# Norfolk & Western Railway Company v. Missouri State Tax Commission

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## Dissenting Opinion

    Black
United States Supreme Court
390 U.S. 317
Norfolk & Western Railway Co. et al. v. Missouri State Tax Commission et al.
Appeal from the Supreme Court of Missouri
No. 324. Argued: January 25, 1968 --- Decided: March 11, 1968
Appellant N & W, a predominantly coal-carrying railroad with operations centered in the eastern part of the country and which owned no fixed property and only minimal rolling stock in Missouri, leased the property of the Wabash Railroad and became obligated to pay 1965 taxes on fixed property and rolling stock located in Missouri. A state statute prescribes a formula for determining the amount of rolling stock of an interstate railroad that Missouri shall assess for purposes of ad valorem taxation. The statute apportions to Missouri a part of the entire value of all rolling stock of an interstate railroad on the ratio of miles operated in Missouri to the railroad's total road mileage. Applying that formula, which resulted in the postulation that N & W's rolling stock in Missouri constituted 8.2824% of its total rolling stock, the Missouri Tax Commission put N & W's rolling stock assessment at $19,981,757. N & W challenged the assessment, which it showed was more than 2½ times the value of N & W's rolling stock in the State on tax day and more than twice Wabash's assessment for practically the same property in the previous year. Neither N & W's rolling stock in Missouri (about 2.71% of N & W's total rolling stock by number of units and 3.16% by value), the overwhelming amount of which had been leased from Wabash, nor the Missouri operations of N & W and Wabash had materially increased in the intervening period. N & W's coal operations require a great deal of specialized equipment, scarcely any of which enters Missouri, and traffic density on Missouri tracks is but 54% of traffic density on the N & W system as a whole. The Tax Commission's assessment against N & W was affirmed on appeal. The Missouri Supreme Court held that use of the mileage formula could be justified on the theory that the rolling stock regularly employed in one State has an "enhanced value" when connected to "an integrated operational whole."
Held:
    1. Application of the mileage formula resulted in an assessment which on the record in this case went far beyond the value of appellants' rolling stock in Missouri and violated the Due Process and Commerce Clauses. Pp. 323-329.
       (a) A State may impose a property tax upon its fair share of an interstate transportation enterprise, including a portion of the enterprises intangible value. Pp. 323-324.
       (b) Though a State has considerable latitude in devising formulas to measure tangible property within its borders, it is not entitled to tax tangible or intangible property unconnected with the State. Pp. 324-325.
       (c) Appellants' evidence satisfied the burden which rests on a railroad attacking a mileage formula of showing that the formula reached assets outside the State, and Missouri has not countered such evidence here. Pp. 326-327.
       (d) Though this Court's decisions recognize the practical difficulties in applying a mileage formula, they forbid an unexplained discrepancy as gross as that here revealed. P. 327.
       (e) The record is totally barren of evidence relating to the enhanced value of property in Missouri by reason of the incorporation of such property into the entire N & W system. Pp. 327-329.
    2. The Missouri Supreme Court may remand the case to the appropriate tribunal to reopen the record for additional evidence supporting the assessment. P. 330.
426 S.W. 2d 362, vacated and remanded.
William H. Allen argued the cause for appellants. With him on the briefs were Charles L. Bacon, Frederick Beihl, James E. Carr, Melvin J. Strouse and Christopher S. Bond.
William A. Peterson, Assistant Attorney General of Missouri, argued the cause for appellees. With him on the brief were Norman H. Anderson, Attorney General, Thomas J. Downey, First Assistant Attorney General, and Walter W. Nowotny, Jr., Assistant Attorney General.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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