Steiner v. Tax Commission

This opinion is subject to revision before final
publication in the Pacific Reporter

2019 UT 47

IN THE

SUPREME COURT OF THE STATE OF UTAH

ROBERT C. STEINER and WENDY STEINER-REED,
Appellants and Cross-Appellees,
v.
UTAH STATE TAX COMMISSION,
Appellee and Cross-Appellant.

No. 20180223
Filed August 14, 2019

On Direct Appeal

Third District, Salt Lake
The Honorable Noel S. Hyde
No. 170901774

Attorneys:
Peter W. Billings, William H. Adams, Nora K. Brunelle, David P.
Billings, Salt Lake City, for appellants and cross-appellees
Sean D. Reyes, Att’y Gen., Stanford E. Purser, Deputy Solic. Gen.,
Erin T. Middleton, Asst. Solic. Gen., John C. McCarrey, Mark E.
Wainwright, Asst. Att’y Gens., Salt Lake City, for appellee and
cross-appellant

ASSOCIATE CHIEF JUSTICE LEE authored the opinion of the Court, in
which CHIEF JUSTICE DURRANT, JUSTICE HIMONAS, JUSTICE PEARCE,
and JUSTICE PETERSEN joined.

ASSOCIATE CHIEF JUSTICE LEE, opinion of the Court:
¶1 The Utah State Tax Commission disallowed certain tax
deductions claimed by Robert and Wendy Steiner on their tax
returns. The Steiners filed a challenge to that determination in the tax
court. In that forum, the Steiners asserted that the United States
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Opinion of the Court

Constitution, specifically the Dormant Commerce Clause and the
Dormant Foreign Commerce Clause,1 mandated that Utah allow
their claimed deductions relating to (1) income earned in the United
States but outside of Utah and (2) income earned in foreign
countries. The Steiners also cited the Utah Code section 59-10-115(2),
in support of their latter claim. The tax court agreed in part. It
allowed the second set of deductions but disallowed the first.
¶2 Both parties appealed. We affirm in part and reverse in part.
We agree with the State and hold that neither set of deductions is
mandated by the United States Constitution. Nor are the deductions
required by the Utah Tax Code.
¶3 Our constitutional analysis is in line with our 2015 decision
in DIRECTV v. Utah State Tax Commission, 2015 UT 93, 364 P.3d 1036.
There we noted the lack of any textual or originalist mooring for the
doctrine that has built up around the concept of dormant commerce,
while also lamenting the lack of any “clear, overarching theory” in
the decisions of the United States Supreme Court in this field. Id.
¶ 45. We acknowledged, of course, our duty to follow controlling
precedent from that court. But we emphasized the difficulty of
“anticipat[ing] expansions of the law” in this field “into new
territory” not yet explored by the Supreme Court. Id. And in the
absence of clear direction (in text, history, or precedent), we declined
to make a guess about the direction the case law might take in the
next case that comes before the Supreme Court. Id.
¶4 We resolve this case on this basis. We find no controlling
precedent from the United States Supreme Court that mandates a
decision striking down the challenged Utah tax provisions on
dormant commerce grounds. And we uphold their constitutionality
on that basis.
I
¶5 The Steiners filed joint tax returns as Utah residents in tax
years 2011, 2012, and 2013. Although their income included earnings

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1 Throughout this opinion we refer to both the “Dormant
Commerce Clause” and the “Dormant Foreign Commerce Clause.”
We refer to them this way, despite the fact that we cannot find either
such clause in our copy of the United States Constitution, for the
sake of simplicity and concision.

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Opinion of the Court

from various sources, the only component at issue on appeal is the
tax on business income earned by Robert Steiner (Steiner).
¶6 Steiner is a shareholder of Steiner, LLC, which is taxed as an
S corporation.2 He is also a beneficiary of the G.A. Steiner Trust (the
Trust), which is the majority shareholder of Steiner, LLC. The
Steiners’ income from Steiner, LLC during the relevant period
included both amounts passed directly to Steiner by virtue of his
direct stake in Steiner, LLC and amounts attributable to Steiner as a
beneficiary of the Trust.
¶7 Steiner, LLC is the sole shareholder of Alsco, Inc. Alsco is a
textile rental business, which along with its subsidiaries does
business in the United States and around the world. Alsco and all of
its subsidiaries that do business in the United States have elected to
be taxed as Qualified S Subsidiaries. Thus, all of the income derived
from these entities is passed through to Steiner, LLC. Steiner, LLC, in
turn, passes the income through to its individual shareholders,
including Steiner. Such income is accordingly reflected on the
Steiners’ joint tax returns. Most of Alsco’s foreign subsidiaries have
elected to be taxed as partnerships for U.S. tax purposes. Ninety-nine
percent of the income from each subsidiary is passed through to
Alsco as a partner. This income goes through the same pass-through
waterfall and ends up on the Steiners’ joint tax returns as well.
¶8 On their federal tax returns during the relevant years the
Steiners claimed, and received, a tax credit for the taxes they had
paid to foreign jurisdictions. On their Utah tax returns, the Steiners
claimed a state tax credit for taxes they paid to other states. These
credits are explicitly allowed by the Utah Tax Code. UTAH CODE
§ 59-10-1003. But the Steiners also claimed an “equitable adjustment”
under Utah Code section 59-10-115—an adjustment excluding
foreign income from their Utah taxable income.

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2 That means that Steiner, LLC itself does not pay any federal or
state-level tax. See 26 U.S.C. § 1363; UTAH CODE § 59-10-1403(1). All
of its income passes through to individual shareholders’ tax returns
(in proportion to their ownership interest). 26 U.S.C. § 1366; UTAH
CODE § 59-10-1403.1(2). The individuals then pay taxes on the
amount passed through to their individual returns. 26 U.S.C. § 1366.

