The relation of nation and states in a federal system - Fede...

Learning Outcomes

This article examines federalism-based limits on state authority, including:

• Explaining how the Supremacy Clause operates on the MBE, distinguishing express from implied preemption and recognizing when federal statutes, regulations, or treaties displace state and local law.
• Identifying when state regulations or taxes violate the Dormant Commerce Clause because they discriminate against interstate commerce, regulate extraterritorial conduct, or impose an undue burden under the Pike balancing test.
• Distinguishing between discriminatory and facially neutral state laws, and determining when strict scrutiny versus balancing applies in Dormant Commerce Clause analysis.
• Determining when the Article IV Privileges and Immunities Clause forbids discrimination against out-of-state citizens in fundamental rights and important economic activities, and contrasting that analysis with Equal Protection and the Dormant Commerce Clause.
• Evaluating intergovernmental immunities that limit state taxation and regulation of the federal government, while recognizing when states remain subject to valid federal regulation and the anti-commandeering principle.
• Choosing strategically among the Supremacy Clause, Dormant Commerce Clause, and Article IV Privileges and Immunities as the correct doctrine for attacking or defending state laws in MBE-style questions, including common exam traps.
• Applying these doctrines in structured IRAC-style essays and multiple-choice reasoning, using key terms, presumptions, and burden-shifting frameworks to justify each conclusion.

MBE Syllabus

For the MBE, you are required to understand the relationship between federal and state power in a federal system, with a focus on the following syllabus points:

• Applying the Supremacy Clause to determine when valid federal statutes, regulations, and treaties preempt state and local law.
• Distinguishing express preemption from implied preemption (conflict, obstacle, and field preemption), and recognizing the presumption against preemption in traditional state police-power areas.
• Analyzing state and local regulations and taxes under the Dormant Commerce Clause, including:
  • Discriminatory laws versus facially neutral laws with incidental burdens.
  • The undue burden balancing test.
  • The prohibition on regulating wholly extraterritorial conduct.
• Identifying exceptions to Dormant Commerce Clause limits, especially congressional authorization and the market participant exception.
• Evaluating discrimination against out-of-state citizens under the Privileges and Immunities Clause of Article IV (fundamental rights and important economic activities).
• Distinguishing the Article IV Privileges and Immunities Clause from the Fourteenth Amendment Privileges or Immunities Clause (a common exam trap).
• Recognizing intergovernmental immunities: limits on state regulation and taxation of the federal government and the lack of state immunity from valid federal regulation.
• Applying these doctrines to common fact patterns involving state regulation and taxation of interstate commerce.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. A state enacts a law requiring all apples sold within the state to be certified as "Premium Grade" by a state agency, imposing a $50 inspection fee per bushel only on apples grown out-of-state. An out-of-state apple grower challenges the law. Which constitutional provision provides the strongest basis for the challenge?
   1. The Supremacy Clause
   2. The Dormant Commerce Clause
   3. The Privileges and Immunities Clause of Article IV
   4. The Equal Protection Clause
2. Congress passes a comprehensive federal statute regulating the labeling of all pesticides sold nationwide. The federal statute explicitly states it occupies the entire field of pesticide labeling. A state subsequently passes a law requiring additional warnings on pesticides sold within its borders. This state law is likely:
   1. Valid, as states retain police power to protect health and safety.
   2. Valid, if the state warnings provide greater protection than federal law.
   3. Invalid, due to express federal preemption.
   4. Invalid, under the Dormant Commerce Clause.
3. Which doctrine prevents states from discriminating against out-of-state citizens regarding fundamental rights, such as pursuing a livelihood?
   1. The Dormant Commerce Clause
   2. The Supremacy Clause
   3. The Privileges and Immunities Clause of Article IV
   4. The Full Faith and Credit Clause
4. A state, concerned about highway safety, requires all trucks—whether in-state or out-of-state—to stop at random winter checkpoints so state employees can brush snow from their roofs. The program causes major delays for interstate shippers but has only a minimal effect on accident rates. An out-of-state trucking company challenges the statute. Under the Dormant Commerce Clause, the statute is:
   1. Valid, because it does not discriminate against out-of-state commerce.
   2. Valid, because highway safety is a legitimate state interest.
   3. Invalid, because it imposes an undue burden on interstate commerce.
   4. Invalid, because it conflicts with federal safety regulations.
5. A state university charges out-of-state students significantly higher tuition than in-state students. An out-of-state student sues, alleging that the policy violates the Privileges and Immunities Clause of Article IV. The policy is:
   1. Invalid, because education is a fundamental right under Article IV.
   2. Invalid, because the state is discriminating against nonresidents.
   3. Valid, because the Privileges and Immunities Clause does not protect against this type of discrimination.
   4. Valid only if the state shows there is no less restrictive means to conserve its resources.

