CENTRAL RAILROAD COMPANY OF PENNSYLVANIA v. PENNSYLVANIA.
No. 400
Supreme Court of the United States
Argued March 20, 1962.—Decided June 25, 1962.
370 U.S. 607
George W. Keitel, Deputy Attorney General of Pennsylvania, argued the cause for appellee. With him on the briefs was David Stahl, Attorney General.
In this case we must decide whether the Commonwealth of Pennsylvania may, consistently with the Commerce Clause and the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the Constitution of the United States, impose an annual property tax on the total value of freight cars owned by the appellant, a Pennsylvania corporation, despite the fact that a considerable number of such cars spend a substantial portion of the tax year on the lines of other railroads located outside the State. The Supreme Court of Pennsylvania upheld the application of the State‘s Capital Stock Tax, Purdon‘s Pa. Stat. Ann., 1949, Tit. 72, §§ 1871, 1901, to the full value of all appellant‘s freight cars.1 403 Pa. 419, 169 A. 2d 878. We postponed consideration of the
We take the facts pertinent to decision from a stipulation submitted by the parties to the trial court. The appellant is a Pennsylvania corporation authorized to operate a railroad only within the State. It has not been licensed to do business elsewhere. The company‘s track runs from the anthracite coal region in Pennsylvania to the Pennsylvania-New Jersey border, at Easton, where it connects with the lines of the Central Railroad Company of New Jersey (hereinafter CNJ), a New Jersey corporation which owns all the outstanding shares of appellant‘s stock.
In 1951, the year for which the tax was assessed, the appellant owned 3,074 freight cars which were put to use in ordinary transport operations in three ways: (1) by the appellant on its own tracks; (2) by CNJ on that company‘s tracks in New Jersey; (3) by other unaffiliated railroads on their own lines in various parts of the country. CNJ‘s use of appellant‘s cars was pursuant to operating agreements under which CNJ was obliged to pay a daily rental equal to the then-effective rate prescribed by the Association of American Railroads. In order to facilitate interstate transportation by the interchange of equipment among carriers, as prescribed by
Appellant contended in the state courts, as it does here, that in computing its Pennsylvania capital stock tax, which is measured by the value of such property as is not exempt from taxation (note 1, supra), it was constitutionally entitled to deduct from the value of its taxable assets a proportional share reflecting the time spent by its freight cars outside Pennsylvania. In support of this claim appellant offered a statistical summary of the use of its freight cars during 1951, seeking to prove that a daily average of more than 1,659 of its 3,074 cars were located on the lines of railroads (including CNJ) which owned no track in Pennsylvania.2
It also claimed that a daily average of approximately 1,056 other cars had been used by railroads having lines both within and without Pennsylvania. As to such cars, appellant sought to allocate to Pennsylvania only such portions of their value as the combined ratio of road miles of each user-railroad‘s tracks within Pennsylvania bore to its total road mileage throughout the United States.3
I.
Since Miller this Court has decided numerous cases touching on the intricate problems of accommodating, under the Due Process and Commerce Clauses, the taxing powers of domiciliary and other States with respect to the instrumentalities of interstate commerce.5 None of these decisions has weakened the pivotal holding in Miller—that a railroad or other taxpayer owning rolling stock cannot avoid the imposition of its domicile‘s property tax on the full value of its assets merely by proving that some determinable fraction of its property was absent from the State for part of the tax year. This Court has consistently held that the State of domicile retains jurisdic-
This is because a State casts no forbidden burden upon interstate commerce by subjecting its own corporations, though they be engaged in interstate transport, to nondiscriminatory property taxes. It is only “multiple taxation of interstate operations,” Standard Oil Co. v. Peck, 342 U. S. 382, 385, that offends the Commerce Clause. And obviously multiple taxation is possible only if there exists some jurisdiction, in addition to the domicile of the taxpayer, which may constitutionally impose an ad valorem tax.