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¶9 The Utah State Tax Commission3 audited the Steiners’ tax
returns. The Commission disallowed the “equitable adjustment” for
foreign income. But it also recalculated the state tax credit and
determined that the Steiners were entitled to a larger credit than they
had claimed.
¶10 The Steiners filed a Petition for Redetermination challenging
the Commission’s disallowance of the equitable adjustment for
foreign income. In a subsequent amendment to their petition, the
Steiners also challenged Utah’s state tax credit system. They asked
the Commission to make a determination that only the portion of
Steiner, LLC’s income that is apportioned to Utah should be
included in taxable income for Utah purposes.4 The Steiners also
raised constitutional challenges to Utah’s tax scheme in their
petition.
¶11 The Commission conducted a formal hearing on the
Steiners’ petition and later issued a final decision in which it upheld
the original audit determination and denied the Steiners’ new
apportionment claim. The Commission lacked jurisdiction to hear
the constitutional claims and thus declined to address them.
¶12 After this adverse ruling, the Steiners paid the assessed tax
deficiency (plus statutory interest) pursuant to Utah Code section
59-1-611. They then appealed to the third district tax court for a “de
novo” review of the Commission’s determination. See UTAH CODE
§ 59-1-601. In the tax court, both parties moved for summary
judgment. The tax court first ruled that Utah’s tax treatment of
income earned in other states did not run afoul of the Dormant
Commerce Clause. Specifically, the court held that the Dormant
Commerce Clause did not require apportionment of the Steiners’
income and that Utah’s tax credit system satisfied the requirements

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3 Some of the actions in this case were undertaken by
subdivisions of the Commission (specifically the Auditing Division).
Because the distinctions are not relevant, we refer to all of the entities
collectively as the Commission for the sake of simplicity.
4 Apportionment involves allocation of corporate business
income to Utah by comparing a corporation’s Utah-specific presence
with its overall payroll, property, sales, and so forth. UTAH CODE
§ 59-7-311. Only the proportion of income attributable to Utah is then
taxed by Utah.

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of that clause. The court went on to rule that the Steiners were
entitled to claim an equitable adjustment for their foreign business
income. The court’s ruling in this regard, although ultimately based
on statutory grounds, was driven by constitutional concerns. In
particular, the tax court believed that the Dormant Foreign
Commerce Clause mandated that Utah allow foreign business
income to be deducted. The tax court thus remanded the case to the
Commission so it could apply the equitable adjustment to the
Steiners’ income. Both parties filed notices of appeal to this court
pursuant to Utah Code section 59-1-608.
II
¶13 The Commerce Clause grants Congress the authority to
regulate interstate commerce. U.S. CONST. art. I, § 8, cl. 3. “By
negative implication,” the United States Supreme Court has held
that “this provision also limits the states’ authority in this realm.”
DIRECTV v. Utah State Tax Comm’n, 2015 UT 93, ¶ 13, 364 P.3d 1036.
“So even if Congress has not spoken on an issue of interstate
commerce, states are prevented from encroaching on Congress’s
authority—hence the term ‘dormant’ or ‘negative’ Commerce
Clause.” Id. We must decide how to apply this negative implication
to the Utah Tax Code.
¶14 This case presents three distinct questions for our resolution:
(1) whether the Dormant Commerce Clause requires Utah to
apportion a residency-based income tax instead of simply granting a
credit for taxes paid to other states; (2) whether the Dormant Foreign
Commerce Clause requires Utah to allow a deduction for income
earned in foreign countries; and (3) whether Utah’s “equitable
adjustment” statute, Utah Code section 59-10-115(2), mandates a
deduction for foreign income.
¶15 We answer each of these questions in the negative,
explaining our reasoning below. But before diving into the specifics,
we lay out some background on our general jurisprudential
approach to dormant commerce issues.
A
¶16 Decades ago the United States Supreme Court likened its
case law under the Dormant Commerce Clause to a “quagmire.” Nw.
States Portland Cement Co. v. Minnesota, 358 U.S. 450, 458 (1959). That
was an apt metaphor at the time. It seems even more so today.
¶17 The Supreme Court’s body of dormant commerce
jurisprudence has multiplied several-fold in the decades since the
Portland Cement case. But “[n]ot much has changed . . . , except
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perhaps to add more room for controversy and confusion and little
in the way of precise guides to the States in the exercise of their
indispensable power of taxation.” DIRECTV, 2015 UT 93, ¶ 44
(citation and internal quotation marks omitted). This is unfortunate.
The lower courts are operating largely in the dark in this important
field of constitutional law. “Yet we must of course decide the cases
that come before us, mindful of our role as a lower court to follow
controlling precedent from the U.S. Supreme Court.” Id.
¶18 In carrying out our duty, however, “we are reluctant to
extend dormant Commerce Clause precedent in new directions not
yet endorsed” by the Supreme Court. Id. ¶ 45. Because the high
court’s rulings in this area have proceeded on an ad hoc basis lacking
“any clear, overarching theory,” we have noted the difficulty of the
task of a lower court in attempting to “anticipate expansions of the
law into new territory.” Id. And with this in mind, we have warned
of the perils of a lower court reading tea leaves in this field.
¶19 We have acknowledged, of course, the Supreme Court’s
prerogative to place limits on the “longstanding police powers of
state and local governments to regulate business.” Id. ¶ 46. But in
light of the ad hoc nature of that court’s precedents, we have warned
that “it should be the U.S. Supreme Court” that leads the way in
charting new territory in this field. Id.
¶20 We follow this same approach here. We will, of course,
faithfully apply controlling precedent. But we decline to extend that
precedent into new territory—even in ways that might seem logical
in other jurisprudential realms. We do that not out of any disrespect
for the United States Supreme Court, but in our best attempt at
judicial humility in a constitutional field marked more by haphazard
policy judgments than any unifying legal theory. In such a field it
would seem presumptuous to make our own guess about the next
move the high court might make as it extends its precedent. And we
will thus leave it to that court to mark the next extension in this field.
B
¶21 Like many states, Utah taxes its residents on all of their
income, regardless of where it is earned. But Utah also grants its
residents credits for taxes they have already paid to other states. This
ensures that Utah residents’ income is not subject to taxation by both
Utah and another state.
¶22 The Steiners nevertheless contend that this taxation scheme
violates the Dormant Commerce Clause because it taxes a
disproportionate share of the income they earned outside of Utah.
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They are mistaken. We hold that Utah’s provision of credits for
income taxes already paid to other states satisfies the dormant
commerce requirements set forth in controlling precedent.5
¶23 The seminal case in this area is Complete Auto Transit, Inc. v.
Brady, 430 U.S. 274 (1977). Complete Auto is the origin of the four-part
test used to assess state taxes for compliance with the Dormant
Commerce Clause. But the Complete Auto framework was altered by
the Supreme Court’s more recent decision in Comptroller of the
Treasury of Maryland v. Wynne, 135 S. Ct. 1787 (2015). In light of the
complexity of the case law in this area, we first outline the evolution
of Dormant Commerce Clause jurisprudence prior to Wynne. We
next explain how Wynne changed the governing framework. Finally,
we apply Wynne to conclude that Utah’s tax scheme is constitutional.
1
¶24 The modern framework for evaluating the validity of state
taxes under the Dormant Commerce Clause has its origins in
Complete Auto, 430 U.S. 274. In that case the high court overruled the
previously governing analytical approach established in Freeman v.
Hewit, 329 U.S. 249 (1946), and Spector Motor Service v. O’Connor, 340
U.S. 602 (1951). Those cases established what was known as the
“Spector Rule”—that “a tax on the ‘privilege’ of engaging in an
activity in the State may not be applied to an activity that is part of
interstate commerce.” Complete Auto, 430 U.S. at 278. The Complete
Auto Court discarded the Spector Rule on the ground that it
represented a “triumph of formalism over substance.” Id. at 281.
¶25 Apart from its expressed dissatisfaction with the formalist
nature of the Spector Rule, the Complete Auto Court offered very little
in the way of an analytical explanation of its basis for a new legal
framework in this field. Instead the Court just made brief note of
four claims that the taxpayer had not made in that case. Id. at 287.
The Court stated, almost in passing, “that no claim is made that the
activity is not sufficiently connected to the State to justify a tax, or
that the tax is not fairly related to benefits provided the taxpayer, or

