Petition for Writ of Certiorari — ANR Pipeline Co. v. Oklahoma Board of Equalization
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Supreme Court, U.S.
/\ FILED
041 990 JUN 5 - 1995)
tia OFFICE OF THE CLERK
IN THE
Supreme Court of the Hnited States
OCTOBER TERM, 1994
ANR PIPELINE COMPANY and
COLORADO INTERSTATE GAS COMPANY,
Petitioners,
V.
THE STATE BOARD OF EQUALIZATION
and THE OKLAHOMA TAX COMMISSION,
Respondents,
PETITION FOR A WRIT OF CERTIORARI TO THE
SUPREME COURT OF THE STATE OF OKLAHOMA
PETITION FOR A WRIT OF CERTIORARI
REBECCA H. NOECKER*
KAREN L. PAULEY
VIRGINIA G. AMEND
P.O. Box 1087
COLORADO SPRINGS, CO
80944
(719) 520-4767
Counsel for Petitioners
June 5, 1995 * Counsel of Record
Balmar Legal Publishing Services, Washington, D.C., (202) 682-9800
ee
i
QUESTION PRESENTED
Whether, under the federal Equal Protection Clause, a
state’s decision to elect one method of compliance with a
federal anti-discrimination statute constitutes a rationally based
legitimate state interest sufficient to justify discriminatory tax
treatment of similarly situated taxpayers, even though the state
could elect other methods of compliance which treat similarly
situated taxpayers the same.
4 ie a so
See oii” Westie
SA a ia Sete lime
PARTIES TO THE PROCEEDING
The following parties participated in the proceedings be-
low and are petitioners: ANR Pipeline Company and Colorado
Interstate Gas Company. !
DISCLOSURE STATEMENT PURSUANT
TO RULE 29.1
The Coastal Corporation, through wholly owned interme-
diate subsidiaries, is the ultimate parent company of ANR
Pipeline Company and Colorado Interstate Gas Company, nei-
ther of which has subsidiary Corporations other than those
wholly owned.
Additionally, the following parties were in the proceedings below:
Petitioners—Williams Natural Gas Company, Williams Pipeline Company,
and Williams Telecom Group; Respondents—The State Board of Equaliza-
tion and The Oklahoma Tax Commission: and other Intervenors—E] Paso
Natural Gas Company, Transwestern Pipeline Company, Enron Oil and Gas
Marketing, Black Marlin Pipeline Company, Explorer Pipeline Company,
Aquila Gas Systems, Inc., Sun Pipeline Company, Mid-Continent Pipeline
Company, Northern Natural Gas Company, Natural Gas Pipeline Company
of America, and Western Gas Resources, Inc.
acai intitle
ree a ee
Feabitiand WEG hie
ili
TABLE OF CONTENTS
QUESTION PRESENTED .........-.-..-
PARTIES TO THE PROCEEDING ........
DISCLOSURE STATEMENT PURSUANT
TO Rape ek i PEN OU es
TABLE OF AUTHORITIES ............-
CRUE 5 ne ee ttt ee
Pi 8 ae ae ee
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED ..........-.--
PAE cinta ele Whe FP a a
A. Factual Background .............
B. Proceedings Below ......5.2'.-%.
REASONS FOR GRANTING THE PETITION . .
CREE Goa os 6 oe ee we 6 eee 0
iV
TABLE OF AUTHORITIES
Cases Page
Allegheny Pittsburgh Coal Co. v. Webster County,
SP ith SPER EEE O86 Ae incere te 5,6,9,11,14
Cumberland Coal Co. v. Board of Revision,
ee UID. Ey Ae USO oy ieiaacs «ss 10
Department of Revenue of Oregon v. ACF Indus.,
Inc., 127 L. Ed. 2d 165, 171 (1994)(citing
Western Air Lines, Inc. v. Board of
Equalization, 480 U.S. 123, 131 (1987)) ... 6,7,11
Edelman v. Jordan,
Qt tie Gt, OF (1974) woe ae 12
F.S. Royster Guano Co. v. Virginia, 253 U.S. 412,
May Cs Ss Ake ge ie Gee 9
Federal Express Corp. v. Tennessee State Bd. of
Equalization, 717 S.W.2d 873 (Tenn. 1986) . 6
Hooper v. Bernalillo County Assessor, 472 U.S.
Che, BOR 6 a eee a eS 9
In re ANR Pipeline Co., 866 P.2d 1060 (Kan.),
cert. denied, 115 S. Ct. 296 (1994) ...... 6
Jackson Water Works, Inc. v. Public Utilities
Comm’n, 793 F.2d 1090 (9th Cir.),
cert. denied, 479 U.S. 1102 (1986) ...... 12
Jimenez v. Weinberger, 417 U.S. 628, 636-38 (1974) 13
Kennecott Corp. v. Utah State Tax Comm’n,
GOS F.-26 13ST UG TSF ee es 6
Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S.
Si, SG FED a cenit eedo e ewee Ses 9
Mathews v. Lucas, 427 U.S. 495, 510 (1967)... 9
Cases Pages
Metropolitan Life Ins. Co. v. Ward,
WI TOES ee ee 9
Nordlinger v. Hahn, 120 L. Ed. 2d 1 (1992)... . 5,6,9,12
Northern Natural Gas Co. v. State Bd. of Equaliza-
tion & Assessment, 443 N.W.2d 249 (Neb.
1989), cert. denied, 493 U.S. 1078 (1990) . . 5,7,8
Rinaldi v. Yeager, 384 U.S. 305, 308 (1966)... . 13
Shapiro v. Thompson,
394 U.S. 618, 641 (1969), overruled in
part on other grounds, Edelman v. Jordan,
WADE Goa als CPE a 7,12
Sioux City Bridge Co. v. Dakota County,
NE RP Ig odo ce ge en a 7
State v. Colonial Pipeline Co., 471 So. 2d 408
CA SP ROIED in ko kk we ke es 6
Western Air Lines, Inc. v. Board of Equalization,
SAE We La ED is de ss 7
Western & Southern Life Ins. Co. v. State Bd.
of Equalization, 451 U.S. 648, 668 (1981) . . 12
Williams v. Vermont, 472 U.S. 14 (1985) ..... 9,13
Zobel v. Williams, 457 U.S. 55 eee a eS 9
vi
STATUTES
49 U.S.C. § 1513 (recodified at 49 U.S.C. § 04116
CES 6 GE hc y's a's Sa Be ek 2,3,11
ie ee BREED 0 4. 0 oe cea eka 88 2,3
ie Sas ee sii is a. «056 4.4 ok 0 1]
es I i ee a es 14
Okla. Stat. Ann. tit. 68, § 2808 (West 1992) .... 2
Okla. Stat. Ann. tit. 68, § 2864(C) (West 1992) . . 2,3
i.e CO. ORE a SE eke ee ek eel es 2,9
] No.
IN THE
Supreme Court of the United States
OCTOBER TERM, 1994
ANR PIPELINE COMPANY and
| COLORADO INTERSTATE GAS COMPANY,
Petitioners,
Vv .
| THE STATE BOARD OF EQUALIZATION
| and THE OKLAHOMA TAX COMMISSION,
| Respondents,
’
1
PETITION FOR A WRIT OF CERTIORARI TO THE
SUPREME COURT OF THE STATE OF OKLAHOMA
PETITION FOR A WRIT OF CERTIORARI
Petitioners ANR Pipeline Company and Colorado Inter-
state Gas Company hereby petition for a writ of certiorari to
review the judgment of the Supreme Court of the State of
Oklahoma in this case.
OPINION BELOW
The Supreme Court of the State of Oklahoma assumed
original jurisdiction in this case. That opinion is reported at 891
P.2d 1219 and is included in the Appendix beginning at p. A-1.
JURISDICTION
The decision of the Oklahoma Supreme Court was entered
on December 20, 1994. Rehearing was denied on March 7,
9
-
1995. App. beginning at p. B-1. The jurisdiction of this Court
is invoked pursuant to 28 U.S.C. § 1257(a).
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
The Fourteenth Amendment to the United States Constitu-
tion provides, in pertinent part:
No State shall . . . deny to any person within its
jurisdiction the equal protection of the laws.
U.S. Const. amend. XIV, § 1.
The Railroad Revitalization and Regulatory Reform Act,
49 U.S.C. § 11503 (1988), is included in the Appendix begin-
ning at p. C-1.
The Tax Equity and Fiscal Responsibility Act, 49 U.S.C.
§ 1513 (recodified at 49 U.S.C. § 40116 (1994)), is included in
the Appendix beginning at p. D -1.
The relevant section of the Oklahoma Ad Valorem Tax
Code, Okla. Stat. Ann. tit. 68, § 2864(C) (West 1992), is
included in the Appendix beginning at p. E-1 .
STATEMENT
A. Factual Background
Railroad carriers, air carriers and interstate natural gas
pipelines are all interstate common carriers which transport
goods for hire. Historically, the Oklahoma Ad Valorem Tax
Code has classified railroad carriers, air carriers and natural gas
pipelines as public service corporations and assessed all three in
the same manner. Okla. Stat. Ann. tit. 68, § 2808 (West 1992).
The Oklahoma Supreme Court recognized that all three have
been similarly situated. App. at p. A-9 . Indeed, railroad carri-
ers transport fuels, such as coal and propane, which compete
with natural gas. Yet, for tax year 1994, pipeline property was
assessed in Oklahoma at a ratio of 22.85% while railroad and
3
air carrier property was assessed at a ratio of only 12.08%. App.
at p. A-7.
Congress has passed two acts which are designed to prevent
tax discrimination against interstate common carriers. The Rail-
road Revitalization and Regulatory Reform Act, 49 U.S.C.
§ 11503 (the “4-R Act”), prevents a state from taxing interstate
railroad carriers more than that state taxes other commercial and
industrial property. The Tax Equity and Reform Act, 49 U.S.C.
§ 1513 (“TEFRA”), prevents a state from taxing interstate air
carriers more than that state taxes other commercial and indus-
trial property. The 4-R Act and TEFRA both provide that
certain discriminatory taxation acts against interstate common
carriers “unreasonably burden and discriminate against inter-
State commerce.”
In response to these two federal acts, the Oklahoma legis-
lature passed the following statute:
In determining the assessment ratio for all air carrier
property and all railroad property, the State Board
shall only consider the ratio of the aggregate assessed
value of the fair cash value of the locally assessed
commercial/industrial real property of the state.
Okla. Stat. Ann. tit. 68, § 2864(C). The Oklahoma Supreme
Court’s interpretation of this section was that it created a sepa-
rate property tax classification for railroad carriers and air
carriers, but not for pipelines. App. at p. A-9. As a result,
railroad carriers and air carriers are to be spared from burden-
some tax discrimination, but interstate pipelines are not.
B. Proceedings Below
Petitioners challenged in the Court of Tax Review their
property tax assessments by the State Board of Equalization for
tax year 1994, seeking to have their assessment ratios lowered
to that ratio applied to railroad carriers and air carriers. Petition-
ers argued that the lower assessment ratios given to railroad
——————
4
carriers and air carriers, but not given to pipelines, violated the
Equal Protection Clause of the Fourteenth Amendment to the
United States Constitution. Three public service companies
brought a similar 1994 tax challenge before the Oklahoma
Supreme Court on an Application to Assume Original Jurisdic-
tion and Petition for Writ of Prohibition and Petitioners inter-
vened. The Oklahoma Supreme Court assumed original
jurisdiction and concluded that in response to the two federal
acts, the Oklahoma legislature had created a separate subclass
for railroad carriers and air carriers within the public service
corporation tax classification. App. at. p. A-9. The state was
permitted to give the lower assessment rate to railroad carriers
and air carriers which was not given to other similarly situated
public service corporations such as natural gas pipelines. The
Writ of Prohibition was denied. App. at p. A-13.
The Oklahoma Supreme Court stated that because pipe-
lines are “outside the protection afforded by Congress” that they
are “no longer similarly situated to airlines and railroads.” App.
at p. A-9. The court held that the state legislature’s compliance
with the federal laws by creating a separate classification for
railroad carriers and air carriers rationally furthered a legitimate
State interest. App. at p. A-10. The Oklahoma court treated the
federal anti-discrimination laws as a justification for tax dis-
crimination against pipelines, resulting in its holding that there
was no equal protection violation. App. at p. A-10. The Okla-
homa court summarily concluded, without analysis of the ele-
ments of the applicable legal test and without citing to any
supportive United States Supreme Court precedent, that a fed-
eral anti-discrimination statute can justify discriminatory treat-
ment among otherwise similarly situated taxpayers even though
the state could elect other methods of compliance which treat
similarly situated taxpayers the same.
5
REASONS FOR GRANTING THE PETITION
The decision of the Oklahoma Supreme Court raises a
significant question of federal law: Whether federal statutes
designed to prevent tax discrimination can operate as an excuse
under principles of the Equal Protection Clause for affirmative
tax discrimination by a state. More particularly, may a state’s
voluntary election of one method of compliance with a federal
Statute permit a state to discriminate against similarly situated
taxpayers even though the state could elect another method of
compliance that treats similarly situated taxpayers the same?
In the instant case, the Oklahoma Supreme Court decision
conflicts with both a decision of the Nebraska Supreme Court
and with the decisions of this Court. The Oklahoma court’s
ruling conflicts with the Nebraska Supreme Court’s ruling in
Northern Natural Gas Co. v. State Bd. of Equalization & As-
sessment, 443 N.W.2d 249 (Neb. 1989), cert. denied, 493 U.S.
