Western Air Lines, Inc v. Board of Equalization of South Dakota
| Decision Date | 24 February 1987 |
| Docket Number | No. 85-732,85-732 |
| Citation | 107 S.Ct. 1038,480 U.S. 123,94 L.Ed.2d 112 |
| Parties | WESTERN AIR LINES, INC., et al., Appellants, v. BOARD OF EQUALIZATION OF the State of SOUTH DAKOTA, et al |
| Court | U.S. Supreme Court |
A provision of the Airport and Airway Improvement Act of 1982, 49 U.S.C. § 1513(d)(1), prohibits the imposition of discriminatory state or local property taxes on air carriers. However, § 1513(d)(3) provides that the prohibition does not apply to any "in lieu tax which is wholly utilized for airport and aeronautical purposes." The South Dakota Airline Flight Property Tax, enacted in 1961, is imposed on air carriers on the basis of the value of their aircraft and provides for allocation of the taxes to the airports used by the carriers, and for use of the taxes exclusively by the airports for airport purposes. This tax, which is centrally assessed, was an exception from the general state scheme of local property tax assessment at the county level. In 1978 the State exempted from ad valorem taxation all personal property that was locally rather than centrally assessed. Appellant airline companies paid their flight property taxes in 1983 under protest, unsuccessfully sought refunds from appropriate county and state authorities, and ultimately sought relief on appeals to a South Dakota Circuit Court on the ground that, because airline flight property was subject to taxation while most other personal property was exempt, the state tax violated § 1513(d)(1). The court consolidated the actions and held that the state tax was permitted under § 1513(d)(3). Although disagreeing with that holding, the South Dakota Supreme Court affirmed on an alternative ground based on its interpretation of other provisions of § 1513(d).
Held: The South Dakota tax is an "in lieu tax which is wholly utilized for airport and aeronautical purposes" under § 1513(d)(3), and thus does not violate the antidiscrimination provisions of § 1513(d). The question whether a state tax is an "in lieu tax" under § 1513(d)(3) is one of federal law, and the purpose and effect of the state tax must be examined in light of the policy embodied in the federal law. Section 1513(d)(3)'s requirement that the state tax be "wholly utilized for airport and aeronautical purposes" reflects the federal policy of preventing state and local governments from excessively taxing nonvoting, nonresident businesses in order to subsidize general welfare services for state residents. The phrase "in lieu tax" restricts § 1513(d)(3)' § protection to property taxes applied to the exclusion of any other tax on the property—that is, to taxes applied in lieu of any other possible property tax—and reinforces the policy reflected in the "wholly utilized for airport and aeronautical purposes" phrase. The South Dakota Airline Flight Property Tax establishes a method of taxing a particular type of property to the exclusion of any other tax on that property. It therefore stands in lieu of the generally applicable ad valorem property tax that had been assessed on most other commercial and industrial property in the State at the time the airline flight property tax was established. It is not necessary that in order to be exempted under § 1513(d)(3) the state tax must take the place of another tax that historically had been applied to the airline property. Pp. 129-134.
372 N.W.2d 106 (S.D.1985), affirmed.
Raymond J. Rasenberger, Washington, D.C., for the appellants.
Mark V. Meierhenry, Sioux Falls, S.D., for the appellees.
In this case we consider whether the South Dakota Airline Flight Property Tax, S.D. Codified Laws, ch. 10-29 (1982), violates the Airport and Airway Improvement Act of 1982, 49 U.S.C. App. § 1513(d). We conclude that because the South Dakota Airline Flight Property Tax is an "in lieu tax which is wholly utilized for airport and aeronautical purposes," 49 U.S.C. App. § 1513(d)(3), the tax does not violate § 1513(d).
The federal provision at issue is part of a series of congressional actions dedicated to improving the Nation's air transportation system. Aloha Airlines, Inc. v. Director of Taxation, 464 U.S. 7, 8-10, 104 S.Ct. 291, 292-293, 78 L.Ed.2d 10 (1983). In 1970, following findings that "substantial expansion and improvement of the airport and airway system is [sic] required to meet the demands of interstate commerce, the postal service, and the national defense," H.R.Conf.Rep. No. 91-1074, p. 29 (1970), U.S.Code Cong. & Admin.News 1970, pp. 3047, 3101, Congress required the Secretary of Transportation to prepare a plan for the development of public airports, and authorized the Secretary to make grants to States and localities for airport development. Airport and Airway Development Act of 1970, Pub.L. 91-258, 84 Stat. 219. Congress also established an Airport and Airway Trust Fund, maintained by federal aviation taxes, to finance airport development projects. § 208, 84 Stat. 250. Soon afterward, Congress acted to limit state taxation of air transportation. Concluding that state passenger use taxes placed "an unnecessary burden on interstate commerce," and had "a stifling effect on air transportation," H.R.Rep. No. 93-157, p. 4 (1973), Congress prohibited such taxes in the Airport Development Acceleration Act of 1973, Pub.L. 93-44, § 7(a), 87 Stat. 90.
In the Airport and Airway Improvement Act of 1982, 96 Stat. 701, Congress added a § 7(d) to the Airway Development Acceleration Act of 1973, prohibiting the imposition of discriminatory property taxes on air carriers. That prohibition, as codified at 49 U.S.C.App. § 1513(d), reads:
The South Dakota Airline Flight Property Tax, which appellants allege violates § 1513(d), was enacted in 1961. Flight property is defined as "all aircraft fully equipped ready for flight used in air commerce." S.D.Codified Laws § 10-29-1(4) (1982). The portion of the value of flight property subject to the tax is based on flight tonnage, flight time, and revenue ton miles, § 10-29-10, and this value is taxed at the "average mill rate," § 10-29-14. The statute also provides that "[t]he taxes imposed by this chapter shall be allocated by the secretary of revenue to the airports where such airlines companies make regularly scheduled landings and shall be used exclusively by such airports for airport purposes. . . ." § 10-29-15.
The South Dakota statute provides that "[f]light property of airline companies operating in the state shall be assessed for the purpose of taxation by the department of revenue and not otherwise," § 10-29-2. Airline flight property is 1 of 10 specific categories of property that are centrally assessed for purposes of taxation. Each of these categories was an exception from the general South Dakota scheme of local property tax assessment at the county level. S.D.Codified Laws § 10-3-16 (1982). In 1978, South Dakota exempted from ad valorem taxation all personal property that was locally rather than centrally assessed, § 10-4-6.1.
In May 1983, appellants, four airline companies operating in South Dakota, paid their flight property taxes for the first six months of 1983 under protest. Appellants then sued the appropriate county treasurers for a refund. Appellants alleged that, because airline flight property was subject to taxation while most other personal property was exempt, the South Dakota flight property tax violated § 1513(d)(1)(A) and (C). In each case the county answered that the state flight property tax was "utilized wholly for airport and aeronautical purposes and is in lieu of property taxes and is therefore permitted by 49 U.S.C. [App. §] 1513(d)(3)." App. 10-11. Following an unsuccessful request to seven county boards of commissioners to abate and refund flight property taxes paid after the effective date of the Airport and Airway Improvement Act of 1982, appellants sued the county commissions for abatement and refund. App. 17. Finally, appellants appealed the property tax assessment to the South Dakota State Board of Equalization. The Board of Equalization unanimously denied the appeal, holding that "the airline flight...
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