OCTOBER TERM, 1993
Syllabus
DEPARTMENT OF REVENUE OF OREGON
v. ACF INDUSTRIES, INC.,
ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No. 92-74. Argued November 8, 1993-Decided January 24,1994
The Railroad Revitalization and Regulatory Reform Act of 1976,
in relevant part, forbids States to impose (1) higher property tax
rates and assessment ratios upon "rail transportation property"
than upon "other commercial and industrial property," 49 U. S. C.
§§ 11503(b)(1)-(3), and (2) "another tax that discriminates against
a rail carrier providing transportation," § 11503(b)(4). Oregon
exempts from its ad valorem property tax various classes of
business personal property, but not railroad cars owned by
respondent companies. They filed suit in the District Court,
alleging that the tax violates § 11503(b)(4) because it exempts
certain classes of commercial property from taxation while taxing
railroad cars in full. Both the District Court and the Court of
Appeals agreed that discriminatory property tax exemptions may be
challenged under subsection (b)(4). However, the Court of Appeals
reversed the lower court's finding that Oregon's tax complied with
the provision, holding instead that respondents were entitled to
the same exemption enjoyed by preferred property owners.
Held: Section 11503 does not limit the States' discretion
to exempt nonrailroad property, but not railroad property, from
generally applicable ad valorem property taxes. Pp. 338-348.
(a) Respondents' position that "another tax that discriminates
against a rail carrier" is a residual category designed to reach
any discriminatory state tax, including property taxes, not covered
by subsections (b)(1)-(3) is plausible only if subsection (b)(4) is
read in isolation. However, the structure of § 11503 as a whole
supports the view that subsection (b)(4) does not speak to property
tax exemptions. "[C]ommercial and industrial property," which
serves as the comparison class for measuring property tax
discrimination under subsections (b)(1)-(3), is defined in
subsection (a)(4) as "property, other than transportation property
and land used primarily for agricultural purposes or timber
growing, devoted to commercial or industrial use and subject to a
property tax levy." The interplay between subsections (b)(1)-(3)
and this definition is central to subsection (b)(4)'s
interpretation. For example, Congress' exclusion of agricultural
land from the definition demonstrates its intent to permit the
States to tax railroad property at a higher rate than agricultural
land, notwithstanding subsection (b)(3)'s
333
general prohibition of rate discrimination. To consider such a
tax "another tax" under subsection (b)(4) would subvert the
statutory plan by reading subsection (b)(4) to prohibit what
subsection (b)(3), in conjunction with subsection (a)(4), was
designed to allow. The result would contravene the elementary canon
of construction that a statute should be interpreted so as not to
render one part inoperative. Pp. 338-341.
(b) The phrase "subject to a property tax levy" further
qualifies the subsection (a)(4) definition. When used elsewhere in
§ 11503, that phrase means property that is taxed; and since
identical words used in different parts of the same Act are
intended to have the same meaning, the phrase must carry the same
meaning in subsection (a)(4),
Sorenson v.
Secretary of
Treasury, 475 U.
S. 851, 860. Thus, exempt property is not part of the
comparison class. It would be illogical to conclude that Congress,
having allowed States to grant property tax exemptions in
subsections (b)(1)-(3), would turn around and nullify its own
choice in subsection (b)(4). Pp. 341-343.
(c) Other considerations reinforce the foregoing construction of
the statute. Section 11503's silence on the subject of tax
exemptions-in light of the explicit prohibition of tax rate and
assessment ratio discrimination-reflects a determination to permit
the States to leave their exemptions in place. Principles of
federalism compel this view, for a statute is interpreted to
pre-empt traditional state powers only if that result is the clear
and manifest purpose of Congress. The statute's legislative history
casts no doubt upon this interpretation. Nor does the
interpretation lead to an anomalous result. Since railroads are not
the only commercial entities subject to Oregon's tax, it need not
be decided whether subsection (b)(4) would prohibit a tax that did
single out railroad property. And since it is within Congress'
sound discretion to weigh the benefit of preserving some exemptions
against the benefit of protecting rail carriers from every tax
scheme that favors some nonrailroad property, the result reached
here is not so bizarre that Congress could not have intended it.
See
Demarest v.
Manspeaker, 498 U. S. 184, 191. Pp.
343-348.
961 F.2d
813, reversed and remanded.
KENNEDY, J., delivered the opinion of the Court, in which
REHNQUIST, C. J., and BLACKMUN, O'CONNOR, SCALIA, SOUTER, THOMAS,
and GINSBURG, JJ., joined. STEVENS, J., filed a dissenting opinion,
post, p. 348.
Virginia L. Linder, Solicitor General of Oregon, argued
the cause for petitioner. With her on the briefs were
Theodore
R. Kulongoski, Attorney General,
Thomas A. Balmer,
334
Deputy Attorney General, and
Robert M. Atkinson,
Assistant Attorney General.
Kent L. Jones argued the cause for the United States as amicus
curiae urging reversal. With him on the brief were Solicitor
General Days, Acting Assistant Attorney General Paup, Deputy
Solicitor General Wallace, Gary R. Allen, Paul M. Geier, Dale C.
Andrews, S. Mark Lindsey, and G. Joseph King.
Carter G.
Phillips argued the cause for
respondents.
With him on the brief was
James W McBride. *
JUSTICE KENNEDY delivered the opinion of the Court. The power of
state and local governments to impose ad valorem property taxes
upon railroads and other interstate
*Briefs of
amici curiae urging reversal were filed for
the State of Iowa by
Bonnie J. Campbell,
Attorney General, and C.
