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BNSF Railway Company v. Oregon Department of Revenue

United States District Court, D. Oregon

December 14, 2018

OREGON DEPARTMENT OF REVENUE and NIA RAY, in her official capacity as Director of the Oregon Department of Revenue, Defendants.

          Benjamin J. Horwich, Jessica Reich Baril, and Teresa A. Reed, Munger Tolles & Olson LLP, James T. McDermott, Ball Janik LLP, Of Attorneys for Plaintiff.

          Ellen F. Rosenblum, Attorney General; Marilyn J. Harbur, Senior Assistant Attorney General; and Daniel Paul, Assistant Attorney General, Oregon Department of Justice, Of Attorneys for Defendants.



         Plaintiff BNSF Railway Company (BNSF) brings this action against the Oregon Department of Revenue and its Director, challenging Oregon's tax on intangible personal property as a discriminatory tax on railroads prohibited by the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act). Pub. L. 94-210, 90 Stat. 31. The case comes to the Court on cross-motions for summary judgment. In his Findings and Recommendation (F&R), United States Magistrate Judge John Jelderks recommended granting summary judgment in favor of Defendant. For the reasons that follow, the Court declines to adopt the F&R and instead grants BNSF's motion for summary judgment and denies Defendants' cross-motion.

         Subsection (b)(4) of the 4-R Act prohibits states from imposing a tax on railroads “that discriminates against a rail carrier.” 49 U.S.C. § 11501(b)(4). BNSF contends that the State of Oregon has violated this provision. BNSF seeks a permanent injunction, preventing Oregon from taxing BNSF in violation of the 4-R Act, as well as declaratory relief. Defendants argue that Oregon's tax comports fully with subsection (b)(4) of the 4-R Act because a property tax is not “another tax” within the meaning of the 4-R Act and because the United States Supreme Court has determined that Congress did not intend to prohibit states from granting property tax exemptions to non-rail entities while not exempting rail entities. In their briefing, the parties agree that there is no a genuine dispute of material fact and that the issue before the Court is purely a question of law.


         A party is entitled to summary judgment if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment, ” the “mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).

         When parties file cross-motions for summary judgment, the court “evaluate[s] each motion separately, giving the non-moving party in each instance the benefit of all reasonable inferences.” A.C.L.U. of Nev. v. City of Las Vegas, 466 F.3d 784, 790-91 (9th Cir. 2006) (quotation marks and citation omitted); see also Pintos v. Pac. Creditors Ass'n, 605 F.3d 665, 674 (9th Cir. 2010) (“Cross-motions for summary judgment are evaluated separately under [the] same standard.”). In evaluating the motions, “the court must consider each party's evidence, regardless under which motion the evidence is offered.” Las Vegas Sands, LLC v. Nehme, 632 F.3d 526, 532 (9th Cir. 2011). “Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party's case.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010). Thereafter, the non-moving party bears the burden of designating “specific facts demonstrating the existence of genuine issues for trial.” Id. “This burden is not a light one.” Id. The Supreme Court has directed that in such a situation, the non-moving party must do more than raise a “metaphysical doubt” as to the material facts at issue. Matsushita, 475 U.S. at 586.

         BNSF also seeks a permanent injunction to prevent a violation of subsection (b)(4), which it argues would occur if Oregon is permitted to maintain its current tax on intangible property of railroads. The 4-R Act gives a “broad grant of jurisdiction to federal courts to prevent violations of subsection (b).” CSX Transp., Inc. v. Ala. Dep't of Revenue (CSX I), 562 U.S. 277, 281 n.7 (2011). The traditional principles governing equitable relief do not apply where, as here, Congress has expressly authorized the granting of injunctive relief to halt or prevent a violation of federal law. See United States v. Estate Pres. Servs., 202 F.3d 1093, 1098 (9th Cir. 2000); Trailer Train Co. v. State Bd. of Equalization, 697 F.2d 860, 869 (9th Cir. 1983). Accordingly, if BNSF demonstrates that Oregon's taxation of intangible property of railroads violates the 4-R Act, BNSF will have sufficiently demonstrated that a permanent injunction is a necessary and appropriate remedy.