Nor does the Due Process Clause confine the domiciliary State‘s taxing power to such proportion of the value of the property being taxed as is equal to the fraction of the tax year which the property spends within the State‘s borders. Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194, held only that the Due Process Clause prohibited ad valorem taxation by the owner‘s domicile of tangible personal property permanently located in some other State. Northwest Airlines, Inc., v. Minnesota, 322 U. S. 292, reaffirmed the principle established by earlier cases that tangible property for which no tax situs has been established elsewhere may be taxed to its full value by the owner‘s domicile. See New York Central R. Co. v. Miller, supra; Southern Pacific Co. v. Kentucky, 222 U. S. 63, 69; Johnson Oil Refining Co. v. Oklahoma, supra. If such property has had insufficient contact with States other than the owner‘s domicile to render any one of these jurisdictions a “tax situs,” it is surely appropriate to presume that the domicile is the only State affording the “opportunities, benefits, or protection” which due process demands as a prerequisite for taxation. See Ott v. Mississippi Valley Barge Line Co., 336 U. S. 169, 174.
The controlling question here is, therefore, the same as it was in Standard Oil Co. v. Peck, 342 U. S. 382, where the decision whether a state property tax might constitutionally be imposed on the full value of a domiciliary‘s moving assets turned on whether ” ‘a defined part of the domiciliary corpus’ “—there consisting of boats and barges traveling along inland waters—“could be taxed by the several states on an apportionment basis.” 342 U. S., at 384.
Since the burden of proving an exemption is on the taxpayer who claims it, we must consider whether the stipulated facts show that some determinable portion of the value of the appellant‘s freight cars had acquired a tax situs in a jurisdiction other than Pennsylvania.
II.
With respect to the freight cars that had been used on the lines of CNJ during the taxable year, the stipulation establishes that they “were run on fixed routes and regular schedules . . . over the lines of CNJ . . . in New Jersey.” Their habitual employment within the jurisdiction in this manner would assuredly support New Jersey‘s imposition of an apportioned ad valorem tax on the value of the appellant‘s fleet of freight cars. Marye v. Baltimore & Ohio R. Co., 127 U. S. 117, 123-124; Pullman‘s Palace Car Co. v. Pennsylvania, 141 U. S. 18, 23; Union Refrigerator Transit Co. v. Lynch, 177 U. S. 149; Johnson Oil Refining Co. v. Oklahoma, 290 U. S. 158, 162-163; cf. Ott v. Mississippi Valley Barge Line Co., 336 U. S.
III.
We conclude, however, that on the record before us Pennsylvania was constitutionally permitted to tax, at full value, the remainder of appellant‘s fleet of freight cars, including those used by other railroads under the Car Service and Per Diem Agreement of the Association of American Railroads. These were, in the language of the stipulation, “regularly, habitually and/or continuously employed” in this manner, but they did not run “on fixed routes and regular schedules” as did the cars used by CNJ.
Since the domiciliary State is precluded from imposing an ad valorem tax on any property to the extent that it could be taxed by another State, not merely on such property as is subjected to tax elsewhere, the validity of Pennsylvania‘s tax must be determined by considering whether the facts in the record disclose a possible tax situs in some other jurisdiction. Had the record shown that appellant‘s cars traveled through other States along fixed and regular routes, even if it were silent with respect to the length of time spent in each nondomiciliary State, it would doubtless follow that the States through which the regular traffic flowed could impose a property tax measured by some fair apportioning formula. Cf. Braniff Airways, Inc., v. Nebraska Board of Equalization, 347 U. S. 590. And this would render unconstitutional any domiciliary ad valorem tax at full value on property that could thus be
Alternatively a nondomiciliary tax situs may be acquired even if the rolling stock does not follow prescribed routes and schedules in its course through the nondomiciliary State. In American Refrigerator Transit Co. v. Hall, 174 U. S. 70, this Court sustained the constitutionality of a Colorado property tax on a stipulated average number of railroad cars that had been located within the territorial limits of Colorado during the tax year, although it was agreed by the parties that the cars “never were run in said State in fixed numbers nor at regular times, nor as a regular part of particular trains.” Id., at 72. Habitual employment within the State of a substantial number of cars, albeit on irregular routes, may constitute sufficient contact to establish a tax situs permitting taxation of the average number of cars so engaged.
