# Amicus Curiae Brief — Brady v. New York

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_2403%3A4

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1993
- **Citation:** 509 U.S. 905

## Text

summer

NO. 92-1720 i 2%
IN THE
SUPREME COURT OF THE UNITED STATES

October Term, i992

Lawrence J. Brady, Barbara A. Brady,
Deborah R. Labovitz, and Judah I.
Labovitz,

Petitioners,

Vv.

The State of New York, Mario Cuomo,
and James Wetzler,

Respondents.

BRIEF OF AMICUS CURIAE COMMONWEALTH OF
PENNSYLVANIA AND NEW HAMPSHIRE IN SUPPORT
OF PETITION FOR WRIT OF CERTIORARI

JAMES J. HAGGERTY ERNEST D. PREATE, JR.
General Counsel of Attorney General of
Pennsylvania Pennsylvania

Gregory E. Dunlap Michael A. Roman*

Deputy General Chief Deputy Attorney
Counsel General

Office of General Tax Litigation
Counsel Section

333 Market Street Office of Attorney
Harrisburg, PA General

17120 Strawberry Square
(717) 783-6563 Harrisburg, PA 17120

(717) 783-1460
ATTORNEYS FOR AMICUS CURIAE

COMMONWEALTH OF PENNSYLVANIA
*Counsel of Record

3FST AVAILABLE COPY

TABLE OF CONTENTS

Page
yO) ee ae er $33
INTEREST OF AMICUS CURIAR

A. PRELIMINARY
DEE 6 6:6 & 46 460 a: 1
B. IMPACT OF NEW YORK
TAX LAW ON
PENNSYLVANIA......... 4
i. Pennsylvania Tax
SO ese ss eee 4
2 New York Tax
BS ewe baeeweb es 10
GC. INTERESTS OF |
CA 66.5 2666006504 %% 14
ARGUMENT
A. STATE COURT
PROCEEDINGS.......cee 17
1. Appellate
See WS 6 5 4 oo 00 e seek 17

2. Court of
Eee ee ee 23

B. SECTIONS 601(D) AND (E) OF THE
NEW YORK TAX LAW VIOLATE THE
DUE PROCESS RIGHTS OF
NONRESIDENTS.......... 31

Cc. NEW YORK TAX LAW INTERFERES
WITH PENNSYLVANIA’S RIGHT
TO DEFINE THE LEGAL
RELATIONSHIPS OF ITS MARRIED
COUPLES ........ ceccccse 38

D. SECTIONS 601(D) AND (E),
WHEN COMPARED TO SECTION
651(B)(4), VIOLATE THE
PRIVILEGES AND IMMUNITIES
AND EQUAL PROTECTION CLAUSES
OF THE UNITED STATES
CONSTITUTION.......... 47

COMCLUS ION. cccccccccccccccessces 54

ii

TABLE OF AUTHORITIES

Page(s)

CASES

Brady v. State of New York, 80 N.Y.2d
596, 592 N.Y.S.2d 955, 607 N.E.2d 1060
(1992)... creer cece ceecees 17,426,228

Brady v. State of New York, 172 A.D.2d
17, 576 N.Y.S.2d 896 (3rd Dept.
1991)... cc creveveccveeces 18,21

Denoncourt v. State Ethics Commission,
504 Pa. 191, 470 A.2d 945
(1983)... cere reece eevcees 14,41

Complete Auto Transit, Inc. v. Brady,
430 U.S. 274 (1977)...----- 10

Estate of Grossman, 486 Pa. 460, 406
A.2d 726 (1979)... eeeeeeeceees 41

Miller Bros. Co. v. Maryland, 347 U.S.
340 (1954)... eee cree eer eeccees 20,36

National Bellas Hess, Inc. v. Illinois,
386 U.S. 753
(1967). cece cere reece cece reccces 36

New York, L.E. & W. R. Co. v.
Pennsylvania, 153 U.S. 628
(1894)... cece cccccececceerccces 35

Paul v. Virginia, 75 U.S. (8 Wall.)
168 (1969)... cece eee cere eeces 49

St. Louis v. Wiggins Ferry Co., 11 Wall.
(78 U.S.) 423 (1871).---++---e- 35,37

Supreme Court of Virginia v. Friedman,

iii

il el

a ke of: | eer 49

STATUTES

New York

New York Tax Law
BOCEIOR G01 ssc cebass passim

Section 651(b)(2).... passim
Section 651(b)(4).... 47,48,51

Pennsylvania

Tax Reform Code of 1971, Act of
March 4, 1971 (P.L. 6, No. 2),
as amended, Pa. Stat. Ann. tit.
72, §§7101-10004 (Purdon 1990 &
Purdon Supp. 1992)...... 5

Section 302(b)(2), as amended,
Pa. Stat. Ann. tit. 72,
§7302b)(2) (Purdon Supp.

$y) Pee eee ee ee eae ee ee 5

Section 308, as amended, Pa.
Stat. Ann. tit. 72, §7308
(PurGom 1990). .ccsessees 6
Section 309, as amended, Pa.
Stat. Ann. tit. 72, §7309
(Purdon 1990)... ccecccese Ҥ
Section 314, as amended, Pa.
Stat. Ann. tit. 72, §7314
(Purdon 1990)....ccceses 3
Section 331, as amended, Pa.
Stat. Ann. tit. 72, §7331
(Purdon 1990)...cccccsee 7

iv

a

LEGISLATIVE MATERIALS

Commuter Tax Moratorium Bill: Hearing on
S. 800 Before the Senate Committee on
Finance, 10lst Cong., lst Sess.