         In 1976, Congress enacted the 4-R Act to “restore the financial stability of the railway system of the United States.” Dept. of Revenue of Or. v. ACF Indus., 510 U.S. 332, 336 (1994) (quoting 45 U.S.C. § 801(a)). This legislation was needed, according to Congress, because railroads “‘are easy prey for State and local tax assessors' in that they are nonvoting, often nonresident, targets for local taxation, who cannot easily remove themselves from the locality.” Id. (quoting W. Air Lines, Inc. v. Bd. Of Equalization of S.D., 480 U.S. 123, 131 (1987)). The United States Department of Transportation had documented this problem, noting that “‘state and local governments derive substantial revenues from taxes on property owned by common carriers.' It is this temptation to excessively tax nonvoting, nonresident businesses in order to subsidize general welfare services for state residents that made federal legislation in this area necessary.” W. Air Lines, 480 U.S. at 131 (quoting S. Rep. No. 91-630 at 4 (1969)). To remedy this problem, Congress passed the 4-R Act to “prohibit[] States (and their subdivisions) from enacting certain taxation schemes that discriminate against railroads.” ACF, 510 U.S. at 336.

         The provision of the 4-R Act at issue here, 49 U.S.C. § 11501(b), “bars states and localities from engaging in four forms of discriminatory taxation.” CSX I, 562 U.S. at 280. The relevant section of the 4-R Act directs that states and their subdivisions may not:

(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 and industrial property.
(2) Levy or collect a tax on an assessment that may not be made under paragraph (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.
(4) Impose another tax that discriminates against a rail carrier providing transportation subject to the jurisdiction of the Board under this part.

49 U.S.C. § 11501(b)(1)-(4). In addition, the 4-R Act confers jurisdiction on federal courts to “prevent a violation” of subsection (b) of the Act, notwithstanding the Tax Injunction Act, 28 U.S.C. § 1341, which “ordinarily prohibits federal courts from enjoining the collection of state taxes when a remedy is available in state court.” CSX I, 562 U.S. at 281; see 49 U.S.C. § 11501(c).

         In Oregon, railroad companies are taxed through a process known as “central assessment.” Only 14 types of businesses and services are subject to central assessment taxation: (a) railroad transportation; (b) railroad switching and terminal; (c) electric rail transportation; (d) private railcar transportation; (e) air transportation; (f) water transportation upon inland water of the State of Oregon; (g) air or railway express; (h) communication; (i) heating; (j) gas; (k) electricity; (1) pipeline; (m) toll bridge; and (n) private railcars of all companies not otherwise listed in this subsection, if the private railcars are rented, leased or used in railroad transportation for hire. Or. Rev. Stat. § 308.515. In 2017, there were 513 centrally assessed companies in Oregon.

         For most taxpayers in Oregon, property is assessed by county officials, who then calculate the tax rate, determine taxpayers' tax liability, and collect payments. For centrally assessed businesses, however, Oregon calculates the value of “the entire property [owned by the business], both within and without the State of Oregon, as a unit.” Or. Rev. Stat. § 308.555. After Oregon has determined the entire value of the business's property, it multiplies the value of that property by a percentage, known as the allocation factor, to determine the portion of that property subject to tax in Oregon. For a railroad, the allocation factor is calculated using the ratio of the single track mileage in Oregon to the total single track mileage, the ratio of miles traveled in Oregon to the total miles traveled, the ratio of Oregon operating revenue to all operating revenue, the ratio of the Oregon property cost to the cost of all property, and the ratio of Oregon revenue freight ton-miles to all revenue freight-ton miles. See Or. Admin. R. 150-308-0605.

         Oregon employs two alternative methods for determining property value: Real Market Value (RMV) and Maximum Assessed Value (MAV). Or. Rev. Stat. § 308.146. The RMV is the actual assessed value of the property, while the MAV is limited to no more than 103 percent of the property's assessed value from the prior year or no more than 100 percent of the previous year's MAV, whichever is greater. Id. As between the RMV and the MAV, the lesser of these two values becomes the assessed value of the property, which forms the basis for a taxpayer's liability that year. Id. After the Department of Revenue determines the assessed value of the centrally assessed taxpayer's property, it prepares an assessment roll that county officials can rely on to collect tax payments. Or. Admin. R. 150-308-0670.

         Oregon imposes an ad valorem property tax on all taxpayers in the state but defines property differently for non-centrally assessed taxpayers compared to centrally assessed taxpayers. See Or. Rev. Stat. ยง 307.030. ...

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