On May 25, the U.S. Solicitor General filed its highly anticipated brief in New Hampshire v. Massachusetts
The litigation results from New Hampshire’s challenge to a Massachusetts temporary tax sourcing rule (“the rule”). The rule requires certain nonresident employees of Massachusetts employers to treat income from services performed in another state during the pandemic as if the services were performed in Massachusetts. New Hampshire invoked the U.S. Supreme Court’s original jurisdiction over disputes between two states and alleged that the rule is unconstitutional under the Commerce and Due Process Clauses. New Hampshire asserted that the rule fails all four prongs of the Complete Auto test because it: (1) does not apply to an activity with Massachusetts nexus; (2) fails to fairly apportion the nonresident’s income; (3) discriminates against interstate commerce; and (4) is not fairly related to Massachusetts government services.
The Solicitor General recommended that the U.S. Supreme Court decline to exercise original jurisdiction over disputes between states. The Solicitor General argued that the case did not warrant the Court’s original jurisdiction because: (1) New Hampshire itself does not suffer a “serious and direct” injury; and (2) New Hampshire residents can adequately litigate the issues in Massachusetts tax forums.
First, the Solicitor General argued that New Hampshire is not the proper party to challenge Massachusetts because New Hampshire’s injuries are neither “serious” nor “direct.” The Court limits its original jurisdiction to “serious” disputes, which the Solicitor General interpreted as meant to narrow the cases subject to the Court’s original jurisdiction. According to the Solicitor General, accepting a personal income tax case would unduly broaden the Court’s original jurisdiction because states regularly impose personal income tax on nonresidents. Further, the Solicitor General asserted that New Hampshire did not suffer “direct” injuries. The Solicitor General characterized New Hampshire’s alleged injuries as speculative injuries that may result from the choices of third parties, such as individuals choosing not to live in New Hampshire. The Solicitor General acknowledged the increasing importance of remote work arrangements in modern life but argued that New Hampshire’s complaint was not a proper vehicle to address these issues because the Massachusetts rule targeted “idiosyncratic” pandemic-related issues.
Second, the Solicitor General concluded that New Hampshire’s substantive claims do not justify the Court’s original jurisdiction because the Commerce and Due Process Clauses protect private conduct and not the states themselves. Accordingly, New Hampshire’s claims are derivative of private claims that would be better addressed after development of a full factual record. The Solicitor General focused on New Hampshire’s two strongest claims—that the rule did not fairly apportion individual income and is not fairly related to Massachusetts government services—and asserted that these claims depend on facts specific to each claimant. Finally, the Solicitor General identified language in the regulation that Massachusetts tax forums could clarify to narrow the rule’s scope and avoid a constitutional dispute. Consequently, the Solicitor General recommended that the Court allow Massachusetts tax forums to weigh in on these issues.