(The following story by Lee Ross appeared at FoxNex.com on November 5.)
WASHINGTON, D.C. — The following is a summary of a case the U.S. Supreme Court will hear during the week of Nov. 5-Nov. 9, 2007:
Case: CSX Transportation, Inc. v. Georgia State Board of Equalization
Argument Date: Monday, Nov. 5
Law in Question: Conflict between the Tax Injunction Act and the Regulatory Revitalization and Regulatory Reform Act of 1976.
Concern: Is federal court intervention possible to settle disputes over the valuation of railroad?
Impact: This is a federalism case through and through, and would appear to have little impact beyond the court’s determination in this specific case of state’s rights and federal intervention.
Question Presented: “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.”
Background: Remember in the game of Monopoly how important it was to collect the railroads? While one couldn’t build houses and hotels on them they provided a nice stream of revenue for anyone holding them. In real life. rail lines are valuable even if they aren’t the Reading, B&O, Short Line and Pennsylvania. And in real life any thing that’s of value will certainly catch the eye of the Tax Man. This case presents a conflict on what to do when there’s a dispute over tax assessments.
CSX Transportation (and its parent CSX Corporation) is a major player in moving cargo in the eastern half of the United States. Its Web site boasts of operating a 21,000 mile network of rail lines that connect 23 states, the District of Colombia and two Canadian provinces. Its 2006 annual report lists a record $9.6 billion in revenues.
In the mid-20th century a push was made in Congress to resolve lingering frustrations in the rail industry about state and local taxing authorities levying burdensome assessments against rail owners. Their efforts paid off with a 1976 law that in part mandates states to apply a formula for taxation that would not allow for rail lines to be taxed at a rate significantly beyond the rate for other properties.
Georgia decided to use a new methodology for determining property value and totaled CSX’s rail holdings at $8.2 Billion. The company filed a complaint saying calculations under the state’s old valuation method put its holdings at only $6 Billion. That difference would represent a huge difference in tax assessments. All federal courts in this case have ruled that they cannot interfere with a state’s taxation policy—provided it isn’t out of line with other properties. CSX’s appeal to the high court says the change in methodology represents a violation of the 1976 law and is therefore subject to federal review.