''South Carolina v. Baker'', 485 U.S. 505 (1988), was a

United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...

case in which the Court ruled that section 310(b)(1) of the

Tax Equity and Fiscal Responsibility Act of 1982 The Tax Equity and Fiscal Responsibility Act of 1982 (), also known as TEFRA, is a United States federal law that rescinded some of the effects of the Kemp-Roth Act passed the year before. Between summer 1981 and summer 1982, tax revenue fell by ...

(TEFRA) does not violate the

Tenth Amendment to the United States Constitution The Tenth Amendment (Amendment X) to the United States Constitution, a part of the Bill of Rights, was ratified on December 15, 1791. It expresses the principle of federalism, also known as states' rights, by stating that the federal governmen ...

Background

TEFRA continued the federal tax exemption for state bond interest as long as the bond is registered, with each seller and buyer being recorded for audit purposes. Anonymous

bearer bonds A bearer bond is a bond or debt security issued by a business entity such as a corporation or a government. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered—no records are kept o ...

, which often were used in

money laundering Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...

, were no longer exempt, however. South Carolina sued to have the federal tax advantage restored for all their bonds.

Decision

The Court also ruled that a nondiscriminatory federal tax on the interest earned on state bonds does not violate the intergovernmental tax immunity doctrine, which permitted the federal taxation of interest income on bonds issued by state governments in the United States. The Supreme Court stated that the contrary decision of the Court in the case of '' Pollock v. Farmers' Loan & Trust Co.'' (1895) had been "effectively overruled by subsequent case law."

Sources

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External links

* {{US10thAmendment United States Supreme Court decisions that overrule a prior Supreme Court decision United States Supreme Court cases United States Supreme Court cases of the Rehnquist Court United States taxation and revenue case law United States Tenth Amendment case law 1988 in United States case law Government bonds Taxation in South Carolina