6th Cir. Reveals Split Re Whether Comity and Federalism Preclude Federal Jurisdiction over State Taxation Claims

Per Commerce Energy, Inc. v. Levin, 554 F.3d 1094 (6th Cir. Feb 04, 2009):

Yet there is a circuit split. The district court heavily relied on DIRECTV v. Tolson, 513 F.3d 119 (4th Cir.2008), which, in dismissing a § 1983 claim, rejected the idea that Hibbs did anything to limit an expansive reading of Fair Assessment because the comity principle is “broader than the Act itself, and its scope is not restricted by § 1341.” DIRECTV, 513 F.3d at 127 (citing Fair Assessment, 454 U.S. at 110). To the Fourth Circuit, the comity principle's breadth “was simply not before the Supreme Court in Hibbs.” Id. at 127-28.

Other circuits disagree. The Seventh Circuit, for instance, has reconciled these cases by holding that Fair Assessment cannot bar each and every challenge to a state's taxation scheme because Hibbs “restrict[s] comity to cases that could tie up rightful tax revenue.” Levy v. Pappas, 510 F.3d 755, 761 (7th Cir.2007) (quotations omitted).

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Similarly, the Ninth Circuit, in Wilbur v. Locke, 423 F.3d 1101 (9th Cir.2005), took at face value Hibbs's admonition that comity principles preclude jurisdiction “only when plaintiffs have sought district-court aid in order to arrest or countermand state tax collection” and observed that the plaintiffs before it sought “no such relief.” 423 F.3d at 1110 (quoting Hibbs, 542 U.S. at 107 n. 9, 124 S.Ct. 2276).

Animating these courts' disagreement with the Fourth Circuit are twin concerns. First, a sweeping reading of Fair Assessment runs squarely against Hibbs's instruction that comity guts federal jurisdiction only when plaintiffs try to thwart tax collection. Hibbs, 542 U.S. at 107 n. 9, 124 S.Ct. 2276.^FN4 Second, an unduly broad view of comity would render an Act of Congress-the Tax Injunction Act-effectively superfluous, as its contours would never be dispositive so long as extant “comity principles” uniformly barred challenges to state taxation. In recognizing this, the Hibbs Court warned lower courts that prior cases in this area are “not fairly cut loose from their secure, state-revenue-protective moorings.” Id. at 107, 124 S.Ct. 2276.