(1990) cc cresceveccvecscseenecces 16

ADMINISTRATIVE MATERIALS

Pennsylvania

61 Pa. Code §§111.3-
2) are ee ee 3

INTEREST OF AMICUS CURIAE

A. PRELIMINARY STATEMENT

The effect of the provisions of the
New York Tax Law which the New York Court
of Appeals has upheld is to require
married Pennsylvania residents who work in
New York and file joint federal tax
returns to pay New York income tax not
only on the income they earned in New York
but also on their spouse’s income -- even
if the spouse resides and works in
Pennsylvania and has no New York source
income. This law violates the rights of
due process and equal protection of
Pennsylvania citizens who work in New York
and their spouses for the reasons
described in the Petition for Writ of
Certiorari. New York’s constitutional

error is founded in great part on its

Na ote eeeeeeeemnelll

illegitimate assumption that a married
couple residing in another state is
willing to be treated as a single taxable
unit for all purposes simply because they

filed a joint federal return.

The New York law also- erodes
Pennsylvania’s ability as a sovereign
state to tax incomes earned by its
residents within its borders. This result
occurs both because Pennsylvania allows a
limited income tax credit for income taxes
paid to other states and because New
York’s cross-border tax diminishes the
resources of Pennsylvania residents to
support their own state’s and local
communities’ tax efforts mecessary to

provide services to Pennsylvania

. 1
residents.

The New York law is not an isolated
example of this brand of extraterritorial
tax policy. Ohio already has a tax law
which emulates that of New York and,
therefore, adversely affects
Pennsylvanians who work in Ohio.
Moreover, based on the New York precedent,
other states bordering Pennsylvania may
well be tempted to enact tax laws modeled
after the New York law. According to the

petitioners, New Jersey is even now

‘Approximately 29,000 Pennsylvanians
have incomes derived from New York
sources and, thus, are liable to pay
income tax to New York. When a
Pennsylvanian pays income tax to New
York, the Commonwealth of Pennsylvania
(like most other states), in turn and in
fairness to its citizens, allows a credit
against the income tax which would
otherwise be due to Pennsylvania on that
New York income. See Pa. Stat. Ann. tit.
72, §7314 (Purdon 1990); 61 Pa. Code
§§111.3 - 111.5.

EEE

actively considering retaliation for New
York’s law. See Pet. for Writ of Cert.,

at 23-24 (quoting State Tax Notes 708

(Mar. 29, 1993)). Regardless of its
motivation, however, such retaliation by
New Jersey would skewer both residents of

New York and Pennsylvania who work in New

Jersey.
B. IMPACT OF NEW YORK TAX LAW ON
PENNSYLVANIA

oe Pennsylvania Tax Law

When a resident of one state earns
income in another, the state providing the
income is entitled, consistent with due
process under the United States
Constitution, to receive payment for the

benefits, protections and opportunities

provided to the cross-state commuter.

Thus, when a New York resident earns
income in Pennsylvania, Pennsylvania is
entitled to receive from the New York
commuter a fair share of his income,
through taxation, as compensation for the
services, opportunities, protections and
benefits he receives by virtue of his
employment in Pennsylvania. Consistent
with the limits of due process,
Pennsylvania imposes under its Tax Reform
Code of 19717 a tax upon a nonresident, at
a rate of 2.8 percent, on "that part of
his income derived from sources within

[Pennsylvania]." Pa. Stat. Ann. tit. 72,

§§7302(b)(2), 7308 (Purdon 1990 & Supp.
1992) (emphasis added). However, also
consistent with the requirements of due

process, any income a resident of New York

* Act of March 4, 1971 (P.L. 6, No.
2), as amended, Pa. Stat. Ann. tit. 72,
§§7101-10004 (Purdon 1990 & Supp. 1992).

5

Or any other state might earn outside of

Pennsylvania is entirely excluded from
taxation by Pennsylvania or from
consideration in the computation of

Pennsylvania income tax liability.

Some residents of New York and other
states who earn income in Pennsylvania are
married to a spouse who also earns income
in Pennsylvania. For those couples --
both of whom are subject to Pennsylvania’s
tax of 2.8 percent on their respective
incomes derived from sources in
Pennsylvania -- Pennsylvania provides an

option. The couple may, if they elect to

do_so, file a Single joint return and
determine a joint taxable income for which
both spouses are jointly and severally
liable. id., §§7309, 7331 (Purdon 1990).
However, if a nonresident should choose to

file a return Only for himself, then his

6

income from sources within Pennsylvania
would be determined separately from the

income of his spouse; and the taxpayer’s

income tax liability would be deemed to be
the separate and individual liability of
that taxpayer without regard to his
spouse’s income. Id., §§7309(a), 7331(a);
61 Pa. Code §117.2(@). These options,
provided to all nonresident Pennsylvania
taxpayers, are the same options
Pennsylvania accords to its own citizens.
Indeed, Pennsylvania recognizes, as a
matter of its constitution, that couples
in a marriage are not a single economic
entity but individuals with an independent
social, economic and legal status. See

Denoncourt v. State Ethics Commission, 504

Pa. 191, 420 A.2d 945 (1983); Estate of

Grossman, 486 Pa. 460, 406 A.2d 726
(1979).

Consistent with due process under the
United States Constitution, no person from
New York or any other state who derives
income from Pennsylvania is required to
report or to pay tax to Pennsylvania based
on income that is derived from New York or
any other state. Consistent with both due
process and fundamental principles of
privacy, Pennsylvania also does not
require a nonresident taxpayer to report
to Pennsylvania his or her spouse’s income
Or to pay income tax based upon his or her
spouse’s income. Thus, Pennsylvania
recognizes that, consistent with due
process, New York residents who derive
income from Pennsylvania may fairly be
taxed based solely upon the income which
they individually earn in Pennsylvania ar

derive from Pennsylvania sources.

