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 19 TAX ASSESSME NTS ON COMMON CARRIER PROPE RTY

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5OVERN MEN i

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H E A R I N G

BEFO RE T H E

SUBCOMMITTEE ON TRANSPORTA TION AND 

AERONAUTICS

OF T H E

COMMITTEE ON

INT ERSTA TE AND FOREIGN COMMERCE 

HOUSE OE RE PRESEN TA TIV ES

EIGHTY-EIGHTH CONGRESS

SE CO ND SE SS IO N

ON

H.R. 736, H.R. 10169

B IL LS TO AM EN D T H E IN T ER ST A T E CO MMER CE ACT, AS 

AMEN DED , IN O RD ER TO MAK E UNLAW FU L, AS U NR EA SO NABLE A ND U N JU ST D IS C RIM IN A TIO N A GA IN ST AND UND UE ♦

BURD EN UP ON IN T ER ST A T E CO MMER CE , CER TA IN PR O PERTY T AX A SS ES SM EN TS O F COM MON C A R R IE R P ROPERTY , 

AN D FO R O TH ER PU R PO SE S

JU LY 28, 1904

P ri n te d fo r th e use of th e 

Com m itt ee o n In te rs ta te a n d Fore ig n Co mm erc e

39-205

U.S . GOV ERN MENT PR IN TING OF FIC E 

WA SHING TON : 1964
? z—

m -

CO M M IT TEE OX IN T E R S T A T E AND FO R E IG N COM M ERCE 

ORE N H A R R IS , Ark an sa s, Ch air ma n

JO HN B E L L W IL LIA M S, M iss iss ip pi

K E N N E TH A. RO BERTS, Al ab am a 

H A R L E Y O. ST A G G ER S, West V ir gi nia 

W A L TE R RO GE RS , Tex as

SAM U EL N. F R IE D E L, M ar ylan d 

T O R B E R T H. MAC DON AL D, M as sa ch us et ts 

JO HN JA RM AN , Ok lah om a

LE O W. O’ BRIE N, Ne w Yo rk

JO H N E. MO SS, Cal if or nia

JO HN D. D IN G ELL , M ichiga n

P A U L G. RO GE RS , Flo ri da

JA M ES C. H EALEY, Ne w Yor k

H O RACE R. KO R N EG AY, Nor th Ca ro lin a 

G IL L IS W. LO NG , Lo ui si an a 

LIO N E L VAN DEER LIN , C ali fo rn ia 

J. J. P IC K L E , Te xa s 

A L B E R T W. W AT SO N, So ut h Car ol in a 

F R E D B. RO ON EY , P ennsy lv an ia

JO HN B. B EN N ET T, M ichiga n 

W IL LIA M L. SPR IN G E R , Illin oi s 

P A U L F. SCH EN CK , Oh io 

J. A R TH U R YOUNGER, Cal if or nia 

M IL TO N W . G LE NN, Ne w Je rs ey 

SAM U EL L. D EV IN E, Ohio 

A N CH ER N ELSEN , Minne so ta 

H A ST IN G S K E IT H , M as sa ch us etts 

W IL LA R D S. CU R TIN , Pen nsy lv an ia 

A B N E R W. SIB A L , Co nn ec ticu t 

GLE NN CU NNIN GH AM , Neb rask a 

JA M ES T. B R O Y H IL L , Nor th Ca ro lin a 

DO N ALD G. BRO TZ M AN , Co lora do

W . E. Wil l ia m s o n , Cl erk

K e n n et h J. P a in te r, A ss is ta nt Cl erk

Pro fe ss io na l Sta ff

A ndrew Stev en so n J a m es M. Men ge r, Jr ,

K ur t B or ch ar dt Wil l ia m J. Dixo n

Subcomm ittee on T ransp ort ation and Aerona utics

JO HN B E L L W IL LIA M S, M iss iss ip pi , Chair ma n

SA M U EL N. FR IE D E L, M ar yl an d W IL LIA M L. SPR IN G E R , Illin oi s

T O R B E R T H. MAC DON AL D, M as sa ch us et ts SAM U EL L. D EVIN E, Ohio 

JO HN JA RM AN , Ok lah om a A B N E R W. S IB A L , Co nn ec ticu t

A L B E R T W. W AT SO N, So ut h Ca ro lin a

II
C O N T E N T S

Text of— Pae®

II.R. 736___............. 2

II.R. 10169____________________ 2

Report on II.R. 736 from—

Advisory Commission on Inte rgovernmental Relations___________ 6

Bureau of the Budge t-------------------------------------------------------------- 5

Commerce Departm ent_______________________________________ 4

In terstate Commerce Commission______________________________ 2

Justice De partm ent__________________________________________ 3

Sta tem ent of—

Nelsen, IJon. Ancher, a Representative in Congress from the Sta te of

Minnesota ________________________________________________ 16

Ogden, James N., representing Association of American Railroads__ 17

Redding, Rob ert E., vice president and general counsel, Transportation Association of America__________________________________ 37

Additional information sub mitted for the record by—

Association of American Railroads:

Railroad taxes, tab le_____________________________________ 22

Reply of Mr. Ogden to questions propounded by Mr. Friedel___ 49

Scope of II.R. 736, nature of relief provided_________________ 22

National Association of Tax Administrators, letter from Charles F.

Conlon, executive sec retary __________________________________ 55

Transpo rtation Association of America:

Board of dire ctors________________________________________ 43

Info rma tion memo— It’s time to call a halt to discriminatory tax

assessments____________________________________________ 46

I I I

TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

TU ESD A Y , JU L Y 28 , 19 64

H ouse of Representatives,

S ubcommittee on Transportation and

Aeronautics of th e Committee on

I nterstate and F oreign Commerce,

Washington, D.G.

The subcommittee met, pursuant to call, at 10 a.m., in room 1334, 

Longw orth Office Building, Hon. Samuel N. Friedel presiding.

Mr. Friedel. The Subcommittee on Transportation and Aeronautics 

this morning is opening hearings on H.R. 736, introduced by Mr. Nelsen, a member of this committee, and an identical bill. H.R. 10169, 

introduced by a former member of this committee, Mr. Hemphill.

The purpose of the bill is to declare tha t it is an unreasonable and 

unju st discrimination against and an undue burden upon interstate 

commerce for a State to assess a valuation on carrier property at a 

rate higher than it assesses all other prop erty in the State and, collaterally, to provide a remedy in the Federal courts fo r carriers against 

the collection of a tax based on an unlawfu l assessment.

While I understand tha t the principal proponents of the legislation 

are the railroad carriers, the bill covers all common carriers subject to 

the Interstate Commerce Act and thus includes oil pipelines, motor 

carriers, xvater carriers, freight forxvarders, sleeping car and express 

companies, and so on.

From our study and hearings over these past years, we well can 

appreciate tha t there is a vital problem involved in this legislation 

before us. It is my understanding that, since the Tran sportation Act 

Amendments of 1958, much already has transpired in many taxing 

districts to show a recognition on the part of those districts of the 

need for mitigating, in some part, the burden which has been placed 

upon some of our common carriers, primarily the railroads. While 

muchjias been done, I assume tha t the fac t that we have the legislation 

before us is evidence th at there is much yet which the carriers feel 

should be done.

I have a great many questions in my own mind concerning the legislation, prima rily having to do with the constitutional basis upon which 

it rests, and I am sure that other members of the committee also have 

a number of questions in their minds. We shall listen attentively 

accordingly to the witnesses before us this morning and conduct such 

examination as the time may permit. I doubt, however, tha t we can 

develop, in this 1 day, all of the testimony or arguments tha t are 

required properly to reach a conclusion on the measure.

We have a copy of the bill and reports from the Interstate Commerce Commission, the Department of Justice, the Budget Bureau, 

1
2 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

and the Department of Commerce which will all be inserted at the 

proper place in the record.

(The bills, H.R. 736 and H.R. 10169, and reports follow:)

[H .R . 736, H.R . 101 69, 8S th Cong., 1s t se ss.]

A B IL L To am en d th e In te rs ta te Co mm erc e Act, as am en de d, in ord er to make un la w fu l, 

as un re as on ab le an d u nju st dis cr im in at io n agai nst an d un du e bu rd en upon in te rs ta te 

com me rce , ce rt ai n pro per ty ta x as se ss m en ts of com mo n carr ie r pr op er ty , an d fo r oth er 

pu rp os es

Be it enacted by the S enate a nd House of Re pr es en tativ es of the United States

of A merica in-Congress asse mbled, T ha t t he In te rs ta te Commerce Act, as amended, 

is amend ed by inse rti ng a ft er s ect ion 25 the reof a new sec tion 25a as fo llo ws:

“Sec. 25a. (1) Th e following actio n by any State , or sub divisio n or agency 

the reo f, wh eth er such action he tak en pu rs ua nt to a co ns titutiona l provision, 

stat ut e, or ad m inist rativ e or de r or pra ctice, or oth erw ise , is her eby decla red to 

co ns titute an unrea sonable an d un ju st discrim ination ag ai ns t and an undue 

burde n upon in te rs ta te commerce and is her eby for bid den and dec lared to be 

un la wfu l: (a ) the ass ess me nt, fo r pur poses of a pr op erty ta x levied by any 

ta xi ng d ist ric t, of prop ert y owned or used by any comm on ca rr ie r subje ct to this 

Act engaged in tran sp or ta tio n of person s or prop erty in in te rs ta te com merce at 

a val ue which bears a hig he r ra tio to th e tr ue marke t value of such prop erty 

than the assesse d val ue of all othe r prop erty in th e taxi ng di st rict su bject to 

th e sam e propert y ta x levy be ar s to the true marke t value of all such pr op er ty ; 

(b) the collection of any ta x on the portion of said asses sm ent so dec lared to be 

unlaw ful.

“ (2) No tw ith sta nd ing th e pro vision s of section 1341. tit le 28, Un ited States 

Code, or of t he c on sti tut ion or law s of a ny State , the d is tric t co urts of the Un ited 

St ates sha ll have juris diction, upon comp laint and aft er hearing, to issue such 

writs of injunc tio n or ot he r prop er proc ess, man da tory or oth erw ise , as 

may be necessary to re st ra in any State , or sub div ision or agency the reo f, or any 

per son from doing an yt hi ng or perfo rm ing an y ac t decla red by pa ra gr ap h (1) 

hereo f to be un la wfu l: Pro vid ed, however, Tha t such juris diction shall not be 

exc lusive of th at which an y Fe de ra l or St ate co ur t may oth erwi se have .”

I nterstate Commerce Commis sio n,

Wa shi ngton , D.C., J uly 77, 7.964. H o n . Oren Harris.

Chairman, Comm ittee on I nte rs ta te and F oreign Co mmerce,

House o f R epresenta tiv es, Washin gto n, D.C.

< Hear Chair man Harris : Your le tter of Fe br ua ry 15, 1963. addressed to the 

Ch air ma n of the Com miss ion and requ estin g a re po rt on H.R. 736, introduced by 

Congressman Nelsen, to am end the In te rs ta te Commerc e Act, as ame nded, in 

orde r to make unlaw ful, as unreason able an d un ju st dis cri mi natio n ag ains t and 

und ue burde n upon in te rs ta te comm erce, ce rtain prop erty ta x ass ess me nts of 

common ca rr ie r prop erty, an d fo r othe r purposes, ha s been con sid ere d by the 

Commission. I am au th or ized to submit th e follow ing comments:

_H.R. 736 w ould am end the In te rs ta te Com merce Act by inse rti ng af te r section

25, a new section 25a which wou ld make un law ful th e collection o f any tax,«levied 

by any taxing distric t, on prop erty o wned or u sed by any common ca rr ie r su bjec t 

to the act, whe n the asses sm ent for the ta x he ars a hig he r ra tio to th e true m ar ­

ket value than the a sse sse d value of all ot he r pr op erty in th e taxing d is tric t subject to the sam e prop erty ta x levy be ars to th e tr ue marke t value of all such 

oth er property. As we un de rstand it, “tr ue m ar ke t value” is not a term th at is 

used in all State s, bu t is intended to ha ve th e same meani ng as “fai r m ar ke t 

value” o r “m ar ke t value .”

Th ere ar e sev era l po int s to which we wish to invite att en tio n. One such 

point is the de term ination in a Fe de ral co ur t as to precise ly w ha t cons titutes 

“tr ue marke t val ue.” We un de rstand th at th e que stion is now deter mi ne d by 

St ate tri bu na ls. H.R. 736 wou ld sh ift the final determ inati on of “tr ue marke t 

val ue” of ca rrie r propert y, as well as th at of othe r prop erty in a taxing distric t, 

from St ate co urts to U.S. di st rict courts. Wh ile we ar e not in a position to say 

wh eth er, as a m at te r of bro ad general policy, juris diction over the se m at te rs 

should be ves ted in th e U.S. di st rict courts, it does seem th at th e issue might 

very well be rai sed in nume rou s taxi ng di stric ts, such as city , county, and Slate ,
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 3

with the result th at the determination of “tru e market value” might add substa nti ally to the alread y heavy dockets in many of our U.S. d ist ric t courts. If, 

on the oth er hand, the question of “true marke t value” were finally determined 

in a Sta te or local court, then, of course, the question of whether an injunction 

should issue might more appropriately come before a Federal court.

While a rela tively minor matter, it is not clear why this bill, which rela tes 

to ma tters of tax ation over which this Commission has no jurisdictio n, contemplates an amendment to the Interstate Commerce Act. in this form at, it may 

pose a conilict with the present provisions of section 202(b) of the act which provides, among oth er things, th at “nothing in this pa rt shall be construed to affect 

the powers of tax ation of the several States * * While this problem could 

be resolved by an appro priate amendment (by inse rting “notwithstanding the 

provisions of sec. 20 2(b)” at the beginning of proposed sec. 25a) we suggest 

th at the objective sought in H.R. 730 may lend itself to consideration sep ara te 

and ap art from the I ntersta te Commerce Act, and, if favorably considered, mig ht 

be enacted as a sep ara te sta tut e to be codified under title 49, United States 

Code—“Transpo rtation.”

Since our rep ort in the Railroad Passenger Tra in Deficit (306 ICC 417), in 

which we recommended inter alia, that States and local governments tak e such 

step s as may be requ ired to effect a gre ate r degree of equity with respect to the 

tax burden imposed on railway prop erties as compared to th at borne by taxpayers generally, an increased aware ness of the problems of the r ailroa d industry 

has been evidenced by the enactm ent by a number of States of legislation gran ting a measure of tax relief to railroads. Self-interest in the main tena nce and 

preserv ation of ade qua te commuter and oth er passenger tra in service as well 

as freight service f or local indu stries, at reasonable rate s, would seem to dictate 

sim ilar remedial actio n by other States where app ropriate to remove inequitable 

and disc riminatory taxation .

The In terstate Commerce Commission is strongly in favor of any sound proposal to s trengthen the n ational transp ortation system by eliminating inequitab le 

tax burdens on common carriers . Accordingly, we endorse the objective sought 

by H.R. 736 and, subject to the opinion of those versed in ma tters of taxation 

on (he technical aspects of th e bill, f avo r its enactment.

Sincerely yours,

Abe McGregor Goff, Chairman.

U.S. Department of J ustice,

Office of the Deputy Attorney General, 

Washington, D.C., July 24,

Hon. Oren Harris,

Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D.C.

Dear Mr. Chairman : This is in response to your request for the views of the 

Departme nt of Justice on H.R. 736, a bill to amend the Interst ate Commerce 

Act, as amended, in order to make unlawful, as unreasonable and unjus t discrim ination aga inst and undue burden upon interst ate commerce, certain propert y tax assessments of common carri er property, and for other purposes.

The bill would add a new section 25a to the Interstate Commerce Act for the 

purpose, as stated in its title, of rend ering unlawful discriminatory prop erty 

taxes levied by States on common carri er property. It would also confer upon 

the d istric t courts of the United Sta tes jurisdictio n to issue injunction s or other 

app rop riate process as may be necessary to restra in violations. Such ju risd iction 

would not, however, be exclusive of th at which any Federal or Sta te court may 

otherwise have.

Whethe r legislation such as this should be enacted involves policy consideratio ns as to which the Departme nt of J ustice makes no recommendation.

However, we note th at p ara gra ph 1(a) of the proposed new section (p. 2, lines 

4-12 of the bill) declares the assessment of a discriminatory prop erty tax unlawful. Yet, par agr aph 1(b) (p. 2, lines 12-13 of the bill), which deals with the 

collection of the prop erty tax es in question, seems to int erp ret paragraph 1( a) 

as declaring only the discriminatory portion of the assessment to be unlawful. 

This appar ent inconsistency should be clarified if the measure is to be enacted.

If in eliminating the inconsistency mentioned above, the Congress should clearly 

declare the entire assessment unlawful and proh ibit the collection of any pa rt of 

such assessment, the legislation would not give rise to any legal questions. How-
4 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

ev er, if th e Congress is inclined to mak e on ly th e dis cr im in at or y po rtio n of the 

ta x u nl aw fu l an d un co lle cti ble, co ns id er at io n mus t be giv en to Mos es Lak e Hatties, Ine., et al. v. Grant Cou nty (365 U.S. 744 (1961), a t p. 75 2), of whi ch th e Cou rt s ta te d :

“T he eff ect of th e C ou rt’s rem an d w as to dir ec t th e d is tr ic t court to de cree a 

va lid ta x fo r th e in va lid one wh ich th e S ta te ha d at te m pte d to ex ac t. The dis ­

tr ic t co urt ha s no po we r so to de cree . Fed er al co urts ma y not as se ss or levy 

taxe s. On ly th e appro pri at e ta xin g officials of G ra n t Co un ty m ay as se ss an d 

levy ta xes on th es e leas eh olds , an d th e Fed er al co urt s may de term in e, w ith in 

th eir ju ri sd ic tion , only w het her th e ta x lev ied by th os e officia ls is or is no t a 

va lid o ne.”

Thi s ho lding lea ve s und et er m in ed th e qu es tio n of w het her th e Co ng ress may 

co ns titu tiona lly en ac t such a st atu te . Su ch an en ac tm en t, th er ef ore , could be 

ex pe cted to g ive rise to li tigati on to r es olve th is qu estio n.

Th e B ur ea u of th e Bud ge t lia s ad vi se d th a t th er e is no ob jection to th e su bm issio n of th is re po rt from th e st andpoin t of th e adm in is tr ati on’s pr og ram.

Sinc erely y ou rs,

N ic hola s df.B. K atz en bach,

Deputy At torney General.

Gen er al Coun se l of t h e D ep artm en t of Comm er ce ,

Washington, D.C., July 28,1964. Ho n. Ore n H arr is,

Chairman, Committee on Inter sta te and Foreign Commerce,

House o f Representatives, Washington, D.C.

D ear Mr. C h a ir m a n : Thi s le tt e r is in fu rt h e r repl y to you r re qu es t fo r th e 

view s of th is D ep ar tm en t w ith re sp ec t to II.It. 736, a bill to a m en d th e I n te rs ta te 

Co mm erc e Act, as am en de d, in or de r to m ak e un la w fu l, as un re as oa bl e an d 

u n ju st di sc rim in at io n ag ain st an d un du e bu rd en upon in te rs ta te comm erc e, 

ce rt ain pr op er ty ta x as se ss m en ts of com mo n ca rr ie r pro pe rty, an d fo r oth er 

pu rpos es.

Th e bill wo uld in se rt a ne w section 25(a ) in th e In te rs ta te Comm erc e Ac t to 

pro hib it an y Sta te or su bd iv isio n or ag en cy th er eo f fro m as se ss in g, fo r pu rp os es 

of a pr op er ty ta x levied by an y ta xin g dis tr ic t, pro pe rt y ow ne d or us ed by an y 

comm on carr ie r su bj ec t to th is act en ga ge d in tr ansp ort ati on of pe rs on s or 

pr ope rt y in in te rs ta te comm erc e a t a va lu e which bear s a hig her ra ti o to th e 

tr u e m ar ket va lue of suc h pro pe rty th an th e asse ssed val ue of all oth er pro pe rt y 

in th e ta xi ng dis tr ic t su bj ec t to th e sa m e pr ope rt y ta x lev y bea rs to th e tr u e 

m ark et va lue of all su ch pr op er ty . Th e co lle cti on of an y ta x on th e port io n of 

sa id as se ssm en t in ex ce ss of such ra te s wo uld also be de cl ar ed to be un la w fu l.

Th e bil l fu rt h er pr ov ides th at, not w ithst an din g th e pr ov isio ns of section 1341, 

ti tl e 28, United S ta te s Code, or of th e const itut io n or laws of an y Sta te , th e 

d is tr ic t co ur ts of th e U ni ted S ta te s wo uld ha ve ju ri si dic tion, up on co m pl ai nt 

an d aft e r he ar in g, to i ssue w ri ts o f in ju nc tion or oth er pr oper p roce ss to re str ain 

an y Sta te , or su bd ivision or agency th er eo f, or an y pe rs on from do ing an yt hin g 

de clared by the bil l to b e u nl aw fu l.

S ta te an d loc al go ve rn m en ts de riv e su bst anti al re ve nu es from ta xes on pr op ­

er ty owned by com mon ca rr ie rs , part ic ula rl y th e ra il ro ads an d pipe lin es. 

D es pite S ta te la w s re qu irin g un ifor m ta x tr eatm ent, in man y S ta te s ra il ro ads 

an d pipe lin es are d is cr im in at ed again st as c om pa red to oth er pro pe rty ta xpayers 

in th e sam e ju ri sd ic tion, du e in larg e, m ea su re to long -estab lis he d pr oc ed ur es 

fo r as se ssm en t of pr op er ty . Some S ta te s ap ply as se ss m en t by a sing le centr al 

agency, which pe rm its a re la tive ly accura te metho d of as si gn m en t of va lue. 

Ho we ver, oth er S ta te s perm it loc al as se ss m en t which per m its in dis cr im in at e 

as sign m en t of va lu es an d consi derab le, v ar ia tion in as se ssm en ts.

Th e D ep ar tm en t o f C om me rce agr ee s in princ ip le t h a t com mon carr ie r pro per ty 

sh ou ld no t face di sc rim in at io n in pro per ty ta x as se ssm en ts. Su ch dis cr im in ation s ha ve bee n a co nc ern of th e tr ansp ort ati on in dust ry fo r man y ye ar s. The 

sco pe of th is prob lem w as ou tli ne d in p a rt VII, chapte r 1, pa ge s 465 -466 , of th e 

re port of th e Sen at e Com mittee on Co mm erc e on “N at io na l T ra nsp ort ati on 

Po lic y” (87th Cong., 1st sess., R ep ort 445, Ju ne 26, 1961), ot he rw ise kn ow n as 

th e Doyle re po rt.

The D ep ar tm en t, ho we ve r, rec og nizes th a t th ere are dif fic ultie s of ta x ad m in ­

is tr ati on an d lack of ex pe rien ce w ith Fed er al le gi sl at io n of th is kind . F or th is
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 5

reason it does no t seem advisable to enact Fed era l legislation unt il other altern a­ tives are tested with respect to this problem. It is also possible th at oth er property, such as ind ustrial plants and uti lity facilities, may face the same situation as railroads and pipelines. The Department h as been encouraged by re cent a ctivities of the Advisory Com­ mission on Inter-go vernmenta l Relations, which in June 1964, recommended dr af t legislation for Sta te enac tment applying to uniform and equitable property taxation. The Commission suggests th at enactm ent by Sta tes of thi s uniform concept, would go far toward alleviating the problem of disc rimination in assess­ ments. This kind of approach, we believe, should be tested prior to the con­ sidera tion o f any Federal legislation in the field. For the foregoing reasons the Dep artm ent would not recommend favora ble 

action on H.R. 736. We have been advised by the Bureau of the Budget th at there would be no objection to the submission of our rep ort from the stan dpo int of the adm inistra tio n’s program.

Sincerely, L aw ren ce J o nes,

Acting General Counsel.

E xe cu tive Of fic e of t h e P res id en t,

B u rea u of t h e B udge t,

D.C., July 28,196.’f.

Hon. Oren H arris.

Chairman, Committee on Interstate and Foreign Commerce, 'House of Representatives, Washington, D.C.

Dear Mr. Chairm an: T his is in reply to your lette r of Feb rua ry 13, 1963. re­ questing the views of the B ureau of the Budget on H.R. 736, a bill to amend the In terstate Commerce Act, as amended, in order to make unlawful, as unreasonab le and un just discrimination again st and undue burden upon interstate commerce, certain prop erty tax assessments of common-carrier property, and for oth er 

purposes. This bill would amend the In terstate Commerce Act to make unlawful, as an undu e burden on intersta te commerce, the assessment of property owned or used by any common carrie r engaged in interst ate tra nsporta tio n at a higher ra tio to tru e ma rke t value tha n th at imposed on a ll other property subject to the gen eral property tax in the same jurisdictio n. The Bureau of the Budget supports the objective of the proposed legislation, which is consistent with the adm inistration’s tra nsporta tio n policy set forth in the transp ortation message of April 5, 1962. It app ears questionable, however, whether the bill provides a workable solution to the complex technical problem of dete rmining fair ma rke t value of utility property for tax purposes. Fu rthe r­ more, assig ning responsibility for such determ ination s to the U.S. cou rts rais es 

serious issues. In a let ter of July 8, 1964, the Administrative Office of the U.S. Courts informs us th at the Jud icia l Conference voted to disapprove a sim ilar bill intro duce d in the 87th Congress a nd expresses the view t ha t its Committee on Revision of L aws would tak e the same position on thi s bill. The cu rren t formal position of the comm ittee cannot, however, be obta ined until its next meeting in Septem ber 1964. The Departme nt of Justice , in a report alread y sen t to your committee, notes technical inconsistencies in the bill and questions its con stitutionality. While it favo rs the objective of H.R. 736, the Interstate Commerce Commission, in its re­ port to your committee, question s the ap propria teness of amending the In terstate Commerce Act to achieve this purpose and points to a possible conflict with other 

provisions of the act. The staff of the Advisory Commission on Inte rgo ver nmental Relations, in a lette r to the Bureau of the Budget on March 13, 1963, copy enclosed, also expresses doubt th at H.R. 736 is an app rop riate vehicle by which to move to ward the solu­ tion of the u nderlying problem. On the basis of a comprehensive study of Sta te tax ation entitled ‘‘The Role of the S tates in Strengthen ing the Property Tax.” the Commission’s staff has prepared a dr af t bill for ena ctment by Sta te legislatures. This bill has the same objective as H.R. 736 and is preferred by the Commission. Copies of the basic study and the d ra ft bill are enclosed. For your convenience,

39 -2 05—6 4------2
6 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

parts of chapter 13 of the report dealing with the tax ation of railroad property have been marked by the Commission’s staff.

The B ureau of the Budget concurs with the reservations expressed by the vari­ ous agencies that have reviewed the bill and, therefore, is unable to recommend enactm ent.

Sincerely yours,

P h il l ip S. H u g h es,

Assistant Director for Legislative Reference.

Advisor y Co m m is sio n on I nte rg ov er nm en ta l R el atio n s,

A

TFa«Aiwpfo», D.C., March 13,1963. s sis ta n t D irecto r for Leg is la ti ve R ef er en ce,

U.S. Bureau of the Budget,

Washington, D.C.

(Attention: Mr. W. H. Rommel).

D ea r Sir : This is in reply to your request of Feb rua ry 26 for our comments on II.R. 736, to amend the Interstate Commerce Act, as amended, in order to make unlawful, as unrea sonable and unjus t discrimination against and undue burden upon interstate commerce, certain prop erty tax assessments of common ca rri er property, and for other purposes.

The app are nt objective of the proposed amendment is to relieve the economic pressure on the railroads by safeguarding them aga inst discriminatory property assessments. This is clearly a desirable objective. We are doubtful, however, that Federal legislation is the app rop riate vehicle for improving the qua lity of Sta te and local tax adm inistration.

In most States railroads and other public utility properties are centrally assessed for property tax purposes by Sta te agencies. The accepted practice, fairly universally endorsed, is to assess the operating property of public utilities which cross jurisdictiona l lines uniformly thro ughout the Sta te and to allocate the tota l value among the tax ing jurisdictions by form ula. The proposed amendment would make it unlawful for a Sta te agency to assess railroad prop erty owned by an inter sta te company at a ratio of assessed value to market value that is higher than the rat io used in the local jurisdictio n levy­ ing taxes aga inst such property. Since assessment ratios vary considerably among taxing jurisdic tions in virtually every State, the Sta te agency would be required to assess railroad property by applying a different ratio in each jurisdiction.

The quality of property assessments leaves much to be desired in a large number of States. A compulsion upon tax assessors to reduc e discriminatio n against railroad s would tend to stim ulate sim ilar relie f for other groups, if for no other reason, because those similarly situ ated, as for example the other utilitie s, would press for equal treatm ent. In the general situation this ap­ proach would reduce inequities through a reduction in the level of property assessm ents, and therefore, at the expense of the revenue-producing potentia l of the property tax. A more constructive approach would require that the goal of improved equity between classes of prop erty be coupled with an improved level of assessment. However, such general improvement of the prop erty tax can originate only with the Sta tes and should orig inate there rather than at the national level. While considerations of intersta te commerce are impo rtant, they occupy a subo rdinate position to the requirem ent of this Federal system of government that, subject only to the limitations of the Constitution, the State s, as the Federal Government, are free to shape their own and their political sub­ divisions’ tax systems.

At its next meeting, this Commission has scheduled for consideratio n and actio n a repo rt th at deals in depth with property tax adm inistration. It in­ cludes a number of recom mendations for Sta te legis lative and adm inistrative action to improve the qua lity of prop erty assessments and to strengthen the assessment review-and-appeal mach inery for the protectio n of taxpayers who believe themselves to be tre ate d unfairly. These recommendations reflect the belief that States can and should exe rt lead ersh ip in the elimination of inequities in prop erty taxatio n, which presently discrim inate aga inst different classes of property.
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 7

Several States, as you may know, have assumed leadership in guiding the ir 

local governments in the improvement of the qua lity of prop erty tax administration. The results attain ed by some of them leave no doubt that such leadership offers a n effective ap proach to pro perty tax reform.

