The U.S. Supreme Court today issued orders denying petitions for certiorari in several cases challenging the constitutionality of retroactive state tax law changes.
In one of the denied cases, Dot Foods, Inc. v. Dep’t of Revenue of the State of Washington, the taxpayer argued that the Washington State Supreme Court erred when it held that a four-year period of retroactivity comported with the Due Process Clause. The other cases involved several different taxpayers, and generally concerned whether the Michigan legislature’s retroactive repeal of the Multistate Tax Compact back to 2008 (which effectively disallowed the Compact election) also violated the taxpayers’ due process. The Michigan taxpayers also requested that the high court review the Michigan appeals court’s holding in multiple cases that the Compact was not a binding contract, and that its retroactive repeal did not violate the Contract Clause of the U.S. Constitution.
Read the orders [PDF 82 KB]
The last time the Supreme Court addressed retroactivity was in 1994 in United States v. Carlton. In Carlton, the Court held that the retroactive period must be “rationally related” to a legitimate legislative purpose for a law increasing a tax liability to pass muster under the Due Process Clause. While the Court did not grant certiorari in any of these cases, this was not a surprising outcome because the Court very rarely agrees to hear state tax cases. Furthermore, the issue of retroactive state tax increases has been before the Court before. Most recently, in 2015, the Court denied cert in In re Estate of Hambleton, another Washington case challenging an eight-year period of retroactivity.
© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.