. at 817.

The Court explained that, if Michigan “truly intended

to account for differences in retirement benefits,” it

would not provide a “blanket exemption” for state benefits, but would instead distinguish “on the basis of the

amount of benefits received by individual retirees.”

Ibid. Although the Michigan taxing scheme at issue in

Davis provided a “blanket exemption” for state retirees, the rationale for the Court’s decision was not limited to such laws.

By focusing on the total number of state retirees who

do not receive Section 12(c)(6)’s exemption, the court

below engaged in an analysis similar to that of the dissent in Davis. See Pet. Reply Br. 5-6. There, Justice

Stevens would have held that the Michigan taxing

scheme did not violate Section 111 because it “applie[d]

equally to the vast majority of Michigan residents, including federal employees,” and exempted “only the

130,000 retired state employees.” Davis, 489 U.S. at

818, 821 (Stevens, J., dissenting). In Justice Stevens’s

view, “[t]he fact that a State may elect to grant a preference, or an exemption, to a small percentage of its residents does not make the tax discriminatory in any

sense that is relevant to the doctrine of intergovernmental tax immunity.” Id. at 821; see Barker, 503 U.S.

at 605-606 (Stevens, J., concurring) (similar). The

Court rejected that approach, however, explaining that

“[t]he danger that a State is engaging in impermissible

discrimination against the Federal Government is greatest when the State acts to benefit itself and those in

privity with it,” even if it treats federal employees no

worse than private workers. 489 U.S. at 815 n.4. 6

It also is not dispositive that, with respect to the

taxation of retirement benefits, West Virginia law treats

Mr. Dawson better than some state and local retirees.

To be sure, that aspect of the West Virginia scheme

highlights the importance of determining which state

retirees are most similarly situated to Mr. Dawson. If

state law treats Mr. Dawson as well as or better than it

treats the most similarly situated state retirees, West

Virginia’s refusal to provide him an exemption that

other state retirees receive would not be based on “the

source of [Mr. Dawson’s] pay or compensation.” 4 U.S.C.

111. In this case, however, the Circuit Court found it

“undisputed * * * that there are no significant differences between” Mr. Dawson and the state lawenforcement officers who receive a full exemption under

Section 12(c)(6). Pet. App. 22a. This Court’s decisions

applying Section 111 do not suggest that a State may

treat federal employees worse than a segment of

Indeed, the argument that providing a benefit to state employees does not constitute discrimination against federal employees had greater force in Davis than it has here. Because the

Michigan scheme exempted all state retirees, including those who

performed jobs with both federal- and private-sector analogues, the

law did not single out federal retirees for inferior treatment. For

example, while a retired federal paralegal could not claim the

Michigan tax exemption, a retired law-firm paralegal could not do

so either. The tax benefit that West Virginia provides, by contrast,

goes to state law-enforcement personnel who generally lack privatesector counterparts. The exclusion of similarly situated federal lawenforcement personnel thus may be viewed as a more targeted form

of discrimination against federal retirees.

similarly situated state employees, so long as it treats

them better than some other state workers. 7

The court below also suggested that Section 111 is

satisfied whenever the State identifies a salutary motive for its differential tax scheme. See Pet. App. 16a

(finding it significant that the West Virginia scheme was

intended to “give[] a benefit to a very narrow class of

former state and local employees”); id. at 10a (similar).

Under Davis, however, the “State’s interest in adopting

the discriminatory tax, no matter how substantial, is

simply irrelevant” to the dispositive “inquiry into the

nature of the two classes receiving inconsistent treatment.” 489 U.S. at 816. Thus, just as it was “wholly

beside the point” in Davis that Michigan wished to

“hir[e] and retain[] qualified civil servants through the

inducement of a tax exemption for retirement benefits,”

ibid., it is irrelevant here that West Virginia wishes to

“give a benefit to a narrow class of state retirees,” Pet.

App. 15a. For the same reason, the absence of a discriminatory motive or animus against federal employees does not demonstrate that the tax complies with

Section 111. But see id. at 10a, 16a (suggesting that lack

of discriminatory intent is material).

