Jefferson County v. Acker

Background

Jefferson County, Alabama, passed an ordinance imposing a half-percent occupational "license or privilege" tax measured by gross receipts and defined to include salaries. The county sued two federal district judges in state small claims court to collect the fee after the judges declined to pay. The judges removed those collection suits to federal court under the federal-officer removal statute and obtained a favorable ruling below. The case reached this Court to decide removal, a federal statute that limits federal intervention in state tax matters, and whether the tax violated federal protections for federal pay.

Reasoning

The Court first held that the judges met the threshold for removal under 28 U.S.C. §1442(a)(3) and that the Tax Injunction Act did not bar adjudication of a tax-collection suit in federal court. On the merits, the Court examined whether the county’s charge was, in practice, a tax on compensation or an unlawful licensing condition tied to job performance. Looking to the ordinance’s practical operation rather than its label, the Court concluded the measure functions as a nondiscriminatory tax on pay and is permitted by the Public Salary Tax Act (4 U.S.C. §111). The Court reversed the court of appeals and remanded for further proceedings consistent with this ruling.

Real world impact

The decision lets local governments collect nondiscriminatory occupational taxes measured by pay or gross receipts even when the taxpayer is a federal employee, so long as the tax does not single out federal pay. It also confirms that some tax-collection suits may be heard in federal court when federal-officer interests are plausibly implicated. The ruling resolves the dispute on these facts but leaves room for future challenges if states or counties adopt different enforcement practices.

Dissents or concurrances

A four-Justice opinion (Justice Scalia joined by three others) would have held removal improper; Justice Breyer (joined by Justice O’Connor) would have viewed the ordinance as a licensing fee and found it unconstitutional as applied to federal officials.