CONSTITUTIONAL LAW - INTERSTATE COMPACTS - MULTISTATE TAX COMPACTS - TAXATION - CONSENT OF CONGRESS UNNECESSARY FOR FORMATION OF MULTISTATE TAX COMPACT.
We believe that the provisions of chapter 125, Laws of 1967, under which the state of Washington became a party to the multistate tax compact, are effective as Washington law without any legal necessity for consent to formation of the compact to be granted by the United States Congress; however, the enactment of a consent bill by Congress would completely remove any conceivable doubt as to the validity of the compact.
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June 3, 1968
Honorable George Kinnear
Director, Washington State
Department of Revenue
General Administration Building
Olympia, Washington 98501
Cite as: AGO 1968 No. 22
By letter previously acknowledged, you have requested the opinion of this office on a question which we paraphrase as follows:
Is the consent of Congress necessary for chapter 125, Laws of 1967 (the multistate tax compact) to become effective as Washington law?
We answer your question in the negative, as qualified in the analysis.
By enacting chapter 125, Laws of 1967, the legislature made the state of Washington a party to the multistate tax compact, which was developed under the auspices of the council of state governments.1/
[[Orig. Op. Page 2]]
We have been informed that thirteen other states have also adopted the compact by enabling acts which are basically the same as the Washington enabling act, i.e., the only condition for the compact becoming effective is found in § 1 of Article X of the compact itself, which provides in pertinent part as follows:
"This compact shall enter into force when enacted into law by any seven states. Thereafter, this compact shall become effective as to any other state upon its enactment thereof. . . ."
Since the necessary seven states have unconditionally adopted the compact, your question resolves itself into whether or not the multistate tax compact is such a "compact or agreement" as requires Congressional consent pursuant to Article I, § 10 of the United States Constitution in order for it to become effective.2/
In answering this question, it is helpful to analyze exactly what the multistate tax compact does. In this regard, it should be noted that Article XII of the compact contains a standard severability clause. This means that, so far as the problem of the constitutional requirement for consent is concerned, even though one part of the compact may be struck down, the others may be declared valid. Therefore, it is necessary to examine each part of the compact to determine whether or not congressional consent is required for that part.
A.Characterization of Essential Operative Parts of the Compact.
(1)Articles I and II:
These are simply statements of purpose and definitions. They are operative only in relation to other parts of the compact, and therefore require no separate discussion.
(2)Article III, § 1, and Article IV (taxpayer option to use uniform division of income for tax purposes act):
These provisions allow interstate taxpayers an option under which, if the taxpayer is subject to a net income tax in a party state, the taxpayer may elect to divide his income in [[Orig. Op. Page 3]] accordance with the provisions of the uniform division of income for tax purposes act, promulgated by the national conference of commissioners on uniform state laws3/ or to divide his income in accordance with otherwise applicable state law. Quite clearly, a state could independently, apart from any compact, provide an interstate taxpayer with this same option.
(3)Article III, § 2 (taxpayer option-short form):
This provision allows another option to interstate taxpayers. It provides that each party state or any subdivision thereof which imposes an income tax must allow a taxpayer meeting certain requirements to file a "short form" and to compute income tax liability simply on the basis of a percentage of sales volume within the state. The qualifying requirements for this option are designed to alleviate the necessity of the small businessman complying with the complications of an apportionment and allocation statute.
Again, like Article III, § 1, and Article IV, this option is essentially a uniform act, and could be adopted by any state independently of any compact, even though it has been specially devised for the multistate tax compact.
(4)Article V (elements of sales and use tax laws):
This article adopts certain substantive provisions relating to sales and use tax laws. Again, the provisions of this article are essentially a uniform act.
(5)Article VI (the commission):
Sections 1, 2 and 4 of this article involve the internal management of the multistate tax commission and are essentially comparable to the bylaws of an organization of state officials, such as the National Association of Tax Administrators or the Council of State Governments. Section 3, the "powers" provision, generally covers the fields of research, dissemination of information, and proposal of recommendations. Again, these are functions essentially comparable to those performed by other groups of state officials, except for clause (d) of § 3, which gives the commission a broad power to "do all things necessary and incidental to the administration of its functions pursuant to this compact." However, this clause raises no problems [[Orig. Op. Page 4]] separate from those raised by other provisions of the compact.