1078 (1990). The Nebraska court addressed the question of
whether the 4-R Act justified discriminatory taxation among
similarly situated taxpayers. The Nebraska court ruled that
despite the federal statute, the Equal Protection Clause was
violated when similarly situated taxpayers were not treated the
same. In contrast, the Oklahoma Supreme Court held that
because of the 4-R Act, railroad carriers and pipelines are no
longer similarly situated. The Nebraska Court’s decision is in
compliance with both the 4-R Act and with the Equal Protection
Clause. The Oklahoma Court’s decision, however, complies
with only the federal statutes, but not with the federal constitu-
+. re ANR Pipeline Co., 866 P.2d 1060 (Kan.). cert. denied, 115 S. Ct.
296 (1994): Kennecott Corp. v. Utah State Tax Comm’n, 858 P.2d 1381 (Utah
1993): Federal Express Corp. v. Tennessee State Bd. of Equalization, 717
S.W.2d 873 (Tenn. 1986); State v. Colonial Pipeline Co., 471 So. 2d 408
(Ala. Civ. App. 1984). To the extent that these cases held that the 4-R Act
mandates separate tax classification, it appears they have been impliedly
overruled by this Court’s decision in Department of Revenue of Oregon v.
ACF Indus., Inc., which strictly construed the 4-R Act and limited its
pre-emptive effect to its express language. 127 L. Ed 2d 165, 176 (1994).
6
tion. For this reason, the Oklahoma court’s decision is worthy
of this Court’s review. A more detailed discussion of the state
court conflict is set forth in Part I, infra.
The Oklahoma Supreme Court’s ruling also conflicts with
the Equal Protection principles outlined by this Court in
Nordlinger v. Hahn, 120 L. Ed. 2d 1 (1992), and Allegheny
Pittsburgh Coal Co. v. Webster County, 488 U.S. 336 (1989).
Allegheny holds that taxpayers placed in the same tax classifi-
cation may not, under the Equal Protection Clause, be arbitrarily
singled out for discriminatory treatment not imposed on others
in the same tax classification. Nordlinger takes this principle
further, providing that, regardless of whether the state has
chosen to place taxpayers in the same classification or not, there
must be a rationally based legitimate state interest for treating
similarly situated taxpayers differently. Oklahoma’s court
ruled, without discussion of relevant precedent from this Court,
that the federal anti-discrimination laws constituted such a ra-
tionally based legitimate state interest justifying discrimination
against pipelines. In short, the 4-R Act and TEFRA, statutes
designed to prevent tax discrimination, were treated by the
Oklahoma court as permission to discriminate against some
interstate common carriers while affording favorable tax treat-
ment to other interstate common carriers. Thus, the Oklahoma
decision conflicts with the Equal Protection principles set out
by this Court and is worthy of review. A more detailed discus-
sion of the conflict with this Court’s decisions is set forth in Part
Il, infra.
Finally, this Court should consider this Petition because
several states other than Oklahoma have rendered similar deci-
sions interpreting the breadth of federal anti-discrimination
statutes and have used such statutes as justification for discrimi-
As a result of three federal district court decisions, the Nebraska tax
officials were required under the 4-R Act to reduce the taxes of railroad
property to match the levels of other commercial and industrial property.
5
natory state tax practices. The courts of Kansas, Utah, Tennes-
see and Alabama have all interpreted either TEFRA or the 4-R
Act to permit burdensome taxation of public service corpora-
tions other than railroads and airlines.2 Like other interstate
common Carriers, pipelines are “easy prey for State and local tax
assessors in that they are nonvoting, often nonresident targeis
for local taxation, who cannot easily remove themselves from
the locality.” Department of Revenue of Oregon v. ACF Indus.,
Inc., 127 L. Ed. 2d 165, 171 (1994)(citing Western Air Lines,
Inc. v. Board of Equalization, 480 U.S. 123, 131 (1987)).
Hence, because such interpretation of the federal statutes runs
afoul of the Equal Protection Clause and results in widespread
tax discrimination by states, this Court should render a definitive
ruling to guide the states as to the constitutionally permissible
effect of such federal statutes.
The Oklahoma court’s decision is inconsistent with the
Nebraska Supreme Court’s holding in Northern. The Northern
court held that even though the state taxing officials were “acting
involuntarily and under compulsion of federal law,” by taxing
a pipeline differently from railroads, the state had denied “equal
protection of the law contrary to the 14th amendment to the U.S.
Constitution.”> 443 N.W.2d at 255. In considering the cases
interpreting the effect of the 4-R Act on Nebraska’s property tax
scheme, the Nebraska court did not find that the federal act
created or was justification for creating separate tax classifica-
tions. Several pipelines had challenged the state tax commis-
sioner’s provision of favorable tax treatment to railroads. The
Nebraska Supreme Court relied upon Sioux City Bridge Co. v.
Dakota County. 260 U.S. 441 (1923), in holding that failure to
treat the property of railroads and pipelines in the same manner
violated the Equal Protection Clause. Northern, 443 N.W.2d at
256. This Court stated in Sioux City:
8
The purpose of the equal protection clause of the
Fourteenth Amendment is to secure every person
within the State’s jurisdiction against intentional and
arbitrary discrimination, whether occasioned by ex-
press terms of a Statute or by its improper execution
through duly constituted agents.
260 U.S. at 445 (emphasis added). Therefore, even though the
Oklahoma Legislature professed to be acting under compulsion
of the federal laws, the discriminatory tax treatment still consti-
tuted an equal protection violation.
The Oklahoma court tried to distinguish Northern by ex-
plaining that Oklahoma “enjoys a different system of taxation”
because the Oklahoma legislature has the power to establish
different tax classes. App. at. p. A-11. This is a distinction
without a legal difference. The Nebraska Constitution required
that all tangible property, except for motor vehicles, was to be
taxed uniformly. Thus, all pipeline and railroad tangible prop-
‘erty was in the same tax class with most other tangible property.
It makes no difference if the state constitution places tangible
property in one tax class or if the state legislature places all
public service corporation property in one tax class — either
way pipelines are in the same tax class as railroad carriers and
air carriers and are entitled to equal treatment. More impor-
tantly, and despite state designated classifications, interstate
pipelines, railroad carriers and air carriers are similarly situated
taxpayers. For example, interstate pipelines and railroad carri-
ers transport competitive fuels in interstate commerce. Under
the Equal Protection Clause they should be treated the same.
9
The Equal Protection Clause of the United States Consti-
tution provides:
No State shall . . . deny to any person within
its jurisdiction the equal protection of the laws.
U.S. Const. amend. XIV, § 1. This Court stated the test under
the Equal Protection Clause for constitutionality of tax classifi-
cations in Nordlinger. In order to pass constitutional muster,
disparate tax treatment among similarly situated taxpayers must
“rationally further a legitimate state interest” and cannot be
“arbitrary or irrational.” 120 L. Ed. 2d at 13. The Equal
Protection Clause “does not forbid classifications, but simply
keeps governmental decisionmakers from treating differently
persons who are in all relevant aspects alike.” /d. at 12 (citing
F.S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415 (1920)).
The standard of review for challenges to state taxing regimes
under the Equal Protection Clause is properly deferential and
the states have “great leeway in making classifications and
drawing lines which in their judgment produce reasonable sys-
tems of taxation.” Lehnhausen v. Lake Shore Auto Parts Co.,
410 U.S. 356, 359 (1973). Deference, however, is not the same
as abdication, and scrutiny under the “rationally based legiti-
mate state interest” standard is still scrutiny. Mathews v. Lucas,
427 U.S. 495, 510 (1967)(rational basis standard is not tooth-
less); Nordlinger, 120 L. Ed. 2d at 25-26 (Stevens, J., dissent-
ing). This Court has on several occasions invalidated tax
schemes under such a standard of review. See, e.g., Hooper v.
Bernalillo County Assessor, 472 U.S. 612, 618 (1985); Williams
v. Vermont, 472 U.S. 14 (1985); Metropolitan Life Ins. Co. v.
Ward, 470 U.S. 869 (1985); Zobel v. Williams, 457 U.S. 55
(1982). When the “alikeness” of similarly situated taxpayers is
reaffirmed by the state legislators placing them in the same tax
classification, the constitutional directive to treat them the same
is even stronger. See, Allegheny Pittsburgh Coal Co., 488 U.S.
10
at 343-45; Cumberland Coal Co. v. Board of Revision, 284 U.S.
23, 28-30 (1931). The Oklahoma Supreme Court’s conclusion
cannot pass these well-established constitutional tests.
The court opined that the Oklahoma Legislature’s “com-
pliance” with the 4-R Act and TEFRA by enacting Section
2864(C) of the Oklahoma statues, which the court interpreted as
creating a new tax sublclass, was enough of a rationally based
legitimate state interest to avoid an Equal Protection Clause
violation. Yet, the 4-R Act and TEFRA do not contain any
language of classification. These acts do not attempt to tell the
states how to classify or give direction on how to manage their
property tax systems. These acts do not even tell the states how
to tax railroad carriers and air carriers; these acts only prevent
states from taxing railroad carriers and air carriers more than
they tax commercial and industrial property. The 4-R Act
provides in relevant part:
The following acts unreasonably burden and dis-
Ccriminate against interstate commerce, and a State,
subdivision of a State, or authority acting for a State
or subdivision may not do any of them:
(1) assess rail transportation property at a value that
has a higher ratio to the true market value of the rail
transportation property than the ratio that the assessed
value other commercial and industrial property has to
the true market value of the other commercial and
industrial property.
(2) levy or collect a tax on an assessment that may
not be made under clause (1) of this subsection.
(3) levy or collect an ad valorem property tax on
rail transportation property at a tax rate that exceeds
the tax rate applicable to commercial and industrial
property in the same assessment jurisdiction.
1]
49 U.S.C. § 11503(b). Similarly, TEFRA provides in relevant
part:
(1) The following acts unreasonably burden and
discriminate against interstate commerce and a State
... may not do any of them:
(c) levy or collect an ad valorem property tax on air
carrier transportation property at a tax rate that ex-
ceeds the tax rate applicable to commercial and indus-
trial property in the same assessment jurisdiction.
49 U.S.C. § 1513. The two federal acts serve as a guideline or
measuring stick as to which taxing acts are discriminatory
against interstate common carriers under the anti-discrimination
principles of the federal Commerce Clause. See, Department of
Revenue of Oregon v. ACF Indus., Inc., 127 L. Ed. 2d 165, 173
(1994). Significantly, the federal Equal Protection Clause is
founded in anti-discrimination principles paralleling those of the
Commerce Clause. This basic premise that similarly situated
taxpayers, such as interstate common carriers, should be treated
the same is consistent with the philosophies of both the Equal
Protection and Commerce Clauses, as well as the goals of the
4-R Act and TEFRA in preventing tax discrimination against
interstate common carriers.
The Oklahoma Supreme Court’s holding, however, is in-
consistent with these anti-discrimination proclamations. The
Oklahoma decision was rendered with knowledge that railroad
carriers, air carriers and other commercial and industrial prop-
erty owners’ ad valorem taxes are to be assessed at a ratio of
12.08% of the property value while pipelines’ ad valorem taxes
are to be assessed at a ratio of 22.85% of the property value. The
Oklahoma court recognized that under the rule of Allegheny, if
the state legislature has left the pipelines within the same tax
class as railroad carriers and air carriers, “the difference in the
assessment percentages cannot withstand scrutiny under the
12
Equal Protection Clause.” App. at p. A-8. . The Oklahoma
court also admitted that absent the federal statutes, pipelines are
similarly situated with railroads and air carriers. App. at. p. A-9.
The only excuse, under the Oklahoma court’s ruling, for sepa-
rately classifying railroad carriers and air carriers from pipe-
lines, and thereby imposing discriminatory taxes upon pipelines,
is the existence of two federal anti-discrimination statutes.
These federal statutes cannot be read in isolation from the
broader U.S. Constitutional mandate that calls upon the states
to comply with equal protection guarantees. “Congress may not
authorize the States to violate the Equal Protection Clause.”
Shapiro v. Thompson, 394 U.S. 618, 641 (1969), overruled in
part on other grounds, Edelman v. Jordan, 415 U.S. 651, 671
(1974). There is something intuitively wrong and patently
illogical in an analysis which uses compliance with an anti-dis-
crimination statute as the justification for discrimination, espe-
cially where other methods of compliance are available.
There are two distinct prongs to the Nordlinger test: first,
the discriminatory treatment must further a legitimate state
interest; and second, the classification must rationally relate to
that legitimate state interest. Western & Southern Life Ins. Co.
v. State Bd. of Equalization, 451 U.S. 648, 668 (1981); Jackson
Water Works, Inc. v. Public Utilities Comm’n, 793 F.2d 1090
(9th Cir.), cert. denied, 479 U.S. 1102 (1986). The discrimina-
tory treatment of pipelines in Oklahoma does not meet either
prong of the test. There is no doubt that compliance with a
federal statute is a legitimate state interest, however, such com-
pliance must not at the same time violate the federal constitution.
The new subclass created in Oklahoma does not further an
interest in compliance with federal law, it simply violates the
Equal Protection Clause. If the state truly wished to further its
interest in complying with the federal statutes, it could have
chosen two other methods which do not violate the Equal
Protection Clause. First, it could have lowered the assessment
eee
13
ratio for interstate pipelines, along with railroad carriers and air
carriers, to match that of commercial and industrial property.
Second, it could have raised the assessment ratio for commercial
and industrial property to match that of the interstate pipelines,
railroad carriers and air carriers. The expressed interest is not
furthered, however, by discrimination among similarly situated
taxpayers. An interest which violates the United States Consti-
tution can hardly be defined as “legitimate.”
The only interest furthered by the separate classification of
railroad carriers and air carriers is the state’s interest in main-
taining its tax discrimination against pipelines. The Oklahoma
legislature has not in the past recognized any pre-existing dif-
ferences among pipelines, railroad carriers and air carriers for
ad valorem tax purposes. A classification must find justification
outside itself; it must reflect pre-existing differences and cannot
create new ones that are supported by only their own bootstraps.
