OCTOBER TERM, 1997
Syllabus
L UNDING ET UX.
v. NEW YORK TAX APPEALS TRIBUNAL ET
AL.
CERTIORARI TO THE COURT OF APPEALS OF NEW YORK No. 96-1462.
Argued November 5, 1997-Decided January 21, 1998
New York Tax Law § 631(b)(6) effectively denies only nonresident
taxpayers a state income tax deduction for alimony paid.
Petitioners-a Connecticut couple required to pay higher taxes on
their New York income when that State denied their attempted
deduction of a pro rata portion of the alimony petitioner husband
paid a previous spouse-exhausted their administrative remedies and
commenced this action, asserting, among other things, that §
631(b)(6) discriminates against New York nonresidents in violation
of the Privileges and Immunities Clause, U. S. Const., Art. IV, §2.
The Appellate Division of the New York Supreme Court agreed and
held § 631(b)(6) to be unconstitutional, but the New York Court of
Appeals reversed, holding that § 631(b)(6) was adequately justified
because New York residents who are subject to taxation on all of
their income regardless of source should be entitled to the benefit
of full deduction of expenses, while personal expenses of a
nonresident taxpayer are more appropriately allocated to the State
of residence. The court also noted that § 631(b)(6)'s practical
effect did not deny nonresidents all benefit of the alimony
deduction, because they could claim the full amount of such
payments in computing their hypothetical tax liability "as if" a
resident, one of the steps involved in computing nonresident tax
under New York law.
Held: In the absence of a substantial reason for the
difference in treatment of New York nonresidents, § 631(b)(6)
violates the Privileges and Immunities Clause by denying only
nonresidents an income tax deduction for alimony payments. Pp.
296-315.
(a) While States have considerable discretion in formulating
their income tax laws, that power must be exercised within the
limits of the Federal Constitution. When confronted with a
challenge under the Privileges and Immunities Clause to a law
distinguishing between residents and nonresidents, a State may
defend its position by demonstrating that "(i) there is a
substantial reason for the difference in treatment; and (ii) the
discrimination practiced against nonresidents bears a substantial
relationship to the State's objective."
Supreme Court of N.
H. v.
Piper, 470 U. S. 274, 284. Thus,
New York must defend §631(b)(6) with a substantial justification
for its different treatment of nonresidents, including an
explanation of how the discrimination relates
288
to the State's justification.
E. g., Shaffer v.
Carter, 252 U.
S. 37, 55. Pp.296-299.
(b) This Court's precedent respecting Privileges and Immunities
Clause challenges to nonresident income tax provisions informs the
review of the State's justification for § 631(b)(6).
Travis
v.
Yale &
Towne Mfg. Co., 252 U. S. 60, 80-82, and
Austin v.
New Hampshire, 420 U. S. 656, 665, make
clear that the Clause prohibits a State from denying nonresidents a
general tax exemption provided to residents, and
Shaffer,
supra, at 57, and
Travis, supra, at 75-76, establish
that States may limit nonresidents' deductions of business expenses
and nonbusiness deductions based on the relationship between those
expenses and in-state property or income. While the latter
decisions provide States considerable leeway in aligning
nonresidents' tax burden to their in-state activities, neither
those decisions nor
Austin can be fairly read to hold that
the Clause permits States to categorically deny personal deductions
to a nonresident taxpayer without a substantial justification for
the difference in treatment. pp. 299-302.
(c) Respondents' attempt to justify § 631 (b) (6)'s limitation
on nonresidents' deduction of alimony payments by asserting that
the State only has jurisdiction over their in-state activities is
rejected. The State's contention that, under
Shaffer and
Travis, it should not be required to consider expenses
"wholly linked to personal activities outside New York" does not
suffice. pp. 302-314.
(i) The New York Court of Appeals' decision upholding §
631(b)(6) does not contain any reasonable explanation or
substantial justification for the discriminatory provision. The
case on which that decision was based,
Goodwin v.
State
Tax Commission, 286 App. Div. 694, 146 N. Y. S. 2d 172, aff'd,
1 N. Y. 2d 680, appeal dism'd, 352 U. S. 805, is of questionable
relevance here, since it involved a state tax provision that is not
analogous to § 631(b)(6), was rendered before New York adopted its
present system of nonresident taxation, and was called into doubt
in a subsequent decision. Unlike the New York Court of Appeals,
this Court takes little comfort in the fact that inclusion of the
alimony deduction in a nonresident's federal adjusted gross income
reduces the nonresident's "as if" tax liability, because New York
effectively takes the alimony deduction back in the "apportionment
percentage" used to determine the actual tax owed. In summarizing
its holding in the present case, the New York Court of Appeals
explained that, because there could be no serious argument that
petitioners' alimony deductions were legitimate business expenses,
the approximate equality of tax treatment required by the
Constitution was satisfied. This Court's precedent, however, should
not be read to suggest that tax schemes allowing nonresidents to
deduct only their business expenses are
per se constitu-
289
tional. Accordingly, further inquiry into the State's
justification for § 631(b)(6) in light of its practical effect is
required. Pp. 303-306.
(ii) Respondents' arguments to this Court do not supply adequate
justification for § 631(b)(6). The State's suggestion that the
Court's summary dismissals in
Goodwin and other cases should
be dispositive here is rejected, because such dismissals do not
have the same precedential value as do opinions of the Court after
briefing and oral argument. Moreover, none of those cases involved
the unique problem of the complete denial of deductions for
nonresidents' alimony payments. Also unavailing is the State's
reliance on a statement by one of its former Tax Commissioners
that, because it cannot legally recognize the existence of non-New
York source income, the State cannot recognize deductions of a
personal nature unconnected with the production of income in New
York. There is good reason to question whether that statement
actually is a rationale for § 631(b)(6), given evidence that the
State currently permits nonresidents what amounts to a pro rata
deduction for personal expenses other than alimony and that, before
1987, it allowed them to deduct a pro rata share of alimony
payments. Moreover, this Court is not satisfied by the State's
argument that it need not consider the impact of disallowing
nonresidents a deduction for alimony paid merely because alimony
expenses are personal in nature, particularly in light of the
inequities that could result when a nonresident with alimony
obligations derives nearly all of her income from New York, a
scenario that may be "typical," see
Travis, supra, at 80. By
requiring nonresidents to pay more tax than similarly situated
residents solely on the basis of whether or not the nonresidents
are liable for alimony payments, § 631(b)(6) violates the "rule of
substantial equality of treatment" required by
Austin,
supra, at 665. Pp.306-311.
(iii) The Court also rejects respondents' claim that § 631(b)(6)
is justified by the State's adoption of an "income splitting"
regime that creates parity in the tax treatment of the spouses in a
dissolved marital relationship by allowing the alimony payer to
exclude the payment from income and requiring the recipient to
report a corresponding increase in income. Section 631(b)(6)
disallows nonresidents' entire alimony expenses without
consideration as to whether New York income tax will be paid by the
alimony recipients. Respondents' analysis begs the question whether
there is a substantial reason for this difference in treatment, and
is therefore not appreciably distinct from the State's assertion
that no justification is required because § 631(b)(6) does not
concern business expenses. Pp.311-313.
(iv) There is no basis in the record for the assertions of
several respondents' state
amici that § 631(b)(6) would have
only a
de minimis effect on the run-of-the-mill taxpayer or
on comity among the States
290
because States typically give their residents a deduction or
credit for income taxes paid to other States, so that the taxpayer
would pay roughly the same overall tax. Further, the
constitutionality of one State's statutes affecting nonresidents
cannot depend upon the statutes of other States.
E. g., Austin,
supra, at 668. Pp. 313-314.
89 N. Y. 2d 283, 675 N. E. 2d 816, reversed and remanded.
O'CONNOR, J., delivered the opinion of the Court, in which
STEVENS, SCALIA, SOUTER, THOMAS, and BREYER, JJ., joined. GINSBURG,
J., filed a dissenting opinion, in which REHNQUIST, C. J., and
KENNEDY, J., joined,
post, p. 315.
Christopher H. Lunding, pro se, argued the cause for
petitioners. With him on the briefs was
John E. Smith.
Andrew D. Bing, Assistant Attorney General of New York,
argued the cause for respondents. With him on the brief for
respondent Commissioner of Taxation and Finance were
Dennis
C.
Vacco, Attorney General,
Barbara G.
Billet,
Solicitor General, and
Peter H. Schiff, Deputy Solicitor
General. *
JUSTICE O'CONNOR delivered the opinion of the Court. The
Privileges and Immunities Clause, U. S. Const., Art.
IV; § 2, provides that "[t]he Citizens of each State shall be
entitled to all Privileges and Immunities of Citizens in the
several States." In this case, we consider whether a provision of
New York law that effectively denies only nonresident taxpayers an
income tax deduction for alimony paid is consistent with that
constitutional command. We conclude that because New York has not
adequately justified the discrimi-
* A brief of
amici curiae urging affirmance was filed for
the State of Ohio et al. by
Betty D. Montgomery, Attorney
General of Ohio,
Jeffrey S.
Sutton, State Solicitor,
and
Robert C.
Maier and
Barton A. Hubbard,
Assistant Attorneys General, and by the Attorneys General for their
respective States as follows:
Winston Bryant of Arkansas,
Daniel E. Lungren of California,
Margery E. Bronster
of Hawaii,
Alan G.
Lance of Idaho,
James E.
Ryan of Illinois,
Jeremiah W (Jay) Nixon of Missouri,
Joseph P. Mazurek of Montana,
Michael F.
Easley of North Carolina,
Jan Graham of Utah,
William H. Sorrell of Vermont,
Darrell V. McGraw of
West Virginia, and
James E. Doyle of Wisconsin.
291
natory treatment of nonresidents effected by N. Y. Tax Law §
631(b)(6), the challenged provision violates the Privileges and
Immunities Clause.
