Opinion ID: 1867810
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Heading Rank: 1

Heading: Does 49 U.S.C.A. ง 40116 Foreclose Dormant Commerce Clause Review of the Hub Exemption?

Text: ถ 27 Northwest's principal challenge to the hub exemption is that it violates the Interstate Commerce Clause. Article I, Section 8, clause 3 of the United States Constitution gives Congress the power [t]o regulate commerce ... among the several states. . . . Courts have consistently held that there is a negative implication to this affirmative grant of power to Congress that restricts the ability of states to regulate interstate commerce. Camps Newfound/Owatonna, Inc. v. Town of Harrison, Maine, 520 U.S. 564, 571, 117 S.Ct. 1590, 137 L.Ed.2d 852 (1997); Olstad v. Microsoft Corp., 2005 WI 121, ถ 30, 284 Wis.2d 224, 700 N.W.2d 139. This restriction upon the states, called either the negative or dormant Commerce Clause, prohibits economic protectionismโthat is, `regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.' Fulton Corp. v. Faulkner, 516 U.S. 325, 330, 116 S.Ct. 848, 133 L.Ed.2d 796 (1996). Under the dormant Commerce Clause, courts protect[ ] the free flow of commerce, and thereby safeguard[ ] Congress' latent power from encroachment by the several States[ ] when Congress has not affirmatively exercised its Commerce Clause power. Merrion v. Jicarilla Apache Indian Tribe, 455 U.S. 130, 154, 102 S.Ct. 894, 71 L.Ed.2d 21 (1982). ถ 28 The Commerce Clause is a grant of plenary power to Congress to regulate interstate commerce. Fed'l Energy Regulatory Comm'n v. Mississippi, 456 U.S. 742, 753, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982). As part of its Commerce Clause power, Congress may redefine the distribution of power over interstate commerce. S. Pac. Co. v. State of Ariz. ex rel. Sullivan, 325 U.S. 761, 769, 65 S.Ct. 1515, 89 L.Ed. 1915 (1945). Thus, by affirmative legislation in an area, Congress can authorize the states to regulate interstate commerce in a manner that would otherwise violate the dormant Commerce Clause. Id. ถ 29 Within the scope of congressional authorization, state regulation of interstate commerce is invulnerable to Commerce Clause challenge. W. & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648, 652-53, 101 S.Ct. 2070, 68 L.Ed.2d 514 (1981). Describing the judiciary's role in applying the dormant Commerce Clause, the Supreme Court has said: When Congress has struck the balance it deems appropriate, the courts are no longer needed to prevent States from burdening commerce, and it matters not that the courts would invalidate the state tax or regulation under the Commerce Clause in the absence of congressional action. Merrion, 455 U.S. at 154, 102 S.Ct. 894. ถ 30 A threshold question in many dormant Commerce Clause cases is whether Congress has exercised its Commerce Clause power in a field in which case judicial review is precluded. See Granholm v. Heald, 544 U.S. 460, 476-89, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005); Wyoming v. Oklahoma, 502 U.S. 437, 457-58, 112 S.Ct. 789, 117 L.Ed.2d 1 (1992); Northeast Bancorp, Inc. v. Bd. of Governors, 472 U.S. 159, 168-75, 105 S.Ct. 2545, 86 L.Ed.2d 112 (1985); South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87-93, 104 S.Ct. 2237, 81 L.Ed.2d 71 (1984); Merrion, 455 U.S. at 154-56, 102 S.Ct. 894; W. & S. Life Ins. Co., 451 U.S. at 652-53, 101 S.Ct. 2070. For a statute to preclude dormant Commerce Clause review, congressional intent must be unmistakably clear. E.g., Wyoming, 502 U.S. at 458, 112 S.Ct. 789; Wunnicke, 467 U.S. at 91-92, 104 S.Ct. 2237; see also Hillside Dairy, Inc. v. Lyons, 539 U.S. 59, 66, 123 S.Ct. 2142, 156 L.Ed.2d 54 (2003) (requiring Congress to have clearly expressed its intent to permit states to discriminate against interstate commerce). ถ 31 Whether Congress has given its consent to state regulations that would otherwise run afoul of the dormant Commerce Clause requires a reverse-preemption analysis. See 1 Laurence H. Tribe, American Constitutional Law 1039 (3d ed. 2000). Whereas preemption operates on the presumption that state laws are constitutional unless Congress enacts legislation to the contrary, state laws that discriminatorily regulate or unduly burden interstate commerce are presumptively unconstitutional unless Congress enacts legislation to the contrary. Id. ถ 32 In this case we apply a reverse-preemption analysis to discern whether Congress has consented to differential taxation of air carriers. We first examine the text of 49 U.S.C.A. ง 40116 to determine whether Congress has expressly consented to differential taxation among air carriers. Cf. Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 299-300, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988) (describing the first stage in standard preemption analysis as whether Congress made explicit the extent to which state law is preempted). Only if ง 40116 fails to demonstrate that Congress gave its express consent to differential taxation of air carrier transportation property do we examine legislative history and extrinsic sources to determine whether Congress implicitly consented to differential taxation of air carriers. Cf. id. at 300, 108 S.Ct. 1145; Northeast Bancorp, Inc., 472 U.S. at 169, 105 S.Ct. 2545 (noting that although the face of the statute did not establish with unmistakable clarity congressional consent to discriminatory regulations, the legislative history demonstrated congressional consent). ถ 33 Three subsections of 49 U.S.C.A. ง 40116 are relevant to our inquiry: (b) Prohibitions. Except as provided in subsection (c) of this section and section 40117 of this title, a State, a political subdivision of a State, and any person that has purchased or leased an airport under section 47134 of this title, may not levy or collect a tax, fee, head charge, or other charge onโ (1) an individual traveling in air commerce; (2) the transportation of an individual traveling in air commerce; (3) the sale of air transportation; or (4)the gross receipts from that air commerce or transportation. . . . . (d) Unreasonable burdens and discrimination against interstate commerce. (1) In this subsectionโ (A) air carrier transportation property means property (as defined by the Secretary of Transportation) that an air carrier providing air transportation owns or uses. . . . . (D) commercial and industrial property means property (except transportation property and land used primarily for agriculture or timber growing) devoted to a commercial or industrial use and subject to a property tax levy. (2)(A) A State, political subdivision of a State, or authority acting for a State or political subdivision may not do any of the following acts because those acts unreasonably burden and discriminate against interstate commerce: (i) assess air carrier transportation property at a value that has a higher ratio to the true market value of the property than the ratio that the assessed value of other commercial and industrial property of the same type in the same assessment jurisdiction has to the true market value of the other commercial and industrial property. (ii) levy or collect a tax on an assessment that may not be made under clause (i) of this subparagraph. (iii) levy or collect an ad valorem property tax on air carrier transportation property at a tax rate greater than the tax rate applicable to commercial and industrial property in the same assessment jurisdiction. (iv) levy or collect a tax, fee, or charge, first taking effect after August 23, 1994, exclusively upon any business located at a commercial service airport or operating as a permittee of such an airport other than a tax, fee, or charge wholly utilized for airport or aeronautical purposes. . . . . (e) Other allowable taxes and charges. Except as provided in subsection (d) of this section, a State or political subdivision of a State may levy or collectโ (1) taxes (except those taxes enumerated in subsection (b) of this section), including property taxes, net income taxes, franchise taxes, and sales or use taxes on the sale of goods or services; and (2) reasonable rental charges, landing fees, and other service charges from aircraft operators for using airport facilities of an airport owned or operated by that State or subdivision. ถ 34 Midwest and DOR contend that 49 U.S.C.A. ง 40116 constitutes unmistakably clear evidence that Congress intended to preclude dormant Commerce Clause review of state taxation of air carriers. Midwest and DOR reason as follows. First, ง 40116(b) and (d) prohibit eight tax practices with regard to air carriers. [13] Second, ง 40116(e) clearly authorizes state taxes, including property taxes, except those proscribed in ง 40116(b) or (d). Therefore, because property tax exemptions among air carriers are not expressly prohibited, Midwest and DOR conclude that Congress authorized exemptions like the hub exemption and precluded judicial review of tax exemptions under the dormant Commerce Clause. [14] ถ 35 Northwest disagrees and argues that 49 U.S.C.A. ง 40116 does not demonstrate that Congress intended to preclude dormant Commerce Clause review. It draws vastly different conclusions from the text of ง 40116. Northwest argues that ง 40116(b) and (d) preempt traditional state powers of taxation and that ง 40116(e) is merely a non-preemption or saving clause, which was intended to preserve then-existing state tax powers rather than to confer upon the states new powers to tax. According