Petition for Writ of Certiorari — Deer Park Independent School District v. Harris County Appraisal District
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\ Supreme Court, U.S.
i| ED
U) FIL
'97 1730 APR 221998
In The
Supreme Court of the United States
e
October Term, 1997
DEER PARK INDEPENDENT SCHOOL DISTRICT,
GALENA PARK INDEPENDENT SCHOOL DISTRICT and
SHELDON INDEPENDENT SCHOOL DISTRICT,
Petitioners,
VS.
HARRIS COUNTY APPRAISAL DISTRICT, et ail.,
Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals for the Fifth Circuit
PETITION FOR WRIT OF CERTIORARI
RUSSELL R. GRAHAM
CALAME LINEBARGER
GRAHAM & PENA, L.L.P.
Attorneys for Petitioners
P.O. Box 17428
Austin, Texas 78760
(512) 447-6675
(800) 274-3321 + (800) 359-6859 WA ppellate
A DIVISION OF COUNSEL PRESS Services, Inc.
i
QUESTION PRESENTED
Whether Congress, in exercising its power under the
Commerce Clause, may prohibit a State and/or its political
subdivisions from levying a non-discriminatory tax on persons
or property located within its jurisdiction when that tax violates
neither the prohibitions of the Import/Export clause nor the
dormant protections of the Commerce Clause of the United
States Constitution.
li
PARTIES TO THE PROCEEDING
In addition to the parties named in the caption, Shell
Chemical Corporation, Shell Oil Company, Marubeni Tubulars
Incorporated, Mitsui Tubular Products Incorporated, Lyondell-
Citgo Refining Company Limited, Crown Central Petroleum
Corporation, Vinson Supply Company and Siderca Corporation
were parties before the Court of Appeals and Respondents
herein.
li
TABLE OF CONTENTS
Page
BR eae ae ee pee i
Per PU POGUE ss cdo ce dccecccnccc. ii
I eo ili
eS ey es. iv
RAPS egy cg a ele aay ee aren I
I I I i ia oe ce cece |
Constitutional and Statutory Provisions Involved .. 2
tReet aa cee 3
A. Nomenclature, Record References and Emphasis
RE es Pe a ee 3
a EN a ese 4
os memos OF Dhig Case ..............-... 6
Reasons for Granting the Writ .................... 9
I. The Petition Should Be Granted Because The
Opinion Below Conflicts With This Court’s Prior
Rulings On The Essential And Indispensable
Powers Of Taxation Reserved To The States By
The Tenth Amendment To The United States
IS oe ot: 9
iv
Contents
Page
I]. The Petition Should Be Granted Because The
Opinion Below Effectively Renders The Tenth
Amendment To The United States Constitution
WOU ec hier h dno shea chee ees 18
CRUCTRPOE Ne seek cia es ae hee aes ees 29
TABLE OF CITATIONS
Cases Cited:
American Trucking Ass'n v. Scheiner, 483 U.S. 266
FOOUETD kak sc kwcig nw os he ok ad Lika eae dieies 21
Aransas County Appraisal Review Bd. v. Texas Gulf
Shrimp Co., 707 S.W. 2d 186 (Tex. App. — Corpus
ae, UR, ge ES A ee Oat 7
Brown v. Maryland, 12 Wheat. 419 (1827) ......... 15
Colonial Pipeline Co. v. Traigle, 421 U.S. 100 (1974)
POM EEE PEE PEL OEE TE CL NE See 13
Complete Auto Transit v. Brady, 430 U.S. 274 (1977)
cea Paes KES ee ted ke a OD has 10, 13, 21
Deer Park Ind. Sch. Dist. v. Harris County Appraisal
ist. (32 F356 TGS (Ce. I998) oe ksccndens l
Deer Park Ind. Sch. Dist. v. Harris County Appraisal
Dist., 963 F. Supp. 605 (S.D. Tex. 1997) ........ l
sisal
Contents
Page
Department of Revenue of Washington v. Association of
Washington Stevedoring Companies, 435 U.S. 734
CHOU bo Maka a1 8 os hue ee eR ee 21
Diamond Shamrock Ref. and Mktg. v. Nueces County
Appraisal Dist., 876 S.W. 2d 298 (Tex. 1994), cert.
denied, 130 L. Ed. 2d 409, 115 S. Ct. 500 (1994) . 8
Garcia v. San Antonio Metro, 469 U.S. 528 (1985)
ieee wwe Hae ENDER EY OAS DA ed LEDER ue a2, 23, 24
Gibbons v. Ogden, 9 Wheat. 1 (1824).............. 14, 15
Goldberg v. Sweet, 488 U.S. 252 (1989) ........... 21
Greyhound Lines, Inc. v. Board of Equalization of Fort
Worth, 419 S.W. 2d 345 (Tex. 1967) ............ 7
Lane Co. v. Oregon, 74 U.S. 101 (1869) ........... 16, 17
Maryland v. Louisiana, 451 U.S. 724 (1981) ....... 21
McCulloch v. Maryland, 4 Wheat. 316 be is) aoe 10, 11, 14
Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976)
ERT ER TOR ER PE ee EPO PR 10, 13, 21
National League of Cities v. Usery, 426 U.S. 833
CEPT SOK Nice ba dhe ON eke RE ee 22
vi
Contents
Page
Prinz, Sheriff/Coroner, Ravalli County, Mont. v. United
States, _. U.S. __, 117 S. Ct. 2365 (1997) . 17, 26, 27, 28
Trinova Corp. v. Michigan Dep't of Treasury, 498 U.S.
Sa TASES 6 cnbeaddn en veccntasneauleseteete 21, 22
Tyler Pipe Indus., Inc. v. Washington State Dep't of
prunes. GES UA Bee CAP OtE Wika ce heoes beh ens 21
United States v. Lopez, 514 U.S. 549 (1995) ...... 23, 24, 25
Western Live Stock v. Bureau of Revenue, 303 U.S. 250
PEE ahd ks beebnbed40hee Serkan hers See 13
Statutes Cited:
re UA 8 UES CRG. IFFT OE BO bie siwcices 6
USA. 8 Shae) Cape: SFP E isc ce Siwcedeeeuds
Cr ey R eee CT Te rr Pere +S BiH Oe IA eS
BO Uhre O RAOTE) CEE cercveccen eee seeewiaees l
Re as BRE LEED. Fic ee eee ed wids Roe wen 4
Be bed, O ASE EDGE. wa do edn doaennsceeven tos 4
Be UKs EDOM CESPED obs Keb eRe ee des weg ese l
Contents
Page
United States Constitution Cited:
SP NN MEM id eee eee a me 2,9
cess Rac I I 5 ee 2, 9, 10, 18
RR A a ER. SRR es eg gees ee 2,9
Rule Cited:
Supreme Court Rule 29, Section 4(b) .............. I
Other Authorities Cited:
Legislative History for P.L. 98-573, U.S. Trade and Tariff
Act of 1984 — 1984 U.S.C.C.A.N. 4910, 4945-4946
Geis be aoe Rie Ald Aiba Mick Ae RAG Ok a ak ee Bl hab ae 8
THE FEDERALIST No. 32 (Alexander Hamilton) ....... 20
ee es ea Raa oo Rin 7
Ts A PO Be i a 7
De Ss ks WE EE. ch ove dbesek besa bal ns 7
vill
Contents
Page
APPENDIX
Appendix A — Opinion Of The United States Court Of
Appeals For The Fifth Circuit Dated January 22,
SPE bivn SueeuRnda neni chaeva sede snea ernest la
Appendix B — Opinion Of The United States District
Court For The Southern District Of Texas Entered May
Sg SOT.” hak CakSe bed UME Shee RRR peeves 10a
Appendix C — Stipulation Of Facts Dated January 17,
bf ee Er erry Pe ae bree Seer 22a
nw ew
Petitioners, the Deer Park, Galena Park and Sheldon
Independent School Districts (the “School Districts”)
respectfully request that a writ of certiorari be issued to review
the judgment of the United States Court of Appeals for the
Fifth Circuit in this case.
OPINIONS BELOW
The opinion of the United States Court of Appeals for the
Fifth Circuit is reported at Deer Park Ind. Sch. Dist. v. Harris
County Appraisal Dist., 132 F.3d 1095 (Sth Cir. 1998).
(Appendix A). The opinion of the District Court in Deer Park
Ind. Sch. Dist. v. Harris County Appraisal Dist., is reported at
963 F. Supp. 605 (S.D. Tex. 1997). (Appendix B).
STATEMENT OF JURISDICTION
The judgment of the United States Court of Appeals for
the Fifth Circuit was entered on January 22, 1998.
The jurisdiction of this Court is invoked under 28 U.S.C.
§ 1254(1) (1988).
28 U.S.C. § 2403(a) (1990) may apply to this case and
Petitioners find no indication in the record that the courts below
certified to the Attorney General of the United States that the
constitutionality of an Act of Congress has been drawn into
question.
In accordance with Rule 29, Section 4(b), Rules of the
Supreme Court and 28 U.S.C. § 2403(a) (1990) thi. “etition
for a Writ of Certiorari is being served on the Solicitor General
of the United States, Room 5614, Department of Justice, 950
Pennsylvania Avenue, N.W., Washington, D.C. 20530.
2
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
Article I, § 8 reads in relevant part as follows:
The Congress shall have the power . . . To regulate
Commerce with foreign nations, and among the
several states, and with the Indian tribes...
U.S. Const. art. I, § 8.
Article I, § 10, Clause 2 reads as follows:
No state shall without the consent of the Congress,
lay any imposts or duties on imports or exports,
except what may be absolutely necessary for
executing its inspection laws: and the net produce
of all duties and imposts laid by any State on imports
or exports, shall be for the use of the treasury of the
United States: and all such laws shall be subject to
revision and control of the Congress.
U.S. Const. art. I, § 10, cl. 2.
Amendment X reads as follows:
The powers not delegated to the United States by
the Constitution, nor prohibited by it to the States,
are reserved to the States respectively, or to the
people.
U.S. Const. amend. X.
