Over the past week, President Obama’s first nomination to the U.S. Supreme Court, the Honorable Sonya Sotomayor, has been making headline after headline as she moves through the nomination process. As such, I thought it would be a good time to take a look at some of her tax related opinions, and predict how the future of taxation in the United States might change if she were to become a Supreme Court Justice.
Lack of Tax Related Cases
Unfortunately the Supreme Court does not hear many cases on tax issues, which makes predicting how a new Justice will influence the court all the more difficult.
According to the Tax Girl, whom I follow on Twitter, during the term beginning in October 2007, the Supreme Court only agreed to hear five tax-related cases. They are all listed below, along with a brief note on the issue. As you can see, none of them were very note worthy.
- Kentucky Department of Revenue v. Davis, No. 06-666 (state bond issue)
- Knight v. Commissioner, No. 06-1286 (trust administration fees)
- CSX Transportation Inc. v. Georgia State Board of Equalization, No. 06-1287 (railroad property valuation)
- MeadWestvaco Corp. v. Illinois, No. 06-1413 (state gain issue)
- Boulware v. United States, No. 06-1509 (diversion of corporate funds to a shareholder of a corporation)
Most Cited Tax Case
Unfortunately, Judge Sotomayor has not written extensively on tax law. In fact, there is really only one tax related case that she has drafted an opinion. Although the case does not provide enough information to determine how she would decide on future issues, it can provide some hints.
In the case of Knight vs. Commissioner, 467 F.3d 149 (2006) Sotomayor’s court unanimously upheld a lower tax court ruling that said some fees paid by a trust are only partially tax deductible. Although they upheld the decision, the rejected the lower court’s reasoning and Sotomayor authored the deciding opinion.
The reason this case has gotten so much attention was because the U.S. Supreme Court heard the appeal, and rejected Sotomayor’s reasoning. They did unanimously uphold the decision, but Chief Justice Roberts noted that Sotomayor’s approach "flies in the face of the statutory language." I also found it especially interesting that one of the main areas the two courts disagreed on was what the term “would” meant under the statute in questions.
Other Relevant Cases
Although she has only authored an opinion on one tax related cases, Justice Sotomayor has ruled on a few other related cases. The first of which was Dabit vs. Merrill Lynch, 395 F.3d 25 (2005), where she overturned a lower court decision and allowed certain types of fraud lawsuits to be settled in state court, rather than federal. However, the U.S. Supreme court overturned the decision claiming that the federal government did have interest in overseeing such cases.
Empire Healthchoice Assurance, Inc. vs. McVeigh, 396 F.3d 136 (2005) was another interest case that has been discussed frequently over the past week. In it Sotomayor ruled against a health insurance company that sued the estate of a deceased federal employee who had won a settlement form a separate civil case.
U.S. Supreme Court Justice Sotomayor
Although it is impossible to predict how Justice Sotomayor would rule in a case as a Supreme Court Justice, we can make some predictions based on her history. According to the Congressional Research Service, Sotomayor’s “approach as an appellate judge has been an adherence to the doctrine of stare decisis,” meaning she has a tendency to uphold concepts decided by former justices. The report also found that her approach was “in line with the judicial philosophy of Justice Souter,” the judge she is nominated to replace.
From looking at the findings of the Congressional Research Service, and examining her history, it is quite difficult to determine how taxation in the United States would change if Sotomayor’s nomination was accepted. However, based on her decision against health care and investment companies, it seems likely that Sotomayor might be somewhat progressive in her approach to the tax code. Yet, with the Supreme Court only hearing a handful of select cases per year she might never even get the opportunity to rule on a meaningful tax case.
Nomination as a Distraction?
