September 26, 2007

Tax Foundation Files Two Amicus Briefs with U.S. Supreme Court

Last week, the Tax Foundation filed amicus curiae briefs with the U.S. Supreme Court in two cases:

In Staff IT, Inc. v. United States, the Tax Foundation’s brief supports Staff IT, Inc.’s effort to have its case heard by the U.S. Supreme Court. Congress has passed a law forgiving penalties if the failure to file payroll taxes was reasonably caused by “undue hardship.” The lower court, disagreeing with four other circuit courts, held that unless a company ceases all payments to employees and creditors, it is not suffering “undue hardship.” If the lower court ruling stands, the brief argues, “troubled small business that owe taxes and creditors will end up paying neither. This is a result that benefits no one, and a result that Congress sought to avoid.” Read the brief here.

In Kentucky Dep’t of Revenue v. Davis, the Tax Foundation’s brief supports George and Catherine Davis, Kentucky residents who invested in municipal bonds issued by several states. Federal law excludes from income tax all interest earned by such bonds, but Kentucky punishes out-of-state investment by taxing interest on non-Kentucky bonds. The legal challenge is based on the Commerce Clause of the U.S. Constitution, which bars states from solely punishing out-of-state activity. The Supreme Court will hear the case on November 5. Read the brief here.

See all of the Tax Foundation’s recent amicus filings here.