On the record before us, however, we find no evidence, except as to the CNJ cars, of either regular routes through particular nondomiciliary States or habitual presence, though on irregular missions, in particular nondomiciliary States. It is not disputed that many of the railroads listed as owning no track within Pennsylvania do have lines in more than one State, but there is no way of knowing which, if any, of these States may have acquired taxing jurisdiction over some of appellant‘s freight cars. And
In short, except as to freight cars traveling on the lines of the CNJ, this record shows only that a determinable number of appellant‘s cars were employed outside the Commonwealth of Pennsylvania during the relevant tax year. But as this leaves at large the possibility of their having a nondomiciliary tax situs elsewhere, that showing does not suffice under our cases to exclude Pennsylvania from taxing such cars to their full value. Neither Union Refrigerator Transit Co. v. Kentucky, supra, nor Standard Oil Co. v. Peck, supra, is properly read to the contrary. In the former, the case was remanded for further proceedings “not inconsistent” with the Court‘s opinion that the cars in question, “so far as they were [permanently] located and employed in other States,” were not subject to the taxing power of the domiciliary State. 199 U. S., at 211. In the latter, the existence of a tax situs in one or more nondomiciliary States sufficiently appeared from the record. Note 6, supra. To accept the proposition that a mere general showing of continuous use of movable property outside the domiciliary State is sufficient to exclude the taxing power of
As we have shown there is nothing to the contrary in Standard Oil Co. v. Peck. Note 6, supra. And neither the Braniff nor Ott case points to a different conclusion. In Braniff the airplanes held subject to nondomiciliary taxation were shown by the record to have flown on fixed and regular routes. 347 U. S., at 600-601. In Ott the Court was careful to point out that “the statute ‘was intended to cover and actually covers here, an average portion of property permanently within the State—and by permanently is meant throughout the taxing year.’ ” 336 U. S., at 175. (Emphasis added.) In the case before us it is impossible to tell, except as to cars on the lines of the CNJ, what the average number of cars was annually in any given State.
IV.
Finally, we think that the appellant‘s equal protection argument is insubstantial and that it was correctly rejected by the Pennsylvania Supreme Court. For purposes of this tax, Pennsylvania could reasonably differentiate between railroads having tracks which lay only within its borders and those whose tracks were located both within and without the State. The various considerations that justify such a classification from a federal constitutional standpoint need hardly be elaborated. It is sufficient to note that the State might reasonably have concluded that the probability of a nondomiciliary apportioned ad valorem tax on a railroad‘s total assets is greater if the railroad maintains tracks in another State than if it does not. Or it might have determined that the imposition of franchise or other taxes by nondomiciliary States in which the railroad did business compelled some
Accordingly, we conclude that with respect to all cars other than those employed by CNJ on its lines in New Jersey the appellant has failed to sustain its burden of proving that a tax situs had been acquired elsewhere. The exemption was properly disallowed in this regard.
The judgment of the Supreme Court of Pennsylvania is vacated and the case is remanded for further proceedings not inconsistent with this opinion.
It is so ordered.
MR. JUSTICE FRANKFURTER took no part in the decision of this case.
MR. JUSTICE WHITE took no part in the consideration or decision of this case.
MR. JUSTICE BLACK, concurring.
In holding that one State‘s property tax may be invalidated in part because excessive under the Commerce Clause upon the showing of a risk that some other State could impose a tax on part of the value of the same property, the Court is following principles announced in prior decisions of this Court from which I dissented.1 While my views expressed in those cases remain un-
Since I think partial invalidation of the tax as to the average number of cars in New Jersey on any given day in the taxable year is fully supported by the Commerce Clause as this Court has interpreted it, I would have been content not to discuss the due process question at all. But since the Court does rest in part on due process, I find it necessary to express my doubts about the use of the Due Process Clause to strike down state tax laws. The modern use of due process to invalidate state taxes rests on two doctrines: (1) that a State is without “jurisdiction to tax” property beyond its boundaries, and (2) that multiple taxation of the same property by different States is prohibited. Nothing in the language or the history of the Fourteenth Amendment, however, indicates any intention to establish either of these two doctrines concerning the power of States to tax. In fact neither of these doctrines originated in the Due Process Clause at all, but were first declared by this Court long before the Fourteenth Amendment with its Due Process Clause was
“It seems to me that the result reached by the court probably is a desirable one, but I hardly understand
how it can be deduced from the Fourteenth Amendment, and as the Chief Justice feels the same difficulty, I think it proper to say that my doubt has not been removed.”8
The Court has ever since used the Due Process Clause to strike down state laws by finding in it substantially the same protection for interstate commerce as it has found in the Commerce Clause.9 But there is no reference to commerce in the Fourteenth Amendment and the Court has still never adequately explained just what the basis for its constitutional doctrine is. Because of this I have long entertained many of the same doubts that Mr. Justice Holmes expressed as to the use of this flexible and expansive interpretation of due process to invalidate state tax laws,10 but since the Court‘s holding here adequately rests on the presently prevailing interpretation of the Commerce Clause, I do not find this to be an appropriate occasion to suggest reconsideration of the applicability of the Due Process Clause to state tax laws.