Introduction

The U.S. Constitution creates a system of federalism, in which power is divided between the national government and the states. Most regulatory areas are concurrent—both Congress and the states may legislate, subject to federal supremacy. Some powers, however, are exclusively federal (for example, foreign affairs and coinage of money), and some structural features of the Constitution limit how states may exercise their powers.

Three of the most frequently tested federalism-based limits on state authority are:

• The Supremacy Clause and the doctrine of preemption.
• The Dormant Commerce Clause, which limits state regulation of interstate commerce even when Congress is silent.
• The Privileges and Immunities Clause of Article IV, which limits state discrimination against out-of-state citizens with respect to fundamental rights and important economic activity.

In addition, doctrines of intergovernmental immunity restrict how states may regulate or tax the federal government, and vice versa.

Key Term: Supremacy Clause
The Article VI provision declaring that the U.S. Constitution, and valid federal statutes, regulations, and treaties made pursuant to it, are the “supreme Law of the Land,” overriding conflicting state and local law.

Key Term: Preemption
A doctrine derived from the Supremacy Clause under which valid federal law—statutes, regulations, or treaties—displaces (“preempts”) conflicting or interfering state or local laws.

Key Term: Dormant Commerce Clause
The implicit limitation on state and local regulation inferred from the Commerce Clause’s grant of power to Congress, prohibiting states from discriminating against or unduly burdening interstate commerce, absent valid congressional authorization.

Key Term: Privileges and Immunities Clause (Article IV)
The clause in Article IV, Section 2 providing that “The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States,” which limits state discrimination against out-of-state citizens with respect to fundamental rights and important economic activities.

Key Term: Market Participant Exception
A Dormant Commerce Clause doctrine allowing a state, when acting as a buyer or seller in the market (rather than as a regulator), to favor its own citizens or businesses in that market participation.

A recurring MBE challenge is to identify which doctrine—preemption, the Dormant Commerce Clause, or Article IV Privileges and Immunities—provides the best basis for attacking (or defending) a state law. The analysis often turns on:

• Whether there is relevant federal legislation or regulation (Supremacy Clause/preemption).
• Whether the law discriminates against interstate commerce or only incidentally burdens it (Dormant Commerce Clause).
• Whether the law discriminates against citizens of other states regarding fundamental rights or important economic activities (Article IV P&I).

The following sections examine each doctrine in turn and highlight MBE-style pitfalls and distinctions.

Supremacy Clause and Preemption

The Supremacy Clause makes federal law supreme over conflicting state law. When Congress validly legislates under an enumerated power (for example, the Commerce Clause, the Spending Power, or the Post–Civil War Amendments), or a federal agency issues a valid regulation, states cannot simultaneously enforce inconsistent rules.

Preemption issues arise only when there is some relevant federal law. If Congress has not acted and no federal regulation exists, you are usually in Dormant Commerce Clause or Article IV territory, not preemption.

Types of Preemption

Preemption can be express or implied. On the MBE, you must identify which type is implicated and whether preemption in fact occurs.

Key Term: Express Preemption
Preemption that occurs when a federal statute explicitly states that federal law displaces state law in a specified area or to a specified extent.

Express Preemption

Congress may include an explicit preemption clause in a statute: for example, “No State may establish or continue in effect any law or regulation relating to X.” When such language is present:

• The clause is construed narrowly; courts do not assume Congress meant to wipe out state law beyond the clause’s terms.
• State laws falling within the clause’s scope are invalid.

A related textual device is a “savings clause” that preserves certain state laws or remedies. Always read both the preemption clause and any savings clause.

Key Term: Conflict Preemption
Implied preemption that occurs when it is impossible to comply with both federal and state law simultaneously, or when the state law stands as an obstacle to the accomplishment and execution of Congress’s full purposes and objectives.