These rules under Pennsylvania’s Tax

8

=

Reform Act and implementing regulations
are based upon three important governing

principles:

(1) Respect for the
sovereignty of New
York and other states
and their primary
authority to impose
income taxes on their
own residents without
undue overreaching by
Pennsylvania.

(2) Respect for the
exclusive rights of
other states to
establish the legal
rules governing the
economic relationships
between married
couples domiciled in
that state and, to the
extent not determined
by another state’s
law, respect for the
Spetivecy and
independence of the
partners to a marriage
to choose the rules of
© 8B e@ 2 2 own
relationship,
including those
affecting their
financial dealings
between each other and
with the government;

9

| |

and

(3) Imposition of
taxes on only that
portion of income
which "bears fiscal
relation to the
Protections,
Opportunities and
benefits given by the
state," consistent
with due process. See

Complete Auto Transit .

Inc. vy. Brady, 430
U.S. 274, 279 (1977).

Y New York Tax Law

Under TRARA, New York has seriously
invaded Pennsylvania’s and other states’
important interests and prerogatives as
Sister states. First, New York has
improperly invaded the taxing prerogatives
of Pennsylvania and other states. When
New York imposes additional taxes on

Pennsylvanians and other nonresidents

10

beyond those which fairly reflect the
services, protections and opportunities
provided to nonresidents by New York, New
York takes directiy from Pennsylvania and
other states important revenue upon which
those states depend to provide services
and protections to their own citizens.
New York's tax, therefore, harms
Pennsylvania and other states directly
when it overreaches the borders’ by
depriving the other state of income tax

revenue.

Equally important, the new tax policy
imposed by New York under TRARA has the
destructive effect of draining the
resources of the Commonwealth of
Pennsylvania and other states, their local
taxing jurisdictions and the people of
Pennsylvania and other states surrounding

New York. When New York reaches across

11

——————————

State lines -- as it does under TRARA --
to impose taxation based upon income
earned by individuals in Pennsylvania and
other states who receive no income in New
York (i.e., spouses of nonresident New
York taxpayers), or to impose taxation
based upon income with no connection to
New York (i.e., non-New York source income
of nonresident taxpayers and their
spouses), New York invades the very core
of Pennsylvania’s and other states’
-abilities as sovereign states to sustain
themselves and the abilities of their
local school districts and municipalities
to maintain essential human services.
Thus, when New York commands a
Pennsylvania couple to pay a tax to New
York based upon income earned in
Pennsylvania or from other non-New York
sources, New York not only violates the

personal civil rights of the citizens of

12

Pennsylvania, at erodes the very
sovereignty of the Commonwealth.

Third, the New York Tax Law, as
amended by TRARA, substantially intrudes
into the individual privacy interests of
Pennsylvania citizens and their families
in a manner deeply offensive to
Pennsylvania constitutional law. Through
its income reporting requirements, New
York trammels upon the basic foundations
of the marital relationship of
Pennsylvania citizens in which
Pennsylvania has the most compelling of
interests. The New York Tax Law strikes
at the heart of Pennsylvania’s
constitutionally protected rights of
privacy and individuality between married
couples who live in Pennsylvania by
requiring a New York taxpayer who resides
in Pennsylvania to disclose to New York

not only his own income but the income of

13

sin eieeeeeenineeneneemeeneeaeenl

his Pennsylvania resident spouse. In this
way, New York requires Pennsylvanians to
disclose information to New York which
Pennsylvania itself would not be able
constitutionally to require of its own

citizens. See Denoncourt yv. State Ethics

Commission, 504 Pa. 191, 470 A.2a 945

(1983).

Cc. INTERESTS OF COMITY

By reaching across State lines to
include, for tax calculation purposes,
Pennsylvania source income -- including
the income of Pennsylvanians who have no
connection with New York —- New York
invites other states to retaliate in a way
which Substantially undermines the
delicate comity among the states. Indeed,
retaliation by New Jersey or other states

for New York’s interstate taxation would

14

neieidentehiietieenntiniieiainia

also negatively impact Pennsylvania since
such retaliatory legislation would skewer
Pennsylvanians as well as New Yorkers who
work in New Jersey or in other states

which impose retaliatory taxation.

Governor Robert P. Casey of
Pennsylvania expressed that very concern
when he presented testimony to the United
States Congress four years ago. In a
statement submitted to the Committee on
Finance of the United States Senate on

June 13, 1989, Governor Casey said:

New York's cross-
border tax policy has
created hostility
between the states and
raised the specter of
retaliatory
legislation. If all
of the states
bordering New York are
to provide a full
range of services to
residents and
nonresident- commuters

15

alike, unilateral

aggrandizement like
the New York system
must be avoided. In

the final analysis,
unneighborly attempts
to shift the tax
burden onto
nonresidents can only
lead to interstate
conflict.

Commuter Tax Moratorium Bill: Hearing on

S. 800 Before the Senate Committee on

Finance, 10lst Cong., lst Sess. 101 (1990)

(statement of Robert P. Casey, Governor of

Pennsylvania).

Governor Casey’s words are no less
true today than they were in 1989.
Indeed, under the pressures increasingly
placed upon states to raise additional
revenues, it would be surprising if
retaliatory taxation were not launched in
other jurisdictions, such as New Jersey,

which have a progressive form of income

16

taxation.