Williams v. Vermont, 472 U.S. at 27. The Equal Protection
Clause requires more of a state law than nondiscriminatory
application within the class it establishes. Rinaldi v. Yeager,
384 U.S. 305, 308 (1966). Oklahoma must do more than
arbitrarily create a separate class for railroad carriers and air
carriers to deflect an equal protection challenge.
Also, the classification must rationally relate to the legiti-
mate state interest by displaying some “fit” between the dispa-
rate treatment and the legislative purpose. Although the fit must
not be made with mathematical precision, failure to include
within a class those similarly situated may be so severe that it
cannot be said that the legislative distinction “rationally furthers
the posited state interest.” Jimenez v. Weinberger, 417 U.S. 628,
636-38 (1974). The Oklahoma court failed to address how the
expressed “compliance” is rationally related to a legitimate state
interest when the state action taken was not even required by the
federal laws. The federal laws only require that the state refrain
from taxing railroad carriers and air carriers more than commer-
14
cial and industrial property; they do not require separate classi-
fication. They do not require continued discrimination against
other interstate common carriers. Oklahoma’s classification
does not “fit” the stated goal of compliance with the 4-R Act
and TEFRA.
Additionally, despite the Oklahoma Supreme Court’s in-
terpretation of it, even the plain language of Section 2864(C)
does not compel separate classification. Like the 4-R Act and
TEFRA, it simply directs the state to refrain from taxing railroad
carriers and air carriers more than commercial and industrial
property. The Oklahoma Constitution permits broad discretion
in choosing assessment ratios, allowing a range of 0-35%. Okla.
Const. art. X, § 8. The Oklahoma taxing officials could have
complied with the 4-R Act, TEFRA and state law without
creation of a tax subclass simply by ending discriminatory
taxation against all similarly situated public service corporations
and taxing all of them no more than the commercial and indus-
trial property owners. The contrived explanation that the federal
Statutes required reclassification of railroad carriers and air
Carriers is not only inaccurate, it is also not rational to use
anti-discrimination statutes as the foundation for discrimination.
Oklahoma’s ill-conceived attempt at “compliance” with
federal law defies logic, and is no more than an excuse for
continued discrimination. It does not alter the fact that railroad
Carriers, air carriers and pipelines have all been placed in the
same tax Classification of public service corporations, and under
Allegheny Pittsburgh Coal Co., must be taxed uniformly. It is
important that this Court review the effect of the 4-R Act and
TEFRA on equal protection principles; the trend in Oklahoma
and a few other states is to use these statutes as justification for
singling out certain interstate common carriers to bear a vastly
disproportionate tax burden.
: :
: 1S
CONCLUSION
: For the foregoing reasons, this petition for a writ of certio-
i rari should be granted.
2
Respectfully submitted,
REBECCA H. NOECKER*
KAREN L. PAULEY
VIRGINIA G. AMEND
P.O. Box 1087
Colorado Springs, CO 80944
(719) 520-4767
Counsel for Petitioners
June 5, 1995 * Counsel of Record
:
A-1
Appendix A
No. 84,097
Iu the Supreme Court of the
State of Oklahoma
WILLIAMS NATURAL GAS COMPANY,
WILLIAMS PIPE LINE COMPANY and
WILLIAMS TELECOM GROUP,
Petitioners,
V.
THE STATE BOARD OF EQUALIZATION
and THE OKLAHOMA TAX COMMISSION,
Respondents.
APPLICATION TO ASSUME ORIGINAL JURISDICTION
AND PETITION FOR WRIT OF PROHIBITION
Public service corporations filed original action to protest
difference in ad valorem tax ratio applied to them and ratio
applied to airlines and railroads.
Filed Dec. 20, 1994
ORIGINAL JURISDIC1 ION ASSUMED;
PETITION FOR WRIT OF PROHIBITION DENIED.
Hall, Estill, Hardwick, Gable, For Petitioners
Golden & Nelson
By: Graydon Dean Luthey, Jr.
and
Kenneth L. Hunt
Tulsa, Oklahoma
and
William G. von Glahn
Associate General Counsel
The Williams Companies
Tulsa, Oklahoma
Susan Brimer Loving
Attorney General of Oklahoma
and
Douglas F. Price
Assistant Attorney General
Oklahoma City, Oklahoma
David Allen Miley
Assistant General Counsel
Oklahoma Tax Commission
Oklahoma City, Oklahoma
Stipe Law Firm
By: Gene Stipe
and
J. Rick Faling
Oklahoma City, Oklahoma
and
Stuart Strasner
Oklahoma City, Oklahoma
For Respondent
State Board of
Equalization
For Respondent
Oklahoma Tax
Commission
For Intervenors
Oklahoma State School
Board Association
and
Association of County
Commissioners of Oklahoma
McKenzie, Moffett, Elias
& Books
By: William K. Elias
Oklahoma City, Oklahoma
Gable & Gotwals
By: Oliver S. Howard
and
Teresa D. Adwan
Tulsa, Oklahoma
Cleeta John Rogers
General Counsel
and Jon D. Sellers
Oklahoma City Public Schools
Oklahoma City, Oklahoma
Doerner, Stuart, Saunders,
Daniel, Anderson & Biolchini
By: John B. Turner
and
Rebecca M. Fowler
Tulsa, Oklahoma
-3
For Intervenors
ANR Pipeline Company
Colorado Interstate Gas Company
E] Paso Natural Gas Company
Transwestern Pipeline Company
Enron Oil & Gas Marketing
Black Marlin Pipeline Company
Explorer Pipeline Co.
Aquila Gas Systems, Inc.
Sun Pipeline Company
Mid-Continent Pipe Line Company
Northern Natural Gas
Company
Natural Gas Pipeline Company
of North America
Western Gas Resources, Inc.
Additional Counsel
for Intervenors
ANR Pipeline Company
and
Colorado Interstate Gas
Company
For Intervenors
Independent School
District No. 89 of
Oklahoma County,
Oklahoma
For Intervenor
Public Service
Company of Oklahoma
A-4
HODGES, C.J.
Three public service corporations, Williams Natural Gas
Company, Williams Pipe Line Company, and Williams Tele-
com Group (Williams Companies) ask this Court to assume
original jurisdiction. They request a writ prohibiting the State
Board of Equalization (Board) from assessing their public serv-
ice property at a greater ratio than that applied to public service
property owned by railroads and airlines. Original jurisdiction
is assumed and the petition for a writ of prohibition is denied.
The Williams Companies assert that the assessment of their
property at a ratio higher than that used to assess railroad and
airline property is unlawfully discriminatory. They have chal-
lenged the Board’s assessment in the Court of Tax Review.
There are seventy to ninety other challenges pending in that
court. All were brought by public service corporations seeking
to have their assessment ratio lowered to the ratio applied to
railroad and airline companies.
The Board has responded through the Attorney General to
the Williams Companies’ application to this Court to assume
original jurisdiction. The Oklahoma Tax Commission has
adopted that response. Motions to intervene have been granted
to the State School Board Association, the Association of
County Commissioners, several pipeline companies with cases
pending before the Court of Tax Review, the Oklahoma City
Public Schools, and Public Service Company of Oklahoma. Oral
arguments were heard on this matter on October 19, 1994.
ORIGINAL JURISDICTION
The Williams Companies, the Board, the School Board
Association, and the Oklahoma City Schools ask this Court to
assume original jurisdiction on the basis of publici juris. They
point to the many other challenges pending in the Court of Tax
Review which raise the issues presented by this original action.
They urge resolution of the “pure questions of law” raised in this
A-5
action which must ultimately be determined by this. Court.
Further, they point out that if the matter is not resolved before
April 1, 1995, when the ad valorem taxes are due, the taxes will
be paid under protest. Those funds will then be placed in an
escrow account and will be unavailable to schools and county
governments.
Every recipient of ad valorem tax revenue is potentially
impacted by this action. These include common schools (K-12),
vocational technical education, county government, county
health departments, emergency medical service districts, solid
waste management districts, county and city/county libraries,
and cities (sinking funds only). The projected revenue shortfall
for these institutions is $63.8 million. This represents 6.8% of
total property tax revenue.
This Court has assumed original jurisdiction pursuant to
the doctrine of publici juris to address ad valorem tax issues
emanating from the Board. See State ex rel. Poulos v. State Bd.
of Equalization, 646 P.2d 1269 (1982); State ex rel. Poulos v.
State Bd. of Equalization, 552 P.2d 1134 (1975). The public
importance of the issues presented by this action are heightened
by the adverse impact on school districts and county government
if the controversy is not rapidly resolved. In addition, judicial
economy will be served by today’s resolution of the central
issues in numerous ad valorem tax protests. Original jurisdiction
is therefore assumed to address the issues raised by the Williams
Companies.
BACKGROUND
In Oklahoma’s Ad Valorem Tax Code, the Legislature has
listed three classes of property: 1) real property; 2) personal
property; and 3) public service corporation property. Okla. Stat.
tit. 68, § 2803(A) (1991). Real and personal property are as-
sessed locally by county officials. The Board, however, is
“responsible for valuation of railroad, airline and public service
A-6
corporation property and the adjustment and equalization of all
property values both centrally and locally assessed.” Jd. at §
2802(26). The Board assesses ad valorem taxes on public serv-
ice corporations by 1) establishing a fair cash value for property
and 2) fixing an assessment percentage for property. The second
step is challenged in this action.
During the 1960s and 1970s, Congress became concerned
about the number of failing railroads. See Chrysler Rail Transp.
Corp. v. Holt, 845 F. Supp. 463, 465 (W.D. Mich. 1994).
Congress found that the states had been forcing railroads to carry
more than their share of the tax burden. To prevent discrimina-
tory taxation of railroad property by the states, Congress enacted
the Railroad Revitalization and Regulatory Reform Act of 1976
(4-R Act), 49 U.S.C. § 11503 (1988). The Act provides in part:
The following acts unreasonably burden and dis-
criminate against interstate commerce, and a State,
subdivision of a State, or authority acting for a State
or subdivision may not do any of them:
(1) assess rail transportation property at a value that
has a higher ratio to the true market value of the rail
transportation property than the ratio that the assessed
value other commercial and industrial property has to
the true market value of the other commercial and
industrial property.
(2) levy or collect a tax on an assessment that may
not be made under clause (1) of this subsection.
(3) levy or collect an ad valorem property tax on rail
transportation property at a tax rate that exceeds the
tax rate applicable to commercial and industrial prop-
erty in the same assessment jurisdiction.
Id. at § 11503(b)(emphasis added).
Tax discrimination against airline property which burdens
interstate commerce was similarly remedied under provisions of
—_— |
A-7
the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),
49 U.S.C. § 1513 (1988). That Act provides in part:
(1) The following acts unreasonably burden and dis-
criminate against interstate commerce and a State . . .
may not do any of them:
(c) levy or collect an ad valorem property tax on air
Carrier transportation property at a tax rate that ex-
ceeds the tax rate applicable to commercial and indus-
trial property in the same assessment jurisdiction.
Id. at § 1513(d)(1)(c).
In response to these federal acts, the Oklahoma Legislature
enacted section 2864(C) of title 68. That section provides that
“[i]n determining the assessment ratio for all air carrier property
and all railroad property, the State Board shall only consider the
ratio of the aggregate assessed value of the fair cash value of the
locally assessed commercial/industrial real property of the
state.”
In June of this year, the Board adopted an assessment ratio
of 12.08% for airline and railroad property. In July, the Board
adopted a ratio of 22.85% for the Williams Companies and other
public service corporations.
The Williams Companies claim the assessments 1) violate
the Equal Protection Clause of the Fourteenth Amendment to
the United States Constitution, 2) violate article X, section 5 of
the Oklahoma Constitution which requires uniform taxation
within a tax class, and 3) violate sections 2803(C) and 2847 of
the Ad Valorem Tax Code, Okla. Stat. tit. 68, §§ 2801-3152
(1991), which require uniform treatment in ad valorem taxation.
EQUAL PROTECTION
The Williams Companies assert that the Board’s assess-
ments violate the Equal Protection Clause of the Fourteenth
A-8
Amendment to the United States Constitution because their
property subjects them to a higher assessment percentage than
the assessment percentage applied to the property of airlines and
railroads. Thus, they argue, their property has been subjected to
discriminatory treatment. The Board responds that the Legisla-
ture has created a subclass of property for ad valorem taxation
purposes of public service corporations, the railroad and airline
companies, in response to the federal legislation.
The Equal Protection Clause of the Fourteenth Amendment
requires that no state “deny to any person within its jurisdiction
the equal protection of the laws.” State legislatures are given
“especially broad latitude in creating classifications and distinc-
tions in tax statutes.” Regan v. Washington, 461 U.S. 540, 547
(1983). Unless a classification “jeopardizes exercise of a funda-
mental right” or it “characterizes based upon an inherently
suspect characteristic,” the Equal Protection Clause requires
only that the classification “rationally further a legitimate state
interest.” Nordlinger v. Hahn, 112 S. Ct. 2326, 2332 (1992)
(citing Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432,
439-441 (1985); New Orleans v. Duke, 427 U.S. 297, 303
(1976)). “This standard is especially deferential in the context
of classifications made by complex tax laws.” /d.
ee ee ee Oe ee ee ee ee ee
Ce ew en
The present controversy, however, raises the threshold
issue of whether a classification has occurred. If the Legislature
has made railroads and airlines a subclass of public service
corporations, that is permissible provided that “the relationship
of the classification to its goal is not so attenuated as to render
the distinction arbitrary.” /d. If, on the other hand, the Legis-
lature has left the Williams Companies and other public service
corporations within the same tax class, the difference in the
assessment percentages cannot withstand scrutiny under the
Equal Protection Clause. See, e.g., Allegheny Pittsburgh Coal
Co. v. Webster County, 488 U.S. 336, 345 (1989) (“The equal
protection clause . . . protects the individual from state action
| |
A-9
which selects him out for discriminatory treatment by subjecting
him to taxes not imposed on others of the same class.” Hillsbor-
ough v. Cromwell, 326 U.S. 620, 623 (1946)).