(6)Article VII (uniform regulations and forms):
This article provides that the commission may adopt uniform regulations and forms for the administration of various types of taxes in the party states when such taxes involve uniform or similar provisions of law among the party states. This article also provides for certain procedures necessary for the adoption of such regulations and forms by the commission.
However, any such uniform regulations and forms, to be legally effective, must be adopted by the individual states, in accordance with their own procedures for adoption of regulations and forms. Thus, so far as the commission is concerned, its function under Article VII is essentially recommendatory. An identical function could be performed by such groups as the National Association of Tax Administrators, the Council of State Governments, or the American Bar Association.
(7)Article VIII (audits):
Here the commission is given a legal authority which it exercises in its own right, i.e., the authority to perform audits and specifically the authority to require, through court order, production of information needed for the audit. But exercise of this authority is effectively limited geographically to those states which have adopted the compact, since, under § 4 of this article, only courts in these states are required to issue compulsory process under the terms of the compact.
In brief, state tax administrators are empowered to delegate the audit-making function to a separate body, i.e., the commission, and each state directs its own courts to aid in this function by issuance of compulsory process. This provision is thus essentially comparable to the reciprocal enforcement of taxes act, now adopted by practically all of the states, pursuant to which one state may use the courts of another state to collect taxes.4/ This provision simply carries a similar type of reciprocity down to the auditing level, and extends it not only to the individual states, but also to the commission when acting as auditing agent for the individual states.
[[Orig. Op. Page 5]]
(8)Article IX (arbitration):
This provision is essentially comparable to the uniform interstate arbitration of death taxes act, under which disputes between states as to the domicile of a decedent are to be settled by arbitration. Thirteen states, including Washington, already have this act in force. (See, p. 338, Vol. 9B, Uniform Laws Annotated.)
(9) The remaining three Articles -Article X (entry into force and withdrawal); Article XI (effect on other laws and jurisdiction); and Article XII (construction and severability) - require no special comment at this point.
In summary -the multistate tax compact is a package of various devices which have been traditionally used, independently of any compact, to further interstate uniformity and cooperation, i.e., uniform acts, including reciprocal acts, and a permanent body of state officials to make recommendations with respect to statutory and administrative changes. Such devices have been aptly characterized by Frankfurter and Landis as ". . . extra-constitutional forms of legal invention for the solution of problems touching more than one State. . . ."5/
This is not to suggest that, as a practical matter, all of the things which the compact is intended to do could be done without the use of the compact device. The use of this device would appear to be not only appropriate, but perhaps even essential to accomplish these things in a single package. But the above analysis does suggest that there is no legal impediment to these things being accomplished separately by means other than the compact device. It also delineates a key question involved in your inquiry: When the compact is actually a combination of devices which, if used separately, would not require Congressional consent, does the combining of them into a compact result in consent being required?
With this analysis in mind, we turn to the criteria for determining whether the compact requires Congressional consent.
[[Orig. Op. Page 6]]
B.Criteria for Determining Whether a Compact Requires Congressional Consent.
The "compact" clause of the federal constitution is found in Article I, § 10, which reads in pertinent part as follows:
"No state shall, without the consent of congress, . . . enter into any agreement or compact with another state, or with a foreign power, . . ."
Read literally these words would certainly seem to indicate thatall interstate compacts require the consent of Congress before they can come into operation.
This view finds support in the first United States Supreme Court decision in which the scope of the compact clause was discussed, Holmes v. Jennison et al., 39 U.S. (14 Pet.) 540 (1840). The issue in that case was whether an extradition agreement between the governor of Vermont and a Canadian official violated the compact clause because it was entered into without Congressional consent. Chief Justice Taney decided that it did. And in so deciding, he stated his reasoning as follows (39 U.S. [14 Pet.] at 572):
". . . The word 'agreement' does not necessarily import any direct and express stipulation; nor is it necessary that it should be in writing. If there is a verbal understanding to which both parties have assented, and upon which both are acting, it is an 'agreement.' And the use of all these terms, 'treaty,' 'agreement,' 'compact,' show that it was the intention of the framers of the constitution to use the broadest and most comprehensive terms; and that they anxiously desired to cut off all connection or communication between a State and a foreign power: and we shall fail to execute that evident intention, unless we give to the word 'agreement' its most extended signification, and so apply it as to prohibit every agreement, written or verbal, formal or informal, positive or implied, by the mutual understanding of the parties."
