Retroactive Tax Legislation Under Fire: ABA SALT Committee Explores Constitutional Limits

At the May 2025 meeting of the ABA Section of Taxation, the SALT Committee’s Retroactive Legislation Task Force released its latest update on a legal issue that continues to vex taxpayers and legislators alike: retroactive tax laws.

Retroactive legislation—particularly in the tax space—raises serious concerns over due process, taxpayer fairness, and the constitutional separation of powers. The Task Force’s report sheds light on recent litigation, including a high-profile case in Massachusetts, and the broader doctrinal debates around the reach of retroactive fiscal policymaking.

⚖️ The Constitutional Landscape of Retroactive Taxation

State tax laws are frequently amended to close loopholes or clarify ambiguity. But when these changes apply retroactively—sometimes for several years—they can run afoul of constitutional protections. At the federal level, retroactivity is generally analyzed under due process principles. At the state level, however, there are added constraints, including state constitutional limitations and rules governing legislative procedure.

The Supreme Court’s decisions in United States v. Carlton (1994) and other key cases allow for some retroactive effect, but only if it is rationally related to a legitimate legislative purpose and the period of retroactivity is not excessive. Many state courts have adopted similar tests, though interpretations vary widely.

🏛️ Spotlight: Massachusetts and the Veto Override Controversy

A central focus of the Task Force’s May 2025 report is the case of 480 McClellan v. Board of Assessors of Boston. This case involves a Massachusetts law designed to apply retroactively to preserve certain tax assessments that were in doubt due to prior court decisions.

Notably, the law was passed by the Massachusetts legislature and then vetoed by the governor. However, the legislature overrode the veto—but it did so during a legislative session after the statutory deadline for override actions had passed. The procedural misstep formed the basis of the constitutional challenge.

In short, the taxpayer argued that:

• The law’s retroactive application violated due process
• The veto override was procedurally invalid under the Massachusetts Constitution

The Task Force highlighted this case as a perfect example of how substantive retroactivity issues and procedural irregularities can combine to create constitutional crises in tax law.

📜 Broader Doctrinal Themes and Litigation Strategy

Across jurisdictions, taxpayers are increasingly arguing that retroactive tax statutes lack a clear, legitimate governmental purpose—or that the stated purpose is merely pretextual. Courts have scrutinized whether retroactive laws were designed to:

• Undo unfavorable court decisions
• Fill unexpected budget gaps
• Apply new interpretations of tax rules without legislative process

The report emphasized the importance of litigating both procedural irregularities (like improper veto overrides) and substantive due process violations in challenging retroactive laws.

📅 What Comes Next?

The Task Force plans to continue tracking retroactive tax laws, with a special focus on:

• Trends in retroactive enforcement of apportionment rules
• State-level overrides of court decisions through legislation
• Ongoing due process litigation in state supreme courts

Their findings will shape future recommendations to the ABA SALT Committee and may lead to proposed model language or commentary on retroactive tax legislation.

🧭 Final Thoughts: A Line in the Sand?

The Retroactive Legislation Task Force’s report illustrates that tax retroactivity is no longer a niche issue. With states facing fiscal pressures and increasingly aggressive legislative responses to taxpayer victories, retroactive laws are becoming more common—and more legally controversial.

Taxpayers, practitioners, and legislators alike should keep a close eye on how courts treat these challenges. Procedural missteps, like in Massachusetts, may offer just as much ammunition for taxpayers as the substantive constitutional questions.

Bottom line: retroactivity may be a tool, but it comes with constitutional strings attached.