For these reaso ns we would counsel strongly aga inst favo rable consideration 

of the approach represented by the bill II.R. 736. In the time available, it has 

not been practicable to asc ertain the individual views of the members of the 

Commission on the specific provisions of H.R. 736. Therefore, the views here 

expressed can best be ch aracter ized as those of th e staff.

Sincerely yours,

Wm. G. Colman, Exe cutive DirectorPreliminary Draft, for Discussion Purposes

Advisory Commission on Inte rgovernmental Relations, Jun e 1964 

SU GG ES TE D PROPE RTY TA X L E G IS L A T IO N1

T itle

I. P ro pert y Ta x Su rv ey C om miss ion.

II. A dm in is tr at iv e O rg an iz at io n and Po wer s.

III . A ss es sm en t S ta ndard s an d M ea su re m en t of A ss es sm en t Per fo rm an ce .

IV. E qual iz at io n Pro ce du re s.

V.T ax Re vie w an d App ea l Pro ce dur es .

Suggested Legislation

(Title should conform to state requirements. The following is a suggestion: 

“An omnibus act th at creates a property tax survey commission ; amends various 

sta tutory provisions relating to prop erty tax assessment standa rds, organization 

and equaliz ati on; and esta blishes an independent property tax review procedure.” )

TIT LE I----P RO PE RTY TA X SU RV EY CO M M IS SIO N

Section 1. Property Tax Survey Commission. The re is hereby created a 

commission of ( ) members for the general purpose of making a thorough

examination of the property tax adm inistration with responsibility for making 

specific recommendations to the Governor and each session of the Leg islature 

not later th an ( ) of each ( ) numbered year.

Section 2. Commission’s Duties. The scope of the Commission’s d uties is as 

follow s:

(a) To ascertain whether ade qua te provision is being made for continuing 

stud y and analysis of the property tax by the research division of the [St ate 

Tax Agency] and by the appro priate legislative committees so as to insure th at 

this ma jor revenue source serves an app rop riate role in the overall sta te and 

local tax and revenue struc ture.

(b) To determine (1) whethe r any constitutional provision unduly res tricts 

legis lative and gub ernatorial flexibility and respo nsibility for producing and 

mainta inin g a productive and adm inistrab le prop erty tax system and, (2) 

whether the prop erty tax laws generally need a thorough reex amn ation, overhauling, and recodification.

(c) To reexamine the sta te’s property tax exemption policies to insure th at 

this indirect subsidy privilege is extended only on clear dem onstration of public 

int ere st and is limited to those cases in which the tax exemption method is 

preferab le to outright gra nts supp orted by appropriations.

(d) To recommend a procedure for reim bursing local communities for the 

amounts of tax loss sustain ed in the instanc e of manda tory tax exemptions 

extended to individuals as personal welfare aid and as expressions of personal 

esteem.

1

 T his d ra ft , part ic u la rl y ti tl e V, dra w s liber al ly on S ta te ta x laws , es pe cially M ar ylan d. 

A nnota te d Cod e (1 95 7) , a rt. 81, secs. 22 4- 23 1, an d M as sa ch use tts, Gen er al La ws , C. 58A, 

sec s. 1- 13 .
8 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

(e) To make a thorough review of all regulatory or partial exemptions from tax liability based on assessed valuations made by local assessment officials, to consider the desirability of their continuance from the point of view of sound l>olicy, and with respect to those exemptions tha t may be continued, to recom­ mend such adjustments as would be called for by the adoption of the market value determinations of the [State Tax Agency] as the uniform measure for all such regulatory or partial exemption from property tax liability.

(f) To review all state imposed limits on the taxing and borrowing powers of*local government tha t are related to assessed valuation set by local assessment officials, to consider the desirability of their continuance, and for any tha t may be continued to recommend such adjustments as would be made necessary by the adoption of the market value determinations made by the [State Tax Agency] as the uniform base for restricting the taxing and borrowing powers of local governments.

(g) To review all State financial grants to school districts and local govern­ ments th at use assessed valuations set by local assessment officials as a measure of local fiscal capacity and tax effort and to recommend such adjustments as may be necessitated by the adoption of the marke t value determinations of the I State Tax Agency] as an equalized measure of local fiscal capacity and tax effort.

(h) To evaluate the structure, powers, facilities, and competence of both the [State Tax Agency] and local property tax offices and on the basis of such evaluations to recommend one of the following policies for legislative enact­ ment :

(1) Centralized property tax administration, with each local govern­ ment levying the amount of taxes tha t it wishes and the state providing all professional services for the assessment, collection and enforcement of the prop­ erty tax liability.

(2) Centralized property assessment administration, with the valuations certified to local officials as the basis for their billing and collection of taxes. (3) Coordinated joint state-local administration with the [Sta te Tax Agency] granted all appropriate supervisory powers and facilities but whose assessment responsibilities would be confined to property of types (1) tha t customarily lie in more than one district and do not lend themselves to piecemeal local assess­ ment; (2) tha t require appraisal specialists beyond the specialized skills of most local district staffs; and, (3) that can be more readily discovered and valued by a central agency.

(i) To evaluate the present administrative-judicial hierarchy of agencies for assessment review and appeal in order to determine whether taxpayers have ready access to effective legal remedies.

Section 3. Composition op Commission. The Governor shall appoint ( ) members of the commission and he shall designate the chairman of the com­ mission.

Section 4. Term. The term of office shall be (4) years but the life of the commission may be continued from time to time as deemed necessary by the Legislature.

Section 5. Staff. The commission may employ such research or adminis­ trative staff as it deems necessary outside the classified service.

Section G. Powers. The commission may hold public hearings in various parts of the state and subpena and swear witnesses.

Section 7. Per Diem and Expenses. Members of the commission shall re­ ceive per diem of (.$ ) for each full day of attendance at a meeting of the commission plus their actual and necessary expenses incurred in the discharge of their official duties. Members of the commission who are also members of 

the legislature shall not receive per diem but shall be entitled to reimbursement for their actual and necessary expenses.

Section 8. Appropriation. An appropriation of ($ ) is authorized for the expenses of research projects and studies of state governmental problems. This appropriation may be used for projects conducted by the executive office and cooperative projects conducted by the university of [ ] or other state agencies. In addition to materials and expenses and capital outlay this appropriation may be used for consultative services and expenses of advisors and for expert assistants and temporary employees who may be employed or ap­ pointed without regard to the classified service.

Section 9. Effective Date. (Insert effective date)
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 9

TITLE I I— AD MINIS TRAT IVE ORGANIZATION AND POW ERS

Section 1. Purpose. Title II sets forth the organizational anti staffing requirements and apportions assessing jurisdiction for a joint State-local administration of the property tax on a professionalized basis.

Section 2. Division of Property Taxation. There is hereby created a Division of Property Taxation within the [State Tax Agency] with the powers and 

duties in this Act specified.1

Section 3. Director of the Division of Property Taxation.

(a) The head of the Division of Property Taxation shall be the director, who 

shall be appointed by the [Commissioner] of the [State Tax Agency] and shall 

hold office thereafter under the provisions of [Statutory Citation] of the [State 

Merit System.] 1

Section 4. Duties of the Director of Property T ax Division. The Director 

shall be charged with the duty of administering and enforcing all laws now in 

force or which may hereafte r be passed relating to the supervision of local proie 

erty tax administration and the central assessment of property subject to ad 

valorem taxation. He shall also exercise such other rights, duties, obligations, 

and functions as may now or hereafte r be conferred upon him by law or by the 

(Commissioner) of the [State Tax Agency.]

Section 3. Staff. The Director shall have such assistants, statisticians, 

appraisers, clerical staff, and professional consultants as provided for in the 

budget.

Section 6. Certification of Professional Qualifications for Assessors and

Appraisers. The [State Tax Agency] shall be empowered to establish the professional qualifications of all tax assessors and appraisers employed by the State 

and local assessment jurisdictions and to certify candidates as to their fitness 

for employment on the basis of examinations given by it or of examinations 

satisfactory to it given by a state or local personnel agency, and to revoke such 

certification fo r good and sufficient cause. No person shall hold or continue in the 

office of assessor or to appraise property for taxation who is not thus certified.

Section 7. General Supervisory Power. The [State Tax Agency] may do 

any act or give any order to any local board of equalization or local assessor as to 

the valuation of any property or class of property which the [State Tax Agency) 

deems necessary so that all taxable property is assessed according to the law.

Section 8. Research.

(a) The [State Tax Agency] is authorized to require local assessors and other 

local officers to report to it dat a on assessed valuations and other features of the 

property tax for such periods and in such form and content as the [State Tax 

Agency] shall require. The [State Tax Agency] shall so structure its system for 

the collection and analysis of property tax facts as to enable it to make interstate .comparisons based on property tax and assessment ratio data compiled for 

other states by the United States Bureau of the Census and published in its 

property tax studies.

(b) The [State Tax Agency] shall publish annually, meaningful digests of 

property tax data together with the findings of the county assessment ratio 

studies.

Section 9. Publicizing Tax Exemption Information. In order tha t taxpayers may be kept informed, the [State Tax Agency] shall by appropriate regulation require the regular assessment of all tax exempt property, compilation 

of the totals for each type of exemption by taxing districts, computation of the 

percentages of assessed valuation th us exempt in each taxing district and publication of the findings. Such publication should also present summary information on the function, scope, and nature of exempted activities.

Section 10. Provision of Necessary Assessment T ools and Facilities. The 

[Sta te Tax Agency] is authorized to direct the governing body of any local government to provide the local assessor with the requisite basic tools, equipment, 

and office facilities deemed essential to the effective performance of the assessment function.

1

 As an al te rn at iv e fo r St ates In whi ch orga niz ation fo r ta x ad ministra tio n is diffused, the agency sho uld be given pro minen ce as a se pa rate de pa rtm en t or bureau . It may be desirable to have the career ad m in is trat or serve un de r a multi-m ember commission ap ­

po inted fo r overlappin g term s.
10 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

Section 11. Prescription and Provision of a Property Tax Record System. The I State Tax Agency] shall devise, prescribe, supply, and require the use of 

all basic types of forms deemed necessary for effective adm inistration of the 

prop erty tax laws. The [State Tax Agency] is authorized to take such supe rvisory action as deemed necessary to insure that property tax record systems are 

kept current.

Section 12. Tax Maps. The [Stat e Tax Agency] shall require each local assessment jurisdiction to insta ll and maintain tax maps in accordance w ith sta ndard s specified by the [St ate Tax Agency]. To correct mapping deficiencies, the 

[St ate Tax Agency] shall eith er ins tall standard maps or approve mapping plans 

and supervise map production. The local governing body shall reimburse the 

Sta te on an at-cost-basis for all tax maps installed by the [State Tax Agency]. 

The [S tate Tax Agency] is authorized to take such supervisory action as deemed 

necessary to insure that tax maps are kept current.

Section 13. Provision of T ax Manuals and Guides.—To promote assessment uniformity, the [St ate Tax Agency] shall prepare, issue, and periodically revise 

guides for local assessors in the form of handbooks of rules and regulations, appra isa l manuals, special manuals and studies, cost and price schedules, and news 

and reference bulletins.

Section 13. Provisions of Tax Manuals and Guides. To promote assessment rolls, tax rolls, and tax bills, the [St ate Tax Agency] is authorized to take such 

action as may be appropriate to enable the smaller tax jurisdictions on a cooperative basis to tak e advan tage of autom ated da ta processing.

Section 15. Provision of Professional and Technical Services.

(a) Whenever a local government by order of its legislative body requests the

[Stat e Tax Agency] to provide professional or technical services for the a ppraisal 

or rea ppraisa l of properties therein, the [St ate Tax Agency] may, according to 

the comparative need thereof, provide personnel and other assistance to aid local 

assessors. The [Stat e Tax Agency] shall presc ribe the methods and specifications for the app rais al or rea ppraisal of property. The legislative body of the 

local government shall reimburse the state on a ( ) basis. To assist

local government bodies in budgeting for such services, the [Stat e Tax Agency] 

shall submit to each local assessor not lat er than ( ) an estimate of

the costs thereof for the following fiscal year.

(b) The [State Tax Agency] shall provide to the various local assessment

jurisdictio ns the services of qualified appra isal engineers for the app raisal of 

(princip al industrial properties) situated within each jurisdiction. The properties 

shall be determined by the [St ate Tax Agency] af ter consulta tion with local 

assessors. In making such determinations, the [Stat e Tax Agency] shall take into 

account the ability of the various assessors to perform such (in dustrial ) appra isals with their own personnel and the v arying amo unts of (in dustr ial ) property situated in the localities. Local taxing jurisd iction s’ reimbursement of the 

sta te for such services shall be on a ( ) basis. To assist local governing

bodies in budgeting for such services, the [St ate Tax Agency] shall subm it to

each county assessor not later th a n --------------an estima te of the costs thereof

for the following fiscal year.

Section 16. Training and Orienting of Assessors.

(a) The [St ate Tax Agency] shall sponsor, in cooperation with educational 

institutions, formal in-service training programs on the technical, legal, and 

adm inistrative aspects of the assessment process. The State Fiscal Officer is 

authorized to reimburse the basic partici pation expenses incurred by assessors 

and othe r qualified persons requested to att end such traini ng programs.

(b) The [Stat e Tax Agency] in cooperation with the educational institu tions 

shall plan and conduct pre-entry courses of study and shall also conduct or arra nge 

for regular internsh ip trainin g programs.

Section 17. Enforcement of Assessment Standards. To assure th at assess­ ing throughout the S tate meets a t least acceptable minimum standa rds, the [Stat e 

Tax Agency] shall determine the minimum level acceptable assessment perform ­

ance that can be tolerated , and the [Stat e Tax Agency] shall provide app ropriate 

assessment adm inistra tion, at the local jurisd iction ’s expense, in those local 

jurisdic tions that fail to meet the minimum standa rd. The criteria to be used 

in the determination of such cases shall inc lud e:

(1) Failure to ma intain adequate ta x maps and record systems ;

(2) Failure to meet minimum personnel requirements ; and

(3) Assessments disclosing an index of inequa lity clearly in excess of a specified 

level of tolerance.
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 11

Section 18. Creation of the Appointive Office of County Assessor and the

Abolition of the Elective Office of Assessor.

(a) Effective (--------------), there is create d in each county the appointive office

of County Assessor and, effective the same date, the elective office of [county, township, city] assessor is abolished.

(b) The chairman of the county board shall appoint the Assessor from a list of 

certified can didates prep ared by the [St ate Tax Agency]. Whenever a vacancy 

occurs, the (Commissioner) of the [State Tax Agency] may designate a person 

to car ry on the duties of the office until such time as some person can be duly 

qualified a nd appointed. All vacancies occurring in the office of County Assessor 

shall be filled in the manner prescribed in this sub-section.

(c) The County Assessor may be removed from the office by the (Commissioner) of the [Stat e Tax Agency] or by the chairman of the county board for 

cause, in cluding incompetence.

(d) Any elected county assessor who is in office on (-------------------------) shall

succeed to the appointive office of County Assessor in his county for a term to

expire on (________________ ), if he so desires and if he makes application for

such office on a form supplied by the [St ate Tax Agency] for this purpose. If 

the incumbent on (_____ ) passes the qualifying exam ination, he shall be

appointed County Assessor.

Section 19. Minim um Staffing Requirements for Local Assessment J urisdictions. The [Stat e T ax Agency] is au thorized to prescribe and to enforce minimum professional staffing requirements in all local assessment districts.

Section 20. Division of Assessment Jurisdiction Between State and Local

Agencies. The County Assessor shall assess all classes of taxable property not 

specifically designated by lawr to be assessed by the [St ate Tax Agency]. The 

County Assessor shall also assess those classes of tax exempt prop erty as may 

be deignated by the [S tate Tax Agency] for special treatment. •

Section. 21. Adoption of the County Assessor’s Valuation By All Local

Taxing Districts. In order to abolish overlapping assessment dis tricts and to 

eliminate wasteful duplication of work, the [St ate Tax Agency] is directed to 

order each local tax ing unit to adopt for property subject to its tax the assessed 

valuations prep ared by the county assesso r’s office.

Section 22. Authorization for the Creation of Multi-County Assessment

Districts.

(a) In order to give each local assessment dis trict the size and resources it 

needs to become an efficient assessment jurisdic tion, any two or more counties 

may enter into an agreeme nt for joint assessment of taxable property provided 

such agreement has been approved by the (Commissioner) of the [St ate Tax 

Agency].

(b) The agreeme nt may provide f or th e abolition of the office of local assessor 

in any contrac ting u nit where the assessment of p roperty within it is to be made 

under the agreement by anoth er assessor. In such case, the office of assessor 

in that unit shall cease to exis t upon the date fixed in the agreement.

(c) When the agreem ent provides for joint employment of an assessor, he shall 

be appointed and removed in a man ner and shall hold office for such term as is 

provided in the agreement.

TIT LE I I I — A SSE SSM E N T ST AN DA RD S AN D M EA SU REM EN T OF A SS ESSM EN T 

PE RF OR MANCE

Section 1. Purpose. The leg isla ture hereby finds and declares that a reasonable degree of assessment uniformity can be more readily attained by abolishing fixed assessment levels (subject to enforcement of a specified minimum 

level of assessment) and giving the assessor a flexible range of action, but 

requiring the [State Tax Agency] to determine annually by assessment ratio 

stud ies the average level of assessment in each assessment distric t and to 

supply this info rmation to the taxpayers.

Section 2. Defin ition s.

(a ) “Cu rrent market value” means the estim ated price a property would 

brin g as of the assessment date in an open market on a sale between a willing 

seller and a willin g buyer, both conv ersant with the property and with prevailing general price levels.

(b) “Assessment level” mean s the percentage relation ship which the assessed 

value of taxab le property bears to its cu rrent m ark et value.
12 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

(c) “Assessment ratio stud ies” means the comparisons, on a sampling basis, 

of the bona fide sales prices of sold properties with their assessed valuation s, 

and the application of sta tistical procedures to determine assessment levels and 

to measure nonuniformity of assessm ents. Ex pert app raisals by a technicia n 

other tha n the assessor may be used to supplement sales prices for classes of 

prop erty whose sales do not provide an ade qua te sample or app raisals may be 

used as an altern ative to sales ratio studies.

(d) “Coefficient of int ra-are a dispersio n” mean s the percentage which the 

average of the deviations of the assessment ratios of individual sold (or appraised ) prop erties bears to the ir median ratio. The resulting percentage, 

which measures dispersion or scatt er above and below the average, serves as 

an index of assessment inequality.

Section 3. Tax Base Determination. All classes of taxable prop erty shall be assessed at the same percentage of curre nt ma rke t value with in each assessment jurisdic tion. No assessment level so estab lished shall be lower tha n 

( ) percent of curre nt market value as determined by the assessment rati o

studies made by the [State Tax Agency] pursu ant to (statutory cit ati on ). 

In the event that an assessment ratio study reveals that the prevailing general 

assessment level with in a county falls more than 10% below the minimum 

assessment level prescribed by law, the [State T ax Agency] shall issue an orde r 

directing the app rop riate local officials to make such horizontal adjustments 

in the assessment base as are necessary to secure compliance with the law.

Section 4. Preparation of Assessment Ratio Studies. The [Stat e Tax Agency] shall annually conduct comprehensive assessment ratio studies of the 

average level of assessment and the degree of inequality of assessment overall 

and for each major class of prop erty in each assessment dis trict in the state. 

In orde r to determine the degree of inequality in the assessment of major 

classes rtf property within each assessment jurisdiction the [State Tax Agency] 

shall compute the coefficients of in tra-ar ea dispersion as defined in this Act.

Section 5. Hearings on Tentative Assessment Ratio F indings. Before pub­ lication of assessment ratio findings the [Stat e Tax Agency] shall send each 

assessment jurisdictio n the ten tative ratio computed for th at jurisdictio n. If 

the assessor has any objections he may, within thirty (30) days request a hearing 

before the [Stat e Tax Agency]. Following the hearing the [St ate Tax Agency] 

may change or amend its ten tative ra tio which then becomes the assessment ratio 

to be published as provided in Section 6 below. Unless manifestly con trary to 

the evidence, the findings of the [Stat e Tax Agency 1 on objection to its tentativ e 

assessment ratio findings shall be final and conclusive.

Section 6. Publication of Assessment Ratio Findings. To insure t ha t tax­ paye rs are full apprised of the level and quality of assessment in each county 

the [Stat e Tax Agency] shall publish annually the findings of each county assessment ratio study in clear, rea dily understand able form. The [State Tax 

Agency] shall post or cause to be posted on or near the door of the County 

Assessor’s office the ratio of assessed to curre nt market value as shown by the 

study in letters sufficiently larg e to be visible to a person with normal vision 

stan ding with in 10 feet thereof. The [Stat e Tax Agency] is authoirzed to cause 

additio nal publicity thereof to be given by other means, including publication 

in newspapers and by radio an d television announcements.

Section 7. Assessment Appeals Based on State Assessment Ratio Studies.

(a) If a taxpay er petitions for reduction and equaliza tion of the assessed 

valuation of his prop erty and sta tes in his petition the estim ated current ma rke t 

value of the particular property, the [County or Sta te Board of Review] shall 

not deem such petition insufficient or fail to consider or to tak e action thereon 

merely because the petitioner, in sta tin g therein the fac ts and grounds upon 

which the petition is based, does not make statements regarding the valuation 

or assessment of prop erty oth er tha n the particular property with which the 

petition is concerned.

(b) If the [County or Sta te Board of Review] determines that the assessm ent 

rati o f or the particular prope rty is more tha n 10 percent above the county assessment ratio as determined by the [St ate Tax Agency], such findings shall constitu te prima facie evidence of excessive assessment and the [County or Sta te 

Board of Review] shall g rant app rop riate relief.

TITL E IV—EQUALIZATION PROCEDURES

Section 1. Purpose. The Leg islature hereby finds and declares th at the objective of interd istrict property tax equalization can be attain ed by directing a 

taxing district located in more tha n one assessment jurisdiction to adjus t its tax
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 13

ra te s to co m pe ns at e fo r vari ati ons in lo ca l as se ss m en t lev els . P u rs u an t to th is fin din g, th is act se ts fo rt h th e pro ce du re fo r effecti ng in te rd is tr ic t ta x eq uali za­ tio n. T his act also se ts fo rt h a pr oce dur e fo r eq ua lizi ng th e ta x lo ad am on g th e 

va ri ous c la ss es of p ro per ty w ithin a t a x d is tr ic t.

Section 2. I nt erdis trict T ax Equ aliza tio n P rocedure. F or th e pu rp ose of 

effecting in te rd is tr ic t ta x eq ua liza tion , th e st ate an d an y ta xin g d is tr ic t lo ca te d in mor e th an on e as se ss m en t ju ri sd ic ti on sh al l ap po rtio n it s pro per ty ta x ch ar ges am on g th e va ri ous as se ss m en t ju ri sd ic ti ons in th e sa m e pr oport io n th a t th e m ark et va lu e of pro pert y s ub je ct to th e d is tr ic t’s ta x in ea ch as se ss m en t ju ri sd ic ­ tion bear s to th e m ark et val ue of al l pro per ty su bj ec t to th e d is tr ic t’s ta x. Su ch ap port io nm en t sh al l be ba se d up on th e m ark et val ue det er m in at io ns de rive d from th e an nual as se ss m en t ra ti o s tu die s mad e by th e [S ta te T ax Agenc y] purs u an t to [s ta tu to ry cit ati o n ]. T h ere aft er th e ta xin g d is tr ic t's ta x ra te s sh al l be fixe d in th e re sp ec tive as se ss m en t ju ri sd ic ti ons ca lc ula te d to ra is e th e am ou nts so ap ­ po rtio ne d whe n ap pl ie d to th e as se ssed v al ue s th er e. #

Section 3. I ntradistr ict T ax E qu aliza tio n P rocedure. F or th e pu rp os e of 

effecting in tr a d is tr ic t ta x eq ua liza tion , th e [S ta te T ax Ag ency] sh al l pre par e as­ se ss m en t ra ti o st udie s fo r ea ch m ajo r cl as s of pro per ty w ithi n ea ch ta xin g dis ­ tr ic t. In th e ev en t th a t su ch st udy re vea ls th a t th e as se ss m en t ra ti o fo r a p art ic u la r cl as s of pro pert y w ithin a ta xin g d is tr ic t de via te s by mor e th an 10 pe rc en t from th e d is tr ic t’s gen er al a ss es sm en t lev el, th e [S ta te T ax Ag ency] sh al l dir ect th e ap p ro p ri ate lo ca l officia ls to m ak e su ch hori zo nta l adju st m ents in th e as se ss m en t ba se as it d ee ms ne ce ss ar y to se cu re c om plianc e w ith th e law th a t al l cl as se s of p ro per ty w ithin a ta xin g dis tr ic t sh al l be as se ss ed a t th e sa m e per ce ntag e o f c u rr en t m ark et va lue.

TITL E V--- TAX REVIE W AND APPEAL PROCEDURES

Section 1. P ur pose. In ord er to pr ov id e th e ta x p ay er w ith re ad il y us ab le an d effecti ve m ea ns of pro te ct in g him se lf fr om in eq ui ta bl e pro per ty ta x as se ss ­ men t, th is T it le cre ate s a tw o-leve l review an d ap pe al pro ce du re w ith th e in de ­ pe nd en t S ta te T ax C ou rt se rv in g on ly an ap pel la te fu nc tio n.

Section 2. Hearin g of T ax Ass ess m en t A ppe al s by Local Ass es sm en t Sta ff . 

The [S ta te T ax Age ncy] is auth ori zed an d em po wered (b u t no t re quir ed ) to is su e an ord er des ig nat in g th e Cou nt y Ass es so r’s office to hear ta x as se ss m en t ap pe al s pr ov id ed th a t su ch as se ss m en t or ga niz at io n ha s on it s fu ll-tim e st af f a t le ast [t hre e] pe rs on s who se ab il it y to appra is e pro per ty has been ce rtifie d by 

th e [S ta te T ax A gency.]

Section 3. J ur isdict ion. In an y co un ty w her e th e loca l as se ss m en t ag en cy has be en de si gn at ed by ord er of th e [S ta te T ax Ag ency] to h ear ta x as se ss m en t ap pe al s, th e [L oc al B oa rd of R ev iew ] of su ch co un ty sh al l th e re a ft e r hav e no ju ri sd ic ti on to h ear or det er m in e ta x ap pe al s, or to as se ss, clas sify , re as se ss, or re -c la ss ify pro per ty fo r pur po se s of ta x a ti o n ; b u t al l su ch po wers an d duties sh al l be ve sted in th e Cou nt y A ss es so r’s office, su bje ct to th e ri g h t of ap pe al to 

th e [------------------------- T ax C ourt ],

Sect ion 4. T h e F il in g of a Tax Appea l w it h th e County T ax Ass es sm en t

Agen cy. T he ta x p ay er sh all be enti tl ed to p ro te st his as se ss m en t on gr ou nd s of ov er ev al ua tion , un eq ual valu ati on, or un eq ua l val uat io n pr oc ed ur e. H e or hi s agen t sh al l in it ia te th e pr oc ee di ng s by filing be tw ee n [sp ecified date s] , an app lica tion fo r review on a fo rm pr ov id ed by th e Co un ty Assesso r. T he ap pl ic a­ tion sh al l sp ec ify w heth er a heari ng is de sire d. W ith th e ap pl ic at io n, th e ta x ­ payer sh al l pr es en t, in w riting, fo r st udy by th e revi ew in g ag en cy , a re as on ab ly co mplete su m m ar y of t he r ea so ns fo r th e p ro te st . The ta xpayer sh al l be entitled to se t fo rt h in hi s w ri tt en st ate m en t ev iden ce ob tain ed fr om as se ss m en t ra ti o st udie s m ad e by th e [S ta te T ax Ag en cy ] on th e issu e of w het her hi s as se ss m en t 

is i ne qu itab le .

Section 6. H ear ing P rocedure.

(a ) The Cou nty Asses so r sh al l ass ig n one o r mor e appra is ers fr om his ro st er of ap p ra is ers c er tified by th e [S ta te T ax Ag ency] to h ear th e as se ss m en t ap pe al, but no t incl ud in g, ho wev er, th e ap p ra is er wh o mad e th e as se ss m en t of th e 

p art ic u la r pr oper ty u nde r review . (b ) The pr oc ed ur e fo r heari ng ta x as se ss m en t ap pe al s sh al l be in fo rm al an d th e ta x p ay er sh al l be entitled to ap p ear fo r himse lf, w ith pr ofe ss io nal ai d if he wish es , or to be re pr es en te d by his ag en t. Su ch pr of es si on al re pre se nta ti on m ay in cl ud e an att orn ey, an appra is er, an ac co un ta nt , an econ om ist, a re alt or, or 

som e o th er sp ec ia list.

39-205— 64------3i
14 TAX ASSES SMENTS ON COMMON CARRIER PROPERTY

(c ) The de te rm in at io n of an y ta x as se ss m en t upi*eal bro ug ht be fore th e 

Cou nty Assesso r sh al l be ev idenced by a w ri tt en ord er sign ed by th e appra is er 

or appra is ers as sign ed to review th e as se ss m en t upi>eal an d co un te rs ig ne d by th e 

Cou nty As sessor.

Section 7. Creation of a State T ax Court. T her e is he re by cr ea te d th e 

[ T ax C ou rt], an in de pe nd en t adm in is tr ati ve hotly w ith th e po we rs

an d duti es in th is Act specified. The C ou rt sh al l co ns ist of [five] ju dg es to 

be ap is iint ed by th e Gov erno r an d de si gn at ed in th eir in it ia l ap po in tm en ts to 

se rv e re sp ec tiv ely fo r two, th re e, fo ur , five an d six year s from Id at eJ in th e 

yea r of th eir ap po intm en t. The Gov erno r sh al l des ig nat e on e of th e ju dg es 

as Chief Ju dg e. Upo n ex pi ra tion of th e term of th e office of a ju dg e, his su cce ssor sh al l be ap po inted in th e m an ner af ore sa id fo r [s ix ] ye ar s. The Chief 

Ju dge of sa id Cou rt sh al l rec eiv e a sa la ry of [ ] doll ar s an d ea ch ju dge

sh al l rece ive a sa la ry of [ ] dollar s an d sh al l de vo te his fu ll tim e to th e

du ties of hi s office. Th e m aj ori ty of th e ju dg es of th e court sh al l const itute 

a qu or um fo r th e tr an sa cti on o f it s bu sin ess, ex ce pt th a t th e co u rt m ay pr ov id e 

by ru le fo r th e decis ion by a sing le ju dg e on as se ss m en t ap pe al s whe re th e 

es tim at ed curr en t m ar ket va lue of th e p art ic u la r pro pe rt y does no t ex ceed 

[s ix ty th ou sa nd J do lla rs. A va ca nc y on th e Cou rt sh al l no t im pai r it s po wers 

no r af fe ct its du tie s. The C ou rt sh al l ha ve a se al which sh al l be ju dic ia lly 

no tic ed .

