Department of Revenue, State of Fla., v. Trailer Train Co.

• Decision Date: 02 November 1987
• Docket Number: No. 87-3093,87-3093
• Citation: 830 F.2d 1567
• Parties: DEPARTMENT OF REVENUE, STATE OF FLORIDA, a State Agency and Randy Miller, its Executive Director, Plaintiff-Appellant, v. TRAILER TRAIN COMPANY, a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1567

830 F.2d 1567

DEPARTMENT OF REVENUE, STATE OF FLORIDA, a State Agency and Randy Miller, its Executive Director, Plaintiff-Appellant, v. TRAILER TRAIN COMPANY, a Delaware corporation, Defendant-Appellee.

No. 87-3093.

United States Court of Appeals Eleventh Circuit.

Nov. 2, 1987.

Jeff Kielbasa, Stephen J. Keller, Deputy Chief Counsel, Florida Dept. of Revenue, Tallahassee, Fla., for plaintiff-appellant.

Kenneth R. Hart, Ausley, McMullen, McGehee, Carothers & Proctor, Tallahassee, Fla., James W. McBride, Laughlin, Halle, Gibson & McBride, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Florida.

Before HILL and VANCE, Circuit Judges, and PROPST ^*, District Judge.

PROPST, District Judge:

This is an interlocutory appeal, brought pursuant to 28 U.S.C. Sec. 1292(b), from a judgment of the district court granting Trailer Train Company's (Trailer Train) motion for partial summary judgment. Plaintiff-Appellee Trailer Train brought this action pursuant to the Railroad Revitalization and Regulatory Reform Act of 1976 (4 R. Act) (Sec. 306), seeking a judgment against Defendants-Appellants Department of Revenue, State of Florida and Randy Miller, its executive director (collectively, Department), declaring that the Department's proposed tax assessment of Trailer Train's property for the 1982 tax year violates Sec. 306, and seeking to enjoin the Department from collecting and assessing ad valorem taxes against it for the 1982 tax year. ¹

Facts and Contentions of Parties ²

The State of Florida, through the Department, assesses and taxes all railroad transportation property within the state on an ad valorem basis. The state assessment of railroad property is allocated to each county by the Department in accordance with Fla. Stat. Sec. 193.085(4)(b)(4) (1981). The state acts as agent for the several counties in the assessment and collection process.

Trailer Train is a Delaware corporation which owns a pool of specialized railroad cars and equipment. Trailer Train is engaged in the business of leasing railroad cars to a number of railroad companies, some of which are engaged in interstate commerce operations in Florida. Trailer Train's railroad transportation property, (which is its rolling stock) consists solely of tangible personal property. On January 1, 1982, Florida totally exempted business inventory from ad valorem taxation Fla. Stat. Sec. 196.185 (1981).

Trailer Train argues that the assessment of its property at 100% of its market value violates Sec. 306(1)(a) when business inventory is totally exempt from ad valorem taxation and is not included as a part of "all other commercial and industrial property" market values. ³ Trailer Train also argues that it is protected by Sec. 306(1)(d) and that the assessment of its property is discriminatory and violates Sec. 306(1)(d) when a significant portion of the tangible personal property of other commercial and industrial taxpayers is totally exempt from ad valorem taxation.

The Department argues that the total exemption of business inventory need not be added into the calculus to determine levels of assessment of Trailer Train's property because Sec. 306 measures discrimination only between transportation property and commercial and industrial property which is "subject to a property tax levy." The Department asserts that since business inventories are totally exempt from the imposition of ad valorem tax, they do not constitute property "subject to a property tax levy" and do not come within the scope of Sec. 306(1)(a). The Department further asserts that, since Trailer Train is not a carrier, it is not protected by Sec. 306(1)(d) and that, in any event, its actions are not discriminatory under Sec. 306(1)(d).

District Court's Opinion and Order

The district court noted that it had "previously held that partial exemptions from taxation of business property impermissibly reduced the assessment ratio of such property as compared to railroad property in violation of 49 U.S.C. Sec. 11503." See Louisville & Nashville Railroad Co. v. Department of Revenue, etc., No. TCA 81-771 (N.D.Fla. June 1983), aff'd, 736 F.2d 1495 (11th Cir.1984). ⁴

The district court held that the failure of the Department to include the totally exempt business inventory in the assessed value of "other commercial and industrial property" did not violate Sec. 306(1)(a), because it "is not property subject to a property tax levy" as provided by Sec. 306(3)(c). The district court further concluded that the granting of a total exemption could be considered under the catchall "other tax which results in discriminatory treatment" provisions of Sec. 306(1)(d) and that Trailer Train's property was covered by Sec. 306(1)(d) even though Trailer Train is not a "common carrier," or "rail carrier," but is a private carline.

