Amended Complaint Brief — Gary-Hobart Water Corp. v. National Labor Relations Board

Supreme Court brief1975

Ask Donna

What actually matters in this document.

Text

October Term, 1975

No. 68 Original

COMMONWEALTH OF PENNSYLVANIA,

Plaintiff

Vv.

STATE OF NEW JERSEY,

Defendant

PROPOSED AMENDED COMPLAINT

and

BRIEF IN SUPPORT OF

PROPOSED AMENDED COMPLAINT

ROBERT P. KANE

Attorney General

LAWRENCE SILVER

DONALD J]. MURPHY

HowarpD M. LEVINSON

Deputy Attorneys General

Department of Justice

Capitol Annex Building

Harrisburg, Pa. 17120

(717) 787-1100

—E_____.___ le

Murrelle Printing Co. Law Printers, Box 100, Sayre, Pa. 18840

INDEX

Proposed Amended Complaint ............

Brief in Support of Amended Complaint .....

Proposed Amended Complaint 1

IN THE SUPREME COURT OF THE

UNITED STATES

October Term, 1975

No. 68 Original

COMMONWEALTH OF PENNSYLVANIA,

Plaintiff

STATE OF NEW JERSEY,

Defendant

PROPOSED AMENDED COMPLAINT

On July 25, 1975, the Commonwealth of Pennsyl-

vania, by its Attorney General, Robert P. Kane, filed

with this Court, a motion for leave to file complaint,

complaint and interrogatory. Pursuant to Rule 9 (2),

Rules of the Supreme Court of the United States,

which incorporates the Federal Rules of Civil Proce-

dure, where appropriate, and pursuant to Rule 15 (a)

of the Federal Rules of Civil Procedure which pro-

vides that “‘[a] party may amend his pleading once

as a matter of course at any time before a responsive

pleading is served. . .”, and upon notice of intention

to file this proposed amended complaint given on Au-

gust 25, 1975, to opposing counsel, the Common-

2 Proposed Amended Complaint

wealth of Pennsylvania, by its Attorney General,

Robert P. Kane, files this proposed amended com-

plaint in substitution for the complaint attached to its

motion for leave to file complaint and in support of

it states: —

COUNT ONE—Declaratory and Injunctive Relief

1. The original and ‘exclusive jurisdiction of the

Supreme Court of the United States is invoked pur-

suant to Article III, Section 2 of the Constitution of

the United States and 28 U.S.C. §1251(a) (1) since

this is a controversy between two states.

2. Plaintiff, the Commonwealth of Pennsylvania,

is a state of the United States and brings this action,

a. on behalf of itself and

b. as parens patriae on behalf of its citizens

and residents.

3. Defendant, the State of New Jersey, is a state

of the United States.

4. The New Jersey Transportation Benefits Tax

Act, N.J.S.A. 54:8A-58 et seq. (hereinafter referred

to as the “‘Act”’) , imposes a tax on nouresidents’ New

Jersey derived income when the nonresident of New

Jersey is a resident of a state which is certified by New

Jersey’s Transportation Commissioner as a critical

area state.

5. Plaintiff, Commonwealth of Pennsylvania, at

all relevant times, has always been certified as a

critical area state.

6. The rate of taxation under the Act presently

is 2%, N.J.S.A. 54:8A-60; however, the rate has

Proposed Amended Complaint 3

always been adjusted to be exactly equivalent to the

rate of taxation imposed by Pennsylvania pursuant to

its income tax, Tax Reform Code of 1971, 72 PS.

§7301 et seq., which is a tax on all income earned in

Pennsylvania.

7. The Act also imposes the tax upon New Jersey

residents whose income is derived from a critical area

State, N.J.S.A. 54:8A-59, but then exempts all such

income to the extent it is taxed by such state, N.J.S.A.

54: 8A-94.

8. Since Pennsylvania, pursuant to the Tax Re-

form Code of 1971, 72 P.S. §7302(b), taxes its resi-

dents and New Jersey residents at a rate of 2% on in-

come earned in Pennsylvania, New Jersey residents

working in Pennsylvania are not taxed by New Jersey.

9. The domestic earned income of New Jersey

residents is not and, at all relevant times, has not been

taxed by New Jersey.

10. By reason of the operation of the Act, New

Jersey taxes only the income of nonresidents, or

Pennsylvanians, working in New Jersey.

11. Pennsylvania, like all or nearly all other

states which have a domestic earned income tax, per-

mits a tax credit to any Pennsylvania resident for in-

come taxes paid to other states, like New Jersey, Tax

Reform Code of 1971, 72 P.S. §7314 (a).

12. During the fiscal years of 1972, 1973 and

1974, pursuant to the Act, New Jersey collected ap-

proximately $6,100,000.00, $11,600,000.00 and $12,

000,000.00 respectively, and during the 1975 fiscal

+ Proposed Amended Complaint

year is expected to collect an amount in excess

of $12,000,000.00, of which nearly all, if not all, was

and will be collected from residents of Pennsylvania.

13. The levying and imposition of taxes by New

Jersey pursuant to the Act violates the Constitution of

the United States and more particularly the Privileges

and Immunities Clause of Article IV, Section 2,

Clause 1. The tax falls exclusively on nonresidents’

income which was not offset, even approximately, by

other taxes imposed upon residents alone. The Act

also violates the Equal Protection Clause of the Four-

teenth Amendment in that the Act makes a legislative

classification without a rational basis.

14. Pennsylvania and those it represents are ad-

versely affected by the Act. Pennsylvania has been

improperly deprived of revenues totalling approxi-

mately $29,700,000.00. Pennsylvania is currently

being deprived of revenues, and Pennsylvania’s resi-

dents have been and are being deprived of govern-

mental services which are not now funded or are

under-funded because of the revenues Pennsylvania

has not been able to collect.

COUNT TWO—Accounting and Repayment

15. The Act imposes criminal sanctions of up to

a $1,000.00 fine and/or one year imprisonment for

failure to file tax returns required by the Act and

holds New Jersey employers liable for taxes that

should have been withheld from their employees.

16. For each of the taxable years since 197i and

continuing until present, nonresident New Jersey tax-

Proposed Amended Complaint 5

payers paid their tax due under the Act under the du-

ress Of criminal and civil penaltics.

17. Prior to the passage of the Act, New Jersey’s

officials were aware and advised of the possible con-

stitutional defects in the Act.

18. Shortly after the passage of this Act, New

Jersey was on notice of the possible constitutional de-

fects in the Act b: the initial filing of, on December

6, 1971, the case of Austin v. State Tax Commission,

114 N.H. 137, 316 A.2d 165 (1974), rev’d sub nom.

Austin v. New Hampshire, 420 U.S. 656 (1975).

19. Since March 19, 1975, the date that this

Court decided the Austin case, New Jersey has been

put on notice of the constitutional defects in the Act.

20. The net effect of the Act has been to divert to

New Jersey taxes which would otherwise be collected

by Pennsylvania causing the burden of the loss of

funds collected pursuant to the Act to be borne en-

tirely by Pennsylvania.

Wherefore, the Plaintiff, Commonwealth of Penn-

sylvania, respectfully requests that this Court:

(a) assume jurisdiction of this case;

(b) declare New Jersey’s Transportation Benefits

Tax Act unconstitutional;

portation Benefits Tax Act;

(d) order New Jersey to prepare and file a full

accounting of all sums which have been collected

from residents of Pennsylvania pursuant to the Trans-

portation Benefits Tax Act;

6 Proposed Amended Complaint

(e) enter a money judgment in favor of Pennsyl-

vania and against New Jersey in the amount of the

sums which have been collected from residents of

Pennsylvania pursuant to the Transportation Benefits

Tax Act, together with interest on such sums com-

pounded annually from the date of ft’ .1r collection by

New Jersey to the date of repaymeuit;

(f) enter an award of costs in favor of Pennsyl-

vania and against New Jersey;

(g) grant such further and other relief as justice

may require.

ROBERT P. KANE

Attorney General

Deputy Attorneys General

DONALD J. MURPHY

HOWARD M. LEVINSON

LAWRENCE SILVER

Department of Justice

Capitol Annex Building

Harrisburg, Pa. 17120

(717) 787-1100

IN THE SUPREME COURT OF THE UNITED

STATES

October Term, 1975

No. 68 Original

COMMONWEALTH OF PENNSYLVANIA,

Plaintiff

STATE OF NEW JERSEY

BRIEF IN SUPPORT OF PROPOSED AMENDED

COMPLAINT

ROBERT P. KANE

Attorney General

LAWRENCE SILVER

DONALD J. MURPHY

Howarp M. LEVINSON

Deputy Attorneys General

Department of Justice

Capitol Annex Building

Harrisburg, Pa. 17120

(717) 787-1100

PAGE

EE cece cckccccosccececes ii

Teer eee eeseébeedeccccvees

ee dace wee rcecces ccc 8

PCF OT UTTTETTTET 9

Statement of the Case ...........ceeceee: 10

Summary of Argument .................. 11

Argument:

I. Plaintiff Has Standing To Protect Its

Proprietary Interests .............. 13

Il. The Supreme Court Is the Proper For-

Mt ERMARBEGWeaeeeceecececccces 18

Ill. Plaintiff Has a Clear Right to Re-

Tech nuh s eens éeveeccec 20

A. A holding that the New Jersey

Transportation Benefits Tax Act is

unconstitutional should be applied

Ee 20

(1) A holding that the New Jersey

Transportation Benefits Tax Act

is unconstitutional is clearly fore-

ith hascueeecceces 22

(2) There is no inequity to be im-

posed by retroactive application

of a decision holding the New Jer-

sey Transportation Benefits Tax

Act unconstitutional .......... 27

B. Plaintiff should not be penalized .. 28

C. The taxes were paid under duress 30

D. Plaintiff is entitled to relief, even

Ge SE sec cidscccesesceees 36

IV. Plaintiff Is Entitled to Interest .... 38

Dn rénuuddeducbhadaueeaueessaces 41

SEE dékdnbessndaadewecudvcsnwoeds 43

TABLE OF CITATIONS

CASES:

Alabama v. Arizona, 291 U.S. 286 (1934) .. 20

American Tobacco v. United States, 328 U.S.

ee Ge cence dane etecdadeeed ccs 22, 24

Arizona v. California, 283 U.S. 423 (1931) 17

Arizona v. California, 298 U.S. 558 (1936) 17

Arizona v, California, 373 U.S. 546 (1963) 17

Arkansas v. Texas, 346 U.S. 368 (1953) .. 14

Atchison, Topeka & Santa Fe Ry. Co. v. O’Con-

nor, 223 U.S. 280 (1912) ...... 31,32, 33,34

Austin v. State Tax Commission, 114 N.H.