Section 8. J urisdiction of th e [S tate T ax Court]. A ft er th e eff ectiv e d ate of th is Act, th e I Sta te Tax Co mmiss ion] sh al l ha ve no ju ri sd ic ti on to h ear or 

de te rm in e pr op er ty ta x as se ss m en t ap pe als, bu t al l su ch ap pel la te po wers an d 

duties sh all he veste d in th e [ Tax C ourt], su bje ct to th e ri ght of api>eal

to th e Sta te S up rem e C ou rt on qu es tion s o f law .

Section 9. 1’i.ace of Meet ing . The pr in ci pa l office of th e C ourt sh al l be in 

[ ] bu t it ma y si t a t an y plac e w ith in th e Sta te . The tim e am i plac e

of its m ee tin g sh al l be pr es cr ib ed by th e Chief J ud ge . Th e co un ty g ov erning body 

sh al l p rovide th e C ou rt w ith's uitable room s in co ur th ou se s o r oth er b ui ld ings w he n 

ne ce ss ar y fo r he ar in gs ou ts id e th e ci ty of [ ]. A de qu ate offices an d a

he ar in g room in th e st at eh ous e or else whe re i n sa id c ity s hal l be provide d fo r th e 

Cou rt.

Section 10. P ublication of Opi ni on s and Repor ts. T he C ou rt sh al l pr ov id e fo r the pu blicatio n an d sa le of dis trib ution of su ch of it s re port s an d op inions 

as are <»f publi c in te re st , in su ch fo rm an d m an ner as it may deein be st ad ap te d 

fo r public convenien ce an d use, up on such te rm s an d co nd itio ns as may be ap ­

prov ed by th e Go verno r.

Section 11. Ann ua l Report. T he C ou rt sh al l mak e an an nua l re port to 

th e Leg isla tu re c on tain in g su ch su gg es tio ns an d re co m m en da tio ns fo r th e am en dmen t, al te ra tion , an d mod ifi ca tio n of ex is ting law s re la ti ve to ta xati on an d 

re la te d m at te rs , as it may deem de sira ble, an d sh al l in cl ud e in su ch re port a 

st at em en t of the nu m be r an d type of m att ers han dl ed by it duri ng th e pr ec ed ­

in g fiscal yea r an d th e num be r of m att ers pe nd ing a t th e en d of th e ye ar .

Section 12. Exp en ses of Court. Th e mem be rs an d em ploy ees of th e Cou rt 

sh al l receive th eir ne ce ss ar y tr av el in g ex pe ns es an d th eir ex pe ns es ac tu ally 

in cu rr ed fo r su bs iste nc e w hi le tr aveli ng ou ts id e th e ci ty of [ ] in th e pe rfor m an ce of th eir du ties . Th e Cou rt, su bje ct to th e ap pr ov al of th e 

Gov erno r, may ap po in t su ch em plo yees, in cl ud in g a clerk, an d mak e such 

ex pe nd itur es , includ ing ex pe nditure s fo r law books an d pu blications , as may 

be ne ce ss ary in ord er to ex ec ut e efficiently th e fu nct io ns ve sted in sa id Cou rt. 

Th e cler k an d ass is ta n t cl er ks sh al l hold office duri ng good be ha vior , but 

su bjec t, howe ver, to re ti re m ent un de r th e pr ov isions of an y ap plicab le ge ne ral 

or sp ec ial law re la tive to re ti re m en t system s. All ex pen di tu re s of th e Cou rt 

sh al l be all ow ed an d pa id out of mon eys ap pro pri ate d fo r th e pu rpos es of the 

Cou rt, uiM>n pre se nta tion of ite mized vo uc he rs th ere fo r sig ned by th e Chief 

Ju dge o r a pe rson d es ig na te d by th e C ou rt fo r th e pu rpos e.

Section 13. R ule-Makin g.

(a ) All ap pe al s to th e Cou rt, of w hat ev er natu re , sh al l be no ted by th e 

filing of a w ri tt en pe tition wh ich sh al l se t fo rt h su cc in ctly th e natu re of th e 

case, th e fa ct s inv olv ed, an d th e qu es tio n or qu es tion s to be rev iewe d by th e 

Cou rt. The op po sin g p art y sh al l mak e su ch resp on se as the C ou rt may by 

ru le prescribe.

(b ) Th e Cou rt sh al l ha ve powe r, su bj ec t to pr ov isions of th is Act, to ad op t 

such reas on ab le ru le s of pr oc ed ur e re la ting to plea di ng s, no tic es, hea ring s, 

an d ar gu m en ts a s it may deem prop er.

(c) Proc ee ding s be fo re th e Cou rt sh al l be de no vo an d sh al l be co nd uc ted in a m an ne r si m il ar to proc ee ding s in co urt s of eq ui ty in th is Sta te .
TAX ASSESSME NT S ON COMMON CAR RIER PROPERTY 15

(d ) An y pe rson appea ri ng an d ac ting fo r himself, , or fo r a co rp or at io n of 

which he is an officer, or an y pe rson des ig na te d as hi s ag en t sh al l be au th ori ze d 

to p ra ct ic e be fo re th e C ou rt.

(e ) Up on re ce ip t of a pe tition of ap pe al, th e Clerk sh al l fo rt hw ith issu e a 

su m mon s an d su bp oe na du ce s te cu m to th e as se ss in g or ta xin g au th o ri ty or 

oth er ag en cy ap pe al ed from , re quir in g it to pr od uc e a t th e hea ri ng th e reco rd 

of proc ee ding s, as we ll as al l map s, pl at s, do cu men ts, an d oth er pap er s co nne cted w ith th e reco rd , an d the reco rd or a copy th er eo f pr op er ly ce rtifie d by 

th e as se ss in g or ta xin g auth ori ty or ot he r ag en cy ap pe al ed from sh al l be ev ide nced be fore the C ou rt a t th e he ar in g.

(f ) The C ou rt sh al l ha ve fu ll po wer to hea r, tr y, an d de te rm in e any m att er 

be fo re it an d may per m it or re quir e all ex pl an at io ns , am en dm en ts, an d addition s to be mad e to an y of the pr oc ee ding s or plea di ng s, in cl ud in g th e pet itio n 

of ap pe al, as in it s di sc re tion sh al l be ne ce ss ar y or des irab le so th a t th e ca se 

may be pr op er ly heard an d de term in ed . The C ou rt sh al l no t be bo un d by th e 

te ch ni ca l ru le s o f ev ide nc e.

(g ) The C ou rt is em po wered to as se ss an ew , clas sify an ew , ab at e, mod ify , 

ch an ge , or a lt e r an y va lu at io n, as se ss m en t, clas sific ation, ta x, or fin al ord er 

ap pe al ed from , pr ov id ed th a t in th e ab senc e of an y affir mative ev iden ce to the 

contr ary or of a ny err o r ap pare nt on th e face of th e proc ee ding s, th e as se ssm en t, 

clas sifica tion , or o rd er a pp ea le d f ro m sh al l be a ffirm ed.

(h ) Th e C ourt sh al l hear and de te rm in e al l ap pea ls pr om ptly . In pr op er 

ca se s th e C ou rt sh al l file a w ri tt en or de r. Co pie s of sa id ord er sh al l be ce rti fie d 

by th e Cl erk , under th e seal of th e C ou rt, to th e ag en cy ap pe al ed from an d to all 

p art ie s to th e a pp ea l. Such ord er sh al l be fin al an d conclus ive , un le ss an ap pe al 

be ta ken to th e S ta te S up reme C our t on a q ue stio n of law.

(i ) In a ny p ro ce ed in gs b efor e th e C ou rt an y p art y in in te re st m ay file in fo rm ation in w ri ti ng w ith th e C ou rt of hi s ad dre ss or of th e addre ss of his ag en t or 

att orn ey to wh om a ll no tic es p ert ain in g to s aid p ro ce ed in g may be se nt , an d th ere ­

a ft e r a copy of an y ord er of th e C our t in sa id m att er sh al l be de live re d to sa id 

p art y or hi s agen t or attorn ey , or mailed, po stag e pr ep ai d, to th e addre ss af ore ­

sa id ; but no th in g he re in co nt ai ne d sh al l re quir e an y pe rson to file su ch in fo rm ation in o rd er to ap pe al, as pr ov id ed in t his A ct.

(j) In an y proc ee ding be fo re th e Cou rt, an y p art y to su ch pr oc ee di ng s ma y 

su bm it re qu es ts fo r ru ling s on po in ts o f law, si m il ar to pra yers in non -jur y ca ses 

in court s of law, an d th e C ou rt sh al l gra nt, re je ct , or mod ify th e same, so fa r as 

may b e m ate ri al to its decision.

Section 14. T ak ing of Tes timon y.

(a ) An y mem be r of th e Cou rt, or any em plo yee of th e C ou rt des ig na te d in 

w ri ti n g fo r th e pu rp os e by th e Chief J ud ge , may ad m in is te r oa th s, an d an y me mber of th e C ou rt may summo n an d ex am in e w itn es se s and re qu ire, by subp oe na 

sign ed by th e me mb er, th e pr od uc tion of al l re tu rn s, boo ks, pa pe rs , do cu men ts, 

co rres po nd en ce , an d oth er ev iden ce p ert in ent to th e m att er under in qu iry, a t an y 

des ig na te d pl ac e of he ar in g, an d may re quir e th e ta kin g of a de po sitio n before 

an y pe rs on co mpe tent to ad m in is te r oa th s, eit her w ith in or w ithout th e st at e. 

In th e ca se of a de po sit ion, th e te st im on y sh all be re du ce d to w ri ti ng by th e 

pe rs on ta kin g th e de po sitio n or under his di re ct io n and sh al l th en be su bs cribed 

by t he de po ne nt.

(b ) E it h er part y may summ on w itne ss es or may re quir e th e pr od uc tion of 

pa per s in th e sam e m an ne r in w hich w itnes se s may b e summo ned an d pa pe rs may 

be re quir ed to be prod uc ed fo r th e pu rp os e of tr ia ls in th e co ur ts . Any w itn es s 

summon ed or wh ose de po sitio n is ta ken sh al l rec eive th e sa m e fees an d mile ag e 

as w itn es se s in th e c ou rts.

Section 15. Ass es sm en t R atio E vidence. At an y heari ng re la tive to th e 

as se ss ed val ua tion of pr op er ty , as se ss m en t ra ti o fin ding s as de te rm in ed by th e 

[S ta te T ax Agency ] sh al l be ad missible.

Section 16. S mal l Cla im s or I nforma l P rocedure.

(a ) Th e ow ne r o f a ny ta xab le p ro pe rt y w ith an e st im at ed c u rr en t m ar ket v al ue 

of les s th an [fi fty th ousa nd] doll ars m ay ele ct, up on pa ym en t of a $2,00 filing fee, 

to ap pe al hi s ta x as se ss m en t under th e sm al l claim pr oc ed ur e. Su ch pr oc ed ur e, 

to t he exte nt th a t th e C ou rt m ay c on side r pra ct ic ab le , sh al l el im in at e fo rm al ru le s 

of evide nc e, pl ea di ng s pr ac tice , an d w ith th e ex ce pt ion of th e filing fee. ma y 

el im in at e an y or all fe es an d co sts, or may pr ov id e th a t co sts sh al l be in the 

di sc re tion of t he C ou rt.

(b ) Th e appel la nt sh al l file a w ri tt en st at em en t of th e fa cts in th e ca se, to ­

geth er w ith a w ai ve r of th e ri g h t to ap pe al to th e S ta te Su prem e Cou rt, ex ce pt 

up on q ue stio ns o f law ra is ed by th e plea di ng s. The Clerk of th e C ourt sh al l th en
16 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

serve a copy of such statement to the appellee. No furth er pleadings shall be 

required und er this small claims procedure if the appellee intend s to offer no 

other defense than th at the property was no t overassessed.

(c) The Chief Justice shall provide for a speedy hea ring of all appeals to he 

heard und er (his inform al procedure and he shall make every effort to reduce 

the expense of hearing cases by dire cting whenever possible, th at petitions for 

abateme nt of taxes assessed upon property situ ated in the same general locality, 

be heard together, regardless of the identity of the appe llants. The appe llant 

may app ear on his own beha lf or may be represented by legal or other professional counsel. All testim ony sh all be given under oath.

Section 17. Exhaustion of Remedies. No appeal to the [Stat e Tax Court] shall be allowed until the party seeking to appeal has exhausted his remedies 

before the [County Assessor] or other assessing or taxing autho rity as the case 

may be.

Section 13. Separability Clause. [In sert sepa rability clause.]

Section 14. Effective Date. [Ins ert effective date.]

Mr. F riedel. The first witness is our colleague from Minnesota, the 

Honorable Ancher Nelsen. Mr. Nelsen, we will be glad to hear you at 

this time.

STATEM ENT OE HON. ANCH ER NELSEN, A RE PR ES EN TA TIVE IN 

CONGRESS FROM TH E STATE OF MIN NESOTA

Mr. Nelsen. Mr. Chairman and members of the subcommittee, I 

introduced ILK. 736, the measure now before the subcommittee, to 

afford railroads, and all other carriers subject to the Interstate Commerce Act, an additional remedy whereby they might obtain relief 

from the excessive and discriminatory portion of the property taxes 

levied in any State; tha t is, th at portion which is attributable to the 

practice now prevalent of assessing carrier property at a higher proportion of its f air value than t hat at which other property, subject to 

the same taxes, is assessed. It is estimated that the amount of excess 

taxes on account of such discriminatory assessment of railroad property exceeds$100 million annually.

It is true that railroads in Minnesota are not taxed as they are in 

other States. Our railroads are taxed on a percentage (5 percent) of 

their gross receipts earned in Minnesota. This method of taxing 

railroads was adopted over a hundred years ago for the purpose of 

assisting in their construction and encouraging their continued operation. Briefly, it was done so that the railroads would not be required 

to pay taxes on their property until they were operating and earning 

money with which to pay such taxes. Now the financial well-being 

of our Minnesota railroads continues to be a matter of concern to all 

who are interested in our State and its future.

There are 8,057 miles of railroad in the State of Minnesota owned by 

11 railroads, of which 9 are major class 1 carriers. The tracks of 

Minnesota’s 9 principal lines do not stop at its border but extend into 

27 States for 65,000 miles and, through their connections with other 

lines, reach every par t of the United States, Canada, and Mexico served 

by railroads.

Included in the 27 States served by Minnesota’s major lines are 17 

States which are charged with practicing substantial discrimination 

in the matter of railroad assessments. And it is worthwhile to note 

tha t among them are three of the four States which border Minnesota.

Naturally, we in Minnesota have a substantial interest in everything 

tha t affects the ability of our Minnesota railroads to serve the people of
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 17

our State. The undue burden of the discriminatory taxes imposed on our Minnesota lines in these other States affects their Minnesota op­ erations proportionately, because this is an added expense which must be spread over their entire systems. My State has a direct interest, therefore, in having such discriminatory practices eliminated. It, is common knowledge th at the railroad industry is having diffi­ culty raising its ‘‘head above water without the added burden of State and'local taxes that are demonstrably unreasonable and unjust. I share with you the responsibility of preserving our national tran s­ portation systems and, in doing so, to provide them every possible protection against unreasonable and unjust discriminatory action and 

undue burdens regardless of their source.

Mr. Friedel. Are there any questions? If not, we thank you for 

your testimony, Mr. Nelsen.

Mr. Nelsen. Thank you, Mr. Chairman.

Mr. Friedel. Our next witness will be Mr. James N. Ogden, vice president and general counsel of the Gulf, Mobile & Ohio Railroad Co., appearing on behalf of the Association of American Railroads.

Mr. Watson. Mr. Chairman, before Mr. Ogden begins, I notice you said there was a statement, by the Attorney General's Office. 1 wonder if we might have a copy of th at statement. If not, if you are aware of its contents, could you state whether or not it expresses an opinion 

as to the constitutional iy of this bill ? 1 am informed by counsel that the Attorney General expresses a question concerning the constitutionality of it as well as the Bureau 

of the Budget. I think it might perhaps be helpful for the witness to have tha t information so that he could perhaps touch upon that in his 

testimony.

Thank you, Mr. Chairman.

Mr. F riedel. You may proceed.

STATEMENT OE JAMES N. OGDEN, VICE PRESIDENT AND GENERAL

COUNSEL OE THE GULF, MOBILE & OHIO RAILROAD CO, REPRE ­

SENTING THE ASSOCIATION OE AMERICAN RAILROADS

Mr. Ogden. Mr. Chairm an, and gentlemen, my name is James N. Ogden. I am vice president and general counsel of the Gulf, Mobile & Ohio Railroad Co., with headquarters in Mobile, Ala. I am repre­ senting the Association of American Railroads, whose members oper­ ate 95 percent of all the railroad mileage in t he United States, employ 92 percent of all railroad workers, and haul more than 99 percent of this country's ra ilroad line-haul freight and passenger traffic. I wish to state the views of the railroad industry with respect to ll.R. 736 and H.R. 10169 (identical bills) now before you for consideration. The railroad industry strongly endorses and wholeheartedly sup­ ports these two bills. Since the bills are identical except for number and authorship, I will, fo r convenience, refer only to H.R. 736 in the remainder of my statement. But 1 wish to express the warm appreci­ ation of our entire industry to Congressman Ancher Nelsen, of Minne­ sota, the author of ll.R . 736, and to former Congressman Robert W. Hemphill, of South Carolina, the author of ll.R. 10169, for their con­ tribution toward the preservation of our common carrier system of transportation by offering the legislation here being considered.
18 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

The principal purposes of the bill are to declare that a portion of 

certain tax assessments of common carrier property shall be unlawful 

as constituting an unreasonable and un just discrimination against and 

an undue burden on interstate commerce, and to provide a remedy in 

I he Federal courts for such carriers against the collection of any tax 

based on such unlawfull assessment.

This unlawful proportion exists only when, and to the extent that, 

common carrier property is assessed at a greater proportion of its true 

market value than the proportion at which all other property in the 

taxing district subject to the same levy is assessed.

Before discussing the bill in detail, I would like first to review the 

facts and circumstances that cause this bill to be appropriate at this 

time, 'fhe bill deals with all common carriers of persons and property 

subject to the Intei-state Commerce A ct 1

 but 1 will confine my re­ marks mainly to the railroad industry because 1 am appearing in behalf of that industry and because I believe it suffers most from the 

burdens which this bill seeks to remove.

Railroads require a great deal of property in order to do business. 

Right-of-way and rails; locomotives, cars, and other equipment that operate on those rails; and stations, buildings, shops and so forth, all 

are needed to conduct railroad operations.

At the close of 1963 the railroads in the United States had a total 

investment before depreciation of over $35 billion extending over and 

along214,500 miles of line. This enormous property investment makes 

railroads prime targets for the tax assessor. Their property is easily 

identified and located. Cities, schools, counties, and other political 

subdivisions invariably attempt to include within their boundaries as 

much railroad property as possible and thus insure a steady income 

from property taxes.

For the 5 years 1958-62 the total tax payments by all class I railroads in the I nited States for all State and local purposes ranged 

from a high of $400 million in 1959 to a low of $364 million in 1962. 

The fact that over 80 percent of those payments went to satisfy ad 

valorem tax liens clearly identifies ad valorem taxes as the most important and the most burdensome of all railroad State and local taxes.

The vulnerability of our industry and the desire of State and local 

governments for revenue have combined to create a great many tax 

problems, few of which are resolved in favor of the railroads. The 

most pressing and persistent of these problems relate to railroad 

assessments.

fhe principal problem in the matter of railroad assessments is not 

one of how to value a railroad. Tn the hundred-year history of railroad taxation, the practice of valuing railroads for tax purposes has 

reached a substantial degree of refinement. Though not as simple as 

valuing a one-familv dwelling, the method is neither incomprehensible 

nor even overly complicated. And it should be remembered tha t no 

greater effort is required to assess a railroad fairly and reasonably

1

 See ap p. B.
TAX AS SESSME NT S ON COMMON CAR RIER PR OP ER TY 19

than is required to assess one unfairly and unreasonably. I he real problem is to determine how much of the valuation that has been found should be assessed, which, in turn , depends upon how much of the valuation of other property is assessed. In other words, the problem is how to get the tax assessors in the several States to equalize the rail­ road’s assessment with that of other property in the same taxing 

district. True equalization requires tha t each parcel of property be assessed at a figure which is the same proportion of its full value as the assess­ ment of every other parcel of property in the same taxing district is of 

its full value. Railroad assessments are not equalized fairly and reasonably in numerous instances. Many tax assessors simply cannot or will not equalize railroad assessments with the assessments of other property even though both kinds of property are subject to the same tax levy. This is a well-known and widely publicized fact. In the Do yle report 2

 it was shown tha t railroads paid ad valorem taxes in 1957 in 31 specified States by an amount that was excessive, when compared with the taxes on locally assessed property, to the extent of $141 mil­ lion, or approximately 54 percent of the total railroad ad valorem tax 

bill in those States. A second study made for 1961, which showed excessive taxes in 24 specified States amounting to $113 million, or slightly more than 58 percent of the total railroad property tax bill in those States, was the subject of an informative and readable article in the December 9, 1963, 

issue of the magazine Railway Age. A third study made for 1962, and reproduced as appendix A, shows excessive ad valorem taxes paid in 24 specified States amounting to $111 million, or slightly more than 58 percent of the total railroad ad 

valorem tax bill in those States. In describing the 1957 study, the Doyle report was careful to state tha t the information had been furnished by the Association of Amer­ ican Railroads, and it added the following significant statement be­ neath the detailed inform ation for each of the States referred to :3

The re so ur ce s av ai la ble to th is co m m itte e wer e no t su ch as to be ab le to co n­ d uct an in de pe nd en t su rv ey to aff irm or disp ro ve th e spe cific d ata pr es en te d to us. How ev er, re se ar ch has been suffi cie ntl y ex te ns iv e to es ta blish th a t re la ­ tive dis cr im in at io n, of co ns id er ab le m ag ni tude , doe s, in fa ct , exis t ag ai nst th e ra il ro ads in th e as se ss m en t pro ce du re s of S ta te an d loc al go ve rn m en ts fo r ad 

va lo re m ta x ati o n pu rp os es . Ther ef ore , th e da ta is ac ce pted ax co nfirm ing th e

ju dgm ent o f th is st udy gr ou p th a t S ta te an d local as se ss m en t pr oc ed ur es do dis ­

cri m in ate a ga in st th e ra ilro ad s. [E m phas is add ed .]

It seems almost, self-evident that excessive property taxes resulting from discriminatory equalization of railroad assessments would un­ duly burden interstate commerce. Railroads are responsible for moving the largest share of our intercity tonnage carried by any one

2

 “ N at io nal T ra nsp ort ati on Policy ,” a re p o rt pr ep ar ed by th e Sp ec ial Stu dy Group on T ra n sp o rt ati o n Policies in th e U nited S ta te s fo r th e Sen at e Com mitt ee on In te rs ta te an d For ei gn Comm erc e, 87 th Con g., 1st sess. (p re li m in ar y d ra ft , 19 61 ).

3

 “ N at io nal T ra nsp ort ati on Pol ic y,” su pra no te 2, a t 487 .
20 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

mode of transportation (43.1 percent in 1963). Any substantial addition to the railroads' cost of doing business obviously burdens interstate commerce, and where such added cost is a direct result of discriminatory action aimed at the railroad industry, then the burden is 

clearly an undue burden and interstate commerce should be protected 

against it.

The estimated $111 million annual additional tax for railroads 

which results from this discrimination, as shown in appendix A, is 

clearly substantial in amount. It represents 48.64 percent of all railroad State and local taxes of every kind and description in the 24 

States listed in tha t appendix, and it represents 28.5 percent of all 

such State and local taxes for the entire railroad industry in the 48 States (Hawaii and Alaska excluded).

While appendix A lists only 24 of the 48 States involved, the tax 

discrimination which they are shown to practice actually has a much 

broader reach on the railroad industry. To illustrate, in 1962 the 

average road mileage operated in transportation service of all class I 

line-haul railroads in the 48 States was 218,780 miles, and those same 

carriers employed 70,146 persons and generated 592,862,417,000 revenue ton-miles. In respect of the 24 States listed in appendix A, the 

total mileage operated by all of class I line-haul railroads having 

property in any one or more of these 24 States was 209,643 (95.82 p ercent of the tota l). The number of employees of those same carriers 

was 667,106 (95.28 percent of the total) ; and the revenue ton-miles 

generated by those same carriers everywhere was 575,104,547,000 (97 percent of the tota l).

It is clear tha t legislation forbidding discriminatory taxation of carrier property may appropriately be made a part of the Interstate Commerce Act.

The undue burden on interstate commerce flowing from discriminatory tax assessments is comparable to the undue burden on interstate 

commerce resulting from discriminatory action of State authorities 

in their failure or refusal to act reasonably in the m atter of rail rates and services.

H.R. 736 follows the language of section 13(4) of the Interstate 

Commerce Act in declaring that the proscribed action by any State 

or subdivision or agency (in taxing common carrier property on a basis 

higher than that at which other property in the same taxing district 

is taxed) “is hereby declared to constitute an unreasonable and unjust 

discrimination against and undue burden upon interstate commerce 

and is hereby forbidden and declared to be unlawful.”

The fact that section 13(4) deals with one type of discrimination 

or burden and H.R. 736 with another is immaterial, because they are 

both concerned with “unreasonable and unjust discrimination against 

and an undue burden upon in terstate commerce.” In the former, the 

prohibition is against a State’s requiring a carrier to charge intrastate 

rates so low as to be un fair to or discriminatory against, or to place 

an undue burden upon, interstate commerce—tha t is, so low as not
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 21

to contribute their fair share to the revenues required by the carrier 

properly to perform its interstate operations. In II.R. 736, the pro­ hibition (simply stated) is against the action of a State or its sub­ division in assessing and collecting taxes on carrier property at a higher rate or ratio than on other property in the same taxin g district. In each case the act forbidden is unjust discrimination against inter­ state commerce, that is, against common carriers which are engaged in interstate operations and are subject to the Interstate Commerce Act. In each case the prohibition is against a type of discrimination or burden which would deprive a carrier of revenues needed in the performance of its services in interstate commerce. The provisions and purposes of section 13a of the Interstate Com­ merce Act relating to rail services are to the same effect—discrimina­ tory State action which unduly burdens interstate commerce will not 

be permitted. To avoid unduly lengthening this statement and at the same time make readily available full inform ation concerning this measure and certain questions th at might be asked rega rding it, I have prepared and attached as appendix B a memorandum dealing with the scope of 

H.R. 736 and the nature of the relief provided. In addition to the material in the attached appendixes, I have ob­ tained and now submit copies of the following documents which should 

be of interest and assistance to the subcommittee and its s taff: First. The Doyle report; that is, “National Transportation Policy,” a report prepared by the special study group on transportation policies in the United States for the Senate Committee on Interstate and F or­ eign Commerce, 87th Congress, 1st session (preliminary draft, 1961). Second. U.S. Bureau of the Census, U.S. Census of Governments: 1957, volume V, “Taxable Property Values in the United States.” Third. U.S. Bureau of the Census, Census of Governments: 1962, 

volume II , “Taxable Property Values.” Fourth. Report of the Advisory Commission on Intergovernmnetal Relations on “The Role of the States in Strengthening the Property 

Tax,” volumes 1 and 2, June 1963.

I have these documents right here and available. I thank the chairman and the members of the committee for this opportunity to appear before you. If there are any questions which you desire to ask, I shall be happy to tr y to answer them. If there is any additional information on this subject which you wish us to fur­ nish now or in the future, we will do our very best to oblige you. In closing, we submit that the duty of the Congress to protect inter­ state commerce from the undue burden of discriminatory taxes and, by so acting, to preserve our transp ortation systems in furtherance of the 

national transporta tion policy, is clear and compelling.
22 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

(The attachments to Mr. Ogden’s statement follow:)

App en dix A

S ta te

A la b a m a ........... .

A ri zo n a ...............

C ali fo rn ia _____

Id a h o _________

Ill in o is ________

Io w a __________

K a n sa s________

K e n tu c k y _____

L o u is ia n a......... .

M is si ss ip p i____

M is so u ri .............

M o n ta n a ______

N e v a d a .. :_____

N ew J ers ey ____

N ew M ex ic o .. . 

N o rth C ar olina 

N o rth D ak o ta ..

O k la h o m a..........

S o u th D a k o ta ..

T ennes se e_____

U ta h ....... ...........

V ir g in ia _______

W est V ir g in ia .. 