ARGUMENT

A. STATE COURT PROCEEDINGS

l. Appellate Division

Under section 651(b)(2) of the New
York Tax Law, as amended by TRARA, New
York required "nonresident taxpayers and
their nonresident spouses, like resident
taxpayers and their resident spouses, [to]
file a joint state income tax return
(thereby reporting their aggregate
incomes) if they filed a joint federal tax

return." Brady v. State of New York, 172

A.D.2d 17, 20, 576 N.Y.S.2d 896, 898 (3rd
Dept. 1991) (App. 18a). As amicus curiae
in the New York Supreme Court, Appellate

Division, the Commonwealth of Pennsylvania

17

Supported the petitioners’ Claim that
section 651(b)(2) denies to nonresidents
substantive due process and equal
protection under the Fourteenth Amendment
to the United States Constitution since it
imposes tax Obligations to New York upon

persons who have no contact with New York.

The Commonwealth of Pennsylvania also
joined with the petitioners in New York in
arguing that the New York Tax Law violates
the Equal Protection Clause of the
Fourteenth Amendment and the Privileges
and Immunities Clause of the United States
Constitution since it allows to a New York
resident taxpayer married to a nonresident
the option of filing either a separate or
joint state income tax return, while
denying that option to a nonresident New

York taxpayer. See Brady v. State of New

18

York, 172 A.D.2d at 20-21, 576 N.Y.S.2d at

898 (App. 18a).

Finally, Pennsylvania supported the
petitioners’ challenge to sections 601(d)
and (e) of the Tax Law, which require
inclusion of non-New York income in New
York’s “income tax calculation as a
violation of substantive due process and

equal protection.”

*In the Appellate Division of the
Supreme Court of New York, all parties
assumed in their briefs that sections
601(d) and (e) of the Tax Law did not --
independently of the joint filing
requirement of section 651(b)(2) --
require a nonresident New York taxpayer
to pay income tax to New York based upon
his nonresident spouse’s income as
reported on their joint federal income
tax retirn. Indeed, after the appellate
division ruled section 651(b)(2) of the
Tax Law to be unconstitutional, the
Commissioner of Taxation and Finance
announced that a nonresident New York
taxpayer would not be required to report
his spouse’s income or to pay tax based
on -his spouse’s income. Instead, he was
allowed to recalculate his federal
adjusted gross income as if he had filed

19

With respect to the issue of spousal
income, the Appellate Division of the
Supreme Court of New York reached only the
petitioners’ due process objection to
section 651(b)(2) of the New York Tax Law.
Striking down the joint filing
requirement, the court relied upon this

Court’s decision in Miller Bros. Co. v.

Maryland, 347 U.S. 340, 344-45 (1954),

holding as follows:

Out-of-state
cohabitation with a
spouse having New York
income and filing a
joint Federal income
tax return with that

spouse cannot
constitute the
necessary minimum

connection for the
extraterritorial
exercise of New York’s
taxing power. Thus,
we have concluded that

an individual federal return.

20

Tax Law §651(b)(2)
violates due process
insofar as it may be
applied to require a
nonresident spouse of
a nonresident taxpayer
to file a joint State
tax return solely by
reason of the marital
relationship and the
filing by the couple
of a joint Federal
income tax return.

Brady v. State of New York, 172 A.D.2d at

22, 576 N.Y.S.2d at 899 (App. 20a).

The New York appellate court did not
reach the question of whether a
requirement that spousal income be
included in the calculation of a
nonresident New York taxpayer’s income tax
liability would violate the Due Process or
Equal Protection Clauses of the Fourteenth
Amendment or the Privileges and Immunities
Clause of the United States Constitution.

The court did not reach the other issues

21

because it concluded that sections 601(d)
and (e) do not by themselves reach spousal
income. In the opinion of the court,
section 651(b)(2) was the sole Statutory
mechanism for reaching spousal income for

tax calculation purposes. The court said:

The foregoing
ruling regarding Tax
Law §651(b)(2) renders
academic plaintiffs’
constitutional
challenges to the
validity of Tax Law
$601(d) and (e) that
were based upon the
interaction of those
sections with section
651(b)(2). The
language of Tax Law
$601(d) and (e) is
"Marriage neutral".
Once _a__nonresident
Spouse having no New
York income is no
longer obligated to
file a joint return

the remaining sections

of the Tax Law at

issue here are not

s2att_=nere are not
subject to the

objection that the
increase a onresident

taxpayer’s State tax

22

liability on the basis
of the non-New York

income of that
taxpayer’ s nonresident
spouse.

Id. (emphasis added) (App. 20a-2la)._

Thus, the Appellate Division of the
New York Supreme Court concluded that,
without the unconstitutional requirement
of section 651(b)(2) that a nonresident
spouse of a nonresident New York taxpayer
file a joint tax return with her spouse,
subsections (d) and (e) of section 601 do
not require a nonresident New York
taxpayer to include in his individual tax
return the income of his nonresident
spouse even if the couple had filed a
joint federal return.

-

7 2. Court of Appeals

23

New York did not appeal the decision
of the appellate division declaring
section 651(b)(2) of the New York Tax Law
to be unconstitutional. Nor did New York
appeal the ruling of the appellate
division that subsections (d) and (e) of
section 601 do not, independently of
section 651(b)(2), require a nonresident
New York taxpayer to include in his income
tax return the non-New York income of the
taxpayer’s nonresident spouse. Only the
petitioners appealed the appellate

division ruling.

