CSX Transportation, Inc. v. Georgia State Board of Equalization

PETITIONER: CSX Transportation, Inc.
RESPONDENT: Georgia State Board of Equalization et al.
LOCATION: U.S. Naval Base at Guantanamo Bay

DOCKET NO.: 06-1287
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Eleventh Circuit

CITATION: 552 US 9 (2007)
GRANTED: May 29, 2007
ARGUED: Nov 05, 2007
DECIDED: Dec 04, 2007

ADVOCATES:
Carter G. Phillips - on behalf of the Petitioner
Douglas Hallward-Driemeier - on behalf of the United States as amicus curiae supporting the Petitioner
Warren R. Calvert - on behalf of the Respondents

Facts of the case

The Tax Injunction Act establishes a general rule that federal courts will not interfere with matters of state taxation, but the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act) provides an exception for railroads. In an effort to prevent state tax discrimination against railroads, Section 306 of the 4-R Act requires that the ratio of the assessed value to the true market value of railroad property not exceed by more than five percent the ratio of assessed value to true market value for all other commercial and industrial property in the assessment jurisdiction. This calculation requires that states determine the "true market value" of the railroads' property - a valuation that can be subjective. Using a new valuation methodology, the Georgia State Board of Equalization appraised the property of the railroad company CSX Transportation, Inc. at $8.2 billion. CSX filed a complaint under the 4-R Act, noting that the old appraisal methodology would have valued the property at only $6 billion. Despite CSX's argument that the 4-R Act allows railroads to challenge state valuation methods, the district court ruled that the only the state's methodology could be considered.

The U.S. Court of Appeals for the Eleventh Circuit affirmed the lower court. The Eleventh Circuit ruled that in the absence of a clear statement in the 4-R Act, principles of federalism weighed against interpreting the Act to give railroads additional power to challenge the taxing authority of the states in federal court. The Circuit Court stood by the general principle that federal courts should not interfere with state taxation policies. Since the 4-R Act did not allow challenges to the state's choice of valuation method, CSX could not bring its arguments that Georgia's methodology was faulty.

Question

Does the Railroad Revitalization and Regulatory Reform Act of 1976 require a federal district court determining the "true market value" of railroad property to accept the valuation method chosen by the State?

Media for CSX Transportation, Inc. v. Georgia State Board of Equalization

Audio Transcription for Oral Argument - November 05, 2007 in CSX Transportation, Inc. v. Georgia State Board of Equalization

Audio Transcription for Opinion Announcement - December 04, 2007 in CSX Transportation, Inc. v. Georgia State Board of Equalization

John G. Roberts, Jr.:

I have the opinion of the Court in case 06-1287, CSX Transportation versus Georgia State Board of Equalization.

In 1976, Congress passed an act to prevent States from discriminating against railroads by taxing railroad property more heavily than other commercial property in the state.

In a prior case, we held that this statute, popularly known as the 4-R Act, permits a railroad to challenge a State's valuation of its property for tax purposes.

States can discriminate by applying higher tax rates to railroads or less blatantly by over valuing railroad property compared to other property.

Now, in that earlier case, the railroad challenged only how the state applied its method for figuring out the value of railroad property rather than the method itself.

We had no occasion, therefore, to decide whether the statute permits railroads to dispute the underlying valuation methods chosen by the State, that’s the question presented by today's case.

CSX Transportation is a freight rail carrier with multiple routes across the State of Georgia.

In 2002, Georgia charged CSX almost 50% more in property taxes than it had the previous year.

CSX sued under the 4-R Act, claiming that Georgia had dramatically overvalued its in-state rail property by changing the valuation methods it used to assess their property.

The District Court ruled for Georgia, a divided panel of the Eleventh Circuit Court of Appeals affirmed.

Both courts reasoned that the 4-R Act does not allow railroads to challenge the State's valuation methods, but only the application of those methods.

In an opinion filed today with the clerk, we reverse.

The text of the act draws no distinction between valuation methods and the application of those methods.

Instead, the act clearly prevents States from taxing railroad property at a ratio of assessed to true market value that is higher than the comparable ratio for other commercial and industrial property in the State.

In order to perform that required comparison, courts must calculate the true market value of railroad property and in order to do that, they must be able to look behind the State's choice of valuation methods.

We reverse the judgment of the Court of Appeals.

Our opinion is unanimous.