A. Daw; for the State of Washington
et al. by
Christine Q Gregoire, Attorney General of
Washington, and by the Attorneys General for their respective
States as follows:
Grant Woods of Arizona, Daniel E. Lungren of California, Robert
A. Butterworth of Florida, Larry EchoHawk of Idaho, Chris Gorman of
Kentucky, Hubert H. Humphrey III of Minnesota, Mike Moore of
Mississippi, Jeremiah W (Jay) Nixon of Missouri, Joseph P. Mazurek
of Montana, Don Stenberg of Nebraska, Tom Udall of New Mexico,
Robert Abrams of New York, Michael F. Easley of North Carolina,
Heidi Heitkamp of North Dakota, Lee Fisher of Ohio, Susan B. Loving
of Oklahoma, T. Travis Medlock of South Carolina, Charles W Burson
of Tennessee, Jan Graham of Utah, Jeffrey L. Amestoy of Vermont,
Stephen D. Rosenthal of Virginia, James E. Doyle of Wisconsin, and
Joseph B. Meyer of Wyoming; and for the National Conference of
State Legislatures et al. by Richard Ruda and Richard G.
Taranto.
Richard A. Malm and
Thomas W Andrews filed a brief
for the Railway Progress Institute et al. as
amici curiae
urging affirmance.
Briefs of
amici curiae were filed for the State of
California by
Daniel E. Lungren, Attorney General,
Timothy G.
Laddish, Assistant Attorney General,
Richard F.
Finn, Supervising Deputy Attorney General,
and
Robert E. Murphy and
Marguerite C.
Stricklin, Deputy Attorneys General; for the Association of
American Railroads by
Betty Jo Christian, Timothy M. Walsh,
Jerald S.
Howe, Jr., Robert W Blanchette, and
Kenneth
P. Kolson; and for Interstate Air Carriers by
Jay R. Martin,
Peter W Davis, and
John E. Carne.
335
carriers has been the source of recurrent litigation under the
Commerce Clause and the Due Process Clause. See,
e.
g., Central R. Co. of Pa. v.
Pennsylvania,
370 U. S. 607
(1962);
Braniff Airways, Inc. v.
Nebraska Bd. of
Equalization and Assessment, 347 U. S. 590 (1954);
Morgan v.
Parham, 16 Wall. 471 (1873). In the case
before us, a state property tax is challenged under a federal
statute, the Railroad Revitalization and Regulatory Reform Act of
1976 (4-R Act). Pub. L. 94-210, 90 Stat. 31.
The question presented is whether the State of Oregon violated
the statute by imposing an ad valorem tax upon railroad property
while exempting various other, but not all, classes of commercial
and industrial property. We hold that a State may grant exemptions
from a generally applicable ad valorem property tax without
subjecting the taxation of railroad property to challenge under the
relevant provision of the 4-R Act, § 306(1)(d), 49 U. S. C. §
11503(b)(4).
I
Oregon imposes an ad valorem tax upon all real and personal
property within its jurisdiction, except property granted an
express exemption. Ore. Rev. Stat. § 307.030 (1991). Various
classes of business personal property are exempt, including
agricultural machinery and equipment; nonfarm business inventories;
livestock; poultry; bees; furbearing animals; and agricultural
products in the possession of farmers. §§ 307.325,307.400. Standing
timber is also exempt, but is subject to a severance tax when
harvested. § 321.272. Oregon, like many other States, exempts motor
vehicles as well, instead levying upon them a modest annual
registration fee. §§ 803.585, 803.420(1).
Respondents, called the "Carlines" in this litigation, are eight
companies that lease railroad cars to railroads and shippers. The
railroad cars are considered "tangible personal property" under
Oregon law, § 307.030, and are not exempt from taxation. The
Carlines brought suit in United States District Court under §
306(1)(d) of the 4-R Act, seeking de-
336
claratory and injunctive relief against the assessment, levy,
and collection of the State's property tax upon their railroad
cars.
Congress enacted the 4-R Act in part to "restore the financial
stability of the railway system of the United States." § 101(a), 90
Stat. 33. When drafting the legislation, Congress was aware that
the railroads" 'are easy prey for State and local tax assessors' in
that they are 'nonvoting, often nonresident, targets for local
taxation,' who cannot easily remove themselves from the locality."
Western Air Lines, Inc. v.
Board of Equalization of
S.
D., 480 U.
S. 123, 131 (1987) (quoting S. Rep. No. 91-630, p. 3 (1969)).
Section 306 of the 4-R Act, now codified at 49 U. S. C. § 11503,
addresses this concern by prohibiting the States (and their
subdivisions) from enacting certain taxation schemes that
discriminate against railroads. See
Burlington Northern R.
Co. v.
Oklahoma Tax Comm'n, 481 U. S. 454, 457
(1987).
The relevant provisions of § 11503 are contained in subsec-
tion (b), which states:
"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 clause (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.
337
"(4) impose another tax that discriminates against a rail
carrier providing transportation .... "
The reach of subsections (b)(1)-(3) is straightforward:
These provisions forbid the imposition of higher assessment
ratios or tax rates upon rail transportation property than upon
"other commercial and industrial property." The scope of subsection
(b)(4), which forbids the imposition of "another tax that
discriminates against a rail carrier providing transportation," is
not as clear.