137, 316 A.2d 165 (1974) ........... 5, 26

Austin v. New Hampshire, 420 U.S. 656

Dy s<cbdineses 5, 12, 17, 18, 23, 25, 26, 41

Boston & Maine R. Co. v. State, 63 N.H. 571, 4

inn GD. «stn ten enh bu decdbusese 40

Chesebrough v. United States, 192 U.S. 253

SEDGE aveeccdbvbobaedasednesiecs ; 31

Chevron Oil Company v. Huson, 404 U.S. 97

SENG ceceeseestesbsecde sles’ 21, 27,

Chisholm v. Georgia, 2 U.S. 419 (1793) ....

Cipriano v. Houma, 395 U.S. 701 (1969) . .27,

Cohens v. Virginia, 19 U.S. 264 (1821) ....

Colorado v. Kansas, 320 U.S. 383 (1943) ..

Connecticut v. Massachusetts, 282 U.S. 660

E90 le Oe Sea eee

District of Columbia v. Brady, 288 F.2d 108

| #

Dupre v. Opelousas, 161 La. 272, 108 So. 479

SD encochesceosereneveoneyens

Flammia v. Maller, 66 N.J. Superior Ct. 440,

Pe fF 8 errr re

Georgia v. Pennsylvania R. Co., 324 U.S. 439

DEE be cekcensistésesesuqeneeees

SEED cbweeceecdcsct¥Wseeneceseot

Grayson v. Virginia, 3 U.S. 320 (1796) ....

Hahne Realty Co. v. Newark, 119 N.J.L. 12,

Se Ah Se GUE vv ckhcckccdensectiecs 39,

Hanover Shoe, Inc. v. United Shoe Machinery

Corp., 392 U.S. 481 (1968) ...... 22, 23,

Hinderlider v. LaPlata River & Cherry Creek

Ditch Co., 304 U.S. 92 (1938) ........

Illinois v. Michigan, 409 U.S. 36 (1972) ....

Illinois v. Milwaukee, 406 U.S. 91 (1972) ..

Kansas v. Colorado, 206 U.S. 46 (1907) ....

Kansas v. United States, 204 U.S. 331 (1907)

iii

Koewing v. Town of West Orange, 89 N.J.L.

— * Fe 8. Pere 35

Lemon v. Kurtzman, 411 U.S. 192 (1973)

21,23, 27,35

Linkletter v. Walker, 381 U.S. 618 (1965) .. 21

Little v. Bowers, 134 U.S. 547 (1890) ...... 31

Louisiana v. Mississippi, 202 U.S. 1 (1906) 16

Louisiana v. Texas, 176 U.S. 1 (1900) ....14, 20

Mayor of Jersey City v. O’Callaghan, 41 N.J.

Law 349 (1879) .......... 36, 37, 38, 39, 40

Messner v. Union County, 34 N.J. 233, 167

Ria GE GUUS occeccsncccd ese 32

Miller v. Eisele, 111 N.J.L. 268, 168 A. 426

DE ‘davdcdadesaswdeubenasdes 33, 34,35

Missouri v. Illinois, 180 U.S. 208 (1901) .. 16

Nebraska v. lowa, 406 U.S. 117 (1972) .... 16

Nebraska v. Wyoming, 325 U.S. 589 (1945)

17,19

New Hampshire v. Louisiana, 108 U.S. 76

TE vendedendkeshoneeekeun cesses 14,15

New Jersey v. New York, 30 U.S. 284 (1831) 15

New Jersey v. New York, 345 U.S. 369 (1953) 17

North Dakota v. Minnesota, 263 U.S. 365

SD cnvevnessdsncbsh éGeeudex 13, 14, 19

Ohio v. Kentucky, 410 U.S. 641 (1973) .... 19

Oklahoma ex rel. Johnson v. Cook, 304 US.

et MT -bosnsncasseseunueseneat i4

Pennsylvania v. West Virginia, 262 U.S. 553

i PPrrrrrrrrrrie re Lee 17

Phoenix v. Kolodziejski, 399 U.S. 204 (1970)

27,35

Prescott v. Memphis, 154 Tenn. 462, 285 S.W.

Pe 00 beeen detensseeense 30

Principality of Monaco v. Mississippi, 292 U.S.

ee EE Sb ceenendhennseseneee es 37, 38

Radich vy. Hutchins, 95 U.S. 210 (1877) ..30,3i

Rhode Island v. Massachusetts, 37 U.S. 657

ERC is Fp CA ee 15

Safeway Trails, Inc. v. Furman, 77 N.J. Super.

26, 185 A.2d 245 (1962) ........... 39, 40

San Francisco & N. R. Co. v. Dinwiddie, 13

Fed. 789 (Cal. Cir. 1882) ............ 37

Shaffer v. Carter, 252 U.S. 37 (1920) ...... 23

South Dakota v. North Carolina, 192 U.S. 286

SSeS aera ee 16, 17

Texas v. Florida, 306 U.S. 398 (1939) ....13,18

Texas v. New Jersey, 379 U.S. 674 (1965) ..14, 18

Travellers Insurance Co. v. Connecticut, 185

I ia a 23

Travis v. Yale and Towne Mfg. Co., 252 US.

ee) GEE, dweeeeosh davis 6x cones es 23, 29

Union Pac. R. R. Co. v. Bd. of County

Comm’rs., 98 U.S. 541 (1879) ........ 31,32

Virginia v. West Virginia, 238 U.S. 202 (1915) 17

Virginia v. West Virginia, 246 U.S. 565

DD <adtchudnsdbenenesewe 15, 17, 20, 38

Ward v. Love County, 253 U.S. 17 (1920) .. 32

Ward v. Maryland, 79 U.S. (12 Wall.) 418

DT wae nenceseeedekedockenns 24

Washington v. Oregon, 297 U.S. 517 (1436) 17

Western Union Tel. Co. v. Pennsylvania, 368

WB. FE COGBED ccccccccccccvevecses 18

Wisconsin v. Illinois, 309 U.S. 569 (1940) .. 17

Wyoming v. Colorado, 259 U.S. 419 (1922) 17

Wyoming v. Colorado, 298 U.S. 573 (1936) 17

OTHER AUTHORITIES:

Brief of the Attorney General of New Jersey as

Amalows Curiae ..ccccccccccccccccees 18, 25

CCH State Tax Guide (All States Unit) “15-

— PPP eererrry ore Te 29

Constitution of the United States:

Article III, Section 2 ...... 2,7, 13, 14, 37

Article IV, Section 2, Clause 1 ...4,9, 11,

17,29

Fourteenth Amendment ........-.--+++5: 4,9, 11

Eleventh Amendment .........-.++++0005 14, 15

Day, Taxing Interstate Commuters, a New Jer-

sey Experiment Under the United States

Constitution, 18 Rutgers L. Rev. 1 (1963) 25

Federal Rules of Civil Procedure, Rule 15(a) 1

Hearing on Assembly Bill No. 65 Before the

New Jersey Assembly Appropriations Com-

mittee (1960) .........eeeeeeeeeees 25, 26

New Jersey Emergency Transportation Tax Act,

54:8A-1 et seq. ....- eee eeeees 8, 24, 25, 26

New Jersey Transportation Benefits Tax Act,

N.J.S.A. 54:8A-58 et seq. 2,3,4,5,6,7,8, 10,

11, 17, 18, 20, 21, 22, 24,

26, 27, 33, 34, 36, 41

New Jersey’s Uniform Procedure Law, 54:50-1

DUS 6606600055006.0060K0¢60080008 8

1 C. Warren, The Supreme Court in United

States History, 92-101 (1924) ........ 14

Pa. Tax Reform Code of 1971, 72 PS. Sec.

3 , re eer er 3,8

Rules of the Supreme Court of the United

Se ED 66 cubes obnseetises 1

28 U.S.C. Section 1251(a) (1) .......... 2,7,13

vii

Jurisdiction 7

JURISDICTION

Plaintiff, the Commonwealth of Pennsylvania, is a

state of the United States, and brings this action in

its sovereign capacity and as parens patriae on behalf

of its citizens and residents, against the State of New

Jersey, in its sovereign capacity, to have declared

unconstitutional the New Jersey Transportation Bene-

fits Tax Act, N.J.S.A. 54:8A-5 et seq., and to recover

the tax funds diverted from the Commonwealth of

Pennsylvania to the State of New Jersey because of

the operation of the aforementioned Act. As such,

this is an action over which this Court has original

and exclusive jurisdiction under Article III, Section

2 of the Constitution of the United States and 28

U.S.C. $1251 (a).

8 Statutes Involved

STATUTES INVOLVED

Selected portions of the following statutes are

printed in the appendix.

