Document: 486 U.S. 269 108 S.Ct. 1803 100 L.Ed.2d 302 NEW ENERGY COMPANY OF INDIANA, Appellant,v.Joanne LIMBACH, Tax Commissioner of Ohio, et al. No. 87-654. Argued March 29, 1988. Decided May 31, Syllabus An Ohio statute awards a tax credit against the motor vehicle fuel sales for each gallon ethanol sold (as component gasohol) by dealers, but only if is produced in or, another State, to extent that State grants similar advantages Ohio. Appellant, an Indiana limited partnership, manufactures Indiana, which has no exemption ethanol, wherefore appellant's ineligible credit. Appellant sought declaratory and injunctive relief Court Common Pleas Franklin County, alleging violates Commerce Clause Federal Constitution discriminating out-of-state producers. The court denied relief; Appeals Supreme affirmed. Held: discriminates interstate commerce violation Clause. Pp. 273-280. (a) Clause's "negative" aspect, directly limiting States' power discriminate commerce, prohibits economic protectionism—that is, regulatory measures designed benefit in-state interests burdening competitors. Thus, state statutes, such as Ohio's, clearly are invalid, unless discrimination demonstrably justified valid factor unrelated protectionism. There merit appellees' argument availability some manufacturers (those States give Ohio-produced ethanol) shows provision not discriminatory but, rather, likely promote encouraging other enact will spur sale ethanol. Discriminatory treatment goods more validated promise remove it reciprocity accepted than would be categorical exclusion goods. Nor there any should considered because apparently one manufacturer (appellee South Point Ethanol) benefited (appellant) disadvantaged. Where patent, here, neither widespread advantage nor disadvantage competitors need shown. Moreover, "market participant" doctrine—under negative limitations apply State's acting its governmental capacity, capacity market participant—has application here. action at issue Ohio's purchase or assessment computation taxes. Although scheme purpose effect subsidizing particular industry, does transform into form participation free market. 273-278. (b) clear this case cannot justifications advanced appellees: health commerce. Appellees argue encourages use reduce harmful exhaust emissions, both surrounding whose polluted atmosphere may reach reason suppose, however, offer less healthy, thus have importation suppressed denial otherwise standard credit; outside just effectively fostered production fashion giving provision, merely occasional accidental achieving what purpose, favorable Essentially same reasoning applies asserted justification requirement increase subsidies. 278-280. 32 St.3d 206, 513 N.E.2d 258, reversed. SCALIA, J., delivered opinion unanimous Court. Herman Schwartz, Washington, D.C., appellant. Richard C. Ferrin, appellee. Justice SCALIA 1 New Energy Company challenged constitutionality Rev.Code Ann. § 5735.145(B) (1986), question presented whether Clause, Const., Art. I, 8, cl. 3. 2 * Ethanol, ethyl alcohol, usually made from corn. In last decade come automotive fuel, mixed with gasoline ratio 9 produce called gasohol. interest emerged reaction petroleum dislocations early 1970's. product was originally promoted means energy independence while providing surplus corn; recently, emphasis shifted environmental replacement lead enhancing octane. See United Department Agriculture, Ethanol: Economic Policy Tradeoffs (1988). Ethanol was, however (and continues be), expensive gasoline, emergence on commercial scale dates enactment first federal subsidy, excise taxes, 1978. Act 1978, Pub.L. 95-618, 221, 92 Stat. 3185, codified, amended, 26 U.S.C. §§ 4041, 4081 (1982 ed. Supp. IV). Since then, many States, particularly those grain-producing areas country, enacted their own General Accounting Office, Importance Impact Alcohol Fuel Incentives 5 (1984). passed measure 1981, gasohol dealers so cents per used payable gasoline. This available without regard source June 10, 1, 1981-1982 Leg. Acts 1693, 1731-1732. 1984, 5735.145(B), denies coming do grant credit, exemption, refund smaller granting equivalent State.1 3 partnership Bend, several including repealed effective July 1985, see Mar. 5, 4, 1984 Ind. 189, 194-195, time also legislation direct subsidy producers (the sole appellant). Ind.Code 4-4-10.1-1 4-4-10.1-8 (Supp.1987). became violated industry.2 relief, A divided initially reversed, finding discriminated adequate products origin, shielded competition. then granted motion rehearing reversed itself, majority protectionist unreasonably burdensome. 258 (1987). We noted probable jurisdiction. 484 984, 500, 98 499 II 4 It long been Congress authority regulate among limits See, e.g., Hughes v. Oklahoma, 441 322, 326, 99 1727, 1731, 60 250 (1979); H.P. Hood & Sons, Inc. Du Mond, 336 525, 534-535, 69 657, 663, 93 L.Ed. 865 (1949); Welton Missouri, 91 (1 Otto) 275, 23 347 (1876). aspect Bacchus Imports, Ltd. Dias, 468 263, 270-273, 104 3049, 3054-3056, 82 200 (1984); supra, U.S., 532-533, S.Ct., 662; Guy Baltimore, (10 434, 443, 25 743 (1880). statutes routinely struck down, see, Sporhase Nebraska ex rel. Douglas, 458 941, 102 3456, 73 1254 (1982); Lewis BT Investment Managers, Inc., 447 27, 2009, 64 702 (1980); Dean Milk Co. Madison, 340 349, 71 295, 95 329 (1951), protectionism, Maine Taylor, 477 131, 106 2440, 110 (1986). here explicitly deprives certain generally beneficial they face appears violate cardinal nondiscrimination. argue, far it, rejected contention earlier "reciprocity" case, Great Atlantic Pacific Tea Cottrell, 424 366, 96 923, 47 55 (1976). regulation permitted milk out Mississippi origin reciprocal basis. put forward, arguments, assertion "the free-trade advancing identical national served Clause." Id., 378, 932. response, we said "Mississippi threat isolation weapon force sister enter even desirable agreement." 