The Williams Companies argue that the Legislature has not
created a separate tax class or subclass for railroads and airlines
because it did not amend section 2803. That section lists only
three ad valorem tax classes. However, it is the intent of the
Legislature to create a tax class that controls rather than the
Statutory format it chooses.
Section 2864(C) provides a different taxing method for a
clearly defined subclass of public service corporations, the
railroads and airlines. No longer are other public service corpo-
rations of the same class. They are outside the protection af-
forded by Congress and are no longer similarly situated to
airlines and railroads. The fact that the Legislature chose to
include the provision in section 2864 rather than section 2803
does not change that. Just as the Legislature made public service
corporation property a subset of the larger set of commercial and
industrial property, it made railroad and airline property a subset
of public service corporation property.
The Legislature was required to recognize the supremacy
of federal law. It responded by creating a subclass for railroads
and airlines. This is not a situation where federal law has
preempted a state statute due to a conflict. The Oklahoma
Legislature responded to the federal act by amending the ad
valorem tax scheme so that it would not conflict with federal
law.
There is nothing arbitrary or irrational in that classification.
It is limited to those protected by the federal acts. The Legisla-
ture’s method of creating the class was consistent with the “large
leeway” states are given “in making classifications and drawing
lines which in their judgment produce reasonable systems of
taxation.” Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S.
356, 359 (1973).
A- 10
The classification furthers a legitimate state interest. The
Legislature enacted section 2864(C) to bring Oklahoma’s ad
valorem taxing scheme into compliance with federal laws which
gave special protection to railroads and airlines. Compliance
with federal law achieved by legislative creation of a tax sub-
class does not violate the Equal Protection Clause.
The parties have cited four state court decisions which have
addressed equal protection and uniformity of taxation issues in
this context. The Williams Companies rely upon Northern Nat-
ural Gas Co. v. State Board of Equalization and Assessment,
433 N.W. 2d 249 (Neb. 1989) cert. denied, 493 U.S. 1078
(1990). There, a pipeline company sought to have its property
assessment equalized with railroads. On appeal from the State
Board of Equalization and Assessment the Supreme Court of
Nebraska found the decision denied equal protection to the
pipeline company. It held:
The State Board of Equalization and Assessment, by
not taxing the personal property of certain property in
a class, although acting involuntarily and under com-
pulsion of federal law, nevertheless, by complying
with that mandate, has denied another taxpayer in that
same class the equal protection of the law contrary to
the 14th amendment to the Constitution of the United
States.
Id. at 251 (Syllabus by the Court n.8)(emphasis added).
The key distinction between the facts of that case and the
present one is that the Nebraska Board treated taxpayers of the
same class differently. The Nebraska Constitution requires that
“{t]axes shall be levied by valuation uniformly and proportion-
ately upon all tangible property ... .”” Neb. Const. art. VIII, § 1.
Essentially, the Nebraska taxing scheme treats all tangible prop-
erty as being within the same class unless certain property, such
as motor vehicles and agricultural land, has been exempted.
Thus, when a federal court enjoined the state of Nebraska from
A- ll
assessing the personal property of railroads, the result was that
the assessments upon others within the class became dispropor-
tionately higher. 443 N.W.2d at 256.
When the Nebraska Supreme Court ordered that pipelines
be given the same exemption as railroads, it created a revenue
crisis. The Nebraska Legislature responded by making the per-
sonal property of railroads “a separate and distinct class of
property and exempt/ed] the class from property taxation .. . .
“See Neb. Rev. Stat. § 77.202.47 (4) (1990).
Oklahoma enjoys a different system of taxation. Our Con-
stitution permits the Legislature to establish different tax classes
in which property can be valued differently. See Okla. Const.
art. X § 22. Airlines and railroads are in a legislatively created
subclass of public service corporation property. This factual
distinction brings this case under the persuasive authority of
cases cited by the Oklahoma Board. See In re ANR Pipeline Co.
866 P.2d 1060 (Kan. 1994), cert. denied, 115 S. Ct. 296 (1994).
See also State v. Colonial Pipeline Co., 471 So. 2d 408 (Ala.
Civ. App. 1984); Federal Express Corp. v. Tennessee State
Board of Equalization, 717 S.W.2d 873 (Tenn. 1986). Those
cases held that legislative tax classifications of railroads and
airlines on one hand and other entities on the other hand, did not
violate the Equal Protection Clause.
Specifically, the Kansas Supreme Court in ANR rejected a
pipeline’s request to have its real property assessed on the same
basis as railroad property. In doing so, that court held that taxing
railroad property differently from pipeline property did not
violate either the Equal Protection Clause or the equal taxation
provision of the Kansas Constitution.
The ANR court refused to follow the Nebraska decision
noting that “(t]he Nebraska Constitution does not have property
classifications.” 866 P.2d at 1067. It observed that, unlike the
Nebraska tax scheme, the Kansas Constitution “classifies all real
and personal property and fixes the assessment rate for each
A- 12
subclass.” /d. at 1066. A 1992 amendment to the Kansas Con-
stitution made railroad real property an exception to the public
utility subclass to which it belonged. /d. at 1066-1067. The ANR
court held that the challenged assessments did not violate the
Kansas or United States Constitutions.
Oklahoma’s tax scheme is similar to that of Kansas in that
railroad property has been separately classified for different tax
treatment. While the Kansas classification is found in its consti-
tution, the Oklahoma classification is statutory pursuant to the
express power to classify granted to the Oklahoma Legislature.
Finally, the Williams Companies’ equal protection chal-
lenge to Oklahoma’s Ad Valorem Tax Code constitutes an
indirect attack on the validity of the 4-R Act and TEFRA. It
should be noted that the constitutionality of the 4-R Act has been
upheld in federal courts. See Arizona v. Atchison T. & S.F.R.,
656 F.2d 398 (9th Cir. 1981); Louisville & N.R. v. Louisiana
Tax Comm’n, 498 F. Supp. 418, 421 (D.La. 1980); Tennessee
v. Louisville & N.R., 478 F. Supp. 199 (D. Tenn. 1979), aff'd,
652 F.2d 59 (2d Cir. 1981), cert. denied, 454 U.S. 834 (1981).
No state or federal court has declared either the 4-R Act or
TEFRA unconstitutional. Oklahoma’s classification of rail-
roads and airlines presents no equal protection violation.
OKLAHOMA CONSTITUTION
The Williams Companies next urge that the Board’s assess-
ments violate article X, section 5 of the Oklahoma Constitution.
That section requires that “[t]axes be uniform upon the same
class of subjects.” However, because this Court has determined
that a subclass of public service corporations was created by the
Legislature, the applicable provision is section 22 of article X.
It provides that “[n]Jothing in this Constitution shall be held, or
construed, to prevent the classification of property for purposes
of taxation; and the valuation of different classes by different
means or methods.” Railroads and airlines are a distinct subclass
A- 13
of public service corporations whose property may, under the
Oklahoma Constitution, be valued with a different assessment
ratio.
OKLAHOMA’S AD VALOREM TAX CODE
The Williams Companies also argue that the Board’s as-
sessments violate sections 2803 (c) and 2847 of the Ad Valorem
Tax Code. Section 2803 (c) requires that “[c]lassification as
provided by this section shall require uniform treatment of each
item within a class or any subclass as provided in Article X,
Section 5 of the Oklahoma Constitution.” Section 2847 requires
in part that the assessment ratio “shall be selected by the State
Board of Equalization and, subject to the requirements of federal
law, uniformly applied to calculate the taxable values of public
service corporation property within the state for the applicable
assessment year.”
These sections are statutory requirements of uniform ad
valorem taxation within a class. Again, this case does not present
an intra-class disparity of treatment. The airlines and railroads
are within a legislatively created tax subclass. Therefore, no
conflict with these sections is presented.
The Williams Companies have failed to demonstrate a
violation of equal protection or ad valorem uniformity require-
ments. The Petition for Writ of Prohibition is denied.
ORIGINAL JURISDICTION ASSUMED; PETITION
FOR WRIT OF PROHIBITION DENIED.
Concur: HODGES, C.J., SIMMS, HARGRAVE,
SUMMERS, WATT, JJ.
Concur in Result: KAUGER, J.
Dissent: LAVENDER, V.C.J.,OPALA, WILSON, JJ.
A-14
No. 84,097
In the Supreme Court of the
State of Oklahoma
WILLIAMS NATURAL GAS COMPANY,
WILLIAMS PIPE LINE COMPANY and
WILLIAMS TELECOM GROUP,
Petitioners,
V.
THE STATE BOARD OF EQUALIZATION
and THE OKLAHOMA TAX COMMISSION,
Respondents.
Filed Dec. 20, 1994
KAUGER, J. concurring in result:
Although the majority’s discussion of equal protection rights
has been centered upon the protection afforded by the United States
Constitution and cases discussing its provisions, it has long been
recognized that the due process clause found in art. 2, $7 of the Okla.
Const.’ has a definitional range which is coextensive with its federal
counterpart. The United States Constitution and the Oklahoma Con-
stitution each contain built-in anti-discrimination components which
afford protection against unreasonable or unreasoned classifications
which serve no important governmental interests.” * The same equal
protection component found in the fourteenth amendment of the United
States Constitution is present in the due process clause of art. 2, §7.°
| The Okla. Const. art. 2, §7 provides:
“No person shall be deprived of life, liberty, or property,
without due process of law.”
2 Fair School Finance Council v. State, 746 P.2d 1135, 1148 (Okla. 1987).
> Callaway v. City of Edmond, 791 P.2d 104, 106 (Okla. 1990); Fair
School Finance Council v. State, see note 2, supra; McKeever Drilling Co.
v. Egbert, 170 Okla. 259, 40 P.2d 32, 35 (1935).
A- 15
The Williams Companies are entitled to the privileges and
guarantees found both in the United States and the Oklahoma
Constitutions. Nevertheless, there is nothing arbitrary or irra-
tional in the Legislature’s classification providing a different
taxing method for public service corporations, the railroads and
airlines. The ad valorem tax scheme furthers a legitimate state
interest aligning Oklahoma’s tax laws with federal legislation.
It does not violate the protections afforded by the Okla. Const.
art. 2, §7. My conclusion that the Williams Companies have
failed to demonstrate a violation of equal protection or ad
valorem uniformity requirements is based on the Oklahoma
Constitution which provides bona fide, separate, adequate and
independent grounds upon which to rest the holding.
Michigan v. Long, 463 U.S. 1032, 1042, 103 S.Ct. 3469, 3476, 77
L.Ed.2d 1201, 1214 (1983).
A- 16
No. 84,097
In the Supreme Court of the
State of Oklahoma
WILLIAMS NATURAL GAS
COMPANY, WILLIAMS PIPE
LINE COMPANY and WILLIAMS
TELECOM GROUP,
Petitioners,
V.
THE STATE BOARD OF
EQUALIZATION and
THE OKLAHOMA TAX COMMISSION,
Respondents.
Fiied Dec. 20, 1994
OPALA, J., with whom LAVENDER, V.C.J., and WILSON,
J., join, dissenting.
The court holds today that the Legislature’s compliance
with certain federal statutes ! — by creating a separate subclass
of public service corporations? (comprised only of railroads and
air carriers),> which alone qualify for a lower ad valorem
assessment ratio than that afforded others (pipelines) in the same
class of public service corporations—does not violate the Equal
| See 49 U.S.C. § 1513(d)(1) [Tax Equity and Fiscal Responsibility Act
of 1982], infra note 17, and 49 U.S.C. § 11503(b) [Railroad Revitalization
and Regulatory Reform Act of 1976}, infra note 16.
> For a statutory definition of public service corporation, see 68
O.S.1991 § 2808, infra note 43. For another definition of the term, though
in a different context, see Ari. 9, § 34, Okl.Const.
3 The terms of 68 O.S.1991 § 2864 (C) provide:
“In determining the assessment ratio for all air carrier property
and all railroad property, the State Board shall only consider the
A-17
Protection Clause of the 14th Amendment, U.S. Const.4 The
court’s rationale for sanctioning the disparity of treatment in the
ad valorem tax scheme under scrutiny in this case rests on federal
law preemption. The court assumes original cognizance and
denies the petitioners’ [pipelines’] quest to prohibit the State
Board of Equalization [State Board] from subjecting their prop-
erty to an assessment ratio greater than that applied to railroad
and air carrier property.°
I must recede from the court’s pronouncement. The dis-
positive first impression issue in this original proceeding is
whether the federal-law mandate — that the states not discrimi-
nate against railroads and air carriers by assessing their prop-
erty at a higher ratio than the assessed value of other
“commercial and industrial property” — violates the anti-dis-
crimination component of the 5th Amendment’s Due Process
Clause® by not affording the same protection to other common
carriers in interstate commerce. If I were writing for the court
today, I would (a) hold that the congressional acts’ invoked by
the State are fatally infirm for an impermissible underinclusion
ratio of the aggregate assessed value to the fair cash value of the
locally assessed commercial/industrial real property of the
state.” (Emphasis added.)
The Equal Protection Clause of the 14th Amend., § 1, U.S. Const.,
commands that no State shall “deny to any person within its jurisdiction the
equal protection of the laws.” Nordlinger v. Hahn, 505 U.S. _, 112 S. Ct.
2326, 2331 n.1, 120 L.Ed.2d 1 (1992).