1. New Jersey Transportation Benefits Tax Act,

N.J.S.A. 54:8A-51 et seq.

2. New Jersey Emergency Transportation Tax

Act, 54:8A-1 et seq.

3. New Jersey’s Uniform Procedure Law, 54: 50-1

et seq.

4. Pennsylvania’s Tax Reform Code of 1971, 72

P.S. §7301 et seq.

Questions Presented a

QUESTIONS PRESENTED

1. Whether a New Jersey statute which taxes in-

come of nonresidents earned in New Jersey but which

does not tax income of residents earned in New Jersey

violates the Privileges and Immunities Clause of

Article IV, Section 2 of the United States Constitu-

tion?

2. Whcether a New Jersey statute which taxes in-

come of nonresidents earned in New Jersey but which

does not tax income of residents earned in New Jersey

violates the Equal Protection Clause of the Fourteenth

Amendment to the United States Constitution?

3. Whether the State of New Jersey, which has

collected tax revenues pursuant to a statute whose un-

constitutionality is clearly foreshadowed, should be

required to account for and pay to the Common-

wealth of Pennsylvania funds diverted from the Com-

monwealth’s treasury to the State of New Jersey be-

cause of New Jersey’s unconstitutional tax?

—— « + +, I

10 Statement of the Case

STATEMENT OF THE CASE

Plaintiff, Commonwealth of Pennsylvania, in its

sovereign capacity and as parens patriae of its citizens

and residents, brings this action before this Court to

challenge the constitutionality of the New Jersey

Transportation Benefits Tax Act, N.J.S.A. 54:8A-58

et seq. (the Act), and to redress direct injury to its

governmental and proprietary interests.

The Act in question imposes a tax on nonresidents’

New Jersey derived income when the nonresident of

New Jersey is a resident of a state which is certified

by New Jersey’s Transportation Commissioner as a

critical area state. Plaintiff, Commonwealth of Penn-

sylvania, at all relevant times, has been certified as a

critical state area. Thus, residents of Pennsylvania

who derive income from New Jersey are subject to

the tax.

The Act also imposes a tax upon New Jersey resi-

dents whose income is derived from a critical state

area, but then exempts such income to the extent it is

taxed by such state. Furthermore, the domestic

earned income of New Jersey residents is not and, at

all relevant times, has not been taxed by the State of

New Jersey.

Thus, by reason of the operation of the Act, New

Jersey taxes only the income of nonresidents, or Penn-

sylvanians, working in New Jersey.

Since Pennsylvania, like all or nearly all other

states which have a domestic earned income tax, per-

mits a tax credit to any Pennsylvania resident for in-

come taxes paid to other states, the net effect of the

New Jersey tax is to divert to New Jersey tax revenues

which would otherwise be collected by Pennsylvania.

—— --- —— . .. — as he

Summary of Argument 11

SUMMARY OF ARGUMENT

By this action, Plaintiff, Commonwealth of Penn-

sylvania, in its sovereign capacity and as parens

patriae of its citizens and residents, challenges the

constitutionality of the New Jersey Transportation

Benefits Tax Act, N.J.S.A. 54:8A-58 et seq., and

seeks to redress direct injury to its governmental and

proprietary interests, which injury was caused directly

by New Jersey acting in its governmental capacity.

This Court has original and exclusive jurisdiction over

the controversy. The factual posture of this case, with

few, if any, facts being subject to dispute, makes this

Court’s exercise of its original jurisdiction particu-

larly appropriate.

The tax statute under consideration imposes a tax

on Pennsylvania residents who earn income in New

Jersey, but imposes no tax on New Jersey residents

on income earned, within New Jersey.

This statute violates the Privileges and Immunities

Clause of Article IV, Se-tion 2 of the United States

Constitution and the Equa! Protection Clause of the

Fourteenth Amendment of the United States Con-

stitution. The Privileges and Immunities Clause pre-

cludes the imposition of substantially higher taxes

upon citizens of other states than the taxes imposed

by the taxing state upon its own citizens. The Equal

Protection clause denies a state the power to legislate

in a manner which classifies persons on a basis that

12 Summary of Argument

is not reasonably related to the objective of the stat-

ute. *

Plaintiff has a clear right to the relief sought—

return of the funds collected by New Jersey under

its unconstitutional tax scheme. First, Plaintiff is en-

titled to a retroactive application of a decision hold-

ing the New Jersey tax scheme unconstitutional. A

holding of unconstitutionality would neither establish

a new principle of law nor decide an issue of first

impression. Furthermore, Defendant was keenly

aware of the serious constitutional pitfalls of the tax

scheme prior to its enactment. Second, the taxes were

paid under duress and now are subject to recovery

as a matter of general tax law. Even absent duress,

the claim for recovery is well founded. Third, the

baiance of the equities as between Plaintiff and De-

fendant weigh heavily in favor of ordering New Jer-

sey to return that which it unlawfully collected in the

first placey

Although it is impossible to fully compensate Plain-

tiff for Defendant’s intentional depletion of its sources

of revenue an award of interest in addition to the

principal amount of taxes due is equitable. New

Jersey law supports the recovery of interest.

1'The Commonwealth of Pennsylvania adopts the Equal

Protection arguments submitted in the briefs by and on

behalf of Appellants in Austin v. New Hampshire, 420 U.S.

656 (1975).

Argument 13

ARGUMENT

I. PLAINTIFF HAS STANDING TO PROTECT

ITS PROPRIETARY INTERESTS

The Supreme Court’s original jurisdiction over suits

between states rests upon Section 2 of Article Lil of

the United States Constitution. Clause 1 of Section

2 places controversies among the states within the

judicial power of the United States. “The judicial

power shall extend . . . to controversies between two

or more States... .”” U. S. Const., art. III, §2. The

second clause of this Section gives the Supreme Court

original jurisdiction over such cases. “In all cases...

in which a State shall be party, the Supreme Court

shall have original jurisdiction.” Id.

Congress, acting pursuant to the authority thus

ceded to the federal government, has declared that

such original jurisdiction shall lie exclusively in the

Supreme Court for cases between two or more states.

“The Supreme Court shall have original and exclusive

jurisdiction of: (1) All controversies between two or

more States... .” 28 U.S.C. §1251 (a) (1).

The Supreme Court’s original and exclusive juris-

diction is to be exercised wh.uever the complaining

state is suing for the protection of its own proprietary

interests. Texas v. Florida, 306 U.S. 398 (1939);

North Dakota v. Minnesota, 263 U.S. 365 (1925).

This is particularly appropriate when the action com-

14 Argument

plained of can be attributed to the government of the

defendant state. Texas v. New Jersey, 379 U.S. 674

(1965) ; Louisiana v. Texas, 176 U.S. 1 (1900).

Historically, Article III had been construed to per-

mit a citizen of one state to file an action in the Su-

preme Court against another state. Chisholm v.

Georgia, 2 U.S. 419 (1793); Grayson v. Virginia,

3 U.S. 320 (1796). However, the Eleventh Amend-

ment to the United States Constitution was ratified

in order to overturn the Chisholm ruling. Cohens v.

Virginia, 19 U.S. 264 (1821); 1 C. Warren, The Su-

preme Court in United States History, 92-101 (1924).

Thus, the Eleventh Amendment cannot be avoided,

and original jurisdiction is not available, where a

state sues in an action which really is brought on be-

half of designated individuals. Illinois v. Michigan,

409 U.S. 36 (1972); Arkansas v. Texas, 346 U.S. 368

(1953) ; Oklahoma ex rel. Johnson v. Cook, 304 US.

387 (1938); North Dakota v. Minnesota, 263 US.

365 (1923); New Hampshire v. Louisiana, 108 U.S.

76 (1883).

The Eleventh Amendment does not bar suits which

are brought to protect the genuine interests of a state.

“The right of a state as parens patriae to bring

suit to protect the general comfort, health, or

property rights of its inhabitants, threatened by

the proposed or continued action of another state,

by prayer for injunction, is to be differentiated

from its lost power as a sovereign to present and

enforce individual claims of its citizens as their

trustee against a sister state.” North Dakota v.

Minnesota, 263 U.S. 365, 375-376 (1925).

Argument 15

The states lost their power to enforce claims for

individual citizens, as a trustee in the Supreme Court,

by ratifying the Eleventh Amendment. The states

have retained their power to enforce claims in the

Supreme Court against other states, for damage to

their proprietary or governmental interests. Virginia

v. West Virginia, 246 U.S. 565 (1918) ; Rhode Island

v. Massachusetts, 37 U.S. 657 (1838); New Jersey

v. New York, 30 U.S. 284 (1831).

To determine whether a state is the real party in

interest, the Court must look to the effect of the

judgment or decree which is sought. Kansas v.

United States, 204 U.S. 331 (1907). Plaintiff seeks

herein to recoup losses suffered by its state treasury

due to New Jersey’s direct diversion of tax dollars

from Plaintiff’s citizens. The effect of the relief

sought by Plaintiff will be to reimburse its general

state treasury for the tax revenues which were diverted

by New Jersey.

In the first case which interpreted the impact of

the Eleventh Amendment on original jurisdiction ac-

tions, this Court noted that only suits which could

have been initiated by individual citizens prior to

adoption of the Amendment were to be barred there-

after from prosecution by the states on behalf of such

citizens. New Hampshire v. Louisiana, 108 U.S. 76,

91 (1883). In view of the interests which Plaintiff

is seeking to protect and the nature of relief requested

against Defendant, the case at bar presents the clearest

example of a controversy between states, not individ-

uals. First, the judgment sought will protect the

sovereign interest of Plaintiff in its general state

16 Argument

treasury. Second, the funds recovered will be ap-

plied to Plaintiff’s general governmental purpose of

providing for the health, safety and welfare of its

citizens. Third, the acts complained of were taken

directly by the State of New Jersey, acting as a

sovereign, through the New Jersey Legislature per-

forming the governmental function of enacting a gen-

eral revenue-raising measure. Fourth, Plaintiff does

not seek relief from any particular individuals in the

New Jersey government. Such relief might be appro-

priate were the taxes levied and collected pursuant to

mal-administration of a statute or the wrongful acts

of particular officials. In the case at bar, the taxes

were collected in compliance with New Jersey law.

