state taxation

CSX Transportation, Inc. v. Georgia State Board of Equalization

Issues

Whether 49 U.S.C. § 11501(b)(1), the federal statute that prohibits states from overtaxing railroads as compared with other commercial and industrial property within the same assessment jurisdiction, permits a railroad to challenge the method by which a  states  assesses the market value of its rail property, when that method is not irrational or intentionally discriminatory.

 

After finding that states consistently overtax railroads when compared with similar commercial and industrial property, Congress passed the Railroad Revitalization and Regulatory Reform Act of 1976 ("the 4-R Act" or "the Act"), 49 U.S.C. § 11501. The 4-R Act permits railroads to challenge a state’s tax assessment as discriminatory in federal court. CSX Transportation, Inc. challenged Georgia’s 2002 tax assessment, claiming it violated the anti-discrimination provision of the Act. The Northern District of Georgia ruled that while the Act permitted CSX Transportation, Inc. to challenge the assessment, it did not permit the railroad to challenge the methods the state used unless it could show that they were irrational or intentionally discriminatory. Agreeing with one other Circuit and affirming the District Court’s decision, the Eleventh Circuit is the fourth Court of Appeals to address the issue. In this case, the U.S. Supreme Court will determine whether a railroad may challenge a state’s methods in assessing its property value under the 4-R Act.

 

    Questions as Framed for the Court by the Parties

    Whether, under the federal statute prohibiting state tax discrimination against railroads, 49 U.S.C. § 11501(b)(1), a federal district court determining the “true market value” of railroad property must accept the valuation method chosen by the State.

    The following facts are generally derived from the Circuit Court decision in this case. CSX Transportation v. State Bd. of Equalization, 472 F.3d 1281 (11th Cir. 2006).

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    DaimlerChrysler Corp. v. Cuno; Wilkins v. Cuno

    Issues

    Does either the investment tax credit or the property tax exemption at issue violate the Commerce Clause of the United States Constitution or the Equal Protection Clauses of the United States or Ohio State Constitutions by discriminating in favor of businesses locating new investments in Ohio and against incumbent businesses or those locating elsewhere?

    Do the Respondents here (and plaintiffs below) have standing as the state and municipal taxpayers to challenge the tax incentive programs at issue?

     

    The Ohio State investment tax credit (Ohio Revised Code ? 5733.33) encourages development in economically depressed areas by providing tax breaks to companies or individuals that choose to locate in such areas and to install new manufacturing machinery and equipment. The personal property tax incentive, under Ohio Rev. Code Ann. ?? 5709.62 and 5709.631, permits municipalities to grant property tax exemptions to corporations that develop in economically depressed areas and meet certain employment and investment levels. Together, these two statutes create incentives for corporate development in Ohio in otherwise unfavorable locations. Respondents, state and non-state taxpayers and one Ohio business forced to relocate upon the construction of a DaimlerChrysler plant, argue that this tax-incentive scheme is unconstitutional under the dormant Commerce Clause, which prohibits state taxes from discriminating against interstate commerce. Petitioners assert that (1) the Respondents lack standing to bring the suit, and (2) the dormant Commerce Clause prevents only state taxes which discourage companies from doing businesses in other states and not incentives that encourage companies to locate within the state.

    Questions as Framed for the Court by the Parties

    DaimlerChrysler Corp. v. Cuno (04-1704):

    Whether Ohio's investment tax credit, Ohio Revised Code ? 5733.33, which seeks to encourage economic development by providing a credit to taxpayers who install new manufacturing machinery and equipment in the State, violates the Commerce Clause of the United States Constitution.

    Whether Respondents have standing to challenge Ohio's investment tax credit, Ohio Rev. Code Ann. ? 5733.33.

    Wilkins v. Cuno (04-1724):

    Does the dormant Commerce Clause allow a State to attempt to attract new business investment in the State by offering credits against the State's general corporate franchise or income tax, where the amount of the credit is based on the amount of a business's new investment in the State?

    Whether Respondents have standing to challenge Ohio's investment tax credit, Ohio Rev. Code Ann. ? 5733.33.

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    Factual Background

    DaimlerChrysler contracted with the City of Toledo, Ohio in 1998, to construct a new vehicle-assembly plant in exchange for tax incentives. See Cuno v. DaimlerChrysler, Inc., 386 F.3d 738, 741. DaimlerChrysler forecasted its total investment in the project to be about $1.2 billion, which would result in tax incentives totaling an estimated $280 mil

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