Term: 2018
Docket: 17-419
Dawson v. Steager
- Pro
17-419 DAWSON V. STEAGER, WV STATE TAX COMMISSIONER DECISION BELOW: 2017 WL 2172006 GRANTED LIMITED TO THE QUESTION PRESENTED BY THE SOLICITOR GENERAL IN HIS BRIEF FOR THE UNITED STATES AS AMICUS CURIAE. Whether the doctrine of intergovernmental tax immunity, as codified in 4 U.S.C. 111, prohibits the State of West Virginia from exempting from state taxation the retirement benefits of certain former state law-enforcement officers, without providing the same exemption for the retirement benefits of former employees of the United States Marshals Service. CERT. GRANTED 6/25/2018 QUESTION PRESENTED: In Davis v. Michigan Department of Treasury, 489 U.S. 803, 815-16 (1989), this Court held that a state may not impose a heavier tax burden on federal employees than state employees, unless the discriminatory treatment is "justified by significant differences between the two classes." Such tax discrimination- even against a "subcategory" of federal employees- violates the doctrine of intergovernmental tax immunity and 4 U.S.C. § 111. See Jefferson Cty., Ala. v. Acker, 527 U.S. 423 (1999). James Dawson worked as a deputy U.S. Marshal before being presidentially appointed as the U.S. Marshal for the Southern District of West Virginia. Mr. Dawson was enrolled exclusively in the Federal Employee Retirement System ("FERS"). He sought a West Virginia tax exemption for all of his FERS retirement income, but that exemption was ultimately denied. Under West Virginia Law, Mr. Dawson is entitled to exempt a portion of his FERS income from his state taxable income. See W. VA. CODE §§ ll-21- 12(c)(5) and 11-21-12(c)(8). In contrast, West Virginia law allows state law enforcement retirees to entirely exempt from their taxable income all benefits received from four West Virginia retirement plans. See id. § 11 -21-12(c)(6). Federal law enforcement retirees like Mr. Dawson are not entitled to full exemptions, although it is undisputed that Mr. Dawson's job duties were not significantly different from those of the exempted state law enforcement officers. After Davis, three state courts of last resort struck down tax laws that discriminate against federal employees, but three state courts of last resort have upheld such laws based on an extremely narrow and strained reading of Davis, while many other state courts of last resort have inconsistently ruled on related laws. The question presented is: Whether this Court's precedent and the doctrine of intergovernmental tax immunity bar states from exempting groups of state retirees from state income tax while discriminating against similarly situated federal retirees based on the source of their retirement income. LOWER COURT CASE NUMBER: 16-0441
In Dawson v. Steager, the U.S. Supreme Court ruled unanimously in favor of James Dawson, a retired U.S. Marshal living in West Virginia who was taxed on his federal retirement benefits by the state while certain state law enforcement retirees were exempt from similar taxes. The court held that this taxation violated a federal law known as the "doctrine of intergovernmental tax immunity," which prohibits states from taxing federal employees more heavily than those employed by the state itself. Justice Neil Gorsuch wrote for the court and stated that there was no significant difference between Mr.Dawson's former job responsibilities and those of most of the tax-exempt state law enforcement officers to justify such differential treatment.
In the case of Dawson v. Steager, there was no dissenting opinion as the decision by the Supreme Court was unanimous. The court ruled in favor of Dawson, a retired U.S. Marshal living in West Virginia who argued that his pension should be tax exempt just like certain state and local law enforcement pensions under West Virginia law. The justices agreed with Dawson's argument that this discrepancy violated a federal law known as the doctrine of intergovernmental tax immunity which prohibits states from taxing federal government employees more heavily than those employed by the state.