Key Term: Field Preemption
Implied preemption that arises when Congress intends federal regulation to occupy an entire regulatory field so completely that there is no room for any state law, even parallel or consistent state rules.

Implied Preemption

Even without an express preemption clause, state law may be displaced in three main ways.

1. Conflict Preemption (Impossibility)
   If compliance with both federal and state law is impossible, the state law is preempted. For example, if federal law requires a label to say “Warning A,” and state law forbids using “Warning A,” someone cannot obey both.

2. Conflict Preemption (Obstacle/Interference)
   Even when dual compliance is technically possible, a state law is preempted if it “stands as an obstacle” to the accomplishment of the full purposes and objectives of Congress. The classic example is a state law that frustrates the “fresh start” policy of federal bankruptcy law by continuing to penalize discharged debtors.

3. Field Preemption
   Sometimes Congress intends federal regulation to occupy an entire field, leaving no room for state law. Courts infer such intent when:

   • The federal regulatory scheme is comprehensive and detailed, or
   • Congress creates a federal agency to administer a pervasive regulatory program, such as immigration or certain aspects of air safety.

When field preemption applies, any state regulation in that field is invalid, even if it is consistent with federal standards.

Presumption Against Preemption

There is a strong presumption against preemption in areas traditionally regulated by states under their police power—health, safety, welfare, and land use. On the MBE, if the question is close and the area is clearly within traditional state authority, it is often correct that the state law is not preempted unless the federal statute clearly indicates otherwise.

Treaties and Executive Agreements

Valid treaties and certain executive agreements made by the federal government also preempt conflicting state law, just like federal statutes. For example, a state law that interferes with a federal agreement regarding Holocaust claims or international trade may be preempted as an intrusion into foreign affairs, which are exclusively federal.

Worked Example 1.1

Congress enacts the Federal Airline Safety Act (FASA), setting detailed safety standards for commercial aircraft maintenance nationwide. FASA includes a clause stating, “This Act is intended to occupy the field of aircraft maintenance safety standards.” State X subsequently passes a law requiring airlines operating within the state to perform an additional, specific engine inspection not mandated by FASA. Is State X’s law valid?

Answer:
No. The state law is likely invalid due to express federal preemption. FASA explicitly states Congress’s intent to occupy the entire field of aircraft maintenance safety standards. Because State X’s law imposes requirements within this federally occupied field, it intrudes into an area Congress reserved exclusively for federal regulation and is preempted under the Supremacy Clause.

Worked Example 1.2

Federal law sets minimum automobile emissions standards, requiring that car emissions be at least 95% clean. California enacts a statute requiring all cars sold in the state to meet a 98% purity standard. The federal statute does not contain any express preemption clause and does not bar stricter state standards. Is California’s law preempted?

Answer:
No. There is no impossibility conflict because manufacturers can comply with both standards by meeting the stricter 98% requirement. There is also no clear congressional intent to occupy the field of emissions regulation, and no showing that California’s stricter standard frustrates federal objectives. Because of the presumption against preemption in traditional health and environmental regulation, the state law is valid.

Worked Example 1.3

Federal bankruptcy law allows discharge of certain tort judgments. State Y has a statute providing that any driver who fails to pay a judgment arising from an auto accident will have their driver’s license suspended, regardless of bankruptcy discharge. A driver has such a judgment discharged in bankruptcy, but State Y nevertheless suspends his license under its statute. Is the state law preempted?

Answer:
Yes. This is obstacle preemption. One purpose of federal bankruptcy law is to give debtors a “fresh start” free from the burdens of past debts. State Y’s statute imposes an additional penalty that effectively continues to punish the debtor for the discharged judgment. Even though it is technically possible to comply with both the federal discharge and the state law (by paying anyway), the state law interferes with the federal objective and is therefore preempted.

Dormant Commerce Clause

The Commerce Clause gives Congress the power to “regulate Commerce…among the several States.” The Dormant Commerce Clause (DCC) doctrine is the negative implication of that grant: in the absence of congressional authorization, states cannot enact laws that discriminate against or unduly burden interstate commerce.

The typical Dormant Commerce Clause question has this structure:

• A state or local regulation or tax.
• A challenge by an out-of-state individual or business.
• No relevant federal statute authorizing or forbidding the state conduct.

