David P. Eby & a. v. State of New Hampshire

NOTICE: This opinion is subject to motions for rehearing under Rule 22 as
well as formal revision before publication in the New Hampshire Reports.
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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Merrimack
No. 2013-035

DAVID P. EBY & a.

v.

THE STATE OF NEW HAMPSHIRE

Argued: November 14, 2013
Opinion Issued: June 13, 2014

Devine, Millimet & Branch, PA, of Manchester (Thomas Quarles, Jr. and
Joshua M. Wyatt on the brief, and Mr. Wyatt orally), for the petitioners.

Joseph A. Foster, attorney general (Laura E. B. Lombardi, assistant
attorney general, on the brief and orally), for the State.

LYNN, J. The petitioners, David P. Eby and Leonard Willey, appeal
orders of the Superior Court (McNamara, J.): (1) granting summary judgment
in favor of the State; (2) denying the petitioners’ motions for summary
judgment; and (3) dismissing the petitioners’ remaining claims in their putative
class action challenge to the constitutionality of the state’s tax on gambling
winnings, RSA 77:38-:50 (Supp. 2009) (amended 2010; repealed 2011). We
affirm.
 I

Most of the relevant facts are not in dispute. Effective July 1, 2009, the
Legislature imposed a ten percent tax on gambling winnings (Gambling
Winnings Tax). Laws 2009, 144:249 (codified at RSA 77:38-:50 (Supp. 2009)
(repealed 2011)). The legislation defined “gambling winnings” as “winnings
from lotteries and games of chance including, but not limited to bingo, slot
machines, keno, poker tournaments, and any other gambling winnings subject
to federal income tax withholding.” RSA 77:38, III (Supp. 2010) (repealed
2011). The tax applied to gambling winnings of New Hampshire residents
“from anywhere derived,” and those of nonresidents “derived from New
Hampshire entities.” RSA 77:39, I (Supp. 2010) (repealed 2011).

The Gambling Winnings Tax was repealed effective May 23, 2011. Laws
2011, ch. 47. The repeal was not retroactive, meaning that the tax was
assessed on gambling winnings between July 1, 2009, and May 22, 2011. See
Laws 2011, 47:3, :4.

Willey is a New Hampshire resident who, for the three years preceding
the filing of this action, derived almost all of his earned income from gambling.
For the 2009 tax year, he owed no federal income tax because his gambling
losses exceeded his winnings. Under the Gambling Winnings Tax, he reported
gambling winnings of $184,700 for that part of 2009 during which the tax was
in effect and paid $18,470 in tax under the statute. All of his winnings during
this period were from out-of-state casinos.

Eby was not an original party to this action, but was added as a
substitute party later in the case. He is a New Hampshire resident who, in May
2011, purchased a scratch ticket offered by the New Hampshire Lottery
Commission. Eby won ten dollars on the ticket, and was required to pay one
dollar under the Gambling Winnings Tax as a result.

This class action was filed on May 20, 2010, by putative class
representatives Dean T. Leighton and Leighton Family Enterprises, LLC (the
Leighton Petitioners),1 and Willey. The petitioners sought a declaratory
judgment that the Gambling Winnings Tax was illegal and unconstitutional on
its face, as applied to pre-enactment lottery winners receiving their winnings
through annuities, and as applied to professional gamblers, as well as a refund
of all such taxes collected or withheld.

1 Leighton is a New Hampshire resident who won a Powerball jackpot on March 20, 1996,
receiving his winnings via a twenty-year annuity. In 2000, he assigned his rights to receive the
remainder of the annuity payments to Leighton Family Enterprises, LLC. In March 2010, the New
Hampshire Lottery Commission withheld ten percent of the annuity payment pursuant to the
Gambling Winnings Tax.

2
 The parties agreed that there were no genuine issues of material fact and
that the case could be decided on the legal issues. They also agreed to
postpone class certification until after all legal issues had been resolved. The
parties requested, and the trial court approved, an interlocutory transfer
without ruling so that the legal issues could be decided by this court. However,
we declined to accept the interlocutory transfer.

On May 19, 2011, the Leighton Petitioners and Willey moved for
summary judgment. Before the State’s response and cross-motion for
summary judgment was filed, the Leighton Petitioners resolved their claims
against the State, after which Eby was added as a party. The trial court denied
the petitioners’ motion and granted the State’s cross-motion in part. The court
ruled that the Gambling Winnings Tax neither lacked uniformity nor was
disproportional, unjust, or unreasonable in violation of the New Hampshire
Constitution, and that it did not violate the Commerce Clause of the Federal
Constitution. It also found a genuine issue of material fact as to whether
Willey was a professional gambler. The trial court set forth factors, including
those that the Internal Revenue Service considers when determining whether a
taxpayer’s activity constitutes a trade or business for federal tax purposes, see
Treas. Reg. § 1.183-2(b) (1972), that it intended to consider in deciding whether
Willey was a professional gambler.

Thereafter, the petitioners conceded that Willey would not qualify as a
professional gambler under the test adopted by the court. They reserved their
right to appeal the use of that test and disputed the court’s ruling that only a
professional gambler could raise as-applied constitutional arguments on behalf
of other professional gamblers as a class representative.

In 2012, the declaratory judgment statute was amended so as to provide
for expanded “taxpayer standing” to challenge governmental actions. See Laws
2012, ch. 262; RSA 491:22 (Supp. 2013). Thereafter, the petitioners filed a
motion for summary judgment arguing that the amendment gave them
standing to raise all constitutional issues, including those related to
professional gamblers. The State objected and moved to dismiss the
petitioners’ remaining claims. On December 4, 2012, the court denied the
petitioners’ motion for summary judgment and granted the State’s motion to
dismiss. This appeal followed.