The stipulations of fact in this case show that an average of 158 freight cars (of the value of $525,765.71) run on fixed routes and regular schedules over railroad lines outside of Pennsylvania. The Court properly holds that they are beyond the constitutional reach of Pennsylvania.
The stipulations of fact also show that an average of 2189.30 freight cars (of the value of $7,282,773) run regularly, habitually, and continuously on the lines of other railroads outside of Pennsylvania, though not on fixed schedules. The Pennsylvania tax on these cars is sustained on the authority of New York Central R. Co. v. Miller, 202 U. S. 584; and if that case is still intact the Court is correct in denying the exemption claimed.
With all deference we cannot, however, allow Pennsylvania to lay this tax and adhere to our recent decisions. In Ott v. Mississippi Valley Barge Line, 336 U. S. 169, we allowed Louisiana and the City of New Orleans to levy ad valorem taxes on barges of foreign corporations even though the barges were not permanently in those jurisdictions nor operated there on fixed routes and regular schedules. The assessments sustained were “based on the ratio
“The problem under the Commerce Clause is to determine ‘what portion of an interstate organism may appropriately be attributed to each of the various states in which it functions.’ Nashville, C. & St. L. R. Co. v. Browning, 310 U. S. 362, 365. So far as due process is concerned the only question is whether the tax in practical operation has relation to opportunities, benefits, or protection conferred or afforded by the taxing State. See Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444. Those requirements are satisfied if the tax is fairly apportioned to the commerce carried on within the State.” Ibid.
We applied the decision in Pullman‘s Palace Car Co. v. Pennsylvania, 141 U. S. 18, to barges, even though the Pullman‘s Car case, as noted in the Miller case (202 U. S., at 597), sustained a tax on capital stock where the “same cars were continuously receiving the protection” of the nondomiciliary taxing State. Nonetheless, in the Ott decision we allowed the tax by the nondomiciliary State to be levied on “an average portion of property permanently within the State.” 336 U. S., at 175.
In Standard Oil Co. v. Peck, 342 U. S. 382, we completed the redefinition of the holding in the Miller decision which was implicit in what we wrote in Ott. In the Peck case the domiciliary State was held to have no power to tax barges, except on a formula “which fairly apportioned the tax to the commerce carried on within the state” (id.,
“No one vessel may have been continuously in another state during the taxable year. But we do know that most, if not all, of them were operating in other waters and therefore under Ott v. Mississippi Valley Barge Line Co., supra, could be taxed by the several states on an apportionment basis. The rule which permits taxation by two or more states on an apportionment basis precludes taxation of all of the property by the state of the domicile. See Union Transit Co. v. Kentucky, 199 U. S. 194. Otherwise there would be multiple taxation of interstate operations and the tax would have no relation to the opportunities, benefits, or protection which the taxing state gives those operations.” Id., at 384-385.
In Braniff Airways v. Nebraska Board, 347 U. S. 590, we allowed a nondomiciliary State to levy an apportioned ad valorem tax on aircraft making 18 stops per day in that State. We said, “We think such regular contact is sufficient to establish Nebraska‘s power to tax even though the same aircraft do not land every day and even though none of the aircraft is continuously within the state.” Id., at 601.
As a result of the Ott, Peck and Braniff cases the average of 2189.30 freight cars that run regularly, habitually, and continuously on lines of other railroads outside Pennsylvania could be taxed by other States, even though no State can identify the precise cars within its borders and even though the complement of cars is constantly