The Carlines do not challenge Oregon's ad valorem property tax
under subsections (b)(1)-(3). We attribute this choice to the fact
that the State subjects all nonexempt property "to assessment and
taxation in equal and ratable proportion." Ore. Rev. Stat. §
307.030 (1991). Rather, it is the Carlines' contention that
Oregon's tax should be considered "another tax that discriminates
against a rail carrier," in violation of subsection (b)(4), because
it exempts certain classes of commercial and industrial property
while taxing railroad cars in full.
The District Court, after reviewing a stipulated record, held
that discriminatory property tax exemptions are subject to
challenge under subsection (b)(4). On the facts presented, however,
the court determined that Oregon's ad valorem property tax complied
with the provision. The court observed that, in other cases, only
those state taxes exempting more than 50% of nonrailroad commercial
personal property had been found to contravene subsection (b)(4).
See
Trailer Train Co. v.
Leuenberger, 885 F.2d
415 (CA8 1988), cert. denied, 490 U. S. 1066 (1989);
Burlington Northern R. Co. v.
Bair, 766 F.2d
1222 (CA8 1985). Because (according to the court's
calculations) Oregon exempted only 31.4% of nonrailroad commercial
personal property from taxation, the court granted judgment to the
State.
The Court of Appeals reversed.
961 F.2d
813 (CA91992).
In accordance with Circuit precedent, see
ACF Industries,
Inc. v.
Arizona, 714 F.2d
93, 94 (CA9 1983), the court ac-
338
knowledged that subsections (b)(1)-(3) do not speak to the
question of discriminatory property tax exemptions. Like the
District Court, however, the Court of Appeals accepted the
Carlines' contention that property tax exemptions are subject to
challenge under subsection (b)(4). The court explained that
Congress enacted § 11503 to "'prevent tax discrimination against
railroads
in any form whatsoever.'" 961 F. 2d, at 820
(emphasis in original) (citing
Ogilvie v.
State Bd. of
Equalization of N.
D., 657 F.2d
204, 210 (CA8), cert. denied, 454 U. S. 1086 (1981)).
Rejecting the District Court's apparent view that ad valorem tax
schemes exempting less than 50% of nonrailroad business property
are not proscribed by subsection (b)(4), the Court of Appeals held
that the "most natural reading" of the provision dictates that
"any exemption given to other taxpayers but not to
railroads" is forbidden, with possible room for "a
de
minimis level of exemption[sJ." 961 F. 2d, at 822 (emphasis in
original). The court found that Oregon's property tax, under the
calculation most generous to the State, exempted 25% of nonrailroad
commercial property, far exceeding any possible
de minimis
exception. On this ground, the court concluded that the State's
taxation of railroad property violated subsection (b)(4).
Id., at 823. Holding that the Carlines "were entitled to the
same total exemption preferred property owners enjoyed," the court
enjoined the State from levying any tax upon the Carlines' railroad
property.
Ibid.
We granted certiorari, 508 U. S. 905 (1993), and now
reverse.
II
Before passing upon the validity of Oregon's ad valorem property
tax under § 11503(b)(4), the Court of Appeals and the District
Court addressed a preliminary question:
Whether a tax upon railroad property is even subject to
challenge under subsection (b)(4) on the ground that certain
339
other classes of commercial and industrial property are exempt.
We consider the same question.
Both parties contend that the plain meaning of subsection
(b)(4), which prohibits "another tax that discriminates against a
rail carrier," dictates an answer in their favor. In the State's
view, the word "another" means "different from that which precedes
it." Because subsections (b)(1)-(3) address property taxes and only
property taxes, it follows that the term "another tax" in
subsection (b)(4) must mean "a tax different from a property tax."
The State concludes that subsection (b)(4) does not speak to
discriminatory property tax exemptions for the simple reason that
the provision does not speak to property taxes at all.
The Carlines, like the Court of Appeals, take a different view.
They understand the phrase "another tax that discriminates against
a rail carrier" to be a residual category designed to reach any
discriminatory state tax, including discriminatory property taxes,
not covered by subsections (b)(1)-(3). It follows that property tax
exemptions disfavoring railroad transportation property-exemptions
the Carlines in effect admit fall outside the scope of subsections
(b)(1)-(3), see Brief for Respondents 16-17-are within the ambit of
subsection (b)(4). Accord,
e. g., Trailer Train Co. v.
Leuenberger, 885 F.2d
415, 417-418 (CA8 1988), cert. denied, 490 U. S. 1066 (1989);
Department of Revenue of Fla. v.
Trailer Train Co.,
830 F.2d
1567, 1573 (CA111987). If Congress had intended to exclude
property taxes from the reach of subsection (b)(4), the Carlines
contend, it would have drafted the provision to prohibit "any tax
other than a property tax," and not phrased the statute as it did.
Brief for Respondents 17.
Both the State's and the Carlines' readings are defensible if
subsection (b)(4) is read in isolation, cf.
Burlington Northern
R. Co. v.
Oklahoma Tax Comm'n, 481 U. S., at 461
(language of subsection (b)(l) "plainly declares [its] purpose"),
and so we must look elsewhere to determine its meaning.
340
The structure of § 11503 as a whole does yield an answer, one
adverse to the Carlines' challenge to Oregon's property tax. We
conclude that a State may grant exemptions from a generally
applicable ad valorem property tax without exposing the taxation of
railroad property to invalidation under subsection (b)(4).
