OPINION OF THE COURT
CSX TRANSP., INC. V. GEORGIA STATE BD. OFEQUALIZATION
552 U. S. ____ (2007)
SUPREME COURT OF THE UNITED STATES
NO. 06-1287
CSX TRANSPORTATION, INC., PETITIONER
v.
GEORGIA STATE BOARD OF EQUALIZATION et al.
on writ of certiorari to the united states court of
appeals for the eleventh circuit
[December 4, 2007]
Chief Justice Roberts delivered
the opinion of the Court.
The Railroad Revitalization and
Regulatory Reform Act prohibits States from discriminating against
railroads by taxing railroad property more heavily than other
commercial property in the State. Two decades ago, we held that
this statute permits an aggrieved railroad to challenge a State’s
valuation of its property for tax purposes.
Burlington Northern
R. Co. v.
Oklahoma Tax Comm’n, 481 U. S. 454, 462
(1987). Because the railroad in that case challenged only the
State’s
application of its valuation methods, we expressly
reserved the question whether a railroad may challenge the State’s
methods themselves. We answer that question today, and hold that
railroads may challenge state methods for determining the value of
railroad property, as well as how those methods are applied. The
statute provides for nothing less.
I
Congress enacted the Railroad
Revitalization and Regulatory Reform Act in 1976. 90 Stat.
31.[
Footnote 1] Called the “4–R
Act” for brevity, the law aimed to halt the economic decline of the
rail industry by, among other means, barring “discriminatory state
taxation of railroad property.”
Burlington Northern,
supra, at 457; see also
Department of Revenue of
Ore. v.
ACF Industries, Inc.,
510 U. S. 332, 336 (1994). The 4–R Act
prohibits four separate forms of discriminatory state taxation of
railroads.[
Footnote 2] Only the
first is at issue here: States, the Act provides, may not “[a]ssess
rail transportation property at a value that has a higher ratio to
the [property’s] true market value . . . than the ratio” between
the assessed and true market values of other commercial and
industrial property in the same taxing jurisdiction. 49 U.
S. C. §11501(b)(1). If the railroad ratio exceeds the ratio
for other property by at least five percent, the district court may
enjoin the tax. §11501(c).[
Footnote
3]
Petitioner CSX Transportation,
Inc., is a freight rail carrier with multiple routes across the
State of Georgia. As a consequence, it is subject to Georgia’s ad
valorem tax on real property. Under Georgia law, most commercial
and industrial property is valued locally by county boards. Public
utilities such as railroads, however, are initially valued by the
State, which then certifies the proposed valuations to the county
boards for adoption or alteration. In 2001, Georgia’s State Board
of Equalization, a respondent here, put CSX’s ad valorem tax
liability at $4.6 million. A year later, the State’s appraiser used
a different combination of methodologies to determine the market
value of CSX’s in-state property.[
Footnote 4] The result was a significantly higher tax
levy. The State estimated the railroad’s 2002 market value at
approximately $7.8 billion, 472 F. 3d 1281, 1285 (CA11 2006),
a 47 percent increase over the previous year. That brought the
assessed value of CSX’s Georgia property to $514.9 million, for a
final property tax bill of $6.5 million. Brief for Petitioner
15.
CSX filed suit in the United States District
Court for the Northern District of Georgia, contending that the
State’s 2002 tax assessment violated the 4–R Act. The railroad
alleged that Georgia had grossly overestimated the market value of
its in-state property while accurately valuing other commercial and
industrial property in the State. The result, according to CSX, was
that its rail property was taxed at a ratio of assessed-to-market
value considerably more than 5 percent greater than the same ratio
for the other property in the State.
To make its case, CSX submitted the testimony
of its own expert appraiser, who relied on a combination of
valuation methods different from those used by the appraiser for
Georgia. The CSX appraiser calculated the 2002 market value of the
railroad’s property to be $6 billion, not the $7.8 billion figure
used by the State. 472 F. 3d, at 1285–1286. CSX maintained
that the state appraiser’s valuation methodologies were flawed, and
urged the District Court to accept the market value estimated by
its expert as more accurate.
The District Court refused to do so. Following
a bench trial, the court ruled Georgia had not discriminated
against CSX in violation of the 4–R Act because the State had used
widely accepted valuation methods to arrive at its estimate of true
market value. 448 F. Supp. 2d 1330, 1341 (ND Ga. 2005). In the
judgment of the District Court, the Act “does not generally allow a
railroad to challenge the state’s chosen methodology,” as long as
the State’s methods are rational and not motivated by
discriminatory intent.
Ibid.