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5 The tax court granted summary judgment in favor of the
Commission on this issue. We review summary judgment decisions
for correctness, granting no deference to the lower court’s legal
conclusions. Salt Lake Cty. v. Holliday Water Co., 2010 UT 45, ¶ 14, 234
P.3d 1105.

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that the tax discriminates against interstate commerce, or that the tax
is not fairly apportioned.” Id.
¶26 This offhand statement was eventually elevated into a “test.”
See D.H. Holmes Co. v. McNamara, 486 U.S. 24, 30 (1988). To pass
Dormant Commerce Clause scrutiny under this “test,” a state tax
must: (1) apply to an activity with a substantial nexus to the state, (2)
be fairly apportioned, (3) not discriminate against interstate
commerce, and (4) be fairly related to the services the state provides.
Id. Only the fair apportionment prong is at issue in this appeal.
¶27 The Supreme Court has further subdivided the fair
apportionment prong into two parts—internal consistency and
external consistency. Container Corp. of Am. v. Franchise Tax Bd., 463
U.S. 159, 169 (1983). Internal consistency requires an analysis of the
inherent characteristics of the state tax system. Under this analysis
we assume that every state uses Utah’s tax system, and assess
whether, in this hypothetical world, there is systematic
discrimination against interstate commerce. Wynne, 135 S. Ct. at
1801–02. External consistency, on the other hand, requires that state
taxes “reflect a reasonable sense of how income is generated.”
Container Corp., 463 U.S. at 169. To evaluate this question, a court
must assess “whether the State has taxed only that portion of the
revenues from the interstate activity which reasonably reflects the in-
state component of the activity being taxed.” Goldberg v. Sweet, 488
U.S. 252, 262 (1989). This essentially requires states to apportion
income, and tax only that part of the income attributable to in-state
activity.
¶28 Prior to Wynne there was considerable uncertainty regarding
the continued vitality of both of these two components. See, e.g., Okla.
Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175, 196 (1995) (declining
to require external consistency of sales taxes for sake of “simplicity”);
Walter Hellerstein, Is “Internal Consistency” Dead?: Reflections on an
Evolving Commerce Clause Restraint on State Taxation, 61 TAX. L. REV. 1,
26 (2007). Despite this confusion, neither test has been expressly
overruled by the Supreme Court. With this in mind, the Steiners
assert that Utah’s tax scheme, as applied to them, must satisfy both
the internal and external consistency tests. If the tax fails to do this,
in their view, it does not survive the Dormant Commerce Clause
challenge.
¶29 To see why this assertion is mistaken, we have to take a
detailed look at the Wynne decision.