An assessment ratio of 12.08 percent (12.08%) for public service
corporation property owned by air carriers was adopted by the State Board
on June 20, 1994. Then, on July 15, 1994 a 22.85 percent (22.85%)
assessment ratio was ratified for property owned by the petitioners (pipe-
lines). Taxes calculated under these ratios will be due after April 1, 1995.
6
4
The pertinent terms of the 5th Amend., U.S. Const., are:
. nor [shall any person] be deprived of life, liberty, or
property, without due process of law . . .” (Emphasis added.)
Railroad Revitalization and Regulatory Reform Act of 1976, infra note
16, and Tax Equity and Fiscal Responsibility Act of 1982, infra note 17.
A-18
in the preferred class of other common carriers in interstate
commerce, (b) conclude that the infirm federal acts have no
preemptive effect on state law,® (c) examine the contested state
tax laws for conformity to state fundamental-law equality? and
uniformity! standards, (d) direct that, upon due notice and
hearings, the State Board set an across-the-board assessment
ratio that would apply alike to all public service corporations,
and (e) enjoin that, on the State Board’s failure to do so within
some reasonable period of time to be set by the court, the
petitioners could discharge their ad valorem tax liability at the
assessment ratio now applicable solely to railroads and air
carriers. Because the solution I advance represents a sharp break
with recent practice, | would (a) give prospective effect to the
court’s pronouncement and make it apply to this case, to like
challenges presently pending before the Court of Tax Review
or before any administrative agency and to those challenges that
are now in the appellate litigation process, (b) expressly reject
any refund claims to be pressed by the affected entities for
overpayment of taxes assessed at the impermissible ratio for any
past years!! and (c) postpone the effective date of the new
assessment ratio required by my analysis until the fiscal year
beginning July 1, 1996.
For a discussion of the federal acts’ nonpreemptive effect, see Part IX,
infra.
9 Art. 10, § 22, OkI.Const., infra note 39.
10 Art. 10, § 5, Okl.Const., infra note 38.
'! Fora discussion of the prospective effect I would give to my solution,
see Part IX, infra.
I
UNDER THE FEDERAL OUSTER-OF-JURISDICTION
DOCTRINE, THIS COURT IS NOT DIVESTED OF ITS
INHERENT AUTHORITY TO TEST THE RAILROAD
REVITALIZATION AND REGULATORY REFORM
ACT OF 1976 AND THE TAX EQUITY AND FISCAL
RESPONSIBILITY ACT OF 1982 FOR THEIR CON-
FORMITY TO THE MANDATORY STANDARDS OF
THE U.S. CONSTITUTION
State courts have inherent authority and are presumptively
competent to adjudicate claims arising under the laws of the
United States.'* To exclude state courts from this adjudicative
1?
McKesson v. Div. of Alcoholic Beverages & Tobacco, 496 U.S. 18,
48, 110 S.Ct. 2238, 2246 n.10, 110 L-Ed.2d 17 (1990); Yellow Freights, Inc.
v. Donnelly, 494 U.S. 820, 823, 110 S.Ct. 1566, 1568, 108 L.Ed.2d 834
(1990): Tafflin v. Levitt, 493 U.S. 455, 458-459, 110 S.Ct. 792, 795, 107
L.Ed.2d 887 (1990); Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473,
477-478, 101 S.Ct. 2870, 2875, 69 L.Ed.2d 784 (1981); Charles Dowd Box
Co. v. Courtney, 368 U.S. 502, 507-508, 82 S.Ct. 519, 522-523, 7 L.Ed.2d
483 (1962); Plaquemines Tropical Fruit Co. v. Henderson, 170 U.S. 511,517,
18 S.Ct. 685, 688, 42 L.Ed. 1126 (1898); Chaflin v. Houseman, 93 U.S. 130,
136, 23 L.Ed. 833, 838 (1876); Houston v. Moore, 18 U.S. (5 Wheat.) 1,
25-26, 5 L.Ed. 19 (1820). The Court stated in Howlett By and Through
Howlett v. Rose, 496 U.S. 356, 367, 110 S.Ct. 2430, 2438, 110 L.Ed.2d 332
(1990):
“Federal law is enforceble in state courts not because Congress
has determined that federal courts would otherwise be burdened
or that state courts might provide a more convenient forum .. .
but because the Constitution and laws passed pursuant to it are
as much laws in the States as laws passed by the state legisiature.
The Supremacy Clause makes those laws ‘the supreme Law of
the Land,’ and charges state courts with a coordinate responsi-
bility to enforce that law according to their regular modes of
procedure.”
Testa v. Katt, 330 U.S. 386, 393, 67 S.Ct. 810, 814, 91 L.Ed. 967 (1947),
teaches that the Supremacy Clause compels a state court to exercise jurisdic-
A - 20
arena, Congress must affirmatively divest (or oust) them of their
presumptively concurrent jurisdiction.'> Congressional state-
court ouster may be effected by (1) an explicit statutory direc-
tive, (2) unmistakable implication from legislative history, or
(3) a clear incompatibility between state-court jurisdiction and
federal interests. !4 None of these indicia of ouster is present in
the federal legislation we are called upon to consider in this
case.
Because my examination of the congressional acts, their
legislative history and attendant jurisprudence reveals no federal
ouster of state-court cognizance, I would proceed to test their
validity under the applicable standards of the U.S. Constitution
and hold them fatally infirm for the reasons stated in Parts IV,
VI and VIII, infra.
tion over a federal-law claim because “the policy of the federal Act is the
prevailing policy in every state.” (Emphasis supplied.) Any other result, the
Court notes, “flies in the face of the fact that the States of the Union constitute
a nation.” /d., 330 U.S. at 389, 67 S.Ct. at 812.
'3 Howlett, supra note 12, 496 U.S. at 368 n.15, 110 S.Ct. at 2438:
Yellow Freight, supra note 12, 494 U.S. at 823, 110 S.Ct. at 1568; Tafflin,
supra note 12, 493 U.S. at 459, 110 S.Ct. at 795. See in this connection
McKesson, supra note 12, 496 U.S. at 48 n.10, 110 S.Ct. at 2246 (“* [I]n every
case in which [state courts] were not expressly excluded by the future acts
of the national legislature, they will of course take cognizance of the causes
to which those acts may give birth .. . . [T]he inference seems to be conclusive
that the state courts would have a concurrent jurisdiction in all cases arising
under the laws of the union, where it was not expressly prohibited’”). Id.
(quoting from The Federalist No. 82 at 555 (A.Hamilton) (J.Cook ed. 1961)
(emphasis added).
'4 Tafflin, supra note 12, 493 U.S. at 459, 110 S.Ct. at 795; Chaflin,
supra note 12, 93 U.S. at 136; Houston, supra note 12, 5 U.S. at 68; Gulf
Offshore, supra note 12, 453, U.S. at 478, 101 S.Ct. at 2875.
pxbeiace a &
Ps lh as tate aa
A- 21
II
THIS COURT IS NOT OFFENDING AGAINST THE
ADVERSARY FORMAT OF THE PROCEEDINGS
WHEN IT USES ITS OWN REASONING IN ADDRESS-
ING THE PROPOSITIONS VIGOROUSLY
ADVANCED BY THE PETITIONERS
Whenever in an original proceeding the petitioner vigor-
ously and articulately urges a fully briefed legal proposition, this
court is free to supply its own analysis and reasoning in address-
ing the petitioner’s argument for the relief sought.!5
Even though the petitioners argued that the assessment
ratio affecting their property is violative of the state and federal
fundamental law, they did not expressly call for constitutional
condemnation of the two federal acts under consideration. Their
failure vigorously to press that point in support of the proposi-
tion urged does not preclude this court from applying sua sponte
the analysis I counsel today, which favors granting the relief
petitioners seek by this original action.
Il
THE FEDERAL AND STATE STATUTORY SCHEME
To revitalize the struggling railroad industry and to provide
for “tax equity” in general, Congress enacted the Railroad
Revitalization and Regulatory Reform Act of 1976 [4-R Act]!6
and the Tax Equity and Fiscal Responsibility Act of 1982
'S California v. Rooney, 483 U.S. 307, 311, 107 S.Ct. 2852, 2854, 97
L.Ed.2d 258 (1987), reh. denied, 483 U.S. 1056, 108 S.Ct. 30, 97 L.Ed.2d
819 (1987); Black v. Cutter Laboratories, 351 U.S. 292, 297, 76 S.Ct. 824,
827, 100 L.Ed. 1188 (1956), reh. denied, 352 U.S. 859, 77 S.Ct. 21, 1 L.Ed.2d
69 (1956); see also Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed. 2d 694
(1984), reh. denied, 468 U.S. 1227, 105 S.Ct. 28, 82 L.Ed.2d 921 (1984);
Williams v. Norris, 25 U.S. (12 Wheat.) 117, 120, 6 L.Ed. 571 (1827).
'© ‘The terms of 49 U.S.C. § 11503 (b) [4-R Act] provide in pertinent part:
A-22
[TEFRA].!7 Among other things, these two acts prohibit the
states from assessing railroad and air carrier property at a level
that has a higher ratio to true market worth than that borne by
the assessed value of other “commercial and industrial property”
in the same assessment jurisdiction. The petitioners, who as
pipelines also engage in interstate commerce, are not similarly
shielded by the Congress from a higher state assessment ratio.
“The following acts unreasonably burden and discriminate
against interstate commerce, and a State, subdivision of a State,
or authority acting for a State or subdivision of a State may not
do any of them:
(1) assess rail transportation property at a value that has a
higher ratio to the true market value of the rail transportation
property than the ratio that the assessed value of other commer-
cial and industrial property in the same assessment jurisdiction
has to the true market value of the other commercial and indus-
trial property.
(2) levy or collect a tax on an assessment that may not be made
under clause (1) of this subsection.
(3) levy or collect an ad valorem property tax on rail transporta-
tion property at a tax rate that exceeds the tax rate applicable to
commercial and industrial property in the same assessment ju-
risdiction. * * *” (Emphasis added.)
'7 The pertinent terms of 49 U.S.C. § 1513(d)(1) [TEFRA] are:
“(d) Acts which unreasonably burden and discriminate against
interstate commerce; definitions
“(1) The following acts unreasonably burden and discriminate
against interstate commerce and a State, subdivision of a State,
or authority acting for a State or subdivision of a State may not
do any of them:
(A) assess air carrier transportation property at a value that has
a higher ratio to the true market value of the air carrier trans-
portation property than the ratio that the assessed value of other
commercial and industrial property of the same type in the same
assessment jurisdiction has to the true market value of the other
commercial and industrial property; * * * ” (Emphasis added.)
|
A - 23
Responding to the federal-law mandate, the Legislature
created a subclass of railroad and air carrier property!® and
established for that category an assessment methodology which
is different from that imposed upon the property of other public
service corporations.!? Section 2864(C) of the Ad Valorem Tax
Code provides that in determining the assessment ratio for “all
air carrier . . . and railroad property, the State Board shall only
consider the ratio of the aggregate assessed value of the fair cash
value to the locally assessed commercial/industrial real property
of the state.”*” No other public service corporations are af-
forded the same benefit. Based on the statutory scheme, the State
Board adopted in 1994 an assessment ratio of 12.08% for air
carrier and railroad property and 22. 85% for the petitioners.?!
The petitioners seek relief from the State Board’s action in
assessing their property at a ratio much higher than that applied
to public service corporation property of air carriers and rail-
roads. They urge the State Board’s dissimilar treatment of
members of the same class violates the 14th Amendment guar-
antee of equal protection” as well as the uniformity of taxation
mandate in the state fundamental law.” The State Board asserts
18 See 68 O.S.1991 § 2864 (C), supra note 3; see also the terms of 68
O.S.1991 § 2803 (A), which provide:
“A. The Legislature, pursuant to authority of Article X, Section
22 of the Oklahoma Constitution, hereby classifies the following
types of property for purposes of ad valorem taxation:
1. Real property;
2. Personal property; and
3. Public service corporation property.”
19 Fora statutory definition of public service corporation, see 68 O.S.
1991 § 2808, infra note 43.
70 For the terms of 68 O.S.1991 § 2864(C), see supra note 3.
*
See supra note 5.
*2 For the terms of the Equal Protection Clause of the 14th Amend., U.S.
Const., see supra note 4.
23
Art. 10, § 5, Okl.Const., infra note 38.
A- 24
that its assessment ratios are based on the Legislature’s legiti-
mate response to the mandate of the two federal statutes invoked.
IV
MEASURED BY THE ANTI-DISCRIMINATION
COMPONENT OF THE 5TH AMENDMENT?’S DUE
PROCESS CLAUSE, THE TWO FEDERAL
STATUTES UNDER CONSIDERATION CREATE AN
IMPERMISSIBLE SUBCLASS OF COMMON
CARRIERS IN INTERSTATE COMMERCE
WHICH IS VOID FOR UNDERINCLUSIVENESS
The equal protection command of the U.S. Constitution has
one clear and central meaning — it absolutely prohibits invidi-
ous governmental discrimination. That standard, which, under
the Equal Protection Clause of the 14th Amendment, 24 has to
be met by every state must also be obeyed by the federal |
government under the command of the Due Process Clause in |
the Sth Amendment.*> “Equal protection analysis in the Fifth |
Amendment area is the same as that under the Fourteenth
Amendment.”26
” Nordlinger, supra note 4, 505 U.S. at__, 112 S.Ct. at 2331; Loving
v. Virginia, 388 U.S. 1, 10, 87 S.Ct. 1817, 1822, 18 L.Ed.2d 1010 (1967);
Hill v. Texas, 316 U.S. 400, 405, 62 S.Ct. 1159, 1162, 86 L.Ed. 1559 (1942).
