CSX v. Ga. State Bd. of Equalization

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1 Briefs and Documents
2 Pre-Argument Articles
- 2.1 Grant write-up
- 2.2 Argument Preview
3 Oral Argument Recap
4 Opinion Analysis
5 Links and further information
- 5.1 From the Blogosphere
  - 5.1.1 SCOTUSblog

[edit] Briefs and Documents

Docket: 06-1287

Oral Argument: Transcript

Judgment: REVERSED in an opinion by Chief Justice Roberts.

Merits briefs

Brief for Petitioner CSX Transportation, Inc.
Brief for Respondent Georgia State Board of Equalization; Bart L. Graham, Georgia Commissioner of Revenue; Russell W. Hinton, Georgia State Auditor and Gena L. Abraham, Director of Georgia State Properties
Reply Brief for Petitioner CSX Transportation, Inc.

Amicus briefs

Certiorari Filings

[edit] Pre-Argument Articles

[edit] Grant write-up

This post was originally written for SCOTUSblog by Kevin Russell.

Today the Supreme Court agreed to decide whether railroads can challenge states’ methods of valuing their assets for tax purposes under a federal statute that prohibits states from discriminating against railroads in imposing property taxes on their in-state operations. The case is CSX Transportation, Inc. v. State Board of Equalization, No. 06-1287.

The case involves the interpretation of a provision of the Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. 11501. That statute bars states from “[a]ssess[ing] rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property.”

In order to apply this statute, one needs to know the “true market value” of a railroad. This would be relatively easy if railroads were like automobiles – you could look up the railroad’s true market value in the Blue Book or by surveying the prices paid for them in a competitive market. But railroads are not fungible and are not sold very often, so figuring out their value – whether in order to enforce this statute or to impose a property tax – requires making some guesses and assumptions about what the market would pay for the property if it were, in fact, for sale.

This case began when the State of Georgia changed its method of valuing petitioner CSX’s railroad operations from one method to another. The new method estimated the value of the railroad’s property to be significantly higher than it had been under the old method. As a result, CSX’s property tax went up by almost $2 million.

CSX brought suit under the federal statute. The district court, later affirmed by the court of appeals, decided that it did not have authority to second-guess the State’s choice of valuation methods. All the court could do was to decide whether the State has misapplied the valuation method it had chosen and whether the ratio between the assessed value and true market value (as calculated under the state’s chosen valuation method) was higher for the railroad than it was for other commercial property in the state.

The Supreme Court will now decide whether that view of the statute was correct. The case will be briefed over the summer and argued in the fall.

[edit] Argument Preview

The Tax Injunction Act, 28 U.S.C. 1341, prohibits federal courts from interfering with state tax issues. However, in response to economic problems in the railroad industry, Congress in 1976 enacted the Railroad Revitalization and Regulatory Reform Act (the 4-R Act), which allows railroads to challenge a state’s method for determining the market value of a railroad. Railroads can obtain relief under the 4-R Act only if the ratio of assessed value to true market value is at least five percent higher than a similar ratio for other commercial property.

At issue in the case is Georgia’s valuation for property owned in the state by petitioner CSX. In the state’s view, the railroad’s property should be taxed at a value of $7.8 billion; by contrast, an appraiser hired by the railroad – using a different methodology – assessed the property at a maximum of $6 billion.

CSX challenged the valuation in federal district court in Georgia. The district court held that Georgia had not discriminated against CSX and that “the 4-R Act does not generally allow a railroad to challenge the state’s chosen methodology” as long as the state’s methods “are rational and were not chosen for the purpose of discriminating against” the railroads.

On appeal, a divided panel of the Eleventh Circuit affirmed. The majority agreed with the district court that “railroads may not challenge state valuation methodologies.” Judge Fay dissented from that holding, concluding that “a railroad should be allowed to challenge the method used in an attempt to prove that the result of such a method was not the true market value of its property.”

CSX filed a petition for certiorari, which the Supreme Court granted on May 29, 2007.

In its brief on the merits, petitioner CSX first argues that the Eleventh Circuit’s holding is inconsistent with the very purpose of the 4-R Act – viz., “to remedy tax discrimination by state and local authorities.” It is also inconsistent with the statute itself, which specifically outlines “a precise formula for measuring discrimination” based on true market value – a calculation that courts are frequently called upon to make in other scenarios.

Georgia counters that, pursuant to “well-established principles of federalism,” the 4-R Act should be construed narrowly and should not be “extended ‘beyond its evident scope.’” Turning to the text of the statute, the state emphasizes that nothing clearly indicates that Congress intended to “allow a railroad to challenge the true market value of its assets determined under a correctly applied, reasonable valuation method chosen by the state.” Moreover, the state posits, a ruling in the railroad’s favor would turn each dispute over valuation into a “battle of expert witnesses.” The state decries such a solution as “worse than the supposed problem,” as it “would turn district courts into federal boards of equalization.”

The United States filed an amicus brief in support of CSX. It argues that “[t]here is nothing sacrosanct about a State’s use of a particular methodology in determining a railroad’s ‘true market value.’” Furthermore, the United States notes, there is “no clear line of demarcation between the State’s choice of a ‘method’ and its ‘application.’” It emphasizes that the different “methods” relied on by the parties’ dueling experts are essentially just different iterations of the same method, “but with slightly different assumptions about petitioner’s future income.” Finally, the United States echoes CSX’s argument that, in other circumstances, federal courts do determine the true market value of a property and thus are perfectly capable of doing so in cases such as this one.