3
Section 81lo(e) reads as follows:
(e) Tangible personal property imported from
outside the United States and held in a zone for
the purpose of storage, sale, exhibition,
repackaging, assembly, distribution, sorting,
grading, cleaning, mixing, display,
manufacturing, or processing, and tangible
personal property produced in the United States
and held in a zone for exportation, either in its
original form or as altered by any of the above
processes, shall be exempt from State and local
ad valorem taxation.
19 U.S.C. § 8lo(e) (Supp. 1997).
STATEMENT OF THE CASE
The fundamental question in this case is whether the
indispensable and essential power of a State to levy non-
discriminatory taxes on persons and property within its
jurisdiction may be abrogated by Congress under the guise of
regulating commerce. While the tax in question in this instance
is an ad valorem (property) tax, Petitioners can see no distinction
in principle which would prevent Congress from prohibiting a
state from levying any type of tax if the statute being challenged
here is a valid exercise of Congressional authority. Indeed, if
Congress may prohibit a State or its political subdivisions from
levying a tax merely because it has some impact on commerce
it is impossible to envision any source of revenue which is secure
to the States and beyond the reach of Congress.
A. Nomenclature, Record References and Emphasis Added
Throughout this Petition the Petitioners, Deer Park
Independent School District, Galena Park Independent School
4
District, and Sheldon Independent School District, will be
referred to collectively as “the School Districts”. The
Respondents which have a financial interest in the outcome of
this case are eight corporations which will be referred to as the
“Industries”. The remaining Respondent is the Harris County
Appraisal District, which does not have a financial interest in
this case but which is a necessary party. It will be referred to
infrequently as “HCAD”.
References to the record shall be through the document
number appearing on the district court docket sheet, followed
by the internal page number in the document where the specific
text being referenced appears, such as “Doc. 9, p. 6”.
All emphasis added herein is ours unless otherwise
indicated.
B. Statement of Facts
The School Districts filed suit in the court below on
September 30, 1996, seeking a declaratory judgment that 19
U.S.C. § 8lo(e) is unconstitutional. The United States District
Court for the Southern District of Texas had jurisdiction under
28 U.S.C. § 1331 (1986). The United States Court of Appeals
for the Fifth Circuit had jurisdiction under 28 U.S.C. § 1291
(1986). For purposes of ad valorem taxation for 1995 and 1996,
HCAD had granted an exemption from taxation for certain
tangible personal property owned by the Industries which was
located within the taxing jurisdictions of the School Districts
on January 1, of 1995 and 1996. The exemption was granted
due to the provisions of § 8lo(e).
Specifically, Deer Park 1.S.D. alleged that the exemption
granted to the general industrial property belonging to Shell
Chemical Corporation was depriving it of tax revenues of
ac ire
5
$3,483,420.16. (Doc. 1, pp. 4-5). Galena Park I.S.D. alleged
that the exemptions granted to the pipe inventory of Marubeni
Tubulars, Inc. and of Mitsui Tubular Products, Inc., and to the
inventory and g.weral industrial property belonging to Shell
Oil Company, to Lyondell-Citgo Refining Co., Ltd., and to
Crown Central Petroleum Corporation were depriving it of tax
revenues estimated at $557,254.50. (Doc. 1, pp. 5-7). Sheldon
1.S.D. made similar allegations about its loss of tax revenue
from the pipestock inventories of Marubeni Tubulars, Inc.,
Vinson Supply Company and Siderca Corporation, estimated
to total $82,415.61. (Doc. 1, pp. 7-9).
At the direction of the District Court, each party except
HCAD filed a brief Data Sheet. Those of the Industries contain
short descriptions of their business activities within each Foreign
Trade Zone in which the School Districts seek to tax property.
(Docs. 34, 35, 36, 37, 38, 40, 42, 44). For example, Shell
Chemical Corporation processes, manufactures and stores
various chemical products (Doc. 34), while Shell Oil Company
processes, manufactures and stores products such as gasoline,
jet fuel and heating oil. (Doc. 35). Neither of those parties
indicated the locations of the customers for their products. Crown
Central Petroleum Corporation produces gasoline, jet fuel and
heating oil, and identified its market for its refined products as
being local. (Doc. 36). Lyondell-Citgo Refining Company, Ltd.
does no refining in a Foreign Trade Zone. Rather it stores
imported crude oil in the zone before moving it to its refinery,
which is outside the zone. The location of its market was not
stated. (Doc. 38). The remaining Industries all brought pipestock
or other tubular goods into the Foreign Trade Zones and did
no significant processing of alterations on the pipe while in the
zone. (Docs. 37, 40, 42 and 44). Siderca Corporation and
Vinson Supply Company specifically stated that the pipe which
they import into the zones was eventually to be exported to
foreign destinations.
6
In the data sheets filed by the School Districts they stated
their size, student populations, campuses, values of taxable
property after exemptions listed by categories, tax rates, tax
levies, and top 10 taxpayers and their taxable values. All of the
Data Sheets were incorporated by reference into ten stipulations
of facts. (Doc.45). The School Districts believe that the
following stipulations are most critical to this case:
9. All or a significant portion of the property
involved in this dispute would be taxable by the
[School Districts] were it not for the exemption
created by the provisions of 19 U.S.C. §8lo(e).
10. The property involved in this dispute is
exempt from taxation by the [School Districts] unless
the provisions of 19 U.S.C. §8lo(e) are
unconstitutional.
(See Appendix C, p. 24a).
C. Background of This Case
The basic issue in this case arises from a 1984 amendment
to the Foreign Trade Zones Act of 1934, 19 U.S.C. § 81a (Supp.
1997), et seq. The School Districts think it is uncontested that
the original purpose of the Act when it became law was to
encourage economic growth through increased manufacturing
and employment. That goal was accomplished by allowing
imported goods into this country and delaying the payment of
any tariffs or customs duties until those goods left the “Foreign
Trade Zone” and eliminating such tariffs or duties on imports
that were re-exported from such zones. For fifty years the
purposes for creating such zones were served by the Federal
Government foregoing its own sources of revenue. In 1984,
however, the Act was amended by the addition of § 8lo(e)
which is set forth above.
7
With respect to the law of Texas, it is clear that under both
the Constitution and the statutes all property situated in this
State on the assessment date is to be taxed, unless an exemption
is authorized by the Texas Constitution or is imposed by some
overriding protection or prohibition in the United States
Constitution. Tex. Const. art. VIII, §§ 1, 2 and 11; Greyhound
Lines, Inc. v. Board of Equalization of Fort Worth, 419 S.W.
2d 345 (Tex. 1967); Aransas County Appraisal Review Bad. v.
Texas Gulf Shrimp Co., 707 S.W. 2d 186 (Tex. App. — Corpus
Christi, 1986, writ ref’d n.re.). Article VIII, § 1 of the Texas
Constitution for example, reads in part as follows:
Article VIII, Sec. 1. Equality and Uniformity; Tax
in Proportion to Value; Occupation Taxes;
Income Tax; Exemption of Certain Tangible
Personal Property from Ad Valorem Taxation.
(a) Taxation shall be equal and uniform.
(b) All real property and tangible personal
property in this State unless exempt as required or
permitted by this Constitution, whether owned by
natural persons or corporations, other than municipal,
shall be taxed in proportion to its value, which shall
be ascertained as may be provided by law.
Tex. Const. art. VIII, § 1.
The legislative history of § 8lo(e) leaves no doubt that it
was aimed specifically at overriding this and other provisions
of the Texas Constitution that all property be taxed equally.
Reason for provision — Local taxing
jurisdictions in Texas may seek to declare
exemptions for property taxes on some tangible
8
personal property stored in foreign trade zones,
but are precluded from doing so by the Texas
Constitution. The local foreign trade zones thus are
disadvantaged in promoting the benefits of zones in
their localities. The committee is unaware of any
states or localities outside the State of Texas that
seek to impose property taxes on tangible personal
property located in foreign trade zones for bona fide
customs reasons, or have a bar similar to that in Texas
that would preclude localities from declaring an
exemption to such a tax.
Legislative History for P.L. 98-573, U.S. Trade and Tariff Act
of 1984 — 1984 U.S.C.C.A.N. 4910, 4945-4946.
Perhaps most illustrative of the invasive effect of 19 U.S.C.
§ Slo(e) appears from a consideration of the fact that a
substantial portion of the property involved in this case is crude
oil destined to be refined in Texas and the products resulting
from the refining process. This property is indistinguishable in
any way, other than its location in a Foreign Trade Zone, from
the crude oil which the Texas Supreme Court found to be
taxable in Diamond Shamrock Ref. and Mktg. v. Nueces County
Appraisal Dist., 876 S.W. 2d 298 (Tex. 1994), cert. denied,
130 L. Ed. 2d 409, 115 S. Ct. 500 (1994).
Instead of bearing their fair share of the tax burden imposed
to educate the children residing in the School Districts, the
Industries enjoyed an exemption from taxation on millions of
dollars worth of property, and, presumably, were able to benefit
from a cost advantage not enjoyed by their competitors whose
property was located outside of a Foreign Trade Zone.
Since the passage of § 81o(e) the School Districts and other
political subdivisions in Texas have found themselves precluded
eee eee
9
from taxing property such as that owned by the Industries
involved in this case simply because the property was located
in a “Foreign Trade Zone”, while at the same time levying taxes
on property indistinguishable in nature from that owned by the
Industries but located outside of such zones.
REASONS FOR GRANTING THE WRIT
I.
THE PETITION SHOULD BE GRANTED BECAUSE
THE OPINION BELOW CONFLICTS WITH THIS
COURT’S PRIOR RULINGS ON THE ESSENTIAL AND
INDISPENSABLE POWERS OF TAXATION RESERVED
TO THE STATES BY THE TENTH AMENDMENT TO
THE UNITED STATES CONSTITUTION.
The tax exemption authorized by § 81o(e) is an exemption
from a non-discriminatory property tax. That tax is a primary
source of revenue for cities, counties, school districts and many
other types of political subdivisions in Texas. If there is any
constitutional basis for the exemption authorized by § 8lo(e) it
must arise from the provisions of the Commerce Clause of the
U.S. Constitution (U.S. Const. art. I, § 8) or from the express
prohibitions found in the Import-Export Clause (U.S. Const.
art. I, § 10, cl. 2) which are set forth above.
