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Keywords

plaintiffstatutediscriminationalimony

plaintiffalimony

Related Cases

Wood v. Department of Revenue, 305 Or. 23, 749 P.2d 1169, 56 USLW 2507

Facts

Plaintiffs Erskine B. Wood and Ronnie Wood, nonresidents of Oregon, filed personal income tax returns in Oregon and sought refunds for alimony payments made during the years 1979, 1980, and 1981. The Oregon Department of Revenue denied their claim, stating that nonresidents could not deduct alimony payments under Oregon law. The Tax Court affirmed this decision, concluding that the denial of the deduction was constitutional.

The parties have stipulated to the facts. Plaintiff Erskine B. Wood practiced law in Portland for many years (including the years in question: 1979, 1980 and 1981) as a partner in the firm of Wood, Tatum, Mosser, Brooke & Holden.

Issue

Whether the disallowance of a deduction for alimony to nonresidents of Oregon, while allowing it for residents, violates the Privileges and Immunities Clause of the United States Constitution.

The issue in this case is whether the disallowance of a deduction for alimony to nonresidents of Oregon, when contrasted with the allowance of a deduction for alimony to residents of Oregon under ORS 316.127(1)(a), violates the Privileges and Immunities Clause of the United States Constitution, Article IV, section 2.

Rule

The Privileges and Immunities Clause prohibits discrimination against citizens of other states unless there is a substantial reason for the discrimination that bears a close relation to the state's objective.

The Privileges and Immunities Clause of the United States Constitution provides: 'The citizens of each state shall be entitled to all Privileges and Immunities of citizens in the several states.'

Analysis

The court analyzed the reasons provided by the Oregon Department of Revenue for the differential treatment of residents and nonresidents regarding alimony deductions. It found that the reasons did not substantiate a valid basis for the discrimination, as the practical effect of the tax scheme was to impose a higher tax burden on nonresidents without a substantial justification.

The department argues that there are substantial reasons for the denial to nonresidents of a deduction for alimony. The department asserts: '(a) Nonresidents are only taxed on their Oregon source income, and alimony expenditures are not connected with Oregon source income.'

Conclusion

The Supreme Court held that the Oregon statute was unconstitutional as it discriminated against nonresident taxpayers without a substantial reason, thus reversing the Tax Court's decision and remanding the case.

The decision of the Tax Court is reversed, and the case is remanded to the Department of Revenue for further proceedings consistent with this opinion.

Who won?

Plaintiffs, Erskine B. Wood and Ronnie Wood, prevailed because the court found that the statute's differential treatment of alimony deductions violated their federal constitutional rights.

Plaintiffs rest their claim solely on federal constitutional rights under the Privileges and Immunities Clause.

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