Ogilvie v. State Bd. of Equalization of State of N. D., s. 80-1679
| Citation | 657 F.2d 204 |
| Decision Date | 20 August 1981 |
| Docket Number | Nos. 80-1679,80-1738,s. 80-1679 |
| Parties | Richard B. OGILVIE, Trustee of the property of the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, a corporation; Soo Line Railroad Company, a corporation; and Burlington Northern, Inc., a corporation, Appellees, v. The STATE BOARD OF EQUALIZATION OF the STATE OF NORTH DAKOTA and The Honorable Arthur A. Link, as Governor of the State of North Dakota and Chairman of the State Board of Equalization and The Honorable Byron L. Dorgan as Tax Commissioner of the State of North Dakota and Secretary of the State Board of Equalization, Appellants. Richard B. OGILVIE, Trustee of the property of the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, a corporation; Soo Line Railroad Company, a corporation; and Burlington Northern, Inc., a corporation, Appellants, v. The STATE BOARD OF EQUALIZATION OF the STATE OF NORTH DAKOTA and the Honorable Arthur A. Link, as Governor of the State of North Dakota and Chairman of the State Board of Equalization and The Honorable Byron L. Dorgan as Tax Commissioner of the State of North Dakota and Secretary of the State Board of Equalization, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Kenneth M. Jakes (argued), Robert W. Wirtz, Leo F. J. Wilking, Sp. Asst. Attys. Gen., for the State of North Dakota, Bismarck, N. D., for appellants/cross-appellees.
Byron D. Olsen, Vice President and Gen. Counsel, Minneapolis, Minn., Joseph J. Nagle, Gen. Counsel, Chicago, Ill., Steven L. Wood (argued), Burlington Northern Inc., St. Paul, Minn., Frank Magill, Nilles, Hansen, Selbo, Magill & Davies, Ltd., Fargo, N. D., for appellees/cross-appellants.
Before LAY, Chief Judge, ROSS, Circuit Judge, and VAN PELT, * Senior District Judge.
This action was brought by three railroads, to-wit, the Milwaukee (by a trustee), the Soo Line, and the BN, the full names of which are above set forth, as plaintiffs, against The State Board of Equalization of the State of North Dakota, and others above named. A provision of the Railroad Revitalization and Regulatory Reform Act of 1976, hereinafter called the 4-R Act, vests United States District Courts with jurisdiction to prevent, restrain or terminate acts by a state and others which are prohibited under the 4-R Act. It is claimed that section 306 of the 4-R Act has been violated. Judge Paul Benson heard the case. His decision and order is reported at 492 F.Supp. 446 (D.N.D.1980).
The two cases before this court involve an appeal and cross-appeal from Judge Benson's order, which prohibited the State Board of Equalization of the State of North Dakota from (1) assessing the plaintiff railroads' personal property, including trade fixtures, for the tax year 1979; and (2) assessing the plaintiff railroads' remaining property at a ratio greater than 13.24% of true market value. On appeal, the appellant State Board contends (1) that the district court erred in failing to include car line companies as "other commercial and industrial property," as that term is used in § 306 of the 4-R Act thus bringing the proper level of assessment to 13.29% of true market value; and (2) that the district court erred in excluding the railroads' personal property from tax assessment.
On cross-appeal, the plaintiff-appellee railroads allege that the district court erred in including public utilities and airline companies as commercial and industrial property, and that if these entities were omitted the proper level of assessment would be 12.2% of true market value instead of the 13.24% level ordered by the district court.
Both parties agree that this case is controlled by § 306 of the 4-R Act. 1 However, they disagree as to the proper interpretation of this statute. The goal of this legislation was "to eliminate the long-standing burden on interstate commerce resulting from discriminatory State and local taxation of common and contract carrier transportation property." 2
In order to better understand the Act, it may be helpful to refer briefly to its legislative history. The 86th Congress passed Senate Resolutions 29, 151 and 244 requesting a national transportation policy study. A preliminary draft report of the study presented during the 87th Congress consisted of over 700 pages. A portion of this report concerned ad valorem property taxation of railroads. It is stated in the report that:
(T)he Association of American Railroads was requested to submit any pertinent information available on relative tax discrimination in the matter of State and local taxes. A Table was submitted by the Association of American Railroads ... showing the extent of overpayment of railroad ad valorem taxes resulting from the assessment of railroad property at a percent of its value that is higher than the percent which the assessment of other taxpayer property is to the value of such other property. This confirmed the findings of this committee that there is a studied and deliberate practice of assessing railroad property at a proportion of full value substantially higher than other property subject to the same tax rates.