The stipulations entered by the parties to this cause make it
clear that with respect to most, if not all, of the property
exempted in this cause, neither the protections from taxation
afforded to commerce by the Commerce Clause nor the express
prohibitions found in the Import-Export Clause are violated by
the tax in question here. (See Appendix C, p. 24a, no. 9) By
agreeing that most if not all of the property would be taxable
but for the existence of § 8lo(e), the Industries have waived
10
any argument that the tax in question is in the nature of a duty
or impost (Michelin) or that it does not meet the test set forth in
Complete Auto, that it (1) is applied to an activity with a
substantial nexus with the taxing state; (2) is fairly apportioned;
(3) does not discriminate against interstate commerce; and (4)
is fairly related to services provided by the state. Michelin Tire
Corp. v. Wages, 423 U.S. 276 (1976); Complete Auto Transit
v. Brady, 430 U.S. 274 (1977).
That the power to levy a non-discriminatory tax was
reserved to the states by the Tenth Amendment is so clearly in
the affirmative as to be indisputable. The foundation upon which
almost all jurisprudence dealing with the powers of the national
government versus the state governments is built is McCulloch
v. Maryland, 4 Wheat. 316 (1819).
In that case Chief Justice Marshall and this Court went to
great lengths to define the balance between the powers which
the adoption of the United States Constitution had ceded to the
national government and those which had been reserved to the
States. In this respect Marshall wrote as follows:
That the power of taxation is one of vital
importance; that it is retained by the states; that it is
not abridged by the grant of a similar power to the
government of the Union; that it is to be concurrently
exercised by the two governments: are truths which
have never been denied...
Id. at 425.
... It is admitted that the power of taxing the
people and their property is essential to the very
existence of government, and may be legitimately
exercised on the objects to which it is applicable, to
1]
the utmost extent to which the government may
choose to carry it. The only security against the
abuse of this power is found in the structure of the
government itself. In imposing a tax the legislature
acts upon its constituents. This is in general a
sufficient security against erroneous and oppressive
taxation.
The people of a state, therefore, give to their
government a right of taxing themselves and their
property, and as the exigencies of government
cannot be limited, they prescribe no limits to the
exercise of this right, resting confidently on the
interest of the legislator, and on the influence of the
constituents over their representative to guard them
against its abuse...
Id. at 428.
This opinion does not deprive the states of
any resources which they originally possessed. It
does not extend to a tax paid by the real property
of the bank, in common with the other real
property within the state, nor to a tax imposed
on the interest which the citizens of Maryland
may hold in this institution, in common with
other property of the same description
throughout the state. But this is a tax on the
operations of the bank, and is, consequently, a tax
on the operation of an instrument employed by the
; government of the Union to carry its powers into
execution. Such a tax must be unconstitutional.
Id. at 436-437.
12
In the last paragraph above, this Court went out of its way
to make it clear that non-discriminatory state taxes against
property or people within the State were not the evil being
addressed in the case and that those forms of taxation were
available to the states before the adoption of the United States
Constitution and retained by them after its adoption.
What Chief Justice Marshall and this Court found
objectionable was the levying of a tax by Maryland on the
operation of the Bank of the United States. After determining
that Congress had the power to incorporate a national bank this
Court found that such a tax was repugnant to that power. This
Court repeatedly stated that the power to tax was the power to
destroy, but in almost the same breath reflected that the power
to tax was essential to the states. It is clear that what this Court
condemned was a tax focused on an essential institution of the
Federal Government and not on taxes which were general and
non-discriminatory in nature and levied on people or property
within the State. In the latter instance the self interest of state
legislatures and their constituents would serve to prevent such
taxes from being instruments of destruction.
What Chief Justice Marshall and this Court really sought
to condemn was a tax which was “repugnant” to the proper
exercise of Federal functions authorized by the United States
Constitution. In the instant cause the question is whether the
tax in question is in fact repugnant to the purposes of the
Commerce Clause or the Import-Export clause of the
Constitution. The School Districts urge that this Court has made
it clear that the tax in question is not repugnant to those
provisions.
It is a truism that the mere act of carrying on
business in interstate commerce does not exempt a
corporation from state taxation. “It was not the
———
- er ea
13
purpose of the commerce clause to relieve those
engaged in interstate commerce from their just
share of state tax burden even though it increases
the cost of doing business.”
Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 254
(1938). Colonial Pipeline Co. v. Traigle, 421 U.S. 100, 108
(1974). Complete Auto Transit, 430 U.S. at 288.
To be sure, allowance of nondiscriminatory ad
valorem property taxation may increase the cost of
goods purchased by “inland” consumers. But as
already noted, such taxation is the quid pro quo
for benefits actually conferred by the taxing State.
There is no reason why local taxpayers should
subsidize the services used by the importer;
ultimate consumers should pay for such services
as police and fire protection accorded the goods
just as much as they should pay transportation
costs associated with those goods. An evil to be
prevented by the Import-Export Clause was the
levying of taxes which could only be imposed
because of the peculiar geographical situation of
certain States that enabled them to single out
goods destined for other States. In effect, the
Clause was fashioned to prevent the imposition
of exactions which were no more than transit fees
on the privilege of moving through a State. A
nondiscriminatory ad valorem property tax
obviously stands on a different footing, .
ET et SP eee er
Michelin Tire Corp., 423 U.S. at 289-290.
If, as indicated above, neither the Commerce Clause nor
the Import-Export clause were intended to prevent those
14
engaged in commerce from paying their way, how can a tax
which extracts that payment be repugnant to either? One might
urge that McCulloch was just the first significant step made by
this Court in defining what powers had been granted the Federal
Government by the Constitution and that subsequent opinions
served to expand Federal authority at the expense of the states.
Indeed, in the significant Commerce Clause case, Gibbons v.
Ogden, 9 Wheat. 1 (1824), one finds the often cited language
which reads as follows:
It is the power to regulate; that is, to prescribe
the rule by which commerce is to be governed. This
power, like all others vested in Congress, is complete
in itself, may be exercised to its utmost extent, and
acknowledges no limitations, other than are
prescribed in the constitution.
Id. at 196-197.
This language has been the cornerstone of literally
thousands of actions both legislative and judicial which have
served to expand federal powers under the Commerce Clause
to almost limitless bounds. In Gibbons v. Ogden this Court,
however, acknowledged the existence of limits in almost the
next breath with the following:
The power of taxation is indispensable to their
existence, and is a power which, in its own nature,
is capable of residing in, and being exercised by,
different authorities at the same time . . . Congress
is authorized to lay and collect taxes, etc., to pay the
debts, and provide for the common defense and
general welfare of the United States. This does not
interfere with the power of the states to tax for the
support of their own governments; nor is the exercise
of that power by the states an exercise of any portion
15
of the power that is granted to the United States. In
imposing taxes for state purposes, they are not doing
what Congress is empowered to do. Congress is not
empowered to tax for those purposes which are
within the exclusive province of the states. When,
then, each government exercises the power of
taxation, neither is exercising the power of the other.
Id. at 199.
At least within the sphere of states taxing their people and
property, this Court found no conflict between this retained
power and the authority granted to Congress under the
Commerce Clause. In Brown v. Maryland, 12 Wheat. 419
(1827) this court similarly found no conflict between such state
taxation and the Import-Export Clause, at least as to properties
which had become part of the general mass of property in the
state (as has all or most of the property involved in this cause).
The constitutional prohibition on the states to
lay a duty on imports — a prohibition which a vast
majority of them must feel an interest in preserving
— may certainly come in conflict with their
acknowledged power to tax persons and property
within their territory . . . It is sufficient for the present
to say, generally, that when the importer has so acted
upon the thing imported that it has become
incorporated and mixed up with the mass of property
in the country, it has, perhaps, lost its distinctive
character as an import, and has become subject to
the taxing power of the state; but while remaining
the property of the importer, in his warehouse, in
the original form or package in which it was
imported, a tax upon it is too plainly a duty on
imports to escape the prohibition in the constitution.
Id. at 441-442.
16
It is hard to imagine a broader list of actions which a
property owner might take to mix up his property with the
“mass of property in the country” than the laundry list included
in § 8lo(e). The property in question is not simply passing
through Texas but rather has come to rest in Texas for the
business purposes of the Industries, including manufacturing,
refining, processing, and storage. It is impossible to distinguish
the property owned by the Industries from any other
manufacturer’s inventory of raw materials or finished goods
located anywhere else in Texas.
This Court’s opinion in Lane Co. v. Oregon, 74 U.S. 101
(1869) directly addresses the issue in this case. In that case, this
Court held as follows:
Now, to the existence of the States, themselves,
necessary to the existence of the United States,
the power of taxation is indispensable. It is an
essential function of government. It was exercised
by the Colonies; and when the Colonies became
States, both before and after the formation of
the Confederation, it was exercised by the new
governments. . . The Constitution, it is true, greatly
changed this condition of things. It gave the power
to tax, both directly and indirectly, to the National
Government, and subject to the one prohibition of
any tax upon exports and to the conditions of
uniformity in respect to indirect, and of proportion
in respect to direct taxes, the power was given
without any express reservation. On the other hand,
no power to tax exports or imports, except for a
single purpose and to an insignificant extent or to
lay any duty on tonnage, was permitted to the States.
In respect, however, to property, business and
persons, within their respective limits, their power
17
of taxation remained and remains entire. It is,
indeed, a concurrent power, and in the case of a tax
on the same subject by both governments, the claim
of the United States, as the supreme authority, must
be preferred; but with this qualification it is absolute.
The extent to which it shall be exercised, the subjects
upon which it shall be exercised, and the mode in
which it shall be exercised, are all equally within
the discretion of the Legislatures to which the States
commit the exercise of the power. That discretion is
restrained only by the will of the people expressed
in the state constitutions or through elections, and
by the condition that is must not be so used as to
burden or embarrass the operations of the National
Government. There is nothing in the Constitution
which contemplates or authorizes any direct
abridgement of this power by national legislation.
To the extent just indicated it is as complete in the
States as the like power, within the limits of the
Constitution, is complete in Congress.
Id. at 104-105.