Compare Missouri v. Illinois, 180 U.S. 208 (1901);

Georgia v. Tennessee Copper Co., 206 US. 230

(1907) ; Louisiana v. Mississippi, 202 U.S. 1 (1906) ;

Nebraska v. lowa, 406 U.S. 117 (1972).

In South Dakota v. North Carolina, 192 U.S. 286

(1904) , the defendant state was ordered to pay $27,-

400 to South Dakota, plus costs of the suit, upon

certain government bonds.

“C1]t is enough to say that the clear import

of the decisions of this court from the beginning

to the present time is in favor of its jurisdiction

over an action brought by one state against an-

other to enforce a property right. Chisholm v.

Georgia [2 U.S. 419 (1793) ], was an action of

assumpit; United States v. North Carolina [136

U.S. 211 (1890) ], an action of debt; United

States v. Michigan [190 U.S. 379 (1903) ], a

suit for an accounting, and that which was sought

Argument 17

in each was a money judgment against the

defendant state.” Id. at 318.

Plaintiff is seeking to recover damages for New

Jersey’s unconstitutional diversion of tax dollars

from its state treasury to that of Defendant. As such,

Plaintiff’s claim is directly analogous to that pre-

sented in Virginia v. West Virginia, 238 U.S. 202

(1915) and 246 U.S. 565 (1918), where one state

sought and won a money judgment against another.

This case is also similar to the numerous instances

where this Court has exercised its original jurisdic-

tion to prevent the diversion of natural resources

flowing from onc state to another. Arizona v. Cali-

fornia, 373 U.S. 546 (1963); New Jersey v. New

York, 345 U.S. 369 (1953); Nebraska v. Wyoming,

325 U.S. 589 (1945); Colorado v. Kansas, 320 US.

383 (1943); Wisconsin v. Illinois, 309 U.S. 569

(1940) ; Wyoming v. Colorado, 298 U.S. 573 (1936) ;

Arizona v. California, 298 U.S. 558 (1936); Wash-

ington v. Oregon, 297 U.S. 517 (1936); Arizona v.

California, 283 U.S. 423 (1931); Pennsylvania v.

West Virginia, 262 U.S. 553 (1923); Wyoming v.

Colorado, 259 U.S. 419 (1922).

In Austin v. New Hampshire, 420 US. 656

(1975) , this Court held a New Hampshire tax statute

violative of the Privileges and Immunities Clause be-

cause the statute imposed a tax on nonresidents which

was not substantially equivalent to the taxes imposed

on residents. The Attorney General of New Jersey

in an amicus curiae brief in Austin recognized not

only the similar effect of the New Jersey Transporta-

tion Benefits Tax Act and the New Hampshire tax

statute reviewed in Austin, but also that the states

18 Argument

of Maine, Vermont and Massachusetts, which offered

its residents a tax credit against the New Hampshire

tax, were the one’s who would benefit from the

elimination of the New Hampshire tax, and thus

these states, not its individual taxpayers, were the real

parties in interest. Brief of the Attorney General of

New Jersey as Amicus Curiae at 3, 6, Austin v. New

Hampshire, 420 U.S. 656 (1975). Similarly, in the

case at bar, the gain which may result from the elimi-

nation of the New Jersey Transportation Benefits

Tax Act will inure to the benefit of the Common-

wealth of Pennsylvania. Thus, the Commonwealth

of Pennsylvania is the real party in interest.

The Commonwealth of Pennsylvania is properly

before the Supreme Court seeking to protect its gov-

ernmental interests which have been unlawfully

abridged by the State of New Jersey.

Il. THE SUPREME COURT IS THE PROPER

FORUM

in a legitimate controversy between states over

specific property interests, it is the responsibility of

the Supreme Court to exercise its original jurisdiction

and settle the question, since the states separately do

not have the constitutional power to resolve the con-

troversy. Texas v. New Jersey, 379 U.S. 674 (1965)

(right to escheat debts owed by Sun Oil Company) ;

Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71

(1961) (right to escheat money orders); Texas v.

Florida, 306 U.S. 398 (1939) (right to collect death

Argument 19

taxes). ‘‘Neither State can legislate for, or impose

its own policy upon the other.” Kansas v. Colorado,

206 U.S. 46, 95 (1907).

Placement of such responsibility in the Supreme

Court reflects the historical purpose of the constitu-

tional provision for original jurisdiction—to offer a

method of settling disputes between sovereign pow-

ers, which disputes traditionally could be settled only

by diplomacy or war. Nebraska v. Wyoming, 325

U.S. 589 (1945); Georgia v. Pennsylvania R. Co.,

324 U.S. 439 (1945); North Dakota v. Minnesota,

263 U.S. 365 (1923).

The concept of sovereignty which underlies the

instant case requires that this Court exercise its juris-

diction and resolve the dispute, by application of fed-

eral common law. See, Kansas v. Colorado, 206 U.S.

46 (1907). “[P]roceedings under this Court’s orig-

inal jurisdiction are basically equitable in nature. .. .”

(Ohio v. Kentucky, 410 U.S. 641, 648 (1973)) and,

in actions between states, neither the statutes nor the

decisions of either state can be conclusive. “For the

decision of suits between States, federal, state and

international law is considered and applied by this

court as the exigencies of the particular case may re-

quire.” Connecticut v. Massachusetts, 282 U.S. 660,

670 (1931). Accord, Hinderlider v. LaPlata River &

Cherry Creek Ditch Co., 304 U.S. 92, 110 (1938).

The Supreme Court has the authority to enforce a

decision which adjudicates the conflicting claims of

two or more states. Such enforcement authority, in-

cluding enforcement of a money judgment, is inherent

in the constitutional provision for original and ex-

20 Argument

clucive jurisdiction over such controversies. Virginia

v. West Virginia, 246 U.S. 565, 591 (1918).

Plaintiff’s claim against New Jersey presents a

clearly-defined, justiciable controversy, which is sus-

ceptible of enforcement under settled common law

and equitable principles. At issue is the Plaintiff-

State’s right to a defined fund of tax collections. The

evidence necessary to adjudicate the issues is all doc-

umentary in nature, so there can be little, if any, fac-

tual dispute.

Where a controversy between ‘states is justiciable

and the necessity for action by this Court is absolute,

as in the case at bar, original jurisdiction is available.

Illinois v. Milwaukee, 406 U.S. 91, 95 (1972);

Alabama v. Arizona, 291 U.S. 286, 291 (1934);

Louisiana v. Texas, 176 U.S. 1, 15 (1900).

III. PLAINTIFF HAS A CLEAR RIGHT TO

RELIEF

The imposition of an unconstitutional tax by one

state that falls, in effect, upon another state, gives rise

to a right of recovery, as in any other instance where

one state violates the legally protected interest of an-

other state.

A. A Holding That the New Jersey Transportation

Benefits Tax Act 1s Unconstitutional Should Be Ap-

plied Retroactively

This Court has employed a balancing approach to

retroactivity looking at “the prior history of the rule

Argument 21

in question, its purposes and effect, and whether re-

trospective operation will further or retard its opera-

tion”. Lemon v. Kurtzman, 411 U.S. 192, 199

(1973) (quoting Linkletter v. Walker, 381 U.S. 618,

629 (1965)). The criteria for determining retroactive

or prospective application were set forth in Chevron

Oil Company v. Huson, 404 U.S. 97, 106-107 (1971).

“In our cases dealing with the nonretroac-

tivity question, we have generally considered

three separate factors. First, the decision to be

applied nonretroactively must establish a new

principle of law, either by overruling clear past

precedent on which litigants may have relied

[citation omitted] or by deciding an issue of

first impression whose resolution was not clearly

foreshadowed [citation omitted]. Second, it

has been stressed that ‘we must . . . weigh the

merits and demerits in each case by looking to

the prior history of the rule in question, its pur-

pose and effect, and whether retrospective op-

eration will further or retard its operation.’

[citation omitted] Finally, we have weighed

the inequity imposed by retroactive application

for ‘(w) here a decision of this Court could pro-

duce substantial inequitable results if applied

retroactively, there is ample basis in our cases

for avoiding the “injustice or hardship” by a

holding of nonretroactivity.’ [citation omitted ]”.

Each of these considerations warrant the retroac-

tive application of a decision holding the New Jersey

Transportation Benefits Tax Act unconstitutional.

22 Argument

(1) A Holding That the New Jersey Transportation

Benefits Tax Act Is Unconstitutional Is Clearly

Foreshadowed

Hanover Shoe, Inc. v. United Shoe Machinery

Corp., 392 U.S. 481 (1968), is a clear reminder that,

in the absence of what is, in essence, a decision over-

turning a prior line of cases, retroactive application

of a judgment is the rule, not the exception. In Han-

over Shoe the plaintiff company won a treble damage

antitrust action against the defendant for monopoliza-

tion of the shoe machinery market. The period of

limitation under the applicable statute commenced

July 1, 1939. The suit was filed September 21, 1955.

The Court of Appeals disallowed the district court’s

award of damages for the full period of limitations,

holding instead that the focal point was June 10,

1946. the.date on which the Supreme Court an-

nounced American Tobacco v. United States, 328

U.S. 781 (1946). In reversing the Court of Appeals,

the Supreme Court held that American Tobacco had

not fundamentally altered the law of monpolization.