Your analysis turns on whether the law discriminates against interstate commerce or is nondiscriminatory but burdensome, and whether any exceptions apply.

Key Term: Undue Burden on Interstate Commerce
A burden imposed by a nondiscriminatory state law on interstate commerce that is clearly excessive in relation to the law’s legitimate local benefits, such that the law violates the Dormant Commerce Clause under a balancing test.

Key Term: Extraterritorial Regulation
A state law that attempts to control commerce occurring wholly outside the state’s borders, typically by tying in-state prices or terms to out-of-state conduct; such regulation is generally invalid under the Dormant Commerce Clause.

Discriminatory State Laws

A state or local law is discriminatory for DCC purposes if it treats in-state and out-of-state economic interests differently to benefit local interests at the expense of out-of-state competitors. Discrimination may be:

• Facial: the statute explicitly distinguishes based on origin.
• Purposeful: the statute is neutral on its face but enacted for a protectionist purpose.
• In effect: the statute’s design or implementation heavily favors in-state over out-of-state interests.

Examples include:

• Requiring that metal ore mined in the state be processed in-state before shipment, effectively excluding out-of-state refiners.
• Limiting landfills to in-state garbage, while barring or surcharging out-of-state waste.
• Prohibiting export of local water to out-of-state users while allowing in-state sales.
• Imposing extra fees or inspection requirements only on out-of-state goods.

These laws are subject to strict scrutiny:

• The state must show the law is necessary to achieve an important (often phrased as “compelling” or “legitimate but very important”) noneconomic purpose (such as health or safety), and
• There are no reasonable nondiscriminatory alternatives.

Because states usually can pursue their objectives with nondiscriminatory measures (e.g., uniform safety standards, conservation quotas applied equally to in-state and out-of-state users), discriminatory laws are “virtually per se invalid” and rarely upheld.

Nondiscriminatory Laws: The Pike Balancing Test

If a state law applies equally to in-state and out-of-state interests—there is no discrimination—but it still burdens interstate commerce (for example, by causing delay or increasing costs), courts use a balancing test (Pike v. Bruce Church):

• The law will be upheld unless the burden on interstate commerce is clearly excessive compared with the law’s putative local benefits.

Factors include:

• The importance of the local interest (e.g., safety versus aesthetics).
• The extent of the burden: delays, costs, fragmentation of national markets.
• The availability of less burdensome means to achieve the same goal.

Key Term: State Taxation of Interstate Commerce
The body of Dormant Commerce Clause doctrine governing state taxes on interstate businesses and transactions, requiring (1) a substantial nexus between the taxed activity and the state, (2) fair apportionment, (3) nondiscrimination against interstate commerce, and (4) a fair relation to services provided by the state.

State taxation of interstate commerce is analyzed under similar principles:

• There must be a substantial nexus between the state and the taxed activity (physical presence is not always required).
• The tax must be fairly apportioned so interstate businesses are not taxed multiple times on the same value.
• The tax must be nondiscriminatory and fairly related to services provided by the state.

Worked Example 1.4

A state with heavy snowfall each winter enacts a statute requiring state-employed road crews to set up random checkpoints at highway on-ramps and border crossings during the winter months. Every truck above a certain size must stop so crews can brush snow off its roof. The checkpoints cause major, unpredictable delays, making it hard for interstate shippers to meet delivery schedules. Accident rates, however, change very little. An out-of-state trucking company sues, claiming the law violates the Dormant Commerce Clause. Is the company likely to succeed?

Answer:
Yes. The statute is nondiscriminatory—it applies equally to in-state and out-of-state trucks—but it imposes a substantial and unpredictable burden on interstate commerce (major delays and scheduling problems) while yielding minimal safety benefits. Under the Pike balancing test, a court would likely find that the burden on interstate commerce is clearly excessive in relation to the modest local benefits, and thus the law imposes an undue burden on interstate commerce.

Extraterritorial Regulation

States may not regulate commerce occurring wholly outside their borders. A classic example is a statute requiring that beer sold in Connecticut not be priced differently from beer sold in other states; this effectively controls out-of-state pricing decisions and is invalid.

Any law that conditions in-state sales on out-of-state prices, production methods, or terms of sale risks being struck down as an impermissible extraterritorial regulation.

