SUPREME COURT
TAX CASES
MONDAY, JUNE 22, 2015
1:00 PM ET/NOON CT/
11:00 AM MT/10:00 AM PT
Supreme Court Tax Cases
Presented by the State and Local Legal Center
Featuring Andrew Brasher, Alabama Solicitor General
John Neiman, Maynard, Cooper & Gale
Ron Parsons, Johnson, Abdallah, Bollweg & Parsons
About the Webinar
• Type your questions in anytime in the box on the lower left had side of the
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• A recording of the webinar will be available on the SLLC’s website about a week
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• Download the presentation, along with the handout, through the media library;
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• The views expressed in this webinar do not necessarily reflect the views of the
SLLC member groups
About the SLLC
• Members:
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National Governors Association
National Conference of State Legislatures
Council for State Governments
National Association of Counties
National League of Cities
U.S. Conference of Mayors
International City/County Management Association
• Associate members: International Municipal Lawyers Association and Government
Finance Officers Association
About the SLLC
• Since 1983 the SLLC has filed over 300 briefs
• The SLLC filed 12 briefs before the Supreme Court this term—including
the cases discussed in this webinar
• The SLLC is a resource for Big Seven members on the Supreme Court—
this webinar is an example
About our Speaker
• Andrew Brasher, Alabama Solicitor General, argued Alabama
v. CSX
• John Neiman, Maynard, Cooper & Gale, co-write the SLLC’s
amicus brief in Comptroller v. Wynne
• Ron Parsons, Johnson, Abdallah, Bollweg & Parsons, wrote
the SLLC’s amicus brief in DMA v. Brohl
Alabama Dept. Revenue v. CSX Trans. Inc,
No. 13-553 (March 4, 2015)
Andrew L. Brasher
Alabama Solicitor General
4-R Act 49 U.S.C. §11501
(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 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.
Diesel Taxes
• On-road fuel is taxed by federal government; off-road fuel is not
• Off-road includes farming, trains, boats, etc.
• Many states, like feds, tax on-road fuel and off-road fuel differently
• Alabama imposes generally applicable sales tax on off-road fuel
• On-road fuel is except from sales tax and pays higher per gallon tax
similar to fed tax
• Fuel used in interstate water commerce is also exempt from sales tax
CSX v. Alabama (CSX I)
• Does a tax “discriminate against a railroad” if the railroad is denied an
exemption that another group receives?
• Department of Revenue of Oregon v. ACF Industries, Inc (1994): Railroads could
not sue over being denied property tax exemptions
• Court holds that ACF is limited to property taxes:
• “Discrimination” includes denying railroads an exemption such that railroads have to
pay a tax that a similarly situated group does not have to pay.
• Discrimination is making similarly situated taxpayers pay different taxes without a
justification.
CSX v. Alabama (CSX I)
Expressly leave two questions open on remand:
• Are competitors, such as truckers, a similarly situated group that railroads can
compare themselves to under the 4-R Act? Or must they allege discrimination
compared to the class of “general commercial and industrial” taxpayers more
broadly?
• Can a state justify treating railroads differently based on the fact that some other
business or group must pay a similar tax?
• Alabama loses on both questions on remand from CSX I.
Alabama v. CSX (CSX II)
• Court resolves first question 7-2 against Alabama
• Competitors like truckers and water carriers may be a proper class against which to
compare the taxation of railroads. But general commercial taxpayers may also be a
proper class.
• Refuses to apply tax-specific doctrines of statutory interpretation.
• Refuses to read (b)(4) of the statute in line with the other sections, which expressly used
comparison class of all commercial and industrial taxpayers.
• Instead, the Court invokes the common meaning of discrimination: The question is
whether the favored taxpayer is similarly situated to railroads.
Alabama v. CSX (CSX II)
• Court resolves second question 9-0 in favor of Alabama
• Discrimination only exists if the state cannot justify the favorable or unfavorable
treatment.
• An offsetting “roughly equivalent” tax can justify a tax that is imposed on a railroad
• Remands for determination whether Alabama’s tax scheme is justified.
Takeaways from CSX II
• The Court wants lower courts to work
• CSX I: lower courts said railroads lost because evaluating tax exemptions is too hard
• CSX II: lower courts said railroads won because evaluating justifications is too hard
• The Court is nationalist in outlook
• Refused to read an ambiguous statute in favor of state taxing power
• The Court is incrementalist
• The Court left two questions open in CSX I. In CSX II, the Court still did not resolve
whether Alabama’s taxes were invalid.
CSX III????
• More litigation over how the state justifies treating railroads differently
• The phrase “roughly equivalent” comes from Dormant Commerce Clause
doctrine. What, if any, of that doctrine is incorporated into 4-R Act?
• What other kinds of reasons might justify treating railroads differently?
• Is there a standard of scrutiny that applies?
• Alabama’s water carriers?
• Does the Court’s reasoning about the meaning of “discrimination” have any
salience in other contexts? E.g. employment.
Comptroller v. Wynne
Maryland’s tax
--Tax MARYLAND residents’ Maryland income
--Tax non-residents’ Maryland income
--Tax MARYLAND residents’ non-Maryland income (no
credit)
Smith
• Bethesda resident
• $1 million in income – all in Maryland
Jones
• Smith’s next-door neighbor in Bethesda
• $1 million in income – job in Arlington,
Virginia
Direct Marketing Association v. Brohl
135 S. Ct. 1124 (March 3, 2015)
The Problem
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The rise of internet sales
The nature of sales and use taxes
The Quill effect on state and local revenues
The Marketplace Fairness Act
State efforts to recapture remote sales tax revenues
The Decision
• The Court’s holding on the Tax Injunction Act jurisdictional issue
• Bombshell: Justice Kennedy’s concurrence calling for Quill’s reconsideration
• Justice Ginsburg’s concurrence
The Remand
• Is comity still in play?
• The merits of the Dormant Commerce Clause issue
• Is Quill in jeopardy?
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