“The theory of the Court of Appeals seems

to have been that when a party has significantly

relied upon a clear and established doctrine, and

the retrospective application of a newly declared

doctrine would upset that justifiable reliance to

his substantial injury, considerations of justice

and fairness require that the new rule apply

prospectively onty. .. . There is, of course, no

reason to confront this theory unless we have

before us a situation in which there was a clearly

Argument 25

declared judicial doctrine upon which United

relied and under which its conduct was lawful,

a doctrine which was overruled in favor of a

new rule according to which conduct performed

in reliance upon the old rule would have been

unlawful... .

Neither the opinion in [United States v.

Aluminum Co. of America, 148 F. 2d 416 (2d

Cir. 1945) ] nor the opinion in American To-

bacco indicated that the issue involved was

novel, that innovative principles were necessary

to resolve it, or that the issue had been settled

in prior cases in a manner contrary to the view

held by those courts.” Hanover Shoe, Inc. v.

United Shoe Machinery Corp., 392 U.S. 481,

496 (1968).

The Hanover Shoe Court also set forth the criterion

for a finding of novel doctrine, requiring that there

be “such an abrupt and fundamental shift in doctrine

as to constitute an entire new rule which in effect

replaced an older one”. Id. at 498.

A decision holding the New Jersey Transportation

Benefits Tax Act unconstitutional would not con-

stitute ‘‘an abrupt and fundamental shift in doctrine”’.

Compare Lemon v. Kurtzman, 411 U.S. 192 (1973).

In fact such a holding would not represent any shift

in doctrine whatsoever, but would merely call for an

application of long standing legal principles, Austin

v. New Hampshire, 420 U.S. 656 (1975); Travis v.

Yale and Towne Mfg. Co., 252 U.S. 60 (1920);

Shaffer v. Carter, 252 U.S. 37 (1920); Travellers

Insurance Co. v. Connecticut, 185 U.S. 364 (1902) ;

24 Argument

and Ward vy. Maryland, 79 U.S. (12 Wall.) 418

(1870), which principles have been recognized by

New Jersey. Opinions of the Attorney General of

New Jersey, F.O. No. 1, June 6, 1962.

Even though Hanover Shoe involved treble dam-

ages, the Court did not back away from the plain

consequences of an absence of novel doctrine in

American Tobacco:

“In these circumstances, there is no room for

argument that Hanover’s damages should reach

back only to the date of the American Tobacco

decision. Having rejected the contention that

Alcoa-American Tobacco changed the law of

monopolization in a way which should be given

only prospective effect, it follows that Hanover

is entitled to damages for the entire period per-

mitted by the applicable statute of limitations.”

Hanover Shoe, Inc. v. United Shoe Machinery

Corp., 392 U.S. 481, 502 (1968).

A decision holding the New Jersey Transportation

Benefits Tax Act unconstitutional is so clearly fore-

shadowed that even the authors of this Act must have,

by necessity, recognized the constitutional problems

involved.

Although there appears to be no legislative history

on the Tax Act in question, it will be instructive to

examine the legislative history of the New Jersey

Emergency Transportation Act of 1961. N.J.S.A.,

54:8A-1 et seg. This Act is similar in effect to the

Act under consideration in that it imposes on residents

of New York who derive income from New Jersey a

commuters tax at a rate which is geared to the New

Argument 25

York tax structure. At the same time this Act ex-

cludes New Jersey residents from the tax. N.J.S.A.,

54:8A-16. Thus, the effect of the Emergency Trans-

portation Tax Act of 1961, as with the Act under con-

sideration, is to exempt residents from a tax to which

nonresidents are subject. Day, Taxing Interstate

Commuters, A New Jersey Experiment Under The

United States Constitution, 18 Rutgers L. Rev. 1

(1963). Not only is the effect of these two Acts

similar but also the form and purpose of the two

Acts bear a remarkable resemblance to one another.

New Jersey, by its own admission, has recognized

the similarities in the two tax Acts. Brief of the

Attorney General of New Jersey as Amicus Curiae at

1-2, Austin v. New Hampshire, 420 U.S. 656 (1975).

In view of the similarities between the two tax

Acts discussed above, it seems only reasonable to

conclude that the earlier Act was used as a model for

the latter. and, that the legislative history of the

former reflects the considerations which the legisla-

ture dealt with prior to enacting the latter.

The public hearing held on May 20, 1960, before

the New Jersey Assembly Appropriations Committee

is replete with references to the possible unconstitu-

tional effect of the Emergency Transportation Tax

Act of 1961. Hearing on Assembly Bill No. 65 Before

the New Jersey Assembly Appropriations Committee

(1960). Some of the more preceptive comments con-

cerning this proposed tax were made by Mrs. Ken-

neth D. Smith on behalf of the League of Women

Voters. In her statement to the Committee opposing

the proposed Act, Mrs. Smith noted the fact that

the Act was a mere “tax gimmick” and that there

26 Argument

was a “serious question of the constitutionality of

the tax”’. Id. at 24-25. Mrs. Smith suggested that the

tax Act, if passed, would be regarded as a hostile act

by New York and took note of the fact that restraint

and cooperation are important in relations between

states and that retaliation tends to breed retaliation.

These considerations go to the very heart of the Privi-

leges and Immunities Clause. Austin v. New Hamp-

shire, 420 U.S. 656 (1975) .”

Thus, New Jersey’s own records demonstrate an

awareness of the constitutional pitfalls of the Tax Act

under review and the risk the state was taking in

adopting it. Furthermore, shortly after the passage

of the Transportation Benefits Tax Act, New Jersey

was on notice of the possible constitutional defects in

the Act by the filing of, on December 6, 1971, Austin

v. State Tax Commission, 114 N.H. 137, 316 A. 2d

165 (1974), rev’d. sub nom. Austin v. New Hamp-

shire, 420 U.S. 656 (1975).

By prior precedent and by New Jersey’s own aware-

ness a decision holding the Transportation Benefits

Tax Act unconstitutional is ‘“‘clearly foreshadowed”’

and such a holding should be retroactively applied.

*For other references to the possible unconstitutional ef-

fect of the Emergency Transportation Tax Act, see Hearings

on Assembly Bill No. 65, supra, at 28, and memorandum

attached as exhibit to hearing.

Argument 27

(2) There Is No Inequity To Be Imposed by

Retroactive Application of a Decision Holding

the New Jersey Transportation Benefits Tax Act

Unconstitutional

The inequities suggested in Chevron Oil Company

v. Huson, 404 U.S. 97 (1971), and Lemon v. Kurtz-

man, 411 U.S. 192 (1973), are basically problems of

third-party reliance, such as this Court addressed in

Cipriano v. Houma, 395 U.S. 701 (1969), and

Phoenix v. Kolodziejski, 399 U.S. 204 (1970).

In both Cipriano and Phoenix, this Court refused

retroactive application because of substantial reliance

on a long standing practice.

Here, there is no long standing past practice, but

rather one illegal tax scheme which is the first of

its kind with respect to residents of Pennsylvania. If

New Jersey did rely on the constitutionality of their

novel tax, it was at their peril. Certainly, no one has

undertaken specific agreements with New Jersey in

expectation of receipts from the Transportation Bene-

fits Tax, at least insofar as that might be reflected

in the public laws or the history of the Act.

The requirement to pay back the total amount

levied under the tax may create a fiscal burden for

New Jersey, as it was designed to and did, in fact,

create a burden for Plaintiff. The present question,

however, is who should bear the responsibility of

that fiscal burden—the state which imposed and col-

lected the unconstitutional tax or the state whose

treasury was drained unlawfully. It would be in-

28 Argument

appropriate for New Jersey to win the retention of

such gains on grounds that their return would cause

financial hardship, when their collection has caused

financial hardship to Plaintiff.

During the period of the imposition of the Trans-

portation Benefits Tax, Plaintiff-State has had to look

to other sources of revenues, in an amount that is

necessarily the same principal amount as that di-

verted by New Jersey. To allow New Jersey to escape

repayment, on the theory that there would be some

disruption to its fiscal expectation, would encourage

other states to adopt similar predatory tax measures

without regard to constitutional niceties, since a judg-

ment of invalidity, when finally obtained, would only

operate in futuro.

At a time when all states of the Union are sub-

jected to unusually severe fiscal problems, a decision

against retroactivity here would encourage further

legislative adventurism.

B. Plaintiff Should Not Be Penalized

Theoretically, Plaintiff could have reduced or

avoided the losses by revoking its tax credit laws or

by enacting retaliatory laws. However, Plaintiff

should not be denied recovery for failure to take such

action.

This Court has long maintained that states should

not attempt to correct discrimination against their

citizens by retaliation. Avoidance of such retaliation

ae a

Argument 29

“was one of the chief ends sought to be accomplished

by the adoption of the Constitution.” Travis u Yale

and Towne Mfg. Co., 252 U.S. 60, 82 (1920). If

a decision holding the tax unconstitutional is not ap-

plied retroactively, Plaintiff, Commonwealth of Penn-

sylvania, will be punished for failing to take retalia-

tory action, either through revoking tax credits for

its own residents or attempting to increase tax burdens

imposed on those New Jersey residents and businesses

who derive income within the Commonwealth of

Pennsylvania.

Mr. Justice Blackman, dissenting in Austin, might

suggest that Plaintiff’s losses could have been avoided

simply and easily, through denial of tax credits to

its residents who pay taxes to New Jersey. This sug-

gestion does not take into consideration the Equal

Protection and Privileges and Immunities problems

that would likely ensue if Plaintiff, in the instant case,

were to deny the benefits of the tax credit only to

those residents who pay taxes in New Jersey. Fur-

thermore, this suggestion does not take account of

the long history and importance of tax credits in the

Federal structure. Currently, 40 states impose gen-

eral income taxes. CCH State Tax Guide (All States

Unit) 15-000 at 1531-34. All of these states allow

a credit against taxes otherwise payable to them, for

taxes actually paid by their residents to other states.