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2
¶30 Wynne was a challenge brought by individual taxpayers
against Maryland’s tax statutes. The Wynnes sought two important
extensions to the Supreme Court’s then-existing Dormant Commerce
Clause jurisprudence. First, they wanted the Court to apply the
clause to an individual (rather than a corporation) for the first time.
Second, they wanted the Court to apply the clause to a
residency-based income tax—also for the first time.
¶31 Like the Steiners, the taxpayers in Wynne were shareholders
of an S corporation. Wynne, 135 S. Ct. at 1793. The Wynnes were
residents of Maryland. Id. At the time of that case, Maryland
imposed two levels of state taxation—first, a state income tax, which
Maryland levied at a graduated rate; and second, a county income
tax, which varied based on geography but was levied at a flat rate.
Id. at 1792. Despite the differing nomenclature, both taxes were
collected directly by the state of Maryland. Id. Maryland allowed
taxpayers to claim a credit for taxes paid to other states, but only
against the “state” tax—not the “county” tax. Id. Maryland residents
were thus subject to double taxation on their income earned in other
states. Income was taxed by the other state via that state’s taxation
regime and Maryland via its flat rate county tax. Maryland also
taxed the income of nonresidents. Id. Nonresidents paid the state
income tax on all income they earned within Maryland. Id. They also
had to pay a “special nonresident tax” instead of the county tax. Id.
This tax was equivalent to the lowest county income tax rate. Id. The
Wynnes claimed that this system violated the Dormant Commerce
Clause.
¶32 The Supreme Court agreed. As a threshold matter the Court
noted that “it is hard to see why the dormant Commerce Clause
should treat individuals less favorably than corporations.” Id. at
1797. It thus concluded, with little analysis, that individuals are also
protected by the Dormant Commerce Clause—even though the
Court had previously never explicitly held as much.6 The Wynnes, as

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6 The Wynne case is a departure from the Court’s previous
position that an individual’s residence in a state subjected him, in
full, to that state’s taxation regime. Indeed, as the principal dissent
noted, “the sheer volume and consistency of [the Court’s] precedent
confirms . . . the degree to which this Court has—until now—
endorsed the well-established principle . . . that a State may tax its
(continued . . .)
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shareholders of an S corporation, accordingly fell within the ambit
its protection.
¶33 The Court then went on to assess the substance of the
Maryland tax. But in doing so, it sailed past the four-part Complete
Auto test and assessed the Maryland tax only on internal consistency
grounds. Although the Court noted that the Maryland Court of
Appeals applied the full Complete Auto test, id. at 1793, it did not
endorse or apply the full test anywhere in its opinion. Nor did it
state that it was simply unnecessary to apply the remaining prongs
because one of the prongs was dispositive. Instead, it at least
implicitly treated internal consistency as a standalone constitutional
test. The continuing vitality of the Complete Auto test is thus in
serious doubt.7
¶34 Wynne also introduced uncertainty into the fair
apportionment prong. As discussed above, supra ¶ 27, the fair
apportionment requirement consists of two subparts—internal
consistency and external consistency. The Wynne Court first
concluded that Maryland’s tax failed the internal consistency test.
The Court imagined a simplified world in which every state had the
same taxation system as Maryland. Id. at 1803. The Court then
[a]ssume[d] further that two taxpayers, April and
Bob, both live in State A, but that April earns her
income in State A whereas Bob earns his income in
State B. In this circumstance, Bob will pay more
income tax than April solely because he earns income
interstate. Specifically, April will have to pay a 1.25%
tax only once, to State A. But Bob will have to pay a
1.25% tax twice: once to State A, where he resides,
and once to State B, where he earns the income.

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residents’ worldwide income, without restriction arising from the
source-based taxes imposed by other States and regardless of
whether the State also chooses to impose source-based taxes of its
own.” Comptroller of the Treasury of Md. v. Wynne, 135 S. Ct. 1787,
1818 (2015) (Ginsburg, J., dissenting) (citation and internal quotation
marks omitted).
7 We flag this point without conclusively resolving it. We need
not decide whether Wynne dispensed with Complete Auto because
only the fair apportionment prong is at issue in this case.

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Id. at 1803–04. Based on this hypothetical, the Court determined that
the Maryland tax systematically discriminated against interstate
commerce and thus failed the internal consistency test. Id. at 1803.
And in light of this failure, the Court held that Maryland’s tax failed
to survive the Dormant Commerce Clause challenge. Id.8
¶35 So far so good. Because Maryland’s tax failed the internal
consistency test, the Supreme Court need not have reached the
external consistency test since a failure on either prong would have
been determinative. But the Court went on to propose a potential
solution to Maryland’s problem. Significantly, the Court’s proposed
solution is one that would fail the external consistency test.
¶36 The Wynne Court suggested that Maryland could fix the
problem with its tax code by eliminating the special nonresident tax,
but continuing to tax all of its residents’ income regardless of source.
Id. at 1806. Yet this solution would fail the external consistency
requirement. The proposed system would allow Maryland to levy
the county tax on 100 percent of its residents’ income generated
outside of Maryland. Maryland would apportion none of this
income to other states. Crucially, it would not even have to grant a credit
for taxes paid to other states (as long as it didn’t tax nonresidents).9
This “would seem to squarely violate the external consistency test,”
which requires states to apportion income such that it “reflect[s] a
reasonable sense of how income is generated.” Dormant Commerce
Clause—Personal Income Taxation—Comptroller of the Treasury of
Maryland v. Wynne, 129 HARV. L. REV. 181, 186–87 (2015) (internal
quotation marks and emphasis omitted). This tax system does not
even come close to “slicing [the] taxable pie among [the] States in
which the taxpayer’s activities contributed to taxable income.”

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8 This despite the fact that the Court had upheld internally
inconsistent state taxes before. See, e.g., Am. Trucking Ass’ns v. Mich.
Pub. Serv. Comm’n, 545 U.S. 429, 437 (2005); Shaffer v. Carter, 252 U.S.
37, 57 (1920). So much for consistency.
9 As long as Maryland taxes only residents, the tax system is
internally consistent. If every state taxed based only on residency
(and not based on the source of the income), there would be no
discrimination against interstate commerce. A person living in State
A would pay only State A taxes, and a person living in State B would
pay only State B taxes. There would be no differing tax burden based
on the interstate nature of the income.