to Northwest, ง 40116 supplements but does not replace dormant Commerce Clause review; thus, taxes imposed upon air carriers must survive scrutiny under both ง 40116 and the dormant Commerce Clause. ถ 36 We cannot accept Northwest's reading of the statute. To evaluate the parties' arguments, we begin with the statutory text to determine whether Congress made unmistakably clear its intent to authorize tax exemptions like the hub exemption, and thereby foreclose dormant Commerce Clause review. We employ the same methodology to interpret a federal statute as we do when we interpret a state statute; that is, we start with the text of the statute. If the statute's meaning is plain, then our inquiry ordinarily stops. State ex rel. Kalal v. Circuit Court for Dane County, 2004 WI 58, ถ 45, 271 Wis.2d 633, 681 N.W.2d 110. Accord Dodd v. United States, 545 U.S. 353, 360, 125 S.Ct. 2478, 162 L.Ed.2d 343 (2005); Lamie v. United States Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000) (when the statute's language is plain, the sole function of the courtsโat least where the disposition required by the text is not absurdโis to enforce it according to its terms). Because we conclude that 49 U.S.C.A. ง 40116 demonstratesโwith unmistakable clarityโcongressional consent to allow states to impose differential taxes among air carriers, we need not resort to extrinsic sources. [15] ถ 37 The statutory structure of 49 U.S.C.A. ง 40116 creates two types of taxes on air carriers: taxes that are prohibited and taxes that are authorized. Taxes that are not prohibited under either subsection (b) or subsection (d) are authorized by subsection (e). [16] We must determine, therefore, whether the hub exemption fits within any of the prohibited provisions, and if it does not, whether subsection (e) evinces congressional intent to preclude dormant Commerce Clause review. ถ 38 The parties agree that the hub exemption does not contravene 49 U.S.C.A. ง 40116(b), which prohibits a state from levying or collecting a tax on (1) an individual traveling in air commerce; (2) the transportation of an individual traveling in air commerce; (3) the sale of air transportation; or (4) the gross receipts from that air commerce or transportation. We agree that subsection (b) does not prohibit ad valorem taxes upon air carriers. See Aloha Airlines, Inc. v. Dir. of Taxation of Hawaii, 464 U.S. 7, 12, 104 S.Ct. 291, 78 L.Ed.2d 10 (1983). ถ 39 The parties' real dispute centers on the relationship of 49 U.S.C.A. ง 40116(d) to ง 40116(e). Subsection (d) deems certain methods of calculating a property tax or an ad valorem tax [u]nreasonable burdens and discrimination against interstate commerce. Subsection (d) constrains (1) the assessment ratio states may use to calculate the taxable value of air carrier property, ง 40116(d)(2)(A)(i) and (ii); and (2) the tax rate states may use to calculate an ad valorem tax on air carrier property, ง 40116(d)(2)(A)(iii). Subsection (d) requires that neither the assessment ratio nor the tax rate for the property of air carriers be greater than the assessment ratio or tax rate of commercial and industrial property in the assessment jurisdiction. ถ 40 At the same time, 49 U.S.C.A. ง 40116(e) authorizes states to levy and collect property taxes upon air carriers, [e]xcept as provided in subsection (d)[.] ถ 41 The argument presented by Midwest and DOR turns on how 49 U.S.C.A. ง 40116(d)(1)(D) defines commercial and industrial property. Commercial and industrial property means property ( except transportation property and land used primarily for agriculture or timber growing) devoted to a commercial or industrial use and subject to a property tax levy.  49 U.S.C.A. ง 40116(d)(1)(D) (emphasis added). Discrimination requires differential treatment of two otherwise comparable groups. For purposes of ง 40116(d), whether a state tax impermissibly discriminates against air carriers is determined by comparing the property tax assessment ratio and the ad valorem property tax rate of air carrier transportation property with the assessment ratio and tax rate of commercial and industrial property. Commercial and industrial property supplies the comparison class by which discrimination against air carriers is measured. ถ 42 Northwest argues the hub exemption discriminates against interstate commerce because it results in a different tax rate being applied to Midwest and Air Wisconsin from all other air carriers. Midwest and DOR emphasize, however, that the ad valorem tax rate imposed upon Midwest and Air Wisconsin is irrelevant because the property of the two air carriers is both transportation property and exempt property. This means, they contend, that the property of Midwest and Air Wisconsin is not