Subsections (b)(1)-(3) of § 11503, as noted, forbid the
imposition of higher property tax rates and assessment ratios upon
"rail transportation property" than upon "other commercial and
industrial property." 49 U. S. C. §§ 11503(b)(1)(3). "Commercial
and industrial property," which serves as the comparison class for
measuring unlawful discrimination under those provisions, is
defined as "property, other than transportation property and land
used primarily for agricultural purposes or timber growing, devoted
to a commercial or industrial use and subject to a property tax
levy." § 11503(a)(4).
The interplay between subsections (b)(1)-(3) and the definition
of "commercial and industrial property" in subsection (a)(4) is
central to the interpretation of subsection (b)(4). For example,
the definition of "commercial and industrial property" excludes
"land used primarily for agricultural purposes." The fact that
Congress made this particular exclusion demonstrates its intent to
permit the States to tax railroad property at a higher rate than
agricultural land, notwithstanding subsection (b)(3)'s general
prohibition of rate discrimination. One still could maintain, we
suppose, that taxing railroad property at a higher rate than
agricultural land should be considered "another tax that
discriminates against a rail carrier," and thus forbidden under
subsection (b)(4). That interpretation, however, would subvert the
statutory plan by reading subsection (b)(4) to prohibit what
subsection (b)(3), in conjunction with subsection (a)(4), was
designed to allow. The result would contravene the "elementary
canon of construction that a statute should be interpreted so as
not to render one part inoperative."
341
Mountain States Telephone & Telegraph Co. v. Pueblo of Santa
Ana,
472 U. S.
237, 249 (1985) (internal quotation marks omitted).
Congress qualified the definition of "commercial and industrial
property" further, limiting the comparison class to property
"subject to a property tax levy." 49 U. S. C. § 11503(a)(4). The
statute does not define this phrase, which on its face could bear
one of two interpretations: (1) taxed property; or (2) taxable
property, a broader category consisting of the general mass of
property within the State's jurisdiction and power to tax,
including property that enjoys a current exemption.
The first interpretation has been the subject of some criticism,
see
Western Air Lines, Inc. v.
Board of Equalization
of S.
D., 480 U. S., at 135 (White, J., concurring), * but
we
*Western Air Lines, Inc. v.
Board of Equalization
of S.
D. raised the question whether certain property
tax exemptions were prohibited under the antidiscrimination
provisions of the Airport and Airway Improvement Act of 1982
(AAIA), 49 U. S. C. App. §§ 1513(d)(1)(A)-(C), which are identical
for all relevant purposes to analogous provisions under the 4-R
Act, 49 U. S. C. §§ 11503(b)(1)-(3). The case was on appeal from
the Supreme Court of South Dakota, which had held that such
exemptions were not subject to challenge under the AAIA.
Western
Air Lines, Inc. v.
Hughes County, 372 N. W. 2d 106
(1985). The court rested this ruling upon its conclusion that the
definition of "commercial and industrial property" in the AAIA, 49
U. S. C. App. § 1513(d)(2)(D)-which, like the parallel definition
in 49 U. S. C. § 11503(a)(4), is limited to property "subject to a
property tax levy" -included taxed property but not exempt
property, 372 N. W. 2d, at 110. Because the comparison class
against which tax discrimination was measured under §§
1513(d)(1)(A)-(C) did not include exempt property, the court
reasoned that the AAIA did not prohibit property tax exemptions. We
affirmed, but on grounds unrelated to the court's construction of
the terms "commercial and industrial property" and "subject to a
property tax levy."
Western Air Lines, Inc. v.
Board of
Equalization of S.
D., 480 U. S., at 129-134. Justice
White concurred, but expressed his view that the "ground on which
the South Dakota Supreme Court sustained the tax" was "plainly
improvident."
Id., at 135; see also
Northwest Airlines,
Inc. v.
North Dakota, 358 N. W. 2d 515, 517 (N. D.
1984).
342
believe it follows from the way Congress used identical language
elsewhere in § 11503. Section 11503(c) confers jurisdiction upon
United States district courts to enforce the terms of § 11503(b)
despite the bar otherwise imposed by the Tax Injunction Act, 28 U.
S. C. § 1341. Subsection (c)(l) grants district courts the power
(under certain circumstances not pertinent here) to prohibit
"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." (Emphasis added.)
In the context of this provision, which concerns the
differential assessment of taxed property, the words "property
subject to a property tax levy" must mean "taxed property." Given
the "normal rule of statutory construction" that " '''identical
words used in different parts of the same act are intended to have
the same meaning,"'"
Sorenson v.
Secretary of
Treasury, 475 U.
S. 851, 860 (1986) (quoting
Helvering v.
Stockholms
Enskilda Bank, 293
U. S. 84, 87 (1934) (in turn quoting
Atlantic Cleaners
&
Dyers, Inc. v.
United States, 286 U. S. 427, 433
(1932))), that phrase must carry the same meaning in subsection
(a)(4), where it qualifies the definition of "commercial and
industrial property."
All this bears on the case before us. Because property "subject
to a property tax levy" means property that is taxed, the
definition of "commercial and industrial property" excludes
property that is exempt. Exempt property, then, is not part of the
comparison class against which discrimination is measured under
subsections (b)(1)-(3), and it follows that railroads may not
challenge property tax exemptions under those provisions.
343
As was the case with agricultural land, we must pay heed to the
fact that Congress placed exempt property beyond the reach of
subsections (b)(1)-(3). It would be illogical to conclude that
Congress, having allowed the States to grant property tax
exemptions in subsections (b)(1)-(3), would turn around and nullify
its own choice in subsection (b)(4). So the Carlines' reading of
subsection (b)(4), while plausible when viewed in isolation (see
supra, at 339), is untenable in light of § 11503 as a whole.