The petitioners contended on appeal,
as they do in this Court, that sections
601(d) and (e) of the Tax Law are
unconstitutional because they require
inclusion of non-New York source income of

the individual nonresident taxpayer in the

tax calculation. However, even though

24

New York and its executive branch
officials did not appeal the appellate
division ruling, the New York Court of
Appeals overruled the appellate division’s
interpretation of sections 601(d) and (e).
Directly contrary to the opinion of the
appellate division, and contrary to the
arguments presented by the parties in the
lower courts, the court of appeals held
that sections 601(d) and (e),

independently of section 651(b)(2), do

require a nonresident taxpayer to report
his nonresident spouse’s income to New
York and to calculate his tax liability
based upon the joint income, regardless cf

the nonresident spouse’s lack of contact
with New York.

Thus, under the court of appeals’
interpretation of New York law, spousal

income is again attached by New York for

25

income taxation. Reversing his original
adherence to the appellate division’s
ruling, the Commissioner of Taxation and
Revenue no longer permits nonresident
taxpayers to recalculate their federal
adjusted gross income as if they had filed

individually rather than jointly.

The court of appeals described the
issue simply as "whether in fixing the
[state} tax rate, New York can refer to
Spousal income -included in the total
adjusted gross income on the couple’s

federal return ... ." Brady v. State of
New York, 80 N.Y.2d 596, 600n.1, 592

N.Y.S.2d 955, 956n.1, 607 N.E.2d 1060,
1061n.1 (1992) (emphasis added) (App. 4a).
The court of appeals held that New York's
authority to require the reporting of
spousal income for purposes of calculating

New York income tax liability, regardless

26

of the spouse’s lack of contact with New

York, "is unaffected by [the] holding" of
the appellate division that section
651(b)(2) requiring joint filing by the
spouse is unconstitutional. ee
Therefore, even though New York did not
appeal the appellate division
determination that sections 601(d) and (e)
of the Tax Law do not, without section
651(b)(2), in any way reach the income’ of
a nonresident spouse of a nonresident New
York taxpayer, the court of appeals held
that sections 60l(d) and (e) of the New
York Tax Law do provide that New York will

determine a nonresident’s tax liability by

“The appellate division clearly
disagreed with the court of appeals on
this issue of statutory construction
since the appellate division believed it
did not need to address the
constitutionality of requiring the
inclusion of spousal income in the
determination of income tax liability
once it struck down the joint filing
requirement. App. 20a-2la.

27

taking into account both the taxpayer’s
income and the income of his nonresident
Spouse -- as "determined by reference to
the taxpayer’s ‘federal adjusted gross
income’ (Tax Law §$612[a]})." Brady v.
State of New York, 80 N.Y.2d at 600, 592

N.Y.S.2d at 957, 607 N.E.2d at 1062 (App.
4a).

With one of the five judges
dissenting, the court of appeals rejected
each of the ‘arguments made by the
petitioners, including the argument that
Substantive due process does not permit
-New York to include in the tax calculation
of a nonresident taxpayer the separate
income of a nonresident spouse who has had
no contact with New York. The majority of
the court of appeals explained the
rationale for New York’s tax System as

follows:

A system of
progressive taxation
apportions the tax

burden based on
ability to pay --
higher income

taxpayers can pay more
and are therefore
taxed at a higher rate
than lower income
taxpayers.
Id., 80 N.Y.2d at 605, 592 N.Y.S.2d at

960, 607 N.E.2d at 1065 (App. 10a).

Implicit in the court of appeals’
rationale upholding the New York Tax Law
is the assumption that a nonresident New
York taxpayers’ income is defined not
simply by his own income, but by the joint
incomes of the taxpayer and his spouse.
Based on that assumption, New York
requires the reporting of the incomes of a
nonresident New York taxpayer and his

nonresident spouse as the measure of the

29

nonresident New York taxpayer’s "ability
to pay" income tax to New York. By
implication, New York and its court of
appeals has concluded that all marriage
partners residing in another state
necessarily share their individual incomes
with one another and are a single economic
entity for purposes of income taxation by
New York. New York’s assumption as to the
unitary status of married couples is
evidenced by the court of appeals’
statements that "similarly situated
taxpayers are those with the same total
income," id., 80 N.Y.2d at 605, 592
N.Y.S.2d at 960, 607 N.E.2d at 1065 (App.
10a), and that the joint income of married
couples is the true measure of their

"ability to pay" New York tax. Id.”

By measuring a couple’s "ability to
Pay" New York tax, the "economic reality"
and “practical effect" of New York’s
taxing scheme is that nonresidents with

30

B. SECTIONS 601(D) AND (E) OF THE
NEW YORK TAX LAW VIOLATE THE DUE PROCESS
RIGHTS OF NONRESIDENTS

On its face, sections 601(d) and (e)
of the New York Tax Law mandate that every
nonresident who derives income from New
York file a New York tax return reporting
all of the taxpayer’s income, from
whatever jurisdiction derived. And as now
construed by the Court of Appeals of New
York, sections 601(d) and (e) also require
a non-resident to report as well the

income of his nonresident spouse if, for

that tax year, the couple has elected

no connection to New York whatsoever are
compelled by "economic realities" to
assist their spouses in paying income tax
to New York. The practical effect upon
the nonresident spouse is that he or she
is to pay income tax to New York without
having received individually any benefit
or protection from New York and without
having had any relevant contact with New
York.

31

under federal law to file a joint return
with the Internal Revenue’ Service.
Sectfons 601(d) and (e) then require a
nonresident New York taxpayer to pay
income tax to New York based upon his
total income and the total income of his

nonresident spouse.