II

On appeal, the petitioners contend that the trial court erred by granting
the State’s motions for summary judgment and to dismiss their claims, and by
denying their motions for summary judgment. In reviewing the trial court’s
rulings on cross-motions for summary judgment, we consider the evidence in
the light most favorable to each party in its capacity as the nonmoving party.

3
City of Concord v. State of N.H., 164 N.H. 130, 133 (2012). Where, as here, the
parties agree that there are no genuine issues of material fact in dispute, our
task in reviewing the trial court’s summary judgment rulings is to determine
whether the moving party is entitled to judgment as a matter of law. See id. In
such circumstances, the analysis for summary judgment purposes is not
meaningfully different from that employed in ruling on a motion to dismiss.
See Belcher v. Paine, 136 N.H. 137, 142-43 (1992).

We review the constitutionality of statutes de novo. N.H. Assoc. of
Counties v. State of N.H., 158 N.H. 284, 288 (2009). “In reviewing a
constitutional challenge to a legislative act, we presume the act to be
constitutional and will not declare it invalid except on inescapable grounds;
that is, unless a clear and substantial conflict exists between the act and the
constitution.” City of Concord, 164 N.H. at 134. “A party may challenge the
constitutionality of a statute by asserting a facial challenge, an as-applied
challenge, or both.” Huckins v. McSweeney, ___ N.H. ___ (decided April 11,
2014) (quotation omitted). “A facial challenge is a head-on attack of a
legislative judgment, an assertion that the challenged statute violates the
Constitution in all, or virtually all, of its applications.” Id. (quotation omitted).
“To prevail on a facial challenge to a statute, the challenger must establish that
no set of circumstances exists under which the Act would be valid.” Id.
(quotation omitted). “An as-applied challenge, on the other hand, concedes
that the statute may be constitutional in many of its applications, but contends
that it is not so under the particular circumstances of the case.” Id. (quotation
and brackets omitted).

III

We first address the petitioners’ facial challenges to the constitutionality
of the Gambling Winnings Tax under the New Hampshire Constitution. The
petitioners allege that: (1) the tax violates the uniformity requirement of the
State Constitution; and (2) the tax is disproportional and unreasonable.

A

The petitioners argue that the Gambling Winnings Tax violated the
uniformity requirement of the State Constitution because it taxed gambling
winnings at a ten percent rate while interest and dividends are taxed at a five
percent rate. They argue that “gambling winnings” and “interest and
dividends” are both part of the broader class of “gross income,” and that in
order to achieve constitutional uniformity throughout that class, the taxes had
to be assessed at an equal rate. See Opinion of the Justices, 95 N.H. 537, 539
(1949) (“[G]ross income . . . constitutes a class of property taxable under . . .
our Constitution . . . subject, however, to the constitutional requirement of
proportionality or equality of rate within [that] class.”). They base this

4
assertion on the premise that our previous decisions and advice require that
taxes within the separate classes of “gross income” and “net income” be
uniform within each class. We disagree with this premise.

In general, “there is no other state in the union with a structure of taxing
powers and limits comparable to New Hampshire’s.” Hurn, State
Constitutional Limits on New Hampshire’s Taxing Power: Historical
Development and Modern State, 7 Pierce L. Rev. 251, 252 (2009). We,
therefore, begin with a review of this unique constitutional structure, which
frames our analysis.

“Three provisions of the New Hampshire Constitution work in
conjunction to ensure the fairness of any scheme of taxation enacted by our
legislature.” First Berkshire Bus. Trust v. Comm’r, N.H. Dep’t of Revenue
Admin., 161 N.H. 176, 183 (2010). “These three constitutional provisions
require that taxation be just, uniform, equal, and proportional.” Id. at 184. “A
tax must be in proportion to the actual value of the property subject to tax, and
it must operate in a reasonable manner.” Id.

First, Part I, Article 12 establishes that “[e]very member of the
community has a right to be protected by it, in the enjoyment of his life, liberty,
and property; he is therefore bound to contribute his share in the expense of
such protection.” N.H. CONST. pt. 1, art. 12. “This article requires that a
given class of taxable property be taxed at a uniform rate and that taxes must
be not merely proportional, but in due proportion, so that each individual’s just
share, and no more, shall fall upon him.” First Berkshire, 161 N.H. at 183-84
(quotation omitted). Second, Part II, Article 5 authorizes the General Court “to
impose and levy proportional and reasonable assessments, rates and taxes,
upon all the inhabitants of, and residents within, the . . . state.” N.H. CONST.
pt. II, art. 5. “This section requires that all taxes be proportionate and
reasonable, equal in valuation and uniform in rate, and just.” First Berkshire,
161 N.H. at 184 (quotation omitted). Third, “Part II, Article 6 grants the
legislature broad power to declare property to be taxable or non-taxable based
upon a classification of the property’s kind or use, but not based upon a
classification of the property’s owner.” Id. “Together, Part II, Articles 5 and 6
permit the disproportionality inherent in taxes levied upon classes of property,
so long as there is uniformity and proportionality within each class.” N.
Country Envtl. Servs. v. State of N.H., 157 N.H. 15, 19 (2008) (quotation
omitted).

