Opinion ID: 1423388
Heading Depth: 1
Heading Rank: 4

Heading: Wardair: A Governmental Silence of a Different Kind

Text: Three years after its opinion in Container, supra, 463 U.S. 159, upholding California's use of formula apportionment in calculating the intrastate tax liability of a domestic-based unitary business, the high court decided Wardair Canada v. Florida Dept. of Revenue (1986) 477 U.S. 1 [91 L.Ed.2d 1, 106 S.Ct. 2369] ( Wardair ). At issue was a Canadian-based international air carrier's challenge to an excise tax assessed by Florida on intrastate fuel purchases by common carriers, including airlines. The tax was levied at the rate of 5 percent on a deemed fuel price of $1.148 per gallon; air carriers were liable for the full amount of the tax whether the fuel was consumed in flights within or outside the state, regardless of the amount of intrastate business transacted by the taxpayer. ( Id., at p. 4 [91 L.Ed.2d at p. 7].) In attacking application of the tax to its Florida fuel purchases on foreign commerce clause grounds, the carrier  joined by the United States as amicus curiae  conceded that the tax, being assessed on discrete intrastate transactions, presented no risk of multiple international taxation. It relied instead entirely on the one voice element of the dormant foreign commerce clause analysis, the last of the six factors identified by the court in Japan Line, supra, 441 U.S. 434. Specifically, the carrier contended that a patchwork of reciprocal tax exemptions, embodied in a network of multilateral agreements and conventions to which the United States was a party, manifested a national policy to exempt from state taxation the instrumentalities of international air commerce, including aviation gasoline. Florida's excise on aviation fuel purchased by a foreign carrier engaged in international air commerce, the carrier claimed, was inconsistent with that univocal national policy, thus threatening the ability of the Federal Government to `speak with one voice.' ( Wardair, supra, 477 U.S. at p. 9 [91 L.Ed.2d at p. 10].) The high court rejected the claim. Not only did the matrix of international conventions, resolutions and air commerce agreements relied on by the carrier and the United States fail to sustain a federal policy pretermitting Florida's excise on aviation fuel, the high court said, but, even more fundamentally, [it] shows also that in the context of this case we do not confront federal governmental silence of the sort that triggers dormant Commerce Clause analysis. In point of fact, the court continued, the international agreements cited demonstrate that the Federal Government has affirmatively acted, rather than remained silent, with respect to the power of the States to tax aviation fuel, and thus that the case does not call for dormant Commerce Clause analysis at all. ( Wardair, supra, 477 U.S. at p. 9 [91 L.Ed.2d at p. 10].) As we explain below, the court's opinion in Wardair, supra, 477 U.S. 1, establishes an interpretive framework for educing from a compilation of legislative materials a species of governmental silence that forecloses resort to a dormant foreign commerce clause analysis. In some cases where Congress affirmatively declines to adopt certain measures, the resulting governmental silence is not the sort that triggers use of a dormant foreign commerce clause analysis. Properly applied under the appropriate conditions, the Wardair methodology interdicts judicial resort to executive branch opinions as to the international commercial effect of a challenged state taxation practice because Congress has acquiesced in the contested practice, thereby validating it. ( Id., at p. 12 [91 L.Ed.2d at p. 12].) Where appropriate, Wardair supplants what the court has termed the quagmire of dormant commerce clause analysis ( Northwestern Cement Co. v. Minn., supra, 358 U.S. 450, 458 [3 L.Ed.2d 421, 427]) with a heightened judicial attentiveness to expressions of congressional foreign commerce policy. Because it delimits use of dormant foreign commerce clause analysis in important ways, it is useful to lay out the analytical lines of the Wardair paradigm in some detail before applying it to the case before us. The foreign carrier in Wardair, supra, 477 U.S. 1, relied on a hierarchy of multinational agreements to support its thesis that federal policy precluded state taxation of intrastate aviation fuel purchases by international carriers: the Chicago Convention on International Civil Aviation (Convention), signed in 1944 by the United States, Canada, and 155 other nations; a resolution adopted in 1966 by the International Civil Aviation Organization, of which the United States was a member by virtue of being a signatory to the Convention; and more than 70 bilateral international aviation agreements between the United States and foreign nations, including a United States-Canadian aviation agreement. ( Wardair, supra, at p. 10 [91 L.Ed.2d at p. 11].) But it was these very texts, the high court concluded, that in combination impeached the existence of a national policy to exempt international air commerce from state taxation and, by their negative implications, supported an inference that the United States has at least acquiesced in state taxation of fuel used by foreign carriers in international