Since Lane Co. has been cited favorably by several recent
opinions of this Court one would expect its holding to have
been binding on the Court below. See New York v. United States,
505 U.S. 144 (1992), and Prinz, Sheriff/Coroner, Ravalli
County, Mont. v. United States, __ U.S. __, 117 S. Ct. 2365,
2376 (1997). If it is correct that “There is nothing in the
Constitution which contemplates or authorizes any direct
abridgment of this power by national legislation” then § 81o(e)
is unconstitutional. It is inconceivable that a more direct
abridgement of the power of a state and/or its political
subdivisions to tax property within their jurisdiction could exist
than a statute such as § 81lo(e).
18
Il.
THE PETITION SHOULD BE GRANTED BECAUSE
THE OPINION BELOW EFFECTIVELY RENDERS THE
TENTH AMENDMENT TO THE UNITED STATES
CONSTITUTION MEANINGLESS.
If, as this Court has repeatedly held, the power of the States
to tax persons or property within their boundaries is essential
and indispensable to their sovereignty, then a conflicting power
in the Federal Government to prohibit such taxation means that
State sovereignty exists only at the pleasure of the Federal
Government. Such sovereignty is an illusion.
The court below based its opinion on its conclusion that
when Congress is exercising its authority under the Commerce
Clause the only test that must be met is
1) whether a rational basis exists for finding that the
regulated activity affects interstate commerce, and
2) whether the means chosen by Congress were
reasonably adapted to the end permitted by the
Constitution.
(See Appendix A, page 5.) If general non-discriminatory state
taxation is an activity that is subject to regulation by Congress
then it would have to be conceded that any state tax (income,
sales, property, etc.) would meet the first part of that two-pronged
test. The more significant question is whether protection of
commerce from a general non-discriminatory state tax is an end
“permitted by the Constitution”. If it is, then all state taxes are
subject to Congressional control because they all “affect
interstate commerce”. The “affect” of the tax in question here is
no different on property outside a Foreign Trade Zone than
inside. Can Congress therefore designate the entire State of Texas
hes itis total
Tne 7) eae Tie one! ae ae ae
72)
ea ee ee ee
19
as a Foreign Trade Zone and prohibit taxation on all
manufacturing inventories?
The very existence of § 8lo(e) (to say nothing of the
stipulation between the parties that most if not all of the
exempted property would be taxable but for that section) proves
that its purpose is to prohibit Texas and/or its politica!
subdivisions from doing what they previously had the right to
do, namely, taxing the subject property. The School Districts
would urge that the tax in dispute here has no impact on
commerce different from any tax levied by any State or local
government. Does a property tax levied in Texas on property
located in a “Foreign Trade Zone” have any different impact on
commerce than an income tax levied in New York on companies
that own property in a “Foreign Trade Zone”? Any tax, by
definition, is an imposition on the taxed party.
It is inconceivable that the framers of the United States
Constitution intended that Congress would have the power to
pick and choose which taxes the States might levy on persons
and property within their jurisdiction. In the Federalist Papers
Alexander Hamilton wrote at length (papers 30 through 36) to
justify the provisions in the Constitution giving the power of
direct taxation to the Federal Government and to ameliorate the
fear that the sovereign powers of the States to tax would be
destroyed by that government. Hamilton’s justification of the
power of the Federal Government to levy a direct tax was
eloquent and forceful. It is doubtful, however, that it would
have turned the tide toward ratification if he had not been just
as eloquent and forceful in defending the co-equal and sovereign
rights of the States to impose taxes.
In the latter regard Hamilton in Paper 32 wrote as follows:
Although I am of opinion that there would be
no real danger of the consequences which seem to
20
be apprehended to the State governments from a
power in the Union to control them in the levies of
money, because I am persuaded that the sense of the
people, the extreme hazard of provoking the
resentments of the State governments, and a
conviction of the utility and necessity of local
administrations for local purposes, would be a
complete barrier against the oppressive use of such
a power; yet I am willing here to allow, in its full
extent, the justness of the reasoning which
requires that the individual States should possess
an independent and uncontrollable authority to
raise their own revenues for the supply of their
own wants. And making this concession, I affirm
that (with the sole exception of duties on imports
and exports) they would, under the plan of the
convention, retain that authority in the most
absolute and unqualified sense; and that an
attempt on the part of the national government
to abridge them in the exercise of it would be a
violent assumption of power, unwarranted by any
article or clause of its Constitution.
THE FEDERALIST No. 32 (Alexander Hamilton).
Had it been contemplated by the Framers of the Constitution
that Congress could prohibit a general state tax on the people
or property within the state merely because the tax might have
some impact on commerce, it is hard to conceive of the
justification that Hamilton, Madison or Jay could have set forth
in the Federalist Papers which would have overcome the
objections of the opponents to ratification. All taxes have an
impact on commerce in one way or another and, therefore, the
power to preclude state taxation under the guise of regulating
commerce would be all-encompassing. The States would have
been left as mere shells with no real sovereignty.
aici noni acce eae msc an alan ce reer ae maes
2]
Ratification was a close thing. If the Framers had in fact
intended that the Federal Government have such power over
the States it probably would not have occurred.
This Court has repeatedly said that the Commerce and
Import-Export Clauses were not designed to protect interstate
or international commerce from paying its way. See Michelin
Tire Corp., 423 U.S. 276 (1976); Department of Revenue of
Washington v. Association of Washington Stevedoring
Companies, 435 U.S. 734 (1978); Complete Auto Transit, 430
U.S. 274 (1977); and Goldberg v. Sweet, 488 U.S. 252 (1989).
If the tax singles out interstate or international commerce it
will be struck down. See American Trucking Ass'n v. Scheiner,
483 U.S. 266 (1987); Maryland v. Louisiana, 451 U.S. 724
(1981); and Tyler Pipe Indus., Inc. v. Washington State Dep't
of Revenue, 483 U.S. 231 (1987). But if the tax is fairly related
to the commerce or property being taxed it will be upheld.
Complete Auto Transit, 430 U.S. 274 (1977): Michelin Tire
Corp., 423 U.S. 276 (1976); Washington Stevedoring, 435 U.S.
734 (1978); and Trinova Corp. v. Michigan Dep’t of Treasury,
498 U.S. 358 (1991).
The Trinova decision contains perhaps the most concise
statement of the role this Court has set for itself in these cases.
There this Court held as follows:
In reviewing State taxation schemes under the
Commerce Clause, we attempt “to ensure that each
State taxes only its fair share of an interstate
transaction.” (cite omitted) We act as a defense against
State taxes which, whether by design or inadvertence,
either give rise to serious concerns of double taxation,
or attempt to capture tax revenues that, under the
theory of the tax belong of right to other
jurisdictions. We have always “declined to undertake
22
the essentially legislative task of establishing a single
constitutionally mandated method of taxation.”
Trinova Corp., 498 U.S. at 386.
Since the tax in question in this case violates none of the
restrictions on State taxation imposed either by the United States
Constitution or this Court’s opinions in the cases cited above,
the provisions of §81o(e) can be constitutional only if Congress’
plenary power under the Commerce Clause is limitless. The
School Districts acknowledge that in Garcia v. San Antonio
Metro, 469 U.S. 528 (1985) this Court overruled National
League of Cities v. Usery, 426 U.S. 833 (1976), and moved
from “a rule of state immunity from federal regulation that turns
on a judicial appraisal of whether a particular governmental
function is integral or traditional” to a somewhat ill-defined
protection afforded to whatever remains of State sovereignty
by “the built-in restraints that our system provides through state
participation in federal governmental action.” Jd. at 556.
It is unclear to the School Districts how the people of Texas
and their Constitution are to be protected by the “system” when,
as evidenced by the legislative history quoted above, the statute
in question in this case was aimed specifically at Texas and
only at Texas. It is clear that prior to the enactment of §81lo(e)
Texas was doing what it had the right to do — taxing property
such as that involved in the current dispute. Does the fact that
Texas was the only state obligated by its Constitution to levy
such taxes mean that it should be deprived of such a basic right
by a Congress comprised in large part of representatives from
49 other states with nothing at stake?
Even in Garcia this Court held “If there are to be limits on
the Federal Government’s power to interfere with state functions
— as undoubtedly there are... .” Garcia, 469 U.S. at 547.
That court also held as follows:
iia
23
The States unquestionably do “retain a significant
measure of sovereign authority.” EEOC v. Wyoming,
460 US, at 269, 75 L.Ed. 2d 18, 103 S.Ct. 1054
(Powell, J., dissenting). They do so, however, only
to the extent that the Constitution has not divested
them of their original powers and transferred those
powers to the Federal Government.”
Id. at 549.
Since it is indisputable that the power of the States to levy
general taxes on their people and property was an original power
of the States, one must look to the extent that the Constitution
has “transferred those powers to the Federal Government.”
Garcia, 469 U.S. at 549.
In United States v. Lopez, 514 U.S. 549, 558 (1995), this |
Court once again reviewed the powers transferred to Congress |
with respect to the regulation of commerce. In that case the
Court held that there were “three broad categories of activity
that Congress may regulate under its commerce power.”
... First, Congress may regulate the use of the
channels of interstate commerce . . . Second,
Congress is empowered to regulate and protect
the instrumentalities of interstate commerce or
persons or things in interstate commerce, even
though the threat may come only from intrastate
activities ... Finally, Congress’ commerce
i authority includes the power to regulate those
activities having a substantial relation to
interst>’. commerce, Jones & Laughlin Steel, 301
U.S., at 37, 57 S.Ct., at 624, ie., those activities
that substantially affect interstate commerce.
Id. at 558-59.
24
In Lopez the Federal Government, in attempting to defend
the statute involved, argued that (like the taxes involved here)
the costs of violent crime are substantial and that they have an
impact on the national economy and that it was therefore within
Congress’ authority under the Commerce Clause to regulate
the possession of firearms within a certain distance of public
schools. In response this Court held as follows:
We pause to consider the implications of the
Government’s arguments. The Government
admits, under its “costs of crime” reasoning, that
Congress could regulate not only all violent crime,
but all activities that might lead to violent crime,
regardless of how tenuously they relate to
interstate commerce. See Tr. of Oral Arg. 8-9.
