Davis v. Michigan Department of Treasury

Paul S. Davis (plaintiff) was a Michigan resident who had worked as a federal employee and who received federal retirement benefits. Under Michigan state law, retirement benefits other than those received from state or local governments were included in a taxpayer’s gross income for tax purposes. Between 1979 and 1984, Davis paid Michigan state income tax on his federal retirement benefits. In 1984 Davis petitioned the Michigan Department of Treasury (the treasury department) (defendant) for a refund of the income taxes he paid on his federal retirement benefits. The treasury department denied Davis’s petition. Davis appealed in state court, arguing that Michigan’s state income tax violated 4 U.S.C. § 111 and the doctrine of intergovernmental tax immunity by discriminating against federal employees. Under § 111, the federal government consented to the state taxation of federal employees as long as the states did not discriminate against the federal employees. The treasury department defended Michigan’s tax laws, arguing that the doctrine of intergovernmental tax immunity is meant to protect governments, not private individuals. The treasury department reasoned that because Michigan’s tax laws did not interfere with the functions of the federal government, the doctrine of intergovernmental tax immunity had not been violated. The court of claims ruled against Davis, and the Michigan Court of Appeals affirmed the court of claims. The Michigan Supreme Court denied Davis’s petition to appeal the case, and the United States Supreme Court granted certiorari.