I A
New York law requires nonresident individuals to pay tax on net
income from New York real property or tangible personalty and net
income from employment or business, trade, or professional
operations in New York. See N. Y. Tax Law §§ 631(a), (b) (McKinney
1987). Under provisions enacted by the New York Legislature in
1987, the tax on such income is determined according to a method
that takes into consideration the relationship between a
nonresident taxpayer's New York source income and the taxpayer's
total income, as reported to the Federal Government. §
601(e)(1).
Computation of the income tax nonresidents owe New York involves
several steps. First, nonresidents must compute their tax liability
"as if" they resided in New York.
Ibid. The starting point
for this computation is federal adjusted gross income, which, in
accordance with the Internal Revenue Code, 26 U. S. C. § 215,
includes a deduction for alimony payments. After various
adjustments to federal adjusted gross income, nonresidents derive
their "as if" resident taxable income from which "as if" resident
tax is computed, using the same tax rates applicable to residents.
Once the "as if" resident tax has been computed, nonresidents
derive an "apportionment percentage" to be applied to that amount,
based on the ratio of New York source income to federal adjusted
gross income. N. Y. Tax Law § 601(e)(1). The denominator of the
ratio, federal adjusted gross income, includes a deduction for
alimony paid, by virtue of 26 U. S. C. § 215, as incorporated into
New York law by N. Y. Tax Law § 612(a). The numerator, New York
source income, includes the net income from property, employment,
or business operations in New York, but, by operation of §
631(b)(6), specifi-
292
cally disallows any deduction for alimony paid.1 In the last
step of the computation, nonresidents multiply the "as if" resident
tax by the apportionment percentage, thereby computing their actual
New York income tax liability. There is no upper limit on the
apportionment percentage. Thus, in circumstances where a
nonresident's New York income, which does not include a deduction
for alimony paid, exceeds federal adjusted gross income, which
does, the nonresident will be liable for
more than 100% of
the "as if" resident tax.2
Section 631(b)(6) was enacted as part of New York's Tax Reform
and Reduction Act of 1987. Until then, nonresidents were allowed to
claim a pro rata deduction for alimony expenses, pursuant to a New
York Court of Appeals decision holding that New York tax law then
"reflected a policy decision that nonresidents be allowed the same
non-business deductions as residents, but that such deductions be
allowed to nonresidents in the proportion of their New York income
to income from all sources."
Friedsam v.
State Tax
Comm'n, 64 N. Y. 2d 76, 81, 473 N. E. 2d 1181, 1184 (1984)
(internal quotation marks omitted); see also Memorandum of
Governor, L. 1961, ch. 68, N. Y. State Legis. Ann., 1961, p. 398
(describing former N. Y. Tax Law § 635(c)(1), which permitted
nonresidents to deduct a pro rata portion of their itemized
deductions, then including alimony, as "represent[ing] the fairest
and most equitable solution to the problem of many years' standing"
respecting the taxation of nonresidents working in New York).
Although there is no legislative history explaining the rationale
for its enactment,
1 Section 631(b)(6) provides that "[t]he deduction allowed by
section two hundred fifteen of the internal revenue code, relating
to alimony, shall not constitute a deduction derived from New York
sources."
2See,
e. g., 1990 IT-203-I, Instructions for Form
IT-203, Nonresident and Part-Year Resident Income Tax Return ("To
figure your income percentage, divide the amount ... in the
New
York State Amount column by the amount ... in the
Federal
Amount column .... If the amount ... in the
New York State
Amount column is more than the amount ... in the
Federal
Amount column, the income percentage will be more than
100%").
293
§ 631(b)(6) clearly overruled
Friedsam's requirement that
New York permit nonresidents a pro rata deduction for alimony
payments.
B
In 1990, petitioners Christopher Lunding and his wife, Barbara,
were residents of Connecticut. During that year, Christopher L
unding earned substantial income from the practice of law in New
York. That year, he also incurred alimony expenses relating to the
dissolution of a previous marriage. In accordance with New York
law, petitioners filed a New York Nonresident Income Tax Return to
report the New York earnings. Petitioners did not comply with the
limitation in § 631(b)(6), however, instead deducting a pro rata
portion of alimony paid in computing their New York income based on
their determination that approximately 48% of Christopher's
business income was attributable to New York.
The Audit Division of the New York Department of Taxation and
Finance denied that deduction and recomputed petitioners' tax
liability. After recalculation without the pro rata alimony
deduction, petitioners owed an additional $3,724 in New York income
taxes, plus interest. Petitioners appealed the additional
assessment to the New York Division of Tax Appeals, asserting that
§ 631(b)(6) discriminates against New York nonresidents in
violation of the Privileges and Immunities, Equal Protection, and
Commerce Clauses of the Federal Constitution. After unsuccessful
administrative appeals, in which their constitutional arguments
were not addressed, petitioners commenced an action before the
Appellate Division of the New York Supreme Court, pursuant to N. Y.
Tax Law § 2016 (McKinney 1987).
The Appellate Division held that § 631(b)(6) violates the
Privileges and Immunities Clause, relying upon its decision in
Friedsam v.
State Tax Comm'n, 98 App. Div. 2d 26,470
N. Y. S. 2d 848 (3d Dept. 1983), which had been affirmed by the New
York Court of Appeals, see
supra, at 292. 218 App.
294
Div. 2d 268, 639 N. Y. S. 2d 519 (3d Dept. 1996). According to
the court's reasoning, "although a disparity in treatment [of
nonresidents] is permitted if valid reasons exist, the Privileges
and Immunities Clause proscribes such conduct ... where there is no
substantial reason for the discrimination beyond the mere fact that
[nonresidents] are citizens of other States."
Id., at 270,
639 N. Y. S. 2d, at 520 (internal quotation marks omitted). Thus,
despite the intervening enactment of § 631(b)(6), the court
concluded that "there exists no substantial reason for the
disparate treatment, leaving as '[t]he only criterion ... whether
the payor is a resident or nonresident.'"
Id., at 272, 639
N. Y. S. 2d, at 521 (quoting
Friedsam, supra, at 29, 470 N.
Y. S. 2d, at 850).
Respondents appealed to the New York Court of Appeals, which
reversed the lower court's ruling and upheld the constitutionality
of § 631(b)(6). 89 N. Y. 2d 283, 675 N. E. 2d 816 (1996). In its
decision, the New York Court of Appeals found that
Shaffer
v.
Carter, 252
U. S. 37 (1920), and
Travis v.
Yale &
Towne Mfg. Co., 252 U. S. 60 (1920),
"established that limiting taxation of nonresidents to their
in-State income [is] a sufficient justification for similarly
limiting their deductions to expenses derived from sources
producing that in-State income," and that the constitutionality of
a tax law should be determined based on its "'practical effect.'"
89 N. Y. 2d, at 288, 675 N. E. 2d, at 819. The court noted that
"the Privileges and Immunities Clause does not mandate absolute
equality in tax treatment," and quoted from
Supreme Court of
N.
H. v.
Piper, 470 U. S. 274, 284
(1985), in explaining that the Clause is not violated where" '(i)
there is a substantial reason for the difference in treatment; and
(ii) the discrimination practiced against nonresidents bears a
substantial relationship to the State's objective.'" 89 N. Y. 2d,
at 289, 675 N. E. 2d, at 820.
Applying those principles to § 631(b)(6), the court determined
that the constitutionality of not allowing nonresidents to deduct
personal expenses had been settled by
Goodwin v.
295
State Tax Comm'n, 286 App. Div. 694, 146 N. Y. S. 2d 172,
aff'd, 1 N. Y. 2d 680, 133 N. E. 2d 711 (1955), appeal dism'd, 352
U. S. 805 (1956), in which a New Jersey resident unsuccessfully
challenged New York's denial of tax deductions respecting New
Jersey real estate taxes, interest payments, medical expenses, and
life insurance premiums. The
Lunding court adopted two
rationales from
Goodwin in concluding that § 631(b)(6) was
adequately justified. First, the court reasoned that because New
York residents are subject to the burden of taxation on all of
their income regardless of source, they should be entitled to the
benefit of full deduction of expenses. Second, the court concluded
that where deductions represent personal expenses of a nonresident
taxpayer, they are more appropriately allocated to the State of
residence. 89 N. Y. 2d, at 289-290, 675 N. E. 2d, at 820.
Based on those justifications for § 631(b)(6), the court
distinguished this case from its
post-Goodwin decision,
Golden v.
Tully, 58 N. Y. 2d 1047, 449 N. E. 2d 406
(1983), in which New York's policy of granting a moving expense
deduction to residents while denying it to nonresidents was found
to violate the Privileges and Immunities Clause because "[n]o other
rationale" besides the taxpayer's nonresidence "was ... proffered
to justify the discrepancy in treating residents and nonresidents."
According to the court,
Golden was decided "solely on the
narrow ground that the Tax Commission in its answer and bill of
particulars had offered only nonresidence as the explanation for
the disallowance" of nonresidents' moving expenses. 89 N. Y. 2d, at
290, 675 N. E. 2d, at 821. The court also distinguished
Friedsam, supra, on the ground that § 631(b)(6) was enacted
to overrule that decision. 89 N. Y. 2d, at 290, 675 N. E. 2d, at
821.
As to § 631(b)(6)'s practical effect, the court noted that
"nonresidents are not denied all benefit of the alimony deduction
since they can claim the full amount of such payments in computing
the hypothetical tax liability 'as if a resident' under Tax Law §
601(e)."
Id., at 291, 675 N. E. 2d, at 821.
296
The court rejected petitioners' contention that the lack of
legislative history explaining § 631(b)(6) was of any importance,
finding that "substantial reasons for the disparity in tax
treatment are apparent on the face of the statutory scheme."
