Renzenberger, Inc. v. N.M. Taxation & Revenue Dep't, 34,999

Background

Renzenberger, Inc. contracted with Union Pacific and BNSF to transport railroad crew members to and from trains; services occurred both within New Mexico and from New Mexico to other states.
New Mexico Taxation and Revenue Department audited Renzenberger and assessed gross receipts tax (plus penalties and interest) only on revenues from intrastate transportation within New Mexico. Renzenberger paid and sought a refund.
The central legal question was whether 49 U.S.C. § 14505(2) (part of the ICCTA) preempts New Mexico from taxing Renzenberger’s intrastate transport of railroad crew because it is “transportation of a passenger traveling in interstate commerce by motor carrier.”
Lower court (district court) granted summary judgment for the Department; Renzenberger appealed.
The Court of Appeals reviewed statutory interpretation de novo, applying canons that favor strict construction of claimed tax exemptions/deductions and requiring the preemption proponent to show clear congressional intent.

Issues

Issue	Plaintiff's Argument (Renzenberger)	Defendant's Argument (Department)	Held
Whether §14505(2) preempts New Mexico taxing receipts from Renzenberger’s intrastate transport of railroad crew (i.e., whether the service is “transportation of a passenger traveling in interstate commerce by motor carrier”).	The crew transport is “in interstate commerce” because it substantially affects and is integral to the railroads’ interstate operations; Renzenberger is a motor carrier and the crew are its passengers.	§14505(2) targets passengers/tickets for interstate travel (city-to-city interstate trips); Renzenberger’s intrastate crew transfers are not passengers “traveling in interstate commerce” and thus are taxable.	Court held §14505(2) does not preempt taxation of Renzenberger’s intrastate crew transports; refund denied.
Meaning of “in interstate commerce” in §14505(2) — broad effects test vs. flow-of-commerce/stream limitation.	The phrase should be read broadly to include intrastate activity that substantially affects interstate commerce.	Established U.S. Supreme Court usage distinguishes terms; “in interstate commerce” targets the flow/stream of interstate commerce (e.g., direct/integral steps), not every activity that affects interstate commerce.	Court adopted the narrower “flow of interstate commerce” reading: affecting interstate commerce alone is insufficient; intrastate crew transfers do not qualify.
Whether the transported railroad crew are “passengers” and whether Renzenberger’s status as a motor carrier brings the service within §14505(2).	Crew members are Renzenberger’s passengers; Renzenberger is a motor carrier, so §14505(2) applies.	§14505’s purpose and context (response to Jefferson Lines) focus on ticketed interstate passenger travel; crew members are not passengers of the interstate carrier for §14505 purposes and the statute targets ticketed city‑to‑city interstate trips.	Court held crew were not §14505 passengers “traveling in interstate commerce” and the statute’s purpose does not encompass Renzenberger’s intrastate crew transfers.

Key Cases Cited

United States v. Yellow Cab Co., 332 U.S. 218 (1947) (intrastate leg that is an integral step in an interstate journey can be part of the stream of interstate commerce)
American Bldg. Maintenance Indus. v. United States, 422 U.S. 271 (1975) (the phrase “in commerce” can denote a limited assertion of federal jurisdiction tied to the flow of interstate commerce)
Jefferson Lines, Inc. v. Oklahoma Tax Comm’n, 514 U.S. 175 (1995) (upheld state tax on interstate bus tickets; prompted Congress to enact §14505)
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (Congress uses different commerce modifiers with distinct meanings)
De Buono v. NYSA-ILA Medical & Clinical Servs. Fund, 520 U.S. 806 (1997) (party asserting federal preemption bears the burden of demonstrating clear congressional intent to displace state law)