W yom in g_____

T ota l

1962 ra il ro ad 

ad va lo re m 

ta xe s

(1)

A ll o th er 

1962 S ta te 

a n d lo cal 

ra il ro ad

ta xes

(2)

P erc en t of 

val ue a t 

w hi ch ra il ­

ro ad p ro p ­

erty assessed 

in 1961

(3)

P erc en t of 

v alu e a t 

w hic h pro p ­

ert y of ot hers 

as se ss ed 1

(4)

E sti m ate d red ucti o n i n ra il ro ad 

ad v al ore m taxe s 

if rail ro ad a ssessm en ts h ad be en

m ad e a t t h e 

sa m e per ce nt of 

val ue as w ere 

th e a ss es sm en ts 

of p ro p ert y o f 

oth ers

(5)

P erc en t 

of ta x 

ex cessi ve

$2,9 72,9 94

8,50 8,32 1

$2, 152 ,51 3

324,2 14

40 20 .2 $1,4 71,6 32 49. 50

24,457 ,046 89 14.2 7,150, 393 84.04 4,9 53,28 8 2

4,407,619 275,041 2

 46 17.8 14,992,169 61.30

34,0 07,2 22 45 11.8 3,251.9 41 73. 78 8,0 17, 110 2

7,15 5,3 33 100 46. 0 18,363,900 54. 00 100,776 2

12,529,471 60 24 .5 4,233,811 59.17 618,4 46 2

5,35 9,97 5 55 19.0 8,200,53 9 65.45

4,173,331

595,553 60 27.7 2,885,27 5 53.83 1,623,704 2

3,06 8,8 30 40 20 .4 2,044,93 2 49.00 664, 404 2

9,4 67, 848 35 14.0 1,841,298 60.00 899,573 2

6, 906, 108 50 25 .8 4,582,438 48.40

2,241, 215

171,233 35 7.4 5,44 6,15 7 78.86

16,948, 285

1,423 35 23.2 755,514 33.71

2, 050,838

1,244,378 100 29. 1 12,016,334 70.9 0 275, 999 2

2,13 8. 786 70 15.7 1, 590,835 77.5 7 2,953,561 2

5,467, 012 50 32.4 752,853 35.20

6,261. 986

139, 765 40 19.0 2,870,181 52.5 0 377,930 2

1,27 7,018 50 19.3 3,8 44, 859 61.40

6,900, 506

37,2 48 100 42.3 736,839 57. 70 2,0 43, 766 2

4,059.511 85 28.4 4,595.047 66. 59 376,0 43 2

7,355,454 28 14.5 1,957,090 48.21 6,7 89,65 0 2

7,829,137 40 29. 1 2,004,361 27.25 4,2 15, 690 2

3, 314, 969 50 33.7 2,552,299 32.60 40,6 33 100 20.4 2,638,715 79.60

188,858.815 38,891,941 110,779,412 58.6

1

 E ach p er ce nt u se d was th e h ig he st of th e 4 1961 rat io s r ep o rt ed b y th e B u re au of th e C en su s, U .S . D ep art­ m e n t of Com m er ce , in “ C en su s of G over nm en ts 1962, T ax ab le P ro p erty V alu es, ” vo l. II, p. 94, ta b le 13. T h is m in im iz es th e ex te n t of d is cr im in ati on.

2

 Or hi gh er .

• In 1963 I lli no is enact ed a la w ( S.B . 946, ap pro ved A ug . 26,1 963 ) re q u ir in g ass es sm en t o f ra ilro ad s a t sa m e per ce nta ge of ful l va lu e as lo cal p ro p ert y is a sses se d. H ow ev er , a n u m b er of Illinois li nes c onte st ed th e 1963 as se ss m en ts , cl ai m in g th a t arb it ra ri ly in cr ea se d va lu es offse t eq uali za ti on.

Appen dix B

Scope of H.R . 73 6; Nature of Rel ief P rovided

Thi s bil l, if en ac ted, wou ld am en d th e In te rs ta te Co mmerce Ac t by ad di ng 

th er et o a new section, 25a. I t wo uld by it s ow n te rm s ap pl y to th e ta xati on of 

“p ro per ty ow ned or used by an y com mon c a rr ie r su bje ct to th is act (i.e., th e 

In te rs ta te Co mm erc e Act) en ga ge d in th e tr an sp o rt ati o n of pe rson s or pro per ty 

in in te rs ta te co mm erc e.” T hu s it wo uld in cl ud e th e fo llo wing com mo n carr ie rs , 

all of w hom a re su bj ec t to th e a c t :

(1 ) Tho se enga ge d in th e tr ansp ort ati on of pa ss en ge rs or pro per ty by 

ra il ro ad (se c. 1 ( a ) ) ;

(2 ) Th os e en ga ge d in th e tr ansp ort ati on of o il or oth er co mmod ity (exc ep t 

w ate r an d n a tu ra l or a rt ific ia l g as ) by p ip el in e (se c. 1 ( b ) ) ;

(3 ) Th os e enga ge d in th e tr an sp o rt ati o n of pa ss en ger s or pro pe rt y by 

mot or ve hicle (se c. 2 0 2 (a )) ;

(4 ) Th os e en ga ge d in th e tr an sp o rt ati o n of pa ss en ger s or pro per ty by 

w ate r (se c. 3 0 2 (d )) ; a nd

(5 ) F re ig ht fo rw ard ers (sec. 4 0 2 (5 )) .

The five ty pe s of carr ie rs ju st listed are th e on ly comm on carr ie rs su bje ct to 

th e In te rs ta te Co mm erc e Act. The bill is lim ited in it s ap pl ic at io n to com mon 

carr ie rs , so it wo uld not ap ply to contr act carr ie rs or p ri vate carr ie rs of an y
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 23

type . F re ig ht fo rw ard ers are in clud ed in th e ab ov e li st in g be ca us e of th e st atu to ry de fini tio n of a fr eig ht fo rw ard er as an y co rp or at io n, as so ci at io n, etc . “w hich ho lds it se lf out to th e ge ne ra l pu blic as a comm on c a rr ie r to tr an sp o rt 

or pr ov ide tr an sp o rt ati o n of pro per ty ,” etc. (se c. 40 2( 5) of th e a c t) . The b ill, se ction 1, s ta te s th a t cert ain a ct io n by an y S ta te o r su bd ivision th er eo f 

“i s he reby de cl ar ed to co n st it u te an un re as onab le an d u nju st dis cr im in at io n again st a nd un due b ur de n up on in te rs ta te comm erc e an d is he reby fo rb id de n an d de cl ar ed to be unla w fu l.” The fo rb id de n ac tion is th en de sc rib ed in det ai l, in cl ud in g (a ) th e a ss es sm en t o f c om mo n carr ie r pr oper ty “a t a va lue which be ar s a hi gh er ra ti o to th e tr u e m ark et va lu e of su ch proj>erty th an th e as se ss ed va lu e of al l oth er pro pert y in th e ta xin g dis tr ic t su bj ec t to th e sa m e pro per ty ta x levy 

bea rs t o th e tr u e m ark et val ue of a ll su ch p ro pe rt y an d (b ) th e co lle cti on o f a ny 

ta x o n th e u nla w fu l po rt io n of suc h as se ssm en t. As will be no ted, th e ac tion fo rb id de n is an y ex ce ss as se ss m en t (o r co lle ctio n) of ta xes of th e ty pe de sc ribe d, w het her th e ex ce ss is g re at or little , w heth er the c a rr ie r is larg e or sm all, and w het her it ow ns mu ch or li tt le pro pe rty. If ta xes sh ou ld be as se ss ed or co lle cted on th e fo rb id de n ba sis, th ere wou ld be u n ju st dis ­ cri m in at io n again st in te rs ta te co mm erc e an d an un du e bu rd en up on it, th us mak in g th e pra ct ic e unl aw fu l an d su bj ec t to be ing en joined . A carr ie r m ig ht no t el ec t to co mpl ain in court fo r ev ery such vio la tion (f or in stan ce , w he re th e un la w fu l po rtio n of th e ta x is sm all or in co ns id er ab le ) bu t, re gar dle ss of th e am oun t invo lved, th e c a rr ie r wou ld ha ve a ca us e of ac tion unde r th e prov isions 

of t he bill. Com pa re Loo ne y v. Cr an e Co. (245 U.S . 177, 62 L. Ed. 230 ) w he re th e 

court sai d (a t p. 2 36) : " I t is th u s m anif est on th e fa ce o f all of th e cas es t h a t th ey in no w ay su st ai ne d th e a ss um ption th at, be ca us e a vi ol at io n of th e C on st itution w as no t a la rg e one, 

it wou ld be sa nc tion ed , or th a t a mer e op inion as to th e de gree of wrong wh ich wou ld ari se if th e C onst itution wer e vi ol ated w as tr eate d as af fo rd in g a mea su re 

of th e duty of e nf or ci ng th e C onst itution .” H.R. 736 wou ld cre ate a new ca use of ac tion in th e d is tr ic t co urt s of th e U ni te d Sta te s, av ail able to comm on carr ie rs su bje ct to th e act an d co mpl aini ng of ta x dis cr im in at io n of th e ty pe c on de mne d by th e bill. I t p ro vide s in it s section (2 ) th a t “th e d is tr ic t court s Qf th e U ni te d S ta te s sh al l ha ve ju ri sd ic io n. upon co m pl ai nt an d a ft e r he ar in g, to issu e su ch w ri ts of in ju nct io n” o r ot her proc es s to re str ain th e do ing of anyth in g de clar ed by th e bil l to be unl aw fu l. Thi s ju ri sd ic ti on wo uld be in additio n to t he ge ne ra l ju ri sd ic ti on of th e dis tr ic t co urt s pr es cr ib ed by 28 U.S .C. 1331 an d 1332. Se cti on 1331 ve sts in th e dis tr ic t co urt s “o ri gin al ju ri sd ic ti o n ” of al l civil ac tion s w he re th e m a tt e r in co nt ro ve rs y ex ­ ce ed s $10,000, and ari se s under th e C on st itution or laws of th e United S ta te s; an d se ction 1332 confe rs si m il ar ju ri sd ic tion w he re th e am ou nt ex ce ed s $10,000 

an d th ere is div ers it y of ci tize ns hi p. The qu es tio n may ari se w het her a ca us e of ac tion of th e ty pe wh ich wo uld be cr ea te d by II.R . 736 wou ld be su bje ct also to th e re quir em en ts of section 1331 or se ction 1332 as to th e am oun t in co nt ro ve rsy an d as to d iv er si ty of c iti ze ns hi p. The answ er is “N o.” Man y F edera l sta tu te s ha ve been en ac ted, cr eati ng ca us es of ac tion which may be in sti tu te d inde pe nd en tly of an d w ithout co mplianc e w ith se ct ions 1331 an d 1332. E xam ple s: Acti on s by c arr ie rs an d ot her s to en jo in or se t as id e or de rs of th e In te rs ta te Co mm erc e Co mm ission , 28 U.S.C . 1336; ac tion s by th e Co mm iss ion to en jo in c a rr ie rs an d oth er s fro m vi ol at in g th e In te rs ta te Co mm erc e Act, 49 U.S.C. 1 6 (2 ), 16 (1 2), 20(9 ), 222(b 3, 316(b ), 4 1 1 (e ); an d, mor e re ce nt ly, th e vari ous civil ri ghts ac tion s au th or iz ed to be br ou gh t in th e d is tr ic t co urt s to en fo rc e vot in g righ ts , etc ., 28 U.S.C. 1343, an d th e Civil R ig ht s 

Act of 1964. The bill wo uld ve st ju ri sd ic ti o n in th e d is tr ic t co urts of th e U ni ted S ta te s “N otw ithst an din g th e pr ov isio ns of section 1341. ti tl e 28, United S ta te s C<xle.” Se ctio n 1341 pr ov id es th a t th e d is tr ic t co urt s sh al l no t en join, su sp en d or re sr ai n th e as se ss m en t, levy or co lle ctio n of an y ta x under Sta te law w he re a pl ain, sp ee dy an d efficient rem ed y may be ha d in th e court s of such St at e. Th e ex per i­ en ce of m an y ra il ro ad s ov er a num ber o f yea rs ca use s them to b eli ev e th at S ta te court s sel dom pr ov id e a pl ai n, sp ee dy an d efficient remed y in ta x di sc rim in at io n ca se s and th a t th is is es pe cially ev id en t in th e co ur ts of th os e S ta te s whe re ta x di sc rim in at io n of th e fo rb id de n ty pe now ex ists. Th e la ng ua ge in th e bil l is in ­ te nded to le av e no roo m fo r arg um en t on th is po int. It prov id es , in eff ect, th a t se ct io n 1341 sh al l not be co ns id er ed as a b ar to ac tion s of th e ty pe au th ori ze d to be in s ti tu te d ; th a t is to sa y, in ac tions of th is ty pe se ction 1341 sh al l ha ve no
24 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

application. Such a provision would appear to be necessary in orde r to afford 

complaining car riers an unquestioned righ t to obtain relief.

Mr. F riedel. I want to than k yon, Mr. Ogd en, for your very fine 

statem ent.

Mr. Ja rm an ?

Mr. J arman. Mr. Ogd en, I have two questions I would like to ask. 

On page 5 you ref er to “m any t ax assessors sim ply cannot or will not 

equalize railro ad assessmen ts’’ and so forth . What do you mean by 

“ca nnot” ? Do you mean bv the law of the pa rticul ar State the y are 

not in a p osition to m ake a fa ir assessment ? How would you elaborate 

on th at ?

Mr. Ooden. Tha t was not what 1 had in mind, M r. Ja rm an . I had 

in mind that frequently throu gh forc e of circumstan ce, throug h the 

hab itual tre atmen t of the pr op erty over the yea rs, the fac t th at the 

assessors may be elected officials, th at the pub lic revenue of course is 

involved, it goes ag ain st tra ditio na l methods that perha ps have been 

followed for some time. Th ey may feel it would be unpopular . It 

might hu rt them in th ei r chances for reelection. Frequently t he r ai lroads, which would be the ones to com plain—you see th e local people don’t complain about low assessments.

They like them. Every body hopes to have his assessment jus t as low 

as possible. Actually we feel the same way about it. Ou r only problem is t hat ours is jus t not as low as everyb ody else’s.

Bu t the local assessor who makes low assesm ents is popula r.

Now the S tate assessor who fails to equalize the rai lro ad assessment, 

he is the one of course th at is caught, you might say, in the toils of 

tra ditio n and the way the m atter has been handled for so long, and it 

was that cond ition th at T had in mind more so than any State law.

T know of no State law, Mr. Ja rm an , any where th at proh ibits the 

equ alization of railr oa d pr op erty with oth er propert y, or in fac t th at 

prohibits any so rt of equaliz atio n anywhere.

Mr. J arman. The othe r question I had was with refe rence to the 

adequacies of pre sen t remedies th at the railroa ds or other ca rri ers 

might have.

I understand th at un de r the bill befo re us the re would be created 

a new cause of action in the Fe deral d ist ric t c ourts. How ade qua te are 

the pre sen t rem edies th at are ava ilab le ?

Mr. ( )oden. Well, o f course as you know, Mr. Ja rm an , it is still possible to go into the Fe deral court in a tax case, if there is not a pla in, 

speedy, and efficient remedy at law in th e courts of the State .

The cu rre nt St ate remedies we feel actua lly are not speedy and 

efficient. 1 dislike to be critical of any State , and lef t out a good bit 

tha t could have been pu t in the statem ent.

But I would be glad to give you some “for insta nces,” and assu re 

you that I can multip ly the instances by ju st as man y times as you 

would like to hear them . To illustra te, tak e the case of the tax prob ­

lems of the railr oa ds in the State of Ari zon a, which are immediate 

and very pres sing, an d have been the subject of a grea t deal of at te ntion.

Af ter pa yin g its 1959 taxes, the South ern Pacific sta rte d litigation 

on the clear proposition t ha t its prop erty was assessed a t a much high er 

pe rcen tag eo f value tha n t he p rope rty gener ally in Arizon a.
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 25

I don’t think anybody ever really actually disputed that lact. And 

finally the case went to the Supreme Court, and the Court very fairly 

held tha t the Arizona law did provide relief, tha t the constitution of 

Arizona would not permit such discrimination, and that the railroad 

was entitled to relief. But there were several catches in it. One was 

the Court refused to make the relief retroactive, so tha t for the 2 or 3 

years that had ensued while the litigation was in progress the railroad 

would recover nothing. . . .

The Court provided tha t its decree would only be prospective in its 

operation, and th at no relief could be had unless the railroad first obtained an injunction. When tha t case came out, the Governor of the 

State issued a statement, and he said thi s:

“What the Court has said in elfect is that if discrimination does in 

fact exist”—and here is the important part—“and L think that everyone who has gone into the subject at all will concede that it does, ’ and 

then he went on with his statement.

He suggested tha t the legislature should do something about it. 

Well, the legislature very promptly did do something about it. They 

first tried to pass a law that would permit the railroads to be assessed 

at a high er proportion of value than other property. That law failed 

of passage. Then in 1964, earlier this year, the legislature passed two 

laws th at effectively denied the railroads the fruits of their victory if 

you could call them fruits. It enacted a law providing that no State 

injunction could issue in a State tax case.

Well, the Supreme Court had already held that the railroad couldn t 

recover any taxes and tha t the only remedy was to obtain an injunction. 

The second law passed was to the effect tha t a reappraisal figure on 

assessments in the State could not be used in a tax case until the entire 

State had been reappraised, and the legislature had authorized such a 

reappraisal, and everybody was confident that the reappraisal would be 

years and years off. And so after litigation tha t commenced in 1959- 

60, and extended through legislation in 1964, and a successful decision 

at the hands of the Supreme Court on the pleadings, the company is no 

further along toward relief than it was when it started.

These sort of illustrations take time. 1 can multiply them if the 

committee would like to have them. But by and large relief of that 

sort is tedious, expensive, and often utterly fruitless.

Mr. J arman. 1 think that is all the questions I have at this time, but 

I would like to say th at I think you have made an excellent statement.

Mr. Ogden. Thank you, sir.

Mr. Friedel. Mr. Springer.

Mr. Springer. Mr. Ogden, this statement is a good one and it rather 

intrigues me. Are you familiar with the Nashville-Chattanooga-St.

Louis Railw ay v. Browning?

Mr. Ogden. Yes, sir.

Mr. Springer. You weren’t referring to that in any context with Mr. 

Jarman of Oklahoma were you ? You weren’t talking about that ?

Mr. Ogden. Well, 1 could talk about Tennessee. We have property 

in Tennessee.

Air. Springer. Let me see if T understand this case right. Now, 

presumably this was made unlawful for any district to assess property 

owned or used by a common carrier at a value proportionately higher
26 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

to the tru e marke t valu e o f its pr op erty than the assessed value of all 

othe r pr op erty in the t ax in g distr ict prop ortio na te to its t ru e ma rket 

value.

Now, I wish you would just develop fo r me if you could ju st how 

fa r the commerce clause can override the St ate au thor ity to assess 

and collect ad valorem taxes on yo ur pr op erty wi thin th at Sta te.

Mr. Ogden. You mean in the light of N.C . <& St. L. v. Br ow ning I Mr. Springer. Yes, you have to ta ke that in to con sid era tion, because 

I un de rst an d t ha t is the law.

Mr. Ogden. Let me give you first a word about N.C . St. L. v. Brow ning . As I say, 1 know a lit tle som eth ing about it because ou r 

ra ilr oa d ope rates throug h Tennessee, and we hav e ou r Tennessee assessm ents and have to keep up with those thing s. But in Br ow ning , the ra ilr oa d attack ed th e assessment which it claime d was excessive, on 

two grounds.

One grou nd was th at the allo cation of value to the State , because 

the N.C. & St. L. was no t who lly wi thin Tennessee, it lay with in and 

without, th at the alloc atio n fra ction or method of allocat ion emp loye d 

by Tennessee was no t prop er, an d it was in respec t of the allocati on 

fra cti on th at the commerce c laus e was brou gh t into play.

Th e pop ul ar concept of the commerce clause in t ax cases o f r ailro ad s 

in those days was th at if the allo cation fra cti on was no t fa ir and 

reasonable, the effect of it was to import into the St at e values which 

were not actua lly the re, an d thus bu rden the In tersta te Commerce or 

the commerce th at was ove r in an oth er Sta te. In fa ct th at was not 

only th e f av orite ap peal to th e commerce clause, it was the only app eal. 

Well, the Supre me Co urt in Br ow ning held th at the St at e’s alloca ­

tion, use o f the allo cation form ula was not, generally speak ing u nf air. 

So there fell the commerce clau se arg um ent. But i n that, reg ard , Mr. 

Sp ring er , I feel th at a ctu all y Br ow ning s up po rts t he con sti tutio na lity 

of th is pa rtic ul ar m easure because Mr. Fra nkfu rt er was very caref ul 

to po in t out th at h ad he fou nd th at the use of this allo cation form ula 

would hav e th e effect of bu rden ing inter sta te comm erce, then he would 

have strick en it down. He ju st fou nd th at it di dn ’t, an d the cou rts 

have found th at it di dn ’t.

Now, t he othe r gro und of a ppeal on the part of the railr oa d had to 

do with a professed failu re to assess the railr oa d pr op er ty at the same 

level as othe r p rope rty as bei ng assessed.

Mr. Springer. Th at was the second point.

Mr. Ogden. Yes, th at was the second point. Now th at po int was 

ac tua lly decided ag ain st the ra ilro ad in the court below. Th e court 

below held th at the railr oa d faile d to prove it. But Mr. Fra nkfu rter 

said th at even if the ra ilr oa d ha d pro ved it, th at it wou ld give them 

no co mf ort because, h e said, an d this has no thing to do with the commerce clause, he said the equal pro tection clause of th e 14th am endment, doesn’t extend any p rotection in a si tua tion of this kin d.

Now again , gentlem en, at th at tim e the po pu lar concept of wh at to 

do in case o f a fa ilu re to equaliz e w hen resort was not being had to the 

St ate constitu tion itse lf, was to claim the equal pro tec tion clause as 

yo ur have n and refuge.

I don’t know o f a case w here th e commerce clause and the un due burden, the the ory of an un du e bu rden grow ing ou t of dis crim ina tory 

action aim ed at interstate commerce, has been clai med in a failu re to 

equalize case.
TAX AS SESS ME NT S ON COMMON CAR RIER PROPERTY 27

If there has been one, I don’t know of it.

Mr. Springer. In other words, there is at the present time no decisions upon this question of failure to equalize based upon the commerce clause; is that true ?

Mr. Ogden. That is right, as far as I know.

Mr. Springer. Let me read these words to you, and then I will ask 

a question. This is what Justice Fr ankf urte r said :

The S ta te s m ay cl as si fy pro per ty fo r ta xati on, may se t up di ff er en t mo des 

of as se ss m en t, val ua tion, and co lle cti on , m ay ta x som e ki nd s of pro per ty a t 

hi gher ra te s th an ot her s, and in m ak in g all th es e dif fe re ntial s be tw ee n ra il ro ad s 

and oth er u ti li ti es w ith th a t se para te ness which are dis tinct iv e chara cte ri st ic s 

an d fu nc tio ns , th es e are am on g th e co mmon plac es of ta xati on an d of const it utional ity. So fa r as th e F ed era l C on st itution is co nc erne d, a S ta te ca n put 

ra il ro ad pr oper ty in to one pi ge on ho le an d oth er pro pe rt y in to an oth er .

Now there are two things I am trying to get out by this examination. First of all, can they do this without a State law? This is my 

first question. He hasn’t said here whether or not the State law of 

Tennessee allowed them to do that or not, but 1 take it since the State 

Board of Equalization of Tennessee has charge of public utilities— 

isn’t that true?

Mr. Ogden. Yes, sir.

The State railroad and public utilities commission in that State and 

the-----

Mr. Springer. Now specifically in Tennessee, the local assessor 

lays the local tax assessment, doesn't it ?

Mr. Ogden. Yes, sir.

Mr. Springer. In the State of Tennessee the State-----

Mr. Ogden. Railroad and public utilities.

Mr. Springer. Railroad and public utilities sets that assessment; 

is tha t right?

Mr. Ogden. Yes.

Mr. Springer. Now Justice Frankfu rter didn't say in this decision 

as to whether or not tha t they were allowed under the Tennessee law 

to set this. Now this is one question whether or not they were allowed 

by the law to do it or whether they just started out and did it on their 

own. Do you see what I mean ?

Mr. Ogden. Yes, sir.

Mr. Springer. Now he has said here tha t the State can do it. I 

presume that what he is saying here is tha t they can do it by law. 

But as I understand it from what he has said here, he hasn’t said, 

and I don’t know whether or not, tha t under the Tennessee law they 

can do this. Now he has said here tha t Tennessee wants to do it 

by law, there isn't any question, they can put public utilities in one 

pigeon hole at one rate and they can put bank accounts, and which 

many States do at one-quarter of 1 percent, they tax everybody else 

at 4.5 percent as you well know, so ap paren tly this is constitutional. 

The question in my mind is this : Are you saying tha t they can't 

do this by law, or shouldn’t be doing it by law, or they shouldn’t 

be doing it by law or otherwise and you are asking for this relief?

Mr. Ogden. Let me see if I can answer, Mr. Springer, like this : 

As I understand this situation, on the point as to what Tennessee could 

do, Mr. Frankfurt er was saying the constitution of Tennessee, unlike the constitution of Illinois, for instance, would permit classification of property. Of course as an Illinois lawyer you know all about 

the constitution.
28 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

Mr. Springer. I know that law backward and forward.

Mr. Ogden. Yes, sir; but Tennessee law differs from Illinois law 

in that regard because the constitution permits classification.

Now the statutes in Tennessee actually do not provide for classification. Mr. Fra nkf urter in effect held or said tha t the action of these 

assessors down through the years virtually amounted to classification, 

and he treated it as if the legislature had met, passed a law and said 

they had implemented the constitutional provision which would have 

permitted classification. That is the way I understand the decision.

Mr. Springer. That is an effect that is almost statutory in nature 

by the fact that it has existed over a long period of time.

Mr. Ogden. And the State constitution permits it, you see, permits 

classification. And of course many others don’t. But it does in 

Tennessee. So he in effect held tha t tha t amounted to the same 

thing as if the legislature had passed a law on the subject.

Mr. Springer. Now let me ask you two or three more questions.

By this legislation are you seeking in those States which have no 

statutes at all with reference to classification to prevent a State from 

either classifying or putting you in a different category ?

Mr. Ogden. Can I answer tha t provisionally. I am saying yes, 

if it would mean tha t in the property tax field, and where all property is subject to the same rates, tha t property devoted to interstate 

commerce would be required to pay a greater portion based on a 

higher assessment relatively than others; yes, sir.

Mr. Springer. Now tha t is one where there is no State statu te ?

Mr. Ogden. Yes; that is right.

Mr. Springer. Now does this apply, this legislation you have suggested, does it apply also to those States which set up different 

classifications by statute and they put public utilities in one class and 

one assessment, one rate, and they p ut other property and other property and other property in different classifications ?

Mr. Ogden. Excuse me, Mr. Springer, but the answer there would 

be no, because you put in the word “rate.”

Mr. Springer. I beg your pardon.

Mr. Ogden. You put in the word “rate.”

Mr. Springer. Let’s take out rate and put in assessment ?

Air. Ogden. Because you see it is so important to keep rate out of it.

Mr. Springer. I understand. We are talking just about assessment.

Mr. Ogden. Tha t is right, but rate has to be in to the point that it is 

subject to the same rates, you see. Everything is equal except the 

assessment.

Mr. Springer. All right. Now are you saying then tha t they could 

not assess—what you are advocating, even if the State statute says 

“we will assess railroads at 100 percent, we will assess local property 

at 46 percent,” now are you saying by this legislation that that is going 

to supersede the local statute?

Mr. Ogden. Tha t is right.

Mr. Springer. You are asking for relief both in those States where 

there is no statute and you are asking for relief also in those States 

where there is a statute.

Mr. Ogden. That is right.

Mr. Springer. Classifying we will say different assessment rates, 

or different rates of assessments, that is a better way to put it.
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 29

Mr. Ogden. Yes, sir.

Mr. Springer. So you are asking relief from both of those instances. 

Now I take it then tha t you are in effect asking for us to overrule the 

Fra nkfur ter decision, because I take it the Fr ank fur ter decision is the 

law at the present time. Do you agree on that, Mr. Ogden ?

Mr. Ogden. Well now, 1 would have to again qualify that answer, 

and I don’t mean to be evasive, Mr. Springer.

Mr. Springer. I understand.

Mr. Ogden. Honestly, the point that is the basis for this suggested 

measure as I understand it actually was never passed on, never even 

presented in the N.G. St. L. case. How the Court would have 

treated it I don’t know of course.

It was not presented. It was not passed on. What the Court did 

say there would indicate tha t had it been presented, the Court would 

have held just as this suggested measure points up, because the Court 

was very careful to say, or to indicate at least, that an undue burden 

on interstate commerce under the commerce clause would not be permitted even if it grew out of the State assessment.

Now as far as overruling, for tha t reason I would have to say that 

in a sense the purpose of this as 1 conceive it would not be to overrule the N.G. (ft St. L. v. Brow ning, but it would be to provide relief 

in Tennessee and in any other State like it where property used in 

interstate commerce is singled out for discriminatory action in assessing it higher than other property? and this is the important thing, 

subject to the same tax rates and in the same taxing district.

Mr. Springer. All right. Now you believe than tha t this legislation 

would be constitutional ?

Mr. Ogden. I do.

Air. Springer. In overruling. Well we will say this-----

Mr. Ogden. It isn’t really overruling.

Mr. Springer. In substituting itself we will say fo r a State statute. 

That is what I am think ing of. In other words, you believe this is within the commerce clause.

Mr. Ogden. I don’t think there is any question about it, Mr. Springer.

Mr. Springer. In other words, you think if this went up to the Supreme Court, tha t you could justify your position to such an extent 

tha t you could make this law stand up ?

Mr. Ogden. Oh yes.

Mr. Springer. You don’t thin k there is any doubt about it ?

Mr. Ogden. I have no doubt.

Mr. Friedel. I would like to ask one question.

Mr. Springer. All right.

Mr. Friedel. Speaking about true market in the bill.

M r.Ogden. Yessir.

Mr. Friedel. I am wondering what would happen in Baltimore, 

Md., where the B. & O. is exempt from taxation. Would the enactment 

of this bill rule out the exemption clause in Maryland ?

Mr. Ogden. I don’t see how it would. Mr. Friedel, as I read the bill, 

it is a very narrowly drawn bill, and it only applies where all the prop ­

erty involved is subject to assessment, and you say that the railroad is 

exempt, so I presume that it couldn’t possibly be involved, and it only 

applies again where they are all subject to the same rates. I must confess I don’t know too much about the Maryland tax situation, but if I 

may, Mr. Friedel, I would have to say this: Keep in mind, gentlemen,
30 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

th at th is is s ort o f a situatio n th at you mi ght, to borrow an o ld phr ase , 

if th e shoe fits you can we ar it.