We have previously advised that “gross income” and “net income” are
classes of property that may be taxed at separate rates in conformity with our
constitution. See, e.g., Opinion of the Justices, 110 N.H. 117, 122 (1970) (“The
Constitution does not require the rate of a tax upon net income to be uniform
with that of the existing interest and dividends tax, which is a tax upon certain

5
gross income . . . .”); Opinion of the Justices, 101 N.H. 549, 558 (1958) (stating
that “should the tax contemplated . . . be levied upon net income, it would be
distinguished from [a] tax . . . the essential characteristics of which are those of
a gross income tax”); Opinion of the Justices, 95 N.H. at 539 (“A gross income
tax does not differ from a net income tax with respect to the constitutional
requirements. Either form of income constitutes a class of property taxable
under . . . our Constitution.”). But contrary to the petitioners’ argument, we
have not interpreted the Legislature’s “broad discretionary powers to classify
subjects of taxation” to be so limited as to prevent further classification of
income for the purposes of taxation. See Opinion of the Justices, 117 N.H.
512, 515 (1977). Rather, the question in determining whether a tax
classification violates our constitution is whether the classes of property at
issue are “sufficiently distinguishable” so as to “make it apparent that there is
just reason” to tax them at different rates. Id.

For example, in 1977 we were asked to determine whether income
derived from the sale or exchange of capital assets could constitutionally be
taxed at a rate different from the rate of tax imposed on gross income derived
from the receipt of certain interest and dividends. Id. at 514. We advised that
income from capital gains was sufficiently distinguishable from income from
interest and dividends to justify their separate classification and assessment at
different rates. Id. at 516. The proposed tax analyzed in that advisory opinion
happened to be assessed on net income derived from capital gains, as opposed
to the existing tax on gross income derived from interest and dividends. Id.
But we based our conclusion that there was a rational basis for the separate
classification of these two forms of income upon their “very different
characteristics,” not upon the fact that one tax was assessed on net income
while the other was assessed on gross income. Id.

The petitioners assert that the trial court misinterpreted that 1977
advisory opinion, and that we later “confirmed that gross/net income
classifications had endured the proliferation of classifications from the 1950s
to the 1970s.” In support of this argument, they cite a later advisory opinion in
which we wrote that “[g]ross income is a class of property taxable under part
two, article six of the New Hampshire Constitution.” Opinion of the Justices,
123 N.H. 296, 300 (1983). But as we clarified less than two weeks later, in
that 1983 Opinion of the Justices, we had advised only that “alternate
business profits” as taxed in the proposed bill and “taxable business profits” as
taxed under existing law were “both essentially classifications of one class of
property; namely, business income,” and, for that reason, taxing them at
different rates violated the uniformity requirement. Opinion of the Justices,
123 N.H. 344, 346 (1983). Our analysis of the proposed bill in our earlier
advisory opinion had not focused upon whether it taxed a class of gross income
or a class of net income, but rather upon whether it taxed a class of business

6
income at a different rate than another tax on essentially the same class of
business income.2

The petitioners argue that even if the Legislature can constitutionally
classify different kinds of gross income, gambling winnings are not sufficiently
distinct from interest and dividends income to justify their separate
classification. We disagree.

“Strictly speaking, the rule of equality and proportionality does not apply
to the selection of the subjects of taxation, provided just reasons exist for the
selection made.” N. Country Envtl. Servs., 157 N.H. at 19 (quotation omitted).
“In this context, just reasons are the equivalent of a reasonable or rational
basis.” Id. Here, the trial court found that the Legislature had just reasons to
tax gambling winnings at a different rate because gambling “presents a social
problem properly coming under the exercise and jurisdiction of the police
power of the State and which requires strict regulation and supervision.” Ratti
v. Hinsdale Raceway, 109 N.H. 270, 272 (1969). The petitioners argue that this
does not constitute a just reason for the separate classification because no
indicia exist in the Gambling Winnings Tax’s legislative history to suggest that
this was the reason the tax was enacted. Further, they argue, income from
gambling winnings is not sufficiently distinct from interest and dividends
income so as to justify its separate classification for tax purposes.

The petitioners are correct that the legislative history of the Gambling
Winnings Tax does not contain enumerated reasons for its enactment.
However, the New Hampshire Constitution requires only that “just reasons
exist” in selecting a certain class of property for taxation. N. Country Envtl.
Servs., 157 N.H. at 19 (emphasis added; quotation omitted). Under our
rational basis test, the “legitimate governmental interests” served by the statute
need not be the Legislature’s actual interests in adopting it nor need they be
based upon articulated facts. See Cmty. Res. for Justice v. City of Manchester,
154 N.H. 748, 757 (2007). Accordingly, the Legislature need not declare its
reasons for passing the tax; it is sufficient that there are just reasons for the
classification.

“[T]he constitutionality of a taxation classification depends upon the
physical and functional characteristics of the property itself.” Opinion of the
Justices, 142 N.H. 102, 107 (1997). The inherent differences between the
subjects of taxation and similar property or sources of income justify differing

2Although we also wrote that requiring a business to pay taxes on both “alternate business
profits,” as proposed, and the existing class of “taxable business profits,” under RSA chapter 77-A,
could result in unconstitutional double taxation, see Opinion of the Justices, 123 N.H. at 346,
such a taxing scheme was “not contemplated in the proposed legislation,” Opinion of the Justices,
123 N.H. at 301-02, and this point merely clarified our guidance that the two classes are
essentially the same.

7
tax treatment. See Smith v. N.H. Dep’t of Revenue Admin., 141 N.H. 681, 690
(1997) (holding that the inherent differences between banks and other financial
institutions constituted just reasons for differing tax treatment); Opinion of the
Justices, 117 N.H. at 515 (“The question is therefore whether capital gains are
sufficiently distinguishable from interest and dividends as to make it apparent
that there is just reason to tax capital gains at a rate different from the rate
imposed . . . on income derived from certain interests and dividends.”).