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Jefferson Lines, 514 U.S. at 186. Maryland would be entitled to tax the
out of state “slice” simply because the taxpayer resided in Maryland.
But slicing the tax pie is the quintessential point of external
consistency.
¶37 The Wynne Court thus went out of its way to endorse a tax
regime violative of the external consistency test. Whatever life
external consistency might have left, it is highly unlikely that it
continues to apply in the context of an individual taxpayer’s
challenge to a state’s taxation system.10
¶38 To summarize, Wynne struck down Maryland’s tax system
solely on the basis of internal consistency. The Court did not apply
the Complete Auto test. And it strongly implied that tax systems that
fail external consistency would nonetheless pass constitutional
muster.
¶39 The task that remains, then, is to assess Utah’s tax scheme
under the guidelines laid out in Wynne.
3
¶40 We can distill several principles from Wynne that bear on the
Steiners’ first claim: (1) As shareholders of an S corporation, the
Steiners are entitled to bring a Dormant Commerce Clause challenge;
(2) Utah’s tax regime must satisfy the internal consistency test; and
(3) Utah’s tax regime need not satisfy the external consistency test.
The Steiners’ challenge will rise and fall, then, on a showing of
internal inconsistency in Utah’s tax code.

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10 Although we are unaware of any judicial opinions reaching
this precise conclusion, there is significant scholarly commentary
along these lines. See, e.g., Mackenzie Catherine Schott, Comment,
Inconsistency with the Internal Consistency Test, 77 LA. L. REV. 947
(2017) (arguing that Wynne established internal consistency as a
standalone constitutional test); Edward A. Zelinsky, The Enigma of
Wynne, 7 WM. & MARY BUS. L. REV. 797, 809–10 (2016) (noting that
Wynne “can be read as presaging a future formal repudiation of the
external consistency test”); Dormant Commerce Clause—Personal
Income Taxation—Comptroller of the Treasury of Maryland v.
Wynne, 129 HARV. L. REV. 181, 188 (2015) (asserting that Wynne
demonstrates that the Supreme Court is “hesitant to apply the
[external consistency] test”).

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¶41 We uphold the constitutionality of the Utah tax scheme at
issue under these principles. Because Utah’s tax system is internally
consistent, we hold that the Steiners’ Dormant Commerce Clause
challenge fails on the merits.
¶42 For the years in question, Utah taxed its residents’ state
taxable income at a rate of 5 percent. UTAH CODE § 59-10-104 (2013).
Utah residents who paid income taxes in other states could take a
credit against their Utah taxes in the amount of taxes they paid to
other states, up to the amount that they would have paid under
Utah’s tax rate. Id. § 59-10-1003. Nonresidents were also taxed at the
same rate of 5 percent, but only on their income earned in Utah. Id. §
59-10-103(1)(w), -104(2), -116.
¶43 This arrangement satisfies Wynne’s internal consistency test.
If every state adopted the same tax system as Utah, there would be
no discrimination against interstate commerce. April and Bob (our
hypothetical taxpayers)—who are both residents of State A—pay the
same tax even though April earns her income in State A and Bob
earns his in State B. April will pay a 5 percent tax to State A on her
income because she resides there. Bob will pay a 5 percent tax to
State A because he resides there and a 5 percent tax to State B
because he earns income there, but he will receive a credit in State A
for the 5 percent tax paid to State B. Like April, he will be taxed only
once on his income. Bob does not shoulder a higher tax burden even
though he earns his income in interstate commerce.11 This conclusion
is bolstered by the Wynne majority’s statement that “Maryland could
cure the problem with its current system by granting a credit for
taxes paid to other States.” 135 S. Ct. at 1806. This is exactly what
Utah does.
¶44 Utah’s tax code thus satisfies the internal consistency test. In
Wynne, the Supreme Court declined to require anything else of
Maryland’s tax. We accordingly apply Wynne and conclude that a

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11 It is true that some states have a 0 percent income tax, and no
credit against Utah taxes is thus available for income earned in those
states (because no taxes are paid to those states). But this is
immaterial to the analysis. Internal consistency analyzes only the
effects of a state’s own tax system. The fact that a given state’s system
might generate odd results because of its interaction with the
systems of other states is irrelevant. See Okla. Tax Comm’n v. Jefferson
Lines, Inc., 514 U.S. 175, 185 (1995).

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state tax levied against individuals need satisfy only the internal
consistency test to pass Dormant Commerce Clause scrutiny.12 It
would be an extension of Wynne to require that these taxes also
satisfy external consistency. If the Supreme Court wishes to mandate
such an extension, it is of course free to do so. But we will not do so
here.
C
¶45 The Steiners also assert a challenge to Utah’s tax code under
the Dormant Foreign Commerce Clause.13 They contend that Utah’s
failure to grant a credit for taxes already paid to foreign countries
impermissibly discriminates against international commerce. The tax
court agreed and allowed the Steiners to deduct their foreign income
under the equitable adjustment statute so as to avoid what it viewed
as an otherwise unconstitutional result. We reverse. There is no
Supreme Court case in which that Court has struck down a state tax
on the foreign income of an individual or an S corporation. We
decline to break new ground here—if the Dormant Foreign
Commerce Clause is going to be extended to individuals “it should
be the United States Supreme Court that makes that decision.”
DIRECTV v. Utah State Tax Comm’n, 2015 UT 93, ¶ 46, 364 P.3d 1036.
The protections of the Dormant Foreign Commerce Clause have
been extended only to corporations. And even if the clause did apply
to the Steiners, the requirements are met here. Accordingly, we hold
that Utah’s tax system does not run afoul of the Dormant Foreign
Commerce Clause.14

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12 As discussed previously, only the fair apportionment prong of
the Complete Auto test is at issue before us. So although a fair reading
of Wynne is that it may have discarded that test entirely, we need not
decide the issue. It is enough for our purposes to conclude that after
Wynne, “fair apportionment” means the same as “internal
consistency” in this context.
13 The Dormant Foreign Commerce Clause is analogous to the
Dormant Commerce Clause. But whereas the latter is derived by
negative implication from the Commerce Clause, the former finds its
footing (or lack thereof) in the Foreign Commerce Clause.
14 We review the tax court’s grant of summary judgment for
correctness. Salt Lake Cty. v. Holliday Water Co., 2010 UT 45, ¶ 14, 234
P.3d 1105.

