29 05 2017

Tax Foundation To Campaign Against Retroactive US Tax Law Changes

The Tax Foundation has spoken out against the United States Supreme Court's decision to refuse to hear challenges against a state-level tax law change imposed retroactively.

The cases were Sonoco Products Co. v. Michigan Department of Treasury, No. 16-687; Skadden, Arps, Slate, etc. v. Michigan Department of Treasury, No. 16-688; Gillette Commercial Operations v. Michigan Department of Treasury, No. 16-697; IBM Corp. v. Michigan Department of Treasury, No. 16-698; Goodyear, et al. v. Michigan Department of Treasury, No. 16-699; and DirecTV Group Holdings v. Michigan Department of Treasury, No. 16-736.

They all related to Michigan's 2014 decision that a tax compact it had signed in 1967 was no longer advantageous. It decided to repeal it retroactively to 2008. The Tax Foundation noted this harmed a number of business taxpayers who had been counting on tax refunds.

The Tax Foundation noted it had filed a brief with the Supreme Court in one of the cases. It said the deeper issue is about the extent of protection from legislative overreach provided by the Due Process Clause of the Fourteenth Amendment.

The Tax Foundation said: "The seminal case regarding the Due Process limitations on retroactive tax law is United States v. Carlton, which provides that a retroactive tax statute must have a 'legitimate legislative purpose' and a 'modest' period of retroactivity. Unfortunately, courts are misapplying Carlton and upholding retroactive tax laws of increasingly long periods, to the point where states can essentially do whatever they please, unsettling expectations, and saddling taxpayers with years of unanticipated tax obligations. In many instances, the purpose of the retroactive tax law was merely to raise revenue."

Following the Supreme Court's decision to reject the appeals, the Tax Foundation said it would be launching a new project to bring greater awareness to retroactive tax increases. It said: "The Supreme Court is asked to hear over 8,000 cases a year, but only takes 70 to 80 of them. Thus, they don't hear over 99 percent of the cases they're asked to hear, and sometimes it seems like the odds are even higher for tax cases... Without a clear standard, this problem [of retroactive tax law changes] will only continue to proliferate."