The inherent differences between “winnings from lotteries and games of
chance” and other forms of income justify their separate treatment for tax
purposes. Few other legitimate forms of income result from activity that may
be referred to as a “social problem,” as explained by the trial court. Gambling
winnings are also unique because they result from “lotteries and games of
chance,” making their receipt dependent, at least in part, upon events that are
largely fortuitous, and they result from activity that is recreational for at least
most participants. In comparison, “[i]nterest . . . is a form of compensation for
the use, or forbearance, or detention of money,” while “[d]ividends, such as are
taxed pursuant to RSA 77:4, . . . represent a distribution of the earnings and
profits of a corporation, partnership, or other association.” Opinion of the
Justices, 117 N.H. at 516 (quotation omitted).

Given the “very considerable latitude of discretion” left to the Legislature
“as to the selection of proper subjects of taxation and the proportion of the tax
that shall be laid on each subject,” Smith, 141 N.H. at 687, we hold that there
were just reasons to classify gambling winnings as a distinct class of income
for tax purposes under our constitution.

B

The petitioners next argue that the Gambling Winnings Tax violated the
constitutional requirements of fairness, reasonableness, and proportionality
because the tax did not allow taxpayers to offset gambling losses against their
winnings. N.H. CONST. pt. I, art. 12, pt. II, arts. 5, 6. Here, we address this
argument to the extent that the petitioners raise it as a facial challenge to the
Gambling Winnings Tax.3

The federal tax code allows taxpayers to offset gambling losses to the
extent of their gambling winnings. 26 U.S.C. § 165(d) (2012). Several states
also allow for setoff of gambling losses against winnings. See, e.g., Minn. Stat.
§ 290.01, subd. 19 (2007 & Supp. 2012). But contrary to the petitioners’
claims, there are states that, at least to some degree, do not allow for the
deduction of gambling losses while taxing gambling winnings. See Byrd v.

3To the extent that the petitioners make this argument as applied to professional gamblers, we
address their standing to make such as-applied arguments in Section V(B).

8
Hamer, 943 N.E.2d 115, 121 (Ill. App. Ct. 2011) (describing Illinois tax law,
which carries over deduction from federal tax return for gambling losses
incurred only by professional gamblers, not casual gamblers); Dettwiler v.
Wisconsin Dept. of Revenue, 731 N.W.2d 663, 666 (Wis. Ct. App. 2007)
(“Effective January 1, 2000, gambling losses were no longer offset against
gambling winnings under the Wisconsin tax code . . . .”). Moreover, the
petitioners cite no authority suggesting that other jurisdictions would consider
it unconstitutional to tax gambling winnings without allowing the deduction of
gambling losses. Indeed, considering that “there is no other state in the union
with a structure of taxing powers and limits comparable to New Hampshire’s,”
Hurn, supra, comparing a New Hampshire tax provision to similar provisions of
states that, for example, implement a broad-based personal income tax is of
minimal guidance in showing a constitutional deficiency in the former.

“Gross income” is, by definition, simply “[t]otal income . . . before
deductions, exemptions, or other tax reductions.” Black’s Law Dictionary 831
(9th ed. 2009). Thus, in essence, the petitioners’ argument boils down to the
question of whether the Legislature may tax gross income, or whether doing so
is unconstitutionally unfair, unreasonable, and disproportionate. We have
stated on a number of occasions that taxes on gross income are proper under
the New Hampshire Constitution. See Opinion of the Justices, 123 N.H. at 300
(“Gross income is a class of property taxable under part two, article six of the
New Hampshire Constitution.”); Opinion of the Justices, 110 N.H. at 117 (“No
constitutional barrier stands in the way of the levy of a general income tax . . .
upon the gross . . . income of a taxpayer . . . .”); Opinion of the Justices, 95
N.H. at 539 (“[Gross income] constitutes a class of property taxable under the
1903 amendment to our Constitution.”). By taxing gambling winnings with no
deduction for gambling losses, the Legislature simply exercised its discretion to
tax the gross gambling income of taxpayers rather than their net gambling
income.4

The petitioners cite no New Hampshire authority for the specific
proposition that a tax on gross income is unfair, unreasonable, and
disproportional. They say only that the Gambling Winnings Tax was
unconstitutional because it had “no reference to the ability of the taxpayer to
make payment,” Thompson v. Kidder, 74 N.H. 89, 96 (1906), and because it
was not set at an appropriate level to treat “one’s income, to a reasonable
amount, . . . as necessarily consumed for the support of [oneself] or of [one’s]
family, so that only the excess above such amount should be regarded as
property increasing [one’s] ability to pay taxes,” Opinion of the Justices, 82

4 We note that the legislative history shows the Legislature did apparently consider whether to
allow the deduction of gambling losses from winnings. See N.H.H.R. Jour. 1125 (2009) (statement
of Rep. Neal Kurk) (explaining that not allowing deduction of gambling losses would protect
against fraud from winning bettors at racetracks using discarded losing betting slips to offset their
own winnings).

9
N.H. 561, 572 (1927) (quotation omitted). However, neither premise is
applicable here, as both quotations are cited out of context. The quotation
from Thompson described poll taxes, which have no relationship at all to the
taxpayer’s income. The tax here, assessed as a percentage of the taxpayer’s
gambling winnings, by definition was proportional to the amount of winnings,
and thus the taxpayer’s ability to pay the tax. Thompson, 74 N.H. at 96. The
quotation from the 1927 Opinion of the Justices, itself quoting a
Massachusetts advisory opinion, referred to a proposed income tax exemption
of up to $2,000, which would have set aside, in a literal sense, a discrete
“amount . . . necessarily consumed for the support of” the taxpayer and his or
her family. Opinion of the Justices, 82 N.H. at 572. This description, made in
reference to an income tax exemption, is not applicable to the question of
whether an income tax assessed on gross rather than net income is unfair,
unreasonable, or disproportionate. Certainly nothing in that opinion suggested
that such an exemption was necessary in order to render that tax
constitutional.

