Commonwealth Edison Co. v. Montana (SCOTUS 1981)

Summary

The Court affirmed Montana's coal severance tax against both Commerce Clause and Supremacy Clause challenges. It held that severance taxes are subject to the practical, four-part analysis applicable to other state taxes, but that Montana's tax had a substantial nexus, was fairly apportioned, nondiscriminatory, and fairly related to the taxpayers' in-state activities and governmental benefits. The Court also held that federal mineral-leasing and energy statutes neither prohibited the tax nor preempted it. Justice Blackmun, joined by Justices Powell and Stevens, would have required a trial on whether the tax excessively burdened interstate commerce, while Justice White concurred with reservations about the tax's potential burden.

Holding

Commerce Clause treatment of severance taxes. A state severance tax is not immune from Commerce Clause scrutiny merely because it is imposed before the taxed goods enter interstate commerce. The tax must be evaluated under the four-part test requiring substantial nexus, fair apportionment, no discrimination against interstate commerce, and a fair relation to services provided by the State.

Supremacy Clause and federal preemption. Montana's severance tax on federally owned coal is not invalid under the Supremacy Clause. The federal mineral-leasing statute expressly preserved otherwise lawful state taxation of lessees' mine output, and the federal energy statutes did not clearly preempt state severance taxes.

Summary

Holding

Cited authorities