379, More characterized export ground water "facially legislation" merited " 'strictest scrutiny.' 958, 3465, quoting 337, 1736. 6 true Cottrell refusal accept offered total elimination all transport subject offering State; whereas present placed substantial through treatment. That makes difference purposes analysis. leading Baldwin G.A.F. Seelig, 294 511, 497, 79 1032 (1935), York law excluding did impose absolute ban, rather allowed initial dairy farmer above State-mandated price. words, appellant order sell cut profits reducing price below sufficiently compensate purchaser-retailer forgone wholesaler-distributor Baldwin, York, had increasing meet York-prescribed minimum. viewed "an barrier competition" "equivalent rampart customs duties." 527, 502. Similarly, Hunt Washington Apple Advertising Comm'n, 432 333, 349-351, 97 2434, 2444-2445, 53 383 (1977), found invalid under North Carolina exclude apples imposed additional costs upon sellers deprived them distinctive grading system. likewise imposes sellers; justifies disparity justify exclusion. indicated requirements se unlawful. 931. But cited proposition, Kane Jersey, 242 160, 167-168, 37 30, 31-32, 61 222 (1916), discussed context which, consequence sure, favored citizens, nonetheless complied minimum Here, quite contrary, induce Indiana's acceptance effect, taxing rate higher manufacturers, shall see) disparity. 7 practical scope limited. Apparently exists disadvantaged provision. Our cases, indicate where For example, held unconstitutional special Hawaii's liquor locally alcoholic beverages (okolehao fruit wine), though were tax. 265, 271, 3052, 3055. And Florida excluded business activities entities, bank holding companies, banks, trust companies. these cases consider size number businesses disfavored relevant our determination. Varying strength bar protectionism according firms affected serve except creation new uncertainties already complex field. 8 contend discriminatory, covered so-called market-participant doctrine. doctrine differentiates between general participant; former Alexandria Scrap Corp., 426 794, 806-810, 2488, 2496-2498, 49 220 when chooses manufacture cement, methods, favor residents, greater constitutional concern private business. Reeves, Stake, 429, 438-439, 2271, 2278, 65 244 (1980). ultimately taxes—a primeval activity. To dispositions laws. Scrap, appellees place great reliance, remotely establish proposition. examined, upheld attack basis doctrine, Maryland cash program auto-hulk processors. achieve removal unsightly abandoned autos id., 796-797, 2491, proprietary activity, based analogy purchaser auto hulks, 808-810, 2496-2498. subsequently observed programs unlike might proprietary. 440, n. 14, 2279, 14. think tax, regardless produces plausibly analogized activity purchaser. 10 escaped notice eligible receive producers, potential beneficiary attacks, conferring over believe valid, must well. prohibit residents marketplace, description connection Direct subsidization domestic industry ordinarily run afoul prohibition; taxation does. Of course, retaliatory acceptable. 379-380, 931-932. III 11 leave open possibility validate showing advances legitimate local adequately reasonable nondiscriminatory alternatives. 138, 151, 2447, 2454; 958; 336-337, 1736; 354, 297. perhaps way saying appear "discriminatory" constitutionally prohibited sense—that enactment—may closer analysis so. However put, standards high. Cf. Philadelphia 437 617, 624, 2531, 2535, 57 475 (1978) ("[W]here simple effected legislation, virtually rule invalidity erected"); 1737 ("[F]acial itself fatal defect" "[a]t . invokes strictest scrutiny"). 12 advance two case: As first, (in octane-enhancer) Certainly protection goal, assume furthers it. obviously not, accident. concerned, suppose surely ethanol; helpful expedients qualify could clearer -produced ethanol.3 responds second related) discrimination, What encouraged subsidies general, sum, amount implausible speculation, suffice plain manufacture. 13 reasons stated, judgment 14 Reversed. Section provides: "The qualified contain commissioner determines claimed contains state's containing Ohio; provided exceed allowable Ohio." took January 1985. After litigation began, again amended scheduled 1993. 5735.145 argued there, excessive burden test set forth Pike Bruce Church, 397 137, 142, 90 844, 847, 174 (1970). claim requires separate find unnecessary light disposition claim. alleged courts violations Equal Protection Privileges Immunities Fourteenth Amendment; challenges appeal. interpret trial court's proposed fact April judicial protecting Assembly, conceivable enactment. event, subjective little rational relationship true, inadequate patent

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