CWM Chemical Services, L.L.C. v. Roth, 6 N.Y.3d 418 (2006)
When a statute’s tax provision is deemed unconstitutionally discriminatory, the court must determine whether the legislature would have preferred the statute to be enforced with the invalid part removed, or rejected altogether, considering the legislative intent and policy objectives.
Summary
CWM Chemical Services challenged New York’s disposal tax on out-of-state hazardous waste as discriminatory under the Commerce Clause because it exempted in-state waste. The Court of Appeals held the disposal tax unconstitutional and addressed the remedy. Rather than extending the exemption to out-of-state waste, or eliminating the exemption for in-state waste (which would expand the tax), the Court severed the disposal tax entirely. The Court reasoned that this approach best reflected legislative intent, balancing revenue generation with encouraging environmentally sound practices and avoiding double taxation of in-state businesses, given that the tax played a relatively minor role in the Superfund’s overall funding.
Facts
CWM Chemical Services operated a hazardous waste treatment and disposal facility in New York. New York imposed a disposal tax on hazardous waste, but exempted waste generated in-state. CWM ceased paying the disposal tax on certain out-of-state waste, arguing it violated the Commerce Clause by discriminating against interstate commerce. CWM sought a declaration that the disposal tax was unconstitutional and requested a refund of past taxes paid.
Procedural History
CWM sued the NY Department of Taxation and Finance (DTF) and the Department of Environmental Conservation (DEC). The Supreme Court granted partial summary judgment to CWM, declaring the tax facially discriminatory and ordering refunds, effectively extending the in-state exemptions to out-of-state waste. The Appellate Division reversed, eliminating the in-state exemptions instead, thereby expanding the tax. CWM appealed to the Court of Appeals.
Issue(s)
Whether, given that the disposal tax on out-of-state hazardous waste was unconstitutional, the proper remedy was to: (1) extend the exemptions for in-state cleanup and process wastes to out-of-state cleanup and process wastes; (2) eliminate the exemptions for in-state cleanup and process wastes; or (3) sever the disposal tax entirely.
Holding
No, the Court of Appeals held that the proper remedy was to sever the disposal tax entirely because this approach best furthers the multiple legislative purposes of the special assessments. It preserves the generator tax, does not significantly curtail revenues, and avoids double taxation and imposing new taxes on remediation waste.
Court’s Reasoning
The Court applied the principle of severability, articulated in People ex rel. Alpha Portland Cement Co. v. Knapp, 230 NY 48, 60 (1920), which asks whether the legislature, if partial invalidity had been foreseen, would have wished the statute to be enforced with the invalid part removed, or rejected altogether. This requires examining the statute and its history to determine legislative intent, then evaluating available courses of action. The Court considered that the legislature had multiple objectives: raising revenue, encouraging sound waste management practices, incentivizing generator-financed cleanups and ensuring in-state businesses weren’t taxed twice. Waste-end taxes now play a diminished role in financing State Superfund. Severing the disposal tax best furthers these objectives. Eliminating the in-state exemptions would thwart the legislative command against double-taxing in-state process waste and would impose a new tax on remediation waste. As Judge Cardozo stated, “Severanee does not depend upon the separation of the good from the bad by paragraphs or sentences in the text of the enactment. The principle of division is not a principle of form. It is a principle of function.” People ex rel. Alpha Portland Cement Co. v Knapp, 230 NY 48, 60 (1920).