TheHolmes case, of course, involved an agreement between a [[Orig. Op. Page 7]] state and a foreign power, rather than between sister states. Thus, as has been stated by one commentator6/ :
". . . It is understandable that greater circumspection should have been manifested in judging arrangements with foreign powers than arrangements between sisters states, but this need not have led to a harsh construction of the compact clause. . . ."
In fact, it did not lead to the harsh construction which might have been expected. The next comment by the United States Supreme Court on the scope of the compact clause was in the case ofState of Virginia v. State of Tennessee, 148 U.S. 503, 37 L.Ed. 537 (1893), in which the court refused to apply to a compact between sister states the rather inflexible criteria established by Taney's opinion in Holmes.
Virginia v. Tennessee involved a boundary dispute. The two states had, by agreement, appointed commissioners to establish the boundary. The legislatures of each state ratified the boundaries as established by the commissioners. In discussing the implications of the compact clause, with respect to this agreement, the court stated as follows at 148 U.S. 503, pp. 517-519:
"Is the agreement made without the consent of Congress, between Virginia and Tennessee, to appoint commissioners to run and mark the boundary line between them, within the prohibition of this clause? The terms 'agreement' or 'compact' taken by themselves are sufficiently comprehensive to embrace all forms of stipulation, written or verbal, and relating to all kinds of subjects; to those to which the United States can have no possible objection or have any interest in interfering with, as well as to those which may tend to increase and build up the political influence of the contracting states, so as to encroach upon or impair the supremacy of the United States or interfere with their rightful management of particular subjects placed under their entire control.
[[Orig. Op. Page 8]]
"There are many matters upon which different states may agree that can in no respect concern the United States. If, for instance, Virginia should come into possession and ownership of a small parcel of land in New York which the latter state might desire to acquire as a site for a public building, it would hardly be deemed essential for the latter state to obtain the consent of Congress before it could make a valid agreement with Virginia for the purchase of the land. If Massachusetts, in forwarding its exhibits to the World's Fair at Chicago, should desire to transport them a part of the distance over the Erie Canal, it would hardly be deemed essential for that state to obtain the consent of Congress before it could contract with New York for the transportation of the exhibit through that state in that way. If the bordering line of two states should cross some malarious and disease producing district, there could be no possible reason, on any conceivable public grounds, to obtain the consent of Congress for the bordering states to agree to unite in draining the district, and thus remove the cause of disease. So in case of threatened invasion of cholera, plague, or other causes of sickness and death, it would be the height of absurdity to hold that the threatened states could not unite in providing means to prevent and repel the invasion of the pestilence without obtaining the consent of Congress, which might not at the time in session. If, then, the terms 'compact' or 'agreement' in the Constitution do not apply to every possible compact or agreement between one state and another, for the validity of which the consent of Congress must be obtained, to what compacts or agreements does the Constitution apply?
"We can only reply by looking at the object of the constitutional provision and construing the terms 'agreement' and 'compact' by reference to it. It is a familiar rule in the construction of terms to apply to them the meaning naturally attaching to them from their context. Noscitur a sociis is a rule of construction applicable to [[Orig. Op. Page 9]] all written instruments. Where any particular word is obscure or of doubtful meaning, taken by itself, its obscurity or doubt may be removed by reference to associated words. And the meaning of a term may be enlarged or restrained by reference to the object of the whole clause in which it is used. Looking at the clause in which the terms 'compact' or 'agreement' appear, it is evident that the prohibition is directed to the formation of any combination tending to the increase of political power in the states, which may encroach upon or interfere with the just supremacy of the United States. . . ."