Respondent is also incorrect in describing (Br. in

Opp. 26) Jefferson County as “uph[o]ld[ing] a tax exemption that the county made available to some state

The West Virginia Supreme Court of Appeals’ analysis is also

inconsistent with usual understandings of what it means to “discriminate” based on a prohibited criterion. An employer that paid its

female executives less than its male executives, for example, could

not escape liability under Title VII of the Civil Rights Act of 1964,

42 U.S.C. 2000e et seq., simply by showing that executives formed a

small percentage of the company’s overall workforce, or that female

executives were paid as well as or better than male rank-and-file

employees.

and local judges, but no federal judges.” To the contrary, the Court in that case explained that “all State

District and Circuit Court judges in Jefferson County and

the three State Supreme Court justices who have satellite offices in the county” paid the tax. 527 U.S. at 443;

see Resp. Br. at 36, Jefferson Cnty., supra (No. 98-10)

(arguing that the tax violated 4 U.S.C. 111 despite the

“parity of treatment between federal and state judges”).

Indeed, the Court upheld the provision for just that reason, observing that “[t]he record show[ed] no discrimination * * * between similarly situated federal and

state employees.” 527 U.S. at 443. The Court further

explained that, if the “Alabama or Jefferson County authorities” decided to “exempt[] state officials while leaving federal officials (or a subcategory of them) subject

to the tax, that would indeed present a starkly different

case.” Ibid. Respondent construes (Br. in Opp. 26) this

statement to mean only that “States cannot evade the

logic of Davis by adopting a blanket exemption for all

state retirees, and bringing a select few federal employees along for the ride.” Particularly when read in context, however, the Court’s statement is best understood

as reiterating the rule that States must treat similarly

situated state and federal employees alike. See 527 U.S.

at 443. 8

2. Although the question presented here has not

arisen with great frequency, it has sufficient legal and

practical importance to warrant this Court’s review.

Even if some state judges, but no federal judges, had benefitted

from the tax exemption in Jefferson County, that would not necessarily demonstrate a violation of Section 111. The provision would

still stand if the differential treatment were based on a neutral, nonpretextual characteristic, rather than the federal source of compensation.

a. i. Petitioner identifies (Pet. 11-15) three state

appellate courts that have correctly applied Davis to invalidate discriminatory taxing schemes. In Hackman

v. Director of Revenue, 771 S.W.2d 77 (1989) (en banc),

cert. denied, 493 U.S. 1019 (1990), the Supreme Court

of Missouri held that the State’s system of taxation violated Section 111 because it exempted the receipt of

“certain retirement benefits paid” to state retirees

while providing no corresponding exemption for federal

retirees. Id. at 78; see id. at 80. In Pledger v. Bosnick,

811 S.W.2d 286 (1991), cert. denied, 509 U.S. 921 (1993),

the Supreme Court of Arkansas held that Arkansas’s

taxing scheme, which provided a full exemption for retirement income from “the Arkansas Public Employees,

Teachers, State Highway Police, and State Highway

Employees Retirement Systems, while allowing an exemption for only the first $6,000 of ” federal retirement

and other retirement benefits, impermissibly discriminated against federal retirees. Id. at 288; see id. at 291292. And in Kuhn v. State Department of Revenue,

817 P.2d 101 (1991) (en banc), cert. denied, 504 U.S. 901

(1992), the Supreme Court of Colorado held that the

State’s differential treatment of federal military retirees, as compared to state, private, and other federal retirees, could not be squared with the doctrine of intergovernmental tax immunity. Id. at 107-109.

ii. Three other state appellate courts have applied an

erroneous totality-of-the-circumstances approach to determine whether a tax is discriminatory in violation of

Section 111. See Pet. 15-21.