If it doesn 't you do n't have to wea r it. It merely goes to what is 

den om ina ted as discrim ina tor y action, a nd it merely goes to the excess. 

It doesn’t go to the whole assessment.

I t ju st goes to the difference th at is br ou gh t about by sin gli ng out 

interstate commerce for an added burden .

I n a St ate where it doesn’t ap ply , why we are all ha pp y. I assure 

you th e railr oa ds wo uld be hap py , and we would be ha pp y if we ne ver 

used i t any tim e anywh ere. It is ju st a remed y, in other words.

Mr. F riedel. Would the passage of this bill mak e the B. & O. pay 

the true value on th eir railr oa d prop erty, fro m which the y are now 

exem pt ?

Air. Ogden. I assum e th at the y are pa ying —if the y are escapi ng 

an yt hi ng they are the first, railro ad t hat ever has t hat 1 know of. But 

it doesn’t change any body’s assessment practic es. I t doesn’t cha nge 

any assessment law. It d oesn't c han ge an ythi ng that any St ate wa nts 

to do. I t merely says th at if in th e doing of it you sing le out in te rsta te commerce fo r discrim ina tory a ctio n an d add a burde n to it, that 

you are n ot ad din g to anybody else in the same catego ry, th at is the 

cat egory being subjec t to the same tax r ate , then as to the excess, i f the 

ra ilr oa d can prove it, and the y hav e to p rov e it in a h ea rin g l)efore th e 

court, the n they can issue an injunction again st the excess.

Mr. W atson. Will the ch air man yield?

Mr. F riedel. I yield.

Mr. Watson. As I u nd ersta nd the chairm an ’s que stio n and the bi ll— 

an d I do n’t believe perso nally t ha t the bil l would affect your p ar ticu ­

la r situatio n, it would only pr oh ibit discrim inatory or overassessments aga ins t a rai lro ad .

As I un de rst an d it, there is no tax on the ra ilr oa d, an d I am sure 

the railr oa d wo uld n’t o bject to th at.

Mr. Ogden. Of course not.

Mr. Watson. I don’t th in k it is directed towa rd underassessm ents 

bu t towa rd overassessm ents so fa r as the case is concerned.

Th is bill goes to the m atter of assessment. I th in k it is a good bill, 

an d fo rtu na tely South Ca rolin a is no t listed as one of those State s 

which ap pa rently pra ctices dis crimination.

Mr. F riedel. And ne ith er is Mary lan d.

Mr. Macdonald. In wh at field?

Mr. W atson. In a good many fields, and I might say in th at r eg ard 

I am su rpris ed th at the Supre me Co urt ref used to let the Br ow ni ng

case come u nd er the pu rview of the equal pro tec tio n o f th e 14th am endment, because the y allow ev ery thing else to come un derneath it, and 

th at is the first th in g they have exclude d fro m it. You might men ­

tion it again . When was the Br ow ni ng case brou gh t, in 1947 or 1948 ?

Mr. Ogden. 1940.

Air. Watson. Well, the y h ave a new philosop hy over there now. I f 

you bring the su it ag ain you pro bably would get some relief. But 

this bill goes to the m at te r of dis cri mi natio n in assessment.

Air. Ogden. Yes, sir .

Air. AV atson. AATiat is going to happ en when you have the equal 

assessments a ccordin g to the true v alue of the prop erty, bu t the St ate
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 31

or the subdivision places the common carriers in a different tax 

bracket? Now this bill will not preclude such a maneuver as that. 

Mr. Ogden. No.

Mr. Watson. And actually you are still in the soup again, aren’t 

you?

Mr. Ogden. If t ha t could be done—Mr. Watson, I never heard of 

a situation like th at.

Mr. Watson. That they would place the common carriers in a different tax bracket ?

Mr. Ogden. Not bracket. You mean subject to a different tax 

rate.

Mr. Watson. A different tax rate.

Mr. Ogden. I have never experienced that. It may exist somewhere 

but it has never been brought to my attention.

Mr. Watson. Let me ask you this. What is the method of assessing 

and apportioning the personal property of the railroads, the moving 

stock ?

Mr. Ogden. As a general rule the railroad is valued as a unit. That 

takes into account the rolling stock and everything. Criteria of value 

are used that would have the effect of valuing the whole property, 

franchise, rolling stock, money, everything tha t it has, and this is 

the so-called unit rule of valuation. The illustrations that are used 

here are only employed in States where the unit valuation is available, because actually there are some States, particuarly in the N ortheast, where I have heard some people grumble, but without the unit 

rule of assessment it is virtually impossible to make the kind of comparison that has to lie made in order to find this discrimination. In 

the States in which I have any experience, through the Midwest and 

South, all use the unit rule of assessment.

Most of the States do have a unit rule of assessment tha t includes 

all railroad property.

Mr. Watson. How do you determine the unit rule? The moving 

stock is constantly going from one State to another. Now how do yon 

assess its valuation, and how do you apportion it among the various 

States?

Mr. Ogden. When it is assessed on a unit rule, Mr. Watson, the 

whole property is valued; tha t is, the whole railroad is valued, you 

might say, as a going concern. The State tha t is doing the valuing 

determines through reference to the mileage in the State and the business that is transacted in the State and from a variety of other factors 

that, let us say, 25 percent of the total value of $10 million that they 

have decided the whole railroad is worth, is located in that State.

Then they spread the $2.5 million over the owned property in the 

State, and tha t has the effect of taxing the rolling stock and everything else in tha t State. There are some variations. Illinois is a 

variant in order to p ut some rolling stock valuation on trackage rights, 

but essentially that is the way it is gone about.

Mr. Watson. You have not actually experienced any difficulty in the 

various States on the assessment of your personal property or rolling 

stock ?

Mr. Ogden. No, sir; not now Mr. Watson. States have been doing 

this railroad assessment for a hundred years, and they have a lot of
32 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

problems, but most of tha t type problem is pretty well ironed out. 

Every now and then a new one comes up.

Air. Watson. 1 want to say th at certainly so far as I am concerned, 

I want to do what I can to take Mr. Hemphill's place in pushing this 

legislation. I think it is only fair.

However, 1 might comment, and I am sure tha t you are aware of it, 

tha t this matter of assessment is one of the knottiest, most difficult 

problems that you have. We are trying to get throu gh a statewide 

assessment in South Carolina now.

We have already completed the countywide assessment, and it is 

difficult even on a small division such as a county in getting a true, 

proper, nonprejudicial assessment. Certainly I can appreciate the 

problems of the railroad in this regard, and I am delighted to see 

tha t South Carolina, while it might be accused, and unjustly so, of 

discrimination in some areas, has been excused of the charge of discrimination in regard to the assessment against railroads.

Mr. Ogden. Thank you, sir.

Mr. Watson. Thank you, Mr. Chairman.

Mr. Friedel. Mr. Devine ?

Mr. Devine. 1 have no questions.

Mr. Friedel. Mr. Macdonald?

Mr. Macdonald. Sir, you are obviously an expert in this field and 

it seems fairly technical so my question may be rath er basic. However, I am tryin g to find out the purpose of the bill. You say on 

page 8 of your statement that legislation forbidding discriminatory 

taxation of car rier property may be appropriately made a part of the 

Interstate Commerce Act.

Obviously I have no quarrel with that. I think tha t is true. But 

tha t takes into the statement the fact tha t discrimination is practiced 

by States. Is tha t a fact ?

Mr. Ogden. Yes, sir.

Mr. Macdonald. These States tha t practice discrimination in tax ­

ation, don’t they have public utility boards, statewide?

Mr. Ogden. Yes, sir. Th at is who does it.

Mr. Macdonald. What prevents you from appealing to the public 

ut ility board ?

Mr. Ogden. We do, but tha t is where you get into long-drawn-out 

litigation, and you are fighting with the man before whom you have 

to go and have your property assessed next year.

Mr. Macdonald. In other words, I take it this is an antistates rights 

bill, is that correct?

Air. Ogden. No sir; I wouldn’t say tha t at all. It certainly doesn't 

extend states rights any, but I would say it is this kind of a bill. 

It is a bill that has Congress to exert its power and influence in the 

area that is reserved to it.

Mr. Macdonald. Isn ’t this making me, as a Member of Congress, 

from Massachusetts, pass on whether or not Georgia or Alabama has 

overstepped th eir states rights and say that that right should not be 

preserved to the States, even though it is within the geographical 

boundary of the State, tha t it should come back up here to this big 

powerful National Federal Government and tell that poor little State 

what they can do and what they can’t do in the field of taxation?

Mr. Ogden. Well, no sir, I don’t think so. I don’t think that anybody should apologize for calling to a State’s attention the fact that
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 33

they are singling out anybody for discriminatory treatment in the field 

of taxation.

Mr. Macdonald. There has been a lot of people from your section of 

the country who have been arguing just the opposite for quite some months and years. I was wondering what caused the change. I am glad to see Mr. Watson espousing this legislation now, but I heard him very forcefully and very talentedly defend the rights of South Carolina to make whatever proper laws they want within the 

State of South Carolina.

Mr. W atson. If the gentleman will yield.

Mr. Macdonald. I will be happy to yield.

Mr. Watson. At tha t particular point my argument directed toward tha t end was against an alleged bill which would violate every­ one's rights. Certainly, so far as this particular measure is concerned, the man has figures here, and he has outlined 24 States in which the excessive discriminatory assessment against the railroads ranges any­ where from 27 percent up to 84 percent. So there is no question about the alleged act of discrimination so fa r as this matter is concerned.

Mr. Macdonald. I am sure tha t no witness comes in here with a 

set of figures that does his cause any damage, and, therefore, I assume tha t these figures are correct. But I have seen other figures in other fields in which the arguments were made tha t what belongs within a State belongs to tha t State, and tha t the powerful Federal Govern­ ment and the allegedly socialistic Supreme Court should certainly keep their hands out of the States. I feel that if th at is true in some areas, I suppose it should be true even with railroads. However, I do see, if the statements that are here contained are true, something should be done, and if you say it has been going on 100 years, I think you have said they have been making these un fair assessments against you-----

Mr. Ogden. Excuse me, Mr. Macdonald, if I said that I didn't mean 

to imply it. I said th at railroads have been assessed for 100 years. In other words, railroads have been in this country about a hundred years and we have had property taxes. I don’t know that this type of discrimination has been going on that long. It has been going along 

for a pretty good while.

Mr. Macdonald. Is this the first time such a bill has been intr oduced ?

Mr. Ogden. So far as I know. At the last session there was a bill 

similar to this by the same gentleman who introduced it in the last 

Congress.

Mr. Macdonald. In closing out, my knowledge of railroads is fairly 

limited, but 1 do know two railroads that have got unique solutions, by not paying any taxes. You don’t suggest th at the railroads shouldn’t 

pay any taxes, do you ?

Mr. Ogden. Oh, no sir. I would like to add on to that. We take it 

as a privilege as far as our company is concerned and all others tha t I know anything about to pay taxes. We insist th at we are good citi­ zens everywhere we operate, and we never stand back from anybody on paying taxes. We think it is our duty to do it and our privilege to do it. But I do object to paying too much and more than the other 

fellow.

Mr. Macdonald. Right, sir. I don’t blame you in tha t respect. I 

would ju st point out th at in New England, the New York, New Haven
34 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

& H ar tf ord when called on to pa y these taxes tol d the city of Boston 

and told the State of Massachu setts inc lud ing , I suppose, the leg islatu re of t hat S tate, th at they weren 't going to p ay t he ir taxes th at ha d 

been assessed ag ains t them , an d if the city of Boston wante d to do 

som eth ing abo ut it or the S tate legislatu re, tiie city of Boston co uld t ake 

over this prop erty, and the St ate leg islatu re could ru n its rai lro ad . 

Tha t seemed to me to be a pr et ty unique way of se ttling the ta x 

prob lem.

I might say pa renthetic all y th at it is sti ll ru nn ing and they still 

haven’t pa id t he ir taxes.

So I suggest that perhaps that is a w ay o ut f or you.

Mr. Ogden. Tha t is a way ou t I wou ld not like to tak e, Mr. Macdon ald. Th ey had to go into bank ru pt cy to do tha t.

Mr. Macdonald. We ll, the Boston & M ain e have closed down pr ac ­

tic all y all its passenger service and tol d the vario us localities in which 

it has rea l prop erty in th at the y we ren ’t going to pay any more taxes 

and if the localities did n't like it the y could also tak e over the 

prop erty.

Mr. Ogden. I expect it is th e old say ing. You can’t get blood out 

of a tur ni p. If they do n’t have money they can ’t pay.

Mr. Macdonald. I see they we ren 't listed on yo ur lis t here and 

therefore ap pa rently t he ir fina nci al tro ubles d id n’t stem f rom the fac t 

th at the y w ere be ing overly a ssessed.

Mr. Ogden. Tha t could ju st be one of ma ny perhaps. We do n’t 

claim th at e very ra ilr oa d here holds back tax es a t all.

Mr. Springer. Would t he g entle ma n yield a t th at point ?

Mr. Macdonald. I will be h ap py to yield.

Mr. Springer. Ju st to follow up wh at the gen tlema n from Ma ssachuse tts h as said, I tak e it, Mr. Ogd en, th at you would be satisfied if 

we made a staff stu dy to de ter mine wh eth er or no t thes e rates are as 

they have been pu rp or te d with jus tice on yo ur side?

Mr. Ogden. Mr. Sp rin ge r, it would seem to me th at a staff stu dy 

would be very ap pr op riat e in a sit ua tio n such as this. Th ere a re a lot 

of f ace ts and fac tors to t his problem. If y ou will pa rdon me, I came 

up here with two brief cases w ith ju st a few of the things th at I th ou gh t 

migh t be gone into. Th ere is just a whole lot to it. I wou ld t hink t ha t 

you would perha ps want, t ha t, and we wou ld love to------

Mr. Springer. Do you believe th at this would hav e a very wide 

effect ? I can’t th ink of a law t hat would h ave a ny b road er effect th an 

the one you prop ose here , because alm ost every ta xi ng body is going 

to take issue to it. I am ju st an tic ipat ing wh at we in politics would 

ru n into. Wh ene ver you star t som eth ing like this, unless you h ave go t 

yo ur fac ts pr etty well grounded, and which you can substan tia te in 

public the justification, if we attempt to pu t th is kind of a law into 

effect, we ce rta inl y o ugh t to be backed up not just, with fa cts and figures 

which you, the taxing bodies or anybody else br in g out, but I think 

we oug ht to have some fact on ou r own upon whi ch this committee 

could rely.

Mr. Ogden. I cou ldn’t agree with you more, Mr. Sp rin ge r, and we 

would be glad to help and assist in any way th at we possibly could.

Mr. Springer. I just wa nt to say for the benefit of the committee 

th at I know this railro ad. I rod e it f rom Chicago into my distr ict .
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 35

It is a fine citizen in Illinois. They pay their taxes without any 

rhubarb and they are a fine railroad and we are glad to have them in 

Illinois.

Thank yoff.

Mr. Ogden. Thank you, sir.

Mr. Macdonald. I would just like to clear up in my own mind, sir, 

what the present status of the tax situation is. You say tha t you have 

to appeal to the very people who have already assessed you, is that 

correct, the public u tility commission, for example, of Massachusetts?

Mr. Ogden. That is correct.

Mr. Macdonald. And after you—if you dislike their decision you 

have to take an appeal to them. Is there no appeal to the State court ?

Mr. Ogden. Oh, yes sir. In different States they have different 

methods of going about it, but therein lies the long drawn out expensive procedures tha t we find ourselves in, and it is sometimes utterly 

impossible to go anywhere.

Mr. Macdonald. Would you feel that the State supreme court is less 

accessible ?

Mr. Ogden. That what, sir ?

Mr. Macdonald. Do you believe that the State supreme court, the 

appeal court of whatever State that you are taking the matter of overtaxation to, is more accessible than the Supreme Court of the United 

States, tha t th eir dockets are not as crowded as the Supreme Court of 

the United States ?

Mr. Ogden. Well, I don't know about the dockets in all of the courts 

of the 48 States, but I would say this. That it is pretty hard to get 

into some of those Sta te courts. For instance, we were talking a little 

earlier about Tennessee.

The situation is utterly impossible in Tennessee. The only statutory 

method of going about it in Tennessee is not to take exception to your 

own assessment, but every taxpayer has a right to take exception to 

everybody else's assessment. Well, can you imagine a railroad in Tennessee taking exception to every assessment of every individual in the 

State? It just won’t work.

You can’t do it. Th at is the so-called remedy, but it is one th at is 

just unthinkable.

Mr. Springer. Would the gentleman yield for just an observation.

Mr. M acdonald. Yes.

Mr. Springer. To give you an idea, I formerly sat as a judge. One 

of my jobs was to hear these. In Illinois by statute it goes to the 

county court automatically if there is an objection filed. Well, we have 

27 railroads of different types in our county. We used to hear those for 

6 weeks at a time. That means t hat they had to go into 102 counties 

in the State of Illinois and have hearings in every single county where 

they were assessed.

It raises sort of a jungle. Each one of those you want to go to the 

appellate court you have to take one from each county. There is no 

such thing as joint or anything like that. If they object in say 20 

counties, they find th at the judge hasn’t dealt them justice, they have 

to go on with 26 appeals to the appellate supreme court depending on 

what the gist of their appeal is.
36 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

And I think this is true in most States. In the State of Tennessee 

it is different because the assessment for railroads by public utilities is 

set by State board. This is a little unusual.

I think Massachusetts has the same thing. Out in the West very 

few do. Texas does I think. This is one of the problems tha t they 

have in taking appeals that it is supremely costly.

Mr. Ogden. That is right.

Mr. Macdonald. Thank you very much, sir. I appreciate your 

testimony. It is a very well though t out one, and I am delighted to 

hear some of you from south of the Mason-Dixon line who really want 

to come to Washington and have us be helpful to you within those 

States as a Federal court and Federal Government.

Mr. F riedel. Mr. Ogden, are you aware of the special subcommittee 

of the Judiciary Committee, on special taxation for all States, trying 

to make taxes uniform ? Are you familiar with th at ?

Mr. Ogden. Is tha t the committee tha t recently come out with a 

report on income tax and sales tax allocation ?

Mr. F riedel. Taxation overall, sales tax, excise tax, assessments.

Mr. Ogden. Yes, sir: I am fam iliar with it to some extent.

Mr. Friedel. Did you ever appear before that committee ?

Mr. Ogden. No, sir.

Mr. Friedel. To bring up this question ?

Mr. Ogden. The committee does not deal at all with this problem. 

Tha t has never been dealt with bv the committee in any way at all 

tha t I know of. In fact I have been told tha t it was specifically 

omitted. If it has, it has just escaped my notice.

Mr. Friedel. Mr. Ogden, I want to thank you for your very straigh tforward statement and answers to questions. Many questions have 

been raised in this hearing this morning tha t I will take under 

advisement.

A staff study will be made between now and the convening of the 

next session of the Congress. I know that is in line with Mr. Spring ­

er’s remarks and your line of thinking.

Air. Ogden. Yes, sir.

Mr. J arman. Mr. Chairman, in that connection I would like to 

go on record, and in line with your comments, and Mr. Springer s 

comments as to a staff study. We are just beginning these hearings 

on a tremendously important question. We know t hat we are in the 

final weeks of the congressional session this year, and I would like 

to say personally as a member of the committee tha t I would be very 

strongly in favor of a staff study of this question, pointing toward possible legislative action in the next session of Congress.

Mr. F riedel. We will discuss that. I want to tha nk you very, very 

much.

Mr. Ogden. Thank you.

Mr. Watson. Air. Chairman, if I might ask one question as to your 

interpretation of this bill. Earlie r in our discussion you referred to 

the railroads being assessed on a unit basis. Is it your understanding 

tha t this bill would apply to both assessments on unit basis as well as 

the assessments of individual pieces of property?

Air. Ogden. It would apply—yes sir, it would perhaps make the 

proof a little more difficult. In fact the proof might become 

impossible.

Mr. Watson. Tha t was the question.
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 37

Mr. Ogden. It is a question of the difficulty of proof. The unit 

method makes the proof more clearcut. But there again, Mr. Watson, 

that would be the carriers problem. If you couldn’t prove your case, 

the bill can’t perform the impossible. It merely provides a means. 

And if the carriers are unable to take advantage of it, they are incapable of mustering proof, they have nothing. They are not entitled to 

anything that they can't prove.

Mr. Watson. Thank you, sir.

Mr. F riedel. Thank you very much, Mr. Ogden. Our next witness 

is Mr. Robert E. Redding, vice president and general counsel of the 

Transportation Association of America.

Mr. Redding?

STATEMENT OF ROBERT E. REDDING, VICE PRESIDENT AND GENERAL COUNSEL OF THE TRANSPORTATION ASSOCIATION OF

AMERICA

Mr. Redding. Good morning, Mr. Chairman and members of the 

subcommittee. My name is Robert E. Redding. I am vice president 

and general counsel of the Transportation Association of America, 

with genera] offices located in Washington, D.C. This statement is 

submitted on behalf of the Transportation Association of America 

to express its policy position in support of Il.R . 736 and ILR. 10169 

respecting tax assessments of common carrier property.

Mr. Chairman, 1 would like to depart from my written statement 

simply to say tha t I hope you would receive it into the record together 

with the attachments tha t are with it.

Mr. Friedel. The statement and its attachments will be included 

in the record.

Mr. Redding. Than k you, sir. It doesn't seem to me necessary to 

read all the way through the statement, but simply to explain to the 

members of the subcommittee this morning tha t our purpose in being 

here is to indicate the interest of the membership of the TAA in the 

pending bills. The modes of transp ortation and the investors and 

the users are concerned about this problem. My association in 1961 

adopted a policy position supporting legislation on this subject. It is 

obvious that Mr. Ogden is the acknowledged expert in this field, and 

I am certainly very glad to associate myself and my association with 

what he has had to say.

The first basic p art of my statement, of course, is a description of 

TAA and its activities. The subject that is before the subcommittee 

this morning was considered by our board of directors and all of our 

panels. By the way, it was endorsed by all eight of our panels, all 

of the modes of transportation being represented, and we have attached to the statement a list of the current members of our board of 

directors.

The second basic p art of my statement summarizes the background 

of how we took our policy position. It stemmed from the decision 

in the Doyle study report and the concern of the railroad industry 

about it.

On page 3 of my statement I have referred to the various pages 

in the Doyle report which discuss this subject, particularly the showing that in 1957 the overpayment of railroad ad valorem taxes re-
38 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

suiting from discriminatory assessments was in excess of some $140 

million.

In view of your questioning of Mr. Ogden, I would like to draw 

your attention to a few of the comments quoted on page 4 of my statement. The Doyle report did touch on the problem of the taxation of 

rights of way of railroads and pipelines, and this is indicative of the 

interest taken by the oil pipeline industry in this legislation, and 1 

might also say th at other modes of transporta tion have expressed interest in this problem, including the w ater-carrier industry. I am not 

able to furnish the subcommittee this morning any facts and figures 

about the other modes, but I am confident that they can be elicited if 

a staff study is undertaken.

Mr. Watson. Mr. Chairman, if I may in terrupt at this point?

Mr. Redding. Yes, sir.

Mr. Watson. Usually before I read a book I like to know something 

about the author. Perhaps the committee is familiar with Doyle, but 

T am totally unfamiliar. Who is he and upon what basis did he make 

this study, just briefly ?

Mr. Redding. Mr. Watson, I have in my hand a copy of the socalled Doyle report. Mr. Doyle is a gentleman who was given the responsibility by the Senate Committee on Interstate and Foreign Commerce to undertake a rather extensive analysis of the transportation 

policy problems in the United States back in 1960.

Mr. W atson. Mr. Doyle is not an industry representative, but he 

was selected by the Senate subcommittee ?

Mr. Redding. Correct, sir.

Mr. Watson. To make this study ?

Mr. Redding. Yes. He brought together a very special study staff 

tha t worked on a number of the problems in transporta tion, and then 

in January of 1961 produced a report on ‘‘National Transportation 

Policy” which contains, at the pages to which I refer a discussion of 

the problems of discriminatory assessments. It was really the discussion in this report which triggered the efforts of our association to 

study the problem as it affected all modes of transportation.

Mr. Watson. Thank you, sir.

Mr. Redding. Certainly.

Mr. Springer. May I ask just this one question. Did that study 

show that this so-called discrimination existed as to other modes of 

transportation, say to trucks, buses, airplanes?

Mr. Redding. It did not, Mr. Springer.

Mr. Springer. Only railroads?

Mr. R edding. The special study group specifically requested the 

railroad industry, and particularly the Association of American R ailroads, to submit a report on this problem which had come informally 

to the attention of this special study group, and this was done. It 

was on the basis of that particular report that the study group based 

its findings.

There was discussion in the report of pipeline rights-of-way problems and a consideration of the possibility of exempting such rightsof-way from taxation. But the study group went further to include 

findings in its statement, some of which are quoted, indicating the 

judgment tha t State and local assessment practices did discriminate 

against the railroads, but nothing specifically on the other modes.
TAX AS SESSME NT S ON COMMON CAR RIER PROP ER TY 39

T would like to refer you very briefly to the following quotation at 

the bottom of page 4 from that study report, as it pertains to State 

law :

T hi s prop os ed anti dis cri m in ati on ta x bil l, which co uld be avai la ble to all 

■common c arr ie rs en ga ge d in in te rs ta te comm erc e, has th e ob viou s m eri t of 

in su ring th a t su ch carr ie rs wou ld re ce iv e eq ua l tr eatm en t w ith oth er ta xpayers 

su bje ct to th e sa m e ta x ra te s in ac co rd an ce w ith ap pl ic ab le S ta te law . The 

pr op os al in no w ay alt ers th e fre ed om of th e S ta te to ta x it s ta xpayers as in its 

di sc re tion i t de em s be st, so lon g as su ch carr ie rs a re a cc or de d eq ua l ta x tr eatm en t 

w ith o th er ta xpay ers .

Pas sa ge by th e Con gress of su ch a bill wou ld no t ch an ge th e su bst anti ve effect 

of th e ta x la w s of th e se ve ra l S ta te s be ca use, w ithout kn ow n ex ce pt ion, al l 

Sta te s, eit her by const it uti onal sa fe guard or le gi sl at iv e pr ov ision de cl ar e it to 

be S ta te law th a t ta x p ay ers w ithin its ju ri sd ic ti on sh al l be ta xed un ifor m ly . 

The ad ditio n of a pro ce dura l rem ed y, by auth ori zi ng Fed er al co ur ts to en jo in 

co llec tion of dis cr im in ato ry ta xes ag ain st in te rs ta te carr ie rs , is co ns is te nt w ith 

th e ob lig atio n of Con gr es s to re gula te in te rs ta te comm erc e, re qu ired under th e 

F edera l C on st itution, and is th er eb y a pro pe r an d ne ce ss ar y ac tion of th e 

Co ng ress.

Mr. Macdonald. Mr. Chairman, could I ask a question, a serious 

question from my point of view ?

Mr. Redding. Certainly.

Mr. Macdonald. You talk about carriers, interstate carriers. I can 

see perhaps a reason to have the Federal Government interfere with 

property that goes between States, and 1 am just asking this question 

and not arguing. It is your position tha t the Federal Government has 

a rig ht to say to anv State “No, you can’t collect tha t State tax because 

you evaluated the depot, the tra in station, at too high a value? It th at 

a serious proposal ?

Mr. Redding. Yessir.

Mr. Macdonald. The station that remains completely within the 

State made of concrete, brick, mortar, wood, etc., is built in a State, 

remains in the State, is never going to go out of that State, tha t the 

Federal Government will have the righ t to tell any State how much 

they think is reasonable for a tax on that property ?

Mr. Redding. In the event tha t property, Mr. Macdonald, whether 

it is made of concrete or is purely real estate, land, is assessed in excess 

of the assessable ratios applicable to other properties, a Federal problem exists because such real estate, the buildings and all th at goes with 

it, is an incidence of interstate commerce.

It is utilized for the purpose of facilitating interstate commerce. I 

feel confident that the railroa d industry and even the start’ members of 

the Doyle study group would agree that this is an incidence of interstate commerce, and it should, therefore, be subject to the proposed 

legislation. If it is assessed on a discriminatory basis, this makes 

it an undue burden on interstate commerce.

Mr. MacDonald. Thank you, sir.

Mr. Redding. Mr. Chairman, the balance of my statement, beginning in the middle of page 5, is essentially a summarization of the 

arguments which Mr. Ogden has already advanced. I think the one 

thin g I might draw to your attention was that as a result of that 1957 

survey study, it was determined tha t in the States then reported, the 

rail facilities in the aggregate were assessed at an average of 58 percent 

of true market value, whereas nonrail properties were assessed at only 

25 percent of value.
40 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

My statement continues by saying that property tax assessment is 

a function of local and S tate government well known to all property 

owners because it is the basis upon which property taxes are levied. 

No homeowner would long submit to an assessment ratio on his home 

twice tha t applied to his neighbor’s home. We think all citizens would 

be sympathetic to the plight of the common carriers subjected to such 

treatment, if it was generally known that this practice widely prevails.

Moreover, one would not suspect from a reading of State constitutions, or State and local laws, that discriminatory assessments have imposed unjust taxation on the carriers. The problem instead results in 

large part from the failure of State and local assessing officials to comply with existing statutory mandates which guarantee assessment 

equalization.

I conclude my statement by summarizing the reasons why we felt 

Congress should act, involving the power of the Congress to regulate 

interstate commerce, the findings in the Doyle report, the special study 

approved by the Advisory Commission on Intergovernmental Regulations, referred to by Air. Ogden, which acknowledged the possibility 

of Federal legislation in this area, the precedent brought about and 

already approved by the Congress in connection with the Interstate 

Commerce Commission having the authority to set aside State commission orders on the maintenance of intrastate rail rates and int rastate trains, the tra in discontinuance problem, and finally the fact that 

judicial relief at State and local levels has not been fully effective.

A substantial backlog of cases, involving a delay of years before 

final decision, exists in many States. Suits for recovery of local taxes 

are further impeded because of the necessity of being filed in multiple 

local jurisdictions.

And so, Mr. Chairman and members of the subcommittee, we certainly would endorse the pending bills and a study of this problem by 

your staff.