Similarly, under the Government’s “national
productivity” reasoning, Congress could regulate
any activity that it found was related to the economic
productivity of individual citizens: family law
(including marriage, divorce, and child custody), for
example. Under the theories that the Government
presents in support of §922(q), it is difficult to
perceive any limitation on federal power, even in
areas such as criminal law enforcement or education
where States historically have been sovereign. Thus,
if we were to accept the Government’s arguments,
we are hard-pressed to posit any activity by any
individual that Congress is without power to
regulate. ...
Id. at 564.
In striking down that statute in Lopez this Court was
obviously retreating from reliance upon the purely structural
protections offered by this Court in Garcia in determining how
ee
25
far Congressional authority under the Commerce Clause
extended. Instead of a test that basically held that Congress
could do whatever it was big enough to do, this Court
recognized that there must be limits.
To uphold the Government’s contentions here,
we would have to pile inference upon inference in a
manner that would bid fair to convert congressional
| authority under the Commerce Clause to a general
police power of the sort retained by the States.
Admittedly, some of our prior cases have taken long
steps down that road, giving great deference to
congressional action. See supra, at 1629. The broad
language in these opinions has suggested the
possibility of additional expansion, but we decline
here to proceed any further. To do so would require
us to conclude that the Constitution’s
enumeration of powers does not presuppose
something not enumerated, cf. Gibbons v. Ogden,
supra, at 195, and that there never will be a
distinction between what is truly national and
what is truly local, cf. Jones & Laughlin Steel,
supra, at 30, 57 S.Ct., at 621. This we are
unwilling to do.
Id. at 567-68.
Another recent opinion, New York v. United States, 505
U.S. 144 (1992), serves to define the limits of congressional
power under the Commerce Clause.
As an initial matter, Congress may not simply
“commandee[r] the legislative processes of the States
by directly compelling them to enact and enforce a
federal regulatory program.” Hodel v. Virginia
ica
26
Surface Mining & Reclamation Assn., Inc., 452 U.S.
264, 288, 69 L.Ed.2d 1, 101 S.Ct. 2352 (1981)...
Id. at 161.
. .. While Congress has substantial powers to govern
the Nation directly, including in areas of intimate
concern to the States, the Constitution has never been
understood to confer upon Congress the ability to
require the States to govern according to Congress’
instructions ... The Constitution, in all its provisions,
looks to an indestructible Union, composed of
indestructible States...
Id. at 162.
In providing for a stronger central
government, therefore, the Framers explicitly
chose a Constitution that confers upon Congress
the power to regulate individuals, not States...
The allocation of power contained in the
Commerce Clause, for example, authorizes
Congress to regulate interstate commerce directly;
it does not authorize Congress to regulate state
governments’ regulation of interstate commerce.
Id. at 166.
In the most recent case addressing the issue of State
sovereignty this Court has once again made it clear that there
are limits beyond which the Federal Government may not go,
Printz, Sheriff/Coroner, Ravalli County, Mont. v. United States,
_ U.S. _, 117 S. Ct. 2365 (1997). In that case the court
struck down portions of the “Brady Act” which required local
law enforcement officials to perform background checks on
handgun purchasers. In doing so the Court held as follows:
27
It is incontestible that the Constitution
established a system of “dual sovereignty.” (Cites
omitted) Although the States surrendered many of
their powers to the new Federal Government, they
retained “a residuary and inviolable sovereignty,”
The Federalist No. 39, at 245 (J. Madison).
Residual state sovereignty was also implicit, of
course, in the Constitution’s conferral upon Congress
of not all governmental powers, but only discrete,
enumerated ones, Art. I, Section(s) 8, which
implication was rendered express by the Tenth
Amendment’s assertion that “[t]he powers not
delegated to the United States by the Constitution,
nor prohibited by it to the States, are reserved to the
States respectively, or to the people.”
The Framers’ experience under the Articles of
Confederation had persuaded them that using the
States as the instruments of federal governance was
both ineffectual and provocative of federal-state
conflict . . . (Cites omitted)
Id, at 2376-77.
i i
Preservation of the States as independent and
autonomous political entities is arguably less
undermined by requiring them to make policy in
; certain fields than (as Judge Sneed aptly described
: it over two decades ago) by “reduc[ing] [them] to
puppets of a ventriloquist Congress,” Brown v. EPA,
521 F.2d, at 839. It is an essential attribute of the
States’ retained sovereignty that they remain
independent and autonomous within their proper
sphere of authority. See Texas v. White, 7 Wall, at
28
725. It is no more compatible with this independence
and autonomy that their officers be “dragooned” (as
Judge Fernandez put it in his dissent below, 66 F.3d,
at 1035) into administering federal law, than it would
be compatible with the independence and autonomy
of the United States that its officers be impressed
into service for the execution of state laws.
Id. at 2381.
Isn’t Texas in fact being “dragooned” by the act challenged
in this cause? It is obligated to provide governmental services
to the Industries but prohibited from recovering compensation
for those services from those Industries. This requirement clearly
commandeers the State and local governments into the active
but uncompensated support of the federal regulatory scheme
incorporated into the “Foreign Trade Zone Act.” This certainly
appears to be the exact sort of regulation of the States rather
than of individuals that the New York opinion condemned.
Furthermore, depriving a State of the revenues it is entitled to
as part of the federal regulatory scheme is just as damaging to
the State, if not more so, than commandeering its revenues and
resources to further that scheme. This is exa sy the type of
action so recently condemned in Printz by this Court.
ne i co Tea ase chal ana ET ld SOT Sg
29
CONCLUSION
This case presents a question of exceptional importance —
whether Congress has the power, regardless of how limited its
current application may be, to place restrictions on State taxation
by statute which are not imposed on State taxation by the words
of the United States Constitution itself. If the authority of
Congress under the Commerce Clause is so broad as to allow it
to dictate to the states the method and mode of taxation they
may or may not employ, then the system of dual sovereignty
envisioned by the Framers of the Constitution exists only at the
pleasure of Congress.
Accordingly, the School Districts respectfully request that
their Petition for Writ of Certiorari be granted.
Respectfully submitted,
RUSSELL R. GRAHAM
CALAME LINEBARGER
GRAHAM & PENA, L.L.P.
Attorneys for Petitioners
P.O. Box 17428
Austin, Texas 78760
(512) 447-6675
la
APPENDIX A — OPINION OF THE UNITED STATES
COURT OF APPEALS FOR THE FIFTH CIRCUIT
DATED JANUARY 22, 1998
DEER PARK INDEPENDENT SCHOOL DISTRICT;
Galena Park Independent School District; Sheldon
Independent School District, Plaintiffs-A ppellants,
Vv.
HARRIS COUNTY APPRAISAL DISTRICT; et =
Defendants,
Harris County Appraisal District; Shell Chemical
Corporation; Shell Oil Company; Marubeni Tubulars
Incorporated; Mitsui Tubular Products Incorporated;
Lyondell-Citgo Refining Company Limited; Crown Central
Petroleum Corporation; Vinson Supply Company; Siderca
Corporation, Defendants-Appellees.
GALENA PARK INDEPENDENT SCHOOL DISTRICT,
Plaintiff-Appellant,
v.
Harris County Appraisal District; et al., Defendants,
HARRIS COUNTY APPRAISAL DISTRICT; Marubeni
Tubulars Incorporated; Mitsui Tubular Products
Incorporated; Lyondell-Citgo Refining Company Limited;
Crown Central Petroleum, Defendants-Appellees.
SHELDON INDEPENDENT SCHOOL DISTRICT,
Plaintiff-Appellant,
v.
2a
Appendix A
HARRIS COUNTY APPRAISAL DISTRICT (Central); et al.,
Defendants,
Harris County Appraisal District (Central); Vinson Supply
Company; Siderca Corporation, Defendants-Appellees.
No. 97-20508
Summary Calendar.
United States Court of Appeals,
Fifth Circuit.
Jan. 22, 1998.
* * *
Appeal from the United States District Court for the
Southern District of Texas.
Before REYNALDO G. GARZA, SMITH and
BENAVIDES, Circuit Judges.
PER CURIAM:
This case comes from a final summary declaratory judgment
of the United States District Court for the Southern District of
Texas, Judge Lynn Hughes, presiding. This case was decided
on cross-motions for summary judgment. The district court
granted summary judgment in favor of the Defendants-
Appellees, the Harris County Appraisal District, et al. (the
“Companies”). The Plaintiffs-Appellants, the Deer Park
Independent School District, et al. (the “School Districts”) timely
appealed, and the matter now lies before this panel.
“=e
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6 hea, BM OR ae a. a
Sn ERs GRO GEG BT ede G. GEER Beles 85s eh
oe
rE Ast a >
3a
Appendix A
Background
The School Districts’ filed suit in the district court on
September 30, 1996, seeking a declaratory judgment stating
that 19 U.S.C. § 8lo(e) is unconstitutional. This statute grants
exemptions from state and local ad valorem taxes on property
to businesses located inside of Foreign Trade Zones (“FTZs”).
Specifically, the School Districts alleged that these exemptions
unconstitutionally deprived them of tax revenue.
The Companies’ are various corporations with operations
in the FTZs. Both sides have stipulated that the property
involved in this dispute is either (i) tangible personal property
imported from outside the United States and held in an activated
FTZ for the purpose of storage, sale, exhibition, repackaging,
assembly, distribution, sorting, grading, cleaning, mixing,
display, manufacturing, or processing, or (ii) tangible personal
property produced in the United States and held in an activated
FTZ for exportation, either in the above form or as altered by
the above processes. But for the operation of § 810(e), all or a
significant part of the property would be taxable by the School
Districts.
1. The School Districts are: The Deer Park Independent School
District, the Galena Park Independent School District, and the
Sheldon Independent School District. The Companies asked that the
appeal of the Sheldon Independent Schoo! District be dismissed for
want of jurisdiction. We do not pass on that point at this time, because
it is Moot, given the outcome of this case.
2. The Companies are: the Lyondell-Citgo Refining Company,
Ltd., the Crown Central Petroleum Corporation, the Shell Oil
Company, the Shell Chemical Corporation, the Siderca Corporation,
the Vinson Supply Company, Mitsui Tubular Products, Inc., and
Marubeni Tubulars, Inc. The Harris County Appraisal District was
included as a defendant in this suit because of its role as tax assessor.