travel. ( Id., at p. 12 [91 L.Ed.2d at p. 12].) First, a provision of the Convention explicitly prohibited taxation by both national and subnational governmental units of fuel on board arriving international aircraft. The Convention failed, however, to reach the issue of taxing intrastate fuel purchases by foreign aircraft following their arrival. This omission, the court reasoned, demonstrated by negative implication the international community's awareness of the problem of state and local taxation of international air travel ... and represent[ed] a decision by the parties to [the] Convention to address the problem by curtailing ... only some of the localities' power to tax, while implicitly preserving other aspects of that authority. ( Wardair, supra, 477 U.S. at p. 10 [91 L.Ed.2d at p. 11].) Second, the resolution relied on by the carrier, although endorsing an international regime prohibiting duties of any kind by any taxing authority on international air travel, had not been specifically endorsed, let alone signed, entered into, agreed upon, approved, or passed by either the Executive or Legislative Branch of the Federal Government. In other words, no action has been taken to give the Resolution the force of law. ( Wardair, supra, 477 U.S. at p. 11 [91 L.Ed.2d at p. 11].) It thus could not tenably represent, the court concluded, a policy of the United States, as opposed to a policy of an organization of which the United States is one of many members. ( Ibid., italics in original.) Third, in the years following the Convention, the United States entered into more than 70 bilateral international civil aviation agreements, in not one of [which] has the United States agreed to deny the States the power asserted by Florida in this case. Significantly, most of these agreements explicitly commit the United States to refrain from imposing national taxes on aviation fuel used by airlines of the other contracting party ... but ... none ... explicitly interdicts state or local taxes on aviation fuel used by foreign airlines in international traffic. ( Wardair, supra, 477 U.S. at p. 11 [91 L.Ed.2d at p. 11], italics in original, internal quotation marks omitted.) Reenforcing this view, the United States-Canadian agreement also limited tax exemptions granted foreign air carriers to national duties and charges, an omission [to reach subnational duties] which must be understood as representing a policy choice by the contracting parties.... ( Ibid. ) Summing up the implications of this mosaic of texts for a dormant commerce clause attack on Florida's tax, the court concluded that [w]hat all of this makes abundantly clear is that the Federal Government has not remained silent with regard to the question whether States should have the power to impose taxes on aviation fuel used by foreign carriers in international travel. ( Wardair, supra, 477 U.S. at p. 12 [91 L.Ed.2d at p. 12].) It would turn dormant Commerce Clause analysis entirely upside down, the court continued, to apply it where the Federal Government has acted, and to apply it in such a way as to reverse the policy that the Federal Government has elected to follow. For the dormant Commerce Clause, in both its interstate and foreign incarnations, only operates where the Federal Government has not spoken. ... ( Ibid., first italics in original, second italics added.) For our purposes, the high court's analysis of the textual materials in Wardair, supra, 477 U.S. 1, can be abstracted into a kind of protocol for identifying those kinds of governmental silences that give rise to negative implications supporting an inference of federal acquiescence in the state tax under challenge. Thus, in Wardair the court found that bilateral recognition of an international taxation issue and its specific treatment at the national level (numerous international aviation agreements exempting foreign air carriers from national duties), impliedly supported a finding that the failure to address the correlative issue at the subnational level represented a policy choice by the contracting parties. ( Id., at p. 11 [91 L.Ed.2d at p. 11].) By a kind of parity of reasoning, Wardair found that the explicit treatment of some subnational aspects of an international taxation issue (Convention prohibition on state taxation of fuel aboard arriving foreign aircraft) supported an inference of international awareness of the problem at the state level and a decision ... to address the problem by [limited curtailment of the subnational power] ... while implicitly preserving other aspects of [subnational] authority. (477 U.S. at p. 10 [91 L.Ed.2d at p. 11].) Last, the court found that notwithstanding an international aspiration to erect a particular tax regime (the resolution's endorsement of the complete eradication of national and subnational duties on international air travel), the fact that domestic  law as it presently stands acquiesces in taxation ... by political subdivisions was decisive of the commerce clause issue. ( Ibid., italics in original.) Before considering the history of congressional consideration of curbs on the states' application of formula apportionment to foreign-based multinationals in light of the court's analysis in Wardair, we first consider the treatment of Wardair at the hands of the Court of Appeal.