Id. at 1543. In this way, Plaintiff is consistent with

almost all, if not all, of its sister states.

It should not be necessary to enact a discrimina-

tory statute in order to gain relief from a sister

state’s discriminatory statute. To date, this Court

30 Argument

has offered an effective and appropriate means for

resolution of such a situation. Plaintiff refused to

back away from the normal pattern of tax laws and

exercised restraint in not taking retaliatory action

against New Jersey or against its residents who earn

incomes in Pennsylvania. Such restraint should not

now become a bar to Plaintiff’s recovering for losses

caused by the illegal New Jersey tax.

C. The Taxes Were Paid Under Duress

An old rule of common law held that: “One who

voluntarily pays a tax imposed by an unconstitutional

law, without knowing that the law is unconstitutional,

cannot recover the amount so paid.” Prescott v.

Memphis, 154 Tenn. 462, 285 S.W. 587 (1926). To

the extent that this rule is still good law, it under-

scores thé propriety of Plaintiff's claim for relief in

the instant case.

Initially, courts required proof of actual duress,

which was interpreted as actual or impending re-

straint of person or property, in order to find suf-

ficient involuntariness in tax payments to allow re-

covery of taxes paid and later deemed illegal or

excessive. Thus, this Court held in Radich v.

Hutchins, 95 U.S. 210, 213 (1877):

“To constitute the coercion or duress which

will be regarded as sufficient to make a pay-

ment involuntary . . . there must be some actual

or threatened exercise of power possessed, or be-

lieved to be possessed, by the party exacting or

Argument 31

receiving the payment over the person or prop-

erty of another, from which the latter has no

other means of immediate relief than by making

the payment.”’

This doctrine continued through Union Pac. R.R.

Co. v. Bd. of County Comm’rs., 98 U.S. 541 (1879);

Little v. Bowers, 134 U.S. 547 (1890); and Chese-

brough v. United States, 192 U.S. 253 (1904).

The old rule began to change in Atchison, Topeka

& Santa Fe Ry. Co. v. O’Connor, 223 US. 280

(1912). In that case Mr. Justice Holmes stated the

general principle that a taxpayer may recover taxes

paid under the threat of the state’s exercise of

a summary statutory remedy providing penalities for

nonpayment of the tax.

“It is reasonable that a man who denies the

legality of a tax should have a clear and certain

remedy. The rule being established that apart

from special circumstances he cannot interfere

by injunction with the State’s collection of its

revenues, an action at law to recover back what

he has paid is the alternative left. Of course we

are speaking of those cases where the State is

not put to an action if the citizen refuses to pay.

In these latter he can interpose his objections by

way of defense, but when, as is common, the

State has a more summary remedy, such as dis-

tress, and the party indicates by protest that he

is yielding to what he cannot prevent, courts

sometimes perhaps have been a little too slow to

recognize the implied duress under which pay-

ment is made. But even if the State is driven

32 Argument

to an action, if at the same time the citizen is

put at a serious disadvantage in the assertion of

his legal, in this case of his constitutional rights,

by defence in the suit, justice may require that

he should be at liberty to avoid those disadvan-

tages by paying promptly and bringing suit on

his side. He is entitled to assert his supposed

right on reasonably equal terms.” Atchinson,

Topeka & Santa Fe Ry. Co. v. O'Connor, 223

U.S. 280, 285-86 (1912).

The complete break with the past and acceptance

of the doctrine of implied duress, where business

disruption or penalties could be anticipated for failure

to pay taxes, was made in Ward v. Love County, 253

U.S. 17 (1920). There, the Court specifically stated

that the strict views it had taken in such cases as

Union Pac. R.R. Co. v. Bd. of County Comm’rs., 98

U.S. 541 (1879) , had been modified by later cases.

The law of New Jersey on the question of when an

individual may recover payments made which were

not legally enforceable closely resembles the law as

discussed through the cases cited above. In Messner

y. Union County, 34 N.J. 233, 167 A. 2d 897 (1961),

for example, the court held that where an individual

under a mistake of law, but with full knowledge of

the facts, voluntarily pays money on a demand not

legally enforceable against him or her, the payments

made cannot be recovered absent unjust enrichment,

fraud, duress, or improper conduct on the part of the

payee; and, in Flammia v. Maller, 66 N.J. Super. Ct.

440, 169 A. 2d 488 (1961), the court held that a

mistake of law occurs where a person is truly

Argument 33

acquainted with the existence or nonexistence of

facts, but is ignorant or comes to an erroneous con-

clusion as to their legal effect. The case under con-

sideration presents a situation where residents of

Pennsylvania, with knowledge of the fact that New

Jersey imposed a tax on New Jersey derived income,

paid the tax without realizing its invalidity. Thus,

the New Jersey income tax, imposed on Pennsylvania

residents, was paid under a mistake of law, and can be

recovered where there is a showing of unjust enrich-

ment, fraud, duress or improper conduct on the part

of the payee. It is submitted that the recovery of the

tax is justified on the basis that the tax payments

were made under duress and if retained would cause

unjust enrichment.

A good discussion of the question of when pay-

ments are voluntarily made as opposed to being made

under duress can be found in Miller v. Eisele, 111

N.J.L. 268, 168 A. 426 (1933). Throughout the

court’s discussion of this question, continual emphasis

was given to the notion that to constitute a voluntary

payment the party making the payment must have

had the freedom of exercising his or her will, and

that when one acts under any species of compulsion

ithe payment is not voluntary. The standard adopted

in Miller to determine wher payments are voluntarily

made or made under duress is consistent with the

concept of implied duress as articulated by Mr. Justice

Holmes in Atchison Topeka & Santa Fe Ry. Co. v.

O’Connor, supra.

One of the more telling features of the New Jersey

Transportation Benefits Tax Act is that the payment

I es

34 Argument

of taxes is a necessary condition of employment. Un-

der Section 12 of the Act (N.J.S.A., 54:8A-101) an

employer is required to withhold from each payroll

period an amount computed in such a manner as to

result, as far as practicable, in a sum substantially

equivalent to the amount of tax reasonably estimated

to be due. This withholding requirement does not —

allow a taxpayer any freedom of choice in terms of

whether or not to pay the tax, and, as indicated in

Miller and Atchison, freedom of choice is the touch-

stone for determining duress. The effect therefore,

of the automatic withholding tax is that the payments

are not voluntary, but are made under duress.

Other forms of duress effected by the Act are as

follows: (1) The failure to pay the taxes, fees, inter-

est, and penalties imposed under the Act amounts

to a personal debt of the taxpayer to the State of New

Jersey, and such debt, whether sued upon or not, con-

stitutes a lien on all of the property of the debtor

except as may be provided to the contrary by law.

N.J.S.A., 54:49-1; (2) Individuals face fines up to

$1,000 or-imprisonment of up to one year for failure

to file the returns as required under the Act, N.J.S.A.,

54:8A-97; 54:52-1; (3) Employers are liable for any

taxes that should have been withheld N.J.S.A. 54: 8A-

103 and could be subject to criminal prosecution for

failing to accurately report withholdings. N.J.S.A.,

54:52-1. When these forms of duress are considered

together with the automatic withholding tax it is clear

that the payments made under the New Jersey Trans-

portation Benefits Tax Act are inherently made under

duress.

a ieee

Argument 35

It is self-evident that the State of New Jersey will

be unjustly enriched if it is not required to give

restitution for the taxes that it has illegally collected.

The failure to give restitution in cases analogous to

the one under consideration has been justified on the

grounds that the person receiving the payments has

relied on their being available for use, and, having

so relied, should be protected. It is submitted that

in balancing the equities in the present case, this

Court should not have such a tender regard for the

wrongdoer, i.e. the State of New Jersey. Relief by

way of restitution neither places an undue burden on

the wrongdoer, nor subjects the wrongdoer to dam-

ages. Restitution in the case at bar merely calls upon

the wrongdoer to give back that which it unlawfully

forced from those residents of Pennsylvania who de-

rive income from New Jersey. Lemon v. Kurtzman,

411 U.S. 192 (1973); Chevron Oil Co. v. Huson,

404 U.S. 97 (1971); Cipriano v. Houma, 395 US.

701 (1969); Phoenix v. Kolodziejski, 399 U.S. 204

(1970).

A formal or informal protest is not necessary where

an invalid tax is assessed and paid under duress.

Koewing v. Town of West Orange, 89 N.J.L. 539, 99

A. 203 (1916); Miller v. Eisele, 111 N.J.L. 268, 168

A. 426 (1933). Where the validity of a tax is at-

tacked, the normal protest and abatement processes

are neither required nor appropriate. Instead, the

taxpayer’s remedy is a direct resort to the courts un-

der common-law doctrines’ of law and equity, as is

being pursued in this case. District of Columbia v.

Brady, 288 F.2d 108 (D.C.C.A. 1960).

36 Argument

Because of various provisions of the New Jersey

Transportation Benefits Tax Act, the tax payments

made under the Act are inherently made under duress.

Furthermore, the failure to grant restitution will re-

sult in unjust enrichment to the State of New Jersey.

In view of these factors, Plaintiff’s right to recover

tax monies illegally collected is supported by prece-

dent established by this Court as well as by New Jersey

courts.

D. Plaintiff Is Entitled to Relief, Even Absent

Duress

Having shown that duress was inherent in the im-

position and enforcement of the Transportation Bene-

fits Tax Act, we must emphasize that proof of duress

(or implied duress) should not be required as a pre-

requisite for recovery in this case. Mayor of Jersey

City v. O'Callaghan, 41 N.J. Law 349 (1879). In

O'Callaghan the court ordered Jersey City to return

tax payments illegally collected, but voluntarily paid.

