South Carolina v. Regan

Background

South Carolina asked the Court’s original jurisdiction to challenge a 1982 tax law change that makes interest on many state bonds taxable unless those bonds are issued in registered form. The State says the rule effectively forces it to use registered bonds, raises its borrowing costs, and violates its constitutional rights. The Secretary of the Treasury responded that the Anti‑Injunction Act bars the suit.

Reasoning

The central question was whether the Anti‑Injunction Act prevents a State from bringing a pre-enforcement suit when Congress provided no alternative way to challenge the tax. The Court held the Act was not meant to bar actions where an aggrieved party lacks any statutory remedy. Because only bondholders would be taxed and the State itself could not seek review through ordinary refund procedures, the Court allowed the State to file and appointed a Special Master to develop the factual record. The Court did not decide the constitutional claims.

Real world impact

The ruling lets a State pursue a court challenge to §103(j)(1) before issuing bearer bonds and while refusing to decide the law’s constitutionality. It affects how States and bond markets assess legal risks. The decision is procedural: a Special Master will gather facts and a later ruling will address the merits.

Dissents or concurrances

Justices split. One concurrence would reach the result on narrower grounds about tax purpose. Another concurrence warned the Court’s statutory reading is broader than justified. A dissenting Justice would have denied leave, finding the State’s legal claims meritless.