See
Gade v.
National Solid Wastes Management Assn.,
505 U. S. 88, 99
(1992); see also
United Sav. Assn. of Tex. v.
Timbers of
Inwood Forest Associates, Ltd., 484 U. S. 365, 371 (1988)
("A provision that may seem ambiguous in isolation is often
clarified by the remainder of the statutory scheme ... because only
one of the permissible meanings produces a substantive effect that
is compatible with the rest of the law"). It is true that tax
exemptions, as an abstract matter, could be a variant of tax
discrimination. See
Davis v.
Michigan Dept. of
Treasury, 489 U.
S. 803 (1989). The structure of § 11503, however, warrants the
conclusion that subsection (b)(4) does not limit state discretion
to levy a tax upon railroad property while exempting various
classes of nonrailroad property.
Other considerations reinforce our construction of the statute.
In drafting § 11503, Congress prohibited discriminatory tax rates
and assessment ratios in no uncertain terms, see 49 U. S. C. §§
11503(b)(1)-(3), and set forth precise standards for judicial
scrutiny of challenged rate and assessment practices, see §§
11503(c)(1)-(2). By contrast, the statute does not speak with any
degree of particularity to the question of tax exemptions.
Subsection (b)(4), which prohibits the States from "impos[ing]
another tax that discriminates against a rail carrier," is, at
best, vague on the point. Congress did not state whether exemptions
are a form of forbidden discrimination against rail carriers, and
further did not provide a standard for courts to distinguish valid
from invalid exemption schemes.
344
Had Congress, as a condition of permitting the taxation of
railroad property, intended to restrict state power to exempt
nonrailroad property, we are confident that it would have spoken
with clarity and precision. Property tax exemptions are an
important aspect of state and local tax policy. It was common at
the time § 11503 was drafted, as it is now, for States with
generally applicable ad valorem property taxes to exempt various
classes of commercial property. Before 1960, a number of States
granted such exemptions. See,
e. g., Mo. Rev. Stat. §
150.040 (1949) (exempting unmanufactured articles consigned for
sale and held by commission merchants); N. J. Rev. Stat. §
54:4-3.20 (1937) (exempting personal property stored in a public
warehouse); Vt. Stat. Ann., Tit. 32, § 3802 (1959) (exempting tools
and implements possessed by mechanics and farmers, and
highway-building equipment); see also Jacobs, Exemption of Tangible
Personalty, in Tax Exemptions 141, 146 (1939) (by 1938, 16 States
permitted "temporary exemption of newly located or newly
constructed plants, and the machinery and equipment in such
plants"). By the 1960's, about 20 States granted real and personal
property tax exemptions to pollution control facilities. See
McNulty, State Tax Incentives to Fight Pollution, 56 A. B. A. J.
747, 748, and n. 8 (Aug. 1970). By 1971, still well before
enactment of the 4-R Act, a majority of the States exempted one or
more classes of business personal property, including business
inventories, raw materials used in textile manufacturing,
manufacturing machinery and allied equipment, and mechanics tools.
See Education Commission of the States, Property Assessment and
Exemptions:
They Need Reform, Table C-1 (Mar. 10, 1973). Given the
prevalence of property tax exemptions when Congress enacted the 4-R
Act, § 11503's silence on the subject-in light of the explicit
prohibition of tax rate and assessment ratio
discrimination-reflects a determination to permit the States to
leave their exemptions in place.
345
Principles of federalism support, in fact compel, our view.
Subsection (b)(4), like the whole of § 11503, sets limits upon
the taxation authority of state government, an authority we have
recognized as central to state sovereignty. See,
e.
g., Tully v.
Griffin, Inc., 429 U. S. 68, 73 (1976);
Railroad Co. v.
Peniston, 18 Wall. 5, 29 (1873). When
determining the breadth of a federal statute that impinges upon or
pre-empts the States' traditional powers, we are hesitant to extend
the statute beyond its evident scope. See
Cipollone v.
Liggett Group, Inc., 505 U. S. 504, 533 (1992)
("We do not, absent unambiguous evidence, infer a scope of
pre-emption beyond that which clearly is mandated by Congress'
language") (BLACKMUN, J., concurring);
id., at 523 (opinion
of STEVENS, J.);
R. J. Reynolds Tobacco Co. v.
Durham County, 479 U. S. 130, 140
(1986). We will interpret a statute to pre-empt the traditional
state powers only if that result is "the clear and manifest purpose
of Congress."
Rice v.
Santa Fe Elevator Corp.,
331 U. S. 218,
230 (1947). As explained above, neither subsection (b)(4) nor the
whole of § 11503 meets this standard with regard to the prohibition
of property tax exemptions.
The Carlines contend that the legislative history of § 11503
casts doubt upon our interpretation, but the history-to the extent
it has any relevance to our inquiry-affords the Carlines no
comfort. The excerpts from the legislative record cited by the
Carlines do nothing more than manifest Congress' general concern
with the discriminatory taxation of rail carriers. See,
e.
g., S. Rep. No. 94-595, p. 166 (1976) (describing the Senate
bill, which the Conference adopted, as prohibiting "the imposition
of any other tax which results in the discriminatory treatment of
any common or contract carrier"). The Carlines do not point to a
single instance in the legislative record suggesting that Congress
had any particular concern with property tax exemptions, or that
Congress intended to prohibit exemptions in subsection (b)(4). In
fact, the available evidence suggests the opposite of what the
Carlines would have us believe. See 120 Congo Rec.