4a
Appendix A
Several related cases were consolidated into this one, and
the parties stipulated to the relevant facts. Both sides submitted
motions for summary judgment, and on May 16, 1997, the
district court made its ruling. The district court granted summary
judgment in favor of the Companies, and denied the School
Districts’ motion for summary judgment.
The School Districts timely appealed, claiming that the
district court erred in granting summary judgment in favor of
the Companies. They argue that § 81lo(e) is an unconstitutional
exercise of Congress’ power under the Commerce Clause, and
violates the Tenth Amendment and the Guarantee Clause of the
Constitution. Upon review of the pleadings, briefs, and record
on file, we find no reversible error and affirm the decision of
the district court.
Standard of Review
Summary judgment is appropriate if the record discloses
that “there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law.”
Fed.R.Civ.Proc. 56(c); Sims v. Monumental General Ins. Co.,
960 F.2d 478, 479 (Sth Cir.1992). The pleadings, depositions,
admissions, and answers to interrogatories, together with
affidavits, must demonstrate that no genuine issue of material
fact remains. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986). We review the facts drawing all
inferences in favor of the party opposing the motion. Reid v.
State Farm Mutual Auio. Ins. Co., 784 F.2d 577, 578 (5th
Cir. 1986).
In addition to the aforementioned general procedural
matters, we review challenges to the validity of a Congressional
Sa
Appendix A
exercise of power under the Commerce Clause using the
following standards. The burden for the challenger in cases such
as this is high. This Court must determine only (1) whether a
rational basis exists for finding that the regulated activity affects
interstate commerce, and (2) whether the means chosen by
Congress were “reasonably adapted to the end permitted by the
Constitution.” Hodel v. Virginia Surface Mining & Reclamation
Ass'n, 452 U.S. 264, 276, 101 S.Ct. 2352, 2360, 69 L.Ed.2d
1 (1981). The Commerce Clause power is complete in itself
and is only limited by those limits prescribed in the Constitution.
Id.
Congress’ regulatory power under the Commerce Clause
may be used to regulate the use of the channels of interstate
commerce, Congress may protect and regulate the
instrumentalities of interstate commerce (including people or
things in interstate commerce), and Congress may regulate those
activities having a substantial relation to interstate commerce.
U.S. v. Lopez, 514 U.S. 549, 556, 115 S.Ct. 1624, 1629, 131
L.Ed.2d 626 (1995). While the states do retain broad powers
under the Constitution, they “only do so to the extent that the
Constitution has not divested them of their original powers and
transferred these powers to the Federal Government.” Garcia v.
San Antonio Metropolitan Transit Authority, 469 U.S. 528,
549-550, 105 S.Ct. 1005, 1016-17, 83 L.Ed.2d 1016 (1985).
The right to regulate foreign and interstate commerce is one of
powers expressly granted to the federal government by Art. I,
§ 8, cl. 3 of the Constitution.
Analysis
While all the claims are related, the primary contention of
the School Districts is that Congress did not have power under
6a
Appendix A
the Commerce Clause to enact and enforce § 8lo(e), and as a
result, the statute should be declared unconstitutional. We have
already stated the broad extent of Congress’ powers under the
Commerce Clause, as well as the fact that the standard of review
is whether there was a rational basis for Congress’ actions and
whether the means chosen were reasonably adapted to the ends.
Hodell 452 U.S. at 276, 101 S.Ct. at 2360.
Congress’ actions in this case were rational and pass muster.
First of all, there can be no doubt that the activities in the FTZs
constitute foreign, and by extension, interstate commerce, so
they are within the purview of the Congress. Next, it is
completely rational to believe that the imposition of ad valorem
taxes on the property in the FTZs would affect interstate and
foreign commerce, and that forbidding such taxes would provide
uniform treatment of FTZs throughout the country. Such
uniformity in foreign commerce is a well-recognized federal
interest. Japan Line, Ld.. v. County of Los Angeles, 441 U.S.
434, 448-449, 99 S.Ct. 1813, 1821-1822, 60 L.Ed.2d 336
(1979). Further, in enacting § 8lo(e), Congress explicitly found
that the aims of the original act of Congress which created FTZs
were being frustrated by non-uniform local and state ad valorem
taxes. Congress believed, rationally, that this negatively affected
interstate and foreign commerce, and fashioned a reasonable
response.
Also this law is of importance to Texas because the Texas
Constitution specifically lists the permissible exemptions from
ad valorem taxation, and property within FTZs is not on the
list. For this reason, Texas Senators Lloyd Bentsen and John
Tower, in conjunction with Texas Congressmen Jim Wright and
Jack Brooks, sponsored this law. This law was passed to help
Texas, by encouraging industry, and is not a type of oppression
or “dragooning” of the state, as the School Districts contend.
eT ee
WAS Sinha Mallee «hats ie ITH ea
Ta
Appendix A
Further, the plenary power granted to Congress under the
Commerce Clause includes the power to protect interstate and
foreign commerce from taxation. State Bd. of Insurance v. Todd
Shipyards Corp., 370 U.S. 451, 456, 82 S.Ct. 1380, 1383,
8 L.Ed.2d 620 (1962). This power to grant or withhold
protection from regulation or taxation “is so complete that its
ideas of policy should prevail.” Jd. Congress’ actions were well
within its power under the Commerce Clause, and pass muster
under the standards listed.
The School Districts also claim that § 81o(e) violates the
Tenth Amendment. As stated previously, the Tenth Amendment's
reservation to the states of power not conferred on the federal
government in no way inhibits the activities of the federal
government in situations in which a power has been so
conferred. See Garcia, 469 U.S. at 549-550, 105 S.Ct. at
1016-1017. The explicit granting of power to the Congress, in
regard to its right to regulate foreign and interstate commerce,
in conjunction with the Supremacy Clause, clearly gives
Congress power over this situation. See e.g., Seniors Civil
Liberties Ass'n, v. Kemp, 965 F.2d 1030, 1034 (11th Cir.1992).
Further, historically, Congressional prohibitions on state
taxation have been upheld over Tenth Amendment challenges.
For example, even when National League of Cities v. Usery,
426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976) was the
lead Supreme Court case on these matters,’ the Supreme Court
upheld a federal law which preempted a state tax that
discriminated against the sale of electricity outside the state.
Arizona Public Service Co. v. Snead 441 U.S. 141, 99 S.Ct.
1629, 60 L.Ed.2d 106 (1979). The Supreme Court rejected the
3. National League of Cities was overruled by Garcia, 469 U.S.
at 557, 105 S.Ct. at 1020.
8a
Appendix A
argument that Congress lacked authority under the Commerce
Clause to regulate state taxation, stating that Congress had broad
power in this sphere, had a rational basis for finding that the
tax interfered with interstate commerce, and the means selected
were reasonable to achieve Congress’ ends. /d. at 150, 99 S.Ct.
at 1634. More recent cases have given support to this
proposition as well. For example, in New Jersey v. Consolidated
Railroad Corp., 690 F.Supp. 1061 (Reg’! Rail Reorg.Ct. 1988),
the court held that Congress could exempt Conrail (a privately
owned railroad) from taxation, rejecting the state’s Tenth
Amendment claim.
Congress acted well within its powers under the Commerce
Clause in this case, its belief that this affected interstate commerce
was rational, and the means it used to achieve its goals were
reasonable and appropriate. Therefore, the School Districts’
Tenth Amendment claims fail.
As a final argument on this point, the School Districts claim
that cases such as New York v. United States, 505 U.S. 144,
112 S.Ct. 2408, 120 L.Ed.2d 120 (1992) and Printz, et al v.
United States, — U.S. —, 117 S.Ct. 2365, 138 L.Ed.2d 914
(1997), somehow support their Tenth Amendment claim. This
assertion is incorrect. Those cases involve an act of Congress
which essentially hijacked the administrative apparatus of state
and local government to help achieve Congress’ ends. This case
is not an example of such a Congressional overreach, so this
argument fails as well.
The School Districts also claim that § 8lo(e) violates the
Guarantee Clause of the Constitution in that it deprives the states
of a republican form of government. This claim is not only
incorrect, it is absurd. First of all, the Supreme Court has held
9a
Appendix A
that challenges to Congressional action under the Guarantee
Clause are not justiciable. See Baker v. Cars, 369 U.S. 186,
224, 82 S.Ct. 691, 713, 7 L.Ed.2d 663 (1962); O’Hair v. White,
675 F.2d 680, 684 n. 5 (Sth Cir. 1982). Also, the School Districts
do not explain the merits of their claim, silence which warrants
rejection. Further, at least as of today, Texas is governed by a
freely elected legislature and executive, not a monarchy, military
dictatorship, or any other type of government which would
offend the Guarantee Clause of the Constitution. Unless and
until that fact changes, this claim is an absolute dead letter.
Conclusion
Based on the foregoing, we find no reversible error in the
decision of the district court, which granted summary judgment
in favor of the Defendants-Appellees, and held that § 81o(e) is
constitutional. Therefore, we AFFIRM the decision of the district
court.
AFFIRMED.
10a
APPENDIX B — OPINION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF TEXAS ENTERED MAY 16, 1997
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CIVIL ACTION H-96-3256
DEER PARK, GALENA PARK and SHELDON
INDEPENDENT SCHOOL DISTRICTS,
Plaintiffs,
versus
HARRIS COUNTY APPRAISAL DISTRICT, SHELL
CHEMICAL CORPORATION, SHELL OIL COMPANY,
MARUBENI TUBULARS, INC., MITSUI TUBULAR
PRODUCTS, INC., LYONDELL-CITGO REFINING CO.,
LTD., CROWN CENTRAL PETROLEUM CORP., VINSON
SUPPLY CO., SIDERCA CORPORATION, and MARUBENI
AMERICA CORPORATION,
Defendants.
Opinion on Judgment
1. Introduction
Three school districts located near the port of Houston sued
companies in foreign trade zones for property taxes. A federal
statute allows companies in the zones an exemption from state
and local ad valorem taxes on personal property. The school
districts claim that the law unconstitutionally intrudes on their
Pear be ARE EG oa SPD %
lla
Appendix B
authority as components of the federal system of divided power
and unconstitutionally extends the national authority over
foreign trade.
The school districts cannot collect taxes from these
companies because the exemption statute’s purpose and effect
is directly and substantially related to an express power that the
Constitution confides to the national government. A
constitutional statute supersedes contrary provisions of the Texas
Constitution and laws.
