December 3, 2018
Writ Of Certiorari To The Supreme Court Of Appeals Of West
petitioner James Dawson retired from the U.S. Marshals
Service, his home State of West Virginia taxed his federal
pension benefits as it does all former federal employees. The
pension benefits of certain former state and local law
enforcement employees, however, are exempt from state
taxation. See W.Va. Code Ann. §11-21-12(c)(6).
Mr. Dawson sued, alleging that the state statute violates the
intergovernmental tax immunity doctrine as codified at 4
U.S.C. §111. Under that statute, the United States
consents to state taxation of the pay or compensation of
federal employees, but only if the state tax does not
discriminate on the basis of the source of the pay or
compensation. A West Virginia trial court found no
significant differences between Mr. Dawson's job duties
as a federal marshal and those of the state and local law
enforcement officers exempted from taxation and held that the
state statute violates §111's antidiscrimi nation
provision. Reversing, the West Virginia Supreme Court of
Appeals emphasized that the state tax exemption applies only
to a narrow class of state retirees and was never intended to
discriminate against former federal marshals.
The West Virginia statute unlawfully discriminates against
Mr. Dawson as §111 forbids. A State violates §111
when it treats retired state employees more favorably than
retired federal employees and no "significant
differences between the two classes" justify the
differential treatment. Davis v. Michigan Dept. of
Treasury, 489 U.S. 803, 814-816. Here, West Virginia
expressly affords state law enforcement retirees a tax
benefit that federal retirees cannot receive, and there are
no "significant differences" between Mr.
Dawson's former job responsibilities and those of the
tax-exempt state law enforcement retirees.
narrow preference should be permitted, the State argues,
because it affects too few people to meaningfully interfere
with federal government operations. Section 111, however,
disallows any state tax that discriminates against a
federal officer or employee-not just those that seem
especially cumbersome. And in Davis the Court
refused a similar invitation to add unwritten qualifications
to §111. That is not to say that the narrowness of a
state tax exemption is irrelevant. If a State exempts only a
narrow subset of state retirees, it can comply with §111
by exempting only the comparable class of federal retirees.
The State also argues that the statute is not intended to
harm federal retirees but to help certain state retirees. The
"State's interest in adopting the discriminatory
tax," however, "is simply irrelevant."
Davis, 489 U.S., at 816.
reasons other than job responsibilities, the State insists,
retired U.S. Marshals and tax-exempt state law enforcement
retirees are not "similarly situated." But the
State's statute does not draw any such lines. It singles
out for preferential treatment retirement plans associated
with particular state law enforcement officers. The
distinguishing characteristic of the retirement plans is the
nature of the jobs previously held by retirees who may
participate in them. The state trial court found no
"significant differences" between Mr. Dawson's
former job responsibilities as a U.S. Marshal and those of
the state law enforcement retirees who qualify for the tax
exemption, and the West Virginia Supreme Court of Appeals did
not upset that finding. By submitting that Mr. Dawson's
former job responsibilities are also similar to those of
other state law enforcement retirees who do not qualify for a
tax exemption, the State mistakes the nature of the inquiry.
The relevant question under §111 is not whether federal
retirees are similarly situated to state retirees who do not
receive a tax break; it is whether they are similarly
situated to those who do. Finally, the State says that the
real distinction may not be based on job duties at all but on
the relative generosity of pension benefits. The statute as
enacted, however, does not classify persons or groups on that
basis. And an implicit but lawful distinction cannot save an
express and unlawful one. See, e.g., id.,
at 817. Pp. 3-8.
spent your career as a state law enforcement officer in West
Virginia, you're likely to be eligible for a generous tax
exemption when you retire. But if you served in federal law
enforcement, West Virginia will deny you the same benefit.
The question we face is whether a State may discriminate
against federal retirees in that way.
most of his career, James Dawson worked in the U.S. Marshals
Service. After he retired, he began looking into the tax
treatment of his pension. It turns out that his home State,
West Virginia, doesn't tax the pension benefits of
certain former state law enforcement employees. But it does
tax the benefits of all former federal employees. So Mr.