In rejecting the rule that voluntary payment of an il-

legal tax bars recovery, the court stated that,

“[pJrinciples of law, when intelligently ap-

plied, do not lead, as their sole product, to an

inequitable result; and nothing but injustice

would be served by an admission of the doctrine

that where a tax has been adjudged to be illegal,

the moneys unjustly collected under it can be

retained. It is said in the brief of counsel for

plaintiffs in error that the opposite rule is a hard

one for cities, but the conclusive answer to this

Argument 37

is that it is the rule of honest dealing; and the

legal system would seem much out of joint that

would permit the retention of moneys after a

judicial decision that the person with whom

they were lodged had no right to them.” 41

N.J. Law at 351.

The rationale of O’Callaghan points out the sound-

ness of the rule authorizing recovery of tax payments

demanded and received by the public without right,

notwithstanding the fact that such payments were vol-

untarily made.

The common-law rule denying recovery of illegal

taxes which were voluntarily paid had a rationale

based on four points: (1) principles of sovereign

immunity; (2) the difficulty of determining the class

of persons harmed; (3) the futility of granting re-

covery, since the successful plaintiffs, as taxpayers of

the defendant’s jurisdiction, would have to absorb the

cost of a judgment; and (4) the personal liability of

local assessors to repay illegal taxes, which led courts

to charge both assessors and taxpayers with knowl-

edge of the law at time of payment. See generally,

San Francisco & N.R. Co. v. Dinwiddie, 13 Fed. 789

(Cal. Cir. 1882); Dupre v. Opelousas, 161 La. 272,

108 So. 479 (1926).

These historical factors are not applicable to the

case at bar.

(1) There is no sovereign immunity here. Sov-

ereign immunity as against another state was relin-

quished by ratification of the United States Constitu-

tion, when the states, through Article III, §2, effec-

tively consented to suits by other states. Principality

38 Argument

of Monaco v. Mississippi, 292 U.S. 313, 328 (1934);

Virginia v. West Virginia, 246 U.S. 565 (1918).

(2) There is no difficulty determining who has

been harmed by New Jersey’s actions. But for the

New Jersey tax, the Commonwealth of Pennsylvania

would have had approximately $29.7 million in addi-

tional funds for its state treasury.

(3) Unlike the common-law cases, a judgment

allowing recovery would result in the Defendant, not

the successful Plaintiff, absorbing the costs of a judg-

ment. Such a result is possible as the party unjustly

enriched by the illegal tax and the party harmed by

the illegal tax are clearly identifiable and separate.

(4) There is no intimation that individual tax

assessors may incur liability. This is a matter be-

tween states and this Court has the authority to im-

pose a judgment upon and to require payment from

the Defendant State. Virginia v. West Virginia, 246

U.S. 565 (1918).

In view of the above, there is no requirement that

the payments involved be determined involuntary for

Plaintiff to recover.

IV. PLAINTIFF IS ENTITLED TO INTEREST

New Jersey has long recognized that interest should

be paid on taxes which were wrongfully collected. A

case directly on point is Mayor of Jersey City v.

O'Callaghan, 41 NJ. Law 349 (1879). In

eee

en oe etre oe

Argument 39

O’Callaghan a municipality made assessments against

the plaintiff’s property because of certain benefits

accruing to the property because of sewer construc-

tion. A second taxpayer, i.e. one other than plain-

tiff, successfully challenged the legality of the assess-

ment. Subsequent to this challenge and the resulting

court decision holding the assessment to be illegal, the

municipality then started a second assessment pro-

ceeding against the plaintiff with the result that the

second assessment levied was $1,000 less than the

previous one which the plaintiff had paid. The plain-

tiff sued to recover the difference between the first

and second assessment and asked for interest on the

difference. The court granted the plaintiff’s request

for relief, and allowed interest on the theory “that the

money paid on the first assessment was wiihout right

and that the municipality had the constant duty to

return the debt without demand”. Hahne Realty Co.

v. Newark, 119 N.J.L. 12, 194 A. 191, 192 (1937).

Our research reveals that O’Callaghan is the only

New Jersey case which directly deals with the ques-

tion of whether or not interest can be recovered on

taxes paid under a statute which is declared to be il-

legal. However, the importance of the O’Callaghan

rule has been emphasized in a number of cases where

a taxpayer made an overpayment and sought a refund

plus interest on the overpayment. In such cases the

courts have denied interest and have distinguished

O’Callaghan on the basis that the question presented

did not involve an assessment which was void or il-

legal, but rather the dispute was addressed to the

amount of the tax assessed. Hahne Realty Co. v.

Newark, 119 N.J.L. 12, 194 A. 191 (1937); Safeway

40 Argument

Trails, Inc. v. Furman, 77 N.J. Super. 26, 185 A.2d

245 (1962). The fact that Hahne and Furman did

not extend O’Callaghan to cases involving tax over-

payments shows the vitality of O’Callaghan to cases

involving taxes paid under an illegal statute.

The policy considerations which support the

O'Callaghan decision are aptly stated in Boston &

Maine R. Co. v. State, 63 N.H. 571, 573, 4 Atl. 571,

572 (1886):

“It is not just that a taxpayer should be com-

pelled to bear more than his share oi the public

expense. He would bear more than his share if

he lost and the public gained a year’s use of an

excess paid by him. It could not have been the

intention to impose an unjust loss of a year’s in-

terest. Justice requires that there should be an

equitable adjustment of that loss. In actions at

common law, involving like questions, interest

would be allowed as part of the damages, and

we think it should be in this case.”

In view of the O’Callaghan decision, the vitality

that other New Jersey cases have imputed to that de-

cision, and the legitimate policy considerations sup-

porting the decision, it is submitted that Plaintiff is

entitled to recover both the principal amount of tax

revenues illegally diverted to New Jersey and the in-

terest thereon.

—

a te me ee

Argument 41

CONCLUSION

Plaintiff, Commonwealth of Pennsylvania, is the

party which suffered the loss on account of the New

Jersey Transportation Benefits Tax Act, and thus has

standing to maintain this action as the real party in

interest. As this case is a controversy between two

states, this Court is the proper forum to hear the case.

In view of Austin, the New Jersey Transportation

Benefits Tax Act should be declared unconstitutional.

A holding that the Act is unconstitutional should be

applied retroactively to allow the requested relief, as

such a holding would not deviate from past decisions,

as there is no third-party reliance involved, and as

retroactive application would further the principles

of equal treatment and non-retaliation upon which

Austin was based. Under normal tax law doctrines,

Plaintiff is entitled to recover the sums diverted from

its state treasury, together with interest thereon.

Both the sums involved and the legal issues to be

resolved are of significant importance. Plaintiff’s

motion for leave to file complaint should be granted

or, in the alternative, this Court should summarily

grant the relief requested by Plaintiff, based on the

pleadings and briefs submitted.

ROBERT P. KANE

Attorney General

LAWRENCE SILVER

DONALD R. MURPHY

HowARD M. LEVINSON

Deputy Attorneys General

Dept. of Justice, Capitol Annex Bldg.

Harrisburg, Pa. 17120

(717) 787-1100

APPENDIX

INDEX TO APPENDIX

New Jersey Transportation Benefits Tax Act,

N.J.S.A. 54:8A-58 et seq. (selected por-

0 Ore

New Jersey Emergency Transportation Tax,

54:8A-1 et seq. (selected portions) ....

New Jersey’s Uniform Procedure Law, 54: 50-1

et seq. (selected portions) ............

Pennsylvania’s Tax Reform Code of 1971, Act

of August 31, 1971, Section 3, P. L. 362,

No. 93 (72 P.S. §7301 et seq.) (selected

BOE ccccccveceseccascsvvscees

2 wee

ee 00S te et ne RN ee

New Jersey Trans. Benefits Tax Act 43

APPENDIX

NEW JERSEY TRANSPORTATION BENEFITS

TAX ACT

54:8A-59. Imposition of tax; levy; collection; pay-

ment

A temporary tax is hereby imposed, and shall be

levied, collected and paid annually, at the rate speci-

fied in this act,

(a) upon every resident of this State, who is not

a resident of another critical area state under and pur-

suant to its laws, upon and with respect to the entire

taxable classes of income as defined in this act and

subject to taxation under this act, for the taxable year,

derived from sources within a critical area state other

than New Jersey; and

(b) upon and with respect to the entire taxable

classes of income as defined in this act and subject to

taxation under this act, for the taxable year, derived

from sources within this State by natural persons who

are not residents of this State and who are residents

of another critial area state under and pursuant to the

law of such state.

54:8A-60. Rate of tax

The tax imposed by this act shall be levied and im-

posed annually upon each taxpayer at the rate of

2.8% 2.9% upon each of the classes of income here-

inafter enumerated in section 16 (C. 54:8A-73).

44 New Jersey Trans. Benefits Tax Act

54:8A-94. Income taxes imposed by other states

(a) A resident taxpayer shall be allowed a credit

against the tax otherwise due under this act for the

amount of any income tax, wage tax Or tax on OF

measured by gross or net earned or unearned income

imposed on him by another state with respect to in-

come which is also subject to tax under this act;

(b) The credit provided under this section shall

not exceed the proportion of the tax otherwise due

under this act that the amount of the taxpayer's tax-

able income subject to tax by the other jurisdiction

bears to his entire taxable income.

54:8A-97. Returns; of whom required; personal lia-

bility; report of changes

(a) On or before the filing date prescribed in

section 411 of this act, an income tax return shall be

made and filed by or for every individual having 2

gross income derived from sources within his source

state in excess of the sum of his personal exemptions

allowed in section 25 of this day or having any items

of tax preference derived from ar connected with

New Jersey sources....