Ibid. The court also rejected petitioners' claims that §
631(b)(6) violates the Equal Protection and Commerce Clauses.
Ibid. Those claims are not before this Court.
Recognizing that the ruling of the New York Court of Appeals in
this case creates a clear conflict with the Oregon Supreme Court's
decision in
Wood v.
Department of Revenue, 305 Ore.
23,749 P. 2d 1169 (1988), and is in tension with the South Carolina
Supreme Court's ruling in
Spencer v.
South Carolina Tax
Comm'n, 281 S. C. 492, 316 S. E. 2d 386 (1984), aff'd by an
equally divided Court,
471 U. S. 82 (1985), we
granted certiorari. 520 U. S. 1227 (1997). We conclude that, in the
absence of a substantial reason for the difference in treatment of
nonresidents, § 631(b)(6) violates the Privileges and Immunities
Clause by denying only nonresidents an income tax deduction for
alimony payments.
II A
The object of the Privileges and Immunities Clause is to
"strongly ... constitute the citizens of the United States one
people," by "plac[ing] the citizens of each State upon the same
footing with citizens of other States, so far as the advantages
resulting from citizenship in those States are concerned."
Paul v.
Virginia, 8 Wall. 168, 180 (1869). One right
thereby secured is the right of a citizen of any State to "remove
to and carryon business in another without being subjected in
property or person to taxes more onerous than the citizens of the
latter State are subjected to."
Shaffer, supra, at 56; see
also
Toomer v.
Witsell, 334 U. S. 385, 396
(1948); Ward v.
Maryland, 12 Wall. 418, 430
(1871).
Of course, nonresidents may "be required to make a ratable
contribution in taxes for the support of the govern-
297
ment."
Shaffer, 252 U. S., at 53. That duty is one "to
pay taxes not more onerous in effect than those imposed under like
circumstances upon citizens of the ... State."
Ibid.; see
also
Ward v.
Maryland, supra, at 430 (nonresidents
should not be "subjected to any higher tax or excise than that
exacted by law of ... permanent residents"). Nonetheless, as a
practical matter, the Privileges and Immunities Clause affords no
assurance of precise equality in taxation between residents and
nonresidents of a particular State. Some differences may be
inherent in any taxing scheme, given that, "[l]ike many other
constitutional provisions, the privileges and immunities clause is
not an absolute,"
Toomer, supra, at 396, and that
"[a]bsolute equality is impracticable in taxation,"
Maxwell
v.
Bugbee, 250
U. S. 525, 543 (1919).
Because state legislatures must draw some distinctions in light
of "local needs," they have considerable discretion in formulating
tax policy.
Madden v.
Kentucky, 309 U. S. 83, 88 (1940).
Thus, "where the question is whether a state taxing law contravenes
rights secured by [the Federal Constitution], the decision must
depend not upon any mere question of form, construction, or
definition, but upon the practical operation and effect of the tax
imposed."
Shaffer, supra, at 55; see also
St. Louis
Southwestern R. Co. v.
Arkansas, 235 U. S. 350, 362
(1914) ("[W]hen the question is whether a tax imposed by a State
deprives a party of rights secured by the Federal Constitution, ...
[w]e must regard the substance, rather than the form, and the
controlling test is to be found in the operation and effect of the
law as applied and enforced by the State"). In short, as this Court
has noted in the equal protection context, "inequalities that
result not from hostile discrimination, but occasionally and
incidentally in the application of a [tax] system that is not
arbitrary in its classification, are not sufficient to defeat the
law."
Maxwell, supra, at 543.
We have described this balance as "a rule of substantial
equality of treatment" for resident and nonresident taxpay-
298
ers.
Austin v.
New Hampshire, 420 U. S. 656, 665
(1975). Where nonresidents are subject to different treatment,
there must be "reasonable ground for ... diversity of treatment."
Travis, 252 U. S., at 79; see also
Travellers' Ins.
Co. v.
Connecticut, 185 U. S. 364, 371 (1902)
("It is enough that the State has secured a reasonably fair
distribution of burdens"). As explained in
Toomer, the
Privileges and Immunities Clause bars
"discrimination against citizens of other States where there is
no substantial reason for the discrimination beyond the mere fact
that they are citizens of other States. But it does not preclude
disparity of treatment in the many situations where there are
perfectly valid independent reasons for it. Thus the inquiry in
each case must be concerned with whether such reasons do exist and
whether the degree of discrimination bears a close relationship to
them. The inquiry must also, of course, be conducted with due
regard for the principle that the States should have considerable
leeway in analyzing local evils and in prescribing appropriate
cures." 334 U. S., at 396.
Thus, when confronted with a challenge under the Privileges and
Immunities Clause to a law distinguishing between residents and
nonresidents, a State may defend its position by demonstrating that
"(i) there is a substantial reason for the difference in treatment;
and (ii) the discrimination practiced against nonresidents bears a
substantial relationship to the State's objective."
Piper,
470 U. S., at 284.
Our concern for the integrity of the Privileges and Immunities
Clause is reflected through a "standard of review substantially
more rigorous than that applied to state tax distinctions, among,
say, forms of business organizations or different trades and
professions."
Austin, supra, at 663. Thus, as both the New
York Court of Appeals, 89 N. Y. 2d, at 290, 675 N. E. 2d, at 820,
and the State, Brief for Respondent
299
Commissioner of Taxation and Finance 10-11, appropriately
acknowledge, the State must defend § 631(b)(6) with a substantial
justification for its different treatment of nonresidents,
including an explanation of how the discrimination relates to the
State's justification.
B
Our review of the State's justification for § 631(b)(6) is
informed by this Court's precedent respecting Privileges and
Immunities Clause challenges to nonresident income tax provisions.
In
Shaffer v.
Carter, the Court upheld Oklahoma's
denial of deductions for out-of-state losses to nonresidents who
were subject to Oklahoma's tax on in-state income. The Court
explained:
"The difference ... is only such as arises naturally from the
extent of the jurisdiction of the State in the two classes of
cases, and cannot be regarded as an unfriendly or unreasonable
discrimination. As to residents, it may, and does, exert its taxing
power over their income from all sources, whether within or without
the State, and it accords to them a corresponding privilege of
deducting their losses, wherever these accrue. As to nonresidents,
the jurisdiction extends only to their property owned within the
State and their business, trade, or profession carried on therein,
and the tax is only on such income as is derived from those
sources. Hence there is no obligation to accord to them a deduction
by reason of losses elsewhere incurred." 252 U. S., at 57.
In so holding, the Court emphasized the practical effect of the
provision, concluding that "the nonresident was not treated more
onerously than the resident in any particular, and in fact was
called upon to make no more than his ratable contribution to the
support of the state government."
Austin, supra, at 664.
Shaffer involved a challenge to the State's denial of
business-related deductions. The record in
Shaffer dis-
300
closes that, while Oklahoma law specified that nonresidents were
liable for Oklahoma income tax on "the entire net income from all
property owned, and of every business, trade or profession carried
on in [Oklahoma]," there was no express statutory bar preventing
nonresidents from claiming the same nonbusiness exemptions and
deductions as were available to resident taxpayers. See Tr. of
Record in
Shaffer v.
Carter, o. T. 1919, No. 531, pp.
15-18 (Ch. 164, Okla. House Bill No. 599 (1910), §§ 1, 5, 6, 8);
see also Brief on Behalf of Appellant in
Shaffer v.
Carter, o. T. 1919, No. 531, p. 91 ("In the trial court, ...
the [Oklahoma] Attorney General asserted that the appellant has the
same personal exemptions as a resident of Oklahoma").
In
Travis v.
Yale &
Towne Mfg. Co., a
Connecticut corporation doing business in New York sought to enjoin
enforcement of New York's nonresident income tax laws on behalf of
its employees, who were residents of Connecticut and New Jersey. In
an opinion issued on the same day as
Shaffer, the Court
affirmed
Shaffer's holding that a State may limit the
deductions of nonresidents to those related to the production of
in-state income. See
Travis, 252 U. S., at 75-76 (describing
Shaffer as settling that "there is no unconstitutional
discrimination against citizens of other States in confining the
deduction of expenses, losses, etc., in the case of non-resident
taxpayers, to such as are connected with income arising from
sources within the taxing State"). The record in
Travis
clarifies that many of the expenses and losses of nonresidents that
New York law so limited were business related, such as ordinary and
necessary business expenses, depreciation on business assets, and
depletion of natural resources, such as oil, gas, and timber. At
the time that
Travis was decided, New York law also allowed
nonresidents a pro rata deduction for various nonbusiness expenses,
such as interest paid (based on the proportion of New York source
income to total income), a deduction for taxes paid (other than
income taxes) to the extent those taxes were connected with New
York
301
income, and a deduction for uncompensated losses sustained in
New York resulting from limited circumstances, namely, nonbusiness
transactions entered into for profit and casualty losses. Both
residents and nonresidents were entitled to the same deduction for
contributions to charitable organizations organized under the laws
of New York. Tr. of Record in
Travis v.
Yale &
Towne Mfg. Co., O. T. 1919, No. 548 (State of New York, The
A, B, C of the Personal Income Tax Law, pp. 11-12, 14, "42, 44
(1919)). Thus, the statutory provisions disallowing nonresidents'
tax deductions at issue in
Travis essentially mirrored those
at issue in
Shaffer because they tied nonresidents'
deductions to their in-state activities.