2. Foreign Trade Zone.
A foreign trade zone is an area that is physically within the
United States, but it is treated as if it were outside of the United
States territory for import duty purposes. Since 1934, federal
law has permitted importation of goods into zones without
payment of customs duties until they are transferred from the
zone into the general domestic economy. If the products are
shipped to another country, then no American duty is charged.
See The Foreign Trade Zones Act of 1934, 19 U.S.C. §§ 81a-
81u (1996). The goods — usually raw materials or parts — can
then be assembled, stored, and processed by the company in
the zone. The purpose of a zone is the economic benefit to the
domestic economy of American companies’ using local workers,
supplies, and other resources more frequently than would have
been the case if the companies had to pay United States duties
before working with the goods. A company that buys equipment
to process these tax-exempt goods will owe the school district
taxes on the machines. See A.T. Cross Co. v. Sunil Trading
Corp., 467 F. Supp. 47, 50 (S.D.N.Y. 1979).
12a
Appendix B
3. The 1983 Expansion.
Ironically, the principal congressional sponsors of an
expansion of the law in 1983 were Texas Senators John Tower
and Lloyd Bentsen and Texas Congressmen Jim Wright and
Jack Brooks. Their bill extended the exemption from customs
duties to include an exemption from state and local ad valorem
taxes. The statutory exemption says:
Tangible personal property imported from outside
the United States and held in a zone for the purpose
of storage, ... assembly, ... or processing, and
tangible personal property produced in the United
States and held in a zone for exportation ... shall
be exempt from State and local ad valorem taxation.
19 U.S.C. § 8lo(e).
The bill was introduced to cure a “unique problem in the
State of Texas in which the local taxing jurisdiction does not
have the authority to exempt tangible personal property in a
[foreign trading zone] from taxation due to the State
constitution.” H.R. Rep. No. 267, 96th Cong., Ist Sess 35-36
(1983). Texas’s constitution specifies articles that are exempt
from tax, and no other exemptions may be allowed by local
governments. The legislators “expected that Federal law would
preempt State law in this case.” Jd.
4. Texas & Property Taxes -
The Texas Constitution requires that all property be taxed
unless the property has been allowed an exemption in the
constitution itself. TEX CONST. art. VII, §§ 1, 2, and 3. Until
Poe AEE RTM ee ee TR ay
13a
Appendix B
recently (in historical terms) Texas was dependent on ad valorem
taxation of property. These taxes were administered through
independently elected county officers who appraised the
property, assessed the taxes, and collected the taxes for the
county and state. The state had no separate appraising or
collecting officers. Under these circumstances Texas needed to
keep locals from allowing exemptions that would have the effect
of shifting part of that county’s state tax burden to other counties.
Texas stopped using ad valorem taxes for direct state
revenue in 1968, leaving that source to local governments. This
shift was possible because in 1961 the state had adopted a state-
wide sales tax, among other taxes. See TEX CONST. art. VIII,
§ 1-e(1) (abolition of ad valorem taxes); see generally Mark G.
Yudof, The Property Tax in Texas Under State and Federal
Law, 51 Tex. L. Rev. 885 (1973).
The administrative cost and abuses of each city and school
district having its own appraisal process in addition to the
county's system led the state to compel all taxing authorities
within a county to use a single appraisal authority. The Harris
County Appraisal District serves as the sole source of property
valuations for tax purposes. Because it did not list a taxable
value for these companies’ stocks of goods, the school districts
sued to compel it to appraise the property held by these
companies so that they may assess taxes based on that value.
The appraisal district has admitted that it will obey the law and
that it has no direct interest in the outcome of the case, with the
companies being the real parties in interest.
5. Commerce Clause, Zones & the Constitution.
The districts say that the exemption of goods present within
the district — even if they are exempt from federal taxes — are
14a
Appendix B
indistinguishable from other goods in the districts. The districts’
position is that: The use of the commerce power to reach into a
unit of local government to exempt particular goods based on
their past or future locations (a) extends the authority of the
government beyond the constitutional purpose of the commerce
clause and (b) impedes the constitutional function of regional
and local governments as a counter force to the national
government.
A government act does not violate the constitution, if:
¢ By its terms or impact, the act has an objective that relates
rationally to a governmental power entrusted to that
government;
* The act employs a permissible means;
¢ The actual accomplishment of the objective and
significance of the objective justify the nature and extent
of the resulting inhibition of a component of liberty;
¢ The act has been adopted and applied with procedural
regularity; and
¢ The act distinguishes between affected and non-affected
persons defensibly because the criterion between them
is logically connected to the objective.
As Chief Justice John Marshall said, “Let the end be
legitimate, [then] all means that are appropriate . . . to that end,
which are not prohibited [by] the letter and spirit of the
Constitution, are constitutional.” McCulloch v. Maryland, 4
Wheat. 316, 421 (1819).
15a
Appendix B
A. Entrustment.
The Constitution confides the subject of foreign
commerce to the national government. Congress is allocated
authority over commerce “among nations” and a monopoly
on import duties. U.S. CONST. art. I, § 8. Further, “No
state shall, without the Consent of Congress, lay any
Imposts or Duties on Imports or Exports . . .” U.S. CONST.
art. I, § 10. Further, “The Congress shall have the Power
. .. To regulate Commerce with foreign Nations, and among
the several States .. “” U.S. CONST. art. 1, § 8. This power
is “complete in itself, may be exercised to its utmost extent,
and acknowledges no limitations, other than are prescribed
in the constitution.” Gibbons v. Ogden, 22 U.S. (9 Wheat.)
1. 196 (1824).
B. Permissible Means.
The Constitution restricts congress’s power over taxes
several ways, like tax bills must originate in the house and
import duties must be uniform nationally, but no provision
expressly — comparable, say, to the ban on “takings” —
disallows the technique of tax exemption from the tools
congress may use to effect its policy decisions.
C. Rational Relation.
To comply with its obligations under the Constitution,
the national government must select a means that is
plausibly related to the end that the Constitution has said it
may address. It is not obliged to select a means that is the
best available, single-purposed, or proven. Even the search
for a plausible relation is not an evaluation among the levels
l6a
Appendix B
of effectiveness; it is, rather, the search for a violation of
constitutional limits on the scope of the national government
by use of a power for non-national purposes. Irrationality
suggests deceit, not insanity.
The actual economic effects locally or nationally are
probably unknowable. Deer Park loses the revenue from
the zone property, but it gets increased revenue from rise
in demand for houses and other business properties, if it
works. See generally Robert G. Lynch, Do State & Local
Tax Incentives Work?, ECON. POL’T. INSTITUTE (1996);
Joseph P. Phillips & Ernest P. Gross, The Effect of State
and Local Taxes on Economic Development: A Meta-
Analysis, 62 SOUTH. ECON. J. 320 (1995). Although the
goods are tax exempt, the new equipment a company
acquires to process the goods is added to Deer Park’s source
of revenues. At least the national government defers or
forgoes its taxes along with depriving the districts; this
uniformity suggests an absence of malice. “Foreign trade
zones are valued because they actually promote domestic
industry and create jobs . . . [T]axation of goods in foreign
trade zones could arguably harm domestic industry .. .”
R. J. Reynolds Tobacco Co. v. Durham County, 479 U.S.
130, 153 n.22 (1986).
D. Taxes.
Whatever the particular merit of the plan as economic
stimulation, exemption from local tax has long been a tool
of building a national economy. The Constitution itself
bans local tax barriers to interstate and foreign trade in the
form of customs duties. See U.S. CONST. art. I, § 10.
17a
Appendix B
In the absence of a statute, goods in foreign commerce
although present in the territory of the United States are
free of local taxes. See Xerox Corp. v. County of Harris,
Texas 459 U.S. 145 (1982); Hooven & Allison Co. v. Evatt,
324 U.S. 652, 679 (1945).
E. Liberty Component: Federalism.
This federal statute could adversely affect individual
liberty through its shifting the constitutional balance of
power between the aggregate state and local governments
and the national government. In American political
discourse, the arrangement of governmental power among
different levels and regions is called federalism. A significant
shift in the relation between the levels could disrupt the
constitutional machinery, violating the implicit principle
of balance through federalism.
Excluding sources of revenue could be done so that
the local sub-unit of the state was impotent. With it. local
administrative units crippled, the state could be eviscerated.
While this is true and may occasionally seem likely, this
particular statute will not cause the collapse, so it is
hypothetical. Excluding the property immunized by the
foreign trade zones, Deer Park had a valuation of $541
million of inventories alone in 1996, generating almost $8
million of tax revenue; Galena Park had a valuation of
inventories of $555 million in 1996, generating even more
tax revenue. See Taking Stock of Inventory Taxes, FISCAL
NOTES (Texas Comptroller of Public Accounts), March
1997, at 6.
18a
Appendix B
F. Liberty Component: Republican Guaranty.
The school districts have urged that the national
government has breached its duty to the state through the
districts because the Constitution says the “United States
shall guarantee to every State in this Union a Republican
Form of Government ...” U.S. CONST. art. IV, § 4.
Ordinarily, a guaranty would be protection from the acts
of some third-party and not from the guarantor itself. The
text could be understood to mean that the national
government guarantees that it will not destroy the states’
republican governments by its own excesses, but the
constitutional role of the states is balance through federalism,
which does not require republican states. A monarchical
Nebraska could counter national power.
If a state’s government did not observe the limits on
its power that republicanism requires, its imposition on its
people would require a response by the national government.
The constitutional guaranty says that the national
government will assist the people of a state in maintaining
their right to a state administration whose power is derived
“from the consent of the governed.” Rather than a people
petitioning Washington to restore the state’s republican
institutions, we have a state-created government objecting
to a reduction of taxes on its people.
The companies argue, with much legal “authority” on
their side, that the guaranty required by the Constitution of
the United States for the benefit of the people of the states
cannot be enforced in court. The occasion to decide whether
to enforce the Constitution’s limits on the character of state
governments does not now arise, but an unenforceable limit
19a
Appendix B
is no limit, and the text of the Constitution is mostly keel
and little sail.