54:8A-101. Employer to withhold tax

(a) General.

From and after January 1, 1972, the first day of the

first month following at least a full calendar month

after the enactment of this act; every employer in this

State of a taxpayer subject to tax in respect of wages,

salaries or commissions derived from sources within

this State shall deduct and withhold upon the same

for each payroll period an amount computed in such

-— ow et.

New Jersey Trans. Benefits Tax Act 45

manner as to result, as far as practicable, with due

regard to the personal exemptions and standard de-

duction allowable under this act, in withholding dur-

ing each calendar year a sum substantially equivalent

to the amount of tax reasonably estimated to be due

under this act. Methods for determining the amount

to be withheld shall be prescribed by regulation, as

shall procedures and requirements for the furnishing

of written exemption certificates to the employer, the

amending or substitution of the same, the furnishing

by the employer of written statements showing the

total compensation, the amount withheld and other

specified information. |

54:8A-103. Employer’s liability

Every employer required to deduct and with-

hold tax under this act is hereby made liable for such

tax. For such purposes any amount required to be

withheld and paid over to the Division of Taxation

shall be considered the tax of the employer. Any

amount of tax actually deducted and withheld under

this act shall be held to be a special fund in trust for

the Division of Taxation. No employee shall have

any right of action against his employer in respect to

any moneys deducted and withheld from his wages

and paid over to the Division of Taxation in compli-

ance or in intended compliance with this act.

54:8A-104. Tax not to be collected from employer

on payment; liability for penalties; interest;

failure to pay tax withheld

(a) If an employer fails to deduct and withhold

tax as required, and thereafter the tax against which

46 New Jersey Trans. Benefits Tax Act

such tax may be credited is paid, the tax so required

to be deducted and withheld shall not be collected

from the employer, but the employer shall not be re-

lieved from liability for any penalties, interest, or ad-

ditions to the tax otherwise applicable in respect of

such failure to deduct and withhold.

(b) If any employer shall fail to make a return

and pay a tax withheld by him at the time required

by or under the provisions of this act, such employer

shall be liable for such tax and shall pay the same

together with all penalties and interest charges there-

on as provided in the case of any taxpayer under sec-

tion 48 of this act,’ and such additional amount of

penalties and interest shall in no case be charged to

or collected from the taxpayer by said employer. The

Division of Taxation shall have the same rights and

powers for the collection of such tax, penalties and

interest against such employer as ete now prescribed

by this act for the collection of a tax against a tax-

payer.

54:8A-105. Penalties; interest; abatement or remis-

sion

Any taxpayer who shall fail to file his return when

due shall be liable to a penalty of $2.00 for each day

of delinquency, which penalty shall be payable to,

and recoverable by, the Division of Taxation as a

part of the tax herein imposed. If any tax be not

paid when the same becomes due, as herein provided,

there shall be added to the amount of the tax a sum

equivalent to 5% thereof, as a penalty, and, in addi-

tion thereto, interest at the rate of 1% per month or

fraction thereof from the date the tax became due

New Jersey Trans. Benefits Tax Act 47

until the same be paid. If the Division of Taxation

determines that the failure to comply with any pro-

vision of this act was excusable under the circum-

stances, it may abate or remit such part or all of the

penalty as shall be appropriate under such circum-

stances.

54:8A-114. Controlling statute; exception

The taxes imposed by this act shall be governed in

all respects by the Divisions of the State tax uniform

procedure law (subtitle 8 of Title 54 of the Revised

Statutes) fn. 1 except only to the extent that a spe-

cific provision of this act may be in conflict there-

with.

48 New Jersey Emergency Tax Act

NEW JERSEY EMERGENCY TRANSPORTATION

TAX ACT

54:8A-2. Imposition of tax; levy; collection; pay-

ment; exemption

A temporary emergency tax is hereby imposed, and

shall be levied, collected and paid annually, at the

rates specified in this act;

(a) Upon every resident of this State, who is not

a resident of another critical area state under and pur-

suant to its laws, upon and with respect to the entire

net income as defined in this act and subject to taxa-

tion under this act, for the taxable year, derived from

sources within a critical area state other than New

Jersey; and

(b) Upon and with respect to the entire net

income as defined in this act and subject to taxation

under this act, for the taxable year, derived from

sources within this State by natural persons who are

not residents of this State and who are residents of

another critical area state under and pursuant to the

law of such state.

years beginning on or after January 1, 1972 no tax

shall be payable under section 6(c) (C.54:8A-6 (e) )

by:

(1) Any individual whose entire gross income for

the taxabie year is $2,500.00 or less, provided such

individual is not married nor the head of a household

nor a surviving spouse;

New Jersey Emergency Tax Act 49

(2) Any head of a household or surviving spouse

whose entire gross income for the taxable year is

$5,000.00 or less; and

(3) Any husband or wife whose entire gross in-

come for the taxable year, determined jointly, is

$5,000.00 or less, or the aggregate of whose gross

income for the taxable year, determined separately, is

$5,000.00 or less.

54:8A-16. Credits for tax imposed by another

critical area state

(A) (1) A nonresident of this State shall be al-

lowed a credit against the tax otherwise due under

this act for any income tax imposed for the taxable

year by another critical area State, of which the tax-

payer is a resident but such credit shali not exceed

either:

(a) the percentage of the other tax determined

by dividing the portion of the taxpayer’s income sub-

ject to taxation under this act which is also subject to

the other tax by the total amount of his income subject

to such other tax, or

(b) the percentage of the tax otherwise due under

this act, determined by dividing the portion of the

taxpayer’s income subject to taxation under this act

which is also subject to the other tax by the total

amount of the taxpayer’s income which is taxable

under this act.

(2) No credit shall be allowed under this section

unless the jurisdiction of which the taxpayer is a

resident:

50 New Jersey Emergency Tax Act

(a) grants a substantially similar credit to resi-

dents of this State, or

(b) imposes an income tax on its own residents

with respect to income derived from this State, and

exempts from income tax the income of residents of

this State.

(B) A resident of this State shall be allowed a

credit against the tax otherwise due under this act

for any income tax imposed for the taxable year by

another critical area State, upon income both derived

therefrom and subject to tax under this act.

(1) The credit allowable under this subsection

shall not exceed the percentage otherwise due under

this act determined by dividing the portion of the tax-

payer’s income subject to taxation by such other juris-

diction by the total amount of the taxpayer's income

subject to taxation under this act.

(2) The credit allowable under this subsection

shall not reduce the tax otherwise due under this act

to an amount less than would have been due if the

income subject to taxation by such other jurisdiction

were excluded from the taxpayer’s income subject to

tax under this act.

(3) No credit shall be allowed under this sub-

section for a tax of a jurisdiction which allows resi-

dents of this State a credit against the taxes imposed

by such other jurisdiction for the tax under this act,

if such other credit is substantially similar to the credit

granted to nonresident taxpayers by subsection (A)

of this section.

New Jersey Procedure Law 51

NEW JERSEY UNIFORM PROCEDURE LAW

54:49-1. Tax a debt and lien; preference; proceeds

paid to commissioner

The taxes, fees, interest and penalties imposed by

any such State tax law, or by this subtitle, from the

time the same shall be due, shall be a personal debt

of the taxpayer to the State, recoverable in any court

of competent jurisdiction in an action in debt in the

name of the State. Such debt, whether sued upon or

not, shall be a lien on all the property of the debtor

except as against an innocent purchaser for value in

the usual course of business and without notice there-

of, and except as may be provided to the contrary in

any other law, and shall have preference in any dis-

tribution of the assets of the taxpayer, whether in

bankruptcy, insolvency or otherwise. The proceeds of

any judgment or order obtained hereunder shall be

paid to the commissioner.

54:52-1. Failure to file report; filing of false or

fraudulent report

Any person who shall fail to file any report required

to be filed pursuant to the provisions of any state tax

law, or shall file or cause to be filed with the commis-

sioner any false or fraudulent report or statement, or

shall aid or abet another in the filing with the com-

missioner of any false or fraudulent report or state-

ment, with the intent to defraud the state or evade

the payment of any tax, fee, penalty or interest or any

52 New Jersey Procedure Law

part thereof, which shall be due pursuant to the pro-

visions of this subtitle, or to any state tax law, shall

be guilty of a misdemeanor and be fined not to

exceed one thousand dollars or be imprisoned not to

exceed one year, or both, at the discretion of the

court.

Penna. Tax Reform Code 53

PENNSYLVANIA TAX REFORM CODE OF 1971,

ACT OF AUGUST 31, 1971, SECTION 3, P. L. 362,

No. 93 (72 P.S. §7301 ET SEQ.)

§7302. Imposition of tax

(a) There is hereby imposed an annual tax to be

paid by resident individuals, estates or trusts at the

rate of two per cent on the privilege of receiving each

of the classes of income hereinafter enumerated in

section 303."

(b) There is hereby imposed an annual tax to be

paid by nonresident individuals, estates or trusts at

the rate of two per cent on the privilege of receiving

each of the classes of income enumerated ir section

303 from sources within this Commonwealth.

§7314. Income taxes imposed by other states

(a) A resident taxpayer before allowance of any

credit under section 312’ shall be allowed a credit

against the tax otherwise due under this article for

the amount of any income tax, wage tax or tax on

or measured by gross or net earned or unearned

income imposed on him by another state with respect

to income which is also subject to tax under this

article.

(b) The credit provided under this section shall

not exceed the proportion of the tax otherwise due

under this article that the amount of the taxpayer’s

income subject to tax by the other jurisdiction bears

to his entire taxable income.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.