Where we have found that a tax was unfair, unreasonable, or
disproportionate, the constitutional deficiency has been of a much different
character than the one the petitioners allege here. See Claremont School Dist.
v. Governor, 142 N.H. 462, 470-71 (1997) (holding that property tax was a
state tax and was thus disproportionate, unreasonable, and unfair because of
discrepancies in tax rates of up to 400% between school districts); Opinion of
the Justices, 132 N.H. 777, 783-84 (1990) (stating that proposed statute
providing tax credits to business organizations based on number of employees
was unreasonable because it provided credits without regard to income or
aggregate reasonable compensation expenses, resulting in differing tax rates on
the taxation of a single category of property). In sum, we disagree with the
petitioners that a tax on gross gambling winnings is inherently “unfair,
unreasonable, and disproportional” under our constitution.

IV

We next turn to the petitioners’ argument that the Gambling Winnings
Tax violated the Federal Commerce Clause. In particular, they argue that the
tax violated the “negative aspect” of the Commerce Clause — also referred to as
the “dormant Commerce Clause” — because it applied to gambling winnings
won by New Hampshire residents both inside and outside the state, as well as
to in-state winnings by out-of-state residents. They assert that the trial court
erred in failing to apply what is commonly known as the Complete Auto test,
see Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), when it ruled
that the Gambling Winnings Tax did not offend the Commerce Clause and
granted the State’s motion for summary judgment. We do not reach this

10
argument because we conclude that the petitioners lack standing to bring this
challenge.5

“For a court to hear a party’s complaint, the party must have standing to
assert the claim.” Gen. Elec. Co. v. Comm’r, N.H. Dep’t of Revenue Admin.,
154 N.H. 457, 461 (2006). “The general rule in New Hampshire is that a party
has standing to raise a constitutional issue only when the party’s own rights
have been or will be directly affected.” Id.; see Montenegro v. City of Dover, 162
N.H. 641, 651 (2011). Although the State does not challenge the petitioners’
standing to bring their Commerce Clause claim, “a party’s standing to bring
suit is a question of subject matter jurisdiction, which may be addressed at
any time.” Hughes v. N.H. Div. of Aeronautics, 152 N.H. 30, 35 (2005). We
may raise the issue of a party’s standing sua sponte. See In re Guardianship of
Williams, 159 N.H. 318, 322-23 (2009).

The Commerce Clause reserves to Congress the right to “regulate
Commerce with foreign Nations, and among the several States.” U.S. CONST.
art. I, § 8, cl. 3. The Commerce Clause also has a “negative aspect” that
“prohibits states from unjustifiably discriminating against or burdening
interstate and foreign commerce.” Gen. Elec., 154 N.H. at 466. This
construction supports the Commerce Clause’s purpose of “preventing a State
from retreating into economic isolation or jeopardizing the welfare of the Nation
as a whole,” the likely result if it were “free to place burdens on the flow of
commerce across its borders that commerce wholly within those borders would
not bear.” Smith, 141 N.H. at 691 (quotation omitted). “The core purpose of
the dormant Commerce Clause is to prohibit economic protectionism — that is,
regulatory measures designed to benefit in-state economic interests by
burdening out-of-state competitors.” Smith v. N.H. Dep’t of Revenue Admin.,
148 N.H. 536, 538 (2002) (quotation omitted).

In Wine and Spirits Retailers, Inc. v. Rhode Island, 481 F.3d 1, 12 (1st
Cir. 2007), the Court of Appeals for the First Circuit affirmed the district
court’s determination that the plaintiffs lacked standing to challenge a Rhode
Island in-state residency requirement for liquor licensees under the dormant
Commerce Clause. The court held that none of the plaintiffs, as Rhode Island
residents, “could conceivably have suffered any cognizable harm as a result of”
the residency restriction, and thus they lacked standing to challenge it under
the dormant Commerce Clause. Wine and Spirits, 481 F.3d at 12.

Although the court in Wine and Spirits went on to fully address the
plaintiffs’ dormant Commerce Clause argument against the state restrictions
on franchise and chain-store arrangements, id. at 12-16, the argument

5Because we address the petitioners’ standing arguments based on the 2012 amendment to the
declaratory judgment statute, RSA 491:22, in Section VI(B), we here confine our analysis to
whether the petitioners satisfy standing requirements absent those established by that statute.

11
presented in this appeal is more akin to the one the Wine and Spirits plaintiffs
made against the residency requirement. The plaintiffs in Wine and Spirits
brought the action in that case because they sought to avoid the nullification of
their franchise agreements while retaining their liquor licenses. Id. at 5. They
did not suffer, nor did they claim to suffer, any harm under the residency
requirements.

The same is true in this case. We recognize that the petitioners paid the
Gambling Winnings Tax, and in this sense could claim to have suffered injury
in the same way that the plaintiffs in Wine and Spirits would have once the
State of Rhode Island had enforced its amended restrictions and either nullified
their franchise agreements or revoked their liquor licenses. See Wine and
Spirits v. Rhode Island, 418 F.3d 36, 43-44 (1st Cir. 2005). But also like the
plaintiffs in Wine and Spirits, neither petitioner here claims to have suffered an
injury that has a causal nexus to a dormant Commerce Clause violation.
Neither petitioner claims to have suffered harm under the Gambling Winnings
Tax due to an unjustifiable discrimination against or burdening of interstate or
foreign commerce. Nor can they claim that their rights or interests will be so
affected in the future, given that the tax was repealed in 2011. Eby is a New
Hampshire resident who paid taxes on a winning scratch ticket purchased in
New Hampshire, and alleges no injury related to any participation in interstate
commerce. Willey, on the other hand, did derive the entirety of his gambling
winnings from out-of-state sources for the portion of the 2009 tax year in
which the tax was in effect. However, his out-of-state winnings were taxed at
the same rate as they would have been if they were derived from New
Hampshire sources. He does not allege that he was, in fact, taxed
disproportionately because his gambling winnings were derived from a different
state, that he was doubly taxed by both New Hampshire and another state, or
that he was discouraged from gambling in certain states because of the
potential for double taxation.6 At best, Willey alleges only that the Gambling
Winnings Tax gave rise to the mere possibility of disproportionate or double
taxation. Because the petitioners fail to show any cognizable harm related to
the alleged Commerce Clause violation, they consequently lack standing to
raise this challenge, and we do not consider it further.

