Possible Violations of the United States Code by West Virginia

Does West Virginia actively discriminate against former federal government officers through its tax exemption policies? James Dawson, a retired state marshal, believes so. While filing his taxes, Dawson learned that the West Virginia Tax Commissioner grants a tax exemption to retired state officials, but not to retired federal agents: violating 4 U.S. Code Section 111 (4 U.S.C. § 111), which allows for such exemptions as long as “the taxation does not discriminate against the officer or employee because of the source of the pay or compensation.”[1] This means that a state may not tax employees differently based on which governmental entity pays their salary. By refusing to grant federal marshals’ exemption from taxed retirement benefits, the Tax Commissioner unlawfully discriminates against former federal officers on the basis of their source of pay. Seeing as the West Virginia Court of Tax Appeals, the Circuit Court of Mercer County, and the West Virginia Supreme Court of Appeals could not agree on how the conflict should be settled, the United States Supreme Court decided to hear Dawson v. Steager this term. Thus, the Court will decide if West Virginia violated the doctrine of intergovernmental tax immunity (4 U.S.C. § 111).

When attempting to file amended tax returns, James Dawson found himself at odds with Dale W. Steager, the West Virginia Tax Commissioner. Dawson, who had recently retired from his position as U.S. Marshal for the Southern District of West Virginia, did not agree with his Federal Employee Retirement System (FERS) income being taxed while his state counterparts’ incomes were exempted.[2] This “favoritism” toward state agents, as outlined in West Virginia Code § 12(c)(6), seemed to be unlawful according to petitioner Dawson. Under this code, West Virginia police, firefighters, and sheriffs receive reduced federal gross incomes, resulting in a lower tax to pay which suggests that 4 U.S.C. § 111 has been violated because federal agents are denied this exemption.[3] Steager, a lawyer himself, disagreed with Dawson’s interpretation of 4 U.S. Code § 111 and West Virginia Code § 12(c)(6), reasoning that West Virginia Code § 12(c)(6) does not favor state officers, but simply grants exemptions toward a small number of former state and local agents.[4] This statement seems puzzling, as granting benefits to one group and not another on the basis of their source of payment necessarily distinguishes between the two groups. Steager argued that only about two percent of former state officers receive this tax exemption; thus, Dawson had exaggerated the extent of any “favoritism.” Still, Dawson believed he was unjustly being denied a tax exemption. The case was eventually heard by the Office of Tax Appeals, a court-like tribunal, which sided with Steager.

Dawson appealed his case to the Circuit Court of Mercer County, which reversed the original decision by citing the remarkably similar Brown v. Mierke.[5] In that case, Brown, a former Army soldier, claimed that Mierke, the Tax Commissioner of West Virginia at the time, discriminated against former members of the armed forces by refusing them a similar tax exemption, thus violating 4 U.S.C. § 111.[6] Brown then argued that this refusal to exempt retired members of the armed forces represented discrimination on the basis of the source of income. In comparison to Dawson’s case, the main difference is that members of the armed forces do not parallel state counterparts.[7] The court also referenced Davis v. Michigan Department of Treasury, in which the United States Supreme Court found that Michigan state law granting tax exemptions for state employees but not for federal employees was not compatible with 4 U.S.C. § 111. The court justified its ruling by arguing that there are no major differences between state and federal officers, so the two classes cannot lawfully be taxed differently.[8]

Steager then appealed this decision to the West Virginia Supreme Court of Appeals. Here, the Supreme Court of Appeals found that “The Dawsons… received more favorable tax treatment than non-government retirees,” and even a more favorable tax treatment than some state government retirees to prove that no discrimination on the basis of federal, state, or local employee status exists.[9] This fact, the court claimed, showed that 4 U.S.C. § 111 had not been violated by West Virginia Code § 12(c)(6), resulting in the reversal of the county’s Circuit Court’s verdict.[10]

With this case to soon be heard before the United States Supreme Court, many wonder what effect, if any, a verdict in favor of Dawson might prompt. Aside from the modification of West Virginia Code § 12(c)(6), it is likely that other states will review their tax exemption policies to ensure that they abide by the United States Code. Certainly, as exemplified under Davis, the position of the U.S. Marshal does not dramatically differ from its state counterparts, meaning that differences in tax exemptions cannot be justified by that logic. Moreover, Steager’s claim that West Virginia Code § 12(c)(6) is only meant to benefit a small amount of state retirees should be irrelevant to this case because whether the tax exemption aids many or just a few, it is still a benefit denied to federal retirees. Therefore, there is extensive basis to believe that West Virginia has blatantly disregarded the United States Code in refusing Dawson a tax exemption. If the Court sides with Steager, however, states will be permitted to pick and choose which aspects of federal tax law they wish to follow, and which they will disregard. This decision would ultimately lead to the Court’s permission for states to violate 4 U.S.C. § 111 without repercussion. If this is the decision the Court makes, other states will surely follow West Virginia’s lead to ensure a higher gross tax collection. In doing so, the legitimacy of this section of U.S. Code will weaken significantly. Due to the clear discrimination against former federal officers as well as the negative implications of a decision favoring Steager, the Supreme Court must side with Dawson.

[1] “4 U.S. Code § 111 - Same; Taxation Affecting Federal Employees; Income Tax.” LII / Legal Information Institute, Legal Information Institute, www.law.cornell.edu/uscode/text/4/111.

[2] “Steager v. Dawson | W. Va. | Judgment | Law | CaseMine.” SHERLEY v. SEBELIUS| D.D.C. | Law | CaseMine, www.casemine.com/judgement/us/5965efdaadd7b0204c52aebf.

[3] “WEST VIRGINIA CODE.” West Virginia Code,


[4] Supra.

[5] Idem.

[6] “Opinion, Case No.21923 Dallas C. Brown, Jr., Et Al. v. Alan L. Mierke.” Juvenile Drug Court West Virginia Judiciary, www.courtswv.gov/supreme-court/docs/spring1994/21923.htm.

[7] Wall, Jeffrey B., et al. James Dawson and Elaine Dawson, Petitioners v. Dale W. Steager, West Virginia State Tax Commissioner on Petition for a Writ of Certiorari to the Supreme Court of Appeals of West Virginia. U.S. Department of Justice, www.justice.gov/sites/default/files/briefs/2018/05/16/17-419_dawson_ac_pet.pdf.

[8] “Davis v. Michigan Department of the Treasury.” Oyez, www.oyez.org/cases/1988/87-1020.

[9] Morrisey, Patrick., et al. James Dawson and Elaine Dawson, Petitioners, v. Dale W. Steager, as State Tax Commissioner of West Virginia, Respondent. On Petition For a Writ of Certiorari to the Supreme Court of Appeals of West Virginia Brief in Opposition. U.S. Supreme Court, www.justice.gov/sites/default/files/briefs/2018/05/16/17-419_dawson_ac_pet.pdf.

[10] Idem.