310 U.S. 362 (1940), 789, Nashville, Chattanooga & St. Louis Railway Co. v. Browning

Docket Nº:No. 789
Citation:310 U.S. 362, 60 S.Ct. 968, 84 L.Ed. 1254
Party Name:Nashville, Chattanooga & St. Louis Railway Co. v. Browning
Case Date:May 20, 1940
Court:United States Supreme Court

Page 362

310 U.S. 362 (1940)

60 S.Ct. 968, 84 L.Ed. 1254

Nashville, Chattanooga & St. Louis Railway Co.



No. 789

United States Supreme Court

May 20, 1940

Argued April 30, May 1, 1940



1. In the absence of special circumstances rendering it inapplicable to the particular case, the mileage basis affords an appropriate method, consistent with the Commerce Clause, of apportioning the value of an interstate railroad system among the several States in which it functions, for the purpose of taxation. Arithmetical precision in the apportionment is not essential to its validity. P. 365.

The judgment of state taxing authorities and courts upholding a use of the mileage basis, despite evidence of different earning capacities of lines of the railroad in and out of the State -- accepted in this case.

2. Upon review of a decree of a state court sustaining a tax assessment of a railroad over the objection that unconstitutional discrimination resulted from systematic assessment of railroads and other public utilities at full value and undervaluation of all other kinds of property, this Court declines to examine the minutes of the state board of equalization, not in the record but proffered here for the first time in the litigation, in order to learn whether the state court was correct in presuming that disparities of assessment had been equalized, as required by the state law. P. 366.

3. The Equal Protection Clause of the Fourteenth Amendment permits a State to classify the property of railroads and other public utilities separately from other property, and to tax it higher. P. 367.

Page 363

4. Where a State for many years systematically assessed the property of railroads and other utilities at full cash value and 11 other kinds of property at less than cash value -- held that the practice was the "law" of the State, within the meaning of the Equal Protection Clause of the Fourteenth Amendment, although uniformity of taxation was commanded by the state constitution, and although it were true that the tax in question was sustained by the State Supreme Court by a resort to fiction. P. 369.

5. The contention that an assessment, continued without change for a series of years, had become confiscatory because of decrease in value of the property due to economic causes, is rejected because

(1) The Court finds in the record no warrant for upsetting the administrative determination, sustained by the state courts. P. 370.

(2) The maintenance of an assessment in the face of declining value is merely way of increasing the tax. P. 370.

140 S.W.2d 781 affirmed.

Certiorari, 309 U.S. 651, to review a decree sustaining the dismissal of a suit to reduce, as excessive, a tax assessment of railroad property.

FRANKFURTER, J., lead opinion

MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

This case is here to review a judgment of the Supreme Court of Tennessee sustaining an assessment of petitioner's property, tangible and intangible, under that state's ad valorem tax law. All Tennessee property is subject to such a tax; but there are two schemes of procedure for making assessments, one for public service corporations and one for other taxpayers. As to ordinary property, the task of valuation rests upon officials of the various counties. For public service corporations, the assessments

Page 364

must be made by the Railroad and Public Utilities Commission, which is commanded to ascertain the "actual cash value" of corporate property situated in Tennessee. Tennessee Code, § 1526. Since petitioner operates an interstate railroad, the value of its entire system, and not merely of that portion within Tennessee, had first to be ascertained. This the Commission estimated at $23,996,604.14. From this figure was deducted the value of petitioner's "localized" property, that is, its terminal buildings, shops, and nonoperating real estate. The remaining sum served as the base for calculating the value of what, in the language of Tennessee law, is called the utility's "distributable" property attributable to Tennessee, § 1528, which the Commission ascertained by taking the ratio which petitioner's mileage in Tennessee bears to its total mileage. This was found to be $12,925,944, and that is the amount [60 S.Ct. 970] of the assessment here in dispute. From this action by the Commission, petitioner appealed, in accordance with the local statute, to the State Board of Equalization, respondent here. After hearing and by formal opinion, the Board confirmed the Commission's valuation.

In anticipation of a certification by the Board of its final assessment preliminary to the collection of taxes based upon it, the Railway brought an appropriate proceeding in the state courts to set aside what it claimed was the void "excess of the fair taxable value" of its property. This suit was dismissed by the trial court, and its judgment was affirmed by the Supreme Court of Tennessee, with two justices separately dissenting. 140 S.W.2d 781. Because of petitioner's claim that the result below was inconsistent with decisions of this Court, we granted certiorari. 309 U.S. 651. The assessment was contested below on objections grounded in both state and federal constitutions. Here, of course, only federal questions are open. Petitioner claims that the challenged

Page 365

assessment violates the Fourteenth Amendment in its guarantees of due process and the equal protection of the laws, and is offensive to the Commerce Clause, art. 1, § 8, cl. 3.

We shall first consider the claim based on the historic implications of the Commerce Clause as a limitation upon the state's taxing power. Petitioner argued that Tennessee has taxed values which are in truth outside its borders, thereby burdening that which the Commerce Clause has left free. The guiding principles for adjustment of the state's right to secure its revenues and the nation's duty to protect interstate transportation are by this time well settled. The problem to be solved is what portion of an interstate organism may appropriately be attributed to each of the various states in which it functions. Basic to the accommodation of these conflicting state and national interests is realization that, by its very nature, the problem is incapable of precise and arithmetical solution. In tapping these common sources of revenue, a state cannot, we have held, use a fiscal formula, whatever may be its appearance of certitude, to project the taxing power of the state plainly beyond its borders. Wallace v. Hines, 253 U.S. 66. In the light of these principles, Tennessee has not overstepped its bounds.

In basing its apportionment on mileage, the Tennessee Commission adopted a familiar and frequently sanctioned formula. Pullman's Car Co. v. Pennsylvania, 141 U.S. 18; Maine v. Grand Trunk Ry. Co., 142 U.S. 217; Pittsburgh &c. Railway Co. v. Backus, 154 U.S. 421; Branson v. Bush, 251 U.S. 182. Se...

To continue reading