part of the comparison class by which discrimination against an air carrier is measured under 49 U.S.C.A. ง 40116(d). ถ 43 Northwest discounts these exclusions from the comparison class. Northwest first contends that transportation property had to be excluded to make possible a sensible, non-circular comparison class[.] Second, Northwest acknowledges that exempt property is not part of the comparison class, but, relying upon Department of Revenue of Oregon v. ACF Industries, Inc., 510 U.S. 332, 114 S.Ct. 843, 127 L.Ed.2d 165 (1994), it argues that the hub exemption is contrary to the anti-discriminatory purpose of 49 U.S.C.A. ง 40116. ถ 44 Ultimately, we agree with Midwest and DOR. Although we acknowledge the need for a meaningful comparison class, we believe that Congress determined, first, that air carrier transportation property must not be assessed or taxed at a higher rate than other commercial property (implying that it could be assessed and taxed at a lower rate) and, second, air carrier transportation property need not be assessed and taxed the same as other transportation property (e.g., motor carrier and railroad property). See Am. Airlines, Inc. v. County of San Mateo, 12 Cal.4th 1110, 51 Cal.Rptr.2d 251, 912 P.2d 1198, 1217 (1996) (concluding that assessing the property of air carriers at 100 percent of fair market value while assessing the property of railroads at 70 percent of fair market value did not violate 49 U.S.C.A. ง 40116(d)). Moreover, we do not find persuasive Northwest's reliance upon ACF Industries to minimize the importance of excluding exempt property from the comparison class. ถ 45 In ACF Industries eight railroads challenged Oregon's ad valorem personal property tax, claiming that it violated the Railroad Revitalization and Regulatory Reform Act (4-R Act) (49 U.S.C.A. ง 11501), the model for 49 U.S.C.A. ง 40116(d). [17] ACF Indus., 510 U.S. at 335, 114 S.Ct. 843. Oregon imposed an ad valorem personal property tax that applied to railroads but created a number of exemptions for non-railroad business property for which the railroads did not qualify. These included exemptions for business personal property, non-farm business inventories, livestock, and agricultural products in the possession of farmers. Id. The Supreme Court upheld the exemptions, concluding 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 relevant provision of the 4-R Act[.] Id. ถ 46 The Supreme Court's decision in ACF Industries turned upon the definition of commercial and industrial property in the 4-R Act, which, like the definition in 49 U.S.C.A. ง 40116(d)(1)(D), defines the comparison class for evaluating discrimination against railroads. See id. at 341-42, 114 S.Ct. 843. Like the definition of commercial and industrial property in ง 40116(d)(1)(D), the 4-R Act excludes both transportation property and exempt property from the comparison class. 49 U.S.C.A. ง 11501(a)(4). [18] The Court found that principles of federalism made necessary the exclusion of exempt property from the comparison class, because the power to grant tax exemptions is among the traditional powers of the states and because the states must be allowed to grant tax exemptions to encourage industrial development. Id. at 345-46, 114 S.Ct. 843. Thus, the Court explained that the 4-R Act would not prohibit tax exemptions unless the exemptions result in all property other than railroad property being exempt, in which case it might be incorrect to say that the State `exempted' the nontaxed property. Id. at 346, 114 S.Ct. 843. Rather, one could say that the State had singled out railroad property for discriminatory treatment. Id. at 346-47, 114 S.Ct. 843. ถ 47 Northwest inverts the holding in ACF Industries, claiming the hub exemption targets select air carriers. We acknowledge that the hub exemption is presently available to only two air carriers. However, under ACF Industries, state tax exemptions do not violate the 4-R Act, and by extension 49 U.S.C.A. ง 40116, as long as the amount of property made exempt does not dwarf the amount of property subject to tax. In the present case, the hub exemption is limited, like the exemptions in ACF Industries, and does not warrant the conclusion that the legislature singled out Northwest for discriminatory treatment. Because ง 40116(d)(1)(D) defines commercial and industrial property to exclude (1) transportation property, and (2) property not subject to a property tax levy, and because the property of Midwest and Air Wisconsin fits both exceptions to the comparison class, we conclude that the assessment ratio and tax rate at which the property of Midwest and Air Wisconsin are taxed is irrelevant. See ACF Indus., Inc., 510 U.S. at 342, 114 S.Ct. 843. Northwest cannot establish