Although there is no equal protection clause in the Sth Amendment,
the Court recognizes in its provisions the presence of an element of equal
treatment under the law, which “stem[s] from our American ideal of fair-
ness.” Bolling v. Sharpe, 347 U.S. 497, 500, 74 S.Ct. 693, 694, 98 L.Ed. 884
(1954); see also Washington v. Davis, 426 U.S. 229, 239, 96 S.Ct. 2040,
2047, 48 L.Ed.2d 597 (1976); Weinberger v. Wiesenfeld, 420 U.S. 636, 638
n.2, 95 S.Ct. 1225, 1228, 43 L.Ed.2d 514 (1975); Davis v. Passman, 442 U.S.
228, 234, 99 S.Ct. 2264, 2271, 60 L.Ed.2d 846 (1979). The equal protection
component of the 5th Amendment forbids discrimination that is “so unjusti-
fiable as to be violative of due process.” Bolling, supra, 347 U.S. at 499, 74
S.Ct. at 694.
76 Buckley v. Valeo, 424 U.S. 1, 93, 96 S.Ct. 612, 670, 46 L.Ed.2d 659
(1976).
A - 25
Section 5 of the 14th Amendment?” empowers Congress
to enact legislation implementing the commands of that amend-
ment. While the 14th Amendment’s enforcement clause is a
positive grant of power authorizing Congress to exercise its
discretion in determining what statute is needed to shield equal
protection guarantees, the Sth Amendment prohibits that federal
law-making body from assaulting those guarantees by the very
legislation that is meant to secure them. 28
Economic legislation — like that in the two acts tendered
for our consideration today — “that does not employ suspect
classifications or impinge on judgmental rights must [generally]
be upheld against equal protection attack when the legislative
means are rationally related to a legitimate governmental pur-
pose.””” State legislation imposing a tax on one individual but
Section 5 of the 14th Amendment gives Congress the “power to
enforce, by appropriate legislation, the provisions of this article.” See Katzen-
back v. Morgan, 384 U.S. 641, 648-650, 86 S.Ct. 1717, 1722-1723, 16
L.Ed.2d 828 (1966), where the Court upheld Congress’ statutory prohibition
of state-imposed literacy tests because of their discriminatory effect upon
illiterate minorities. There, the Court subordinated its own contrary juris-
prudence to the § 5 implementing legislation.
Shapiro v. Thompson, 394 U.S. 618, 630, 89 S.Ct.1322, 22 L.Ed.2d
600 (1969) (overruled in part on other grounds, Edelman v. Jordan, 415 U.S.
651, 671, 94 S.Ct. 1347, 1359-1360, 39 L.Ed.2d 662 (1974)); Graham v.
Richardson, 403 U.S. 365, 382, 91 S.Ct. 1848, 1857, 29 L.Ed.2d 534 (1971);
Mississippi University for Women v. Hogan, 458 U.S. 718, 732-733, 102
S.Ct. 3331, 3340, 73 L.Ed.2d 1090 (1982) citing Katzenback, supra note 27):
Williams v. Rhodes, 393 U.S. 23, 29, 89 S.Ct. 5, 9-10, 21 L.Ed.2d 24 (1968).
79 Hodel v. Indiana, 452 U.S. 314, 331, 101 S.Ct. 2376, 2387, 69 L.Ed.2d
40 (1981); Schweiker v. Wilson, 450 U.S. 221, 230, 101 S.Ct. 1074, 1080.
67 L.Ed.2d 186 (1981); Western & Southern Life Ins. Co. v. State Board of
Equalization, 451 U.S. 648, 668, 101 S.Ct. 2070, 2083, 68 L.Ed.2d 514
(1981); Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 461-463, 101
S.Ct. 715, 722-723, 66 L.Ed.2d 659 (1981) reh. denied 450 U.S. 1027, 101
S.Ct. 1735, 68 L.Ed.2d 222 (1981); United States R.R. Retirement Bd. v.
Fritz, 449 U.S. 166, 174-79, 101 S.Ct. 453, 459-61, 66 L.Ed.2d 368 (1980)
reh. denied 450 U.S. 960, 101 S.Ct. 1421, 67 L.Ed.2d. 385 (1981); Kotch v.
Board of River Pilot Commr’s, 330 U.S. 552, 564, 67 S.Ct. 910, 916, 91 L.Ed.
A - 26
not on others of the same class may, on the other hand, violate
the Equal! Protection Clause.*° Federal economic legislation
which has a discriminatory tax impact on class members may
similarly infringe on due process rights. Whether Congress’
mandate for nondiscriminatory state tax treatment of railroads
and air carriers was passed in the exercise of its powers under
the Commerce Clause or under the enforcement provisions in
§ 5 of the 14th Amendment, it is clear that the two federal
statutes result in disparate treatment of pipelines, which, though
falling within the congressionally established class of common
carriers in interstate commerce, are denied the same shield
against excessive state tax assessment ratios.>! In sum, pipelines
have been excluded by Congress from the subclass of favored
common carriers who alone enjoy the palladium against burden-
some taxation.>?
1093 (1947) reh.denied 331 U.S. 864, 67 S.Ct. 1196, 91 L.Ed. 1869 (1947);
Regan v. Taxation with Representation of Washington, 461 U.S. 540, 547,
103 S.Ct. 1997, 2001-2002, 76 L.Ed.2d 129 (1983); Exxon Corporation v.
Eagerton, 462 U.S. 176, 195, 103 S.Ct. 2296, 2308, 76 L.Ed.2d 497 (1983); Eaton
v. Jarvis Products Corp., 965 F.2d 922, 929 (10th Cir. 1992).
s Hillsborough Tp. v. Cromwell, 326 U.S. 620, 623, 66 S.Ct. 445, 448,
90 L.Ed. 358, 363 (1946); cf. City of New Orleans v. Dukes, 427 U.S. 297,
303-304, 96 S.Ct. 2513, 2516-2517, 49 L.Ed.2d 511 (1976) (states are given
greater latitude in implementing purely economic regulations challenged as
violative of the Equal Protection Clause of the 14th Amendment).
3! The Interstate Commerce Act, 49 U.S.C. §§ 10101 (1988) er seq.,
governs, among other things, all common and air carriers (if the latter are not
statutorily included within the definition of common carrier) in interstate
commerce. The terms of 49 U.S.C. § 10102 (4) define a common carrier as
“an express career, a pipeline carrier, a rail carrier, a sleeping car carrier, a
motor common carrier, a water common carrier, and a household goods
freight forwarder.” (Emphasis added.) Though there may be some doubt
whether federal legislation includes air carriers under the heading of common
carrier, I refer to the term common carrier as all-inclusive.
*2 See Appeal of ANR Pipeline Co., 254 Kan. 534, 543, 866 P.2d 1060,
1066-1067 (1994), cert. denied, _U.S._, 115 S.Ct. 296, _ L.Ed.2d _
(1994), where the court notes: “The brief of the [Kansas] Department of
A-27
When Congress singles out some members of a class for a
benefit not given to others in the same class and no rational
relation can be shown for the disparate treatment, an impermis-
sible underinclusive class*> is created which denies the ex-
cluded members equal treatment under the law. Legislative
history, interpretive case law and the text of the two statutes
demonstrate no rational relationship between the disparity cre-
ated and some legitimate government aim to be achieved.*4
Congress, while favoring some common carriers, plainly omit-
ted pipelines from the protective shield afforded by the two acts.
When measured against the anti-discrimination component of
the 5th Amendment, the two federal statutes in question are void
for underinclusiveness. / would so hold.
The Supremacy Clause*5 mandates preemption of state
regulation by discordant national legislation that is conformable
to the U.S. Constitution.*° Federal statutory law that would
require this court to violate the equal-treatment command of the
U.S. Constitution need not be obeyed as valid legislation.3”
Revenue states pipeline companies attempted unsuccessfully to obtain like
federal legislation in their favor. The statement is not disputed.” (Emphasis
added).
33 , i , ie
For a discussion of impermissible under inclusive classifications, see
Orr v. Orr, 440 U.S. 268, 272, 99 S.Ct. 1102, 1108, 59 L.Ed.2d 306 (1979);
Stanton v. Stanton, 421 U.S. 7, 13-14, 95 S.Ct. 1373, 1377, 43 L.Ed.2d 688
(1975).
Clements v. Fashing, 457 U.S. 957, 964, 102 S.Ct. 2836, 2844, 73
L.Ed.2d 508 (1982).
35 Art. 6, cl. 2, U.S. Const., states in pertinent part:
“This Constitution, and the Laws of the United States which shall
be made in Pursuant thereof . . . shall be the supreme Law of the
Land; and the Judges in every State shall be bound thereby, . . . . “
Pac. Gas & Elc. v. St. Energy Resources Conserv., 461 U.S. 190,
203-204, 103 S.Ct. 1713, 1722, 75 L.Ed.2d 752 (1983).
Shapiro, supra note 28, 394 U.S. at 630, 89 S.Ct at 1325; Graham.
supra note 28, 403 U.S. at 382, 91 S.Ct at 1857.
ABSENT PREEMPTIVE FEDERAL
LEGISLATION THAT IS FREE FROM
CONSTITUTIONAL INFIRMITY,
ART. 10, § 5, OKL.CONST.,38 COMMANDS THE
INCLUSION OF ALL PUBLIC SERVICE CORPORA-
TIONS IN THE SAME TAX CLASSIFICATION
The State Constitution authorizes the Legislature to class-
ify property for ad valorem taxation°? and requires the State
Board to assess uniformly all public service corporation prop-
erty.40 The Legislature has divided property that is subject to
ad valorem tax into three classes — real, personal and public
service corporation property*! — and has then carved out of the
latter class a subclass embracing only railroad and air carrier
property.42 For ad valorem taxation purposes, railroads, air
38 The terms of Art. 10, § 5, Okl.Const., are:
“The power of taxation shall never be surrendered, suspended,
or contracted away. Taxes shall be uniform upon the same class
of subjects.” (Emphasis added.)
The terms of Art. 10, § 22, Okl.Const., are:
“Nothing in this Constitution shall be held, or construed, to
prevent the classification of property for purposes of taxation;
and the valuation of different classes by different means or
methods. (Emphasis added.)
#0 Art. 10, § 5, Okl.Const., supra note 38. The terms of Art. 10, § 21,
Okl1.Const., are:
39
“A. There shall be a State Board of Equalization consisting of
the Governor, State Auditor, State Treasurer, Lieutenant Gover-
nor, Attorney General, State Inspector and Examiner and Presi-
dent of the Board of Agriculture. The duty of said Board shall
be to adjust and equalize the valuation of real and personal
property of the several counties in the state ... and they shall
assess all railroad and public service corporation property. * *
=>
4! 68 O.S.1991 § 2803(A), supra note 18.
A- 29
carriers and pipeline companies are all integral members of the
same taxpayer category.4° They must hence be treated alike.
Because I believe the federal legislation in question is
constitutionally infirm, I would require that the State Board
comply with our own fundamental law mandating uniform
assessment ratio for all entities within the same class.
VI
CONGRESS MAY NOT AUTHORIZE THE STATES
TO VIOLATE THE EQUAL PROTECTION CLAUSE
Assuming that the two federal acts are not infirm when
tested for conformity to the Sth Amendment’s anti-discrimina-
tion component, they must nonetheless be condemned as imper-
missible congressional commands to the states. This is so
because both statutes clearly call for an unmistakable violation
of the 14th Amendment’s Equal Protection Clause.44 The U.S.
Supreme Court’s jurisprudence inexorably commands the states
to establish and follow an ad valorem tax regime that is not
offensive to equal protection.*> Federal /egislation, on the other
*2 68 0.S.1991 § 2864(C), supra note 3.
43 The terms of 68 O.S.1991 § 2808 provide in pertinent part:
“A. The term public service corporation, as, used in the Ad
Valorem Tax Code, shall include . . . all persons authorized .. .
to use or occupy any right-of-way, street, alley, or public high-
way, along, over or under the same in a manner not permitted to
the general public.”
See Pure Oil Pipe Line Co. v. Cornish, 163 Okl. 79, 20 P.2d 1041, 1043-44
(1933).
For the terms of the Equal Protection Clause of the 14th Amend., U.S.
Const., see supra note 4; Nordlinger, supra note 4, 505 U.S. at__, 112 S.Ct.
at 2331.
Allegheny Pittsburgh Coal Co. v. County Comm’n, 488 U.S. 336,
344, 109 S.Ct. 633, 638, 102 L.Ed.2d 688 (1989); Lehnhausen v. Lake Shore
Auto Parts Co., 410 U.S. 356, 359, 93 S.Ct. 1001, 1003, 35 L.Ed.2d 351
ee ee ee
A - 30
hand, requires that railroads and air carriers not be assessed at a
higher ratio than that prescribed for commercial property.4° The
latter acts cannot be read in isolation from the broader U.S.
constitutional mandate that calls upon the states to comply with
equal protection guarantees.4” Congress’ statutory command
that the states give air carriers and railroads preferential tax
treatment plainly places the states’ assessment regimes in con-
travention of the U.S. Supreme Court’s equal protection juris-
prudence. This is so because no rational basis exists for denying
pipelines (and other similarly situated landowners) the palla-
dium afforded by the constitutional requirement for an assess-
ment regime that would pass equal protection muster.*®
“Congress may not authorize the States to violate the Equal
Protection Clause.”49 Although “deference [must be given] to
congressional decisions and classifications, neither Congress
nor a State can validate a law that denies the rights guarantecd
by the Fourteenth Amendment.”>° The powers granted by the
(1973) reh. denied 411 U.S. 910, 93 S.Ct. 1523, 36 L.Ed.2d 200 (1973).
Hillsborough, supra note 30, teaches that “[t}he equal protection clause of
the Fourteenth Amendment protects the individual from state action which
selects him out for discriminatory treatment by subjecting him to taxes not
imposed on others of the same class. The right is the right to equal treatment.”