Another provision of New York's nonresident tax law challenged
in
Travis did not survive scrutiny under the Privileges and
Immunities Clause, however. Evincing the same concern with
practical effect that animated the
Shaffer decision, the
Travis Court struck down a provision that denied only
nonresidents an exemption from tax on a certain threshold of
income, even though New York law allowed nonresidents a
corresponding credit against New York taxes in the event that they
paid resident income taxes in some other State providing a similar
credit to New York residents. The Court rejected the argument that
the rule was "a case of occasional or accidental inequality due to
circumstances personal to the taxpayer." 252 U. S., at 80. Nor was
denial of the exemption salvaged "upon the theory that
non-residents have untaxed income derived from sources in their
home States or elsewhere outside of the State of New York,
corresponding to the amount upon which residents of that State are
exempt from taxation [by New York] under this act," because "[t]he
discrimination is not conditioned upon the existence of such
untaxed income; and it would be rash to assume that non-residents
taxable in New York under this law, as a class, are receiving
additional income from outside sources equivalent to the amount of
the exemptions that are accorded to citizens of New York and denied
to them."
Id.,
302
at 81. Finally, the Court rejected as speculative and
constitutionally unsound the argument that States adjoining New
York could adopt an income tax, "in which event, injustice to their
citizens on the part of New York could be avoided by providing
similar exemptions similarly conditioned."
Id., at 82.
In
Austin, a more recent decision reviewing a State's
taxation of nonresidents, we considered a commuter tax imposed by
New Hampshire, the effect of which was to tax only nonresidents
working in that State. The Court described its previous decisions,
including
Shaffer and
Travis, as "establishing a rule
of substantial equality of treatment for the citizens of the taxing
State and nonresident taxpayers," under which New Hampshire's
one-sided tax failed. 420
Travis and
Austin make clear that the Privileges
and Immunities Clause prohibits a State from denying nonresidents a
general tax exemption provided to residents, while
Shaffer
and
Travis establish that States may limit nonresidents'
deductions of business expenses and nonbusiness deductions based on
the relationship between those expenses and instate property or
income. While the latter decisions provide States a considerable
amount of leeway in aligning the tax burden of nonresidents to
in-state activities, neither they nor
Austin can be fairly
read as holding that the Privileges and Immunities Clause permits
States to categorically deny personal deductions to a nonresident
taxpayer, without a substantial justification for the difference in
treatment.
III
In this case, New York acknowledges the right of nonresidents to
pursue their livelihood on terms of substantial equality with
residents. There is no question that the issue presented in this
case is likely to affect many individuals, given the fact that it
is common for nonresidents to enter
303
New York City to pursue their livelihood, "it being a matter of
common knowledge that from necessity, due to the geographical
situation of [New York City], in close proximity to the neighboring
States, many thousands of men and women, residents and citizens of
those States, go daily from their homes to the city and earn their
livelihood there."
Travis, 252 U. S., at 80. In attempting
to justify the discrimination against nonresidents effected by §
631(b)(6), respondents assert that because the State only has
jurisdiction over nonresidents' in-state activities, its limitation
on nonresidents' deduction of alimony payments is valid. Invoking
Shaffer and
Travis, the State maintains that it
should not be required to consider expenses "wholly linked to
personal activities outside New York." Brief for Respondent
Commissioner of Taxation and Finance 24. We must consider whether
that assertion suffices to substantially justify the challenged
statute.
A
Looking first at the rationale the New York Court of Appeals
adopted in upholding § 631(b)(6), we do not find in the court's
decision any reasonable explanation or substantial justification
for the discriminatory provision. Although the court purported to
apply the two-part inquiry derived from
Toomer and
Piper, in the end, the justification for § 631(b)(6) was
based on rationales borrowed from another case,
Goodwin v.
State Tax Comm'n, 286 App. Div. 694, 146 N. Y. S. 2d 172,
aff'd, 1 N. Y. 2d 680, 133 N. E. 2d 711 (1955), appeal dism'd, 352
U. S. 805 (1956). There, a New Jersey resident challenged New
York's denial of deductions for real estate taxes and mortgage
interest on his New Jersey home, and his medical expenses and life
insurance premiums. The challenge in that case, however, was to a
provision of New York tax law substantially similar to that
considered in
Travis, under which nonresident taxpayers were
allowed deductions " 'only if and to the extent that, they are
connected
304
with [taxable] income arising from sources within the state.'"
286 App. Div., at 695, 146 N. Y. S. 2d, at 175 (quoting then N. Y.
Tax Law § 360(11)).
There is no analogous provision in § 631(b)(6), which plainly
limits nonresidents' deduction of alimony payments, irrespective of
whether those payments might somehow relate to New York-source
income. Although the
Goodwin court's rationale concerning
New York's disallowance of nonresidents' deduction of life
insurance premiums and medical expenses assumed that such expenses,
"made by [the taxpayer] in the course of his personal activities,
... must be regarded as having taken place in ... the state of his
residence,"
id., at 701, 146 N. Y. S. 2d, at 180, the court
also found that those expenses "embodie[d] a governmental policy
designed to serve a legitimate social end,"
ibid., namely,
"to encourage [New York] citizens to obtain life insurance
protection and ... to help [New York] citizens bear the burden of
an extraordinary illness or accident,"
id., at 700, 146 N.
Y. S. 2d, at 179.
In this case, the New York Court of Appeals similarly described
petitioners' alimony expenses as "wholly linked to personal
activities outside the State," but did not articulate any policy
basis for § 631(b)(6), save a reference in its discussion of
petitioners' Equal Protection Clause claim to the State's "policy
of taxing only those gains realized and losses incurred by a
nonresident in New York, while taxing residents on all income." 89
N. Y. 2d, at 291, 675 N. E. 2d, at 821. Quite possibly, no other
policy basis for § 631(b)(6) exists, given that, at the time
Goodwin was decided, New York appears to have allowed
nonresidents a deduction for alimony paid as long as the recipient
was a New York resident required to include the alimony in income.
See N. Y. Tax Law § 360(17) (1944). And for several years preceding
§ 631(b)(6)'s enactment, New York law permitted nonresidents to
claim a pro rata deduction of alimony paid regardless of the
recipient's residence. See
Friedsam, 64 N. Y. 2d,
305
at 81-82, 473 N. E. 2d, at 1184 (interpreting N. Y. Tax Law §
635(c)(1) (1961)).
In its reliance on
Goodwin, the New York Court of Appeals
also failed to account for the fact that, through its broad 1987
tax reforms, New York adopted a new system of nonresident taxation
that ties the income tax liability of nonresidents to the tax that
they would have paid if they were residents. Indeed, a
nonresident's "as if" tax liability, which determines both the tax
rate and total tax owed, is based on federal adjusted gross income
from
all sources, not just New York sources. In computing
their "as if" resident tax liability, nonresidents of New York are
permitted to consider every deduction that New York residents are
entitled to, both business and personal. It is only in the
computation of the apportionment percentage that New York has
chosen to isolate a specific deduction of nonresidents, alimony
paid, as entirely nondeductible under any circumstances. Further,
after
Goodwin but before this case, the New York Court of
Appeals acknowledged, in
Friedsam, supra, that the State's
policy and statutes favored parity, on a pro rata basis, in the
allowance of personal deductions to residents and nonresidents.
Accordingly, in light of the questionable relevance of
Goodwin to New York's current system of taxing nonresidents,
we do not agree with the New York Court of Appeals that
"substantial reasons for the disparity in tax treatment are
apparent on the face of [§ 631(b)(6)]," 89 N. Y. 2d, at 291, 675 N.
E. 2d, at 821.
We also take little comfort in the fact, noted by the New York
Court of Appeals, that § 631(b)(6) does not deny nonresidents all
benefit of the alimony deduction because that deduction is included
in federal adjusted gross income, one of the components in the
nonresident's computation of his New York tax liability. See
id., at 290-291, 675 N. E. 2d, at 821. That finding seems
contrary to the impression of New York's Commissioner of Taxation
and Finance as expressed in an advisory opinion,
In re
Rosenblatt, 1989-1990 Transfer
306
Binder, CCH N. Y. Tax Rep. , 252-998, p. 17,969 (Jan. 18, 1990),
in which the Commissioner explained that "[t]he effect of [§
631(b)(6)'s] allowance of the [alimony] deduction in the ...
denominator and disallowance in the numerator is that Petitioner
cannot get the benefit of a proportional deduction of the alimony
payments made to his spouse." In any event, respondents have never
argued to this Court that § 631(b)(6) effects anything other than a
denial of nonresidents' alimony deductions. Though the inclusion of
the alimony deduction in a nonresident's federal adjusted gross
income reduces the nonresident's "as if" tax liability, New York
effectively takes the alimony deduction back in the "apportionment
percentage" used to determine the actual tax owed, because the
numerator of that percentage does not include any deduction for
alimony paid, while the denominator does include such a
deduction.
In summarizing its holding, the New York Court of Appeals
explained that, because "there can be no serious argument that
petitioners' alimony deductions are legitimate business expenses[,]
... the approximate equality of tax treatment required by the
Constitution is satisfied, and greater fine-tuning in this tax
scheme is not constitutionally mandated." 89 N. Y. 2d, at 291, 675
N. E. 2d, at 821. This Court's precedent, however, should not be
read to suggest that tax schemes allowing nonresidents to deduct
only their business expenses are
per se constitutional, and
we must accordingly inquire further into the State's justification
for § 631(b)(6) in light of its practical effect.
B
Turning to respondents' arguments to this Court, as an initial
matter, we reject the State's suggestion that this Court's summary
dismissals in several other cases should be dispositive of the
question presented in this case. See Brief for Respondent
Commissioner of Taxation and Finance 15-
307
16, n. 8.3 Although we have noted that "[o]ur summary dismissals
are ... to be taken as rulings on the merits in the sense that they
rejected the specific challenges presented ... and left undisturbed
the judgment appealed from," we have also explained that they do
not "have the same precedential value ... as does an opinion of
this Court after briefing and oral argument on the merits."
Washington v.
Confederated Bands and Tribes of Yakima
Nation, 439 U. S.
463, 477, n. 20 (1979) (citations and internal quotation marks
omitted). "It is not at all unusual for the Court to find it
appropriate to give full consideration to a question that has been
the subject of previous summary action,"
ibid., particularly
where, as here, other courts have arrived at dissimilar outcomes.