After making only these decisions the district court concluded that "[Trailer Train's] motion for partial summary judgment is GRANTED." The district court made no specific findings and reached no specific conclusions as to whether the total exemption of business inventory, in fact, discriminates against Trailer Train under the provisions of Sec. 306(1)(d). ⁵

This court has considered each decision of the district court and affirms all of its conclusions. The cause will be remanded for further consideration of the issue of discriminatory treatment.

Section 306(1)(a)

Section 306(1)(a) provides, in pertinent part, that, "The assessment ... of transportation property at a value which bears a higher ratio to the true market value of such transportation property than the ratio which the assessed value of all other commercial and industrial property in the same assessment jurisdiction bears to the true market value of all such other commercial and industrial property [is prohibited- ]." ⁶ (Emphasis added). Section 306(3)(c) provides, in pertinent part, that " 'commercial and industrial property' or 'all other commercial and industrial property' means all property ...' which is devoted to a commercial or industrial use and which is subject to a property tax levy." (Emphasis added). ⁷

A plain reading of the statute makes it apparent that business inventory which is totally exempt from taxation is not "subject to a property tax levy." A review of analogous holdings of other courts reinforces this conclusion.

After considering a similar argument to that made by Trailer Train here, the court in ACF Industries, Inc. v. Arizona, 714 F.2d 93 (9th Cir.1983) stated, "The Carlines's first claim is that the state ought to include in its calculation of commercial property all the business inventories in the state (which are categorically exempt from ad valorem taxes) in determining the assessment ratio. This claim has nothing to commend it but a careful lawyer's desire to leave no possible theory unexplored. We find no authority requiring untaxed property to be included in an average of assessed value for taxed property." ⁸ Id. at 94.

In Atchison, Topeka & Santa Fe Railway Co. v. Arizona, 559 F.Supp. 1237, 1241 (D.Ariz.1983), the court rejected an argument that "subject to a property tax levy" means that it could be taxed if the state chose to tax it. The court stated, "Property 'subject to' a tax levy is property which is presently taxed. Property which is for any reason tax-exempt is excluded as a form of commercial and industrial property." Id. at 1245.

In Burlington Northern Railroad Co. v. Bair, 766 F.2d 1222 (8th Cir.1985), the court determined that an Iowa rollback and credit scheme which had the effect of exempting ninety-five percent of personal property owners from taxation was discriminatory. The court noted that Burlington Northern was "excluded" "from the benefits of personal property tax rollbacks and credits which most other taxpayers enjoy." Id. at 1224. (Emphasis added). The court's analysis was under Sec. 306(1)(d) rather than Sec. 306(1)(a). The court stated: "In our judgment, section 306(1)(a) covers claims of unequal valuation ratios between railroad and other commercial and industrial property, but not classification discrimination such as is present here. Section 306(1)(d) is a broad provision intended to reach all types of discriminatory tax treatment." Id. at 1224. ⁹

In ABF Freight System, Inc. v. Tax Division of the Arkansas Public Service Commission, 787 F.2d 292 (8th Cir.1986), the court considered a claim by carriers under 49 U.S.C. Sec. 11503a. The court noted that the statute relied upon by the motor carriers "was patterned after and is virtually identical to [Sec. 306]," and agreed "that cases construing [Sec. 306] and its legislative history are relevant to an analysis of [49 U.S.C. Sec. 11503a]." Id. at 293 n. 1. The court further stated "This court has recognized by implication that courts properly may compare the assessment ratios of only like categories of property...." Id. at 298 (citing Ogilvie v. State Board of Equalization, 657 F.2d 204, 209-10 (8th Cir.), cert. denied, 454 U.S. 1086, 102 S.Ct. 644, 70 L.Ed.2d 621 (1981). Further, "[i]t is clear that Congress intended under [49 U.S.C. Sec. 11503a] 'property of the same type' is to be compared in determining whether a state taxation scheme discriminates against motor carriers." 787 F.2d at 298. The court ultimately concluded that the state did not have to compare both real and personal commercial and industrial property in determining the appropriate assessment ratio for the motor carriers' personal property.

In Arkansas-Best Freight System, Inc. v. Lynch, 723 F.2d 365 (4th Cir.1983), motor carriers, again invoking 49 U.S.C. Sec. 11503a, argued that they were being discriminated against because their rolling stock was being appraised for taxation at a higher ratio of true market value than was commercial and industrial real property. The court stated,

They [the motor carriers] claim discrimination because their personal...