that the hub exemption results in a violation of ง 40116(d). ถ 48 The Supreme Court's holding in ACF Industries bolsters our conclusion that 49 U.S.C.A. ง 40116 evinces congressional intent to (1) permit differential taxation of transportation property, includingโby extensionโdifferential taxation among air carriers; [19] and (2) exclude the effect of property tax exemptions on the average property tax rate of the comparison class. Consequently, the hub exemption is not prohibited by either ง 40116(b) or (d); and ง 40116(e) authorizes the states to create property tax exemptions for transportation property without exposing these exemptions to challenge under the dormant Commerce Clause. ถ 49 When Congress enacted 49 U.S.C.A. ง 40116(b) and (d), Congress intended to replace the uncertainty and quagmire [20] of dormant Commerce Clause review with the relative certainty of statutory tests that protect against discriminatory taxation. As the Supreme Court has recognized, its dormant Commerce Clause cases have resulted in a case-by-case approach [that] has left `much room for controversy and confusion and little in the way of precise guides to the States in the exercise of their indispensable power of taxation.' Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 329, 97 S.Ct. 599, 50 L.Ed.2d 514 (1977) (quoting Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 457, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959)). A tax device, with respect to the property of air carrier companies, that does not conflict with ง 40116(b) or (d) should not be required to run through an additional judicial gauntlet where it is subjected to a different standard of review than is normally applied to a tax statute. ถ 50 At least two features of 49 U.S.C.A. ง 40116 support this conclusion. First, the relationship between ง 40116(d) and ง 40116(e) suggests Congress employed reasoning analogous to that which underlies the canon of construction expressio unius est exclusio alterius. The expressio unius canon is an interpretive guide meaning that the expression of one thing in a statute excludes another that is not stated. Motola v. LIRC, 219 Wis.2d 588, 605, 580 N.W.2d 297 (1998). Congress specifically enumerated eight prohibited tax practices and provided that all other practices are allowable. Accordingly, we conclude that because the hub exemption does not run afoul of ง 40116(d), Congress unambiguously authorized forms of taxation like Wisconsin's ad valorem tax upon air carriers. ถ 51 Second, in evaluating whether Congress has exercised its Commerce Clause power in the field of state taxation of air carriers, we find it significant that Congress entitled 49 U.S.C.A. ง 40116(d), Unreasonable burdens and discrimination against interstate commerce. This title invokes the same test used in dormant Commerce Clause review, demonstratingโwith unmistakable clarityโthat Congress intended to exercise its Commerce Clause power in the field of state taxation of air carriers and thereby preclude dormant Commerce Clause review. ถ 52 Congress intended to allow state taxation of air carriers but also prevent unfair methods of taxation. In 49 U.S.C.A. ง 40116(b) and (d) it enumerated the unfair methods of taxation. When Congress enacted ง 40116, its power under the Commerce Clause ceased to be dormant in the field of state taxation of air carriers. Cf. Ne. Bancorp, Inc., 472 U.S. at 174, 105 S.Ct. 2545 (When Congress so chooses, state actions which it plainly authorizes are invulnerable to constitutional attack under the Commerce Clause.); Wardair Canada, Inc. v. Fla. Dep't of Revenue, 477 U.S. 1, 9, 106 S.Ct. 2369, 91 L.Ed.2d 1 (1986) (noting that when the federal government affirmatively acts, dormant Commerce Clause analysis is not warranted). Congress prohibited a number of taxes and types of tax assessment and collection practices. 49 U.S.C.A. ง 40116(b) and (d). Congress also authorized the states to impose any type of tax and to use any tax assessment or collection practice not prohibited by ง 40116(b) or (d). 49 U.S.C.A. ง 40116(e). Because ง 40116(e) authorizes the states to collect property taxes from air carriers, and because the hub exemption does not fall within any of the assessment or collection practices prohibited by the statute, we conclude the hub exemption is not subject to dormant Commerce Clause review. ถ 53 Even though we have concluded that 49 U.S.C.A. ง 40116 precludes review of the hub exemption under the dormant Commerce Clause, we must determine whether the hub exemption contravenes either the Equal Protection Clause of the United States Constitution or the Uniformity Clause of the Wisconsin Constitution. See W. & S. Life Ins. Co., 451 U.S. at 655-56, 101 S.Ct. 2070 (1981).