A few weeks ago, the Fifth Circuit held in Morris v. Department of Justice that the 157-year-old ban on distilling spirits at home constituted a violation of the Constitution’s Taxation and Necessary and Proper Clauses. (For previous coverage on TaxProf Blog, see here.)

Now it is the Sixth Circuit’s turn, and in the case Ream v. Department of Treasury, the Sixth Circuit held “that the ban is a necessary and proper means of collecting the federal excise tax on distilled spirits.” From the opinion:

The home-distilling ban is among the “ingenious and complicated provisions” of the statutory regime that Congress enacted, in 1868, to “secure the revenue” (as the phrase went) from federal excise taxes on distilled spirits. United States v. Ulrici, 111 U.S. 38, 40 (1884). This regime remains largely intact today. In its current form, the excise tax attaches the moment a distilled spirit comes into “existence as such,” generally “at the rate of $13.50 on each proof gallon.” 26 U.S.C. § 5001(a)(1), (b); see id. § 5004(a)(1). A “proof gallon” is one gallon of 100 proof liquor; as the proof increases or decreases, so does the tax. See id. §§ 5002(a)(10)-(11), 5006(a)(1); 27 C.F.R. § 30.1.

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We begin and end with the question whether the home-distilling ban is a necessary and proper means of collecting the federal excise tax on spirits. The Taxing Clause vests Congress with the “Power to lay and collect Taxes, Duties, Imposts and Excises.” U.S. Const. art. I, § 8, cl. 1. “Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more.” NFIB v. Sebelius, 567 U.S. 519, 574 (2012). The home-distilling ban exceeds that boundary: rather than require payment to the Federal Treasury, it proscribes conduct. The taxing power itself therefore cannot support the ban; so we consider whether the Necessary and Proper Clause does.

That Clause vests Congress with power “[t]o make all Laws which shall be necessary and

proper for carrying into Execution the foregoing Powers, and all other Powers vested by this

Constitution in the Government of the United States, or in any Department or Officer thereof.”

U.S. Const. art. I, § 8, cl. 18. As to the Clause’s scope, Chief Justice Marshall’s formulation has long been the touchstone: “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.” McCulloch v. Maryland, 17 U.S. 316, 421 (1819). Whether a law is “necessary,” on the one hand, and “proper,” on the other, are separate questions; but Marshall’s formulation covers both.

To be necessary, under McCulloch, a means must be “plainly adapted” to a legitimate constitutional end. Id. The Court later glossed that formulation in a case concerning “securing the payment of” taxes specifically—holding that, “in the rules and regulations for the manufacture and handling of goods which are subjected to an internal revenue tax, Congress may prescribe any rule or regulation which is not in itself unreasonable.” Felsenheld v. United States, 186 U.S. 126, 132 (1902). 

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Thus—in the sense of both “plainly adapted” and “reasonable”—the home-distilling ban was “necessary” to the collection of taxes on revenue at the time it was enacted; and we have no reason to conclude otherwise now.

Now that there is a clear circuit split, will the Supreme Court now step in to resolve the important question of whether individuals are permitted to distill spirits at home?