The court later discussed the relation of the compact clause to boundary compacts in particular (148 U.S. 503 at 520):
". . . The compact or agreement will then be within the prohibition of the Constitution or without it, according as the establishment of the boundary line may lead or not to the increase of the political power or influence of the states affected, and thus encroach or not upon the full and free exercise of Federal authority. If the boundary established is so run as to cut off an important and valuable portion of a state, the political power of the state enlarged would be affected by the settlement of the boundary; and to an agreement for the running of such a boundary or rather for its adoption afterwards, the consent of Congress may well be required. But the running of a boundary may have no effect upon the political influence of either state; it may simply serve to mark and define that which actually existed before, but was undefined and unmarked. In that case the agreement for the running of the line, or its actual survey, would in no respect displace the relation of either of states to the general government. . . ."
It could well be argued that this discussion by the United States Supreme Court is purely dicta and not a part of the holding, for the court went on to say that Congress had impliedly approved the compact between the two states by recognizing the boundaries for the purposes of revenue collection, [[Orig. Op. Page 10]] elections, and federal appointments. However, as things have turned out, this discussion has established the guidelines applied by the United States Supreme Court itself, and by state courts, in determining whether or not a compact between the states requires Congressional consent. Thus, although the discussion may well have been dicta when originally expressed, it has been the determining factor in subsequent court decisions.
Shortly after the decision in Virginia v. Tennessee, the United States Supreme Court was confronted with the question of the validity of a compact between Virginia and Maryland, entered into in 1785, under the Articles of Confederation. See,Wharton v. Wise, 153 U.S. 154, 38 L. Ed. 669 (1894). This agreement dealt with the regulation of navigation and fishing, and the exercise of jurisdiction over the Potomac River.
Article VI of the Articles of Confederation had provided that no two or more states could enter into any treaty, confederation, or alliance without the consent of Congress. In determining that the compact between Virginia and Maryland was not one of the type which required such consent, the court quoted extensively from Virginia v. Tennessee, supra, and then concluded as follows: (153 U.S. at 170.)
"So, in the present case, looking at the object evidently intended by the prohibition of the Articles of Confederation, we are clear they were not directed against agreements of the character expressed by the compact under consideration. Its execution could in no respect encroach upon or weaken the general authority of Congress under those articles. . . ."
It is interesting to note that the court did not rest its decision upon a distinction between treaties, alliances, or confederations (which are completely prohibited under Article I, § 10 of the United States Constitution) and compacts or agreements (which simply require Congressional consent). Under the constitution, such a distinction is obviously a critical one. But the court inWharton instead simply reaffirmed the criteria expressed inVirginia v. Tennessee on the question of what compacts or agreements need Congressional consent, and then applied these criteria to the question of what treaties, confederations, or alliances needed Congressional consent under the Articles of Confederation.
[[Orig. Op. Page 11]]
"In this fashion, at the close of the nineteenth century, the paradoxical construction of article I, section 10, was established; it has persisted until this day. It evolved from an effort to eliminate the burdensome requirement of congressional consent from the new types of cooperative interstate arrangements which emerged during that century. . . ." Engdahl,supra, p. 89.
And in fact, ". . . in every case since Virginia v. Tennessee in which an interstate arrangement has been challenged for lack of congressional consent, it has been held exempt from the consent requirement. . . ." Engdahl,supra, p. 69. (Emphasis supplied.)
Typical instances of such cases follow:
State v. Doe, 149 Conn. 216, 178 A.2d 271 (1962), involved a Connecticut statute authorizing the state welfare commissioner to enter into reciprocal agreements with other states for interstate transportation of poor and indigent persons. The legislature had also implemented this authority by passage of the interstate compact on welfare services. It was held that Congressional consent was not necessary for the compact or the reciprocal agreements, since they in no way challenged the supremacy of the federal government.
Dixie Wholesale Grocery, Inc. v. Martin, 178 Ky. 705, 129 S.W.2d 181, cert. denied, 308 U.S. 609 (1939), dealt with an agreement, pursuant to a reciprocal statute, between Kentucky and Ohio under which the two states agreed to exchange information relating to tobacco shipments. The court stated that such an agreement was not "political" within the meaning ofVirginia v. Tennessee, and thus did not require Congressional consent.
Roberts Tobacco Co. v. Department of Revenue, 322 Mich 519, 34 N.W.2d 54 (1948), involved an agreement similar to that involved in Dixie Wholesale Grocery v. Martin. In upholding the constitutionality of the agreement, the court relied primarily upon that decision.
