Union Pacific R. Co. v. Public Utility Com'n of State of Or., 87-4211
| Decision Date | 28 March 1990 |
| Docket Number | No. 87-4211,87-4211 |
| Citation | 899 F.2d 854 |
| Parties | UNION PACIFIC RAILROAD COMPANY, et al., Plaintiffs-Appellees, v. PUBLIC UTILITY COMMISSION OF the STATE OF OREGON; State of Oregon, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Robert M. Atkinson, Asst. Atty. Gen., State of Or., Salem, Or., for defendants-appellants.
Richard G. Smith, and Eugene A. Ritti, Hawley Troxell Ennis & Hawley, Boise, Idaho, for plaintiffs-appellees.
Appeal from the United States District Court for the District of Oregon.
Before BROWNING, TANG and FARRIS, Circuit Judges.
The State of Oregon imposes a levy on railroads doing business in Oregon to recoup the costs of regulating railroad operations within that state. See Or.Rev.Stat. Sec. 756.310. Union Pacific Railroad Company sought and obtained a declaratory judgment that the levy violates a provision of the Railroad Revitalization and Regulatory Reform Act ("4-R Act") prohibiting the imposition of a "tax that discriminates against a rail carrier." See 49 U.S.C. Sec. 11503(b)(4). 1 The only question presented in this appeal is one of statutory interpretation: does Sec. 11503(b)(4) of the 4-R Act prohibit the kind of assessment imposed upon railroads by Or.Rev.Stat. Sec. 756.310? 2 We conclude it does not. 3
We first consider the nature of the assessment imposed by the Oregon statute; we then summarize the factors from which we conclude Congress did not intend to preclude imposition of such a levy by the State.
Oregon Revised Statute Sec. 756.310 is an integral part of a comprehensive scheme, administered by the Oregon Public Utilities Commission, to regulate the business of railroads and other carriers within the State of Oregon. See id. Sec. 756.040.
The regulatory scheme includes five distinct programs applicable to railroads. The first relates to safety at railroad crossings. The Commission establishes uniform standards for the location of grade crossings and necessary protective devices. It examines crossings to determine if they are necessary or in need of repair. It may close existing crossings and must approve new ones. The second program regulates the working environment of railroad employees, enforcing state safety standards for track-site walkways, track clearance and water quality and for sanitation facilities in locomotives and cabooses. The Commission's third program involves regulation of transportation of hazardous materials and wastes, principally by maintaining inventories of such materials and requiring notice of their movement. The fourth program relates to enforcement of Federal Rail Safety Program standards. The federal government provides matching funds to encourage state enforcement of such standards; approximately 42 percent of Oregon's program is federally financed. Finally, the Commission administers a "Rates and Service" program to assure "adequate rail services for Oregon rail users at reasonable rates." As part of this program the Commissioner represents Oregon rail users in legal proceedings relating to rail mergers, branch-line abandonments and rate making.
Each year the Commission calculates the fee required to defray the cost of performing the regulatory duties imposed upon it. 4 Each railroad is required to pay the Commission the railroad's proportionate share of the total cost of railroad regulation, subject to a cap of 0.35 percent of the gross operating revenue of railroads operating in Oregon. Or.Rev.Stat. Sec. 756.310(2), (3)(a). The statute stipulates that the fees collected from the railroads by the Commission "shall be used only for the purpose of paying the expenses of the commission in respect to railroads." Id. Sec. 756.360(1).
In sum, the levy at issue is an integral part of a program to regulate the railroad business in Oregon. It is imposed only upon those who participate in and profit from the business regulated. It is paid directly to the Commission and does not go into Oregon's general fund; it produces no revenues for the general expenses of government but is devoted exclusively to defraying the costs of the regulatory program itself.
Several factors support the conclusion that Congress did not intend section 11503(b)(4) of the 4-R Act to bar assessments of the kind levied by Or.Rev.Stat. Sec. 756.310.