We appreciate the privilege of presenting the views of TAA at this 

hearing. Thank you, Mr. Chairman.

(The document referred to follows:)

Sta te m en t of R obert E. R ed ding , Vic e P res id en t an d Gen er al Co un sel of t h e

T ra ns po rt at io n Ass ocia ti on of A mer ica

Mr. C ha irm an a nd m em be rs of th e su bc om mitt ee , m y na me is Rob er t E. R ed ding . 

I am vic e pr es id en t an d ge ne ra l co un sel of th e T ra nsp ort ati on Assoc iatio n of 

America, witl i ge ne ra l offices lo ca ted in W as hi ng to n. D.C. Thi s st ate m ent is su bm itte d on be hal f of th e T ra nsp ort ati on A ss oc ia tio n of Ame ric a to ex pr es s it s 

po licy po sitio n in su pport o f II.It. 736 an d II .It. 10169 re sp ec tin g ta x as se ss m en ts 

of co mm on ca rr ie r pro pe rty.

I. DES CRIP TI ON OF TA A AN D IT S ACTIV IT IE S

F or th e in fo rm at io n of th is subc om mitt ee , th e T ra nsp ort ati on Assoc iatio n of 

America (T AA) which was or ga ni ze d in 1935 is a no np rofit re se ar ch an d ed uca ­

tion al in st it uti on, de vo tin g its ef fo rts to th e de ve lopm en t an d im pl em en ta tion of 

soun d nati onal po lic ies a im ed a t th e cre at io n of t he st ro nges t po ssible tr an sp o rt atio n sy stem unde r p ri vate ow ne rship. It is an or ga ni za tion o f tr an sp o rt ati o n 

an d ge ne ra l bu sine ss in te re st s o f all kind s, in cl ud in g sh ip pe rs, an d oth er us er s, 

in ve stor s, an d ai r, fr eig h t fo rw ar de r, high way , oil pipe lin e, ra il, an d w ate r carri er s. It s m em be rs hi p also includ es in di vi dua ls su ch as ed uc at or s, tr a n sp o rt a ­

tion co nsu ltan ts , la w ye rs , an d oth er pr of es si on al pe rson s. As such, it does no t 

en ga ge in th e pr om otio n of one form of tr an sp o rt ag ain st an ot he r, bu t se ek s to 

re pr es en t w h at is b es t i n th e broa d pu blic i nte re st .
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 41

In est ab lish in g ba sic po lic ies to gu id e our ov er al l ef fo rts to st re ngth en th e N at io n’s t ra n sp o rt ati o n sy stem , we hav e se t up a car ef ul pr oc ed ure to ass ure fa ir an d th or oug h co ns id er at io n of pe nd ing su bj ec ts be fo re fin al po sition s are ta ke n. T he pr oc ed ur e is briefly as fo ll ow s: Is su es a re in it ia ll y co ns id er ed by ei ght sp e­ cial. i>ern ian ent a dv is or y co m m itt ee s or p an el s of reco gn ized lea ders f ro m all p art s of th e countr y wh o are re pre se nta ti ves of us er s, in ve stor s, an d air , fr eig ht fo r­ w ar der , hi gh w ay , o il pipe lin e, r ail , an d w ate r carr ie rs . Rec om m en da tion s of th es e pa ne ls a re re vi ew ed by th e noncarr ie r po lic y com­ m it te e of th e bo ar d, which in tu rn su bm its it s ow n re co m m en da tion s to th e TA A boa rd of d ir ec to rs . In div id ual mem be rs of T AA als o ha ve an opport unity to su b­ m it th eir view s on su ch m att ers to th e bo ar d. Th e bo ar d of dir ec to rs , which re pre se nts a ba la nc ed cros s se ct ion of our gen er al eco nomic sy stem and co ns is ts of a ppro xim at el y 115 mem be rs from in dust ry , finance, an d ag ri cult ure , as well as tr an sp o rt ati o n , th en ta kes fin al ac tion to de te rm in e TA A policy. A li st of ou r boar d of d ir ecto rs is att ached to th is st at em en t.

II. TAA POSITION ON THE PENDING LEGISLATION

The tw o id en ti ca l bills , II .R . 736 and II .R . 10169, prop os e to am en d th e In te r­ sta te C om merce A ct by a ddi ng a new se ction 25a which wou ld d ec la re to be un la w ­ fu l th a t po rt io n of pro per ty ta x as se ss m en ts on pro per ties ow ned or us ed by com ­ mo n carr ie rs en ga ge d in in te rs ta te comm erc e, which refle ct hi gher as se ss m en t ra ti o s th an th os e ap pl ic ab le to oth er pro per ties su bj ec t to th e sa m e pro per ty ta x lev ies . Als o dec la re d unla w fu l wou ld be th e co lle cti on of an y pro pe rt y ta x de rive d from th e ex ce ss ive por tion of an y su ch as se ssm en t. Su ch unla w fu l ac ­ tion s are de cl are d by th e bi lls to “c onst it ute an unre as onab le an d u n ju st dis ­ cri m in at io n ag ain st an d an u ndu e bur de n up on in te rs ta te c om merce * * *.” In addi tion , th e bi lls wou ld co nf er ju ri sd ic ti on on th e d is tr ic t C ourts of th e U nited S ta te s to re str a in th e pe rf orm an ce of su ch unla w fu l ac ts. Th e su bje ct of dis cri m in ato ry ta x as se ss m en ts w as st udie d ca re fu ll y by each of the e ig ht TA A pa ne ls, cu lm in at in g in th e a do pt io n of M ay 16, 1961, by th e TAA bo ar d of d ir ecto rs o f t he fo llo wing po licy re so lu tion : “To de cl are unla w fu l, as an unr ea so na ble an d u n ju st bur de n up on in te rs ta te comm erc e, th e ass es sm en t of pro per ty of an y comm on ca rr ie r a t a va lu e whi ch bear s a hig her ra ti o to it s tr u e m ark et va lu e th an th e as se ss ed val ue of oth er pro per ty in th e ta x in g d is tr ic t su bj ec t to th e sa m e pro per ty ta x levy bea rs to th e 

m ark et va lu e o f s uc h pr ope rty. “I n ord er to p ro vid e a fo ru m to de cide s uc h unla w fu l as se ss m en t and c ollecti on , ju ri sd ic ti on sh ou ld be co nf er re d up on th e F edera l d is tr ic t co urt s to en jo in an y 

su ch ass es sm en ts .” T he us er , in ve st or , and al l si x c a rr ie r pa ne ls of TAA ap pr ov ed th is pro po sa l to re lie ve co mm on c a rr ie rs of u nr ea so na bl e an d u n ju st t ax ati on.

III . FIN DIN GS IN THE “ DOYLE ST UD Y GROUP REPORT”

T he d ev elop m en t of T AA’s p os iti on on th is su bje ct ori gin at ed in a re port dat ed Ja n u a ry 3,19 61 , pre pare d fo r th e Co mmitt ee on In te rs ta te a nd For ei gn Co mm erc e of th e U.S. Sen at e by a sp ec ial st ud y gr ou p on “T ra nsp ort ati on Polic ies in th e U ni te d S ta te s. ” T his re p o rt h as sin ce becom e kn ow n as th e “D oyle Stu dy Group R eport ” or th e “D oy le R eport ,” na med fo r Jo hn P. Do yle , st af f d ir ecto r of the 

st udy gr ou p. A di sc us sion of the d is cr im in ato ry as se ss m en t prob lem m ay b e fo un d in chapte r I of p a rt V II of the r ep ort . The su bj ec t is spec ifica lly disc us se d a t pa ge s 451—159, 

465 -466, an d 47 5-^ 91. T he co nc lusion s in th e “D oy le R ep ort ” on th is su bje ct are ba sed es se ntial ly on a sp ec ia l st ud y su bm itte d by t he A ssoc iatio n of A merican R ai lr oads a t th e req ues t of th e st ud y gr ou p. Su ch st udy dis clo sed th a t in 1957 th e ov er pa ym en t of ra il ­ ro ad ad va lore m ta xes re su lt in g from dis cr im in at ory as se ss m en ts ex ce ed ed $141 

mill ion. R efe rr in g to th e AA R st ud y, th e “D oyle R ep ort” st ate d th a t it confirm ed fin d­ in gs th a t “t here is a st udie d a nd del ib er at e pra ct ic e of a ss es si ng r ail ro ad pro pert y a t a pr op or tion of fu ll val ue su bst anti all y hig her th an oth er pro per ty su bje ct to 

th e sam e ta x r a te s” (p. 45 8) . The report fu rth e r c on clud ed a t pa ge 487, a s f oll ow s: “T he re so ur ce s av ail able to th is co m m itte e w er e not su ch as to be ab le to co n­ duct a n in de pe nd en t su rv ey to a ffi rm o r di sp ro ve t he specific d a ta p re se nte d to us.
42 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

How ev er, re se ar ch has be en suffi cien tly ex te ns iv e to es ta blish th a t re la tive di s­ cr im in ation, of co nsiderab le m ag ni tu de , do es in fa ct exis t ag ai ns t th e ra ilr oa ds

in th e as se ss m en t proc ed ur es o f S ta te a nd local gov er nm en ts fo r a d va lorem ta xa ­

tion pu rpos es. The re fo re , th e d ata i s [sic] ac ce pt ed a s co nf irm in g th e ju dgm en t of 

th is st udy grou p th a t S ta te an d loca l as se ss m en t pr oc ed ur es do dis cr im in at e 

again st th e ra il ro ads. ” [E m phas is a dd ed .]

In disc us sing the su bje ct of S ta te ta xati on of ra il ro ad an d pi pe lin e rig hts-of - 

way , and th e po ss ibili ty of F edera l remed ies, th e re port st ate d a t pa ge 465 as 

fo ll o w s:

“A t le as t w ith re sp ec t to ad va lore m pr ope rt y ta xes on th e rig ht-o f-way of 

ra il ro ads an d pip elines, th e pu bl ic in te re st i n th e pre se rv at io n of ad eq uat e tr a n sport ati on serv ice sh ou ld su pe rs ed e loca l law . Th e prop os ed nati onal legi slat io n 

wou ld do th is .”

By th is co mmen t th e “D oy le R ep ort” w as re fe rr in g to an d re co mmen di ng Federa l le gi slatio n si m il ar to th a t now prop os ed in II.R . 736 an d II .It. 10169. Th e 

“D oyle Iiei>o rt” s ta te m ent o n su ch le gi slat io n a t pa ge 466 w as as fo ll ow s:

“T hi s prop osed anti dis cri m in ati on ta x bill, which wo uld be av ai la bl e to all 

comm on carr ie rs en ga ge d in in te rs ta te comm erc e, has th e ob viou s m er it of in su r­ ing th at su ch c ar rie rs w ou ld r ec eive eq ua l tr eatm ent ic ith oth er ta xp aye rs su bj ec t to th e sa m e ta x ra te s in ac co rd an ce w ith ap pl ic ab le S ta te law . The pr op os al in 

no way alt ers the free do m of th e S ta te to ta x its ta xpayers as in it s di sc re tion it 

de em s best, so long as su ch carr ie rs a re ac co rded eq ua l ta x tr eatm ent w ith oth er 

ta xpay ers .

“Pas sa ge by th e Con gress of su ch a bill wou ld no t ch an ge th e su bst antive effect of t he t a x law s of th e se ve ra l S ta te s be cause, w ithout kn ow n ex ce ption, al l Sta te s, eit h er by co nst itutional sa fe guar d or legi slat iv e pr ov ision de cl ar e it to be S ta te 

law th a t ta xpay ers w ithin its ju ri sd ic ti on s ha ll be ta xed un ifor mly . The ad di tion 

of a pr oc ed ur al remed y, by au th ori zin g Fed er al co urt s to en jo in co lle cti on of 

dis cr im in at ory ta xes again st in te rs ta te ca rr ie rs , is co ns is te nt w it h th e ob lig ation of Co ngres s to re gu la te in te rs ta te comm erce, re qui re d under th e Fed er al C on sti­ tu ti on a nd is th er eb y a pr op er a nd n ec es sa ry a ct io n of th e Co ng res s.

“A cti on by th e Con gress on * * * th e anti dis cri m in ati on ta x bil l fo r all in te r­ st ate co mmo n ca rr iers , wou ld be sign ific an t m ea su re s in re li ef of un du ly burd en ­

some S ta te s ta xes on in te rs ta te co mm erc e an d wo uld m ar k th a t as su m pt io n 

of co nt ro l by Con gr es s in th e field of ta xati on of in te rs ta te comm erc e so vi ta l 

to u nh am pe re d c om merce betwee n th e Sta te s. ” [E m phas is add ed .]

Thu s, th e TA A bo ar d of dir ec to rs co ns id er ed th e fin ding s an d co nc lusion s 

in th e Do yle re port to be of m eri t an d ad op ted it s policy in su pport of an tidis cr im in at ory as se ss m en t le gis la tion such as th a t now pe nd ing. Also, in Ap ril 

1962, a TA A in fo rm at io n me mo w as pu bl ishe d in su ppor t of such po sitio n, 

en ti tl ed “I t’s Tim e To Call a H alt to D is cr im in at ory T ax Asses sm en ts.” A 

copy of this doc um en t is a tt ach ed to my stat em en t.

IV. CONGRESS SHO ULD GUARA NTEE FAIR PLAY IN TAXATION

In re ce nt ye ar s, th e in eq ui ty of dis cr im in at ory as se ss m en t of com mon carr ie r 

pro per ty ha s been w id es pr ea d. A fa ct of ove rr id in g sig nif ica nce, fo r ex am ple, 

is th e di sc losu re from th e 1957 AAR su rv ey th a t in th e ag gr eg at e ra il fa ci lities 

w er e being as se ss ed a t an av er ag e of 58 pe rc en t of tr u e m ar ket va lue, w he re as 

nonra il p ro pe rtie s w er e a ss es se d a t on ly 25 p er ce nt of v alu e.

P ro per ty ta x as se ss m en t is an in ci de nt of loca l an d Sta te go ve rn m en t we ll 

kn ow n to all pr ope rt y ow ne rs be ca us e it is th e ba si s up on which pro per ty ta xes 

are levied. No ho meo wne r wo uld lon g su bm it to an as se ss m en t ra ti o on his 

ho me tw ice th a t ap plied to hi s ne ig hb or ’s home . W e th in k al l ci tize ns wo uld 

be sy m pa th et ic to th e plight of th e comm on c a rr ie r’s su bj ec ted to su ch tr e a tmen t, if it w as ge ne ra lly kn ow n th a t th is pra ct iv e widely pr ev ai ls. Moreo ve r, 

on e wo uld no t su sp ec t fr om a re ad in g of S ta te co ns titu tion s, or S ta te an d loc al 

law s, th a t dis cri m in ato ry as se ss m en ts ha ve im po sed u nju st ta xati on on th e 

carr ie rs . The prob lem in st ea d re su lts in la rg e p a rt from th e fa il u re of S ta te 

an d loc al as se ss in g off icia ls to comp ly w ith ex is ting sta tu to ry m an da te s which 

guara nte e a ss es sm en t eq ua liza tion .

W hile oth er w itn es se s will off er ev iden ce of as se ss m en t tr en ds sin ce 1957 

they wi ll un do ub tedl y show th a t u n fa ir an d dis cr im in at ory as se ss m en ts are 

st ill a se riou s prob lem . Co ng ress ca n no lo ng er igno re it s ob lig atio n to pr ote ct 

com mon c arr ie rs en ga ge d in in te rs ta te co mmerce from th is his to ri c an d co ntinui ng bur de n. In su m, Con gress m us t a ct be ca us e :
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 43

1. The Fe de ral Co ns tituti on imposes the obliga tion on Con gres s to regu late in te rs ta te com merce and, in this ins tan ce, to pro vide pro tec tion to common 

ca rrie rs fro m ta x discrim inati on . 2. The find ings and conclusions contain ed in the 1961 Doyle re po rt su pp ort 

such action. 3. The possi bil ity of Fe de ra l action in th is field wa s also acknow ledged in a 1963 repo rt on pr op erty ta x policy an d ad minist ratio n, app rov ed by the 

Adv isory C omm issio n on In tergov ernm en tal Relation s. 4. Ample precedent fo r congres sio nal actio n affecting St ate and local prop erty asses sm ents includes, fo r example, th e pow er of the In te rs ta te Com merce Com­ mis sion to set aside or de rs of St ate com mission s rega rding th e ma int en ance of in tr as ta te ra il ra te s an d in tr ast at e tr ai ns which unduly dis crim inate ag ains t 

or burde n in te rs ta te com merce. 5. Ju dicial relie f fro m disc rim inatory assessm ents and taxe s at State and local levels ha s not been fully effective. A su bs ta nt ia l backlog of case s, in­ volving the del ay of ye ar s bef ore final decision, ex ists in many State s. Su its fo r recovery of loca l ta xe s ar e fu rt her imped ed bec aus e of th e nec essity of 

bein g filed in mu ltiple loc al jur isd ictio ns . Acc ordingly, a com pell ing case can be ma de to ju st ify en actm ent of H.R. 736 or H.R. 10169. In th e even t th at such actio n is not possible bef ore ad ­ jo ur nm en t of th e 2d ses sion of th e 88th Congress, we res pectf ull y ur ge the subcom mittee, Mr. Ch air ma n, to un de rtak e fu rt her stu dy of this ar ea of dis ­ crim inator y ta xa tio n in or de r th at sim ila r leg islati on can be ena cte d early 

in th e 89th session. We than k you fo r th e privi leg e of presen tin g th e views of the Trans po rta tio n Assoc iati on of Am erica at th is he ar ing and respectfu lly requ est th at the at ta ch ­ me nts to this statem en t, to which I have pre vio usl y referre d, also be rece ived 

into the record of thi s proceed ing.

T ra ns po rta ti on Ass oci ati on of A mer ic a

BOARD OF DIR ECTO RS

George P. Ba ker, chairm an , dea n, H ar va rd Gradu ate School of Busin ess Admin ­

istrat io n, Bos ton, Mass. Harold F. Hamm ond, pr eside nt, Tra ns po rtatio n Assoc iati on of Americ a, Washing ton , D.C. F ra nk O. Pr ior, ch airm an , bo ard of governo rs, re tir ed ch airm an of th e board ,

Sta nd ar d Oil Co. (I ndia na) , Palm Be ach, F la. F. W. Ack erm an, ch ai rm an of the board, the Greyh oun d Corp., San Francisco,

Calif. Jo hn M. Akers, pr eside nt, A ker s Motor Line s, Inc., Ga sto nia , N.C. G. W. Alb ertson, general traf fic ma nag er, F. W. Wo olw orth Co., New York, N.Y. 

A. G. And erso n, New York , N.Y. Harold Angier, ge ne ral ma nage r, Ca lifornia Grape & Tr ee F ru it League, San

Francis co, Calif. W. J. B ar ta , p res ide nt, M ississipp i Valley B arg e L ine Co., St. Louis, Mo. J. N. Ba um an, p resid ent, the W hite Motor Co., Cleveland, Ohio. Ch arles H. Beard , general traffic ma nag er, Union Ca rbide Corp., New York, N.Y. H ar ry O. Bercher, pr eside nt, In te rn at io na l Harve ster Co., Chicago, Ill. W. J. Bird, vice p resid en t, Ch rysle r Motors Corp., Detr oit , Mich. Richa rd M. Boyd, director of traffic an d tran sp or tatio n, Pitt sb ur gh Pla te Glass 

Co., P ittsb ur gh , Pa. J. D. Brothers, preside nt, th e New Dixie Line s, Inc., Richmond, Va. Ken ne th F. Bur ges s, Sidley, Au stin , Burge ss & Sm ith, Chicago, Ill.

J. L. Burke , preside nt, Service Pipe Line Co., T ulsa, Okla. Richa rd Canha m, ma nager, traffic departm ent, St an da rd Oil Co. of Ca lifornia . 

San Fra ncisc o, Calif. W al te r F. Carey, preside nt, Autom obile Ca rri ers, Inc ., Fl in t, Mich. Braxt on B. Ca rr, presi dent, the Am erican W aterway s Op era tors, Inc., W ashing ton , D.C. Owen Clark e, vice preside nt, the Ch esa peake & Ohio Ra ilw ay Co., Clev elan d, 

Ohio. Ja ck Cole, pre sid ent, Ja ck Cole Co., B irm ing ham , Ala. Ben Colm an, presi dent, Ev an s Eq uip me nt Lea sing , Inc., Me tam ora , Mich. Henry A. Co rrea, vice presi dent, executi ve depa rtm en t, ACF In du str ies, Inc., 

New York, N.Y.
44 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

A. B. Cozzens, vice president, vessel operations, Columbia Tra nsportatio n Division, Oglebay Norton Co., Cleveland, Ohio.

Janies K. Crinnnins, Chadbourne, Park e, Whiteside & Wolff, New York, N.Y. 

Neil J. Curry, president, California Cartage Company, Inc., Los Angeles, Calif. 

Ha rry G. Fair, vice president, Supply & Tra nsporta tion Department, Phillips

Petroleum Co., Bartlesville, Okla.

Charles W. L. Foreman, vice preside nt, United Parcel Service, New York, N.Y. 

Morris Forgash, chairma n of the hoard, Universal Carloading & Distributing

Co., New York, N.Y.

Welby M. Fr antz, president, E astern Express, Inc., Terre Haute, Ind.

L. E. Galaspie, director of traffic, Reynolds Metals Co., Richmond, Va.

J. C. Gibson, vice president, law, the Atchison, Topeka & San ta Fe Railway

System, Chicago, Ill.

Donald M. Graham, vice chairman of the board, Con tinen tal Illinois Natio nal 

Bank & T rust Co., of Chicago, Chicago, 111.

Allen J. Greenough, president, the Pennsylvania Railroad Co., Philadelphia, Pa. 

W. P. Gwinn, president, United A ircraft Corp, E ast Hartford, Conn.

Jam es F. Haley, vice president and director, Traffic and Tra nsp ortatio n Depar tment, Koppers Co. Inc., Pittsbu rgh, Pa.

Win. Barclay Harding, Smith, Barney & Co., New York, N.Y.

B. W. Heineman, chairman of the board, Chicago & North Western Railw ay Co.,

Chicago, Ill. *

J. W. Hersliey, chairm an of the hoard, American Commercial Lines, Inc., Houston, 

Tex.

Richard D. Hill, vice president, the First National Bank of Boston, Boston, 

Mass.

Hunter Holding, vice president, the Equitable Life Assurance Society of the 

United States, New York, N.Y.

Victor Holt, Jr., president, the Goodyear Tire & Rubber Co., Akron, Ohio. 

Phelan II. Hunter, president, Humble Pipe Line Co., Houston, Tex.

A. C. Ingersoll, Jr., president, Federal Barge Lines, St. Louis, Mo.

Downing B. Jenks, president, Missouri Pacific Railroad Co., St. Louis, Mo.

William B. Johnson, president, REA Express, New York, N.Y.

Robert B. Johnston, vice president, the F irs t National Bank of Chicago, Chicago,

Ill.

W. A. Johnston, president and chairman, Executive Committee, Illinois Central 

Railroad, Chicago, III.

Loren F. Kahle, transp ortation coordinator, Sta nda rd Oil Co. of New Jersey 

New York, N.Y.

George E. Keck, president, United Air Lines, Chicago, Ill.

A. M. Kennedy, Jr., vice president, Westinghouse E lectric Corp., Blairsville, Pa. 

Carter Kissell, president, N ation al Castings Co., Cleveland, Ohio.

Jervis Langdon, Jr., president, the Baltimore & Ohio Railroad Co., Baltim ore,

Md.

Maj. Gen. E. C. R. Lasher, president and chief executive officer, North American 

Car Corp., Chicago, Ill.

John C. Leslie, vice president and assista nt to the president, Pan American World 

Airways, Inc., New York, N.Y.

Gordon C. Locke, general counsel, Association of Oil Pipe Lines, Washington, 

I).C.

Daniel P. Loomis, president, Association of American Railroads, Washington, 

D.C.

Karl I). Loos, Poi»e, Ballard & Loos, Washington, D.C.

Robert S. Macfarlane, president. Northern Pacific Railway Co., St. Paul, Minn. 

Sidney Maestre, chairman of the executive committee, Mercantile Trust Co.,

St. Louis, Mo.

Dwight M. McCracken, vice president, general manager, loss prevention, Liberty 

Mutual Insuranc e Co., Boston, Mass.

Wilfred J. McNeil, president, Grace Line, Inc., New York. N.Y.

E. Sj>encer Miller, president, Maine Central Railroad Co., Portland. Maine. 

Raymond W. Miller, president, Public Relations Research Associates, Inc., Washington, D.C.

Chester G. Moore, hono rary secretary for life, American Trucking Association, 

Inc., Washington, D.C.

R. S tua rt Moore, chairma n of the board, Los Angeles-Seattle Motor Express, Inc., 

Oakland, Calif.

Edwin F. Mundy, vice president, traffic, National Biscuit Co., New York, N.Y.
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 45

D. II. Ove rm ye r, pre si de nt , D. II. O ve rm ye r W ar eh ous e Co.. To led o, Ohio. A dr ia n R. Pal m er , p re si den t. Rol lin s B urd ic k H u n te r Co., Ch ica go , Ill . A lfre d E. Per lm an , pr es id en t, New Yo rk C entr al Sy stem . New York, N.Y. Ja m es F. Pin kn ey , ch ie f co un sel, pu bl ic a ff air s, A m er ic an T ru ck in g Assoc iatio ns ,

In c., W as hi ng to n, D.C. Grego ry S. Princ e, ex ec ut iv e vic e pre si dent an d gen er al co un sel, A ss oc ia tio n of Am er ic an R ai lr oad s, W as hi ng to n, D.C. A le xa nd er l ’urdo n, ex ec ut iv e vic e pre si den t, U nited S ta te s Lin es Co., Ne w Yo rk,

N.Y. W illiam J. Quinn , pre si den t, Ch ica go, M ilw au ke e, St. P au l & Pa cific R ail ro ad

Co., Ch ica go , Ill. L. D. Raliil ly, pr es id en t, In te rs ta te M otor F re ig h t Sy stem , G ra nd Rap id s, Mich. Jo hn S. R ice , pr es id en t. Rice T ru ck Li ne s, G re at Fall s, M ont. W. Tho m as Rice, pre si den t, A tlan tic C oas t Lin es R ail ro ad Co., Ja ck so nv ill e, Fla . W. Ly le Riche so n, vic e pre si dent and a ssis ta n t to pre si den t, W es ting ho us e Air

B ra ke Co., P it ts burg h, Pa . S tu a rt T. Sau nd er s, chair m an of th e bo ar d, th e Pen nsy lv ania R ai lr oad Co.,

Philad el phia , Pa . Jo hn W. Sc al la n, pre si den t, P ull m an-S ta ndard , a di vi si on of Pul lm an , In c.,

Ch ica go , Ill. H a rr y G. Sc ha d, p re si de nt, A tlanti c P ip e Lin e Co., P hil adelp hia , Pa. Eug en e A. Sc hm id t, Jr ., vic e pre si den t and tr easu re r, M etr opolita n Life In su ran ce Co., Ne w Yo rk, N.Y. H en ry E. Se yf or tli , Sey fo rth, Sh aw , F air w eath er & G er al ds on , Ch ica go , Ill . B. M. Se ym ou r, chair m an of th e bo ar d, A ss oc ia te d T ra n sp o rt , In c. , Ne w Yo rk,

N.Y. Sa mue l II. Shr iv er , ch air m an and ch ief ex ec ut iv e officer, A le xander & A lexa nd er ,

Inc., Ne w Yo rk, N.Y. C ha rles B. Sc hu man , pre si den t, Amer ican F arm B u re au F edera ti on, Ch ica go , Ill. R ober t F. Six, pre si den t, C on tinen ta l A irl ines , Inc., Los Ang ele s, Calif. E dgar W. Sm ith , E dgar W. Sm ith & S ons, P ort la nd, Oreg . F. Cus hi ng Sm ith , ex ec utive vice pre si de nt , A m er ic an Oil Co., Ch ica go , Ill. Ge eo rge A. Spa te r, ex ec ut iv e vice pre si den t an d genera l co un se l, A m er ic an A ir ­

lin es, Inc., Ne w Yo rk, N.Y. W illiam I. Sp encer, se nio r vic e pre si de nt , F ir st N ational C ity B an k, Ne w Yo rk,

N.Y. Flo yd T. S ta rr , fina nc ia l vice pr es id en t, th e P en n M utu al L if e In su ra n ce Co.,

Philad el phia , Pa. W. J. Su lliv an , d ir ecto r of tra ffi c, Allie d Che mical Co rp., Ne w Yo rk, N.Y. A. M. Tho mas , d ir ecto r of tra ffic, G en er al Mills, Inc., M in ne ap olis, Mi nn. R ober t E . Tho mas , p re si den t, M id-A meri ca P ip el in e Co., Tul sa , Okla. S tu a rt G. Tip to n, pre si dent, A ir T ra n sp o rt A ss oc ia tio n, W as hin gt on, D.C. L. II. T ru e, pr es id en t, M ag no lia P ip e Line Co., D al la s, Te x. K en net h L. Vo re, vic e pre si den t, traffic an d tr an sp o rt ati o n , U nited S ta te s St ee l

Co rp., Pit ts burg h, Pa. R. C. W ae hn er , ge ner al m an ag er , dis tr ib uti on di vi sion . Lev er B ro th ers Co., New

Yo rk, N.Y. Gile s A. W an ai na ker , pre si den t, The H ert z Corp., Ne w York, N.Y’. Hug o W an in ge r, vic e pre si den t, tra ffic, Anh eu se r-B us ch , Inc., St. Lo uis, Mo. D on al d G. W ar d, ge ner al m an ag er , co nta in er op er at io ns, G en er al Amer ican T ra nsp ort ati on Co rp., Ch ica go , Ill. W illiam W . W ar d, p re si den t, W ard T ru ck in g Corp., A lto on a, Pa . T. C ar l W edel, v ice pr es id en t, C IT F in ancia l Corp., Ne w York, N .Y. Jo hn L. W elle r, pr es id en t, S eatr ain L ines , Inc., Edg ew at er , N.J. W illiam W hi te , ch air m an of th e bo ar d, th e D el aw ar e & H ud so n R ail ro ad Corp.,

Ne w Yo rk, N.Y. W illiam G. W hi te , pre si den t, Con so lida te d F re ig htw ay s, Inc., San Fra nc is co ,

Ca lif . Geo rge K. W hi tn ey , tr u st ee, M as sa ch use tts In ves to rs T ru st, Bos ton, Mass. F ra n cis R. Wilcox , ge ner al m an ag er , Sunkis t Growers, Lo s Ang ele s, Ca lif . C. J. W ill iams, pr es id en t, H ills id e T ra n sit Co., Inc., M ilw au ke e. Wis. R. A. W ill ia m s, pr es id en t, S ta n ra y C orp ., Ch ica go, Ill . W illiam W. W olba ch , pre si den t, Bos ton Saf e Dei> osit & T ru st Co., Bos ton. Ma ss. C. E. W oo lm an , pre si den t and ge ne ra l m an ag er , D el ta A ir Lines , Inc., A tlanta ,

Ga . E ll io tt C. Yo un gb erg , gen er al tra ffi c m an ag er , In la nd Ste el Co., Ch ica go . Ill.
46 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

[I n fo rm a ti o n M em o— T ra n s p o rta ti o n A ss o cia ti o n of A m eri ca]

IT ’S TIME TO CALL A HALT TO DISCRIMINATORY TAX ASSESSMENTS 

A Problem—and a Solution

CALLING A HA LT TO DISCRIMINATOR Y TAX AS SE SSMEN TS OF RAILROAD PROPERTY' BY 

STA TE AND LOCAL GOVERNMENTS

The transp ortation industry has long since recognized its obligation to share 

in the cost of State and local governments. The Nation's railro ads in pa r­ ticular have long been subjected to an inequitable and illegal discrimination 

practiced in many such jurisdictions which results in the unfair and confisca­ tory collection of State and local taxes. It’s time to call a halt.

