The “bottom line” in the Bloomberg piece, California Decides to Go It Alone on Taxes, is “A California decision to weaken an interstate tax agreement may put similar compacts between states at risk.” The article, appearing in the February 1-February 7, 2016 edition of the print magazine, is reporting the December 31, 2015 decision of the California Supreme Court weakening “one of the most important interstate compacts,” the Multistate Tax Compact.
As indicated by the regular “bottom line” feature of this publication, the implication is that other interstate compacts could face a similar fate. However, Bloomberg spoke to our own industry colleague, Karen Schutter about the IIPRC and says: “The Interstate Insurance Product Regulation Compact, for instance, is clearly written as a binding legal contract, so the California Supreme Court’s decision is irrelevant to it, argues Karen Schutter, Executive Director of the Washington-based commission that oversees the insurance accord.”
We agree and believe the IIPRC is solid and binding. However, the article ended with a bit of possible disagreement: “For now, the only compacts that everyone agrees are safe from challenge are the ones to which Congress has explicitly given consent—for example, those covering nuclear waste disposal, oil and gas, and water rights. Congressionally approved compacts have the force of federal law, which trumps state law. One solution, then, to the problem of weak interstate agreements like MTC would seem to be for states to ask Congress to put its stamp of approval on all interstate compacts. Falling back on Washington might injure their pride, but it would keep legal uncertainty from gumming up the works.” Of course, Ms. Schutter’s point is that the IIPRC is not weak like the MTC. It is legally and operationally strong and needs no additional action to be safe from challenge.