V

We next turn to whether the petitioners have standing to bring their as-
applied challenges. The petitioners argue that the Gambling Winnings Tax: (1)

6 Insofar as petitioner Willey suggests that the Gambling Winnings Tax fails the Complete Auto
test because it lacks a provision granting a credit or offset against the tax for taxes that could be
imposed by the state where the winnings occurred, we observe that he would benefit from the
credit or offset only if he actually paid a tax imposed by the other state. Because Willey does not
allege that he was taxed by another state on his gambling winnings, it follows that he was not
harmed in any way by the absence of such a provision in former RSA 77:38-:50.

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was unconstitutionally retrospective as applied to previous lottery winners
receiving their winnings through annuity payments; (2) was a proscribed
occupation tax as applied to professional gamblers; and (3) violated the State
and Federal Due Process and Equal Protection rights of professional gamblers.
We do not reach these arguments because the petitioners lack standing to
bring the as-applied claims of annuitants or professional gamblers. We analyze
their standing to bring the claims of each, in turn.

A

We first analyze the petitioners’ standing to bring their retrospectivity
claim on behalf of pre-enactment lottery winners receiving their winnings
through annuities. The petitioners argue that the Gambling Winnings Tax was
unconstitutional as applied to persons who won the lottery prior to the tax’s
enactment and received some of those winnings through an annuity.

However, Eby and Willey do not claim to have paid taxes on gambling
winnings from an annuity. As set forth above, a party may challenge the
constitutionality of a statute only when the party’s own rights have been or will
be directly affected. Gen. Elec., 154 N.H. at 461. The petitioners originally
raised this argument when the Leighton Petitioners, who had suffered the
injury here alleged, were still parties to this action. However, because neither
Eby nor Willey has established standing to advance this claim, we find that the
trial court correctly declined to address it.

B

The issue of the petitioners’ standing to raise the claims of professional
gamblers turns on whether Willey is a professional gambler. In its order on the
parties’ cross-motions for summary judgment, the trial court denied both
motions with respect to Willey because a genuine issue of material fact existed
as to whether he was a professional gambler. The trial court further stated
that it would make this determination by applying factors drawn from the
Internal Revenue Service’s criteria and used by at least one other court.
Thereafter, the petitioners conceded that Willey was not a professional gambler
under the IRS criteria, although they reserved their right to appeal the trial
court’s use of those criteria.

On appeal, the petitioners assert that the State is estopped from
disputing that Willey was a professional gambler because it had already
stipulated to that fact in the Interlocutory Transfer Statement (ITS) the parties
submitted in their failed effort to have this court accept an interlocutory appeal
of this case. They also argue that the trial court erred in adopting the IRS
criteria. Both arguments fail.

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 The ITS recites that “[t]he action was initiated by . . . a professional
gambler who derived ‘gambling winnings’ through earned income.” It further
states that “there are no material facts in dispute.” The petitioners contend
that these statements in the jointly filed ITS amount to admissions by the State
that Willey is a professional gambler and that this fact is not in dispute.7

“The doctrine of judicial estoppel protects judicial integrity by preventing
a party from prevailing in one phase of a case using one argument and then
relying upon a contradictory argument to prevail in another phase.” In re
Zachary G., 159 N.H. 146, 152 (2009) (quotation omitted). “The general
function of judicial estoppel is to prevent abuse of the judicial process,
resulting in an affront to the integrity of the courts.” Pike v. Mullikin, 158 N.H.
267, 270 (2009) (quotation omitted).

While the circumstances under which judicial estoppel may be
invoked vary, three factors typically inform the doctrine’s
application: (1) whether the party’s later position is clearly
inconsistent with the party’s earlier position; (2) whether the earlier
position was accepted by the court; and (3) whether the party
seeking to assert a later inconsistent position would derive an
unfair advantage or impose an unfair detriment on the opposing
party if not estopped.

Id.

We agree with the trial court that the State derives no unfair advantage
nor imposes any unfair detriment on the petitioners by challenging Willey’s
status as a professional gambler, and thus his standing to contest the
constitutionality of the Gambling Winnings Tax as applied to professional
gamblers. Given that the interlocutory transfer request was denied by this
court, the petitioners cannot show any particular unfair advantage to the State
or unfair detriment to themselves in the case before the trial court that resulted
from the State challenging Willey’s status as a professional gambler, whether or
not such a position was inconsistent with the ITS. See In the Matter of Carr &
Edmunds, 156 N.H. 498, 502-03 (2007) (holding that father failed to establish
that any unfairness resulted from mother’s allegedly inconsistent positions in
seeking to modify child support pursuant to statutory right); cf. Kelleher v.
Marvin Lumber & Cedar Co., 152 N.H. 813, 849 (2005) (holding that defendant
would derive an unfair advantage by taking a factual position inconsistent with
one taken in an earlier action in which defendant prevailed). Had the State

7 To the extent that the petitioners’ argument could be interpreted as asserting that the State
stipulated to their standing to raise claims on behalf of professional gamblers, we note that a
party cannot confer subject matter jurisdiction by waiver where it does not exist, and any court
order that acts on the merits based on a waiver would be void. See In the Matter of Goulart &
Goulart, 158 N.H. 328, 332 (2009).