Ham v. Maine New Hampshire Interstate Bridge Authority, 92 N.H. 268, 30 A.2d 1 (1943), concerned a compact under which [[Orig. Op. Page 12]] a bridge authority was established. The court held that Congressional consent was not required since the agreement did not lead to an increase of the political power of the states, or encroach on federal authority.
Landes v. Landes, 1 N.Y.2d 358, 135 N.E.2d 562, 153 N.Y.S. 2d 14, appeal dismissed, 352 U.S. 948 (1956), dealt with the New York uniform support of dependents act and the California uniform reciprocal enforcement of support act. The court stated that these acts did not interfere with the supremacy of the federal government, and thus required no Congressional consent.
Bode v. Barrett, 412 Ill. 204, 106 N.E.2d 521 (1952), involved an Illinois motor vehicle tax for highway use. The act contained a reciprocity provision, under which the secretary of state was authorized to enter into agreements with other states to exempt their residents from the Illinois tax if the other states extended like treatment to Illinois residents. In rejecting the contention that the Illinois act and agreements reached thereunder violated the compact clause, the court first discussed Dixie Wholesale Grocery v. Martin, supra, andVirginia v. Tennessee, supra, and then concluded:
"Consideration of these and other pertinent authorities impels the conclusion that the Federal constitutional interdiction of 'interstate compacts' was written into the organic law of the land in order to protect a then nascent republic from suchententes among powerful States as would aggrandize their political power at the expense or the compromise of national sovereignty. The provision does not inhibit those purely fiscal interstate agreements that facilitate interstate commerce and aid in execution of internal revenue policies. This is particularly true when such agreements conduce to, rather than restrain, commerce among the several states." (Emphasis supplied.) 106 N.E.2d at 536.
In affirming the decision of the Illinois Supreme Court, the United States Supreme Court stated as follows:
"We need notice only one other argument and that is that the statute requires Illinois residents to pay the tax, whereas nonresidents are exempted provided the states of their [[Orig. Op. Page 13]] residence reciprocate and grant like exemptions to Illinois residents. That objection, so far as the Fourteenth amendment is concerned, was adequately answered in Storassli v. Minnesota, 283 US 57 [[283 U.S.57]], 62, 75 L.Ed. 839, 843, 51 S.Ct. 354. And contrary to appellants' suggestions, that kind of reciprocal arrangement between states has never been thought to violate the Compact Clause of Art I, § 10 of the Constitution. See St. Louis & S. F. R. Co. v. James, 161 US 545 [[161 U.S. 545]], 562, 40 L.Ed. 802, 808, 16 S.Ct. 621; Kane v. New Jersey, 242 US 160 [[242 U.S. 160]], 168, 61 L.Ed. 222, 227, 37 S.Ct. 30." Bode v. Barrett, 344 U.S. 583, 97 L.Ed. 567, 571 (1953). (Emphasis supplied.)
Of the two cases cited by the United States Supreme Court in this decision,St. Louis & S. F. R. Co. v. James, is of particular interest. In that case the court stated:
"It is competent for a railroad corporation organized under the laws of one State, when authorized so to do by the consent of the State which created it, to accept authority from another State to extend its railroad into such State and to receive a grant of powers to own and control, by lease or purchase, railroads therein, and to subject itself to such rules and regulations as may be prescribed by the second State. Such legislation on the part of two or more States is not, in the absence of inhibitory legislation by Congress, regarded as within the constitutional prohibition of agreements or compacts between States."
In summary: The criteria established by the United States Supreme Court inVirginia v. Tennessee, supra, as to when a compact requires Congressional consent are imprecise, to say the least.7/ However, until the court enunciates new and more [[Orig. Op. Page 14]] precise criteria, we can only follow the lead of the state courts and apply the criteria of Virginia v. Tennessee, as enunciated therein and as applied by the state courts and by the supreme court itself.8/
C. Application of the Criteria to the Multistate Tax Compact.
Before applying the criteria established by case law to the multistate tax compact, as described in part A of this opinion, some preliminary observations should be made.
