Sean Carey


municipal bonds, taxation


This Note addresses the constitutionality of the selective taxation of conduit bonds, a subset of municipal bonds that finance private enterprise, in the aftermath of the U.S. Supreme Court’s decision in Department of Revenue v. Davis. In Davis, the Court determined that states could tax interest earned on out-of-state municipal bonds while exempting interest earned on its own bonds without violating the Commerce Clause of the Constitution. When issuing this ruling, the Court drew a distinction between municipal bonds issued on behalf of the government and municipal bonds issued on behalf of private industry. The question of whether or not selective taxation was constitutional as applied to municipal bonds issued on behalf of private industry was explicitly left for another day. This Note begins with a discussion of municipal bonds and the dormant Commerce Clause. Next, this Note reviews the arguments for and against subjecting conduit bonds to the selective tax system. Finally, this Note recommends the adoption of a sui generis assessment to identify bonds whose central purpose is economic protectionism so that they may be excluded from the selective tax system.

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