State Taxation of Interstate Commerce

State taxes are analyzed under the same Dormant Commerce Clause framework, with additional emphasis on nexus and apportionment.

A state tax on an interstate business is valid if:

• There is a substantial nexus between the state and the taxed activity or property (the business receives benefits or protection from the state).
• The tax is fairly apportioned to reflect the in-state portion of the business’s activity or property.
• The tax does not discriminate against interstate commerce.
• The tax is fairly related to services provided by the state (roads, police, courts, etc.).

Ad valorem property taxes illustrate these principles:

• Commodities (goods moved in interstate commerce) can be taxed by a state if they come to rest there for a business purpose on the tax day; mere transit is not enough.
• Instrumentalities of commerce (trucks, planes, railcars) can be taxed by multiple states, but each state may tax only a fraction of the value that corresponds to the portion of use within that state (fair apportionment).

Exceptions to the Dormant Commerce Clause

There are three primary situations where state actions that would otherwise violate the Dormant Commerce Clause may be upheld.

1. Congressional Authorization

If Congress clearly authorizes states to regulate or even discriminate against interstate commerce in a particular way, that authorization “turns off” Dormant Commerce Clause scrutiny. Congress, exercising its commerce power, may allow states to:

• Enter into interstate compacts affecting commerce.
• Impose certain discriminatory regulations or taxes.

The state law may still be invalid under other constitutional provisions (Equal Protection, Article IV P&I, etc.), but not under the DCC.

2. Market Participant Exception

As noted above, when the state is acting as a market participant, not a regulator, it may favor in-state interests.

Common examples:

• Selling cement from a state-owned plant only to in-state buyers.
• Limiting a state-owned landfill to in-state garbage.
• Requiring that a certain percentage of the workforce on state‑funded construction projects be state residents.

Limitations:

• The state cannot attach “downstream” conditions controlling what private parties do after leaving the state’s market. For example, a state that sells timber from state land cannot condition the sale on the buyer processing the timber only in-state once it owns the wood.
• The market participant exception does not shield the state from Article IV Privileges and Immunities challenges if the state’s conduct discriminates against out-of-state citizens regarding fundamental rights (for example, access to private employment).

3. State Subsidies

A state may always subsidize its own citizens (for example, through in-state tuition discounts or welfare benefits) without violating the Dormant Commerce Clause. Subsidies are treated differently from regulatory discrimination.

Worked Example 1.5

State Y, facing a severe drought, passes a law prohibiting any sale of water drawn from State Y wells to consumers or businesses located outside the state. The stated purpose is to conserve water for State Y residents. A water bottling company in neighboring State Z, which previously purchased large quantities of water from State Y suppliers, challenges the law. Is the law constitutional?

Answer:
No. The law facially discriminates against out-of-state commerce by barring sales to out-of-state customers while permitting in-state sales. It is subject to strict scrutiny. Although conserving water is an important state interest, a complete ban on out-of-state sales is not “necessary” because there are obvious less discriminatory alternatives (such as across-the-board limits on withdrawals or uniform conservation pricing). The market participant exception does not apply because the state is regulating private water sales, not selling state-owned water. The law likely violates the Dormant Commerce Clause.

Worked Example 1.6

State Z imposes a 5% franchise tax on the gross receipts of all corporations “doing business in the state.” A national trucking company headquartered in State A operates in all 50 states. State Z calculates the tax on the company’s worldwide gross receipts, not just the receipts attributable to operations in State Z. The company challenges the tax under the Dormant Commerce Clause. What result?

Answer:
The tax is likely invalid. Although state taxation of interstate businesses is permissible, the tax must be fairly apportioned to the in-state portion of the company’s activities. By taxing the company’s entire worldwide gross receipts, State Z overreaches and risks multiple taxation by other states. This violates the fair apportionment requirement and imposes an undue burden on interstate commerce.

Privileges and Immunities Clause (Article IV)

The Privileges and Immunities Clause of Article IV limits the ability of states to discriminate against citizens of other states with respect to certain rights.

Key features:

• It applies only to U.S. citizens (natural persons), not to corporations or aliens.
• It protects only privileges and immunities of state citizenship that are “fundamental” to the promotion of cooperative interstate relations.