346
38734 (1974) (providing assurances that subsection (b)(4) would
not prevent the States from granting tax exemptions to encourage
industrial development) (remarks of Reps. Staggers, Adams, and
Kuykendall).
Nor do the Carlines draw our attention to a single instance in
the 15-year legislative history of the 4-R Act in which
representatives of the railroad industry expressed concern about
discriminatory property tax exemptions. In fact, when urging the
Senate to adopt subsection (b)(4), industry representatives
characterized the provision as prohibiting only discriminatory in
lieu taxes and gross receipts taxes; property tax exemptions, in
contrast, were not mentioned. See Hearings before the Subcommittee
on Surface Transportation of the Senate Committee on Commerce on
Legislation Relating to Rail Passenger Service, 94th Cong., 1st
Sess., pt. 5, pp. 1837, 1883 (1975). In sum, the Carlines' argument
with respect to legislative history is without foundation.
As a final matter, we address the contention that our
interpretation of subsection (b)(4) leads to an anomalous result.
The Carlines maintain that it would be nonsensical for Congress to
prohibit the States from imposing higher tax rates or assessment
ratios upon railroad property than upon other taxed property, while
at the same time permitting the States to exempt some or all
classes of nonrailroad property altogether. That result, it is
argued, prohibits discrimination of a mild form, but permits it in
the extreme. We think our interpretation is not at all
implausible.
To begin with, this is not a case in which the railroadseither
alone or as part of some isolated and targeted groupare the only
commercial entities subject to an ad valorem property tax. Cf.
Burlington Northern R. Co. v.
Superior, 932 F.2d
1185 (CA7 1991) (occupation tax on owners and operators of
"iron ore concentrates docks," in practical effect, applied only to
docks owned by one particular rail carrier). If such a case were to
arise, it might be incorrect to say that the State "exempted" the
nontaxed property. Rather, one
347
could say that the State had singled out railroad property for
discriminatory treatment. See J. Hellerstein & W. Hellerstein,
State and Local Taxation 973 (5th ed. 1988) (the term "exemption"
does not mean every exclusion from the reach of a levy, but rather
exclusions of "property, persons, transactions ... which are
logically within the tax base"). On the record before us, Oregon's
ad valorem property tax does not single out railroad property in
that manner, and we need not decide whether subsection (b)(4) would
prohibit a tax of that nature.
In addition, though some may think it unwise to forbid
discrimination in tax rates and assessment ratios while permitting
exemptions of certain nonrailroad property, the result is not "so
bizarre that Congress 'could not have intended'" it.
Demarest v.
Manspeaker, 498 U. S. 184, 191 (1991)
(citing
Griffin v.
Oceanic Contractors, Inc.,
458 U. S. 564,
575 (1982)). About half of the States grant property tax exemptions
to encourage investment in air and water pollution control devices.
See 1 CCH State Tax Guide 691692 (1992). And it is standard
practice for States to grant exemptions to commercial entities for
other beneficial purposes. See,
e. g., La. Const.,
Art. VII, § 21(F) (10-year exemption for any "new manufacturing
establishment or [any] addition to an existing manufacturing
establishment"); Ore. Rev. Stat. § 285.597 (1991) (exemption for
business property in an "enterprise zone"); Va. Code Ann. §
58.1-3661 (1991) (permitting any county, city, or town to exempt
from its property tax "solar energy equipment, facilities or
devices" and "recycling equipment, facilities, or devices"). It is
within Congress' sound discretion to weigh the benefit of
preserving those exemptions, on the one hand, against the benefit
of protecting rail carriers from every tax scheme that favors some
nonrailroad property, on the other.
We conclude that § 11503, which expresses Congress' resolution
of the matter, does not limit the States' discretion to exempt
nonrailroad property, but not railroad property, from
348
STEVENS, J., dissenting
ad valorem property taxes of general application. We therefore
reverse the judgment of the Court of Appeals and remand the case
for proceedings consistent with this opinion.
It is so ordered.
JUSTICE STEVENS, dissenting.
Section 306(1)(d) of the Railroad Revitalization and Regulatory
Reform Act of 1976 (4-R Act), 90 Stat. 54, as amended, 49 U. S. C.
§ 11503(b)(4) (subsection (b)(4)), prohibits States from imposing
taxes that discriminate against railroads.1 In my view, a state tax
that fell upon railroad property, but from which comparable
nonrailroad property was exempt, would clearly implicate that
prohibition. The Court errs in holding that such arrangements are
not even subject to challenge under subsection (b)(4).
Because subsection (b)(4) by its terms bars any tax that
"discriminates" against rail carriers, it is not surprising that
the Courts of Appeals have held that the provision applies to
revenue measures that discriminate by imposing taxes on railroad
property and exempting similar property owned by others.2 While
those courts (and the District Court and
1 As originally enacted, subsection (b)(4) prohibited the States
from imposing "any other tax which results in discriminatory
treatment of a common carrier by railroad .... " 4-R Act,
§306(1)(d), 90 Stat. 54. Pursuant to a recodification in 1978, the
current version of subsection (b)(4) speaks of
"another tax
that discriminates against" a rail carrier. Congress specifically
provided that the 1978 recodification "may not be construed as
making a substantive change in the laws replaced." 92 Stat.
1466.
2 In addition to the Ninth Circuit's decision in this case,
961 F.2d
813, 818-820 (1992), see
Department of Revenue of Fla.
v.