A divided panel of the Court of Appeals for
the Eleventh Circuit affirmed. 472 F. 3d 1281 (2006). The
majority reasoned that the “text of the Act does not clearly state
that railroads may challenge valuation methodologies,” and that
such a clear statement was required in light of the intrusion on
state taxing prerogatives.
Id., at 1289. Judge Fay
dissented.
Id., at 1292. Recognizing the division on this
question among the Circuits, compare
Consolidated Rail
Corp. v.
Hyde Park, 47 F. 3d 473, 481–482 (CA2 1995)
(a railroad may challenge a State’s valuation methodology), and
Burlington Northern R. Co. v.
Department of
Revenue of Wash., 23 F. 3d 239, 240–241 (CA9 1994) (same),
with
Chesapeake Western Ry. v.
Forst, 938 F. 2d
528, 531 (CA4 1991) (a railroad may not challenge a State’s
valuation methodology), and 472 F. 3d, at 1289 (decision
below), we granted certiorari, 550 U. S. ___ (2007), and now
reverse.
II
“[T]he language of §1150[1]
plainly declares the congressional purpose.”
Burlington
Northern, 481 U. S., at 461. States may not tax railroad
property at a ratio of assessed-to-true-market value higher than
the ratio for other commercial and industrial property in the same
jurisdiction. In order to apply the Act, district courts must
calculate the true market value of in-state railroad property. A
court cannot undertake the comparison of ratios the statute
requires without that figure at hand. We said as much in
Burlington Northern: “It is clear from [the Act’s]
language that in order to compare the actual assessment ratios, it
is necessary to determine what the ‘true market values’ are.”
Ibid.
We do not see how a court can go
about determining true market value if it may not look behind the
State’s choice of valuation methods. Georgia insists there is a
clear and important distinction between valuation methodologies and
their application. As the State would have it, the statute allows
courts to question only the latter. We find no distinction between
method and application in the language of the Act, and see no
passage limiting district court factfinding in the manner the State
proposes. The total lack of textual support for Georgia’s position
is not surprising. The dichotomy the State presses would eviscerate
the statute by forcing courts to defer to the valuation estimate of
the State, when discriminatory taxation by States was the very evil
the Act aimed to ban.
Georgia’s position is untenable given the way
market value is calculated. Valuation is not a matter of
mathematics, as if the district court could prevent discriminatory
taxation simply by doublechecking the State’s assessment equations.
Rather, the calculation of true market value is an applied science,
even a craft. Most appraisers estimate market value by employing
not one methodology but a combination. These various methods
generate a range of possible market values which the appraiser uses
to derive what he considers to be an accurate estimate of market
value, based on careful scrutiny of all the data available.
Appraisal Institute, The Appraisal of Real Estate 49 (12th ed.
2001).
Georgia’s appraiser in the instant case, for
example, used three different valuation techniques—the discounted
cashflow approach, a market multiple approach, and a stock and debt
approach. He derived five values from these three methods, ranging
from $8.126 billion to $12.346 billion. After selecting a number at
the low end of the range and then subtracting another $400 million
to account for intangible property not subject to ad valorem
taxation, he settled on $7.8 billion as his final estimate of the
true market value. 472 F. 3d, at 1284–1285.
Appraisers typically employ a combination of
methods because no one approach is entirely accurate, at least in
the absence of an established market for the type of property at
issue. The individual methods yield sometimes more, sometimes less
reliable results depending on the peculiar features of the property
evaluated. As the variation in the state appraiser’s market-value
range reveals, different methods can produce substantially
different estimates. W. Kinnard, Income Property Valuation:
Principles and Techniques of Appraising Income-Producing Real
Estate 52 (1971).
Given the extent to which the chosen methods
can affect the determination of value, preventing courts from
scrutinizing state valuation methodologies would render §11501 a
largely empty command. It would force district courts to accept as
“true” the market value estimated by the State, one of the parties
to the litigation. States, in turn, would be free to employ
appraisal techniques that routinely overestimate the market worth
of railroad assets. By then levying taxes based on those
overestimates, States could implement the very discriminatory
taxation Congress sought to eradicate. On Georgia’s reading of the
statute, courts would be powerless to stop them, and the Act would
ultimately guarantee railroads nothing more than mathematically
accurate discriminatory taxation. We do not find this
interpretation compelling. Instead, we agree with Judge Fay in
dissent below: “Since the objective of any methodology is a
determination of
true market value, a railroad should be
allowed to challenge the method[s] used [by the State] in an
attempt to prove that the result … was not the
true market
value of its property.” 472 F. 3d, at 1294.