These include:

• The right to earn a living—pursue a common calling or profession.
• The right to own property and access courts.
• The right to travel between states and be treated as a welcome visitor rather than as an unfriendly alien.

Recreational activities (such as sport hunting or fishing) are not treated as fundamental for Article IV purposes.

The Test

When a state treats out-of-state citizens differently from its own citizens in relation to a protected activity, the law is invalid unless:

1. The state shows that out-of-state citizens are a peculiar source of the problem the law seeks to address; and
2. The discrimination is substantially related to solving that problem; and
3. There are no less restrictive means available.

This is a form of heightened scrutiny similar to intermediate scrutiny with teeth.

Worked Example 1.7

State C requires all private construction companies working on projects within the state to hire at least 60% state residents for their workforce. A construction company based in State D, which regularly bids on and performs work in State C using its existing workforce (mostly State D residents), challenges the law. What is the company’s strongest constitutional argument?

Answer:
The strongest argument relies on the Privileges and Immunities Clause of Article IV. The law effectively limits out-of-state citizens’ ability to pursue private employment in State C—a fundamental economic right. Because the state is regulating private employment (not acting as a market participant in its own spending), the market participant exception does not apply. The state would have to show that nonresidents are a peculiar source of some problem (such as unemployment or fraud) and that a 60% residency quota is substantially related to addressing it, with no less restrictive alternative. That is a difficult burden. The Dormant Commerce Clause is a secondary argument here.

Distinguishing Article IV P&I from the Dormant Commerce Clause

On the MBE, both doctrines often appear among the answer choices. To choose correctly:

• Who is protected?

  • DCC protects all out-of-state economic interests, including corporations.
  • Article IV P&I protects only natural-person citizens.

• What is protected?

  • DCC focuses on protection of interstate commerce as such (movement of goods, services, and capital).
  • Article IV P&I focuses on individual rights important to cooperative interstate relations, especially the opportunity to pursue a livelihood.

• What type of discrimination?

  • DCC prohibits discriminatory or unduly burdensome laws, even if they do not target individual citizens’ rights. It can invalidate facially neutral taxes that disproportionately burden out-of-state businesses.
  • Article IV P&I requires discrimination based on state citizenship regarding a protected activity.

• Exceptions?

  • DCC allows the market participant exception and congressional authorization.
  • Article IV P&I has no market participant exception; states cannot evade its limits by acting as proprietors when the discrimination relates to fundamental rights.

Key Term: Intergovernmental Immunity
A principle of federalism preventing states from directly regulating or taxing the federal government and its instrumentalities in ways that interfere with federal functions or discriminate against the federal government, and recognizing that states are generally subject to valid, noncommandeering federal regulation.

Worked Example 1.8

State M enacts a statute providing that only state residents may obtain a license to practice law in state courts. An attorney who is a U.S. citizen and a long-time resident of neighboring State N challenges the law. What is the best constitutional argument?

Answer:
The best argument is that the statute violates the Article IV Privileges and Immunities Clause. Practicing law is an important means of earning a livelihood, and denying bar admission solely based on out-of-state citizenship restricts a fundamental economic opportunity. State M would have to show that nonresident lawyers are a peculiar source of some problem (such as unethical practices) and that excluding all nonresidents is substantially related to solving that problem. This is unlikely. The Dormant Commerce Clause is less precise here because the restriction targets individuals’ professional opportunities rather than general commercial goods or services.

Commonly Permissible Discrimination under Article IV

Not all discrimination against nonresidents is forbidden. Examples of discrimination usually upheld include:

• Charging higher tuition at state universities for nonresidents.
• Charging higher fees for nonresident hunting or fishing licenses where the activity is recreational, not livelihood-related.

These do not implicate fundamental rights under Article IV.

The Fourteenth Amendment Privileges or Immunities Clause (Exam Trap)

The Privileges or Immunities Clause of the Fourteenth Amendment is a separate provision that protects certain rights of national citizenship (such as the right to travel and to petition Congress) against state interference. It is rarely a correct answer on the MBE, so answer choices invoking “Privileges or Immunities of the Fourteenth Amendment” are almost always distractors in questions about economic discrimination between states. For most such questions, the correct analysis is under:

• Article IV P&I,
• The Dormant Commerce Clause, or
• Equal Protection.