As construed by the court of appeals,
therefore, a Pennsylvania resident who
receives some cr all of his income from
New York, but whose spouse receives all of
her income from Pennsylvania sources or
other non-New York sources, is
nevertheless ee by New York law
(subject to criminal and civil penalties)
to disclose to New York both his entire
income and the income of his spouse earned
solely outside New York or derived solely

from sources outside New York. Then, the

New York Tax Law requires that the

32

nonresident taxpayer pay tax to New York
based on both his income and income
received solely by his spouse -- income
which the taxpayer does not legally own or
control, and from which he may not even
derive any benefit. New York imposes
these filing and payment obligations
involving nonresident spousal income
solely on the basis that the nonresident
couple has filed a joint federal tax

return.

Contrary to the limits of due
process, the nonresident taxpayer is
required to report his nonresident
spouse’s income and to pay tax based on

his spouse’s income to New York even if

the spouse has had not even one solitary
transaction having any contact with the

State of New York. Indeed, under the New

York Tax Law, the nonresident spouse of

33

the nonresident New York taxpayer would
not even have had to step one foot into
New York for the spouse’s income to be the
subject of the New York disclosure end tax
requirements. Yet New York presumes to
command a nonresident taxpayer residing in
Pennsylvania or another state to pay tax
to New York based on the income of another
person, his spouse, who has had no contact

with New York.

No conceivable argument under the Due
Process Clause of the Fourteenth Amendment
to the United States Constitution can
constitutionally justify New York’s
overreaching into Pennsylvania to tax the
income of Pennsylvania residents based
upon the income of the taxpayer’s spouse
who has had no meaningful or relevant
business or contact with New York.

Because sections 601(d) and (e), as

34

construed by the court of appeals, do
impose disclosure and tax obligations
involving the income of Pennsylvanians and

residents of other states who have had no

contact with New York, i.e., spouses of

nonresident New York taxpayers, the law

exceeds the bounds of due process.

As this Court has held:

If the Legislature of
a State should enact
that the citizens or
property of another
State or country
should be taxed in the
same manner as_ the
persons and property
within its own limits
and subject to its
authority, or in any
other manner
whatsoever, such a law
would be as much 4
nullity as if in
conflict with the most

a a

Se SS a Ss t
constitutional
inhibition.

St. Louis v. Wiggins Ferry Co., ll Wall.

35

(78 U.S.) 423, 430 (1871) (emphasis

added). See also New York, L.E. & W. R.

se. we. Pennsylvania, 153 U.S. 628, 646

(1894). Thus, before New York can require
a resident of Pennsylvania to comply with
the requirements of its tax laws --
including the requirements of disclosure
and taxation of income to New York -- New
York must show some relevant "minimal
contact" between New York and the person

whose income it seeks to reach. National

Bellas Hess, Inc. y. Illinois, 386 U.s.

753 (1967); Miller Bros. Co. v. Maryland,

347 U.S. 340 (1954).

Sections 601(d) and (€), as construed
by the court of appeals, are Clearly an
attempt by New York to reach, for
taxation, the incomes of Pennsylvania
residents and other nonresidents of New

York having no contact with New York but

36

who happen to be married to nonresident
New York taxpayers. The New York law

disregards the individual contacts of each

member of a marital couple domiciled in
Pennsylvania and other’ states. The
economic reality and practical effect of
the tax is to force a nonresident spouse
who is constitutionally beyond the taxing
authority of New York to contribute money
to her spouse to pay tax to New York. It
is no less a tax upon the spouse’s income
than if New York were to impose a tax
directly upon the nonresident spouse, as
it attempted to do under section 651(b)(2)
before the appellate division ruled the
joint filing requirement and liability
obligation to be unconstitutional. MThis
is precisely the type of broad, sweeping,
extra-territorial tax law which this Court
has said is prohibited by due process "as

if in conflict with the most explicit

37

constitutional inhibition." Wiggins

Ferry, supra, at 430.

C. NEW _YORK TAX LAW INTERFERES WITH
PENNSYLVANIA’S RIGHT TO DEFINE THE LEGAL

RELATIONSHIPS OF ITS MARRIED COUPLES

In briefs filed in the New York
courts, New York and its officials
Suggested that a nonresident of New York
might have contacts with New York,
sufficient to justify the imposition of
income tax requirements or to require the
reporting of joint income, simply "by
virtue of the economic benefit derived
from the New York income Shared by the
couple," or some "other [unspecified]
contacts" which the nonresident spouse
might have with New York (emphasis added).
The suggestion of New York and its
officials apparently is that New York may

presume, in enacting its tax laws, that

38

married couples domiciled in other states
are effectively one economic unit for
purposes of the due process clause and
that, therefore, New York may reach both
of their incomes as the income of one tmx

entity.

Perhaps, in defining the marital
relationship for its own domiciliaries,
New York law permits the state to presume
such "mutual economic benefit" between
spouses. But Pennsylvania, for one,
clearly does not presume such a
relationship between married couples
domiciled in Pennsylvania. It offends
both due process and the most basic
principles of comity when New York
presumes to define and interfere with the
economic relationships between spouses
domiciled in Pennsylvania in direct

contravention of Pennsylvania

39

constitutional law.

The Supreme Court of Pennsylvania
held more than a decade ago that the °
government may not view spouses domiciled
in Pennsylvania as one economic entity.