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1
¶46 No Supreme Court case considering the Dormant Foreign
Commerce Clause has involved an individual taxpayer (or S
corporation shareholder). They have all involved C15 corporations.16
The Supreme Court has never indicated that a state—taxing an
individual based on his residency in that state—could run afoul of the
Constitution by failing to grant a tax credit against taxes levied by
foreign countries. Under the principles we articulated in DIRECTV
that alone is enough to end the inquiry. We could conclude
otherwise only by transplanting Wynne into the Court’s foreign
commerce clause jurisprudence. But we find no established basis for
Wynne to be extended into this area.
¶47 As discussed above, Wynne established—for the first time—
that a state tax levied against an individual who resided in that state
was subject to the Dormant Commerce Clause. Supra ¶ 32. Justice
Alito, writing for the Court, noted that “it is hard to see why the
dormant Commerce Clause should treat individuals less favorably
than corporations.” Comptroller of the Treasury of Md. v. Wynne, 135 S.
Ct. 1787, 1797 (2015). Crucially, however, the Court applied a
different doctrinal framework to the individual taxpayers in Wynne
than the one previously applied to corporations.
¶48 Wynne adopted the internal consistency test as a
freestanding constitutional requirement. Id. at 1803. In its previous
cases, however, the Court applied this test as one part of the broader
Complete Auto framework. See, e.g., D.H. Holmes Co. v. McNamara, 486
U.S. 24, 30 (1988). And what’s more, the failure of a tax to pass the
internal consistency test was not previously fatal. See, e.g., Am.
Trucking Ass’ns v. Mich. Pub. Serv. Comm’n, 545 U.S. 429, 437 (2005);
Shaffer v. Carter, 252 U.S. 37, 57 (1920). Thus despite the Court’s
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15 C corporations file corporate tax returns and pay federal and
state corporate-level taxes on the entity’s business and non-business
income. 26 U.S.C. § 11; UTAH CODE § 59-7-101 et seq.
16 See Barclays Bank PLC v. Franchise Tax Bd. Of Cal., 512 U.S. 298
(1994); Itel Containers Int’l Corp. v. Huddleston, 507 U.S. 60 (1993); Kraft
Gen. Foods, Inc. v. Iowa Dep’t of Revenue & Fin, 505 U.S. 71 (1992);
Wardair Canada, Inc. v. Fla. Dep’t of Revenue, 477 U.S. 1 (1986);
Container Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159 (1983); Mobil
Oil Corp. v. Comm’r of Taxes of Vt., 445 U.S. 425 (1980); Japan Line, Ltd.
v. Cty. Of Los Angeles, 441 U.S. 434 (1979).

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Opinion of the Court

insistence that individuals are entitled to be treated no “less
favorably” than corporations under the Dormant Commerce Clause,
it is clear that they can be treated differently. Crucial distinctions
between individuals and corporations continue to exist as a doctrinal
matter. Logically, then, individuals and corporations may also be
subjected to differing analytical frameworks under the Dormant
Foreign Commerce Clause. But the Supreme Court has provided no
guidance whatsoever to lower courts regarding how to treat
individuals in the context of foreign commerce. So even if we were
inclined to conclude that state taxes of individual residents are
subject to Dormant Foreign Commerce Clause scrutiny, we would be
completely at sea. We would have no idea what test to apply or how
to apply it.17
¶49 “Our hesitance to extend the law of dormant commerce is
reinforced by a practical problem: The extension advocated by the
[Steiners] would open a can of worms.” DIRECTV, 2015 UT 93, ¶ 46.
This practical problem is amply illustrated by the Steiners’ own
briefing. In seeking to extend Wynne to foreign commerce, the
Steiners attempt to apply the internal consistency test. As discussed,
this test requires analyzing a hypothetical world in which all
jurisdictions have the challenged tax scheme. We then would assess
if interstate commerce suffers from systematic discrimination in this
alternate world. But this test is quite impossible to apply in an
international setting. Wynne’s internal consistency analysis
contemplated only state-level taxes within a uniform federal system.
And the international income earned by the Steiners is subject to
multiple levels of foreign taxation—local, subnational, and national.
It would make no sense to universalize Utah’s tax system to conduct
a Wynne analysis—Utah is a single, subnational taxing jurisdiction.
There is no proper basis to compare the effect of its tax system with

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17 This difficulty is exacerbated by the fact that the governing
Dormant Foreign Commerce Clause framework is not identical to
the domestic framework. See, e.g., Itel Containers Int’l Corp., 507 U.S.
at 73 (noting that Complete Auto framework is the “domestic
commerce clause test”). We thus do not know (1) how the
assessment of an individual tax would work as a practical matter; or
(2) how it would work as a doctrinal matter. We see no basis for
stumbling through these nesting layers of unknowns until the
Supreme Court lights the way.