Dawson brought this lawsuit alleging that West Virginia
violated 4 U.S.C. §111. In that statute, the United
States has consented to state taxation of the "pay or
compensation" of "officer[s] or employee[s] of the
United States," but only if the "taxation does not
discriminate against the officer or employee because of the
source of the pay or compensation." §111(a).
111 codifies a legal doctrine almost as old as the Nation. In
McCulloch v. Maryland, 4 Wheat. 316 (1819), this
Court invoked the Constitution's Supremacy Clause to
invalidate Maryland's effort to levy a tax on the Bank of
the United States. Chief Justice Marshall explained that
"the power to tax involves the power to destroy,"
and he reasoned that if States could tax the Bank they could
"defeat" the federal legislative policy
establishing it. Id., at 431-432. For the next few
decades, this Court interpreted McCulloch "to
bar most taxation by one sovereign of the employees of
another." Davis v. Michigan Dept. of Treasury,
489 U.S. 803, 810 (1989). In time, though, the Court softened
its stance and upheld neutral income taxes-those that treated
federal and state employees with an even hand. See
Helvering v. Gerhardt, 304 U.S. 405 (1938);
Graves v. New York ex rel. O'Keefe, 306 U.S. 466
(1939). So eventually the intergovernmental tax immunity
doctrine came to be understood to bar only
discriminatory taxes. It was this understanding that
Congress "consciously . . . drew upon" when
adopting §111 in 1939. Davis, 489 U.S., at 813.
this understanding, too, that has animated our application of
§111. Since the statute's adoption, we have upheld
an Alabama income tax that did not discriminate on the basis
of the source of the employees' compensation.
Jefferson County v. Acker, 527 U.S. 423 (1999). But
we have invalidated a Michigan tax that discriminated
"in favor of retired state employees and against retired
federal employees." Davis, 489 U.S., at 814. We
have struck down a Kansas law that taxed the retirement
benefits of federal military personnel at a higher rate than
state and local government retirement benefits. Barker v.
Kansas, 503 U.S. 594, 599 (1992). And we have rejected a
Texas scheme that imposed a property tax on a private company
operating on land leased from the federal government, but a
"less burdensome" tax on property leased from the
State. Phillips Chemical Co. v. Dumas Independent School
Dist., 361 U.S. 376, 378, 380 (1960).
Dawson's own attempt to invoke §111 met with mixed
success. A West Virginia trial court found it
"undisputed" that "there are no significant
differences btween Mr. Dawson's powers and duties as a
U.S. Marshal and the powers and duties of the state and local
law enforcement officers" that West Virginia exempts
from income tax. App. to Pet. for Cert. 22a. In the trial
court's judgment, the State's statute thus
represented "precisely the type of favoritism"
§111 prohibits. Id., at 23a. But the West
Virginia Supreme Court of Appeals saw it differently. In
reversing, the court emphasized that relatively few state
employees receive the tax break denied Mr. Dawson. The court
stressed, too, that the statute's "intent . . . was
to give a benefit to a narrow class of state retirees,"
not to harm federal retirees. Id., at 15a. Because
cases in this field have yielded inconsistent results, much
as this one has, we granted certiorari to afford additional
guidance. 585 U.S. (2018).
believe the state trial court had it right. A State violates
§111 when it treats retired state employees more
favorably than retired federal employees and no
"significant differences between the two classes"
justify the differential treatment. Davis, 489 U.S.,
at 814-816 (1989) (internal quotation marks omitted);
Phillips Chemical Co., 361 U.S., at 383. Here, West
Virginia expressly affords state law enforcement retirees a
tax benefit that federal retirees cannot receive. And before
us everyone accepts the trial court's factual finding
that there aren't any "significant differences"
between Mr. Dawson's former job responsibilities and
those of the tax-exempt state law enforcement retirees. Given
all this, we have little difficulty ...