Point and case
The U.S. Supreme Court has overruled a Nevada Supreme Court tax ruling, giving the state of California a victory and possibly foreshadowing its intent to overturn Roe vs. Wade.
The ruling comes in a 26-year-old case in which wealthy inventor Gilbert Hyatt claimed to move from California to Nevada in 1991, the year he was granted patent 4942516 for a “microcontroller,” a computer microchip. His patent was later voided, but in the meantime he was paid substantial royalties. His move to Nevada was suspected by the California Franchise Tax Board of being an effort to avoid taxation, and the board hired an investigator to probe the matter. The investigator’s conduct tainted California’s case because of her use of investigative techniques like going through Hyatt’s trash and employing discontented members of his family and his ex-wife to make a case. In addition, the investigator was accused of anti-Semitic motivation.
Nevertheless, based on the information supplied to the CFTB, it concluded that Hyatt had moved to Nevada in April 1992, thus subjecting him to more than $10 million in back taxes, penalties and interest.
The case worked its way through the courts and reached the U.S. Supreme Court three times, with Hyatt prevailing the first two times. The case was considered ended in January, when a new California Office of Tax Appeals vetoed the CFTB’s plan to launch new hearings on the case. That left a Nevada Supreme Court and other rulings in Hyatt’s favor standing. But Las Vegas tax analyst Russ Fox predicted the case would continue because the CFTB’s “normal strategy is to exhaust litigation opponents.” However, this week’s decision came in a lawsuit filed by Hyatt in Nevada courts against the California board, and the new ruling turned on exactly that filing.
On May 13, the U.S. Supreme Court swept all of Hyatt’s previous victories away and declared California the winner. That decision overturned a precedent set in an earlier Nevada case and prompted a caustic dissent from Justice Stephen Breyer.
The now-rejected precedent involved a 1979 case called Nevada vs. Hall in which the U.S. Supreme Court ruled that it was a state’s decision whether or not to grant or deny sovereign immunity to other states. That precedent is now voided, a finding that is already earning criticism for shallow reasoning. In Slate, attorney Mark Joseph Stern wrote the ruling “overturned a 40-year-old precedent for the simple reason that five conservative justices didn’t like it.” The Nevada Supreme Court’s ruling on Hyatt relied on Nevada vs. Hall.
Justice Clarence Thomas’s ruling reads in part, “Nevada vs. Hall is contrary to our constitutional design and the understanding of sovereign immunity shared by the States that ratified the Constitution.”
Justice Breyer’s dissent said in part, “The majority has surrendered to the temptation to overrule Hall even though it is a well reasoned decision that has caused no serious practical problems in the four decades since we decided it.”
Legal analyst Jeffrey Toobin filled in Breyer’s blank: “English translation of Justice Breyer’s dissent today in Hyatt: ‘Roe vs. Wade is doomed’.”
The U.S. Supreme Court ruling can be read here: tinyurl.com/y6psexbl.