What is the natu re of these u nfair taxes?

They are the so-called ad valorem or property taxes historic ally collected by State and local governments from local property owners.

What is un fai r about them ?

They are based upon an assessment for tax purposes at a much higher rati o 

to true market value than is applied to other prop ertie s subject to the same tax levy. Therefore, these railroad properties bear more than their fa ir share of the tax load.

Why are these tax collections so large?

The railroads are the larg est ind ustrial owners of real estate in the United State s, with almost 400,000 miles of track trav ersing 1X5 percent of the 3,0(57 counties in continental United States. Literally thou sand s of individual tax 

jurisdictions—State, county, city, town, village, school district, etc.—collect 

such taxes. There are over 6,000 such jurisdicti ons in the Sta te of New York alone.

How extensive is the discrimination being suffered by the railro ads ?

A 1957 study relying on Census Bureau figures and rail ind ustry records disclosed t ha t the railroads were forced to pay some $140 million of excessive taxes in tha t year.

What d iscriminatory practices were involved?

The 1957 study brought to light the following un fair assessment methods in the 31 Sta tes under revie w:

In all 31 States the railroads were assessed at higher ratios to tru e market value than other properties subject to th e same tax levies.

In 17 of the 31 States the rate of railroad assessments was at a rate more 

than double the rat e applicable to oth er properties. These 17 States collected 

$158 million of railroad property taxes, of which $100 million was obtained by discriminatory property assessments.

A half dozen States assessed rail properties at 100 percen t of value while permitting other properties to get by with ratios ranging from only 11 to 50 percent.

As proof of the pudding, a railro ad with extensive terminal facilities in an eastern seaboard city trie d to reduc e its tax burden by selling 33 a cres of land assessed at $621,000. Sale price? Less tha n $20,000!

Has there been any improvement in the situation?

Despite continuous efforts to correct this intolerable situ ation, the improve­ ments which have occurred have been more tha n offset by worsening conditions 

in other areas. Such conditions, when combined with oth er critical elements 

of the current railroad industry crisis, lite rally cry for corrective action.

Wh at does TA A recommend be done?

Because of the obvious burden on interstate commerce and the effect on the 

public interest, effective legislation appears mandatory. The Congress should 

declare unlawful, as an unreason able and unjust discrimination against and an undue burden on inter sta te commerce, the assessment of property of any common c arrie r at a value which bea rs a high er ratio to its tru e market value tha n the assessed value of other proper ty in the taxing dis trict subject to the same property tax levy.

Can anything be done?

TAA urges that such Federal legislation include the conferral of jurisdic tion on the Federal distr ict courts to prevent such d iscriminato ry assessment practices by injunction, if necessary. Pre sen t judicia l appeal chan nels are simply inadequate. Many States prohibit the rail roa ds from seeking an injunction aga inst 

excessive assessments and thu s force them to seek redress by refund lawu its.
TAX AS SESSME NT S ON COMM ON CAR RIER PROPERTY 47

Federa l co urt re li ef is also lim ited be ca us e of th e sh arp re str ic ti ons on in ­ ju nct iv e po wers co nt ai ne d in th e Ju dic ia l Code (28 U.S.C., sec . 1341 ) as fo llow s: “T he d is tr ic t co urt s sh al l not en jo in , su sp en d, or re str ain th e as se ssm en t, levy, or colle cti on of a ny ta x under S ta te law w he re a pl ai n, speedy, an d efficie nt 

remed y may b e h ad in th e co urt s of suc h S ta te .” Is a ny suc h legi slat io n now pe nd in g in the Co ng ress? Yes. Con gr es sm an H em ph ill , of Sou th C ar ol in a, in troduce d II.R . 7421 an d Con gr es sm an Ne lse n, of M in ne so ta, in trod uc ed an id en tica l bill, II.R . 7497, in th e 87 th Con gress which wou ld carr y out th e TAA reco m men da tio n. The se bills are now pe nd ing be fo re th e H ou se Com mitt ee on In te rs ta te and For ei gn Commerce . Is t his rel ie f fo r th e ra il ro ad s su ppor te d b y an y oth er gr ou p? Yes. Su ch le gi sl at io n w as reco mmen de d in th e Ja n u ary 19G1 re port of th e Do yle Stu dy Group on “T ra nsp ort ati on Po lic ies in th e U ni ted Sta te s, ” pre par ed 

fo r th e Sen at e Co mmerce C om m itt ee (pp. 4 65 -466 ). The U.S. D epar tm en t of Co mm erc e re port enti tl ed “F ed er al T ra nsp ort ati on Po lic y an d P ro gra m ,” is su ed in M ar ch 1960, ur ge d th a t “w ay s an d mea ns m us t be fo un d to en co ur ag e ta x re li ef by loca l an d S ta te ju ri sd ic ti ons in he lpin g sol ve 

th e pro bl em s o f c om m ut er or lo ca l pa ss en ge r de fic its ” (p. 7). P ro pert y ta x re lief fo r th e ra il ro ad s has also be en en do rsed in th e 1961 po licy st ate m ent of th e Am er ic an M un ic ip al Assoc iatio n, by th e New Eng land Gov­ ern o rs ’ Com m itt ee on Pub lic T ra nsp ora ti on in 1957. an d by th e S ta te of New York w he re in th e le gis la tu re h as alr ea dy al le via te d th e ta x si tu ati on to som e 

de gree . The us er , in ve stor , a ir tr an sp o rt , high w ay , pipe lin e, ra il ro ad, an d w ate r car­ ri e r pa ne ls of TAA su pport su ch legi slatio n, w hi le th e fr eig h t fo rw ard er pa ne l 

do es not opp ose.

W h at ca n you do to he lp? The ne ed fo r an anti dis cri m in ati on ta x la w is pla in ly appar en t. Cor re ctive ac tion of a la st in g n a tu re ca n be ass ure d only by Fed era l legi slatio n wh ich sh ou ld be su pp or te d by al l pe rs on s co nc erne d w ith th e w el fa re of our nat io nal 

tr an sp o rt sy stem an d sh ou ld be en ac te d by th e Con gres s in 1962.

Mr. Friedel. Thank you.

Mr. Macdonald?

Mr. Macdonald. I just have one question. This is stretching the commerce clause quite a long way; don’t you 

think?

Mr. Redding. This is the question that the committee must resolve, Mr. Macdonald. I would say tha t for a long, long time relief has probably been deserving here. This is the first time, to my knowledge, tha t this committee has considered the problem. It has already been under consideration by the Senate Committee’s Special Study Group, and we are going to have to face it. The burden of excessive taxation on this industry is extremely large. I feel tha t if you will ascertain the facts as it applies to the other modes of transportation, and par­ ticularly the pipelines, you will find that they too are subject to the same discriminatory assessment problem. It just seems to be basic sound equity that all taxpayers subject to the same tax levy should be 

assessed on the same basis.

Mr. Macdonald. Right. I couldn’t agree with you more. We are all for the flag. We are against discrimination in all forms, all of us are, I am sure. But don’t you think the next logical step, if this bill by some strange happenstance might pass this committee and might pass the Congress, tha t thereafter the owner of a building in any State in the Union would say to this committee that he is engaged in 

interstate commerce. Therefore isn’t it up to this commerce committee to see to it that his tax bill is looked into ? Why confine it to the modes of transportation,
48 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

as you have pointed out, the pipelines and the railroad carriers ? They 

are not the only forms of enterprise that are engaged in interstate 

commerce. And if we would do this, if we would stretch the commerce 

clause to this extent, where the Federal Government can tell a local 

entity or the State government or the taxing body in 50 States that 

their tax rate was unreasonable, how could we then turn our backs on 

somebody else who is also engaged in interstate commerce, and feels 

that he is being discriminated against?

Wouldn’t we be getting into each 1 of the 50 States acting as a tax 

appellate board ? Wouldn’t th at be the logical conclusion ?

Mr. Redding. I follow your question, Mr. Macdonald. It is a fair 

question and it deserves careful and thoughtful consideration. I 

think I would respond to you by saying tha t we must realize and 

recognize tha t the transportation industry is the second largest industry in the Nation. It is an important industry that affects all the 

citizens in this country. This committee has the responsibility of 

seeing to it tha t we operate our common carrier transporta tion as 

efficiently and economically as possible, and we are now bringing to 

you an area of discrimination that affects this industry, and unjustly so.

There will be a number of individuals who may come forward to 

all committees of the Congress to claim tax discrimination, and it may 

very well exist. The question is, “When do you reach the point 

where you should do something about it? ’’ The Congress has already 

taken action in the field of unprofitable train discontinuances and the 

other area I mentioned in my testimony, and I know of no other sector 

of our economy affecting interstate commerce that has stepped forward to say that they have any taxing problem of this serious scope. 

I would say the thing th at this committee must do, following its staff 

study, is to determine whether this is a sufficiently serious problem 

for the transportation industry to warrant taking action.

It will follow earlier precedents and is certainly deserving so far as 

the transporta tion industry is concerned.

Mr. Macdonald. Thank you, Mr. Cha irman.

Mr. Friedel. Mr. Jarm an ?

Mr. Jarman. No questions.

Mr. Friedel. Mr. Watson.

Mr.W atson. Mr. Chairman, if I might just make a comment re lating back to my distinguished colleague from Massachusetts, which 

I make in all kindness. We just recently passed a bill here, with the 

gentleman’s help, which makes a little restaurant up in Massachusetts 

subject to the interstate commerce provisions, or at least such an interpretation was drawn as a basis fo r the passage of that bill. I really 

find it difficult now to see how my illustrious friend from Massachusetts finds it difficult to determine how the railroads are, and whether 

or not they are involved in interstate commerce to the extent we should 

try to protect them against discriminatory taxes. Those are some of 

the exigencies and difficulties.

Mr. Macdonald. I will be happy to answer, since the gentleman is 

so courteous as to ask why I felt tha t the public accommodations section was well drawn and certainly didn’t go too far. The answer is 

simply in that the State of Massachusetts there already exists a State 

public accommodation committee which put forth recommendations
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 49

and ended up in the law tha t went a good deal further than did the 

so-called civil rights bill here in the Congress. So as far as Massachusetts was concerned, the bill was not necessary, since the State law already covered it. This is a completely different 

thing. As I recall the gentleman from South Carolina said tha t States rights should prevail, tha t the Federal Government had enough to do in carrying on Federal work, and it should not be telling the vari­ ous 50 States what to do, and I would hate to see the gentleman have to go back to South Carolina and tell his people that he voted for a hili in which the Federal Government told the local communities how much taxes they could assess from any property within the State of 

South Carolina.

Mr. Friedel. Gentlemen, I am afra id we are getting a little far 

afield.

Mr. Watson. If you will yield there I am more than willing to go hack to South Carolina and assure the people that South Carolinians in their typical style want to do what is fa ir and righ t and proper.

Mr. Macdonald. I am sure of that.

Mr. Watson. I am sure tha t the gentleman will agree with me tha t as far as the railroads are concerned there is no question tha t they 

deal in interstate commerce.

Mr. F riedel. Mr. Ogden, I have some other questions, hut because 

of the shortness of time I wasn’t able to ask all the questions.

Mr. Ogden. Yes, sir.

Mr. Friedel. I am wondering whether if I submit them to you in writing you might answer them and they will be included in the record.

Mr. Ogden. I will be happy to respond. Than k you, sir.

(The information referred to follows:)

Reply of J ames N. Ogden to Questions Propounded by Hon. Samuel N. 

F riedel

“ (1) While in your discussion with Mr. Springer and with othe rs you consid­ ere d the present law respectin g the extent to which the commerce clause can override the Sta te autho rity in the tax ation field, I think that beyond your firm statem ent th at the bill is a p roper exercise of the commerce clause the record does not contain any extended pre sen tation of the basis for and authority upon which you rely for concluding th at the commerce clause can override State autho rity in the assessment of ad valorem taxes on property located within the State. I would think it important th at the committee have something in the natur e of a brief on this sub ject and should appreciate your supplying it for us.” I fully realize that H.R. 736 is a new and unique approach but I do not believe that it is an u nw arr anted extension, or even an extension, of the commerce clause, or t ha t it is an invasion of the power of th e States to tax. On th e contrary, I feel th at Federal legislation is the only means of removing an invidious discrimina­ tion which seriously affects the most vita l segment of inter sta te commerce— namely, the interst ate carri ers themselves—and I firmly believe th at the constitution ality of the measure, if enacted, would be upheld. The power of th e Fed era l Government to regu late commerce among the several State s has been the basis f or so much legislation and so many court decisions that its bre adth and scope can not possibly be defined now by a few words. The Supreme Court’s case-by-case ap proach to the interp retation of this clause, which is called for und er our con stitutiona l system, has produced over the years an evolution of its mean ing which, more or less, has kept pace with the ever- expanding role of commerce in our modem civilization. At the hearing there was offered, as an example of t he extreme lengths to which the commerce clause power has been extended, the public accommodations provision of the Civil
50 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

Eights Act of 15X54, and many others can, of course, be mentioned. Here now 

for consideration, however, is a measure which affects only common car riers 

subject to the Intersta te Commerce Act—a more appropriate field fo r exercise of 

the Federal Government’s regulatory power can scarcely be imagined.

The hill proposes a legislative declaration that when a certain type of tax 

discrimination exists against these carriers (and, of course, the discrimination 

is narrowly defined and must be proved), such discrimination constitu tes “an unreasonable and unju st discriminatio n aga inst” and “an undue burden upon” 

inte rstate commerce. There is ample precedent for such a legislative determination in section 13(4) and 13a of the Inter sta te Commerce Act, and I have endeavored to show that the discrimination here involved is not less of a burden 

than those dealt w ith in the s tatute s ju st mentioned.

The real question, of course, has to do with what may loosely be described as 

“States rights.” Does the exercise in this manner of the power of Congress to 

regu late commerce conflict—to the point of being unco nstitutional—with the 

power of the States to tax? Apparently, the way to find the answer to this 

question would he to analyze various court decisions in which the taxp ayer has 

invoked the commerce clause in an effort to have a State tax or taxing practice 

declare unconstitutional, as applied to him, as being a burden on intersta te commerce. Of course, this contention hns frequently been made, and sometimes sustained and sometimes rejected, hut unfo rtun ately the precise basis for a particu lar decision is not alway s entirely clear since frequently there are also involved o ther constitutional grounds, such as the due process and equal protection 

clauses of the 14th amendment. Suffice it to say, that no case has been found 

in which property tax discriminatio n of this sort has been declared unco nstitutional under the commerce clause. This is to say, in effect, th at apparen tly the 

strength of the commerce clause has not been tested in a situ atio n such as those 

sought to be covered in II.R. 73G. I feel confident that the commerce clause can 

and will successfully withstand any such test.

The Browning case (Nashville, C. <£ <8#. L. It. Co. v. Browning, 310 U.S. 3(52 (1040)), referred to at the hearing, is in no way a ba r to this proposed legislation, 

nor would enactment of the bill constitute a legislative ov erruling of th at decision, 

althou gh it would undoubtedly have afforded relief to the r ailr oad there involved, 

which relief was denied by the decision. The only discussion of the commerce 

clause in tha t case had to do with the taxpay er’s contention that the Sta te of 

Tennessee had, by its method of apportioning on a mileage basis, improperly taxed 

part of the railroad’s system property which was outside the borders of th at Sta te 

and thereby burdened the commerce which the Federal Constitutio n protects. 

The Court rejected this argument and went on to hold that the classification of 

railroad property and its assessment at a higher level than other property, permissible under Tennessee law, was not unco nstitutional under the 14th amendment, but this was in the complete absence of any Federal regulatory sta tut e 

dealing with the subject.

It seems to me to he incontrovertible that where inter sta te common carriers 

are subject to projterty tax discriminatio n (and it should be remembered th at we 

are speaking only of discriminatio n between carriers and others subject to the 

same tax rate—not of situation s where separate and additional taxes a re imposed 

on carriers, for the bill would not prevent thi s), such discrimination, even though 

it is permitted or condoned under existing Sta te laws and practices, is (a) unreasonable and unjust, (b) unduly burdensome, (c) vita lly affects inters tate 

commerce (d) calls for app rop riate Federal regulation and may properly be dealt 

with under the commerce clause, and (e) fa r from being a valid exercise of a 

Sta te’s taxing power, is precisely the sort of unwarranted and hampering inter ­

ference with intersta te commerce which this clause of the Federal Constitution 

was designed to protect.

It will readily be seen th at the foregoing is scarcely a presentation in the nature of a brief. If the committee feels that such a brief, with a furth er exam ination into and analysis of such legal decisions as may be relevant, would be desirable, I will, of course, be pleased to prepare it. In orde r to do the job properly, 

however, an additional period of time will be needed.

“ (2) If this theory th at the inter sta te commerce clause may he used so as to 

prevail over State autho rity in the field of ad valorem taxes, is it not equally 

applicable to the assessment of the property of anyone engaged in inte rstate commerce as to the property of common carriers? Would you indic ate why it is 

appropriate tha t th e bill should be limited to common carriers and not include the 

contract carriers or perhaps private ca rriers ?”
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 51

In my opinion the commerce clause is equa lly applicable to all carr iers— common, contra ct, and private —who or which are engaged in the trans porta tion of 

persons or property in inte rsta te commerce; and I can see no objection in theory 

to broadening the terms of the hill so as to includ e all such carrier s with in its 

scope. I think it should be rec ognized, however, that carr iers other than railr oads and 

pipelines are seldom, if ever, discr imina ted aga inst in the matter of ad valorem 

assessment of real property, and for tha t reason such carr iers are not in need of 

the reli ef which II .It . 736 is intended to provide. Much , probably most, of the 

property of railroads and pipelines is real property, has a fixed location, cannot 

escape assessment for ad valorem taxe s, and is susceptible to the discr imin atory 

practices which I attemp ted to describe in my prepared statem ent. On the other 

hand, the property of motor carr iers consists larg ely of trucks, buses, and other 

personality, and the property of water carriers consist s larg ely of barges and 

other vessels, all of which property is portable, cons tantly moving, and, I believe, 

usually taxed on the same basis as the personal property of taxpay ers in genera l, 

without discr imina tion in the assessment thereof. It should be kept in mind, also, tha t the only contract carrier s and priva te 

carr iers which are made subject to the Inte rstate Commerce Act are contract carr iers and priv ate carr iers by motor vehicle and cont ract carr iers by water. 

The ac t does not recognize contra ct carr iers or priv ate carr iers by railro ad.

In my opinion only common carr iers by rai l and by pipeline are suffe ring or 

likel y to suffer from the unfair , un jus t, and unduly burdensome tax assessment 

practices now sought to be remedied. Con tract and priv ate carr iers by motor 

vehicle and contract carr iers by water are believed not to be in need of the 

protection aga inst such practices which would be afforded to railr oad s by H .R . 

736. I can see no p rac tica l reason, theref ore, for making the bill applicable to contrac t and priva te carr iers, although I offer no objection to its being so broadened. “ (3) Bu t gran ting tha t the bill rests upon a firm foundation and that this 

exercise of the inte rstate commerce clause would preva il aga inst the Sta te powers of taxatio n, is not this legis latio n confined solely to ad valorem taxe s, and 

cannot a tax ing district achie ve the same result of discr imina tion aga inst railr oad property— if such discr imina tion now exists—by subs tituting for or adding to 

the ad valorem tax other form s of taxe s such as gross earnings tax es? In such 

connection, I note tha t the report of the Boar d of Inve stigation and Rese arch on 

Car rie r Tax atio n, September 1944, House Document 160, state s at page 135: “ ‘Furth ermo re, since there is now no cons titutional inhibitio n aga inst ad 

valorem taxa tion of railroad property (footnot e: Na sh vil le, Cha ttan ooga <£ St .

Lo uis R y. v. Bro wn ing (1940) 310 U .S . 362) more high ly than nonrailr oad property, there is no firm ground on which to deny the States the rig ht to achiev e 

the same effect by means of a gross earning ta x.’ ”

I am fam ilia r with the statement on page 135 o f the 1944 report of the Board 

of Inve stiga tion and Resea rch on Car rie r Taxat ion tha t Sta tes may achieve the 

same effect (disc rimin atory taxa tion of railr oads ) by means of a gross earnin gs 

tax levied upon railroads in lieu of property taxe s. In theory this migh t still 

be correct but I think it unlikely tha t any State at this time would single out 

the railr oad industry for any addition al tax tha t would burden it alone. Dur ing 

the las t 15 or 20 years the public’s attitude toward the rail roa d indus try has 

changed . The railroads are no longer considered a monopo listic group operating 

for its own benefit witho ut regard to the public's intere st. Evidence tha t the 

public does not openly approve of tax discr imina tion aga inst railr oad s is found 

in two successive defeats of a proposed amendment to the North Dak ota constitu tion which would have required one assessment level for State-assessed 

railr oads and public util itie s and a lower level for other proper ty.1

 H .R . 736 is 

limite d in its application to ad valorem property taxe s because its purpose is to 

insure the closing of only one loophole (but an extremely impo rtant one) in the 

overall tax structure as it applies to the railr oad indu stry. Othe r tax problems 

confr ontin g the railroads can be dealt with as they become more urgen t. “ (4) Ju st wha t is the meani ng of ‘true mark et valu e’ ? Ha s it been jud ica lly 

defined? How fa r has determ ination of the valu e of railr oad property for tax 

purposes been resolved as being the ‘true market valu e’ of the railroad property 

as aga ins t the value of the rail roa d property being determined from the market

1

 See fo otn ote 98, p. 125, 1944 re p o rt of th e Boa rd of In ves ti gat io n an d Res ea t ch on 

C arr ie r T ax at io n.
52 TAX ASSESSME NT S ON COMMON CAR RIER PRO PER TY

va lu e of adja cent pro pe rt y? Is it po ssible fo r th e ‘tru e m ar ket val ue’ of th e 

ra il ro ad pr op er ty to b e mu ch in ex ce ss of th e m ark et va lu e of a dja cent pr oj ierty, 

par ti cula rl y when th e rig ht -o f-w ay is m ar ke te d as one piece to a purc hase r 

de si ring su ch righ t-of -w ay ? In oth er words, a re yo u her e fixing th e st andard 

to be us ed in as se ss in g th e va lu e of ra il ro ad pro pe rt y as th e ‘tru e m ark et val ue’ 

of th at pr op er ty and e xc lu di ng a ny o th er s ta n d ard ?”

“T ru e m ark et val ue” is th e go al ge ne ra lly so ug ht by al l ta x as se ss or s eit h er 

as th e as se ss m en t fig ure or as a st art in g po in t from which fin al as se ss m en ts of 

les s th an “tr u e m ark et valu e” may be co mpu ted. In an auth ori ta ti ve tr eati se 

pu blishe d by th e N at io nal Assoc iatio n of T ax A dm in is tr at ors th e follo wing 

st at em en t a p p e a rs :

“T he sta tu te s of th e se ver al S ta te s pr es cr ib in g th e va lue st an d ard fo r ta x 

pu rp os es us e su ch te rm s as ‘fa ir m ar ket va lu e, ’ ‘fa ir ca sh va lue,’ ‘fu ll m ar ket 

va lue,’ an d th e lik e. Al l of th es e te rm s are sy no ny m ou s; th ey mea n no th in g 

more an d no th in g les s th an w hat we mea n in th is re port by th e te rm ‘m ark et 

va lu e’ or th e w ord ‘valu e’ w ithout a qua lify in g ad je ctive. ” ’

Th ese ha ve been ju dic ia ll y defin ed in nu m er ou s ca ses. F or in stan ce , I ca ll 

yo ur at te nti on to New Y ork B ay R. Co. v. K el ly , 22 N.J. Misc. 204, 37 A. 2d 624, 628 (1944) ; F or t W or th D.N . R y. Co. v. Su gg (T ex . Civ. Ap p.) 68 S.W. 2d 570, 572 (1934) ; an d G uya ndot te Val le y R y. Co. v. B usk ir k, 57 W. Va. 417, 50 S.E. 521, 526 (190 5),

Of cours e, th e pro po rtio n of “tru e m ark et val ue” a t which as se ss m en ts are 

fin all y fixed var ie s am on g th e se ve ra l Sta te s. In some Sta te s th e la w re qu ires 

as se ss m en t a t “tr u e m ark et va lu e, ” in ot he rs a t 60 per ce nt th er eo f, in ot her s 

a t 35 perce nt, e t ce te ra .

Rai lroa d pro pe rt y in mos t of th e Sta te s is va lu ed an d assessed as a u n it ; 

th a t is, th e who le sy stem as it ex is ts in 8, 10. or 15 Sta te s is v a lu e d : th is va lue 

is di st ri bu te d am on g th e se ver al S ta te s on th e bas is of rec og nized al lo ca tion 

fa cto rs ; an d th en , in tu rn , th e va lu e in a p art ic u la r S ta te is ap po rtione d am on g 

th e se ve ra l ta xin g d is tr ic ts in th a t S ta te on th e ba sis of milea ge. In oth er 

wo rds, whe n ra il ro ads a re as se ss ed as a uni t th e to ta l va lue is first de te rm in ed 

am i then app o rt io n ed ; th e to ta l as se ss m en t is not de term in ed by ad di ng th e 

as se ssed va lue of in div id ual ite ms th a t m ak e up th e ra il ro ad pla nt.

As to th e few S ta te s in whi ch ra il ro ad pro pe rt y is loc all y as se ssed , I ha ve 

no spec ific in fo rm at io n co nc er ni ng th e as se ss m en t metho ds but I su pp os e it 

wo uld be n a tu ra l fo r th e as se ss ors to co mpa re ad jo in in g pr op er tie s.

Let me em ph as ize th a t II .It. 736 does not su gg es t or re qu ire a S ta te to ch an ge 

its as se ssm en t st andard s, as se ss m en t pr ac tice s, or th e as se ss m en ts them selves. 

It me rely pr ov ides a sing le sta n d ard again st which al l affecte d as se ss m en ts m ust 

be mea su red in ord er to de te rm in e th eir re la tionsh ip to each oth er . It is no t 

a st an dar d fo r de te rm in in g valu e; it is a st an d ard to wh ich va lu es th a t ha ve 

al re ad y be en de te rm in ed m ust be co mpa red. Thi s st andard is “t ru e m ar ket 

va lu e” (also th e ge ner al ly ac ce pt ed st andard fo r as se ss m en t pu rp os es ) an d the 

re qu irem en t is th a t c a rr ie r pro per ty be as se ssed a t th e same pr op or tio n of su ch 

va lu e as th e pr op ortio n a t which al l oth er pro per ty su bj ec t to th e sa m e ta x 

ra te s is asse ssed .

