Case 4-3 - Catherine Reeves Case 4-3 Citation Department of...

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Catherine Reeves Case 4-3 Citation Department of Revenue of Kentucky v. Davis, Et. Al. United States Supreme Court, 2008. 553 U.S. 328, 128 S.Ct. 1801, 170 L.Ed.2d 685 Facts When calculating gross income for tax purposes, the Internal Revenue Code exempts from taxation the interest earned on any state or local bond; however, Kentucky law requires that interest income earned on bonds issued by other states be taxed as part of an individual's adjusted gross income. George and Catherine Davis filed a class action complaint arguing that Kentucky's policy of taxing out-of-state bonds was in violation of the dormant Commerce. The state trial court ruled in favor of the Kentucky Department of Revenue and declared the tax policy constitutional. On appeal, the Davises stressed Kentucky's market discrimination against other states as a factor indicating that the policy was unconstitutional. In response, the Department of Revenue cited a similar policy that was upheld by state courts in Ohio. The Department also invoked the "market participant
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