Burlington Northern v. Okla. Tax Comm'n.
481 U.S. 454 (1987)

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U.S. Supreme Court

Burlington Northern v. Okla. Tax Comm'n., 481 U.S. 454 (1987)

Burlington Northern Railroad Co. v. Oklahoma Tax Commission

No. 86-337

Argued March 25, 1987

Decided April 28, 1987

481 U.S. 454




Section 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 -- which prohibits discriminatory state taxation of railroad property -- provides, in § 306(b)(1), that a State may not

"assess rail transportation property at a value that has a higher ratio to the true market value . . . 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."

Section 306(c) includes, inter alia, provisions declaring an exception from the provisions of the Tax Injunction Act, conferring jurisdiction on district courts to prevent violations of § 306(b), and stating that "[t]he burden of proof in determining assessed value and true market value is governed by State law." Petitioner railroad filed this action in the Federal District Court, alleging that respondents, Oklahoma taxation authorities and their members had discriminated against petitioner in the assessment of state property taxes for the 1982 tax year, particularly by overvaluing petitioner's property. In Oklahoma, the determination of tax liability involves determining the value of the entire railroad system and allocating a portion of that value to Oklahoma, and then assessing the taxable value of the railroad's property at only a certain percentage of true market value, which, during the tax year in question, was concededly the same assessment ratio employed with respect to all other commercial and industrial property in the State. Petitioner's claim of discriminatory taxation was based solely upon the State's overvaluation of the "true market value" of petitioner's entire railroad system. Holding that § 306 does not permit the exercise of federal .jurisdiction to review such claims of discriminatory state taxation unless the railroad shows purposeful overvaluation with discriminatory intent, the District Court found that no such showing had been made here, and dismissed the case for lack of subject matter jurisdiction. The Court of Appeals affirmed.

Held: Section 306 permits federal court review of petitioner's claim of alleged overvaluation of its property. Pp. 481 U. S. 460-464.

(a) Respondents' contention that § 306 never permits district court review of claims of discriminatory taxation based upon overvaluation of railroad property is without merit. The language of § 306(b)(1) makes

Page 481 U. S. 455

clear that, in order to compare the actual assessment ratios applicable to railroad property and to other commercial and industrial property, it is necessary to determine what the "true market values" are. The obstacle to respondents' position that the first occurrence of the phrase "true market value" in the statute should be read as "state determined market value" is the language of § 306(c) stating that the burden of proof in determining assessed value and true market value is governed by state law. It would be inconsistent to allocate the burden of proof as to an issue which could not be litigated in federal court in the first place. The additional provisions of § 306(c) instructing the district courts as to methods for proving the assessment ratio for "other commercial and industrial property" do not, as respondents claim, raise an implication that the State's valuation of a railroad's property may not be proved at all. Pp. 481 U. S. 460-463.

(b) The position of the courts below that district courts may not review claims of discriminatory taxation based upon overvaluation of railroad property unless the plaintiff first makes a preliminary showing of intentional discrimination is also untenable. Section 306(b) speaks only in terms of "acts" which "unreasonably burden and discriminate against interstate commerce"; nowhere does it refer to the actor's intent. Moreover, § 306(c) provides that relief may be granted only if the ratio of assessed value to true market value of railroad property exceeds by at least 5% the assessment ratio for other commercial and industrial property. That provision makes sense as a prohibition on the litigation of de minimis disparate impact claims, and does not support the view that Congress intended to reach only claims of intentional discrimination by overvaluation. Pp. 481 U. S. 463-464.

(c) The contentions that injunctive relief against state taxation offends principles of comity, and that restrictions on valuation actions under § 306 are necessary to avoid crowded federal dockets and unreasonable delay of the state tax collection process, involve policy considerations that may have weighed heavily with legislators who considered the Act and its predecessors. This Court is not free to reconsider such policy matters. P. 481 U. S. 464.


MARSHALL, J., delivered the opinion for a unanimous Court.

Page 481 U. S. 456

JUSTICE MARSHALL delivered the opinion of the Court.

The issue presented by this case is whether § 306 of the Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. § 11503, permits review by federal courts of alleged overvaluation of railroad property by state taxation authorities.

Page 481 U. S. 457


In 1976, after 15 years of intermittent and inconclusive legislative action, Congress passed the Railroad Revitalization and Regulatory Reform Act, Pub.L. 94-210, 90 Stat. 31 (Act). The Act's purpose, as stated in the congressional declaration of policy, was

"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."

§ 101(a). Among the means chosen by Congress to fulfill these objectives, particularly the goal of furthering railroad financial stability, was a prohibition on discriminatory state taxation of railroad property. After an extended period of congressional investigation, Congress concluded that "railroads are over-taxed by at least $50 million each year." H.R.Rep. No. 94-725, p. 78 (1975).

Congress' solution to the problem of discriminatory state taxation of railroads was embodied in § 306 of the Act, currently codified at 49 U.S.C. § 11503. [Footnote 1] In broad terms, Congress declared in § 306(b) that assessment ratios or taxation rates imposed on railroad property which differ significantly from the ratios or rates imposed on other commercial and industrial property are prohibited as burdens on interstate commerce. [Footnote 2] Section 306(c) declared an exception from the

Page 481 U. S. 458

provisions of the Tax Injunction Act, 28 U.S.C. § 1341, allowing railroads to challenge discriminatory taxation in federal district courts. [Footnote 3] States were given a 3-year grace period, until February 1979, to bring their property taxation systems into compliance with the statutory requirements. § 306(2)(b), 90 Stat. 54; see Act of Oct. 17, 1978, Pub.L. 95-473, 92 Stat. 1466.

The present action was filed by petitioner Burlington Northern Railroad in the United States District Court for the Western District of Oklahoma on March 3, 1983. The complaint alleged that respondents, the Oklahoma Tax Commission

Page 481 U. S. 459

and State Board of Equalization and their members, had discriminated against petitioner in the assessment of state property taxes for the 1982 tax year. [Footnote 4] In particular, petitioner alleged that respondents had overvalued petitioner's property.

The determination of railroad property tax liability in Oklahoma proceeds in several discrete stages. The first step is to ascertain the amount of property subject to tax. The Oklahoma Tax Commission follows the procedure of determining the value of the entire railroad, and then allocating a portion of that total system value to Oklahoma. The value of the railroad is determined by calculating a weighted average of original cost of assets and capitalized net operating income. Response to Complaint

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