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Supreme Court hears municipal bonds tax, railroad property valuation cases

[JURIST] The US Supreme Court [official website; JURIST news archive] heard oral arguments [transcript, PDF] Monday in Kentucky v. Davis [Duke Law case backgrounder; merit briefs], 06-666 [docket], to determine whether a state violates the Commerce Clause [FindLaw backgrounder] of the US Constitution when it taxes bonds issued by other states, but does not tax its own bonds. The case was filed by a couple from Kentucky who allege that their state is unconstitutionally interfering with interstate commerce by permitting tax exemptions for Kentucky-issued bonds. The Kentucky Court of Appeals overruled [opinion, PDF] the lower court decision for the state, determining that the tax system was facially unconstitutional because it favored in-state bonds. The Kentucky court also held that states are not exempt from the Commerce Clause simply because they do not act as market regulators. Currently, 42 states allow such tax exemptions on in-state bonds. Several justices appeared to favor Kentucky's arguments, with Justice Stevens pointing out that 49 states filed an amicus brief in support of Kentucky, and Chief Justice John Roberts noting that Congress hasn't made an effort to regulate state tax exemptions for in-state bonds. AP has more.

The Court also heard oral arguments [transcript, PDF] in CSX v. Georgia State Bd. of Equalization [Duke Law case backgrounder; merit briefs], 06-1287 [docket], in which it considered whether railroad companies can challenge a state's method of valuing railroad property in federal court using federal laws preventing state tax discrimination against railroads [49 USC 11501(b)(1) text]. The Court of Appeals for the Eleventh Circuit ruled [PDF text] that railroads were not explicitly permitted to challenge state valuation methods.

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