14
challenged whether Willey was a professional gambler prior to the parties’
interlocutory transfer request, the State may have objected to the transfer
outright, or the trial court could have denied the request or included the
question of whether Willey was a professional gambler in the request. Under
any of these scenarios, after we denied the interlocutory transfer, the case
would have followed the same course as it did. Therefore, application of
judicial estoppel is not warranted here.8

The petitioners next argue that the trial court committed an error of law
in adopting a multi-faceted test, including factors promulgated by the IRS, in
determining whether a taxpayer’s activity constitutes a trade or business for
tax purposes. No New Hampshire case defines “professional gambler.” The
trial court relied upon Busch v. Commissioner of Revenue, 713 N.W.2d 337,
346-48 (Minn. 2006), in which the Minnesota Supreme Court analyzed whether
the relator was a professional gambler by applying factors from Commissioner
v. Groetzinger, 480 U.S. 23, 35-36 (1987), and IRS regulations. Busch, 713
N.W.2d at 346-48. As described in Busch, the Supreme Court in Groetzinger
considered “the regularity of Groetzinger’s gambling, the effort he exerted, the
skill that he applied, and his intent to produce a livelihood via gambling.”
Busch, 713 N.W.2d at 347 (citing Groetzinger, 480 U.S. at 35-36). The
Minnesota court then set out the IRS factors, which include:

(1) the manner in which the taxpayer carries on the activity (e.g.,
keeping records in a businesslike way); (2) the expertise of the
taxpayer or his advisors; (3) the time and effort expended by the
taxpayer in carrying on the activity; (4) the expectation that assets
used in the activity may appreciate in value; (5) the success of the
taxpayer in carrying on other similar or dissimilar activities; (6) the
taxpayer’s history of income or losses with respect to the activity;
(7) the amount of occasional profits, if any, which are earned; (8)
the financial status of the taxpayer; and (9) elements of personal
pleasure or recreation.

Id. (citing Treas. Reg. § 1.183-2(b)). The Busch court noted that these federal
sources were particularly persuasive in that case because the Minnesota tax
code incorporated aspects of the federal code.

The petitioners argue that the trial court should not have borrowed a
legal standard from a source other than the tax statute under review, and that
doing so improperly added language to the statute. They argue that the court
should have “applied a test on a case-by-case basis” and determined that

8 To the extent that the petitioners argue that the State derived an unfair litigation advantage
because its prior stipulation was a judicial admission, this is a separate argument that was not
preserved for appeal. Therefore, we do not address it. See State v. Noucas, 165 N.H. 146, 152
(2013).

15
Willey was a professional gambler because he had derived almost all of his
earned income from gambling for a period of three years, and he had reported
$184,700 in gambling winnings for the portion of 2009 in which the Gambling
Winnings Tax was in effect.

The State asserts that if these facts suffice to determine that Willey was a
professional gambler, then any individual without other significant income who
gambled a significant enough amount of money could qualify as a “professional
gambler,” regardless of other relevant considerations. We agree that this is not
the test. The trial court properly concluded that the Groetzinger and IRS
factors listed in Hughes are relevant to the fact-based determination of whether
a party is a professional gambler. We need not determine whether other factors
would also be relevant to this determination, as that question is not before us.

Because the petitioners have failed to show that the trial court erred in
utilizing the multi-faceted test as described above, because Willey concedes
that he does not qualify as a professional gambler under that test, and because
he did not present the trial court with any additional facts establishing that he
is a professional gambler, we hold that the petitioners lack standing to raise
their challenges that the Gambling Winnings Tax is unconstitutional as applied
to professional gamblers.

VI

In their remaining arguments, the petitioners contend: (1) that Willey
has standing as a putative class representative to raise arguments on behalf of
all persons in the class; and (2) that the Legislature’s 2012 amendment to the
declaratory judgment statute gives the petitioners standing to bring an action
seeking a declaratory judgment that the tax was unconstitutional. We are not
persuaded.

A

First, the petitioners argue that, because Willey filed this case as a class
action on behalf of all persons subject to the Gambling Winnings Tax, he has
standing to raise all arguments on behalf of all others in the class, i.e., all
those who paid the Gambling Winnings Tax.

“The class action is an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.” Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011) (quotation omitted). “In
order to justify a departure from that rule, a class representative must be part
of the class and possess the same interest and suffer the same injury as the
class members.” Id. (quotations omitted). Superior Court Civil Rule 16 sets
forth a similar requirement for class representatives. See Super. Ct. Civ. R.

16
16(a)(2). Because Rule 16 and Federal Rule of Civil Procedure 23 are similar,
“we rely upon federal cases interpreting the federal rule as analytic aids.” See
In re Bayview Crematory, LLC, 155 N.H. 781, 784 (2007) (construing former
Superior Court Rule 27-A, which was identical to Superior Court Civil Rule 16).

