In a 5-4 decision, the Supreme Court held that a Maine statute violated the Commerce Clause by denying otherwise available tax exemptions to charitable institutions that principally served non-residents of Maine.
The statute at issue exempted "benevolent and charitable institutions incorporated" in Maine from real estate and personal property taxes. However, the exemption was limited or in some cases wholly eliminated with respect to institutions that were "in fact conducted or operated principally for the benefit of persons who are not residents of Maine." The petitioner, a Maine non-profit corporation that operated a summer camp for Christian Scientists, was denied the exemption because about 95% of its campers were not residents of Maine. It sued in state court, challenging the constitutionality of the exemption statute, but lost in the Maine Supreme Court.
Justice Stevens' majority opinion, which reversed the decision of the Maine Supreme Court, first held that the statute discriminated on its face against interstate commerce and would clearly be unconstitutional if it were aimed at profit-making enterprises. The Court next addressed "the novel question" of whether a different standard should apply to the regulation of non-profit entities and concluded that the answer was "no." Finally, the Court rejected respondent's arguments that the tax exemption was tantamount to a direct subsidy of those non-profit corporations that served primarily Maine residents and that Maine had been a market participant acting merely as a purchaser of the charitable services provided by such corporations. Both Justice Scalia (joined by Chief Justice Rehnquist, Justice Thomas, and Justice Ginsberg) and Justice Thomas (joined by Chief Justice Rehnquist and Justice Scalia) filed vigorous dissents.
Cases interpreting the limits of state powers to tax and interfere with interstate commerce are important to manufacturers around the country. They can be important factors in determining where to locate facilities, but can also restrict the ability of out-of-state companies to fully compete both in the state and with international competitors.