S.Rep.No.445, 87th Cong., 1st Sess. 458 (1961). The table referred to shows that in 1957 North Dakota assessed railroad property at 50% of value, while assessing all other property at 15.80% of value. Id. at 487. There were two proposals in the report to help alleviate the tax burden on railroads. One was a right-of-way exemption. The other proposal was put forth by the Association of American Railroads and was the basis for § 306 of the 4-R Act when it was enacted some 15 years later. An examination of the statute and of the language of the Railroad Association proposal shows the statute's paternity. 3
After the report was submitted to the 86th Congress, bills were introduced in the 87th, 89th, 90th, 91st, 92nd and 94th Congressional sessions dealing with this subject matter. 4 In a report accompanying a bill introduced in the 90th Congress, North Dakota is shown for the year 1965 as having valued railroad property at 45% of value, and property of others at 25% of value, resulting in a 44% excessive tax. 5 In a report accompanying a bill introduced in the 91st Congress, North Dakota is shown for the year 1968 as having valued railroad property at 40% of value, and property of others at 23.40% of value, resulting in a 41.50% excessive tax. 6 In the 94th Congress the House and Senate introduced separate versions of the bill. The main difference between the two was that the Senate bill contained a provision that any state having in its constitution a "reasonable classification of property" would be exempt from the provisions of this law. The same provision was rejected as an amendment to the House bill. In the debate it was argued that such a constitutional provision was a form of discrimination in that the constitutions of approximately nineteen states contained such provision. It was further argued that there was nothing to prevent other states from amending their constitutions before the bill took effect, and such action would defeat the bill's purpose. A conference committee composed of members of both houses recommended the adoption of what was substantially the original Senate Bill, minus the constitutional exemption provision. It passed and became § 306, supra. The law was to take effect three years after enactment.
From this history, several things are apparent. The language of § 306 finally adopted closely followed that proposed by the Association of American Railroads, as above stated. The purpose of the legislation was to remedy discriminatory taxation against railroads. North Dakota was specifically named as a State which had a history of taxing railroads at a higher and discriminatory rate. Congress was unwilling to create any type of exemption whereby a state would not have to comply with this law, 7 and states were given three years to rectify any discrimination. Appellant State Board of Equalization did not change its property tax structure during the three year interim. The parties stipulated that in North Dakota there are four classes of property: (1) farmlands; (2) residential; (3) business real estate; and (4) state-assessed. The first three classes are assessed locally. The State Board of Equalization assesses the fourth class consisting of pipeline companies, electric, gas, heat and water companies, telephone and telegraph companies, mobile radio communication companies, car line companies, and railroads.
Section 306 went into effect on February 5, 1979. The statute provides in § 306(1)(a) that transportation property may not be subject to a property tax:
... 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.
Commercial and industrial property is defined in § 306(3)(c) as:
... all property, real or personal, other than transportation property and land used primarily for agricultural purposes or primarily for the purpose of growing timber, which is devoted to a commercial or industrial use and which is subject to a property tax levy.
Transportation property is defined in § 306(3)(d) as:
... transportation property, as defined in regulations of the (Interstate Commerce) Commission, which is owned or used by a common carrier by railroad subject to this part or which is owned by the National Railroad Passenger Corporation.
In 1979, the State Board of Equalization assessed the fourth class of property at 16.8% of the market value of such property. No one disagrees that this was a higher tax than that assessed on "all other commercial and industrial property." The real issue in the case is what constitutes commercial and industrial property. Not surprisingly, the ...
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