New Energy Co. of Ind. v. Limbach

486 U. S. 269

May 31, 1988

Ohio had a law that gave a big tax credit to sellers of Ethanol gasoline, but only if the Ethanol came from Ohio or from a state that gave an equally large tax credit for Ohio Ethanol. An Indiana Ethanol producer wanted the tax credit, but could not get it because Indiana did not offer Ethanol tax credits. The question was whether Ohio’s law violated the Interstate Commerce clause by unfairly restraining commerce.

With Scalia writing, the Court unanimously ruled that Ohio’s law did violate the Commerce clause. Judicial precedent had long since held commercial reciprocity laws out of order, and the fact that this reciprocity law involved a denied tax credits rather than a flat embargo was irrelevant. Precedent also held out of order laws which placed less severe economic disadvantages on out-of-state businesses. Scalia was unimpressed by Ohio’s claim that only the one Indiana seller would be disadvantaged by the law, because the number disadvantaged did not matter.

Under the market-participation doctrine, some discrimination could be acceptable if the state itself was an actor in the economic market, but mere tax credits did not suffice to bring Ohio into the Ethanol market. A case where Maryland was allowed to subsidize in-state car junkers was carefully distinguished. Finally, Scalia rejected as obviously untrue Ohio’s contention that the law was intended to promote health and commerce rather than to discriminate against out-of-state Ethanol.

While Scalia’s opinion seems correct as a legal matter, there does seem to be a really unfair double standard with Interstate Commerce clause cases. Congress seems able to do whatever it wants with no restrictions under the clause at all. But the moment a state does the teeniest, tiniest little bit of commercial discrimination, the Supreme Court brutally slaps them down in summary fashion.

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