In Brown, supra, the West Virginia Supreme Court

of Appeals rejected a challenge by retired military personnel to a prior version of West Virginia’s income-tax

statute, which provided a $2000 exemption for military

pensions while fully exempting “certain firefighters’

and police officers’ retirement benefits.” 443 S.E.2d at

465. Because the full exemption was “surpassingly

narrow”—“less than four percent of all State government retirees in West Virginia” received it—the court

determined that “there is no intent * * * to discriminate against federal retirees; rather, the intent is to

give a benefit to a very narrow class of former state and

local employees.” Id. at 465-466. In light of these “specialized circumstances,” the court concluded that Davis

and Barker were not “controlling,” and that the State’s

taxing scheme complied with Section 111. Id. at 465. In

the decision below, the West Virginia Supreme Court of

Appeals relied heavily on its analysis in Brown. Pet.

App. 9a-16a.

The Court of Appeals of New Mexico applied a similar totality-of-the-circumstances approach in Alarid v.

Secretary of New Mexico Department of Taxation &

Revenue, 878 P.2d 341, cert. denied, 879 P.2d 91 (N.M.

1994) (Tbl.), and 513 U.S. 1081 (1995). The court first

held that, because the retiree plaintiffs were paid by the

State of California rather than by the federal government, “the ‘legal incidence’ of the tax” did not fall on the

federal government, and Section 111 did “not apply.”

Id. at 345. The court went on to note, however, that

“[t]he fact that the State has chosen to exempt from

state tax one limited class of state retirees does not

mean Plaintiffs are being illegally discriminated

against.” Id. at 347. As support for that approach, the

court cited Brown and a concurring opinion in Barker,

in which Justice Stevens reiterated his view that “[a]

state tax burden that is shared equally by federal retirees and the vast majority of the State’s citizens does not

discriminate against those retirees.” Ibid. (citation

omitted; brackets in original). The court in Alarid

failed to acknowledge that Justice Stevens’s position

had not carried the day in Davis. See ibid.; Barker,

503 U.S. at 606 (Stevens, J., concurring).

The Supreme Judicial Court of Massachusetts engaged in a similar analysis in Cooper v. Commissioner

of Revenue, 658 N.E.2d 963 (1995), cert. denied, 517 U.S.

1221 (1996). The state law at issue there exempted from

taxation income from any federal, state, or local “contributory annuity, pension, endowment or retirement

fund.” Id. at 964 (citation omitted). The law required

employees (like the military-retiree plaintiffs) who did

not contribute a portion of their salary to the retirement

system to pay state taxes on their benefits. Ibid. The

court concluded that the statute distinguished not between federal and state employees, but instead between

“contributory and noncontributory retirement plans.”

Ibid. In addition, relying on Brown and Alarid, the

court held that the statute’s grandfather provision exempting income from certain noncontributory state

plans did not violate Section 111. Id. at 965-966. The

court explained that, because the grandfather provision

“protect[ed] a small and dwindling class” of state retirees, it did not “constitute[] ‘discrimination against federally funded benefits.’ ” Id. at 965 (quoting Barker,

503 U.S. at 604-605).

iii. Respondent suggests (Br. in Opp. 18) that these

decisions merely “appl[ied] the same legal principles” to

“different facts.” In respondent’s view, Hackman,

Pledger, and Kuhn involved “blanket” exemptions like

the one at issue in Davis, while Brown, Alarid, and

Cooper (like this case) concerned state taxation schemes

that singled out a relatively small subset of state employees to receive a tax benefit. But as respondent

acknowledges (id. at 30), that distinction makes a difference only if Davis’s application is limited to “blanket” exemptions for state benefits. See, e.g., id. at 11.

Because that understanding of Davis is incorrect (see

pp. 7-14, supra), the state-court decisions applying the

totality-of-the-circumstances approach are inconsistent

with this Court’s precedents.

b. This Court’s review is warranted to clarify the appropriate inquiry under Section 111. To be sure, since

Davis, intergovernmental-tax-immunity issues have not

arisen with great frequency, see Br. in Opp. 27 & n.3,

and this Court denied certiorari in Brown, Cooper, and

Alarid. See Brown v. Paige, 513 U.S. 877 (1994)

(No. 94-246); Cooper v. Massachusetts Comm’r of Revenue, 517 U.S. 1221 (1996) (No. 95-1542); Alarid v. Secretary, 513 U.S. 1081 (1995) (No. 94-840). But this case

presents a better vehicle for the Court’s review than did

any of those cases.

