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SALT TALK: What I Didn't Do On My Summer Vacation

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Dec 17, 2019 11:40:36 AM
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Just like your choice of summer vacations, the Supreme Court of the United States (SCOTUS) has discretionary authority in deciding whether to review a case. If four justices agree to grant a writ of certiorari, SCOTUS will review a lower court decision and either completely affirm, reverse or possibly some combination of the two.

Only about one hundred or less of the ten thousand petitions received annually are accepted for review. While I've never been swimming in a "cert. pool" on any vacation, most of the justices throw their first-year law clerks head first into the pool to decide which cases will float to the top for further review.

One can clearly deduce that the decision to leave a cert. petition at the bottom of the pool can have even greater consequences than a decision rendered. We already know SCOTUS passes on most state tax cases. Hence by looking at what the Court let sink to the bottom of the pool, we can formulate the latest in state tax policy.

So what, if any, policy can we formulate from this year's passive-aggressive judicial non-action? It seems clear that states will continue to be allowed to drop large tax burdens on those who don't vote in their jurisdiction. Review was denied for a rental car tax previously upheld. We all know rental car taxes are paid primarily by out-of-towners arriving at the airport. An Oklahoma statute that permits resident companies to exclude from tax certain gains while teaching nonresident companies was also denied cert. And finally, the New York statutory residency scheme, upheld by the State's appellate courts, sank way to the bottom of the pool. As a result this inaction by SCOTUS, New York and many other states will be allowed to continue to double tax those individuals not domiciled in the state.

So, while it might not be a firm policy, by its action and inaction, SCOTUS is letting states know that they have quite a bit of leeway when targeting and taxing nonresidents.

If you have questions contact me at wberkowitz@berdonllp.com or your Berdon Advisor.

Wayne Berkowitz, a tax partner and co-leader of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

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