We disagree with the petitioners. The fact that the petitioners brought
this case as a class action does not exempt them from the requirement that
they have standing. Although the class certification determination was
postponed until after the ruling on the merits, this does not mean that we may
simply assume that they have standing to raise challenges to the statute on
behalf of any members of the putative class. For example, because Willey has
not established that he is a professional gambler, he lacks standing to raise the
as-applied constitutional claims of professional gamblers notwithstanding that
this case has been filed as a class action. In order to represent a class, the
petitioners must be part of that class, possessing the same interest and
suffering the same injury as the class members. Even the cases cited by the
petitioners in support of their argument are, in fact, fully consistent with this
rule. See Kinney v. Metro Global Media, Inc., 170 F. Supp. 2d 173, 181 (D.R.I.
2001) (holding that putative class representatives had standing to represent
the class, even when they owned stock for only part of lengthy class period,
because they alleged a “common course” of conduct to defraud over that entire
period, including the period during which they owned stock); Gen. Elec. Co.,
154 N.H. at 463 (holding that petitioner had standing to challenge
constitutionality of tax deduction for which it did not qualify precisely because
it had been denied the benefit of that deduction).

Because the petitioners have not shown that they have suffered harm
under the Commerce Clause, are professional gamblers, or are gambling
winnings annuity recipients, they have not suffered the same injury as the
members of these subclasses they claim to represent, and thus they have not
demonstrated their entitlement to act as class representatives for the members
of those subclasses.

B

Finally, the petitioners argue that the 2012 amendment to RSA 491:22
grants them standing as taxpayers to raise all constitutional deficiencies of the
Gambling Winnings Tax.

We review matters of statutory interpretation de novo. Appeal of Phillips,
165 N.H. 226, 230 (2013). “On questions of statutory interpretation, we are
the final arbiters of the intent of the legislature as expressed in the words of a
statute considered as a whole.” Id. “We first examine the language of the
statute and ascribe the plain and ordinary meanings to the words used.” Id.
“We interpret legislative intent from the statute as written and will not consider

17
what the legislature might have said or add language that the legislature did
not see fit to include.” Id.

The Legislature amended RSA 491:22, I, in 2012 by adding the
emphasized language, as follows:

I. Any person claiming a present legal or equitable right or title
may maintain a petition against any person claiming adversely to
such right or title to determine the question as between the
parties, and the court’s judgment or decree thereon shall be
conclusive. The taxpayers of a taxing district in this state shall be
deemed to have an equitable right and interest in the preservation
of an orderly and lawful government within such district; therefore
any taxpayer in the jurisdiction of the taxing district shall have
standing to petition for relief under this section when it is alleged
that the taxing district or any agency or authority thereof has
engaged, or proposes to engage, in conduct that is unlawful or
unauthorized, and in such a case the taxpayer shall not have to
demonstrate that his or her personal rights were impaired or
prejudiced. The preceding sentence shall not be deemed to convey
standing to any person (a) to challenge a decision of any state
court if the person was not a party to the action in which the
decision was rendered, or (b) to challenge the decision of any
board, commission, agency, or other authority of the state or any
municipality, school district, village district, or county if there
exists a right to appeal the decision under RSA 541 or any other
statute and the person seeking to challenge the decision is not
entitled to appeal under the applicable statute. The existence of an
adequate remedy at law or in equity shall not preclude any person
from obtaining such declaratory relief. However, the provisions of
this paragraph shall not affect the burden of proof under RSA
491:22-a or permit awards of costs and attorney’s fees under RSA
491:22-b in declaratory judgment actions that are not for the
purpose of determining insurance coverage.

Laws 2012, 262:1 (emphasis added). Under the plain language of the amended
statute, the petitioners’ argument fails. Although it confers broad taxpayer
standing, the amended declaratory judgment statute contains the limitation
that it does not “convey standing . . . to challenge the decision of any board,
commission, agency, or other authority . . . if there exists a right to appeal the
decision under RSA 541 or any other statute and the person seeking to
challenge the decision is not entitled to appeal under the applicable statute.”
Put another way, where the Legislature has already conferred standing, by
statute, upon a certain class of persons to challenge the decision of a board,

18
commission, agency or other authority, RSA 491:22 does not confer standing
upon a larger class of petitioners, simply because they are taxpayers.

In the case of a taxpayer challenge to the constitutionality of an assessed
tax, such an alternative, statutory scheme exists. RSA 21-J:28-b (2012) sets
forth procedures for a taxpayer to appeal a tax assessment made by the New
Hampshire Department of Revenue Administration (DRA). Under the statute,
following a petition for redetermination and subsequent petition for
reconsideration, a “taxpayer may appeal such decision by written application to
the board of tax and land appeals or the superior court.” RSA 21-J:28-b, IV.
The statute limits the legal issues to be considered on appeal to those raised in
the prior petitions for redetermination and reconsideration, “with the exception
that the taxpayer may raise additional legal claims addressing constitutional
issues.” Id. (emphasis added). The procedures outlined in RSA 21-J:28-a
(dealing with the refund or credit of overpayment of taxes) and :28-b are “the
exclusive method by which taxpayers may challenge their liability for any tax,
or the application to them of any provision” of the statutes governing the DRA.
RSA 21-J:28-a, VI (2012).

RSA 21-J:28-b thus creates a right to challenge the decision of a “board,
commission, agency, or other authority” as contemplated in the exception to
RSA 491:22 — in this case, the assessment of a tax by the DRA. Here,
however, the petitioners seek to challenge assessments against persons other
than themselves. But because the petitioners have not been subjected to the
Gambling Winnings Tax in the circumstances in which they claim it is
unconstitutional — i.e., as applied to those persons facing multi-state taxation,
professional gamblers, and gambling-winnings annuity recipients — and
therefore are not among those entitled to pursue the appellate process under
RSA 21-J:28-b, it follows that they also lack standing to pursue such claims
under the amended version of RSA 491:22.

VII

In sum, we hold: (1) that the Gambling Winnings Tax neither lacked
uniformity nor was disproportional and unreasonable; and (2) that the
petitioners lack standing to bring their remaining challenges to the tax.

Affirmed.

DALIANIS, C.J., and HICKS, CONBOY, and BASSETT, JJ., concurred.

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