Id., 326 U.S. at 623, 66 S.Ct. at 448. “[A] taxpayer, although assessed on not
more than full value, may be unlawfully discriminated against by undervalu-
ation of property of the same class belonging to others.” Southern Railway
Co. v. Watts, 260 U.S. 519, 526, 43 S.Ct. 192, 195, 67 L.Ed. 375 (1923).
46 See 4-R Act, supra note 16; TEFRA, supra note 17.
47 For the terms of the Equal Protection Clause of the 14th Amend..,
§ 1, U.S.Const., see supra note 4; see also Nordlinger, supra note 4, 505
US. at, 112 S.Ct. at 2331.
Different treatment of similarly situated taxpayers does not violate
equal protection so long as rational basis exists for the disparity of treatment.
Lehnhausen, supra note 45, 410 U.S. at 359, 93 S.Ct. at 1003.
9 Shapiro, supra note 28, 394 U.S. at 618, 89 S.Ct. at 1325; Graham,
supra note 28, 403 U.S. at 382, 91 S.Ct. at 1857.
A- 31
U.S. Constitution to the Congress or to the states “are always
subject to the limitation that they may not be exercised in a way
that violate[s] other specific provisions of the Constitution.”>!
The court today notes that the 4-R Act has been upheld by
some federal courts°? and that no state or federal court has ever
declared either that act or TEFRA unconstitutional.*> The cases
cited in the court’s opinion are not persuasive as a legal barrier
to the court’s recognition of the constitutional flaw to which I
allude. Inone of the cases, Tennessee v. Louisville,>4 the federal
court applied a two-part test for determining the constitutionality
of federal legislation under the Commerce Clause: such legisla-
tion, the court said, (1) must bear a rational nexus to an activity
that affects interstate commerce; and (2) if Congress finds such
a basis, it must select a reasonable and appropriate means of
eliminating the detrimental effect the offending activity would
exert on interstate commerce. None of these cases addressed the
issue whether the federal legislation under our scrutiny today
would pass constitutional muster either under the rational-basis
test of the 5th Amendment’s anti-discrimination component or
under the 14th Amendment’s Equal Protection Clause. In the
- Mississippi University, supra note 28, 458 U.S. at 732-733, 102 S.Ct.
at 3340 (citing Katzenbach, supra note 27).
>! Rhodes, supra note 28, 393 U.S. at 29, 89 S.Ct. at 9-10.
>? See State of Arizona v. Atchison, Topeka and Santa Fe RR Co., 656
F.2d 398, 405 (9th Cir. 1981); Louisville & Nashville RR Co. v. Louisiana
_ Tax Comm’n, 498 F.Supp. 418, 422 (1980); Tennessee v. Louisville &
Nashville RR Co., 478 F.Supp. 199, 206-207 (M.D.Tenn. 1979), aff'd, 652
F.2d 59 (6th Cir. 1981), cert. denied, 454 U.S. 834, 102 S.Ct. 135, 70 L.Ed.2d
114 (1981).
~ My research reveals no federal TEFRA jurisprudence which ad-
dresses the constitutional validity of the Act against an attack based on the
Sth Amendment’s anti-discrimination component. In Salem Transp. Co. v.
Port Authority of N.Y. & N.J., 611 F.Supp. 254, 258 (S.D.N.Y. 1985), the
court held that a gross receipts fee levied by a market-participant local
A - 32
absence of a binding Supreme Court precedent,>> on substan-
tive federal-law questions we follow, as a matter of pure comity,
the Tenth Circuit pronouncements, and on issues affecting state
action we defer to that court’s constitutional jurisprudence.*°
Because neither the U.S. Court of Appeals for the Tenth Circuit
nor the highest federal Court ever has passed upon the issue
before us here,>’ we need not today give deference to any extant
federal case law. In the exercise of its inherent authority under
the U.S. Constitution, this court is competent to test the two
federal statutes for constitutional orthodoxy.
Vil
THE CONGRESSIONAL COMMERCE-CLAUSE
POWERS DO NOT LEND SUPPORT TO THE
VALIDITY OF THE TWO FEDERAL ACTS
Bacchus Imports, Ltd. v. Dias*® struck down as violative
of the Commerce Clause5? a state excise tax which discrimi-
nated against interstate commerce by bestowing a commercial
government entity violates neither the provisions of TEFRA nor Commerce
Clause principles.
4 Tennessee, supra note 52 at 206-207.
°> No extant U.S. Supreme Court jurisprudence has addressed the con-
stitutional validity of the federal law under scrutiny here (49 U.S.C.A.
§§ 1513(d)(1)(A), | 1503(b)(1)). In Dept. of Revenue of Or. v. ACF Indus-
tries, U.S. __, 114 S.Ct. 843, 849, 127 L.Ed.2d 165 (1994), a recent case
construing the 4-R Act, the Court merely held the act’s definition of “commercial
and industrial property” excludes property exempted under applicable law.
56 Phillips v. Williams, Okl., 608 P.2d 1131, 1135 (1980); McLin v.
Trimble, Okl., 795 P.2d 1035, 1047 (1990)(Opala, J., dissenting).
57 In Atchison, T. & S. F. Ry. Co. v. Lennen, 640 F.2d 255, 258-259
(10th Cir. 1981), the court interpreted the 4-R Act to authorize injunctive
relief to facilitate the Act’s enforcement, but had before it no issues of a
constitutional dimension.
58 468 U.S. 263, 272-273, 104 S.Ct. 3049, 3055-3056, 82 L.Ed.2d. 200
(1984).
A - 33
advantage (excise tax exemption) on sales of wine and liquor
made from local products while imposing a 20% excise tax on
foreign liquor. The Court held that the states may not build up
their domestic commerce by means of unequal and oppressive
burdens placed upon the industry and business of other states.
Bacchus teaches that state economic protectionism cannot be
rested on the legislative “characterization of an industry as
,»”
either ‘thriving’ or ‘struggling as
The 4-R Act’s purpose, stated in the congressional decla-
ration of policy, is “to provide the means to rehabilitate and
maintain the physical facilities, improve the operations and
structure, and restore the financial stability of the railway system
of the United States.”©! TEFRA’s objective is “to provide for
tax equity and financial responsibility.”©2 Congress’ solution to
these goals was (a) § 11503, which prohibits discriminatory state
taxation of railroad property®? and (b) § 1513(d), which simi-
larly shields air carrier property.™ If the states cannot protect
struggling entities by classifying them for a more favorable tax
treatment, neither can Congress (the latter by failing to extend
its protective arm to less deserving public service corporations)
command the states to discriminate against businesses in inter-
state commerce in a manner that offends the U.S. Supreme
Court’s Commerce Clause jurisprudence.® I would hence re-
° The pertinent terms of Art. 1, § 8, cl. 3, U.S.Const., are:
“The Congress shall have power. . . [t}o regulate Commerce with
foreigs, Nations, and among the several States. . . .”
6 Bacchus, supra note 58, 468 U.S at 272-273, 104 S.Ct. at 3056.
Burlington Northern Railroad Company v. Oklahoma Tax Commis-
sion, 481 U.S. 454, 457, 107 S.Ct. 1855, 1857, 95 L.Ed.2d 404 (1987) quot-
ing from § 10i(a), 90 Stat. 31).
62 Public Law 97-248, Sept. 3, 1982, 96 Stat. 324.
63 For the pertinent terms of 49 U.S.C. § 11503, see supru note 16; see
also Burlington Northern, supra note 61, 481 U.S. at 457, 107 S.Ct. at 0858.
For the pertinent terms of 49 U.S.C. § 1513(d), see supra note 17.
|
|
j
A - 34
fuse today to give our imprimatur to federal legislation that
places state governments in violation of the Commerce Clause
by giving some public service corporations favorable tax treat-
ment in an attempt to improve their financial stability, while
denying the same economic advantage to others through an
impermissible regime of thriving/struggling industry classification.
Vill
THE COURT’S ANALYSIS LEADS IT TO
AN INDEFENSIBLE CONCLUSION
The State Board’s underassessment of air carrier and rail-
road property will not pass constitutional muster under the 14th
Amendment. The equal protection component of the 14th
Amendment prohibits that state action which imposes on some
members of a class burdens and liabilities which are not cast
upon others similarly situated. It makes no difference here
whether the underassessment of air carrier or railroad property
comes about because of deliberate action by the State Board,
legislative enactments or by federal-law compulsion. The im-
pact remains the same. The 14th Amendment’s Equal Protection
Clause commands that pipeline property be accorded tax treat-
ment that is the same as that extended to other public service
corporations. In short, by underassessing railroad and air carrier
property, the state has denied the pipelines equal protection of
the law.
Because our constitutional command — that public service
corporation property be taxed uniformly®’ — is not and has not
been shown to offend against any federal fundamental-law
mandate, we cannot use today federal preemption as an excuse
for violating our own fundamental law.
6 Rhodes, supra note 28, 393 US. at 29, 89 S.Ct. at 9-10, teaches that
the powers granted by the Constitution to the Congress or to the states “are
ua dh kde Set cat
IX
NATURE OF RELIEF TO BE GRANTED AS A
REMEDY FOR THE OFFENDING
ASSESSMENT RATIO
I would direct today that, upon due notice and hearings, the
State Board set an across-the-board assessment ratio for all
public service corporations. On the State Board’s failure to do
so within some reasonable period of time to be set by the court,
I would direct that the petitioners could discharge their ad
valorem tax liability at the assessment ratio now applicable
solely to railroads and air carriers.®
Because my solution represents a sharp break with recent
practice, I would give it prospective effect and make it apply to
this proceeding, to like challenges presently pending before the
Court of Tax Review or before any administrative agency and
always subject to the limitation that they may not be exercised in a way that
violate[s] other specific provisions to the Constitution.”
“4 Nordlinger, supra note 4, 505 U.S. at __, 112 S.Ct. at 2331.
6” See Part V, supra.
68 Before promulgating the court’s pronouncement J would require the
petitioners join in this case as parties respondent all railroads and air
carriers presently benefiting from the acts of Congress that are under con-
sideration in this proceeding and would invite all those added entities to show
cause why these acts should not be declared infirm for underinclusiveness.
“Where a statute is defective because of underinclusion . . . there exist two
remedial alternatives: a court may cither declare [it] a nullity and order that
its benefits not extend to the class that the legislature intended to benefit, or
it may extend the coverage of the statute to include those who are aggrieved
by exclusion.” Califano v. Westcott, 443 U.S. 76, 89, 99 S.Ct. 2655, 2663,
61 L.Ed.2d 382 (1979) (quoting Welsh v. United States, 398 U.S. 333, 361,
90 S.Ct. 1792, 1807-1808, 26 L.Ed.2d 308 (1970) (Harlan, J., concurring in
result)); Orr, supra note 33, 440 U.S. at 272, 99 S.Ct. at 1108.
A - 36
to challenges now in the appellate litigation process;®? I would
expressly reject any refund claims to be pressed by the adversely
affected entities for overpayment of taxes assessed against their
property at the impermissible ratio during any past years.””
Changes to be implemented in the assessment ratio would be post-
poned to take effect during the fiscal year beginning July 1, 1996.
X
SUMMARY
Federal legislation which treats differently members of the
same class without a rational basis for the imposed disparity
cannot pass constitutional muster when measured either by the
anti-discrimination component of the Sth Amendment’s Due
Process Clause or by the U.S. Supreme Court’s Commerce
Clause jurisprudence. The two federal acts in question here are
fatally flawed by an impermissible underinclusion which af-
fords some common carriers (railroads and air carriers) protec-
tion from discriminatory state ad valorem tax regime but
excludes out-of-hand other members of the same class. State
wie prospective effect I would give today is known as the “pipeline
doctrine”. That doctrine saves from extinction those interests presently in
litigation (i.e., the case before the court and cases pending before trial
tribunals or in the appellate litigation process) or capable of being litigated
when the new rule is announced. For Oklahoma jurisprudence applying a
new rule of law to cases in the pipeline see Amoco Production v. Corp. Com’n
of Okl., Okl.App., 751 P.2d 203, 208 (1986); Schepp v. Hess, Okl., 770 P.2d
34, 39 (1989); Dow Jones & Co. v. State ex rel. Tax Com’n, Okl., 787 P.2d
843, 847 (1990); Strelecki v. Oklahoma Tax Comm’n, OKI., 872 P.2d 910,
915 n. 44 (1994); Schulte v. Oklahoma Tax Commission, Ok1., 882 P.2d 65,
75 (1994). James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 111 S.Ct.
2439, 2444-2445, 115 L.Ed.2d 481 (1991), is a U.S. Supreme Court refine-
ment of the pipeline doctrine aimed at securing equality for all claims that
are pending, or for those capable of being litigated, when the new rule is
announced; see also Harper v. Virginia Dept. of Taxation, 509 U.S. _, 113
S.Ct. 2510, 2518, 125 L.Ed.2d 74 (1993).
70 Schulte, supra note 69 at 74.
e
|
A - 37
legislation passed in response to these federal-law commands
clearly violates the 14th Amendment. Because under my analy-
sis the two federal acts are clearly constitutionally infirm, |
would hold today that they cannot operate to preempt contrary
state law. The State Board should hence be declared free of
federal-law restraint, and indeed required by our own fundamen-
tal law, to set a reasonable assessment ratio that equally impacts
the property of all public service corporations. On the State
Board’s failure to act timely by establishing the required, even-
handed assessment ratio, I would extend the benefit of the lower
(railroad and air carrier) ratio to all challengers, who on like
grounds are presently pressing claims before the Court of Tax
Review or before any administrative agency, and to all those
whose challenges are now in the appellate litigation process.