The school districts seek shelter from the national
omnipresence in the reservation of the power to the states
and people that the people did not actually allocate to the
national government in the Constitution. See U.S.CONST.
amend. X. Even if the reservation in the Tenth Amendment
restates the implication of the restricted grants that precede
it, our experience has shown that the categories of grant
have become infinitely expandable; the founders denied a
possible inference that there was a quantum of power
floating free for acquisition by the national government.
Since this statute fits squarely within one of the express
grants of power, the reservation’s express vesting of residual
authority in the people is not implicated.
The form of government may seem like a lawyer’s
hyper-technicality, but our Constitution restricts power by
allocating it to specific parts of the apparatus and by sheer
prohibitions. Other than the implicit policy of preserving
individual liberty through limited government, the
Constitution is about methods and process rather than
policies and ends. The structure of the machinery is the
constitution; what it constitutes is a structure. It constitutes
no policy about postal deficits or tax level. The preservation
of the states as a counter-weight to the national government
is essential to preserving the Constitution.
G. Affected Persons.
The districts say that they are adversely affected
because they are forced to forgo revenue to support national
20a
Appendix B
goals that other districts collect. They say that there is no
defensible way to distinguish between school districts hurt
by this act and those that are not.
The distinction among districts is rationally purposeful
because the act exempts a particular class of goods defined
by geographical areas that are not school-district specific.
Some of a district’s area may be in a zone, some may not,
all may be, or all may not; the area is chosen for its likelihood
of having the ability to attract foreign trade. If a foreign
trade zone were created in a school district that had no
foreign commerce, then none of the goods present at tax
time would qualify for the exemption.
The relation between the zone and district is
adventitious, but the relation between the zone and foreign
trade is direct.
6. Texas Tax Code.
Indeed, the right of Congress to preempt state taxation,
whether under the Commerce Clause or under another
constitutional grant of authority, is recognized by the Texas
Tax Code itself. The code confirms that “[p]roperty exempt
from ad valorem taxation by federal law is exempt from
taxation,” recognizing the federal government’s power to create
exemptions. TEX. TAX CODE ANN. § 11.12 (1992). The Texas
legislature itself recognized Texas’s public interest in
encouraging uniform application of law, as well as foreign and
other trade with Texas citizens, by expressly acknowledging to
federal statutory exemptions from local ad valorem taxation.
Texas adopted a statute allowing local districts at their
option to exempt goods being processed for export. This statute
2la
Appendix B
may be broader than the current federal exemption, but whether
it is wholly moot or still useful is irrelevant to the dominance
of the federal policy. See TEX. TAX COD ANN. § 11.251
(1992) (the option for local taxing jurisdictions exempts goods
warehoused in Texas for less than 175 days that then leave the
state).
7. Conclusion.
Under its authority over international commerce, the
national government created foreign trade zones for goods to
be exempt from local ad valorem taxes while processed in the
United States; that exercise of constitutional authority complied
with the limits of that power itself and the limit on its intrusion
on state governments’ partial autonomy. When the national
government constitutionally exercises its authority, the national
policy supersedes state and local rules that conflict. See U.S.
CONST. art. VI, § 2 (Supremacy Clause). In the context of
state taxation, “the power of congress to grant protection to
interstate commerce against state regulation or taxation is so
complete that its ideas of policy should prevail.” State Board of
Insurance v. Todd Shipyards Corp., 370 U.S. 451, 456 (1962)
(citations omitted).
The Harris County Appraisal District has constitutionally
applied the federal exemption to the Deer Park, Galena Park,
and Sheldon Independent School Districts. The companies do
not owe ad valorem taxes on their unimported goods.
Singed May 15, 1997, at Houston, Texas.
s/ Lynn N. Hughes
Lynn N. Hughes
United States District Judge
22a
APPENDIX C — STIPULATION OF FACTS
DATED JANUARY 17, 1997
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
C.A. NO. H-96-3256
(CONSOLIDATED WITH
H-96-2786 AND
WITH H-96-2959)
DEER PARK INDEPENDENT SCHOOL DISTRICT,
GALENA PARK INDEPENDENT SCHOOL DISTRICT and
SHELDON INDEPENDENT SCHOOL DISTRICT,
Plaintiffs
VS.
HARRIS COUNTY APPRAISAL DISTRICT, SHELL
CHEMICAL CORP., SHELL OIL CO., MARUBENI
TUBULARS, INC., MITSUI TUBULAR PRODUCTS, INC.,
LYONDELL-CITGO REFINING CO., LTD., CROWN
CENTRAL PETROLEUM CORP., VINSON SUPPLY CO.,
and SIDERCA CORP.
Defendants
STIPULATION OF FACTS
All counsel have consulted and consented in the matter
and present the following stipulation of facts as to which the
parties agree there are no genuine issues to be tried:
ee
23a
Appendix C
1. Property taxes levied by school districts on property
located within their respective boundaries comprise a significant
portion of the total expenditure on public education in Texas.
2. The Plaintiffs are independent school districts existing
by virtue of TEX. CONST., art. 7 § 1 and TEX. ED. CODE.
ANN., Title 2 and are political subdivisions of the State of
Texas.
3. The information contained in the “Data Sheets” prepared
at the Court’s direction by both Plaintiffs and Defendants is
incorporated into this Stipulation of Facts.
4. The facts set forth in paragraphs 19-21, 24-33 and 37-42
of Plaintiffs’ First Amended Complaint for Declaratory
Judgment with respect to the identification and valuation of the
properties exempted are correct. The applicable tax rates for the
relevant tax years and taxing jurisdictions are as follows:
The tax rates per $100.00 of value for Deer Park
Independent School District for 1995 and 1996 are $1.53 and
$1.53 respectively. The tax rates per $100.00 of value for Galena
Park Independent School District for 1994, 1995 and 1996 are
$1.5868, $1.5868 and $1.6168, respectively. The tax rate per
$100.00 of value for Sheldon Independent School District for
1996 is $1.52.
5. All of the property involved in this dispute was located
in an activated foreign trade zone on January | of each year
involved in this dispute, and all such property was either
(i) tangible personal property imported from outside the United
States and held in a zone for the purpose of storage, sale,
exhibition, repackaging, assembly, distribution, sorting, grading,
24a
Appendix C
cleaning, mixing, display, manufacturing, or processing, or (ii)
tangible personal property produced in the United States and
held in a zone for exportation, either in its original form or as
altered by any of the above processes.
6. Deer Park Independent School District filed a timely
challenge petition as required by Section 41.04, Texas Tax Code,
timely filed a notice of appeal as required by Section 42.06,
Texas Tax Code and timely filed suit with respect to the property
referenced in paragraphs 19-21 of Plaintiffs’ First Amended
Complaint for Declaratory Judgment.
7. Galena Park Independent School District filed a timely
challenge petition as required by Section 41.04, Texas Tax Code,
timely filed a notice of appeal as required by Section 42.06,
Texas Tax Code and timely filed suit with respect to the property
referenced in paragraphs 24-33 of Plaintiffs’ First Amended
Complaint for Declaratory Judgment.
8. Sheldon Independent School District did not file a timely
challenge petition as required by Section 41.04, Texas Tax Code
and did not timely file a notice of appeal as required by Section
42.06, Texas Tax Code, with respect to the property referenced
in paragraphs 37-42 of Plaintiffs’ First Amended Complaint
for Declaratory Judgment.
9. All or a significant portion of the property involved in
this dispute would be taxable by the Plaintiffs were it not for
the exemption created by the provisions of 19 U.S.C. §81lo(e).
10. The property involved in this dispute is exempt from
taxation by the Plaintiffs unless the provisions of 19 U.S.C.
§8lo(e) are unconstitutional.
Se ee ee
25a
Appendix C
Dated: January 17, 1997.
Respectfully submitted,
STRASBURGER & PRICE, L.L.P.
P.O. Box 50100
Da'las, Texas 75250
Telephone: (214) 651-4300
Facsimile: (214) 651-4330
By: s/ Andrew G. Halpern/JBC
Andrew G. Halpern
State Bar No. 08805100
ATTORNEY FOR DEFENDANTS
Crown Central Petroleum Corporation
Lyondell-Citgo Refining Company, Ltd.
and Siderca Corporation
CALAME LINEBARGER GRAHAM &
PENA, L.L.P.
P.O. Box 17428
Austin, Texas 78760
Telephone: (512) 447-6675
Facsimile: (512) 443-3494
By: s/ R.R. Graham/JBC
Russell R. Graham
State Bar No. 08274500
ATTORNEY FOR PLAINTIFFS
26a
Appendix C
OLSON & OLSON
34385 Three Allen Center
333 Clay Street
Houston, Texas 77002
Telephone: (713) 759-0696
Facsimile: (713) 759-0342
By: s/ K.E. Wall/JBC
Kenneth E. Wall
State Bar No. 20759000
ATTORNEY FOR HARRIS COUNTY
APPRAISAL DISTRICT
JULIAN C. GREEN
Attorney at Law
Willowbrook Place II
17359 State Highway 249, Suite 110
Houston, Texas 77064
Telephone: (713) 469-9645
Facsimile: (713) 894-6442
By: s/ J.C. Green/JBC
Julian C. Green
. State Bar No. 08382500
ATTORNEY FOR MARUBENI
TUBULARS, INC.
MORRIS & CAMPBELL, P.C.
600 Jefferson, Suite 1617
Houston, Texas 77002
Telephone: (713) 659-8697
Facsimile: (713) 659-3020
By: s/ J.S. Brannon/JBC
John S. Brannon
State Bar No. 02895500
ATTORNEY FOR
MITSUI TUBULAR PRODUCTS, INC.
27a
Appendix C
FULBRIGHT & JAWORSKI L.L-P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Telephone: (713) 651-5151
Facsimile: (713) 651-5246
By: s/ J.G. Taylor/JBC
J.G. Taylor Il
State Bar No. 19733500
ATTORNEY FOR SHELL CHEMICAL
CORP. AND SHELL OIL CO.
HUGHES & LUCE, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Telephone: (214) 939-5500
Facsimile: (214) 939-6100
By: s/ C.M. Ohlenforst/JBC
Cynthia M. Ohlenforst
State Bar No. 15236600
ATTORNEY FOR VINSON SUPPLY
COMPANY
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