In any event, none of the cases on which the State relies involved
the unique problem presented here, the complete denial of
deductions for nonresidents' alimony payments.
In the context of New York's overall scheme of nonresident
taxation, § 631(b)(6) is an anomaly. New York tax law
3 See
Goodwin v.
State Tax Comm'n, 286 App. Div.
694, 146 N. Y. S. 2d 172, aff'd, 1 N. Y. 2d 680,133 N. E. 2d 711
(1955) (involving State's denial of deductions not related to
in-state activities, including medical expenses and life insurance
premiums), appeal dism'd, 352 U. S. 805 (1956); see also
Lung v.
O'Chesky, 94 N. M. 802, 617 P. 2d 1317 (1980)
(involving State's denial of grocery and medical tax rebates to
nonresidents), appeal dism'd, 450 U. S. 961 (1981);
Rubin v.
Glaser, 83 N. J. 299, 416 A. 2d 382 (involving State's
limitation of homestead tax rebate to principal residences of
residents), appeal dism'd, 449 U. S. 977 (1980);
Davis v.
Franchise Tax Board, 71 Cal. App. 3d 998, 139 Cal. Rptr. 797
(1977) (involving State's denial of income averaging method of tax
computation to nonresidents), appeal dism'd, 434 U. S. 1055 (1978);
Wilson v.
Department of Revenue, 267 Ore. 103, 514 P.
2d 1334 (1973) (involving State's limitation of nonresident's
deductions to those connected with in-state income), appeal dism'd,
416 U. S. 964 (1974);
Anderson v.
Tiemann, 182 Neb.
393, 155 N. W. 2d 322 (1967) (involving State's denial of food
sales tax credit to nonresidents), appeal dism'd,
390 U. S. 714 (1968);
Berry v.
State Tax Comm'n, 241 Ore. 580, 397 P. 2d
780 (1964) (involving State's limitation of nonresidents' personal
deductions to those connected with in-state income), appeal dism'd,
382 U. S. 16
(1965).
308
currently permits nonresidents to avail themselves of what
amounts to a pro rata deduction for other tax-deductible personal
expenses besides alimony. Before 1987, New York law also allowed
nonresidents to deduct a pro rata share of alimony payments. The
New York State Tax Commissioner's advisory opinion in
In re
Rosenblatt indicates that § 631(b)(6) may have been intended to
overrule
Friedsam. See
In re Rosenblatt, supra, ,
252-998, at 17,969 (Section 631(b)(6) "specifically reversed
Friedson [sic] v.
State Tax Comm'n, 64 N. Y. 2d 76
(1984), which had allowed an alimony deduction to a nonresident
according to the formula for allocation of itemized deductions by
the nonresident"). Certainly, as the New York Court of Appeals
found, § 631(b)(6) "had the effect of removing [the] impairment"
imposed by
Friedsam, 89 N. Y. 2d, at 290, 675 N. E. 2d, at
821, thereby implying a disavowal of the State's previous policy of
substantial equality between residents and nonresidents.
The policy expressed in
Friedsam, which acknowledged the
principles of equality and fairness underlying the Privileges and
Immunities Clause, was not merely an "impairment," however.
Although the State has considerable freedom to establish and adjust
its tax policy respecting nonresidents, the end results must, of
course, comply with the Federal Constitution, and any provision
imposing disparate taxation upon nonresidents must be appropriately
justified. As this Court has explained, where "the power to tax is
not unlimited, validity is not established by the mere imposition
of a tax."
Mullaney v.
Anderson, 342 U. S. 415, 418
(1952).
To justify § 631(b)(6), the State refers to a statement,
presented in 1959 by New York's then-Commissioner of Taxation and
Finance before a Subcommittee of the House Judiciary Committee. In
that statement, the Commissioner explained, "'[s]ince legally we do
not and cannot recognize the existence of [non-New York source]
income, we have felt that, in general, we cannot recognize ...
other deductions,
309
which, in the main, are of a personal nature and are unconnected
with the production of income in New York.' " Brief for Respondent
Commissioner of Taxation and Finance 14 (quoting statement of Hon.
Joseph H. Murphy, Taxation of Income of Nonresidents, Hearing on H.
J. Res. 33 et al. and H. R. 4174 et al. before Subcommittee No.2 of
the House Committee on the Judiciary, 86th Cong., 1st Sess., 98-99
(1959)). Yet there is good reason to question whether that
statement actually is a rationale for § 631(b)(6), given
substantial evidence to the contrary, in both the history of the
State's treatment of nonresidents' alimony deductions,4 and its
current treatment of other personal deductions.
Moreover, to the extent that the cited testimony suggests that
no circumstances exist under which a State's denial of personal
deductions to nonresidents could be constrained, we reject its
premise. Certainly, as the Court found in
Travis, 252 U. S.,
at 79-80, nonresidents must be allowed tax exemptions in parity
with residents. And the most that the Court has suggested regarding
nonresidents' nonbusiness expenses is that their deduction may be
limited to the proportion of those expenses rationally related to
in-state income or activities. See
Shaffer, 252 U. S., at
56-57.
As a practical matter, the Court's interpretation of the
Privileges and Immunities Clause in
Travis and
Shaffer implies that States may effectively limit
nonresidents' deduction of certain personal expenses based on a
reason as simple as the fact that those expenses are clearly
related to residence in another State. But here, § 631(b)(6) does
not incorporate such analysis on its face or, according to the New
York Court of Appeals, through legislative history, see 89
4 See 1943 N. Y. Laws, ch. 245, § 3 (alimony deductions allowed
only when recipient is subject to New York tax); 1944 N. Y. Laws,
ch. 333, §2 (alimony deduction allowed to all residents and to
nonresidents only if recipient is subject to New York tax); 1961 N.
Y. Laws, ch. 68, § 1 (itemized deductions, including alimony,
generally allowed to nonresidents in proportion to New York source
income).
310
N. Y. 2d, at 290-291, 675 N. E. 2d, at 821. Moreover, there are
situations in which § 631(b)(6) could operate to require
nonresidents to pay significantly more tax than identically
situated residents. For example, if a nonresident's earnings were
derived primarily from New York sources, the effect of § 631(b)(6)
could be to raise the tax apportionment percentage above 100%,
thereby requiring that individual to pay
more tax than an
identically situated resident, solely because of the disallowed
alimony deduction. Under certain circumstances, the taxpayer could
even be liable for New York taxes approaching or even exceeding net
income.
There is no doubt that similar circumstances could arise
respecting the apportionment for tax purposes of income or expenses
based on in-state activities without a violation of the Privileges
and Immunities Clause. Such was the case in
Shaffer, despite
the petitioner's attempt to argue that he should be allowed to
offset net business income taxed by Oklahoma with business losses
incurred in other States. See 252 U. S., at 57. It is one thing,
however, for an anomalous situation to arise because an individual
has greater profits from business activities or property owned in
one particular State than in another. An entirely different
situation is presented by a facially inequitable and essentially
unsubstantiated taxing scheme that denies only nonresidents a tax
deduction for alimony payments, which while surely a personal
matter, see
United States v.
Gilmore, 372 U. S. 39, 44 (1963),
arguably bear some relationship to a taxpayer's overall earnings.
Alimony payments also differ from other types of personal
deductions, such as mortgage interest and property tax payments,
whose situs can be determined based on the location of the
underlying property. Thus, unlike the expenses discussed in
Shaffer, alimony payments cannot be so easily characterized
as "losses elsewhere incurred." 252 U. S., at 57. Rather, alimony
payments reflect an obligation of some duration that is determined
in large measure by an individual's income generally, wherever it
is earned. The
311
alimony obligation may be of a "personal" nature, but it cannot
be viewed as geographically fixed in the manner that other
expenses, such as business losses, mortgage interest payments, or
real estate taxes, might be.
Accordingly, contrary to the dissent's suggestion,
post,
at 321, 326-327, we do not propose that States are required to
allow nonresidents a deduction for all manner of personal expenses,
such as taxes paid to other States or mortgage interest relating to
an out-of-state residence. Nor do we imply that States invariably
must provide to nonresidents the same manner of tax credits
available to residents. Our precedent allows States to adopt
justified and reasonable distinctions between residents and
nonresidents in the provision of tax benefits, whether in the form
of tax deductions or tax credits. In this case, however, we are not
satisfied by the State's argument that it need not consider the
impact of disallowing nonresidents a deduction for alimony paid
merely because alimony expenses are personal in nature,
particularly in light of the inequities that could result when a
nonresident with alimony obligations derives nearly all of her
income from New York, a scenario that may be "typical," see
Travis, supra, at 80. By requiring nonresidents to pay more
tax than similarly situated residents solely on the basis of
whether or not the nonresidents are liable for alimony payments, §
631(b)(6) violates the "rule of substantial equality of treatment"
this Court described in
Austin, 420 U. S., at 665.
C
Respondents also propose that § 631(b)(6) is "consistent with
New York's taxation of families generally." Brief for Respondent
Commissioner of Taxation and Finance 14-15. It has been suggested
that one purpose of New York's 1987 tax law changes was to adopt a
regime of "income splitting," under which each spouse in a marital
relationship is taxed on an equal share of the total income from
the marital unit.