The State agrees that it may not be possible
to fix true market value with any precision. But it draws a
different conclusion from this premise. Because any number of
estimates are plausible, Georgia argues, the court is as likely to
get an accurate result by verifying the application of the State’s
methods—so long as they are broadly reasonable—as it is by
employing another method altogether. The State warns that allowing
railroads to introduce their own valuation estimates based on
different methodologies will inevitably lead to a futile clash of
experts, which courts will have no reasonable way to settle. At
least one of the Courts of Appeals shares this concern. See
Chesapeake Western, 938 F. 2d, at 532 (“There is no
absolute way to test the assertions of competing valuations . . .”
(internal quotation marks and brackets omitted)).
Congress was not similarly troubled. It
directed courts to find true market value, however elusive. It made
that value the objective benchmark for courts’ evaluation of state
taxes on railroad property. True market value may well not be a
single, precise number, but Congress obviously believed it was
susceptible to judicial inquiry and that some approximations were
better than others.
Georgia’s grim prophecies notwithstanding, the
inquiry the statute mandates is not unfamiliar to courts. Valuation
of property, though admittedly complex, is at bottom just “an issue
of fact about possible market prices,”
Suitum v.
Tahoe
Regional Planning Agency,
520 U. S. 725, 741
(1997), an issue district courts are used to addressing. Railroad
property is not frequently sold, but “determinations of market
value are routinely made in judicial proceedings without the
benefit of a market transaction.”
Id., at 742. The
District Court in this case made clear that it knew how to find
true market value: “In a more typical case, the court would look at
both [the railroad expert’s] appraisal and [the State’s] appraisal
to determine the true market value of [the railroad].” 448
F. Supp. 2d, at 1338, n. 8. It refused to do so not
because true market value is inherently elusive, but because it
believed the Act did not allow it to question the State’s
methods.
In light of the statute’s directive making
true market value a factual question to be determined by the
district court, what Georgia is really asking for is a limitation
on the types of evidence courts may consider as part of their
factual inquiry. If Congress had wanted to impose such a limit by
reserving to States the prerogative of selecting which valuation
methods may be used, it surely could have done so. Out of deference
to the States, for example, §11501(c) provides that “[t]he burden
of proof in determining . . . true market value [shall be] governed
by State law.” Congress could easily have included similar language
insulating the State’s chosen methodologies from judicial scrutiny.
It did not. Like Oklahoma’s argument in
Burlington
Northern, Georgia’s position in this case ultimately “depends
upon the addition of words to a statutory provision which is
complete as it stands.” 481 U. S.em>., at 463. We decline to
find distinctions in the statute where they do not exist,
especially where, as here, those distinctions would thwart the
law’s operation.
III
Considering the clarity of the
statute, we are tempted to leave the discussion at that. “When we
find the terms of a statue unambiguous, judicial inquiry is
complete . . . .”
Rubin v.
United States,
449 U. S. 424,
430 (1981). Georgia, however, lodges two objections to our
interpretation, each of which merits a reply. First, the State
argues that any interpretation of the Act allowing courts to
question state valuation methods ignores the background principles
of federalism against which the statute was enacted. The majority
below expressed a similar concern. “The selection of a valuation
methodology,” it ruled, “is part of th[e] fundamental power of a
state [to tax],” 472 F. 3d, at 1288, and should not be limited
absent a clear statement from Congress. We have long held that the
means States adopt to collect their taxes “should be interfered
with as little as possible.”
Dows v.
Chicago, 11
Wall. 108, 110 (1871). But we are persuaded that allowing railroads
to challenge a State’s valuation methodologies has been clearly
authorized by the terms of the 4–R Act.
As an initial matter, we question
Georgia’s contention that its selection of valuation methodologies
is an important state policy choice intimately connected to its tax
power. Georgia does not prescribe any particular methodology as a
matter of state law. Its appraisers use different methodologies in
different combinations, as they see fit. See 472 F. 3d, at
1284–1285 (explaining that the state appraiser employed multiple
methods and selected a value according to his best judgment). This
suit, in fact, is the result of an individual appraiser’s decision
to employ a different combination of assessment techniques than
that used by his immediate predecessors. The methods he selected
were his choice, not the dictate of any state statute or
regulation.
Ibid.
But even if important questions of state
policy are, as the Eleventh Circuit believed, “intertwined with the
selection of a valuation methodology,”
id., at 1288,
judicial scrutiny of those methodologies is authorized by the 4–R
Act’s clear command to find true market value. As we explained
above, the power to calculate true market value necessarily
includes the power to look behind a State’s valuation methods. That
the statute should vest this authority in the Nation’s courts is
hardly surprising, given Congress’s conclusion that the States were
assessing railroad property unfairly.
Our decision in
Department of Revenue of
Ore. v.