It said:

Any presumption of
identity of interest
is based upon the same
Ooutmoded social
conditions and policy
as was the common law
legal fiction of unity
of person of husband
and wife. Judges,
like all others, live
and work in a real
flesh and blood world,
tempered by the social
and cultural climate
of the GAP... :
Experience indicates,
and all perceptive
individuals inside and
outside the legal
profession know, that
to say soe that
husband and wife are
one and that their
interests are
identical is an
unmitigated fiction,

40

an assumption
supported by nothing
more than the meager
strength of its own
weak assertion. This
Gourt cannot and must
rot disregard the
plain fact that
spouses are no longer
completely dependent
upon one another
either economically,
socially or legally.

Modern conditions
demand that courts no
longer engage in the
automatic and
unsupported assumption
that one’s pecuniary

or proprietary
interest is identical

to that of one’s

spouse. For many
years, parties to a
marriage have often
pursued independent
careers, businesses
and vocations... .

Estate of Grossman, 486 Pa. 460, 472-73,
406 A.2d 726, 732 (1979) (emphasis added).

See also Denoncourt Vv. State Ethics

Commission, 504 Pa. 191, 470 A.2d 945, 947

41

(1983).

Pennsylvania’s policy of treating
married couples as two separate, and
socially, economically and legally
independent persons, is directly
frustrated when New York presumes that all
married couples share the economic benefit
of their joint income and thereby
constitutionally subject both of their
incomes to the taxing authority of New
York. Comity among the states will not
Survive long if New York is permitted, in
enacting laws affecting married couples in
Pennsylvania,- to ignore the clear
pronouncements of Pennsylvania’s highest
court in defining the legal relationships
of Pennsylvania’s married couples. And
consistent with the requirements of comity
among the states, the due process clause

cannot accept such flimsy rationalizations

42

as New York would proffer to justify the
extra~territorial taxation and
interference with fundamental rights that
sections 601(d) and (e) of the New York
Tax Law visit upon the residents of

Pennsylvania.

There is also no basis, as New York
has professed, which would justify its
conclusion that the act of filing a joint
federal income tax return expresses the
joint and several "desires" of married
couples "to be considered as a single
taxable unit" by the State of New York or
any other state or local taxing
jurisdiction. Nor is there any basis for
New York’s argument that joint filing
evidences a married couple’s "willingness
to be considered for tax purposes as a
Single taxable unit" by any taxing entity

Other than the United States. Individuals

43

are subject to tax by the United States
government, and they individually make
decisions in complying with federal tax
law based upon considerations relating to
the taxes imposed and the laws enacted by
the United States Congress and the rules,
regulations and requirements imposed by
the Internal Revenue Service. Under those
tax laws, many married couples make the
decision to file a joint federal return.
In formulating decisions under the tax
laws enacted by the federal government to
file a joint return with the Internal
Revenue Service, married Citizens in the
United States do not thereby announce to
the world their willingness or desite to
be treated as a "Single taxable unit" by
any other jurisdiction or authority which

might attempt to subject them to taxation.

44

There is absolutely nothing in
federal statutory or constitutional law --
and New York has cited no authority --
which would permit New York to assume that
the filing of a federal joint tax return
establishes the "willingness" or "desire"
of individuals to be treated by
governments, other than the federal
government, as a single taxable unit

without regard to the individual rights

and privileges guaranteed by due process.
The filing of a joint federal tax return
simply does not constitute a voluntary

waiver of individual rights of due process

guaranteed by the United States
Constitution to be subject to taxation
only by those states with whom the
individual has had meaningful contact
sufficient constitutionally to justify the

tax obligation imposed by the state.

45

ee

The filing of a joint federal tax

which precludes the government from
treating Spouses as one economic entity.
A Pennsylvania resident’s filing of a
joint federal tax return with his or her
Spouse, who earns or derives income
Subject to tax in New York, does not
create any "contact" with New York which
constitutionally could empower New York to
reach across state lines to compel the
Pennsylvania resident to report his income
to New York or to assist his or her Spouse
in the Payment of his New York tax
liability. The income earned by a
Pennsylvania resident remains his income
and is not the income of the Pennsylvania
resident’s Spouse, The filing of a

federal joint tax return does not provide

any constitutionally relevant connection

46

between the Pennsylvania resident who has
no New York income and the income derived
py his or her spouse from New York.
Because the filing of a joint federal
tax return creates no “minimal contact"
between New York and ae Pennsylvania
resident sufficient to empower New York
constitutionally to cross state lines to
impose tax liabilities and obligations
upon Pennsylvania residents, sections
601(d) and (e) of the New York Tax Law

violate due process.

D. SECTIONS _601(D) AND
(E), WHEN COMPARED TO
SECTION 651/(B)(4),
VIOLATE THE PRIVILEGES
AND ___I ITIE
EQUAL PROTECTION
CLAUSES OF THE UNITED
STATES CONSTITUTION

Pennsylvania also joins with the
petitioners in their objection to the

inexplicable favorable treatment received

47

by residents of New York married to
nonresidents compared to New York’s
treatment of married couples who both
reside outside of New York. Section
651(b)(4) of the Tax Law permits a New
York resident who is married to a
nonresident the option of filing a
separate return reporting solely the
resident’s individual income. At the same
time, sections 601(d) and (©) of the Tax

Law require a nonresident taxpayer who is

married to a nonresident with whom he has
filed a joint federal tax return to report
their joint income, resulting in a higher
rate of taxation. By such disparate
treatment that uniformly disadvantages
nonresidents married to nonresidents
compared to residents married to
nonresidents, New York has failed "'to
place the citizens of each state upon the

same footing with citizens of other

48

States, so far as the advantages resulting
from citizenship in those States are

concerned.’" Supreme Court of Virginia v.

Friedman, 487 U.S. 59, 64 (1988) (quoting

Paul v. Virginia, 75 U.S. (8 Wall.) 168,

180 (1969)).