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the effect of those of foreign jurisdictions encompassing multiple
levels of taxation.
¶50 In light of this uncertainty, we decline to “veer[] from a
principle of interstate and international taxation repeatedly
acknowledged by [the Supreme Court]: A nation or State ‘may
tax all the income of its residents, even income earned outside the
taxing jurisdiction.’” Wynne, 135 S. Ct. at 1813 (Ginsburg, J.
dissenting) (quoting Okla. Tax Comm’n v. Chickasaw Nation, 515 U.S.
450, 462–63 (1995)). Although the Supreme Court has chosen to
depart from this settled rule in the context of domestic taxation, it
has given no indication of its intent to extend that approach to state
taxation of foreign commerce. “And since a move in that direction
would require subjective line-drawing that would take us far afield
of the Court’s current approach, we doubt that it will.” DIRECTV,
2015 UT 93, ¶ 46. We reverse the tax court and hold that Utah may
tax the entirety of the Steiners’ foreign income based on their
residency in the state.
2
¶51 Although the Supreme Court has never articulated a test for
a residence-based individual income tax, Utah’s tax is consistent
with the broader dormant foreign commerce principles the Court has
hinted at. First, Utah’s tax code interacts with the federal tax code in
a manner that leads to evenhanded treatment of foreign commerce.
Second, we can infer that Congress approves of Utah’s tax system
and has thus authorized it.
¶52 The “foreign commerce clause cannot be interpreted to
demand that a State refrain from taxing any business transaction that
is also potentially subject to taxation by a foreign sovereign.” Itel
Containers Int’l Corp. v. Huddleston, 507 U.S. 60, 74 (1993). Indeed,
“absolute consistency, even among taxing authorities whose basic
approach to the task is quite similar, may just be too much to ask.”
Container Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159, 192 (1983).
There is always some risk of double taxation in the international
realm. Mitigation of this risk, however, would require complex
negotiation with foreign nations—negotiations that the State of Utah
is legally and practically ill-equipped to tackle.
¶53 This is a further indication of the need for leeway for states
in the exercise of their taxing authority in the shadow of the Foreign
Commerce Clause. See id. at 192 n. 31 (noting that “California . . . is in
no position to negotiate with foreign governments,” and thus that
the risk of double taxation was no reason to invalidate the tax).

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Opinion of the Court

Utah’s residency based individual tax may possibly subject the
Steiners to a double tax on some of their income. But this alone may
not be a basis for invalidating the Utah tax.
¶54 This conclusion is strengthened by the way in which Utah’s
tax system interacts with the federal system. The United States
government has entered into a multitude of complex tax treaties
with foreign nations. The federal government, consistent with these
treaties, provides residents with a credit for foreign taxes already
paid on foreign-sourced income. 26 U.S.C. §§ 901–09. The rules
governing these tax credits are understandably extremely complex.
Crucially, these treaties and rules often allow a credit against federal
tax for both foreign national and subnational taxes. Richard D. Pomp
and Michael J. McIntyre, GATT, Barclays, and Double Taxation,
8 STATE TAX NOTES 977 (1995). If the State of Utah were to also grant
a foreign tax credit, foreign-sourced income would be granted the
windfall of a double tax credit. This would systematically favor
foreign commerce over domestic commerce. And we see no basis for
the conclusion that the Dormant Foreign Commerce Clause requires
such a result.18
¶55 Congress seems to agree. Despite the fact that dozens of
states decline to grant a credit for foreign taxes, Congress has never
acted to prohibit the practice or to preempt these laws in any way.
Normally we would hesitate to infer anything from Congressional
inaction. But the Supreme Court has specifically stated that Congress
may “passively indicate that certain state practices” do not violate
the Dormant Foreign Commerce Clause. Barclays Bank PLC v.
Franchise Tax Bd. of Cal., 512 U.S. 298, 323 (1994).19 “[I]f a state tax

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18 It is true that the Supreme Court has previously stated that
there is “no authority . . . for the principle that discrimination against
foreign commerce can be justified if the benefit to domestic
subsidiaries might happen to be offset by other taxes imposed not by
[the State], but by . . . the Federal Government.”
Kraft Gen. Foods, 505 U.S. at 81. But this was before the Court
articulated the principle of passive congressional approval. The
interaction between federal and state statutes is important for
assessing if Congress has sub silentio approved a state law.
19The Court made this statement in the context of evaluating
whether a tax impaired the ability of the federal government to
operate uniformly. This is ostensibly one of two additional prongs
(continued . . .)
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Opinion of the Court

merely has foreign resonances, but does not implicate foreign affairs,
we cannot infer, absent some explicit directive from Congress” that
the states must conform their taxes to federal practice. Container
Corp. of Am., 463 U.S. at 194 (internal alterations, quotation marks,
and citations omitted).
¶56 The lack of an explicit Congressional directive may thus
come close to tacit approval of these state laws. And the Court has
repeatedly stated that Congress can authorize state action that would
otherwise violate the Dormant Commerce Clause. See, e.g., Camps
Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 572 & n.8
(1997); Maine v. Taylor, 477 U.S. 131, 138 (1986). Regardless of any
judicially jury-rigged multipart tests, then, this Congressional
approval immunizes Utah’s tax code from judicial scrutiny under the
Dormant Foreign Commerce Clause.
D
¶57 Lastly, the Steiners argue that the equitable adjustment
statute in Utah’s tax code allows them to deduct their foreign income
from their Utah tax base as a statutory matter. Applying principles of
constitutional avoidance, the tax court agreed and read the relevant
section to allow the deduction. We reverse. We hold that the
equitable adjustment statute does not apply in this instance.
¶58 As in all cases of statutory interpretation, we begin with the
text. See Olsen v. Eagle Mountain City, 2011 UT 10, ¶ 9, 248 P.3d 465
(affirming “our commitment to interpreting statutes according to the
‘plain’ meaning of their text”).20 The equitable adjustment statute
_____________________________________________________________
(along with the Complete Auto factors) in evaluating taxes under the
Dormant Foreign Commerce Clause. But it has broader applicability.
If Congress may “passively” approve of state laws for one part of the
test, there is no reason its passive approval should not be attributed
to the law as a whole. After all, it seems implausible that Congress
would intend to signal approval for just one part of a judicially
invented six-part test.
20 We have previously suggested that statutes granting tax credits
“must be narrowly construed against the taxpayer.” Ivory Homes, Ltd.
v. Utah State Tax Comm’n, 2011 UT 54, ¶ 10, 266 P.3d 751. Yet we have
also said that we “construe tax imposition statutes liberally in favor
of the taxpayer.” Id. ¶ 31. This dichotomy presents a difficult
line-drawing problem, as it is not always apparent whether a given
statutory provision is better viewed as a matter of a tax “credit,” on
(continued . . .)
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 STEINER v. TAX COMMISSION
Opinion of the Court