ACF Industries, Inc.,
510 U. S. 332 (1994), is not to the
contrary. That case concerned a different provision of the 4–R
Act—namely, the command in §11501(b)(4) preventing a State from
“[i]mpos[ing] another tax that discriminates against a rail carrier
providing transportation” in the taxing jurisdiction. This bar on
facially discriminatory taxes, we held, did not prevent a State
from exempting certain nonrailroad property from otherwise
generally applicable ad valorem taxes.
ACF Industries, 510
U. S., at 343. At the time the 4–R Act was adopted, a majority of
States exempted one or more classes of business property from ad
valorem taxation, “including business inventories, raw materials
used in textile manufacturing, . . . and mechanics tools,” to name
just a few.
Id., at 344. The States had provided such
property tax exemptions for years. In the face of this widespread
and historical practice, we declined to read the 4–R Act to
prohibit a type of tax exemption the text did not expressly
mention.
Ibid.
By contrast, we pointedly noted that the Act
“prohibit[s] discriminatory tax rates and assessment ratios in no
uncertain terms . . . and set[s] forth precise standards for
judicial scrutiny of challenged rate and assessment practices.”
Id., at 343. Georgia’s claim that court review of state
valuation methodologies is not authorized by a clear statement in
the Act ignores the statute’s explicit prohibition of
discriminatory assessment ratios. A district court cannot
accurately calculate or compare those ratios without determining
true market value. Congress clearly permitted courts to question
state valuation methodologies when it banned discriminatory
assessment ratios and made true market value a question to be
litigated in federal court.
Georgia also protests that our interpretation
will destroy the States’ discretion to choose their own valuation
methodologies. We disagree. A State may use whatever method or
methods it likes, so long as the result is not discriminatory. The
Act does not prohibit the use of any valuation methodology. It
prohibits discrimination. Far from requiring States to follow a
particular method, we hold only that nothing in the statute
prevents a railroad from attempting to show that the methods chosen
by the State result in a discriminatory determination of true
market value.
The judgment of the Court of Appeals for the
Eleventh Circuit is reversed.
It is so ordered.
Footnote 1
The portion of the Act that concerns us here,
Section 306, was originally codified at 49 U. S. C. §26c (1976
ed.). In 1978, Congress recodified it at 49 U. S. C. §11503
(1976 ed., Supp. II). Congress recodified it again in 1995, without
substantive change, this time as §11501. For convenience, all
references to the statute are to the text of §11501.
Footnote 2
Section 11501 reads, in relevant part:
“(b) The following acts unreasonably burden
and discriminate against interstate commerce, and a State,
subdivision of a State, or authority acting for a State or
subdivision of a State may not do any of them:
“(1) Assess 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.
“(2) Levy or collect a tax on an assessment
that may not be made under paragraph (1) of this subsection.
“(3) Levy or collect an ad valorem
property tax on rail transportation property at a tax rate that
exceeds the tax rate applicable to commercial and industrial
property in the same assessment jurisdiction.
“(4) Impose another tax that discriminates
against a rail carrier providing transportation subject to the
jurisdiction of the Board under this part.”
Footnote 3
Section 11501(c) provides:
“Notwithstanding section 1341 of title 28 and
without regard to the amount in controversy or citizenship of the
parties, a district court of the United States has jurisdiction,
concurrent with other jurisdiction of courts of the United States
and the States, to prevent a violation of subsection (b) of this
section. Relief may be granted under this subsection only if the
ratio of assessed value to true market value of rail transportation
property exceeds by at least 5 percent the ratio of assessed value
to true market value of other commercial and industrial property in
the same assessment jurisdiction. The burden of proof in
determining assessed value and true market value is governed by
State law. If the ratio of the assessed value of other commercial
and industrial property in the assessment jurisdiction to the true
market value of all other commercial and industrial property cannot
be determined to the satisfaction of the district court through the
random-sampling method known as a sales assessment ratio study (to
be carried out under statistical principles applicable to such a
study), the court shall find, as a violation of this section—
“(1) an assessment of the rail transportation
property at a value that has a higher ratio to the true market
value of the rail transportation property than the assessed value
of all other property subject to a property tax levy in the
assessment jurisdiction has to the true market value of all other
commercial and industrial property; and
“(2) the collection of an ad valorem
property tax on the rail transportation property at a tax rate that
exceeds the tax ratio rate applicable to taxable property in the
taxing district.”
Footnote 4
Georgia assesses public utilities using the
“unit rule.” Under this rule, “an appraiser first determines the
value of all assets of an entity, regardless of location,” then
multiplies “by the percentage of the entity located within [the
State] to determine what portion of the value of the company should
be allocated to the state.” 472 F. 3d 1281, 1283 (CA11 2006).
The parties agree the unit rule is the appropriate rule for valuing
CSX’s property. There are, however, numerous methods available to
value property under the unit rule, and many of these methods
themselves have multiple variations. See
id., at 1284.
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