Lastly, I would give prospective effect to my pronounce-
ment, making it apply to this case, to like challenges presently
pending before the Court of Tax Review or before any admin-
istrative agency and to challenges now in appellate litigation
process; I would expressly reject any refund claims to be pressed
(by the adversely affected entities) for overpayment of taxes
assessed against their property at the impermissible ratio during
any past period and would postpone the effective date of the
nonoffending ratio to be established to the fiscal year commenc-
ing July 1, 1996.
-
B-1
Appendix B
Iu the Supreme Court of the
State of Oklahoma
FILED
SUPREME COURT
STATE OF OKLAHOMA
MAR 7, 1995
JAMES W. PATTERSON
CLERK
The Clerk is directed to issue to following orders:
82,410
82,671
82,821
82,822
John and Patty McCown etc. v. City of Elk
City et. al.
Petition for certiorari denied.
CONCUR: Hodges, Lavender, Simms,
Hargrave, Opala, Summers, Watt, JJ.
DISSENT: Wilson, C.J., Kauger, V.C.J.
Randy and Patty Martin v. Jack Yates etc. et al.
Petition for certiorari denied.
CONCUR: All Justices concur.
(comp. w/ 82,822) The State of Oklahoma v.
Jiminez Geraldo Escobar v. American
Bankers Life Insurance Company.
Petition for certiorari denied.
CONCUR: All Justices concur.
(comp. w/ 82,821) The State of Oklahoma v.
Gerardo Melchor Madrigal v. American
Bankers Life Insurance Company.
Petition for certiorari denied.
CONCUR: All Justices concur.
B-2
83,143 Floyd Electric Motor Company, Inc. v.
Professional Services Group, Inc.
Petition for certiorari denied.
CONCUR: All Justices concur.
83,255 In the Matter of the Estate of Henry Treisa
and Verda M. Treisa, deceased.
Petition for certiorari denied.
CONCUR: Kauger, V.C.J., Lavender, Simms,
Hargrave, Opala, Summers, JJ.
DISSENT: Wilson, C.J., Hodges, Watt, JJ.
83,420 Warehouse Market, Inc. etc. v. Charles
Daniel Sayre et al.
Petition for certiorari denied.
CONCUR: All Justices concur.
84,097 Williams Natural Gas Company et al. v.
State Board of Equalization and Oklahoma
Tax Commission.
Petitions for rehearing denied. Petitioners and
4 Intervenors motion to stay denied
VOTE ON REHEARING:
; CONCUR: Kauger, V.C.J., Hodges, Simms,
Hargrave, Summers, Watt, JJ.
DISSENT: Wilson, C.J., Lavender, Opala, JJ.
VOTE ON MOTION TO STAY DENIED:
CONCUR: All Justices concur.
Response due: 6-5
Docketed: 3-8 cm ls/_ Alma Wilson _
CHIEF JUSTICE
C-1
Appendix C
49 U.S.C. § 11503.
Tax discrimination against rail transportation property
(a) In this section—
(1) “assessment” means valuation for a property tax
levied by a taxing district.
(2) “assessment jurisdiction” means a geographical
area in a State used in determining the assessed value
of property for ad valorem taxation.
(3) “rail transportation property” means property, as
defined by the Interstate Commerce Commission,
owned or used by a rail carrier providing transporta-
tion subject to the jurisdiction of the Commission
under subchapter I of chapter 105 of this title.
(4) “commercial and industrial property” means prop-
erty, other than transportation property and land used
primarily for agricultural purposes or timber growing,
devoted to a commercial or industrial use and subject
to a property tax levy.
(b) The following acts unreasonably burden and discriminate against
interstate commerce, and a State, subdivision of a State, or authority
acting for a State or subdivision of a State may not do any of them:
(1) assess rail transportation property at a value that
has a higher ratio to the true market value of the rail
transportation property than the ratio that the assessed
value of other commercial and industrial property in
the same assessment jurisdiction has to the true market
value of the other commercial industrial property.
(2) levy or collect a tax on an assessment that may not
be made under clause (1) of this subsection.
(3) levy or collect an ad valorem property tax on rail
transportation property at a tax rate that exceeds that
C-2
tax rate applicable to commercial and industrial prop-
erty in the same assessment jurisdiction.
(4) impose another tax that discriminates against a rail
carrier providing transportation subject to the jurisdic-
tion of the Commission under subchapter I of chapter
105 of this title.
(c) Notwithstanding section 1341 of title 28 and without regard to
the amount in ‘controversy or citizenship of the parties,’ a district
court of the United States has jurisdiction, concurrent with other
jurisdiction of courts of the United States and the States, to prevent
a violation of subsection (b) of this section. Relief may be granted
under this subsection only if the ratio of assessed value to true
market value of rail transportation property exceeds by at least 5
percent, the ratio of assessed value to true market value of other
commercial and industrial property in the same assessment juris-
diction. The burden of proof in determining assessed value and true
market value is governed by State law. If the ratio of the assessed
value of other commercial and industrial property in the assessment
jurisdiction to the true market value of all other commercial and
industrial property cannot be determined to the satisfaction of the
district court through the random-sampling method known as a
sales assessment ratio study (to be carried out under statistical
principles applicable to such a study), the court shall find, as a
violation of this section—
(1) an assessment of the rail transportation property at
a value that has a higher ratio to the true market value
of the rail transportation property than the assessed
value of all other property subject to a property tax
levy in the assessment jurisdiction has to the true
market value of all other commercial and industrial
property; and
(2) the collection of an ad valorem property tax on the
rail transportation property at a tax rate that exceeds
the tax ratio rate applicable to taxable property in the
taxing district.
D-1
Appendix D.
Title 49. Transportation
Subtitle VII. Aviation Programs
Part A. Air Commerce and Safety
Subpart I. General
Chapter 401. General Provisions
49 U.S.C. § 40116 (1994)
Section 40116. State Taxation
(a) Definition. In this section, “State” includes the District of
Columbia, a territory or possession of the United States, and a
political authority of at least 2 States.
(b) Prohibitions. Except as provided in subsection (c) of this
section and section 40117 of this title, a State or political
subdivision of a State may not levy or collect a tax, fee, head
charge, or other charge on - -
(1) an individual traveling in air commerce;
(2) the transportation of an individual traveling in air
commerce;
(3) the sale of air transportation; or
(4) the gross receipts from that air commerce or
transportation.
(c) Aircraft taking off or landing in State. A State or political
subdivision of a State may levy or collect a tax on or related to
a flight of a commercial aircraft or an activity or service on the
aircraft only if the aircraft takes off or lands in the State or
political subdivision as part of the flight.
(d) Unreasonable burdens and discrimination against interstate
commerce.
(1) In this subsection - -
D-2
(A) “air carrier transportation property” means property (as
defined by the Secretary of Transportation) that an air carrier
providing air transportation owns or uses.
(B) “assessment” means valuation for a property tax levied by
a taxing district.
(C) “assessment jurisdiction” means a geographical area in a
State used in determining the assessed value of property for ad
valorem taxation.
(D) “commercial and industrial property” means property (ex-
cept transportation property and land used primarily for agricul-
ture or timber growing) devoted to a commercial or industrial
use and subject to a property tax levy.
(2) (A) A State, political subdivsion of a State, or
authority acting for a State or political subdivision
may not do any of the following acts because those
acts unreasonably burden and discriminate against
interstate commerce:
(i) assess air carrier transportation property at a
value that has a higher ratio to the true market
value of the property than the ratio that the
assessed value of other commercial and indus-
trial property of the same type in the same assess-
ment jurisdiction has to the true market value of
the other commercial and industrial property.
(ii) levy or collect a tax on an assessment that
may not be made under clause (i) of this subpara-
graph.
(iii) levy or collect an ad valorem property tax
on air carrier transportation property at a tax rate
greater than the tax rate applicable to commercial
and industrial property in the same assessment
jurisdiction.
D -3
(iv) Levy or collect a tax, fee, or charge, first
taking effect after the date of the enactment of
this clause, exclusively upon any business lo-
cated at a commerical service airport or operat-
ing as a permittee of such an airport other than a
tax, fee, or charge wholly utilized for airport or
aeronautical purposes.
(B) Subparagraph (A) of this paragraph does not apply to an in
lieu tax completely used for airport and aeronautical purposes.
(e) Other allowable taxes and charges. Except as
provided in subsection (d) of this section, a State or
political subdivision of a State may levy or collect - -
(1) taxes (except those taxes enumerated in sub-
section (b) of this section), including property
taxes. net income taxes, franchise taxes, and
sales or use taxes on the sale of goods or services;
and
(2) reasonable rental charges, landing fees, and
other service charges from aircraft operators for
using airport facilities of an airport owned or
operated by that State or subdivision.
(f) Pay of air carrier employees.
(1) In this subsection - -
(A) “pay” means money received by an employee for services.
(B) “State” means a State of the United States, the District of
Columbia, and a territory or possession of the United States.
(C) an employee is deemed to have earned 50 percent of the
employee’s pay in a State or political subdivision of a State in
which the scheduled flight time of the employee in the State or
subdivision is more than 50 percent of the total scheduled flight
time of the employee when employed during the calendar year.
D-4
(2) The pay of an employee of an air carrier having regularly
assigned duties on aircraft in at least 2 States is subject to the
income tax iaws of only the following:
(A) the state or political subdivision of the State that
is the residence of the employee.
(B) the State or political subdivision of the State in
which the employee earns more than 50 percent of the
pay received by the employee from the carrier.
(3) Compensation paid by an air carrier to an employee de-
scribed in subsection (a) in connection with such employee’s
authorized leave or other authorized absence from regular duties
on the carrier’s aircraft in order to perform services on behalf of
the employee’s airline union shall be subject to the income tax
laws of only the following:
(A) The State or political subdivision of the State that
is the residence of the employee.
(B) The State or political subdivision of the State in
which the employee’s scheduled flight time would
have been more than 50 percent of the employee’s
total scheduled flight time for the calendar year had
the employee been engaged full time in the perform-
ance of regularly assigned dwties on the carrier’s
aircraft.
HISTORY: (July 5, 1994, P.L. 103-272, @ 1 (e), 108 Stat.
1111; Aug. 23, 1994, P.L. 103-305, Title I, @ 112 (e), Title II,
@ 208, 108 Stat. 1576, 1588.)
E-1
Appendix E
68 § 2864 REVENUE AND TAXATION
§ 2864
State Board of Equalization—Membership — Sessions
— Officers — Quorum — Powers, duties and authority
A. The Governor, State Auditor and Inspector, State
Treasurer, Lieutenant Governor, Attorney General, Superinten-
dent of Public Instruction and President of the Board of Agri-
culture shall constitute the State Board of Equalization, and the
State Board of Equalization must hold a session at the Capitol
of the State, commencing at ten o’clock a.m. on December 1, or
the first working day thereafter of each year for the purpose of
equalizing the taxable property values of the several couniies for
the next following assessment year. The State Auditor and
Inspector shall notify all other members of said Board of the
time and place of said annual session as herein required. The
Governor shall serve as chairman and the State Auditor and
Inspector shall serve as secretary of said Board, and vice-chair-
man shall be elected from the other members. In case of tlie
absence or failure of said chairman and secretary, or either of
them, to so act on the statutory meeting date, any four or more
members thereof shall proceed on said date to conduct the
Board’s session and carry on its work as herein required. Any
official action by said Board shall require approval by a majority
of all members of the Board.
B. It shall be the duty of said State Board to examine the
various county assessments and to equalize, correct and adjust
the same as between and within the counties by determining the
ratio of the aggregate assessed value of the property or any class
thereof, in any or all of them, to the fair cash value thereof as
herein defined, and to order and direct the assessment rolls of
any county in this state to be so corrected as to adjust and
E-2
equalize the valuation of the real and personal property among
the several counties during the next succeeding assessment year.
C. In determining the assessment ratio for all air carrier
property and all railroad property, the State Board shall only
consider the ratio of the aggregate assessed value to the fair cash
value of the locally assessed commercial/industrial real property
of the state.
D. In order to equalize, correct and adjust the various
county assessments within the counties as required by this
section, the State Board of Equalization shall analyze the rela-
tionship between the assessed value and the fair cash value for
each use category of real property and separately analyze the
relationship between the assessed value and the fair cash value
for the agricultural use category, the residential use category aud
the commercial/industrial use category. If Article X, Section 8
of the Oklahoma Constitution provides for a system in which
less than one hundred percent (100%) of value is taxable, the
State Board of Equalization shall order any increase or decrease
determined by the State Board of Equalization to be necessary
for equalization of property values within the county, including,
but not limited to, the authority to require an assessment ratio
for a use category bearing a specific relationship to the percent-
age used to determine taxable value of real property in the
county for the applicable assessment year. If Article X, Section
8 of the Oklahoma Constitution provides for a system in which
one hundred percent (100%) of value is taxable, the State Board
of Equalization shall make such order as authorized by Article
X, Section 8 of the Oklahoma Constitution.
E. The State Board of Equalization shall equalize, correct
and adjust the various county assessments as between the coun-
ties as required by this section by ordering any increase or
decrease required as prescribed by this subsection. If Article X,
Section 8 of Oklahoma Constitution provides for a system in
which less than one hundred percent (100%) of value is taxable,
E-3
the State Board of Equalization shall order any increase or
decrease required to comply with the minimum or maximum
acceptable assessment ratio in effect for the applicable assess-
ment year. If Article X, Section 8 of the Oklahoma Constitution
provides for a-‘system in which one hundred percent (100%) of
value is taxable, the State Board of Equalization shall order any
increase or decrease required to ensure that the assessment ratio
for any county is not less than ninety-two percent (92%) and not
greater than one hundred percent (100%) as provided by Article
X, Section 8 of the Oklahoma Constitution.
Laws 1988, c. 162, § 64, eff. Jan. 1, 1992. Laws 1990, c.
212, § 2, eff. Jan. 1, 1992.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.