An example will make the point.
Assume two men -- Bob and Steve -- work
together at the same firm in New York City
and earn the same annual salary of
$80,000. Neither has any other
significant source of income. Steve
resides in New York, while Bob resides in
Pennsylvania. Assume further that both
Bob and Steve are married to Pennsylvania
residents. Bob is married to Amy, and
Steve is married to Ruth. Assume further
that both Amy and Ruth earn all of their
incomes in Pennsylvania and have equal

annual incomes of $30,000. Both couples

49

file a joint federal income tax return.
Thus, the two couples’ joint incomes are

identical -- $110,000 for the year.

Under sections 601(d) and (e@) of the
New York Tax Law, Bob is required to file
@ New York tax return disclosing to New
York both his individual income of $80,000
earned in New York and the income of
$30,000 earned by his wife, Amy, in
Pennsylvania. Bob is then required to pay
to New York income tax at a rate
determined by the joint income of $110,000
the couple reported on their federal tax
return. Presumably New York justifies
consideration of Amy’s income with Bob’s
income on the unfounded assumption that
both Amy’s income and Bob’s income are
necessarily available to Bob to enable him
to pay the New York tax which he owes

under New York law. According to New

50

York, the couple’s joint income is a
better measure of Bob’s ability to pay the
New York tax which he owes as a result of
his employment in New York than the amount

of Bob’s income alone.

By contrast, under section 651(b) (4)
of the Tax Law, Steve is not required as a
resident of New York to disclose his wife
Ruth’s income of $30,000 to New York; and
Steve is not required to include Ruth’s
income in calculating his own tax
liability on his income for the year.
Thus, because he is a resident of New
York, Steve pays income tax to New York at
a rate determined solely by his own income
of $80,000. By contrast, Bob is required
to pay more tax to New York, on the

identical amount of individual income as

Steve received, based upon the addition of

his income and his spouse’s income. Thus,

51

solely because Steve is a resident of New
York, he Pays a lower rate of tax than Bob
on identical incomes. Solely because he
is a nonresident, Bob is forced by New
York to Pay a higher rate of tax on his
income than his New York resident co-

worker.

On what rationale could New York
conceivably require the reporting of Amy’s
income for New York tax calculation, while
the identical income earned by Ruth is
beyond the taxing authority of New York?
And why is nonresident Bob required to pay
tax to New York at a rate higher than
resident Steve is required to Pay on
taxable incomes which are identical,
solely because Bob is a nonresident and
Steve is a resident? There is absolutely

no conceivable rationale for this

like Steve who have nonresident spouses.
New York cannot rationally explain why
residents like Steve, who have nonresident
spouses, are not presumed by New York to
enjoy the mutual economic benefits of
their spouses’ incomes, as New York
apparently presumes to be the case for two

nonresidents like Bob and Amy.

Under due process, neither Amy’s nor
Ruth’s incomes earned solely in
Pennsylvania should be the subject of New
York’s tax laws, and their spouses should
not be required to report or consider
their nonresident spouses’ incomes in
paying New York’s tax. But in any event,
under the Privileges and Immunities Clause
and the Equal Protection Clause, New York
may not treat Bob less favorably than
Steve solely because Bob is a nonresident

and Steve is a resident. Clearly, New

53

York does not Provide equal treatment when
one compares sections 601(d) and (©) with
651(b)(4) of the Tax Law. Therefore,
sections 601(d) and (e) are
unconstitutional unless the Option of
individual filing and reporting provided
under section 651(b)(4) to residents
married to nonresidents were afforded as
well to nonresidents married to
nonresidents.

CONCLUSION

This Court Should grant the Petition
for Writ of Certiorari to the Court of
Appeals of New York in order to address
the constitutionality Of tax laws Such as
those of New York which ignore state
lines, comity and respect for their

neighboring States in their attempts to

54

generate revenue from sources outside

their borders.

Respectfully submitted,

ERNEST D. PREATE
Attorney General of
Pennsylvania

Michael A. Roman

Chief Deputy Attorney
General

Tax Litigation Section

Office of Attorney General

Strawberry Square

Harrisburg, PA 17120

(717) 783-1460

JAMES J. HAGGERTY
General Counsel of Pennsylvania

Gregory E. Dunlap

Deputy General Counsel
Office of General Counsel
P.O. Box 11775

333 Market Street
Harrisburg, PA 17108
(717) 783-6563

Attorneys for Amicus Curiae
Commonwealth of Pennsylvania

DATED: May 21, 1993

ATTORNEY GENERAL OF COUNSEL :

Honorable Jeffrey R. Howard
Attorney General of New Hampshire
25 Capitol Street

State House Annex

Concord, New Hampshire 03301

CERTIFICATE OF SERVICE

I hereby certify that I did this
date cause three true copies of the

foregoing Brief of Amicus Curiae

Commonwealth of Pennsylvania and New
Hampshire in Support of Petition for Writ
of Certiorari to be served upon the
following attorneys by United States
first class mail, postage prepaid:

Honorable Robert Abrams,
Attorney General of New York
Daniel Smirlock,
Assistant Attorney General
The Capitol
Albany, NY 12224

David H. Weinstein, Esquire
Robert S. Kitchenoff, Esquire
Lindsay B. Slaughter, Esquire
KOHN, NAST & GRAF, P.C.

1101 Market Street

Suite 2400

Philadelphia, PA 19107

(Se

Michael A. Roman
Chief Deputy Attorney General

DATED: May 21, 1993

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_2403%3A4. Public record. Not legal advice.