“ (5) In st ati n g th a t th e ra ti o m ust be no hig her fo r .ra ilr oa d as se ss m en t 

th an th e as se ss m en t of nonra il ro ad pro pe rty, are yo u st ati ng th a t it sh al l be no 

lower than t h a t ra te ? Is the a ss es sm en t you are ta lk in g a bo ut s ole ly th e pr op er ty 

owned or used by th e c a rr ie r in th e tr ansj xjr ta ti on of pe rson s or pro per ty in 

in te rs ta te co mmerce ? Can th is as se ss m en t ra ti o be lower th an th e ra ti o in th e 

pr op er ty used in in tr a sta te comm erc e, which pr op er ty , in the bill, is incl ud ed in 

‘all ot he r pr ope rt y in th e ta xin g d is tr ic t’? Ac cording ly, if it were lowe r, wou ld 

no t th is th ro w a bu rd en , as de sc ribe d in se ction 13(4 ), on in te rs ta te co mm erc e 

as a re su lt o f th e oper at io ns of in tr a sta te c om merce be ing a bu rd en on in te rs ta te 

comm erc e a nd th us be un la w fu l ? I ha ven ’t th oug ht it th ro ug h to a co nclus ion , but 

som eho w do es n’t t his m ea n th a t th e tw o ra ti o s m ust be th e s am e so th a t you ha ve 

se t a m inim um a s w ell as a max im um by t he bill? ”

In st ati ng th a t th e ra ti o m ust be no hig her fo r com mon carr ie r pro pe rt y th an 

fo r ot he r pr ope rt y we are not also st ati n g th a t it m ust be no low er, al th ou gh 

un do ub tedly th is wou ld b e th e p ra ct ic al re su lt, fo r it is hard to im ag in e ra il ro ads 

an d oth er carr ie rs rece iv ing more fa vo ra bl e tr eatm en t th an in di vi du al pro per ty

2

 N at io na l Assoc iatio n of Tax A dm in is tr at ors Com mitt ee on U ni t V al ua tion , “A pp ra isal 

p

f

 j^ a , l r o a d a n < 1 ° th e r Pu bl ic U tility P ro pert y fo r Ad Va lor em Ta x Pur po se s” (1 95 4) ,
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 53

owners. Your second question in this paragraph must be answered in the nega­ tive—that is, the bill does not have reference solely to property owned or used in the transportationn of persons or property in inte rstate commerce, as dis­ tinguished from intrastate commerce—and this perhaps disposes of the re­ mainder of your questions in paragraph (5) since they seem to be based on th e assumption that carrie r property used in in tras tate commerce is taxed separately 

from that used in inte rstate commerce. With very minor exceptions, this assumption is not true and for a good rea­ son—namely, segregation of a carrier’s property on an interstate-intra state basis would be virtually impossible, for the same property is used for both types of commerce, at the same time and without distinction or separation. The same tracks, the same cars, the same locomotives, the same terminal facilities handle both interstate and intrastate shipments, yet all of this property is subject to State and local taxation and is usually assessed all together by a central assessing agency. It would be inaccurate, therefore, to say tha t a carrier’s property used in intrastate commerce is in the same category as “all other (than carrier) property in the taxing district.” This being the case, it is inqiossible to make a comparison of the ratios of the level of assessment of a carrier’s interstate and intrastate property in order to determine whether the taxation of the i ntr a­ state portion throws a burden on inte rstate commerce. Section 13(4) of the Interstate Commerce Act is limited to an undue burden caused by a “rate, fare, charge, classification, regulation, or practice * * * made or imposed by authority of any State,” and has never, to my knowledge, been applied to matters of tax ­

ation. But, in any event, the comparison which would be required is one which 

cannot be made. “(6) How does the proposed legislation approach the assessment for purposes of property tax of the equipment owned or used by a railroad in several States or taxing districts? How is the value of this equipment allocated as between the States or taxing districts? Is there anything in the legislation which prevents the property from being duplicately valued?” We would expect the proposed legislation to deal with the equipment owned by or used by a railroad in several States or taxing districts in exactly the same manner as it deals with other operating property belonging to the railroad. In most instances, a railroad’s rolling stock is treated as par t of the system unit referred to in the response to paragraph (4). Thus, when the unit is valued and assessed and apimrtioned among the States and tlieir several taxing districts, the rolling stock included therein and belonging to the railroad being assessed is necessarily valued and assessed only in those States in which the owner railroad has fixed operating property. When this method is applied to all railroads in the country, it is readily apparent tha t all rolling stock in the country will be assessed only in the States in which the owner line operates, regardless of the location of the cars at any particular time. For many years this has been recognized as the proper manner to deal with the valuation and assessment of rolling stock belonging to a railro ad : “As a general rule, the value of foreign cars (those owned by a railroad other than the using carrier) is not included in the unit appraisal of the using carrier. On the other hand the value of th at carrier ’s rolling stock which may be operating on other railroad lines during some part of the year is included in its unit 

appraisal. * * * “It is apparent that the courts have assumed that the average rail carrier operates as many foreign cars as it leases to others.” 3

There is nothing in II.R. 73(5 which would prevent railroad rolling stock from being duplicately valued, but this is not likely to occur in view of the general acceptance of the assessment method ju st described. Again, it is appropriate to emphasize tha t the proposed legislation will have no bearing on the valuation and assessment of rolling stock or the apportioning thereof to the several States; it will merely insure that railro ad owned rolling stock will be assessed at the same proportion of its “true market value” as other property within the same taxing district and subject to the same tax rates. “ (7) The second paragraph of the bill would provide tha t notwithstanding the Constitution or laws of any State, the district courts of the United States should have jurisdiction in the cases of assessment for property taxes of common carriers.

3

 N at io nal Ass oc ia tion of Tax A dm in is tr at ors , Com mitt ee on U nit V al uat io n, “A ppra is al of R ai lr oad an d O th er Pu bl ic U ti li ty P ro pert y fo r Ad Va lorem T ax P urp ose s” (1 954), pp.
54 TAX ASSESSMENTS ON COMMON CARRIER PROPERTY

Ju st w hat is th e e ffect of th is sh if t of th e m ultitudin ous ta x pr oc ee di ng s in S ta te an d loca l c ou rts to th e Fed er al c ourt s? ”

T her e wo uld he no sh if t of ta x pr oc ee di ng s from on e court to anoth er . If an y 

carr ie r shou ld he ab le to av ai l it se lf of th e Fed er al remed y cr eate d by th e pro ­ posed legi slatio n, th er e wo uld un do ub te dl y he only one su ch ca se by th a t carr ie r 

in an y one Sta te , an d su ch a ca se m ig ht ve ry we ll be tr eate d as a re pre se nta tive proc ee ding fo r th e benefit of all c arr ie rs in th e p art ic u la r Sta te . Once the de cisio n is rend er ed , it shou ld es ta blish a pr ec ed en t an d end liti gati on in th a t Sta te . Furt he rm or e, it is even po ssible th a t th e polic y of no nd is cr im in at io n es ta bl ishe d 

by th e Co ng ress in th e bill wo uld be reco gn ized an d follo wed by a t le ast som e of th e S ta te s w ith ou t litigat io n. Thi s, of c ou rse, wou ld be mos t de sira bl e.

“ (8 ) I am aw ar e of th e som e-487-page re po rt of ‘Ca rr ie r T axati on’ issu ed in Se ptem be r 1944 by th e Boa rd of In ve st ig at io n an d Res ea rc h p urs uant to th e 

st udy au th or iz ed by th e T ra nsp ort ati on Act of 1940. J u s t w hat w as ac co mpl ishe d in carr yin g out th e re co m m en da tion s mad e by th a t re port , an d w hat ha s yo ur as so ciatio n do ne in purs uin g thos e re co m m en da tion s? ”

Ther e lia s been som e ac tivity sinc e 1944 on th e p art o f th e N at io na l Assoc ia­ tio n of T ax A dm in is tr at ors in de ve lopi ng pro gr am s fo r u n it appra is al an d asse ss m en t of ra il ro ads an d fo r uni fo rm metho ds of al lo ca tion of su ch va lu es or 

as se ss m en ts am on g th e S ta te s and al so in pu bl ishi ng a gu id e fo r mak in g salesas se ss m en t ra tio st udie s wh ich co uld pr ov id e th e ba sis fo r eq ua liz ing as se ss ­

men ts. Som e benefit has re su lted from th is work bu t, in vie w of th e w id es pr ea d di sc rim in at io n th a t st ill ex is ts in so m an y of th e Sta te s, it see ms ob vio us th a t 

li tt le ha s re al ly been ac co m plishe d in ca rr yin g out th e reco m m en da tio ns of th e B oa rd co nc erning ad va lore m pro pert y ta x ati o n of carr ie rs as se t fo rt h in th e 1944 re po rt.

The Assoc iatio n of Am er ic an R ail ro ads did no t ta ke an y gr ou p ac tion in p u rsu in g th e B oa rd ’s re co m m en da tion s re gar din g pro pert y ta xes sin ce th ey were di re ct ed pr im ar ily to S ta te go ve rn m en t officia ls an d or gan iz at io ns. So me in ­

di vi du al ra ilro ads ha d mad e att em p ts to sol ve th is pr ob lem of di sc rim in at io n in cert ain St at es , eit her adm in is tr ati vely or by li tigat io n, but it w as no t unti l 1959, wh en th e B ur ea u of th e Ce ns us ra ti o st udy fo r 195G firs t became av ail ­

ab le, th a t it was po ssible fo r th e issu e to ac quir e nati onal prom inen ce . Sin ce th a t tim e th e as so ciatio n has be en m os t ac tive in its ef fo rts to ga in pu blic reco gni tion of th e pro ble m an d to seek it s so lu tion a t th e nati onal le gi sl at iv e leve l. It sh ou ld be ad de d th a t th e w or se ni ng fina nc ial pl ig ht of man y of its ra il ro ad 

mem be rs now mak es it im pe ra tive th a t th ey exert ev ery ef fo rt to pro te ct th em ­ selves a gai nst th is ex pe ns iv e di sc rim in at io n.

“ (9) W hat is being d on e by t h e A dv iso ry Co mmiss ion on In te rg over nm en ta l Re ­

la tions? I un der st an d on th e ba si s of a co m pr eh en sive st udy, re por te d in Ju ne 

1963, on the role of t he S ta te in th e pro per ty ta x, th ey ha ve reco mmen de d a d ra ft hill fo r Sta te ad op tio n. Ho w fa r do es th is d ra ft bill (d ate d Ju ne 1964 ) in its 

ti tl e II I re la ting to as se ss m en t st an d ard s an d m ea su re m en t of as se ss m en t perfo rm an ce an d ti tl e IV re la ti ng to eq ua liza tion pro ce du re s m ee t yo ur ne ed s? ”

We ha ve no in fo rm at io n co nc er ni ng th e ac ti vit ie s of th e Adv iso ry Co mm is­ sio n on In te rg ov er nm en ta l R el at io ns as id e from th e J une 1963 re port on th e “R ole 

of th e Sta te s in Str en gth en in g th e Pro pert y T ax ” (two vo lu m es ), an d th e d ra ft bi ll wh ich ha s been reco mmen de d by th e Co mm iss ion fo r S ta te ad op tio n. W e are 

ad vi se d th a t th e d ra ft hill has no t yet been pe rf ec te d fo r su bm ission to th e se ve ra l Sta te s hut will be th e su bje ct of a co nf er en ce w ith th e Co uncil of S ta te 

Gov ernm en ts to be he ld a t an earl y dat e. The pre se nt la ng ua ge of th e d ra ft bil l, if a do pted an d en ac te d in to law by ea ch of th e S ta te s, wo uld ta ke car e of th e 

di sc rim in at io n in as se ss m en ts, sinc e th e d ra ft bil l pr ov id es th a t al l pr op er ty su bje ct to ad va lore m ta x ati o n sh al l be as se ssed or ta xed a t th e same per ce ntag e of curr ent m ar ket va lue. How ev er, ac ce pt an ce an d pa ss ag e of th is co mpr ehe ns ive legi slatio n by ea ch of th e S ta te s is su ch a re m ot e po ss ib ility th a t it ca n­ no t se riou sly be co ns id ered as pr om isin g an y re lie f.

We are he re se ek ing re li ef that, ca n be mad e avai la ble pr om pt ly th ro ugh 

th e ac tion of on e bod y, th e Con gress of th e U nited Sta te s, th ro ugh th e cr ea tion 

of a new ca us e of ac tion whi ch ca n on ly be us ed if a S ta te fa il s to ad her e 

to a policy of eq ua l tr eatm en t fo r al l ad va lore m pro per ty -t ax pay er s an d 

th e carr ie r co m pl ai na nt is in a po sitio n to pr ov e th e dis cr im in at io n ch ar ge d. In sp ite of th e good wor k th a t has been do ne by th e ad vi so ry co mm iss ion 

in pu blicizing th e ine fficie ncies of th e S ta te ta x sy stem s an d d ra ft in g a bi ll 

th a t wo uld cu re them , w e ha ve no as su ra nce th a t an yth in g like uni fo rm 

ac tion will be ta ken by all of th e S ta te s or by ev en a few S ta te s or by an y 

a t all. Ev en if a pr og ra m of th is kin d co uld actu ally be develop ed in to fu ll
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 55

fr uitio n, it m or e th an like ly wo uld ta ke m an y ye ar s, p art ic u la rl y sinc e th e 

fi rs t step of th e pl an invo lves a pro pe rt y ta x su rv ey in al l of th e S ta te s 

which i ts elf wou ld requir e years to com plete . “ (10) In co nn ec tio n w ith yo ur re qu es t th a t th e su bc om m itt ee ta k e un de r 

ad vi se m en t th e cr ea tion of th e in itia tion of a st aff st udy in th is field, I sh ou ld we lco me in fo rm at io n as to w hat st udy is be ing give n by th e Com mitt ee on th e Ju d ic ia ry unde r Pub lic La w SO-272 to th e t ax ati o n by th e S ta te of inc om e ari si ng 

from bu sine ss acti vit ie s in in te rs ta te co mmerce ? H as th is st udy undert aken to a pp ro ac h yo ur p ro blem ? W hat p re se nta tion ha ve you mad e to th is c om m itt ee ?

I no te d th a t w hile th e st udy origi na lly was to co ve r S ta te ta xati on of inc om e 

de rive d from w ithin th e S ta te s from th e co nd uc t of bu sine ss ac ti vit ie s which are 

in fu rt h era n ce o f in te rs ta te c om me rce , th e pu rp os e of th e st ud y w as am en de d by 

Pub lic Law 87- 17. Apr il 19(51 ‘to ex pa nd th e scop e of th e st udy au th ori ze d by Pub lic Law 86-27 2 to includ e al l m att ers pert ain in g to th e ta x ati o n of in te rs ta te 

co mmerce by th e S ta te s * * * or an y pol itic al or ta xin g su bd iv isio n of th e fo re ­

go ing.’ ’’ I t has ne ve r be en our unders ta ndin g th a t th e st udy of th e Sp ec ial Su bc om ­

m itte e on S ta te T axati on of In te rs ta te Co mm erc e of th e Com mitt ee on th e Ju d ic ia ry ap po in te d p u rs u an t to Pu bl ic Law 86-27 2, as am en de d, wo uld re ac h 

th e ad va lore m ta x ati o n of pro per ty alth ou gh , as yo u poin t ou t, th e am en da­ to ry la ng ua ge of Pub lic Law 87-17 ex pa nd in g th e sco pe of th e st ud y is ce rta in ly ve ry br oa d. I unders ta nd th a t no co ns id er at io n w as giv en, duri ng th e co ur se of th e ex te ns iv e heari ngs co nd uc ted by th is subc om mitt ee , to S ta te 

pr op er ty ta xes an d. co ns eq ue nt ly , our in dust ry ha d no oc ca sion to m ak e an y pre se nta ti on on th is su bje ct an d no ne w as mad e. As you know , th e fi rs t sectio n of th e co m m itte e’s re port (on inc om e ta xes) w as re le as ed on Ju n e 15, 19(54 (H . Ke pt. No. 1480. 88 th Con g.. 2d se ss .). Still to come are th os e po rtio ns 

of th e re port de al in g w ith sa le s an d use ta xe s, gr os s re ce ip ts ta xes , an d capit al 

stoc k ta xe s, an d I unders ta nd th a t th e su bc om m itt ee will not ha ve tim e, w ithi n it s lim ited ex iste nc e ex pir in g on Ju n e 30. 1965, to do m or e th an co mplete its 

w or k on inc om e ta xes an d dea l w ith sa le s an d us e ta xes , gr os s re ce ip ts ta xe s, 

an d capit al sto ck ta xe s. Thu s, ad va lore m ta xes ha ve not been an d w ill no t be co ns id er ed by th e su bc om m itte e ab se nt an ex te ns io n of it s ex istenc e an d an 

ex pa ns io n of th e sc ope o f i ts p re se nt pr og ra m .

Mr. Friedel. The committee is adjourned.

(The following letter was later received for the record :)

Nationa l Asso cia tio n of T ax Adm ini str ator s,

Chicago, .4 agust IS, 1964-

Re H .R . 736 a nd I I.R. 10169.

H on . J oh n Bell Wil lia m s,

Chairman, Subcommittee on Transportation anti Aeronautics,

Committee on Inter state and Foreign Commerce,

House of Representatives, Washington, D.C.

Dear Mb. W illi am s : In fu rth e r re fe re nc e to my le tt e r of Aug us t 10 re gar di ng 

H.R . 736 an d H.R. 10169, th ere a re se ve ra l po in ts invo lved in th is prop os al 

th a t Should be c ar efu ll y co ns id er ed b y th e co mmitt ee . F ir st, th ere is th e qu es tion w heth er F edera l le gi sl at io n is ne ed ed in th is ar ea . 

The pr em ises on which th e pr op os al is ba se d are th a t th ere is a gen er al policy to dis cri m in ate ag ain st in te rs ta te c a rr ie r pro per ty by as se ss in g it a t a hig her perce nt ag e of it s va lu e th a n oth er ta x ab le pro pe rty, an d, w he re dis cr im in at io n is 

show n to ex ist, th a t th ere is no effective remed y in th e adm in is tr ati ve ag en cies 

an d court s o f t he Sta te s. As to th e m att er of dis cr im in at io n, it is tr u e th a t pro pe rt y ta x as se ss m en ts 

in m an y S ta te s are not unif orm ove r th e who le ra nge of pr oper ties ta xe d, bu t th is is a ge ne ra l prob lem and by no m ea ns lim ited to ca rr ie r pr op er ty . Moreov er, it is ra th e r dif fic ult to dem onst ra te , on th e bas is of an ov er al l ta ble su ch as th a t appea ri ng in th e Doy le re port , th a t th e allege d di sc rim in at io n ag ain st 

carr ie r pro per ty do es exis t or th a t it is of th e de gr ee in di ca te d. The pri nci pal fa cto r whi ch dif fe re nti ate s c a rr ie r (a nd pu blic u ti li ty ) pro per ty ta x as se ss ­

m en ts from ta x as se ss m en ts on oth er pro per ty is th a t ca rr ie r pro per ty is cu st om ar ily as se ssed on a st ate w id e ba si s by a ce ntr al as se ss m en t agen cy w her eas oth er pro pert y is as se ss ed by lo ca l officials. In th e ca se of lo ca l as se ss m en ts, 

th e av er ag e lev el of as se ss m en t ca n be de te rm in ed w ithin ac ce pt ab le lim its be ­

ca us e th e ki nd s of pro per ty inv olve d usu al ly ch an ge hands fr eq uen tly an d sa le s
56 TAX ASSESSME NT S ON COMMON CARRIER PR OPERTY

pri ces and ta x asses sm ents can be com pared. On the othe r hand , the ass ess ed 

value o f ca rr ie r (and othe r public ut ility) prop ert y is no t su bject to suc h a sales 

com parison te st because sales of ra ilro ad s or pipelin es as going con cerns ar e 

for all pr ac tic al purpo ses nonexis ten t. Thus, while the asses sm ent perce nta ges 

app licable to prop ert y gen erally in the table subm itted to the sub com mittee ar e 

based on objec tive stan da rd s deriv ed fro m Bu reau of th e Censu s da ta , the as ­

sessment percentag es relied on to sho w th at ca rr ie rs ar e relat ively overassessed 

ar e subje cti ve and ex pa rte in na tu re. If the se es tim ates a re to have any prob ativ e value in th is conn ection, the y nee d to be teste d in at le as t two respec ts, in 

some kin d of ad ve rsary pro cedure wh ere the fa ct s can be br ou gh t o u t; namely, 

(1) as to the basic full value ap pr ai sa l of eac h ca rr ie r prop erty, and (2) as 

to the percentag e of th at fu ll value ap pr ai sa l which is pu t on the asses sm ent roll.

Th e second point on which the proposal is bas ed is essenti all y th a t th er e is no 

real rem edy in th e St ate co urts fo r any discrim inati on th at mi gh t be proved 

to exist. The record is to th e co ntrary . In the la st decade, th e co ur ts of the 

St ates ha ve more and mo re recognized the nec ess ity of em phasizin g un iform ity of ass ess me nt over com plia nce with the leg al stan da rd so th at specificrelie f is now commonly ordered by th e co urts in cas es involving disc rim inatory 

asses sm ents even tho ugh th e cha llenged asses sm ent is less th an the co ns titution 

or st at ut es of the St ate req uir e. In stan ce s of suc h ac tio n ar e cit ed a t pages 6 

an d 7 of the enclosu re, wh ich is repr in ted from the W es tern Po litical Qua rte rly for March 1963.

Th e effe ctiv ene ss of the rem edy in discrim inati on cas es ha s been fu rther 

inc reased by the av ailabilit y of as sessmen t ra tio sur vey da ta an d th e willin gne ss 

of co ur ts to acc ept these da ta as eviden ce of the prevail ing assessme nt level.

Th e ta x ad m in istrat or s of the seve ral St ates have been aw ar e of the problem 

of disc rim inator y ass ess me nts of al l kin ds and have tak en many ste ps to rem edy 

this situ atio n. Fo r exa mp le, pr ac tic ally all the asses sm ent ra tio stu dies un de rtake n in th e St ates ha ve followed the procedure s outlined by a com mittee of 

th is associa tio n in the “G uide fo r Sales-A sses sme nt Ra tio Stud ies ,” and the se 

stu dies in tu rn have pro vid ed th e basis by which the fa ct of dis crim ina tio n 

is easily proved in an ad m in istrat iv e or judicial proceed ing. In the public 

utility asses sm ent field, a comm itte e of this ass ociation ha s form ulate d ex tensiv e procedures fo r th e va luation of pub lic ut ility prop erty inc lud ing railr oa d 

pr op erty and also a stan da rd procedure for all ocati ng an ap pr op ria te portion 

of th e va luation of an in te rs ta te ra ilr oa d amo ng eac h of the States in which it 

operate s. All of the se ac tiv iti es have co ntrib ute d significa ntly to the developmen t of effective ad m in istrat iv e and judicial rem edi es to dea l with cases of 

disc rim inator y asses sm ents as outlined above. An objective ap pr aisa l of rec ent 

dev elo pm ents alon g these lines will be fou nd in the rece nt two-volume re po rt 

of th e Adviso ry Com mission on Intergov ernm en tal Re lat ion s en tit led “The Role 

of th e St ates in St reng the nin g th e Pr op erty T ax .”

Th e forego ing ind ica tes, I sug ges t, th at it is fa r fro m cle ar th at Fe deral 

leg isl ation is needed to dea l w ith th e problem of disc rim inatory ass ess ments. A 

fu rt her com ment or two is in or de r on th e specific pro vision s of II.R . 736 and 

H.R . 10169 as well as the im pa ct of any Fe de ral leg islati on which wou ld 

au th or iz e reso rt to the Fe de ral courts as an or dina ry inc ide nt of the review 

proced ure for St ate and local pr op erty taxes.

First , the se bills, as dr af ted, wou ld ar bi tr ar ily overr ide St ate policy pe rmitt ing cla ssi fication of specific typ es of prop erty fo r ta x pu rp os es ; th at is, a 

cla ssi fication by typ e of pr op erty with ou t rega rd for the use or ow nersh ip of 

th a t specific type of property. If it is the general policy of a St ate to cla ssi fy 

a pa rt ic ula r typ e of prop erty fo r ta x purposes, there is no reason why prop ert y 

of th at kin d owned by a ca rr ie r should no t be sim ila rly tre ated . Second, in 

tho se ins tan ces wh ere relie f is sou ght dir ectly ag ai ns t th e Sta te agency ma kin g 

th e prop erty ta x asses sm ent , thes e bills ra ise a co ns titutiona l question bec ause 

un der th e typ ica l Sta te st atu te au thorizing su its fo r refund s and review s, th e 

consent to sue th e St ate is lim ite d to proceedings in St ate cou rts. Th is di fficulty, how ever, would no t ar is e in connection with su its ag ai ns t loca l gover nme nts. The third , and from a prac tic al stan dp oint the most im po rta nt point 

ab ou t th is propos al, is th at w ha t it really does is to clo the the Fe de ral courts 

with a vet o pow er ove r Sta te prop erty ta x asses sm ent pro ced ure s with con-
TAX ASSESSMENTS ON COMMON CARRIER PROPERTY 57

se quen t ad ve rs e effects on lo ca l bu dg ets. T hi s follo ws be ca us e th e rem ed y 

pr ov id ed is an in ju nc tion ag ain st th e co lle cti on of an y ta x ad ju dged to be 

in val id on th e ba si s of th e cri te ri a la id do wn in th e bill. If ta x co lle ction . w er e en jo in ed , it wou ld mea n th a t su b sta n ti al am ou nts of re ve nu e 

anti cip ate d in loca l bu dg ets wo uld no t be avai la ble fo r ex pen diture duri ng th e 

ta x y ear as ex pe cted . Su ch a si tu ati on co uld be ex tr em el y se riou s fo r sm allan d me dium -si ze d unit s of loca l go ve rn m en t in cl ud in g sch oo l d is tr ic ts and p a rti cula rl y th os e oper at in g under ta x ra te an d deb t lim its. T his is in co n tr ast 

to th e pr oc ed ur e ord in ari ly inv olve d in th e S ta te s whi ch re quir es th e pay m en t 

of th e ta x on th e du e date under pro te st . If it is su bs eq ue nt ly det er m in ed th a t 

th e as se ss m en t sh ou ld be re vi se d, th e di fferen ce in th e ta x is re fu nd ed to th e 

ta xpayer. In th e m ea nt im e, th ou gh , th e oper at io ns of lo ca l go ve rn m en ts are 

not je op ar di ze d by th e w ithh old in g of t he enti re am ount of th e ta x.

It is, of co urse, po ssible th a t once th e Federa l court ta kes ju ri sd ic tion of a 

ca se on th e ba sis au th or iz ed in th es e bil ls, it will proc ee d to re vi se th e ass es sm en t it se lf and fix th e am oun t of ta x du e in ea ch loca l ju ri sd ic ti on w he re th e 

c a rr ie r pro per ty is si tu ate d. W het her su ch an in tr usi on by th e F edera l co urt s 

in to th e ord in ary pro per ty ta x as se ss m en ts and revi ew pr oc ed ur es his to ri ca lly 

re se rv ed to th e S ta te s an d lo ca lities is w ithin th e ge ne ra l ju ri sd ic ti onal po wer s 

of F edera l co urt s is not clea r. A t an y ra te , it cert ain ly do es not appear desi rable. Asid e from th is po int, th ere is the fu rt h e r ob jection th a t th e who le 

re vi ew pr oc es s wou ld th en be ch an ne le d th ro ugh th e F edera l sy stem —to th e 

cir cu it court s of ap pe al and th e U.S. Su pr em e C ou rt—ra th e r th an th ro ugh 

th e ad m in is tr ati v e revi ew ag en cies an d co ur ts of th e Sta te s. The val uat io n 

an d as se ss m en t of u ti li ty pro per ties is a sp ec ializ ed field and th e m ai n fu nction of th e court s is to see th a t pr oc ed ur es re as on ab ly dir ec te d to ob ta in in g a 

fa ir ap p ra is al an d as se ss m en t. The ca se s cite d in th e en clo sed art ic le in dic at e 

th a t th e S ta te co urt s per fo rm th is fu nc tion eff ec tiv ely . The re fo re , it is n eit her 

ne ce ss ar y no r des ir ab le to pr ov id e para ll el or alt ern ati v e ch an ne ls of revi ew 

th ro ugh th e F edera l co ur ts .

A fin al po in t th a t h as to be co ns id er ed is th e pote nti al im pa ct of th es e bi lls 

on th e who le proc es s of pro per ty ta x adm in is tr ati on. In eq uitie s in pr op er ty 

ta x as se ss m en ts ha ve al w ay s been a prob lem but in re ce nt yea rs a goo d de al has 

been ac hi ev ed in th e w ay of re du ci ng th e exte nt and de gree of th es e ineq ui tie s. 

As no ted above, th e avail abil it y of as se ss m en t ra ti o st udie s an d th e de cision of 

co ur ts to mak e unif orm it y ra th e r th an fu ll va lu e or oth er sta tu to ry st an d ard 

th e ke ys to ne of val id ity a re th e m ai n re as on s why th is pr og re ss has bee n ma de. 

As a pra cti cal m att er, th e pr og re ss to w ar d an ac ce pt ab le st an d ard of un if orm ity 

has to be gra dual . The pre dom in ant po sition of th e pro per ty ta x in th e Sta te - 

lo ca l re ve nu e sy stem (it ac co un ts fo r al m os t h a lf of al l S ta te an d loc al ta xes ) 

is such th a t to att em p t to rem ed y all in eq uitie s ov er ni gh t, so to sp ea k, wo uld be 

dis ast ro us to loc al gov er nm en t fin ance. T his is so m ethi ng , it sh ou ld l>e em ­

ph as iz ed , which invo lves not on ly pu blic u ti li ty pro per ty b u t all tyi>es of 

pro per ty : bu sine ss and nonbusi ness ; re al an d p e rs o n a l; ta ngib le an d in ta n g ib le ; 

re si denti al, fa rm , v acant lots, co mm ercial, an d in d u s tr ia l: in ve nt or ie s, work in 

pr og re ss , stoc k in tr ade, and su ch oth er cl as sifica tion s an d type s. If pr op er ty 

under on e ty pe of ow ner sh ip or us e is sing led out fo r sp ec ia l tr eatm en t unde r a 

F edera l st atu te , th ere is no re as on to de ny si m il ar tr eatm en t in th e lon g ru n 

to any ow ne r of pro per ty th a t is us ed in or become s th e su bje ct o f tr ad e in 

in te rs ta te comm erc e. Su ch a po lic y wou ld be ta nta m ount to Fed era l su per ­

vi si on of th e lo ca l pro per ty ta x th ro ugh F ed er al ju dic ia l pr oc ed ur es , a fu nc tion 

fo r which th e Fed er al ju d ic ia ry has no p art ic u la r qu al ific at io ns an d, ju dg in g 

fr om th e st ate m ents appea ri ng now an d th en in U.S. Su prem e C ou rt op inions, 

no de si re to under ta ke. On th e oth er ha nd , th e S ta te s and loc al go ve rn m en ts 

ha ve ac hi ev ed a goo d dea l of im pr ov em en t in th is field in re ce nt yea rs an d th e 

pr os pe ct s a re th a t th ey ca n do a good de al mor e if th e re sp on sibi lity an d 

m ea ns of de al in g w ith th e prob lem are le ft in th eir ha nd s.

On th e wh ole , th en , I su gg es t th a t th es e issu es bea r car ef ul st udy be fo re an y 

ac tion al on g th e lin es reco mmen de d in H.R. 736 an d H.R . 10160 is ap pr ov ed . 

Si nc er ely.

Cha rles F. Conlon, E xecuti ve Se cr et ar y.

(W h e re u p o n , at, 11 :5 0 a.m ., th e co m m it te e w as a d jo u rn e d .)

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