reads, in relevant part: “[t]he commission shall allow an adjustment
to adjusted gross income of a resident or nonresident individual if
the resident or nonresident individual would otherwise . . . suffer a
double tax detriment under this part.” UTAH CODE § 59-10-115(2)(b).
The question presented concerns the meaning of the phrase “double
tax detriment under this part.”
¶59 The Steiners contend that if any of their income is taxed
twice, then they have suffered a “double tax detriment.” Thus, they
argue, the fact that their foreign-source income is taxed by both Utah
and a foreign country entitles them to take advantage of the statute
and adjust the income they report to Utah.
¶60 It’s true that the Steiners have suffered a “double tax
detriment” by being taxed by both Utah and a foreign country. But
the statute doesn’t call for adjustments for any double tax
detriment—it calls for an adjustment only if the taxpayer suffers “a
double tax detriment under this part.” Id. (emphasis added). The
words “under this part” are crucial. And “under this part”
necessarily refers to the part of the tax code to which section 115
belongs—part 1 of title 59, chapter 10, entitled “Determination and
Reporting of Tax Liability and Information” of the State’s Individual
Income Tax Act. See id. §§ 59-10-101–137. The clear import of that
phrase is that an equitable adjustment is available only if the Utah
tax code itself imposes double taxation.21
_____________________________________________________________
one hand, or as an element of the basis for the threshold imposition
of the tax, on the other. The logic of the distinction is likewise a bit
slippery. We have endorsed the notion of narrow construction of tax
credits on the ground that such are a matter of legislative “grace.”
See id. ¶ 10. But there is a sense in which all tax provisions are a
matter of grace, as the taxing authority could always go further in
imposing a greater tax.
We flag this problem as a matter deserving greater attention in a
future case. We need not resolve it here, however, as it has always
been clear that the first order of business in a matter of statutory
interpretation is to credit the ordinary meaning of the words enacted
into law by the legislature. And here we conclude that such meaning
cuts squarely against the Steiners.
21 The tax court’s invocation of the constitutional avoidance
canon was thus erroneous. That canon is applicable only where the
statute is “genuinely susceptible to two constructions.” Utah Dep’t of
(continued . . .)
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Opinion of the Court

¶61 This is fatal to the Steiners’ position. Utah has not taxed their
foreign income twice—it has only taxed it once. The second tax
detriment they suffered was at the hands of a foreign sovereign.
They cannot therefore take advantage of the equitable adjustment
statute. We reverse the tax court and hold that the equitable
adjustment statute applies only when Utah itself imposes double
taxation.
III
¶62 “The principle of dormant commerce . . . is not rooted in
a clause, but in a negative implication of one.” DIRECTV v. Utah State
Tax Comm’n, 2015 UT 93, ¶ 45, 364 P.3d 1036. For that reason there is
a “dearth of any textual or historical foundation for a court to look
to” in this field. Id. The problem is compounded when we search for
principled guidance in precedent from the United States Supreme
Court, as that Court itself has long acknowledged that its case law in
this field is a bit of a “quagmire,” Nw. States Portland Cement Co. v.
Minnesota, 358 U.S. 450, 458 (1959), and its recent decisions “add
more room for controversy and confusion and little in the way of
precise guides to the States in the exercise of their indispensable
power of taxation.” DIRECTV, 2015 UT 93, ¶ 44 (citation and internal
quotation marks omitted).
¶63 This is the legal backdrop for our decision in this case. The
Steiners have raised some plausible arguments and identified some
potential policy concerns with the tax regime enacted by the State of
Utah. But in the absence of any clear anchors in text, history, or
precedent, we are left with little more than a request that we
second-guess the policy judgment of our state legislature—based on
speculation about how a rather haphazard body of case law may
ultimately play out in the future.
¶64 We do not see this as our role.22 We uphold the
constitutionality of the Utah tax provisions at issue on the ground

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Transp. v. Carlson, 2014 UT 24, ¶ 24, 332 P.3d 900 (quoting
Almendarez–Torres v. United States, 523 U.S. 224, 238 (1998)). Here the
statute is unambiguous.

22 See DIRECTV v. Utah State Tax Comm’n, 2015 UT 93, ¶ 46, 364
P.3d 1036 (noting our “hesitance” to “limit[] the longstanding police
powers of state and local governments to regulate business”); see also
(continued . . .)
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 STEINER v. TAX COMMISSION
Opinion of the Court

that the Steiners have identified no basis in controlling precedent for
striking them down. We also hold that they have fallen short in their
attempt to identify a statutory basis for their challenge to these
provisions.

_____________________________________________________________
Comptroller of Treasury of Md. v. Wynne, 135 S. Ct. 1787, 1810 (2015)
(Scalia, J., dissenting) (suggesting that the dormant commerce
“doctrine does not call upon us to perform a conventional judicial
function,” but “instead requires us to balance the needs of commerce
against the needs of state governments”—“a task for legislators, not
judges”).

22