Trailer Train Co., 830 F.2d
1567, 1573 (CAll 1987) (provision targets "discrimination
in
all its guises" and "requires consideration of tax exemptions
in determining whether there has been discriminatory treatment")
(citation and internal quotation marks omitted);
Oglivie v.
State Ed. of Equalization of N. D., 657
F.2d 204, 209-210
(CA8) (history of provision
demonstrates that "its purpose was to prevent tax discrimination
against railroads in any form whatsoever," including exemption of
nonrailroad property), cert. denied,
349
Court of Appeals in this case) have differed on precisely how to
decide whether a wholesale exemption unlawfully "discriminates" and
thus gives rise to
liability, none has taken the position
accepted by the Court today that a claim predicated on
discriminatory exemptions is not
cognizable under subsection
(b)(4).
As the Court explains,
ante, at 343, subsection (b)(4)
does not contain a specific prohibition against imposing on
railroads an ad valorem tax from which other property owners are
exempt. That omission, of course, does not answer the question
before us: whether the
tax that Oregon has imposed
"discriminates against a rail carrier" within the meaning of
subsection (b)(4). A State might discriminate against a disfavored
class of taxpayers in a variety of ways. The absence in the 4-R Act
of a provision specifically addressing exemptions is no more
significant than the absence of a provision addressing deductions,
credits, methods of collecting or protesting state taxes, or
penalties. Surely a state tax law that allowed a substantial tax
deduction for all taxpayers except rail carriers would readily be
recognized as discriminatory. That conclusion would not be affected
by the fact that the antidiscrimination statute does not speak
specifically to deductions. Indeed, the Court suggests that an
exemption for all taxpayers except rail carriers would make the tax
discriminatory. See
ante, at 346.
Rather than addressing every means that might be devised to
accord discriminatory tax treatment to rail carriers, Congress
specified two familiar methods (differential rates and assessments)
and then included a general provision de-
454 U. S. 1086 (1981). Only the Virginia Supreme Court has
reached the contrary conclusion, see
Richmond, F. &
P. R. Co. v.
State Corporation Comm'n, 230 Va. 260,
262, 336 S. E. 2d 896, 897 (1985), and it did so on a basis that I
do not understand the Court to accept today-that because ad valorem
property taxes are treated in the first three subsections, an ad
valorem property tax may never be attacked as discriminatory under
subsection (b)(4).
350
STEVENS, J., dissenting
signed to block other routes to the same end. In my opinion, it
is anomalous to read § 11503(b) to prohibit even minor deviations
in rates or assessments, but then to allow States to put manifestly
disproportionate tax burdens on railroads by exempting most
comparable property. Both the text of subsection (b)(4) and its
evident purposes convince me that Congress intended to bar
discrimination by any means, including exemptions.
In
Davis v.
Michigan Dept. of Treasury, 489 U. S. 803 (1989),
this Court held that a State's exemption of a limited class of
residents violated a general statutory prohibition against
discriminatory taxation (4 U. S. C. § 111) that made no specific
reference to exemptions. While I disagreed with the Court's
conclusion that the limited exemption at issue could fairly be
characterized as discrimination against the protected class,
Davis surely demonstrates that an exemption, even if not
expressly prohibited, may support the conclusion that a tax is
discriminatory. Indeed, tax exemptions may make a tax
unconstitutionally discriminatory. See,
e. g., Bacchus Imports,
Ltd. v.
Dias, 468 U. S. 263, 273
(1984);
Armco Inc. v.
Hardesty, 467 U. S. 638, 642-646
(1984). I see no reason why they should be totally ignored when
Congress has expressly prohibited "discrimination" against a
particular kind of interstate enterprise.
The Court puts great stock in the difference between the
specific and strict bar against discriminatory tax rates and
assessments in subsections (b)(1)-(3) and the open-ended language
of subsection (b)(4), which speaks only tersely of
"discriminat[ion]." As the Court explains, the definition of
"commercial and industrial property" that is applicable to
subsections (b)(1)-(3) is best read to embrace only property that
is taxed, rather than exempted. If we were to accept the Carlines'
position, the Court reasons, subsection (b)(4) would render the
earlier provisions redundant and would "nullify" the limitations
Congress placed on the rate and assessment provisions.
Ante,
at 343. I disagree.
351
The ban on discriminatory rates and assessments targets two
patent and historically common forms of discrimination. In order to
find discrimination in rates or assessment ratios, a court need
only compare the rates and assessments applicable to railroads to
the rates and assessments of other owners of comparable property.
That inquiry would be complicated indeed if the courts were
required to divine the "rates" and "assessments" governing property
that is exempt from tax. It is not surprising, then, that the
strict bars against disparate rates and assessments exclude from
the comparison class property that is not taxed at all.
Congress' exclusion of exempted property from the comparison
class for purposes of subsections (b)(1)-(3) does not determine the
scope of subsection (b)(4), for that provision does not depend on
the limited definition of "commercial and industrial property" that
governs its neighbors. Reading subsection (b)(4) to require
judicial scrutiny of state exemption schemes creates no disharmony
with subsections (b)(1)-(3) unless one assumes that the test of
"discrimination" under subsection (b)(4), like the
per se
rules against differential rates and assessments, prohibits all but
the most minor differentials in tax treatment between railroad
property and owners of similar property. That assumption is
unwarranted.
