DAVIS v. MICHIGAN DEPARTMENT OF THE TREASURY

Print this Page
Case Basics
Docket No. 
87-1020
Appellant 
Paul Davis
Appellee 
Michigan Department of the Treasury
Advocates
(argued the cause for the appellant, appearing pro se)
(argued the cause for the United States as amicus curiae urging reversal)
(argued the cause for the appellee)
Tags
Term:
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.

Question 

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

Conclusion 
Decision: 8 votes for Davis, 1 vote(s) against
Legal provision: 4 U.S.C. 111

Yes. Justice Anthony M. Kennedy delivered the opinion for an 8-1 court. The Court emphasized the principles of intergovernmental tax immunity, which work to keep one part of the government from hindering the operations of another part. Section 111 allows a state to tax income paid by the federal government "if the taxation does not discriminate against the officer or employee because of the source of the pay or compensation." Because the Court found no "significant differences between the two classes [federal and state employees]," it held that the Michigan tax distinguished between employees solely on "the source of the pay."

Cite this Page
DAVIS v. MICHIGAN DEPARTMENT OF THE TREASURY. The Oyez Project at IIT Chicago-Kent College of Law. 10 September 2014. <http://www.oyez.org/cases/1980-1989/1988/1988_87_1020>.
DAVIS v. MICHIGAN DEPARTMENT OF THE TREASURY, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/1980-1989/1988/1988_87_1020 (last visited September 10, 2014).
"DAVIS v. MICHIGAN DEPARTMENT OF THE TREASURY," The Oyez Project at IIT Chicago-Kent College of Law, accessed September 10, 2014, http://www.oyez.org/cases/1980-1989/1988/1988_87_1020.