Intergovernmental Immunities

Federalism also incorporates intergovernmental immunities—limits on how far each level of government may go in regulating or taxing the other.

Federal Immunity from State Regulation and Taxation

• The federal government and its agencies are generally immune from direct state regulation or taxation that would interfere with federal functions or discriminate against the federal government.
• A state may not impose taxes directly on the United States or its agencies (for example, a property tax on a federal courthouse) or subject them to licensing schemes that would give the state veto power over federal operations.
• However, states may impose nondiscriminatory, indirect taxes on private parties who deal with the federal government (for example, state income tax on federal employees, or sales tax on contractors supplying goods to federal agencies).

States also may not shield their officers from federal liability. For example, a state cannot immunize its officials from suits under 42 U.S.C. § 1983 for violations of federal constitutional rights.

State Exposure to Federal Regulation

States are generally not immune from direct, valid federal regulation. Congress may:

• Subject state and local entities to federal labor, environmental, or civil rights statutes.
• Regulate state activities affecting interstate commerce.

The principal limitation is the anti-commandeering principle (derived from the Tenth Amendment):

• Congress cannot commandeer state legislative or executive officers by requiring them to enact or administer federal regulatory programs. It may regulate private conduct directly, and it may encourage states through conditional spending, but it cannot simply order state legislatures to legislate or state executives to enforce federal law.

Worked Example 1.9

A state imposes a property tax on all buildings within its borders, including a federal courthouse and federal office building. It also imposes an income tax on all residents, including federal employees. Are these taxes constitutional?

Answer:
The property tax on the federal buildings is unconstitutional. A state cannot directly tax federal property or instrumentalities because that would interfere with federal functions and violate intergovernmental immunity under the Supremacy Clause. However, the state income tax imposed on federal employees is valid as a nondiscriminatory, indirect tax on private individuals rather than on the federal government itself.

Worked Example 1.10

Congress enacts a statute requiring state environmental agencies to inspect all factories within their borders for compliance with federal emission standards and to bring enforcement actions against violators. A state challenges the statute as unconstitutional. What result?

Answer:
The state is likely correct. Although Congress can directly regulate factories under its commerce power, it may not commandeer state officials to administer or enforce federal regulatory programs. Forcing state agencies to carry out federal inspections and enforcement actions violates the anti-commandeering principle. Congress must either enforce the standards through federal agencies or induce state cooperation through incentives (such as conditional grants), not coercion.

Key Point Checklist

This article has covered the following key knowledge points:

• The Supremacy Clause makes valid federal law supreme over conflicting state law.
• Federal preemption may be express or implied; implied preemption includes conflict (impossibility or obstacle) and field preemption.
• There is a strong presumption against preemption in areas of traditional state regulation such as health, safety, and land use.
• The Dormant Commerce Clause limits state regulation and taxation of interstate commerce when Congress has not authorized the state conduct.
• Discriminatory state laws that favor in-state over out-of-state economic interests are subject to strict scrutiny and are almost always invalid under the Dormant Commerce Clause.
• Nondiscriminatory state laws are evaluated under a balancing test and are invalid only when the burden on interstate commerce clearly exceeds the local benefits.
• States may not regulate commerce occurring wholly outside their borders (no extraterritorial regulation).
• State taxes on interstate commerce must satisfy substantial nexus, fair apportionment, nondiscrimination, and fair relation to state-provided services.
• Exceptions to Dormant Commerce Clause constraints include congressional authorization, the market participant exception, and state subsidies for residents.
• The Article IV Privileges and Immunities Clause protects U.S. citizens against state discrimination regarding fundamental rights and important economic activities, especially the pursuit of a livelihood.
• Article IV Privileges and Immunities has no market participant exception and does not protect corporations or aliens.
• Intergovernmental immunities prevent states from directly taxing or regulating the federal government, while states are generally subject to valid, noncommandeering federal regulation.

Key Terms and Concepts

• Supremacy Clause
• Preemption
• Express Preemption
• Conflict Preemption
• Field Preemption
• Dormant Commerce Clause
• Undue Burden on Interstate Commerce
• Extraterritorial Regulation
• State Taxation of Interstate Commerce
• Market Participant Exception
• Privileges and Immunities Clause (Article IV)
• Intergovernmental Immunity