Davis v. Michigan Department of the Treasury

RESPONDENT: Michigan Department of the Treasury
LOCATION: Michigan Dept. of Treasury

DOCKET NO.: 87-1020
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: State appellate court

CITATION: 489 US 803 (1989)
ARGUED: Jan 09, 1989
DECIDED: Mar 28, 1989

Michael K. Kellogg - argued the cause for the United States as amicus curiae urging reversal
Paul S. Davis - argued the cause for the appellant, appearing pro se
Thomas L. Casey - argued the cause for the appellee

Facts of the case

Paul Davis, a resident of Michigan, worked for the federal government and upon retirement received benefits. Michigan law exempts state retirement benefits from state taxes. Smith unsuccessfully petitioned for a refund on the state taxes he paid on his federal retirement benefits. He then filed suit in the Michigan Court of Claims arguing that the state's tax policy violated 4 U.S.C. 111 by taxing benefits paid to federal employees but not to state employees. The court dismissed his suit and so did the Michigan Court of Appeals.


Did Michigan violate federal law when it exempted state and local government pensions from taxation but levied taxes on federal government pensions?

Media for Davis v. Michigan Department of the Treasury

Audio Transcription for Oral Argument - January 09, 1989 in Davis v. Michigan Department of the Treasury

William H. Rehnquist:

We'll hear argument next in No. 87-1020, Paul Davis v. The Michigan Department of the Treasury.

Mr. Davis, you may proceed whenever you're ready.

Paul S. Davis:

Mr. Chief Justice, may it please the Court:

The State of Michigan in its income tax taxes federal retirement benefits, but exempts retirement benefits paid to retirees from the State of Michigan.

Appellant submits that this different treatment constitutes an unlawful discrimination in violation of the federal statute 4 U.S.C. 111.

Appellant is a former federal employee and receives a retirement annuity under the Civil Service Retirement Act.

For the year 1979 and succeeding years, Appellant, in compliance with the Michigan income tax law, paid Michigan income tax on his retirement benefits.

After the decision of this Court in Memphis Bank & Trust Company v. Garner, which was in 1983, Appellant filed amended returns for several years, starting in the year... tax year starting in 1979 and sought refunds of the income taxes which he had paid on his federal retirement benefits.

The Michigan Commissioner of Revenue denied the requested refunds.

Appellant then filed a suit in the Michigan Court of Claims seeking a refund of those taxes.

The court of claims ruled against Appellant, and Appellant then appealed to the Michigan Court of Appeals.

In the court of claims and the Michigan Court of Appeals, Appellant relied on the federal statute, 4 U.S.C. 111, taking the position that the Michigan law discriminated against federal retirees, as compared with state retirees, in violation of the statute.

John Paul Stevens:

Mr. Davis, can I ask you a question about--

Paul S. Davis:

Yes, sir.

John Paul Stevens:

--the statute?

The statute is one that gives the consent of the United States to certain taxation.

Supposing the United States has not consented so the statute just simply doesn't apply, would there be any prohibition against this taxation?

Paul S. Davis:

Yes, Your Honor.

The constitutional principles would then apply.

John Paul Stevens:

You think--

Paul S. Davis:

Of... of course at the time the statute was initiated, there was intergovernmental tax immunity--

John Paul Stevens:


Paul S. Davis:

--which would have exempted the retirement benefits.

John Paul Stevens:

And those cases have generally been repudiated pretty much by our later cases.

Paul S. Davis:

Well, the Graves case, which I was going to mention, at the... which was pending at the time the Public Salary Tax Act was being considered in 1939, and, and the Graves case for the first time held that all state... all federal salaries would be subject to taxation by the federal government, provided that the tax was nondiscriminatory.

But you think that even without the statute, you'd have a claim based directly on the Constitution?

Paul S. Davis:

Yes, Your honor.

Because the language of the statute really doesn't help you at all.

It just... just says the United States hasn't consented, if you're right on your reading of it.

But... but maybe what my... what I'm suggesting is maybe the consent of the United States simply isn't necessary for this tax.