As discussed above, the West Virginia Supreme

Court of Appeals in Brown announced the totality-ofthe-circumstances test and relied on it to reject a challenge to West Virginia’s taxing scheme. See 443 S.E.2d

at 465-468. But Brown’s result was supported by an

independent rationale: the military-retiree plaintiffs

there had “failed to demonstrate that their job descriptions during any substantial part of their active

service corresponded to the job descriptions of municipal firefighters, municipal police officers or state police officers.” Id. at 465; see id. at 467 n.2. It therefore

was unclear whether those plaintiffs were similarly

situated to any state retirees who received more

favorable tax treatment. If this Court had granted

certiorari in Brown, it might have affirmed the state

court’s judgment without deciding whether the totalityof-the-circumstances approach is consistent with Davis.

By contrast, this case squarely presents that question. The Circuit Court found it “undisputed * * * that

there are no significant differences between Mr. Dawson’s powers and duties as a US Marshal and the powers and duties of the state and local law enforcement officers” who receive the full exemption. Pet. App. 22a.

The West Virginia Supreme Court of Appeals did not

analyze that question. If this Court grants certiorari

and vacates the judgment below, the West Virginia Supreme Court of Appeals can consider on remand any

preserved arguments respondent may have that Mr.

Dawson is not in fact similarly situated to state retirees

who receive more favorable tax treatment. Cf. Br. in

Opp. 29-30.

The retirees in Alarid had worked in the State of

New Mexico for the University of California, but were

paid under a contract between that university and the

United States Department of Energy. 878 P.2d at 343;

Pet. at 2, Alarid, supra (No. 94-840). The case therefore

presented questions regarding whether the doctrine of

intergovernmental tax immunity applies between the

States, and whether the incidence of the tax fell on the

federal government; it did not squarely present the

question whether the totality-of-the-circumstances approach is consistent with Section 111 or with this

Court’s analysis in Davis. See Pet. at i, Alarid, supra

(No. 94-840). And because Cooper concerned in part a

grandfather provision that applied only to police and

firefighters who were first employed before 1938—a

group that was “small and dwindling” by the mid-1990s

when the case was decided—the application of Davis to

that scheme at least arguably presented an issue of diminishing importance. 658 N.E.2d at 965; see Br. in

Opp. at 19-20, Cooper, supra (No. 95-1542). 9

Unlike Brown, Alarid, and Cooper, this case cleanly

presents the question whether a State may provide a tax

benefit to a subgroup of state employees (or retirees)

but not to similarly situated federal employees (or retirees). Because state appellate courts have disagreed

as to the proper mode of analysis in these circumstances, this Court’s review is warranted.

In Cooper, the United States urged this Court to grant certiorari

on the broader question whether Massachusetts’s distinction between contributory and noncontributory retirement plans contravened Davis. Gov’t Amicus Br. at 5-6, Cooper, supra (No. 95-1542).

In Davis, this Court explained that “[a] tax exemption truly intended to account for differences in retirement benefits * * * would

discriminate on the basis of the amount of benefits received by individual retirees.” 489 U.S. at 817. Under analogous reasoning, the

United States urged, an exemption intended to account for an employee’s prior contributions would apportion the tax exemption to

match the level of previously taxed contributions. Gov’t Amicus Br.

at 6-7, Cooper, supra (No. 95-1542). The United States further argued that the grandfather provision—which wholly exempted benefits paid under some older, state noncontributory retirement plans

—demonstrated that “the State’s ‘nondiscriminatory’ rationale [was]

inconsistent with the State’s facially discriminatory legislation.” Id.

at 6.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.