State and local tax controversies are typically litigated in state courts. For various reasons, a party may prefer to pursue its state tax controversy in a federal forum. The reasons for choosing a federal versus a state forum are beyond the scope of this Article. However, a litigant considering a federal forum will confront a number of procedural hurdles in invoking federal jurisdiction. An accompanying article by Professor Peter D. Enrich will discuss one of these obstacles, the Tax Injunction Act (Act).This Article will focus on two other doctrines that potential federal court litigants must consider: standing and comity.
Both of these doctrines have been the subject of judicial attention of late, including two decisions from the Supreme Court of the United States in the last seven years. As will be discussed, recent decisions appear to have raised the bar that state taxpayers face when they seek to challenge certain state tax matters in federal court. Taxpayers desiring to challenge state tax incentive programs in federal court may lack standing. In other circumstances, federal courts may abstain from exercising otherwise permissible jurisdiction under comity. These decisions appear to be grounded by a combination of a narrow view of federal court jurisdiction as well as deference to state government functions.
Part II of this article analyzes the standing doctrine and its elements as articulated by the Supreme Court most recently in Cuno. Part III focuses on the principle of comity, its application prior to the Act, the questions as to its relevance after the Act, and the Court’s affirmation of its continuing vitality in Commerce Energy. Part IV concludes that these doctrines still present significant procedural hurdles for potential federal court litigants and raises some questions still left unsettled by the Court’s decisions.