Norfolk & Western Railway Co. v. Missouri State Tax Commission
Headline: Missouri’s mileage-based tax on a railroad’s rolling stock struck down for producing a grossly distorted valuation, limiting state power to tax property that is largely out-of-state and protecting railroads from unfair assessments.
Holding:
- Prevents States using mileage formulas to tax out-of-state railroad property when results are grossly distorted.
- Allows state courts to reopen the record to prove enhancement before reimposing taxes.
- Protects railroads from assessments exceeding value of rolling stock actually used in the State.
Summary
Background
A Virginia railroad (Norfolk & Western) leased the Wabash railroad’s property and became responsible for paying 1965 taxes in Missouri. Missouri’s Tax Commission used a state mileage formula to assess rolling stock, valuing all the railroad’s rolling stock and applying 8.2824% (the share of track in Missouri) to reach a $19,981,757 assessment for rolling stock in Missouri. Fixed property assessments in the State were not challenged.
Reasoning
The railroad produced an actual inventory showing the equalized value of rolling stock physically in Missouri was about $7,600,000, and that units normally present in Missouri represented about 2.71% by number (3.16% by value) of the entire fleet. The Court found this unexplained gap between the formula result and the actual facts to be a “grossly distorted” assessment. Because the record contained no evidence showing intangible or “enhancement” value that would justify the higher figure, the Court held the tax, as applied, violated the Due Process and Commerce Clauses and could not stand on this record.
Real world impact
The Court vacated the Missouri Supreme Court’s judgment and remanded so the state courts can reopen the record or otherwise justify any enhanced value before reimposing tax. The decision requires States to confront clear evidence of distortion and to provide evidence of enhancement before taxing value that effectively reaches beyond the State.
Dissents or concurrances
Justice Black disagreed, arguing the railroad bore the heavy burden to show the assessment was clearly excessive and would have affirmed the Missouri court’s decision.
Opinions in this case:
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