Central Railroad Company of Pennsylvania v. Commonwealth of Pennsylvania, 400

• Decision Date: 25 June 1962
• Docket Number: No. 400,400
• Citation: 370 U.S. 607,8 L.Ed.2d 720,82 S.Ct. 1297
• Parties: CENTRAL RAILROAD COMPANY OF PENNSYLVANIA, Appellant, v. COMMONWEALTH OF PENNSYLVANIA
• Court: U.S. Supreme Court

370 U.S. 607

82 S.Ct. 1297

8 L.Ed.2d 720

CENTRAL RAILROAD COMPANY OF PENNSYLVANIA, Appellant,

v COMMONWEALTH OF PENNSYLVANIA.

No. 400.

Argued March 20, 1962.

Decided June 25, 1962.

Roy J. Keefer, Harrisburg, Pa., for appellant.

George W. Keitel, Harrisburg, Pa., for appellee.

Mr. Justice HARLAN delivered the opinion of the Court.

In this case we must decide whether the Commonwealth of Pennsylvania may, consistently with the Commerce Clause and the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the Constitution of the United States, impose an annual property tax on the total value of freight cars owned by the appellant, a Pennsylvania corporation, despite the fact that a considerable number of such cars spend a substantial portion of the tax year on the lines of other railroads located outside the State. The Supreme Court of Pennsylvania upheld the application of the State's Capital Stock Tax, Purdon's Pa.Stat.Ann., 1949, Tit. 72, §§ 1871, 1901, to the full value of all appellant's freight cars.¹ 403 Pa 419, 169 A.2d 878. We postponed consideration of the question of jurisdiction to the hearing on the merits, Central R. Co. of Pa. v. State of Pa., 368 U.S. 912, 82 S.Ct. 195, 7 L.Ed.2d 129, and now find that the appeal is appropriately before us under 28 U.S.C. § 1257(2), 28 U.S.C.A. § 1257(2). E.g., Standard Oil Co. v. Peck, 342 U.S. 382, 72 S.Ct. 309, 96 L.Ed. 427.

We take the facts pertinent to decision from a stipulation submitted by the parties to the trial court. The appellant is a Pennsylvania corporation authorized to operate a railroad only within the State. It has not been licensed to do business elsewhere. The company's track runs from the anthracite coal region in Pennsylvania to the Pennsylvania-New Jersey border, at Easton, where it connects with the lines of the Central Railroad Company of New Jersey (hereinafter CNJ), a New Jersey corporation which owns all the outstanding shares of appellant's stock.

In 1951, the year for which the tax was assessed, the appellant owned 3,074 freight cars which were put to use in ordinary transport operations in three ways: (1) by the appellant on its own tracks; (2) by CNJ on that company's tracks in New Jersey; (3) by other unaffiliated railroads on their own lines in various parts of the country. CNJ's use of appellant's cars was pursuant to operating agreements under which CNJ was obliged to pay a daily rental equal to the then-effective rate prescribed by the Association of American Railroads. In order to facilitate interstate transportation by the interchange of equipment among carriers, as prescribed by 49 U.S.C. § 1, pars. (4), (10), (12), 49 U.S.C.A. § 1, pars. (4, 10, 12), the members of the Association including the appellant, had entered into a separate 'Car Service and Per Diem Agreement' under which each subscriber was authorized to use on its own lines the available freight cars of other subscribers at the established per diem rental. Consequently, during 1951 many of the appellant's freight cars were also used by other railroads on lines outside Pennsylvania.

Appellant contended in the state courts, as it does here, that in computing its Pennsylvania capital stock tax, which is measured by the value of such property as is not exempt from taxation (note 1, supra), it was constitutionally entitled to deduct from the value of its taxable assets a proportional share reflecting the time spent by its freight cars outside Pennsylvania. In support of this claim appellant offered a statistical summary of the use of its freight cars during 1951, seeking to prove that a daily average of more than 1,659 of its 3,074 cars were located on the lines of railroads (including CNJ) which owned no track in Pennsylvania.²

It also claimed that a daily average of approximately 1,056 other cars had been used by railroads having lines both within and without Pennsylvania. As to such cars, appellant sought to allocate to Pennsylvania only such portions of their value as the combined ratio of road miles of each user-railroad's tracks within Pennsylvania bore to its total road mileage throughout the United States.³ These claims were disallowed by the Pennsylvania Board of Finance and Revenue, by the Court of Common Pleas of Dauphin County, and by the Supreme Court of Pennsylvania.⁴ The state courts relied primarily on this Court's decision in New York Central & H.R.R. Co. v. Miller, 202 U.S. 584, 26 S.Ct. 714, 50 L.Ed. 1155, which upheld the constitutionality of a domiciliary State's ad valorem property tax levied upon the full value of a railroad's rolling stock, albeit 'some considerable proportion of the (railroad's) * * * cars always (was) absent from the state.' Id., at 595, 26 S.Ct. at 716.

I.