The specific examples given in Virginia v. Tennessee, supra, for the types of compacts or agreements which do not need Congressional consent do not really fit the multistate tax compact. Nor, for that matter, do they fit most of the interstate agreements which have been held by the state courts as not requiring Congressional consent. Accordingly, just as the state courts have done, we must look to the general criteria established byVirginia v. Tennessee, i.e., we must ask whether the multistate tax compact would ". . . tend to increase and build up the political influence of the contracting states, so as to encroach upon or impair the supremacy of the United States or interfere with their rightful management of particular subjects placed under their entire control."
In this regard, two points should be made. First, the subject matter of the multistate tax compact directly involves interstate commerce. And, under the commerce clause of the federal constitution, Congress has the power to regulate interstate commerce. However, it does not at all follow that the compact would therefore ". . . encroach upon or impair the supremacy of the United States or interfere with their rightful management of particular subjects placed under their entire control."
[[Orig. Op. Page 15]]
As Frankfurter and Landis pointed out years ago, although the constitution grants to Congress the power to regulate interstate commerce, the states are not thereby automatically precluded from regulating and taxing interstate businesses. As stated by these two authors, "And so, for a hundred years, we find exertions by state authority within the field of interstate commerce successfully passing the scrutiny of the Supreme Court. . . ."9/ And as was established by the United States Supreme Court in Cooley v. Board of Wardens, 12 How. 299 (1851), these exertions by state authority within the field of interstate commerce are perfectly valid and constitutional unless and until Congress declares otherwise.
It should also be pointed out that the interstate arrangements involved inBode v. Barrett, supra, and St. Louis & S. F. R. Co. v. James, supra, quite clearly involved regulation of taxation in the field of interstate commerce; nevertheless, the United States Supreme Court held that these interstate arrangements did not require Congressional consent. Nor do we believe that the result in those two cases would have been different if the statutes involved had been denominated a compact rather than a reciprocal act.
Secondly, there can be little doubt that, in a sense, the multistate tax compact will "build up the political influence" of the states. But it should be noted that this is the result in any case in which the states act in uniformity with each other. For example, the almost universal adoption by the states of the uniform commercial code undoubtedly strengthens the states as viable political entities. Without such uniform action by the states, it is quite conceivable that the Congress would have imposed a uniform system of commercial law by federal statute.
Similar remarks could be made with respect to almost any uniform state action. Accordingly, we do not feel that this criterion of Virginia v. Tennessee, supra, requires Congressional consent for a compact simply because the compact enables the state to do a better job in a field in which its competence to act is unquestioned, and thereby strengthens the state as a viable instrument of government.
With these general observations in mind, we now turn to the specific question of whether or not Congressional consent is [[Orig. Op. Page 16]] required for the multistate tax compact. Following the analysis made in part A, it is helpful to divide this question into a number of subquestions.
(1) Are the substantive provisions found in Articles III and IV, relating to net income taxes, and in Article V, relating to sales and use taxes, effective Washington law?10/
We conclude that the answer to this question is in the affirmative.
As already pointed out in part A, these three articles really amount to nothing more than uniform state laws. They could have been enacted by each of the party states apart from any compact and their validity would be unquestionable. We can find no reason why their adoption as part of a compact would render Congressional consent necessary for their being effective. The method of adoption could certainly make no difference so far as the political influence of the states or any possible infringement on the powers of the federal government are concerned.
(2) May the multistate tax commission exercise its powers under Articles VI and VII without Congressional consent to the compact and, specifically, are expenditures made by the state of Washington in connection with the activities of the commission, including payment of its share of the commission budget, a legitimate public expenditure? We conclude that the answers to these questions are also in the affirmative. As previously pointed out in part A, these powers are basically those of study and recommendation. Under Articles VI and VII, the commission has no power to impose legally binding obligations upon either the states or taxpayers. Accordingly, under the criteria embodied in the case law discussed above, we see no reason why Congressional consent is necessary.
(3) Is Congressional consent required for the implementation of the interstate audit provisions of Article VIII?
[[Orig. Op. Page 17]]
We conclude that it is not.
To a certain extent, implementation of this article will simply involve an exchange of information between states similar to that involved inDixie Wholesale Grocery, Inc. v. Martin, 278 Ky. 705, 129 S.W.2d 181, cert. denied, 308 U.S. 609 (1939), and Roberts Tobacco Co. v. Department of Revenue, 322 Mich. 519, 34 N.W.2d 54 (1948). Accordingly, we see no reason for the requirement of Congressional consent so far as this phase of the interstate audit program is concerned.
