Court Opinion

ID: 6938062
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:47:48.60627+00
Date Added: 2024-06-11T16:07:34.575761
License: Public Domain

WM. FREMMING NIELSEN, District Judge,
dissenting:
I concur with the Court’s holding in respect to Section II A. However, I respectfully dissent because the majority utilizes an inappropriate comparison class in determining whether this tax exemption results in discrimination against the Railroads. I would AFFIRM the district court’s holding that the correct comparison group is the Railroads’ competitors, and that the tax discriminates against the Railroads.
I believe that using the competitor comparison class in this ease serves the purpose of (1) harmonizing what appears to be a conflict amongst the courts regarding the appropriate comparison class under 306(l)(d); (2) making statutory sense of 806(1) which provides a specific comparison class in three of four subsections, but pointedly omits any reference to a comparison class in the subsection at issue here; (3) upholding the purposes of the 4-R Act in avoiding adverse competitive effects against the railroads; and (4) avoiding the patently discriminatory effects of this tax.
I.
The majority cites two cases supporting the broad comparison group, Burlington Northern R.R. Co. v. City of Superior, 932 F.2d 1185, 1187 (7th Cir.1991); Kansas City So. Ry. v. McNamara, 817 F.2d 368, 376 (5th Cir.1987), but does not address the three courts that adopt the competitor comparison class. Burlington Northern R.R. Co. v. Triplett, 682 F.Supp. 443, 446 (D.Minn.1988); Burlington Northern R.R. Co. v. Commissioner of Revenue, 509 N.W.2d 551, 553-54 (Minn.1993); Atchison, Topeka & Santa Fe Ry. v. Bair, 338 N.W.2d 338, 346 (Iowa 1983). The majority makes no attempt to reconcile these cases. I believe that a harmonization of these seemingly opposite cases is not only possible, but necessary to make sense of the statute. An examination of the cases considering this issue suggests that tax discrimination under 306(l)(d) of the 4-R Act has been rejected in two distinct situations, which necessarily dictate different comparison classes.
Two Circuits embraced the “other commercial and industrial taxpayer” comparative class under 306(l)(d) when railroads were essentially singled out for taxation, Burlington Northern R.R. Co. v. City of Superior, 932 F.2d at 1187, or the class of taxpayers burdened by the tax was “unnecessarily small.” McNamara, 817 F.2d at 376. In these situations, the appropriate comparison class is composed of general commercial and industrial taxpayers subject to the tax because the essence of the railroads’ claim is that the railroads are singled out of that class for differential treatment.
This case, however, involves a broad tax that exempts the Railroads’ primary competitors. The majority’s reliance on McNamara and Burlington Northern v. City of Superior is misplaced because neither case addresses this form of discriminatory taxation. Burlington Northern R.R. Co. v. Commissioner of Revenue, 509 N.W.2d at 553. The use of the “other commercial and industrial taxpayer” class in this setting is ineffectual because it allows precisely the type of discriminatory tax at issue here. Indeed, the majority does not cite to a single ease upholding a general tax that includes a railroad, but excludes the railroad’s primary competitors. Such a case *445does not exist because the discriminatory results are obvious. In this type of situation, then, the appropriate comparison class must be the railroad’s competitors.
II.
Two comparison groups may be utilized under subsection (d) because that subsection does not require that a specific comparison group be adopted. This is in marked contrast to subsections (a), (b), and (c) which require that commercial and industrial taxpayers be used as the comparison class. Indeed, the Ninth Circuit previously noted this omission in subsection (d):
[S]eetions 3061(a) and (c), ... restrict the comparison classes to “other commercial and industrial property.” There is no analogous restriction in the broad language of section 3061(d).
ACF Indus., Inc. v. Department of Revenue, 961 F.2d 813, 821 (9th Cir.1992) rev’d on other grounds, — U.S. -, 114 S.Ct. 843, 127 L.Ed.2d 165 (1994).
The majority glosses over this statutory construction problem by arguing that Congressional intent “dictates” the broad comparison class be used under subsection (d). Putting aside the question of Congressional intent for a moment, this does not explain why Congress specifically chose to omit any reference to a comparison class in subsection (d), yet utilized the “other commercial and industrial” taxpayer group in subsections (a), (b), and (c). I believe a more careful analysis of the statutory construction issue is necessary in order to help discern Congressional intent.
