Opinion ID: 78213
Heading Depth: 2
Heading Rank: 1

Heading: ACF Industries applies to this case

Text: Although neither party briefed ACF Industries in depth, we find this 1994 U.S. Supreme Court decision regarding ad valorem tax exemptions determinative of Norfolk's appeal. In ACF Industries, the Supreme Court held that a State may grant exemptions from a generally applicable ad valorem property tax without subjecting the taxation of railroad property to challenge under the [4-R Act, § 11501(b)(4)]. Dep't of Revenue v. ACF Indus., Inc., 510 U.S. 332, 335, 114 S.Ct. 843, 127 L.Ed.2d 165 (1994). The Court concluded that section 11501 does not limit the States' discretion to exempt nonrailroad property, but not railroad property, from ad valorem property taxes of general application. Id. at 347-48, 114 S.Ct. 843. The company in ACF Industries challenged Oregon's ad valorem tax on real and personal property on the ground that Oregon exempted various classes of goods from the tax, including motor vehicles, and instead charged such businesses a modest annual registration fee. Id. at 335. 114 S.Ct. 843. Oregon thus exempt[ed] certain classes of commercial and industrial property while taxing railroad cars in full. Id. at 337, 114 S.Ct. 843. The Supreme Court analyzed the challenged tax under section (b)(4) for discrimination. Id. at 335, 114 S.Ct. 843. Because, under the 4-R Act's plain language, sections (b)(1)-(3) did not contemplate outlawing exemptions from generally applicable property taxes, the Court reasoned, (b)(4) could not either  Congress placed exempt property beyond the reach of subsections (b)(1)-(3) [and therefore it would be] illogical to conclude that Congress ... would turn around and nullify its own choice in subsection (b)(4). Id. at 343, 114 S.Ct. 843. [11] In ACF Industries, the Supreme Court primarily relied upon the plain language and structure of the 4-R Act, but [o]ther considerations buttressed its analysis. Id. at 343, 114 S.Ct. 843. First, the Court noted that the 4-R Act, while specifically addressing other types of discriminatory taxes, does not speak with any degree of particularity to the question of tax exemptions. Id. Congress could clearly have prohibited such exemptions, but did not. Id. at 344, 114 S.Ct. 843. Second, the Court emphasized the traditional power of the states in providing exemptions from property taxes as an important aspect of state and local tax policy. Id. Indeed, [i]t was common at the time § [11501] was drafted, as it is now, for States with generally applicable ad valorem property taxes to exempt various classes of commercial property. Id. Congress's silence on the subject ... reflects a determination to permit the States to leave their exemptions in place. Id. Third, the Court determined that principles of federalism in fact compelled its reading of the 4-R Act, because [w]hen determining the breadth of a federal statute that impinges upon or pre-empts the States' traditional powers, [the Court is] hesitant to extend the statute beyond its evident scope. Id. at 345, 114 S.Ct. 843. See also Carmichael v. S. Coal & Coke Co., 301 U.S. 495, 509, 57 S.Ct. 868, 81 L.Ed. 1245 (1937) ([i]t is inherent in the exercise of the power to tax that a state be free to select the subjects of taxation and to grant exemptions.). The Supreme Court did acknowledge, however, that a case in which the railroads  either alone or as part of some isolated and targeted group  are the only commercial entities subject to an ad valorem property tax could call into question whether the state had really exempted other commercial entities and could indicate a 4-R Act violation. ACF Indus., 510 U.S. at 346-47, 114 S.Ct. 843. Nonetheless, as a result of ACF Industries, while the 4-R Act prohibits the imposition of discriminatory property tax rates, the Act does not prevent a state from exempting other commercial entities from such taxes and leaving taxes on railroads in place, so long as the railroad is not targeted. [12] While in Norfolk's case we are dealing with exemptions to a sales and use tax, rather than an ad valorem tax as in ACF Industries, the Supreme Court's analysis is equally applicable. Therefore, ACF Industries ' construction of the 4-R Act guides our decision. First, as with the ad valorem property taxes challenged in ACF Industries, there is nothing in the 4-R Act's plain language that indicates an intent to reach exemptions from generally applicable sales and use taxes. The language of section (b)(4) prohibits a discriminatory tax not a discriminatory tax exemption. Second, the Supreme Court did not limit its conclusion  that the 4-R Act does not speak with any degree of particularity to the question of tax exemptions  to ad valorem property taxes; its conclusion therefore has direct application to the issue presented here. Third, as with property tax exemptions, sales and use tax exemptions were ubiquitous at the time the 4-R Act was drafted, and thus benefit from the same presumption that Congress' silence reflects a determination to leave such exemptions in place. [13] Finally, concerns for state sovereignty are just as keen. We accordingly join other courts that also have applied the ACF Industries' analysis to state and local taxes analogous to Alabama's sales and use tax on diesel fuel. [14] We recognize that some courts post-1994 appear to have ignored ACF Industries, and have instead scrutinized exceptions to generally applicable non -property taxes. [15] However, as these decisions do not even discuss ACF Industries or its influence on their analyses, we do not find them persuasive. In addition, these cases conflict with pre-1994 cases that have applied a similar analysis to that in ACF Industries to non-property taxes. See, e.g., Burlington N. R.R. v. City of Superior, 932 F.2d 1185, 1187-88 (7th Cir.1991); Ka. City S. Ry. v. McNamara, 817 F.2d 368, 374-78 (5th Cir.1987). Therefore, we hold that ACF Industries controls our analysis, and dictates that the Alabama tax statute at issue, with its exemptions for motor and water carriers, does not offend the 4-R Act so long as the tax is generally applicable and does not target railroads within Alabama.