Kansler v. Mississippi Department of RevenueAnnotate this Case
Michael and Vickie Kansler moved to Mississippi from New York for Michael’s job and, over the following years, exercised stock options stemming from that employment. The Kanslers took the position that the stock options’ income was taxable only in Mississippi, which reduced their tax burden significantly. New York saw things differently and found a substantial portion of the income taxable by New York. This liability to another state would have entitled the Kanslers to a credit on their Mississippi taxes worth more than $250,000. However, by the time the New York audit was finished, the Mississippi statute of limitations barred the Kanslers from amending their Mississippi returns. They argued the Mississippi statute of limitations unconstitutionally discriminated against interstate commerce. The Mississippi Supreme Court determined Mississippi’s treatment of the statute of limitations for amending tax returns was "unremarkable" and appeared to be shared with many other states. The Kanslers’ dormant Commerce Clause argument, on the other hand, was novel, and depended on an unprecedented and erroneous attempt to apply the “internal consistency test,” intended to evaluate the apportionment of taxes, to the collateral effects of a statute of limitations. The Court held that the challenge was instead governed by the discrimination/Pike v. Bruce Church, Inc. 397 U.S. 137 (1070) balancing test employed by the United States Supreme Court in Bendix Autolite Corp. v. Midwesco Enterprises Inc., 486 U.S. 888 (1988), the only United States Supreme Court case to scrutinize a statute of limitations under the dormant Commerce Clause. The Court affirmed the Mississippi Department of Revenue’s decision to refuse the refund request.