Since Miller this Court has decided numerous cases touching on the intricate problems of accommodating, under the Due Process and Commerce Clauses, the taxing powers of domiciliary and other States with respect to the instrumentalities of interstate commerce.⁵ None of these decisions has weakened the pivotal holding in Miller—that a railroad or other taxpayer owning rolling stock cannot avoid the imposition of its domicile's property tax on the full value of its assets merely by proving that some determinable fraction of its property was absent from the State for part of the tax year. This Court has consistently held that the State of domicile retains jurisdic- tion to tax tangible personal property which has 'not acquired an actual situs elsewhere.' Johnson Oil Refining Co. v. Oklahoma, 290 U.S. 158, 161, 54 S.Ct. 152, 153.

This is because a State casts no forbidden burden upon interstate commerce by subjecting its own corporations, though they be engaged in interstate transport, to nondiscriminatory property taxes. It is only 'multiple taxation of interstate operations,' Standard Oil Co. v. Peck, 342 U.S. 382, 385, 72 S.Ct. 309, 310, that offends the Commerce Clause. And obviously multiple taxation is possible only if there exists some jurisdiction, in addition to the domicile of the taxpayer, which may constitutionally impose an ad valorem tax.

Nor does the Due Process Clause confine the domiciliary State's taxing power to such proportion of the value of the property being taxed as is equal to the fraction of the tax year which the property spends within the State's borders. Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150, held only that the Due Process Clause prohibited ad valorem taxation by the owner's domicile of tangible personal property permanently located in some other State. Northwest Airlines, Inc., v. Minnesota, 322 U.S. 292, 64 S.Ct. 950, reaffirmed the principle established by earlier cases that tangible property for which no tax situs has been established elsewhere may be taxed to its full value by the owner's domicile. See New York Central R. Co. v. Miller, supra; Southern Pacific Co. v. Kentucky, 222 U.S. 63, 69, 32 S.Ct. 13, 15; Johnson Oil Refining Co. v. Oklahoma, supra. If such property has had insufficient contact with States other than the owner's domicile to render any one of these jurisdictions a 'tax situs,' it is surely appropriate to presume that the domicile is the only State affording the 'opportunities, benefits, or protection' which due process demands as a prerequisite for taxation. See Ott v. Mississippi Valley Barge Line Co., 336 U.S. 169, 174, 69 S.Ct. 432, 434.

Accordingly, the burden is on the taxpayer who contends that some portion of its total assets are beyond the reach of the taxing power of its domicile to prove that the same property may be similarly taxed in another jurisdiction. Cf. Dixie Ohio Express Co. v. State Revenue Comm'n, 306 U.S. 72, 59 S.Ct. 435, 83 L.Ed. 495.

The controlling question here is, therefore, the same as it was in Standard Oil Co. v. Peck, 342 U.S. 382, 72 S.Ct. 309, where the decision whether a state property tax might constitutionally be imposed on the full value of a domiciliary's moving assets turned on whether "a defined part of the domiciliary corpus"—there consisting of boats and barges traveling along inland waters 'could be taxed by the several states on an apportionment basis.' 342 U.S. at 384, 72 S.Ct. at 310.

Since the burden of proving an exemption is on the taxpayer who claims it, we must consider whether the stipulated facts show that some determinable portion of the value of the appellant's freight cars had acquired a tax situs in a jurisdiction other than Pennsylvania.

II.

With respect to the freight cars that had been used on the lines of CNJ during the taxable year, the stipulation establishes that they 'were run on fixed routes and regular schedules * * * over the lines of CNJ * * * in New Jersey.' Their habitual employment within the jurisdiction in this manner would assuredly support New Jersey's imposition of an apportioned ad valorem tax on the value of the appellant's fleet of freight cars. Marye v. Baltimore & Ohio R. Co., 127 U.S. 117, 123—124, 8 S.Ct. 1037, 1039, 32 L.Ed. 94; Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18, 23, 11 S.Ct. 876, 878, 35 L.Ed. 613; Union Refrigerator Transit Co. v. Lynch, 177 U.S. 149, 20 S.Ct. 631, 44 L.Ed. 708; Johnson Oil Refining Co. v. Oklahoma, 290 U.S. 158, 162—163, 54 S.Ct. 152, 154; cf. Ott v. Mississippi Valley Barge Line Co., 336 U.S. 169, 69 S.Ct. 432; Braniff Airways, Inc. v. Nebraska Board of Equalization, 347 U.S. 590, 601, 74 S.Ct. 757, 764, 98 L.Ed. 967. Consequently, the daily average of freight cars located on the CNJ lines in the 1951 tax year, 158 in number, could not constitutionally be included in the computation of this Pennsylvania tax. In this respect, the Pennsylvania Supreme Court's decision (which is difficult to reconcile with its holding as to the similarly situated locomotives, note 4, supra) cannot be accepted.

III.

We conclude, however, that on the record before us Pennsylvania was constitutionally permitted to tax, at full...