Limiting the federal forum: the dangers of an expansive interpretation of the Tax Injunction Act.

• Author: Gorod, Brianne J.

In Henderson v. Stalder, (1) the Court of Appeals for the Fifth Circuit held that the Tax Injunction Act (TIA) of 1937 prevents the federal courts from exercising jurisdiction over any case in which a victory for the plaintiff might reduce state revenues. (2) In reaching this result, the Fifth Circuit did more than diminish its own power: It gave state legislatures a potentially powerful tool to insulate their actions from constitutional review in the federal courts. The Fifth Circuit's holding is troubling because it threatens the ability of the federal courts to fulfill their historic role in safeguarding rights created under federal law. (3)

This Comment argues that Henderson was wrongly decided. By holding that the court lacked jurisdiction to hear the plaintiffs' claims, the Fifth Circuit needlessly limited the power of the federal courts vis-a-vis state legislatures and opened a door to state legislatures intentionally crafting legislation so that it will be immune from review in the federal courts. Part I describes the legislative program the plaintiffs challenged in Henderson. Part II argues that in reaching its decision, the Fifth Circuit not only critically misinterpreted existing Supreme Court precedent, (4) but also gave the TIA a construction that is at odds with the enacting Congress's intent. Part III discusses the dangerous possibility that the Fifth Circuit's abdication of jurisdiction will spur states to structure legislative programs as "taxes" specifically to insulate them from constitutional review in the federal courts.

1. THE LOUISIANA PRESTIGE LICENSE PLATE PROGRAM

   A 1999 Louisiana law authorized the Secretary of the state's Department of Public Corrections and Safety to create "a special prestige license plate" that would "bear the legend 'Choose Life.'" (5) In addition to the regular motor vehicle license fee, each applicant for the plate was required to pay $25, as well as a handling fee that would partially offset administrative costs. (6) The legislation provided that these fees would be placed into a "Choose Life" fund. Qualifying organizations that provided adoption and pregnancy-counseling services could submit grant applications to receive a portion of the funds. (7)

   Louisiana citizens and Planned Parenthood of America challenged the statute, alleging that it violated the First Amendment by not authorizing the creation of a pro-choice license plate. The district court held for the plaintiffs and enjoined production of the license plates. (8) In the district court's view, the government's authorization of the special license plate had created a forum for speech, and its refusal to permit pro-choice license plates was impermissible viewpoint discrimination. (9) On appeal, the Fifth Circuit overturned the district court's decision, but failed to reach the merits of the plaintiffs' constitutional claim. Instead, it concluded that the TIA, which bars federal courts from enjoining the collection of "any tax," (10) deprived the federal court of jurisdiction and prevented it from reaching the merits of the constitutional challenge. (11) The Fifth Circuit defined the term "tax" broadly to include any "extraction of property from a private person by a sovereign for its use," (12) and concluded that the license plate charges at issue fell within that definition. Thus, the court remanded the case to the district court with instructions to dismiss. (13) Although the plaintiffs could bring their claims in state court, they would be foreclosed from renewing their claims in federal court unless the state court system failed to provide them with a forum in which they could raise their constitutional challenge. (14) After the Fifth Circuit issued its opinion, the Henderson plaintiffs requested that the Fifth Circuit rehear the case en banc. As of September 2005, that petition is pending; the plaintiffs have not yet decided whether they would appeal an adverse decision to the Supreme Court. (15)

2. THE FIFTH CIRCUIT'S DECISION

   In recognizing the TIA as a jurisdictional bar to hearing the plaintiffs' claims in Henderson, the Fifth Circuit gave the statute a broad application that Congress did not intend and other federal courts have deemed inappropriate. Before Congress enacted the TIA, many states required taxpayers who believed that a tax was invalid to pay the tax before they could challenge its validity in court. (16) Out-of-state taxpayers, however, could bring diversity suits in federal court, and the federal courts could then enjoin the state from collecting the taxes while the federal lawsuit was pending.

   To prevent this perceived unfairness, (17) Congress enacted the TIA, which prohibits federal courts from "enjoin[ing], suspend[ing] or restrain[ing] the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such state." (18) According to a Senate report, the TIA was intended to serve two different, but related, purposes: (1) to "eliminate disparities" between out-of-state and in-state taxpayers, and (2) "to stop taxpayers, with...