James Dawson, et ux. v. Dale W. Steager, West Virginia State Tax Commissioner
Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
DAWSON ET UX. v. STEAGER, WEST VIRGINIA STATE TAX COMMISSIONER
CERTIORARI TO THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
No. 17–419. Argued December 3, 2018—Decided February 20, 2019
After 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 antidiscrimination 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.
Held: 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.
The 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.
For 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.
Reversed and remanded.
Gorsuch, J., delivered the opinion for a unanimous Court.