At the same time, it must be recognized that in certain instances the commission will itself be performing an audit, and is authorized to use compulsory process and the aid of the courts of a party state in obtaining information necessary for this audit. However, we do not believe that this feature necessarily requires Congressional consent. Landes v. Landes, 1 N.Y.2d 358, 135 N.E.2d 562, 153 N.Y.S. 2d 14, appeal dismissed, 352 U.S. 948 (1956), makes it clear that by reciprocal legislation two states may agree that one state may use the courts of a second state to aid in enforcement of legal obligations arising in the first state.
(4) Is Congressional consent necessary for implementation of the arbitration provisions of Article IX? We conclude that it is not.
As already pointed out, the purpose of the arbitration provisions is to afford to a taxpayer a device whereby he can be assured that uniform state laws will be uniform in their application to him by two or more party states. We cannot find any reason why such a device in any way so increases the political influence of the states or results in any possible infringement on the powers of the federal government in such a manner that Congressional consent would be required under theVirginia v. Tennessee test, supra.
Although we have concluded that Congressional consent is not necessary for the multistate tax compact to become effective as Washington law, we do not wish to suggest that obtaining Congressional consent would serve no purpose. It must be recognized that unless and until the United States Supreme Court enunciates more precise criteria and guidelines, it is impossible to arrive at complete certainty on this question.
[[Orig. Op. Page 18]]
The passage of a consent bill would completely remove all conceivable doubt as to the validity of the compact.
Moreover, and perhaps more importantly, although we have concluded that the compact is not void because of lack of Congressional consent, it does not necessarily follow that the compact is not voidable. As stated by Zimmermann and Wendell,11/ ". . . at least in certain cases, consent of Congress must be obtained; in all cases, Congress may forbid the compact by specific enactment." (Emphasis supplied.) And the fact that the multistate tax compact involves taxation of interstate businesses makes this question of voidability an unusually important one. Enactment of a consent bill would therefore be especially useful.
We trust that the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
TIMOTHY R. MALONE
Assistant Attorney General
*** FOOTNOTES ***
1/See, Council of State Governments, Suggested State Legislation, Vol. XXVII 1968.
2/We are aware that two states, in their enabling acts, have expressly made adoption of the compact conditional upon Congressional consent. These two states are in addition to the fourteen which have adopted the compact without such a condition.
3/See, Vol. 9A, Uniform Laws Annotated, p. 449.
4/See, Vol. 1, C.C.H. Wn. Tax Reporter, P 89-401.
5/Frankfurter and Landis, "The Compact Clause of the Constitution -A Study in Interstate Adjustments," 34 Yale L. Rev. 685 at 691 (1925).
6/Engdahl, "Characterization of Interstate Arrangements: When Is a Compact Not a Compact," 64 Mich. Law. Rev. 63 [[64 Mich. L. Rev. 63]], 88 (1965).
7/They have been roundly criticized by various commentators. See, Engdahl,supra, and Dunbar, "Interstate Compacts and Congressional Consent," 36 Virginia Law Rev. 753 [[36 Va. L. Rev. 753]](1950). Congressional Consent," 36 Virginia Law Rev. 753 (1950).
8/We should note, in passing, that the classic study of the compact clause by Frankfurter and Landis, "The Compact Clause of the Constitution," 34 Yale Law Journal 685 [[34 Yale L. J. 685]](1925), does not directly address itself to this problem of when Congressional consent is required, and does not discuss at all the criteria established by Virginia v. Tennessee. The study does, however, recognize the fact that there are interstate agreements which have not received Congressional consent, for it lists such agreements in an appendix. 34 Yale Law Journal [[34 Yale L. J. 749]], at 749.
9/Frankfurter and Landis, supra, at p. 720.
10/Washington, of course, does not yet have a net income tax. Accordingly, the precise question with respect to Articles III and IV is whether, in the event a net income tax is enacted, Articles III and IV would be effective without any further action by the legislature.
11/"The Interstate Compact Since 1925," The Council of State Governments (1951) p. 42.