Norfolk & Western Railway Company v. Missouri State Tax Commission

PETITIONER: Norfolk & Western Railway Company
RESPONDENT: Missouri State Tax Commission
LOCATION: South Boston Court

DECIDED BY: Warren Court (1967-1969)

CITATION: 390 US 317 (1968)
ARGUED: Jan 25, 1968
DECIDED: Mar 11, 1968

Facts of the case


Media for Norfolk & Western Railway Company v. Missouri State Tax Commission

Audio Transcription for Oral Argument - January 25, 1968 in Norfolk & Western Railway Company v. Missouri State Tax Commission

Earl Warren:

Number 324, Norfolk and Western Railway Company et. al, versus Missouri State Tax Commission.

Mr. Allen.

You may take the time to get ready.

William H. Allen:

Mr. Chief Justice, may it please the Court.

In this case, the Norfolk and Western Railway is challenging an assessment of its rolling stock by the Missouri State Tax Commission.

In brief, its claim is that the assessment is so greatly in excess of the actual value of Missouri, of Norfolk and Western rolling stock that was in Missouri, that Missouri has placed out of state values on its tax rolls and that this is in violation of both the Due Process Clause and the Commerce Clause.

The question arises in this way.

Ordinarily, in the case of the of an interstate railroad, no particular unit of its rolling stock will be in a particular state permanently and yet it is said to be permanent presence in the state that gives a state jurisdiction to tax an object.

But it's been recognized that it's proper for a state to be able to tax and reach in some manner the rolling stock that is constantly passing through it.

So in recognition of this, this Court long ago reframed situs doctrines so as to permit the states to tax an average amount of rolling stock that was in the state, a fraction which will be constantly changing in content but which will be more or less stable in size of the entire uh complement of locomotives and cars that are on there, otherwise controlled by the railroad.

The next step was to permit the states to determine the size of this fraction by the use of formulas.

Missouri assesses rolling stock according to one formula a form of the mileage or trackage formula.

Under this formula, a railroad's mileage, branch line and main line in case of Missouri, mileage is computed as a total, as a percentage of its total such mileage and this percentage is then applied to a value ascertained for the entirety of the carrier's fleet of rolling stock.

In other words, if a railroad had a 10% of its mileage in Missouri, Missouri would attribute to itself for property tax purposes 10% of that carrier's -- the value of that carrier's rolling stock.

The premise for the use of this formula in both the Missouri Supreme Court and this Court has recognized this is that rolling stock is roughly, evenly divided throughout a railroad system.

Missouri mileage formula was first applied in the Norfolk and Western in 1965.

That was after the N&W had acquired by lease all the properties of the Wabash Railroad.Before the -- before that lease, which took back at October 16, 1964, the Norfolk and Western did not operate in Missouri, although the Wabash and Lines in operations there.

The Missouri statute and terms applies to property owned hired or leased by a railroad.

On this basis, the Missouri's Tax Commission asked and received from the N&W a detailed statement of its mileage owned or leased in Missouri and elsewhere and of its units of rolling stock and their value at cost less accrued depreciation.

Most of the cars and locomotives that the N&W returned in this manner to the Tax Commission were coal carrying equipment used in the well known N&W coal operation from the mines of Virginia, West Virginia and Kentucky, to Tide Water and the Great Lakes.

As it turned out, the Missouri mileage was about eight and a quarter percent of the N&W's total mileage.

The Commission took 47% of this cost less depreciation figures that the N&W had supplied as the value of its-- of its rolling stocks as the assessed or equalized value of the entire fleet of rolling stock.

It used that same 47% factor for all railroads in the state in that year and when applied to the equalized value of the entire fleet, the eight and a quarter percent mileage factor yielded an assessment of nearly $20 million.

It is that assessment of rolling stock that's in issue here.

It appeared suspect at once that assessment because in the previous year, the rolling stock of the Wabash in the hands of the Wabash had been assessed at only a little more than $9 million and there had been no change in the Missouri operations as a result of the lease of the properties to the -- to the N&W such as would logically it was thought lead to any such inquiries in the value of the fleet that was in Missouri.

Earl Warren:

Well, how would the -- how would the value of the Wabash affect the value of the Norfolk.

William H. Allen:

The purpose of the Missouri formula is to get at the value of the rolling stock within the state.

Earl Warren:

I understand that.

William H. Allen:

The -- in the previous year, it was quite true, only Wabash rolling stock was sought to be valued but it was thought and indeed the evidence at the hearing before the State Tax Commission showed that the most of the rolling stock of the N&W that was in Missouri in 1965 was that rolling stock which had been leased from the Wabash.

Earl Warren:

I see.