The Supreme Court has addressed the issue of statutory omissions. Federal Trade Comm’n v. Sun Oil Co., 371 U.S. 505, 513-515, 83 S.Ct. 358, 363-364, 9 L.Ed.2d 466 (1963). In Sun Oil Company, the Court considered two subsections of a statute, the second part of which omitted a detailed description of “competition” that existed in subsection (a). Id. The Court refused to construe subsection (b) as having the same definition, holding that “(t)here is no reason appearing on the face of the statute to assume that Congress intended to invoke by omission in 2(b) the same broad meaning of competition or competitor which it explicitly provided by inclusion in 2(a); the reasonable inference is quite the contrary.” Id. at 515, 83 S.Ct. at 365 (emphasis added).
Therefore, I proceed with the assumption that the omission of a comparison class in 306(l)(d) is not coincidental. If Congress wanted that subsection to share the same broad comparison class as the three preceding subsections, and none other, it would have said so. It did not. Sun Oil Co., 371 U.S. at 514-515, 83 S.Ct. at 364 (“[Sjince Congress expressly demonstrated in the immediately preceding provision of the Act that it knew how to expand the applicable concept of competition ... it is reasonable to conclude that like clarity of expression would be present in 2(b)....”) I refuse to provide for an exclusive comparison class under 306(l)(d) when Congress explicitly chose not to do so. Finding that 306(l)(d) only permits the broad comparison class does not interpret the 4-R Act, but amends it. Fedorenko v. United States, 449 U.S. 490, 513, 101 S.Ct. 737, 750, 66 L.Ed.2d 686 (1981) (citing Sun Oil Co., 371 U.S. at 514-515, 83 S.Ct. at 364-365).
III.
“The purpose of the 4-R Act was to prevent tax discrimination against railroads in any form whatsoever.” Ogilvie v. State Board of Equalization, 657 F.2d 204, 210 (8th Cir.), cert. denied, 454 U.S. 1086, 102 S.Ct. 644, 70 L.Ed.2d 621 (1981) (emphasis added). The rationale for the Act is the concern that railroads “‘are easy prey for states and local tax assessors in that they are non-voting, often non-resident, targets for local taxation, who cannot easily remove themselves from the locality.’ ” Id. (citations omitted).
The broad comparison group defeats the purpose of the 4-R Act by placing the Railroads at a decided competitive disadvantage. Burlington Northern R.R. v. Commissioner of Revenue, 509 N.W.2d at 553 (comparison class “is in keeping with the purpose of the 4-R Act: to revitalize the railroad industry by making it competitive”); Triplett, 682 F.Supp. at 446. Where the majority sees “preferential treatment” for the Railroads, I *446see a tax that hinders the Railroads’ ability to compete fairly with its competitors. I do not object to the Railroads paying their fair share of the tax burden. I do object, however, to the payment of discriminatory taxes which place the Railroads at a decided competitive disadvantage.
IV.
The weakness of the exclusive use of the broad comparison class becomes evident in a case like this. The transaction privilege tax reaches over 140,000 transaction privilege tax licenses issued statewide. There is one exception. That exception, of course, is for motor carriers who represent the principal competitors of the Railroads. As the Fourth Circuit noted, “in essence, discrimination is a failure to treat all persons equally where no reasonable distinction can be found between those favored and those not favored.” Richmond, Fredericksburg & Potomac R.R. v. Department of Taxation, 762 F.2d 375, 380 n. 4 (4th Cir.1985). I fail to find such a distinction in the case before us.
The broad comparison class overlooks the obvious point that a tax imposed on rail carriers, but not on motor carriers, is discriminatory in the most basic sense of the word — it treats those engaged in an identical activity differently. In this instance, it treats those involved in the transportation of goods or passengers differently, and the Railroads suffer a dramatic competitive disadvantage. This is a result the 4-R Act cannot allow.
The disparate tax treatment of the Railroads with motor carriers, their principal competitor, is discriminatory. This disparate treatment is, in my view, unlawful under the 4-R Act. Accordingly, I DISSENT.