Ibid. (citing McIntyre & Pomp, State
Income Tax Treatment
312
of Residents and Nonresidents Under the Privileges and
Immunities Clause, 13 State Tax Notes 245, 249 (1997)). A similar
effect is achieved in the case of marital dissolution by allowing
the payer of alimony to exclude the payment from income and
requiring the recipient to report a corresponding increase in
income. Such treatment accords with provisions adopted in 1942 by
the Federal Government as a means of adjusting tax burdens on
alimony payers who, without a deduction for alimony paid, could
face a tax liability greater than their remaining income after
payment of alimony. See Committee Report, Revenue Act of 1942,
1942-2
In the federal system, when one resident taxpayer pays alimony
to another, the payer's alimony deduction is offset by the alimony
income reported by the recipient, leading to parity in the
allocation of the overall tax burden. Section 631(b)(6), however,
disallows nonresidents' entire alimony expenses with no
consideration given to whether New York income tax will be paid by
the recipients. Respondents explain that such concerns are simply
irrelevant to New York's taxation of nonresidents, because
"[e]xtending the benefit of income splitting to nonresidents is
inappropriate on tax policy grounds because nonresidents are taxed
by New York on only a slice of their income-that derived from New
York sources." Brief for Respondent Commissioner of Taxation and
Finance 15. Such analysis, however, begs the question whether there
is a substantial reason for the difference in treatment, and is
therefore not appreciably distinct from the State's assertion that
no such justification is required because § 631(b)(6) does not
concern business expenses.
Indeed, we fail to see how New York's disregard for the
residence of the alimony recipient does anything more than point
out potential inequities in the operation of § 631(b)(6).
Certainly, the concept of income splitting works when both former
spouses are residents of the
313
same State, because one spouse receives a tax deduction
corresponding to the other's reported income, thereby making the
state treasury whole (after adjustment for differences in the
spouses' respective tax rates). The scheme also results in an
equivalent allocation of total tax liability when one spouse is no
longer a resident of the same State, because each spouse retains
the burden of paying resident income taxes due to his or her own
State on their share of the split income. The benefit of income
splitting disappears, however, when a State in which neither spouse
resides essentially imposes a surtax on the alimony, such as the
tax increase New York imposes through § 631(b)(6). And, at the
extreme, when a New York resident receives alimony payments from a
nonresident New York taxpayer, § 631(b)(6) results in a
double-taxation windfall for the State: The recipient pays taxes on
the alimony but the nonresident payer is denied any deduction.
Although such treatment may accord with the Federal Government's
treatment of taxpayers who are nonresident aliens, see 26 U. S. C.
§§ 872 and 873, the reasonableness of such a scheme on a national
level is a different issue that does not implicate the Privileges
and Immunities Clause guarantee that individuals may migrate
between States to live and work.
D
Finally, several States, as
amici for respondents, assert
that § 631(b)(6) could not "have any more than a
de minimis
effect on the run-of-the-mill taxpayer or comity among the States,"
because States imposing an income tax typically provide a deduction
or credit to their residents for income taxes paid to other States.
Brief for State of Ohio et al. 8. Accordingly, their argument runs,
"[a]ll things being equal ... the taxpayer would pay roughly the
same total tax in the two States, the only difference being that
[the taxpayer's resident State] would get more and New York less of
the revenue."
Ibid. There is no basis for such an assertion
in
314
the record before us. In fact, in the year in question,
Connecticut imposed no income tax on petitioners' earned income.
Reply Brief for Petitioners 4, n. 1. "Nor, we may add, can the
constitutionality of one State's statutes affecting nonresidents
depend upon the present configuration of the statutes of another
State."
Austin, 420 U. S., at 668; see also
Travis,
252 U. S., at 81-82.
IV
In sum, we find that the State's inability to tax a
nonresident's entire income is not sufficient, in and of itself, to
justify the discrimination imposed by § 631(b)(6). While States
have considerable discretion in formulating their income tax laws,
that power must be exercised within the limits of the Federal
Constitution. Tax provisions imposing discriminatory treatment on
nonresident individuals must be reasonable in effect and based on a
substantial justification other than the fact of nonresidence.
Although the Privileges and Immunities Clause does not prevent
States from requiring nonresidents to allocate income and
deductions based on their in-state activities in the manner
described in
Shaffer and
Travis, those opinions do
not automatically guarantee that a State may disallow nonresident
taxpayers every manner of nonbusiness deduction on the assumption
that such amounts are inevitably allocable to the State in which
the taxpayer resides. Alimony obligations are unlike other expenses
that can be related to activities conducted in a particular State
or property held there. And as a personal obligation that generally
correlates with a taxpayer's total income or wealth, alimony bears
some relationship to earnings regardless of their source. Further,
the manner in which N ew York taxes nonresidents, based on an
allocation of an "as if" resident tax liability, not only imposes
upon nonresidents' income the effect of N ew York's graduated tax
rates but also imports a corresponding element of fairness in
allowing nonresidents a pro rata deduc-
315
tion of other types of personal expenses. It would seem more
consistent with that taxing scheme and with notions of fairness for
the State to allow nonresidents a pro rata deduction for alimony
paid, as well.
Under the circumstances, we find that respondents have not
presented a substantial justification for the categorical denial of
alimony deductions to nonresidents. The State's failure to provide
more than a cursory justification for § 631(b)(6) smacks of an
effort to "penaliz[e] the citizens of other States by subjecting
them to heavier taxation merely because they are such citizens,"
Toomer, 334 U. S., at 408 (Frankfurter, J., concurring). We
thus hold that § 631(b)(6) is an unwarranted denial to the citizens
of other States of the privileges and immunities enjoyed by the
citizens of New York.
Accordingly, the decision of the New York Court of Appeals is
reversed, and the case is remanded for proceedings not inconsistent
with this opinion.
It is so ordered.
JUSTICE GINSBURG, with whom THE CHIEF JUSTICE and JUSTICE
KENNEDY join, dissenting.
New York and other States follow the Federal Government's lead 1
in according an income tax deduction for alimony to resident
taxpayers only.2 That tax practice, I
1 See 26 U. S. C. §§ 872-873; McIntyre & Pomp, State Income
Tax Treatment of Residents and Nonresidents Under the Privileges
and Immunities Clause, 13 State Tax Notes 245, 248-249 (1997).
2 Four States in addition to New York-Alabama, California, West
Virginia, and Wisconsin-expressly limit the alimony deduction to
residents. See Ala. Code §40-18-15(18) (1993); Cal. Rev. and Tax.
Code Ann. § 17302 (West 1994); W. Va. Code § 11-21-32(b)(4) (1995);
Wis. Stat. § 71.05(6)(a)(12) (1989). Two other States-Illinois and
Ohio-restrict nonresidents to specified deductions and adjustments
in calculating in-state income, and do not list the alimony
deduction as one available to nonresidents. See Ill. Compo Stat.,
ch. 35, § 5/301(c)(2)(A) (1996); Ohio Rev. Code Ann. §
5747.20(B)(6) (1994).
316
conclude, does not offend the nondiscrimination principle
embodied in the Privileges and Immunities Clause of Article IV; §
2. I therefore dissent from the Court's opinion.
I
To put this case in proper perspective, it is helpful to
recognize not only that alimony payments are "surely a personal
matter,"
ante, at 310; in addition, alimony payments are
"unlike other ... personal obligation[s],"
ante, at 314.
Under federal tax law, mirrored in state tax regimes, alimony is
included in the recipient's gross income, 26 U. s. C. § 71(a), and
the payer is allowed a corresponding deduction, §§ 215(a),
62(a)(10), for payments taxable to the recipient. This scheme "can
best be seen as a determination with respect to choice of taxable
person rather than as rules relating to the definition of income or
expense. In effect, the [alimony payer] is treated as a conduit for
gross income that legally belongs to the [alimony recipient] under
the divorce decree." M. Chirelstein, Federal Income Taxation ,
9.05, p. 230 (8th ed. 1997) (hereinafter Chirelstein); see also B.
Bittker & M. McMahon, Federal Income Taxation of Individuals ,
36.7, p. 36-18 (2d ed. 1995) ("Unlike most other personal
deductions, [the deduction for alimony payments] is best viewed as
a method of designating the proper taxpayer for a given amount of
income, rather than a tax allowance for particular expenditures. In
combination, § 71 [allowing a deduction to the alimony payer] and §
215 [requiring the alimony recipient to include the payment in
gross income] treat part of the [payer]'s income as though it were
received subject to an offsetting duty to pay it to the payee.").
New York applies this scheme to resident alimony payers. But N. Y.
Tax Law § 631(b)(6) (McKinney 1987) declares that, in the case of a
nonresident with New York source income, the alimony deduction for
which federal law provides "shall not constitute a deduction
derived from New York sources."
317
Thus, if petitioner Christopher Lunding and his former spouse
were N ew York residents, his alimony payments would be included in
his former spouse's gross income for state as well as federal
income tax purposes, and he would receive a deduction for the
payments. In other words, New York would tax the income once, but
not twice. In fact, however, though Lunding derives a substantial
part of his gross income from New York sources, he and his former
spouse reside in Connecticut. That means, he urges, that New York
may not tax the alimony payments at all. Compared to New York
divorced spouses, in short, Lunding seeks a windfall, not an escape
from double taxation, but a total exemption from New York's tax for
the income in question. This beneficence to nonresidents earning
income in New York, he insists, is what the Privileges and
Immunities Clause of Article IV; § 2, of the United States
Constitution demands.
Explaining why New York must so favor Connecticut residents over
New York residents, Lunding invites comparisons with other broken
marriages-cases in which one of the former spouses resides in New
York and the other resides elsewhere. First, had Lunding's former
spouse moved from Connecticut to New York, New York would count the
alimony payments as income to her, but would nonetheless deny him,
because of his out-of-state residence, any deduction. In such a
case, New York would effectively tax the same income twice, first
to the payer by giving him no deduction, then to the recipient, by
taxing the payments as gross income to her. Of course, that is not
Lunding's situation, and one may question his standing to demand
that New York take nothing from him in order to offset the State's
arguably excessive taxation of others.