Congress passed the 4-R Act "to provide the means to rehabilitate and maintain the physical facilities, improve the operations and structure, and restore the financial stability of the railway system of the United States." Burlington N. R.R. v. Oklahoma Tax Comm'n, 481 U.S. 454, 457, 107 S.Ct. 1855, 1857, 95 L.Ed.2d 404 (1987). Section 11503 was included to end discriminatory taxation of railroads by the states. The legislative history reflects Congress's concern that railroads were paying a disproportionate and unfair portion of the cost of state government. See H.R.Rep. No. 725, 94th Cong., 1st Sess. 78 (1975) (). The railroads actively participated in Congress's study of discriminatory taxation and submitted numerous reports to Congress on the subject during the fifteen years the problem was under consideration. Yet so far as we have been informed or have discovered in our own research, nowhere do these reports or the other legislative materials mention the states' practice of financing railroad regulation through assessments on the railroads, much less suggest that such levies were part of the problem Sec. 11503(b)(4) was enacted to solve. 5
The omission is significant. Oregon's method of financing state railroad regulatory programs was employed for many years prior to adoption in 1976 of Sec. 11503(b)(4). Oregon initiated its levy in 1908. The State of Washington, amicus curiae, informs us it instituted a similar assessment in 1921, which the Supreme Court sustained against constitutional challenges as early as 1937. See Great N. Ry. v. Washington, 300 U.S. 154, 57 S.Ct. 397, 81 L.Ed. 573 (1937). When the 4-R Act was enacted, at least 28 states funded their railroad regulatory programs in part by assessing fees to support regulatory commissions. J. Runke & A. Finder, State Taxation of Railroads and Tax Relief Programs app. 2 (1977). An amicus brief filed in the district court by the National Association of Regulatory Utility Commissioners states, without contradiction, that 35 states now fund all or part of their utility and carrier regulatory agencies by fees imposed on the affected industries. See NARUC Amicus Brief at 4 (citing NARUC 1984 Annual Report on Utility and Carrier Regulation 877-78 (1985)).
Not only were such levies widespread and of long standing when the 4-R Act was enacted, but the state regulatory programs they finance are so closely intertwined with federal programs that those concerned with such matters at the national level, in both the legislative and executive branches, could not have been unaware of the levies. See, e.g., 49 C.F.R. Part 212--State Safety Participation Regulations.
It is understandable that neither Congress nor the railroads would consider a levy such as that imposed by Or.Rev.Stat Sec. 756.310 to be part of the problem at which the 4-R Act was aimed. Since the Oregon assessment is limited by the cost of the regulatory program, and the revenues raised must be segregated from Oregon's general fund and used only to finance the program, there could be no fear the State would assess Union Pacific unfairly or for the purpose of raising general revenue in violation of the spirit of the 4-R Act.
The language of Sec. 11503(b)(4), read in light of its legislative history and the definition of the term "tax" by the courts, supports the conclusion that Congress did not intend that a levy of the kind imposed by the Oregon statute be included in and thus barred by the section.
Many years before Congress enacted Sec. 11503, the Supreme Court held in Head Money Cases (Edye v. Robertson), 112 U.S. 580, 5 S.Ct. 247, 28 L.Ed. 798 (1884), that assessments of the kind imposed by Or.Rev.Stat. Sec. 756.310 are not "taxes" within the meaning of the constitutional grant of taxing power to Congress. The Court looked both to the primary purpose of the contested levy and the primary purpose of the provision it was said to violate. 6
The Head Money Cases involved a provision in "An Act to Regulate Immigration" that required ship owners to pay a levy of 50cents for each passenger, not a citizen, entering the United States from a foreign port. Id. at 589-90, 5 S.Ct. at 249-50. The proceeds were deposited in a special fund to be used " 'to defray the expense of regulating immigration under this act, and for the care of immigrants arriving in the United States, for the relief of such as are in distress, and for the general purposes and expenses of carrying this act into effect.' " Id. at 590, 5 S.Ct. at 249 (quoting 22 Stat. 214).
The ship owners contended this provision violated article I, section 8 of the Constitution, which empowers Congress to lay and collect "Taxes, Duties, Imposts and Excises," because the provision did not "provide for the common defence and general welfare of the United States" and was not "uniform throughout the United States." Head Money Cases, 112 U.S. at 594, 5 S.Ct. at 251. "[T]he true answer to all these objections," the Court responded, "is that the power exercised in this instance is not the taxing power." Id. at 595, 5 S.Ct. at 252. The levy, the Court held, was not a tax, but "the mere incident of the regulation of commerce." Id.
The Court pointed out that the purpose of the Act was to regulate immigration and mitigate the evils incident to the business of bringing newcomers to this country; the assessment was merely a means of requiring those who profited from this business to pay the costs of regulating it. The money paid was not, "strictly speaking, a tax or duty within the...
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