The statute before the Court today (like the statute it
construed in
Davis) does not contain a definition of the
term "discrimination," but that familiar concept and the policies
of the 4-R Act provide guidance. Like the statute at issue in
Davis, the 4-R Act protects taxpayers who often have little
voice in the policy decisions of the taxing State, and whose
situation makes them likely targets for unfavorable treatment.3 The
prohibition of discrimination should be
3 Railroads' high rates of fixed investment and their immobile
assets leave them less able than other interstate enterprises to
restrain state taxation by threatening to pull up their stakes and
leave. See
Burlington Northern R. Co. v.
Superior,
932 F.2d
1185, 1186
(CA7 1991).
352
STEVENS, J., dissenting
read to give effect to those concerns, but it need not be read
more broadly. A sensible test for prohibited
discrimination-focusing on whether the protected class is being
treated substantially less favorably than most similarly situated
persons-would leave the States room to employ exemptions without
falling afoul of subsection (b)(4).
As
amicus the Solicitor General suggests, a
discrimination standard allows the States to impose disparate tax
burdens when the disparity is supported by some legitimate
difference between the exempted nonrailroad property and the taxed
railroad property.4 In my view, an exemption for a small minority
of the resident taxpayers would not warrant a conclusion that
prohibited "discrimination" has occurred. See
Davis, 489 U.
S., at 819-823 (STEVENS, J., dissenting). Because subsection (b)(4)
merely protects railroads from discrimination, rather than
conferring on them a right to be treated like the most favorably
treated taxpayer, a violation would not be established when the tax
paid on railroad property is not materially greater than the tax
imposed on most comparable property.5 But surely a tax imposed on
rail carriers is not saved from discrimination merely because some
other kind of enterprise
(e. g., motor carriers) is also
subject to taxation.
The evident purpose of this part of the 4-R Act, as the Court
recognizes, is to protect a class of interstate enterprises that
has traditionally been subject to disproportionately heavy state
and local tax burdens. This is an area in which state authority has
always been circumscribed, most
4 A State might, for example, be able to defend an exemption by
showing that the exempted class was subject to an equivalent tax to
which railroads were not.
5 For similar reasons, the Court of Appeals erred when it held
that the remedy for a discriminatory exemption scheme is a refund
of the
entire tax paid by the railroad. See 961 F. 2d, at
823. To remedy unlawful discrimination under subsection (b)(4), a
State need refund only the difference between the tax collected
from the railroad and the average tax imposed on owners of
comparable property.
353
prominently by the Commerce Clause itself. Subsection (b)(4)
plainly requires States to readjust their tax arrangements to the
extent those arrangements "discriminat[e]." I cannot agree that
federalism "compels" us to read subsection (b)(4) as inapplicable
to exemption arrangements. See
ante, at 345.
Federalism concerns would weigh more heavily in favor of
Oregon's position if, as the Court suggests,
ante, at
344-345, reading subsection (b)(4) to apply to exemption schemes
would require States to choose between exempting railroads or
eliminating tax exemptions across the board. But as I have
explained, such a reading is by no means required. Because the
statutory term "discrimination" permits the States greater
flexibility to employ exemptions than do the bans on disparate
rates and assessments, the Court's concerns about imposing onerous
choices on States are overstated.6 Moreover, an exemption that is
meaningfully available to railroads-as in the Court's example of an
exemption for funds spent on environmental cleanup-would not make a
tax "discriminatory" merely because the exemption may be more
useful for some other businesses than it is for railroads. Cf.
Burlington Northern R. Co. v.
Superior, 932 F.2d
1185, 1187 (CA7 1991) (invalidating tax "imposed on an activity
in which only a railroad or railroads engage").
The Court appears to hedge against its position that subsection
(b)(4) flatly does not apply to taxes and exemption schemes that
operate to burden railroads disproportionately. Thus, the Court
intimates that the state ad valorem tax
6 The cases in which exemption schemes have been found unlawful
under subsection (b)(4) certainly do not suggest any undue
incursions into state fiscal policy. See,
e. g., Trailer Train
Co. v.
Leuenberger, 885 F.2d
415,
416 (CA8 1988) (violation found because State
imposed ad valorem tax on railroad personal property but exempted
over 75 percent of comparable property), cert. denied, 490 U. S.
1066 (1989);
Burlington Northern R. Co. v.
Bair,
766 F.2d
1222, 1223-1224
(CA8 1985) (tax on railroad personal
property coupled with exemption for 95 percent of other personal
property violated statute).
354
STEVENS, J., dissenting
must, in order to escape scrutiny under subsection (b)(4), be
"generally applicable,"
ante, at 335, 340, and that a scheme
that taxed railroad property but exempted
all nonrailroad
property might be unlawful because it would not be a bona fide
"exemption." See
ante, at 346-347. If I were convinced that
Oregon's ad valorem property taxes were generally applicable, I
would agree with the Court's disposition of this case. The
narrowness or breadth of the exemptions, and correspondingly the
evenhanded or discriminatory nature of the tax on railroads, goes
to whether a subsection (b)(4) claim has merit, not to whether it
is cognizable. The statute provides no basis for prohibiting the
exemption of 100 percent of nonrailroad property but allowing the
exemption of, for example, 90 percent.
I recognize that application of the statutory "discrimination"
standard will sometimes involve problems of line drawing, and that
discriminatory exemptions raise special difficulties. But, in my
view, the statute requires courts to grapple with those
difficulties. I would remand the case to the Court of Appeals to
give it an opportunity to resolve the parties' disputes about the
extent of any disparate burdens imposed on rail carriers by
Oregon's ad valorem tax and to review the discrimination issue in
accordance with the considerations set forth in this opinion.
Accordingly, I respectfully dissent.
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