More engagingly, Lunding compares his situation to that of a New
York resident who pays alimony to a former spouse living in another
State. In such a case, New York would permit the New Yorker to
deduct the alimony payments,
318
even though the recipient pays no tax to New York on the income
transferred to her. New York's choice, according to Lunding, is to
deny the alimony deduction to the New Yorker whose former spouse
resides out of state, or else extend the deduction to him. The
Court apparently agrees. At least, the Court holds, New York "has
not adequately justified" the line it has drawn.
Ante, at
290.
The Court's condemnation of New York's law seems to me
unwarranted. As applied to a universe of former marital partners
who, like Lunding and his former spouse, reside in the same State,
New York's attribution of income to
someone (either payer or
recipient) is hardly unfair. True, an occasional New York resident
will be afforded a deduction though his former spouse, because she
resides elsewhere, will not be chased by New York's tax collector.
And an occasional New York alimony recipient will be taxed despite
the nonresidence of her former spouse. But New York could
legitimately assume that in most cases, as in the Lundings' case,
payer and recipient will reside in the same State. Moreover, in
cases in which the State's system is overly generous (New York
payer, nonresident recipient) or insufficiently generous
(nonresident payer, New York recipient), there is no systematic
discrimination discretely against nonresidents, for the pairs of
former spouses in both cases include a resident and a
nonresident.
In reviewing state tax classifications, we have previously held
it sufficient under the Privileges and Immunities Clause that "the
State has secured a reasonably fair distribution of burdens, and
that no intentional discrimination has been made against
non-residents."
Travellers' Ins. Co. v.
Connecticut,
185 U. S. 364,
371 (1902). In
Travellers, the Court upheld a state tax that
was facially discriminatory: Nonresidents who held stock in
Connecticut corporations owed tax to the State on the full value of
their holdings, while resident stockholders were entitled to a
deduction for their proportionate share of the corporation's
Connecticut real estate.
319
But the State's tax system as a whole was not discriminatory,
for although residents were entitled to deduct their share of the
corporation's Connecticut real estate from their
state
taxes, they were required to pay
municipal taxes on that
property; nonresidents owed no municipal taxes. See
id., at
367. Municipal taxes varied across the State, so residents in
low-tax municipalities might end up paying lower taxes than
nonresidents. Nonetheless, "the mere fact that in a given year the
actual workings of the system may result in a larger burden on the
non-resident was properly held not to vitiate the system, for a
different result might obtain in a succeeding year, the results
varying with the calls made in the different localities for local
expenses."
Id., at 369.
Travellers held that tax classifications survive
Privileges and Immunities Clause scrutiny if they provide a rough
parity of treatment between residents and nonresidents. See also
Austin v.
New Hampshire, 420 U. S. 656, 665 (1975)
(Privileges and Immunities Clause precedents "establis[h] a rule of
substantial equality of treatment"). That holding accords with the
Court's observation in
Baldwin v.
Fish and Game Comm'n of
Mont., 436 U. S.
371, 383 (1978), that "[s]ome distinctions between residents
and nonresidents merely reflect the fact that this is a Nation
composed of individual States, and are permitted; other
distinctions are prohibited because they hinder the formation, the
purpose, or the development of a single Union of those States." A
tax classification that does not systematically discriminate
against nonresidents cannot be said to "hinder the formation, the
purpose, or the development of a single Union." See McIntyre &
Pomp, Post-Marriage Income Splitting through the Deduction for
Alimony Payments, 13 State Tax Notes 1631, 1635 (1997) (urging that
the Privileges and Immunities Clause does not require New York to
forgo the incomesplitting objective served by its alimony rules
when both payer and recipient are residents of the same State
simply because "results may be less than ideal" "when one of
the
320
parties to the alimony transaction is a resident and the other
is a nonresident").3
I would affirm the judgment of the New York Court of Appeals as
consistent with the Court's precedent, and would not cast doubt, as
today's decision does, on state tax provisions long considered
secure.
II
Viewing this case as one discretely about alimony, I would
accept New York's law as a fair adaptation, at the state level, of
the current United States system. The Court notes but shies away
from this approach, see
ante, at 311-313, expressing
particular concern about double taxation in the "extreme" case not
before us-the "New York resident [who] receives alimony payments
from a nonresident New York taxpayer,"
ante, at 313.4
Instead, the Court treats alimony as one among several personal
expenses a State makes deductible.
Significantly, the Court's approach conforms to no historic
pattern. "Historically, both alimony and child support were treated
as personal expenses nondeductible [by the payer]
3 Nor does it appear that New York gains "an unfair share of tax
revenue" by denying nonresident alimony payers a deduction even
when the recipient is a resident. McIntyre & Pomp,
Post-Marriage Income Splitting through the Deduction for Alimony
Payments, 13 State Tax Notes, at 1635. Alimony payments into and
out of a State, it seems reasonable to assume, are approximately in
balance; if that is so, then the revenue New York receives under
its current regime is roughly equivalent to the revenue it would
generate by granting a deduction to nonresident alimony payers with
resident recipients and denying the deduction to resident payers
with nonresident recipients. See
ibid.
4 As already observed, Lunding, who seeks to escape any state
tax on the income in question (Connecticut, his State of residence,
had no income tax in the year in issue), is hardly a fit
representative of the individuals who elicit the Court's concern.
See
New York v.
Ferber, 458 U. S. 747, 767 (1982)
("[A] person to whom a statute may constitutionally be applied may
not challenge that statute on the ground that it may conceivably be
applied unconstitutionally to others in situations not before the
Court.").
321
and not includable [in the recipient's income]. Successive
[federal] statutory enactments beginning in 1942 allowed a
deduction and corresponding inclusion for alimony payments while
continuing the nondeductible-excludable treatment for child support
payments." H. Ault, Comparative Income Taxation: A Structural
Analysis 277 (1997).
Accepting,
arguendo, the Court's "personal expense
deduction" in lieu of "income attribution" categorization of
alimony, however, I do not read our precedent to lead in the
direction the Court takes. On Lunding's analysis, which the Court
essentially embraces, the core principle is that "personal
deductions, no matter what they are ... must be allowed in the
proportion that the New York State income bears to total income."
Tr. of Oral Arg. 19. That has never been, nor should it be, what
the Privileges and Immunities Clause teaches.
A
"[E]arly in this century, the Court enunciated the principle
that a State may limit a nonresident's expenses, losses, and other
deductions to those incurred in connection with the production of
income within the taxing State." 2 J. Hellerstein & W.
Hellerstein, State Taxation 20-47 (1992). In two companion
cases-Shaffer v.
Carter, 252 U. S. 37 (1920), and
Travis v.
Yale &
Towne Mfg. Co., 252 U. S. 60 (1920)the
Court considered, respectively, Oklahoma's and New York's schemes
of nonresident income taxation. Both had been challenged as
violating the Privileges and Immunities Clause.
Upholding the Oklahoma scheme and declaring the New York scheme
impermissibly discriminatory, the Court established at least three
principles. First, "just as a State may impose general income taxes
upon its own citizens and residents whose persons are subject to
its control, it may, as a necessary consequence, levy a duty of
like character, and not more onerous in its effect, upon incomes
accruing to nonresidents from their property or business within the
State,
322
or their occupations carried on therein."
Shaffer, 252 U.
S., at 52; accord,
Travis, 252 U. S., at 75.
Second, a State may not deny nonresidents personal
exemptions when such exemptions are uniformly afforded to
residents. See
id., at 79-81. Personal exemptions, which are
typically granted in a set amount "to all taxpayers, regardless of
their income," Hellerstein, Some Reflections on the State Taxation
of a Nonresident's Personal Income, 72 Mich. L. Rev. 1309, 1343
(1974) (hereinafter Hellerstein), effectively create a zero tax
bracket for the amount of the exemption. See Chirelstein, p. 3.
Denial of those exemptions thus amounts to an across-the-board rate
increase for nonresidents, a practice impermissible under
longstanding constitutional interpretation. See,
e. g.,
Chalker v.
Birmingham &
Northwestern R. Co.,
249 U. S. 522,
526-527
(1919); Ward v.
Maryland, 12 Wall. 418, 430
(1871); see also
Austin v.
New Hampshire, 420 U. S.,
at 659 (Privileges and Immunities Clause violated where, "[i]n
effect, ... the State taxe[d] only the incomes of nonresidents
working in New Hampshire"). Because New York denied nonresidents
the personal exemption provided to all residents, the
Travis
Court held the State's scheme an abridgment of the Privileges and
Immunities Clause. 252 U. S., at 79-81.
Finally,
deductions for specific expenses are treated
differently from the blanket exemptions at issue in
Travis:
A State need not afford nonresidents the same deductions it extends
to its residents. In
Shaffer, the Court upheld Oklahoma's
rules governing deduction of business losses. Oklahoma residents
could deduct such losses wherever incurred, while nonresidents
could deduct only losses incurred within the State. The Court
explained that the disparate treatment was "only such as arises
naturally from the extent of the jurisdiction of the State in the
two classes of cases, and cannot be regarded as an unfriendly or
unreasonable discrimination." 252 U. S., at 57. A State may tax its
residents on "their income from all sources, whether within or
without
323
the State," but it cannot tax nonresidents on their outof-state
activities.
Ibid. "Hence there is no obligation to accord to
[nonresidents] a deduction by reason of losses elsewhere incurred."
Ibid. The Court stated the principle even more clearly in
Travis, 252 U. S., at 75-76: "[T]here is no unconstitutional
discrimination against citizens of other States in confining the
deduction of expenses, losses, etc., in the case of non-resident
taxpayers, to such as are connected with income arising from
sources within the taxing State .... "
B
Shaffer and
Travis plainly establish that States
need not allow nonresidents to deduct out-of-state
business
expenses. The application of those cases to deductions for
personal expenses, however, is less clear. On the one hand,
Travis' broad language could be read to suggest that
in-state business expenses are the only deductions States must
extend to nonresidents. On the other hand, neither
Shaffer
nor
Travis upheld a scheme denying nonresidents deductions
for personal expenses.5 A leading commentator has concluded that
"nothing in either the
Shaffer or
Travis opinions
indicates whether the Court was addressing itself to personal as
well as business deductions." Hellerstein 1347, n. 165.
