/dis-KRIM-uh-nuh-tor-ee OR ek-struh-TER-uh-tor-ee TAKS-iz/
Also known as:discriminatory taxes · extraterritorial taxes · discriminatory taxation · extraterritorial taxation
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
1
constitutional law
A state tax that singles out out-of-state businesses for heavier burdens than in-state competitors. Congress may expressly authorize such taxes even though they would otherwise violate the dormant Commerce Clause, provided the authorization is clear and the tax does not conflict with any specific federal statute.
Sense 1
1
constitutional law
A state tax that singles out out-of-state businesses for heavier burdens than in-state competitors. Congress may expressly authorize such taxes even though they would otherwise violate the dormant Commerce Clause, provided the authorization is clear and the tax does not conflict with any specific federal statute.
Sources & Authorities· 1 primary source
Select any source to read its text and confirm it supports the definition.
Cases
Sense 2
2
international tax law
A tax imposed by a foreign country on U.S. citizens or corporations that the President determines is discriminatory or extraterritorial. Upon presidential proclamation, the United States doubles the rates of tax otherwise imposed on citizens and corporations of that foreign country under specified Internal Revenue Code sections.
Sources & Authorities· 1 source
Select any source to read its text and confirm it supports the definition.
Study Supplements
Put it into practice
Test Yourself
10
Practice Questions5
2
international tax law
A tax imposed by a foreign country on U.S. citizens or corporations that the President determines is discriminatory or extraterritorial. Upon presidential proclamation, the United States doubles the rates of tax otherwise imposed on citizens and corporations of that foreign country under specified Internal Revenue Code sections.
Each sense below has its own examples, sources, and questions.
Examples1
State Gross-Receipts Tax on Out-of-State Telemedicine
Congress passed a statute encouraging healthcare financing experiments and expressly permitting states to impose discriminatory taxes on out-of-state telemedicine providers. State X then levied a special gross-receipts tax on MedLink, an out-of-state company, while in-state hospitals paid only a lower income-based tax. MedLink challenged the tax as violating the dormant Commerce Clause. The court upheld the tax because the federal statute supplied clear congressional authorization for the discrimination.
Frequently Asked1
When does congressional authorization allow a state to impose a discriminatory tax that would otherwise violate the dormant Commerce Clause?+
Congress may authorize states to regulate and even discriminate against interstate commerce in ways that would otherwise violate the Commerce Clause, such as imposing discriminatory taxes on out-of-state companies, so long as the state regulation does not conflict with a specific federal statute on the subject. The authorization must be clear. Once given, the usual dormant Commerce Clause limits no longer apply to the authorized state action.
Supporting sources
Examples1
Presidential Retaliation Against Foreign Discriminatory Taxes
Country Z enacted a tax that the President found subjected U.S. corporations to discriminatory treatment on income earned within Z. The President issued a proclamation under Section 891. For the current and future tax years, the United States doubled the rates of tax imposed on citizens and corporations of Country Z under the listed Internal Revenue Code sections. The doubled rates applied automatically upon the proclamation without further legislation.
Frequently Asked2
What triggers the doubling of U.S. tax rates under Section 891?+
Section 891 directs the President to proclaim that citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes under the laws of a foreign country. Upon that proclamation the rates of tax under the listed Internal Revenue Code sections are doubled for citizens and corporations of the foreign country for the taxable year of the proclamation and thereafter.
Supporting sources
Has Section 891 ever been invoked by a President?+
Section 891 has never been invoked by a U.S. President since its predecessor was originally enacted in 1934, although it remains available as a retaliatory mechanism.
Supporting sources
Constitutional LawThe relation of nation and states in a federal system · Federalism-based limits on state authorityNEXTGENFoundational