Court Applies Intergovernmental Tax Immunity In Favor Of Federal Retirees

In Dawson v. Steager, West Virginia sought to tax a federal law enforcement retiree’s pension. Under 4 U.S.C. §111, the federal government permits this so long as the state tax does not discriminate on the basis of the source of the compensation, otherwise known as the intergovernmental tax immunity doctrine. However, West Virginia, by statute, did not tax the pensions of its state and local law enforcement retirees. The West Virginia Supreme Court of Appeals held that the state exemption did not violate the immunity doctrine because the exemption applied to a narrow class of state retirees and was not intended to discriminate. The Court, in a unanimous opinion by Justice Gorsuch, reversed, holding that since West Virginia treated federal law enforcement retirees different from state and local ones, its tax violated the immunity doctrine. The Court further noted that the “relevant question under §111 is not whether federal retirees are similarly situated to state retirees who do not receive a tax break; it is whether they are similarly situated to those who do.”