5The New York law before the Court in
Travis allowed
residents to deduct non-business-related property losses wherever
incurred, but allowed nonresidents such deductions only for losses
incurred in New York. See Tr. of Record in
Travis v.
Yale &
Towne Mfg. Co., O. T. 1919, No. 548 (State
of New York, The A, B, C of the Personal Income Tax Law, pp. 12,
14, n 42,44). Although
Travis held New York's law infirm,
the Court rested its decision solely on the ground that denying
personal exemptions to nonresidents violated the Privileges and
Immunities Clause. See
Travis, 252 U. S., at 79-82. The
Court did not extend its ruling to New York's differential
treatment of residents and nonresidents with regard to
personal-loss deductions. See
id., at 75-76 ("no
unconstitutional discrimination" in confining deductions for
nonresidents' losses "to such as are connected with income arising
from sources within the taxing State").
324
With rare exception, however, lower courts have applied
Shaffer and
Travis with equal force to both personal
and business deductions. The New York court's decision in
Goodwin v.
State Tax Comm'n, 286 App. Div. 694, 702,
146 N. Y. S. 2d 172, 180 (3d Dept. 1955), aff'd mem., 1 N. Y. 2d
680, 133 N. E. 2d 711, appeal dism'd for want of a substantial
federal question, 352 U. S. 805 (1956), exemplifies this approach.
Goodwin concerned a lawyer who resided in New Jersey and
practiced law in New York City. In his New York income tax return,
he claimed and was allowed deductions for bar association dues,
subscriptions to legal periodicals, entertainment and car expenses,
and certain charitable contributions. But he was disallowed
deductions for real estate taxes and mortgage interest on his New
Jersey home, medical expenses, and life insurance premiums.
Goodwin, 286 App. Div., at 695, 146 N. Y. S. 2d, at 174.
Upholding the disallowances, the appeals court explained that the
nonincome-producing personal expenses at issue were of a kind
properly referred to the law and policy of the State of the
taxpayer's residence. That State, if it had an income tax, might
well have allowed the deductions, but the New York court did not
think judgment in the matter should be shouldered by a sister
State.
Id., at 701, 146 N. Y. S. 2d, at 180.
Goodwin further reasoned that a State may accord certain
deductions "[i]n the exercise of its general governmental power to
advance the welfare of its residents."
Ibid. But it does not
inevitably follow that the State must "extend similar aid or
encouragement to the residents of other states."
Ibid. A
State need not, in short, underwrite the social policy of the
Nation. Cf.
Martinez v.
Bynum, 461 U. S. 321, 328 (1983)
(State may provide free primary and secondary education to
residents without extending the same benefit to nonresidents).
Other lower courts, upholding a variety of personal expense
deductions for residents only, have agreed with
Goodwin's
analysis. Challenges to such rulings, like the appeal
325
in
Goodwin, have been disposed of summarily by this
Court. See,
e. g., Lung v.
O'Chesky, 94 N. M. 802,
617 P. 2d 1317 (1980) (upholding denial to nonresidents of grocery
and medical tax rebates allowed residents where rebates served as
relief for State's gross receipts and property taxes), appeal
dism'd for want of a substantial federal question, 450 U. S.
961
(1981);Jlnderson~ Tiemann, 182 Neb. 393,407-408, 155 N. W. 2d
322, 331-332 (1967) (upholding denial to nonresidents of a
deduction allowed residents for sales taxes paid on food purchased
for personal use), appeal dism'd for want of a substantial federal
question,
390 U. S.
714 (1968);
Berry v.
State Tax Comm'n, 241 Ore.
580, 582, 397 P. 2d 780, 782 (1964) (upholding denial to
nonresidents of deductions allowed residents for medical expenses,
interest on home-state loans, and other personal items; court
stated that the legislature could legitimately conclude that
"personal deductions are so closely related to the state of
residence that they should be allowed only by the state of
residence and not by every other state in which some part of a
taxpayer's income might be found and taxed"), appeal dism'd for
want of a substantial federal question,
382 U. S. 16 (1965). But
see
Wood v.
Department of Revenue, 305 Ore. 23,
32-33, 749 P. 2d 1169, 1173-1174 (1988) (State may not deny alimony
deduction to nonresidents).
C
Goodwin's Privileges and Immunities Clause analysis is a
persuasive elaboration of
Shaffer and
Travis. Whether
Goodwin's exposition is read broadly (as supporting the view
that a State need not accord nonresidents deductions for any
personal expenses) or more precisely (as holding that a State may
deny nonresidents deductions for personal expenditures that are
"intimately connected with the state of [the taxpayer's]
residence,"
Goodwin, 286 App. Div., at 701, 146 N. Y. S. 2d,
at 180), Christopher Lunding is not entitled to the relief he
seeks.
326
Alimony payments (if properly treated as an expense at all) are
a personal expense, as the Court acknowledges, see
ante, at
310-311. They "ste[m] entirely from the marital relationship,"
United States v.
Gilmore, 372 U. S. 39, 51 (1963),
and, like other incidents of marital and family life, are
principally connected to the State of residence. Unlike donations
to New York-based charities or mortgage and tax payments for second
homes in the State, Lunding's alimony payments cannot be said to
take place in N ew York, nor do they inure to New York's benefit.
They are payments particularly personal in character, made by one
Connecticut resident to another Connecticut resident pursuant to a
decree issued by a Connecticut state court. Those payments "must be
deemed to take place in" Connecticut, "the state of [Lunding's]
residence, the state in which his life is centered."
Goodwin, 286 App. Div., at 701, 146 N. Y. S. 2d, at 180. New
York is not constitutionally compelled to subsidize them.
The majority is therefore wrong to fault the Court of Appeals
for insufficient articulation of a "policy basis for § 631(b)(6)."
Ante, at 304. The Court of Appeals recalled
Goodwin,
characterizing it as the decision that "definitively addressed" the
disallowance of personal life expenses. See 89 N. Y. 2d 283, 289,
675 N. E. 2d 816, 820 (1996). The court concluded that alimony
payments were no less referable to the law and policy of the
taxpayer's residence than "the expenditures for life insurance,
out-of-State property taxes and medical treatment at issue in
Goodwin." Id., at 291, 675 N. E. 2d, at 821. That
policy-based justification for § 631(b)(6) needed no further
elaboration.
III
Although Lunding's alimony payments to a Connecticut resident
surely do not facilitate his production of income in New York or
contribute to New York's riches, the Court relies on this
connection: "[A]s a personal obligation that generally correlates
with a taxpayer's total income or wealth, ali-
327
mony bears some relationship to earnings regardless of their
source."
Ante, at 314; see also
ante, at 310 (alimony
payments "arguably bear some relationship to a taxpayer's overall
earnings," and are "determined in large measure by an individual's
income generally, wherever it is earned"). But all manner of
spending similarly relates to an individual's income from all
sources. Income generated anywhere will determine, for example, the
quality of home one can afford and the character of medical care
one can purchase. Under a "correlat[ion] with a taxpayer's total
income" approach,
ante, at 314, it appears, the nonresident
must be allowed to deduct his medical expenses and home state real
estate taxes, even school district taxes, plus mortgage interest
payments, if the State allows residents to deduct such expenses.
And as total income also determines eligibility for tax relief
aimed at low-income taxpayers, notably earned income tax credits, a
State would be required to make such credits available to
nonresidents if it grants them to residents.6
The Court does not suggest that alimony correlates with a
taxpayer's total income more closely than does the run of personal
life expenses. Indeed, alimony may be more significantly influenced
by other considerations, for example, the length of the marriage,
the recipient's earnings, child custody and support arrangements,
an antenuptial agreement.7 In
6 New York currently allows low-income nonresident taxpayers to
use the State's Earned Income Tax Credit to offset their income tax
liability, but does not refund any excess credits to nonresidents
as it does to residents. N. Y. Tax Law §§ 606(d)(1)-(d)(2)
(McKinney Supp. 1997); see also §§ 606(c)(1)-(c)(2) (residents
entitled to a refund of excess credit for certain household and
dependent care services; nonresidents may use the credit only to
offset tax liability).
7 Connecticut, where Lunding was divorced, lists as factors
relevant to alimony determinations
"the length of the marriage, the causes for the annulment,
dissolution of the marriage or legal separation, the age, health,
station, occupation, amount and sources of income, vocational
skills, employability, estate and needs of each of the parties ...
and, in the case of a parent to whom the
328
short, the Court's "related-to-income" approach directly leads
to what Christopher Lunding candidly argued: Any and every personal
deduction allowed to residents must be allowed to nonresidents in
the proportion that New York income bears to the taxpayer's total
income. See Tr. of Oral Arg. 19-20. If that is the law of this
case, long-settled provisions and decisions have been overturned,
see
supra, at 324-325, beyond the capacity of any
legislature to repair. The Court's "notions of fairness,"
ante, at 315, in my judgment, do not justify today's
extraordinary resort to a Privileges and Immunities Clause "the
contours of which have [not] been precisely shaped by the process
and wear of constant litigation and judicial interpretation."
Baldwin v.
Fish and Game Comm'n of Mont., 436 U. S.,
at 379.
***
For the reasons stated, I do not agree that the Privileges and
Immunities Clause of Article IV, § 2, mandates the result Lunding
seeks-the insulation of his 1990 alimony payments from any State's
tax. Accordingly, I would affirm the judgment of the New York Court
of Appeals, and I dissent from this Court's judgment.
custody of minor children has been awarded, the desirability of
such parent's securing employment." Conn. Gen. Stat. § 46b-82
(1995).
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