December 22, 2014

Avoiding 'Deja Vu 2' In High Court CSX Tax Case

The oral arguments before the U.S. Supreme Court in Alabama Department of Revenue v. CSX Transportation Inc. found the justices seeking a manageable way to evaluate whether a state tax statute is discriminatory while also keeping the case from appearing before the court for a third time, wrote Benjamin Blair of Faegre Baker Daniels in "Avoiding ‘Déjà vu 2' in High Court CSX Tax Case," published by Law360 on December 18, 2014. At issue is a provision of the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act) that prohibits a state from discriminating against a railroad in its tax regime.

How the Supreme Court approaches its analysis will impact not only similar railroad appeals pending across the county, but also a variety of other taxpayers protected from discriminatory taxation by congressional action, Blair wrote. Section 306 of the 4-R Act, codified at 49 U.S.C. 11501, broadly prohibits states from engaging in four discrete types of tax discrimination against railroads. While the first three involve discriminatory property taxes, subsection (b)(4) prohibits a state from "impos[ing] another tax that discriminates against a rail carrier," Blair reports.

Only time will tell which issue or issues the Supreme Court will address. One thing, however, is certain: the high court does not want its decision in CSX II to lead to a CSX III, according to Blair.

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