Intergovernmental immunities are exemptions of the state and national governments from attempts to interfere with each other's governmental operations. Thus, one government may claim immunity from the other's regulations and taxes. Though immunity claims may invoke specific provisions such as the tenth amendment, they reflect deeper assumptions about the institutional structure envisioned by the Constitution as a whole. Immunity problems originate in the tension between the nation's need to acknowledge the supremacy of federal policies while respecting a tradition of indestructible states. Governmental structures are not ends in themselves in constitutional theory; their ultimate status depends on their efficacy in securing what the federalist #45 called "the solid happiness of the people." Implying ends, institutions also imply powers. (See necessary and proper clause.) Grant the supremacy of national powers over state powers, and the erosion of state institutions follows eventually despite talk of indestructible states. Conversely, protection for state institutions will eventually defeat national power in some respects, talk of federal supremacy notwithstanding. On balance, judicial resolutions of this tension have favored national supremacy.
Immunity claims usually occur in the areas of taxation, regulation, and litigation. Most of the latter involve state claims of immunity from suits by private parties in federal court under the eleventh amendment. The amendment, however, does not extend immunity that would be considered inconsistent with the Constitution's general plan of government, including the principle of national supremacy. The amendment grants no immunity from suits by other states and the national government. It is not a barrier to Supreme Court review of state court decisions involving federal law. Nor does the amendment bar private plaintiffs seeking federal court injunctions to enforce Congress's civil rights laws or federal constitutional rights. In Parden v. Terminal Railway (1964) the Court declined to exclude state-owned railroads from a congressional act authorizing employees' suits for negligence. The Court reasoned that the state had effectively waived immunity by engaging in activity subject to congressional regulation. Though later decisions gave this doctrine of "constructive waiver" a states ' rights twist by requiring clear statements of congressional intent, the Court still assumes that Congress can lift state immunity as necessary for national objectives.
The doctrine that one government cannot tax the instrumentalities of the other is sometimes credited to the obiter dictum in mcculloch v. maryland that power to tax is power to destroy. Chief Justice john marshall made this remark in the course of voiding a state tax on the Second Bank of the United States; he was not seeking to protect the states against Congress. But future Courts transformed Marshall's doctrine of federal immunity into a dual-federalist or states' rights doctrine of reciprocal immunity. In collector v. day (1871) a Court grown fearful of reconstruction voided a civil war federal income tax on the salary of a Massachusetts judge, arguing that if immunity was necessary to preserve the federal government, the same held for the states. Laissez-faire Justices later expanded the immunity doctrine to protect both governments. Items held immune to state taxation included the income of lessees of federal oil lands, sales of gasoline to the national government, and royalties from a federal patent. Fewer decisions went against Congress, but the Court did void some federal taxes, including taxes on income from municipal bonds, profits of state oil leases, and motorcycle sales to a municipal police department.
This pattern of decision ended in the late 1930s as the hughes court began overruling the most important of the earlier decisions, including those conferring tax immunity on the incomes of governmental officials and contractors. Some tax immunity remains, however. On a theory that combines the principle of national supremacy with the argument that states' interests receive more representation in Congress than national interests receive in state legislatures, the modern Court recognizes a narrower tax immunity for the states than for the national government. Dicta identify state property, state revenues, and traditionally essential state activities as immune to federal taxation. These dicta did not prevent a recent decision upholding a federal registration on state police helicopters. As for federal tax immunity, Congress can confer it on federal contractors and others. Where Congress has not done so, the Court recognizes immunity from state taxation only when the tax legally falls on the federal government itself or its closely connected agencies and instrumentalities. This rule offers no protection to a federal government contractor even where, by contract, the economic impact of a state tax is passed on to the government. The Court continues to invalidate state taxes that discriminate against entities doing business with the federal government or that manifest hostility to federal policy.
Although the supremacy clause protects federal officials and agencies from state attempts to control the performance of their duties, federal personnel are subject to state laws that do not conflict with federal policies. Indeed, under the federal Assimilative Crimes Act, state criminal law applies to persons on federal enclaves where Congress has not provided otherwise. Examples of state regulations held in conflict with federal policies include attempts to regulate liquor sales and milk prices on military bases and to inspect fertilizer distributed in a national soil conservation program. Until 1985 states were immune from direct federal attempts to interfere in the performance of "functions essential to [the states'] separate and independent existence." The Court failed to give a formula for identifying these essential functions, but they included decisions on where to locate a state capital and the hours and wages of certain state employees. (See national league of cities v. usery.) The Court permitted federal regulation of such "nonessential" state functions as state liquor, timber, and railroad operations and it declined to apply the Usery rationale against federal policies affecting state agencies in the areas of civil rights, environmental regulation, and energy policy. The Court overruled Usery in 1985 and all but eliminated direct regulatory immunity for the states. (See garcia v. san antonio metropolitan transit authority.) Massive, though indirect, federal regulatory control of state policy continues through conditional federal grants-in-aid to the states.
(See general welfare clause.)
Sotirios A. Barber
Powell, Thomas Reed 1940 Intergovernmental Tax Immunities. George Washington Law Review 8:1213–1220.
Tribe, Laurence H. 1978 American Constitutional Law. Pages 131–143. Mineola, N.Y.: Foundation Press.