Davis v. Wallace
Headline: North Dakota excise tax blocked for out-of-state railroads — Court reverses and prevents the State from collecting the substituted valuation tax, stopping assessment on these railroads for 1918–1919.
Holding:
- Blocks North Dakota from collecting the challenged excise tax from the railroads for 1918–1919.
- Limits states from reassessing out-of-state railroads using a different statutory basis.
- Enjoins collection of these specific assessments while leaving regular property tax unaffected.
Summary
Background
The dispute was brought by the federal Director General of Railroads and five railroad companies against a North Dakota special excise tax for 1918 and 1919. The law laid out different ways to calculate the tax and had a special mileage-based rule for railroads. After an earlier ruling made that mileage rule unconstitutional, state tax officers recalculated the tax using a different valuation method and assessed the railroads, which were for the time operated under federal control.
Reasoning
The Court considered whether the statute allowed the officers to use the substituted valuation basis for railroads. The statute expressly put railroads in a separate class and prescribed a mileage-based measure for them. The Court explained that even though the mileage proviso had been declared unconstitutional for these companies earlier, that proviso still showed the legislature’s intent to exclude railroads from the other methods. Taxing officers therefore could not lawfully apply a different basis that the statute clearly intended not to cover railroads. For that reason the Court held the assessments invalid and said collection should be enjoined.
Real world impact
As a result, North Dakota cannot collect the challenged excise assessments against these out-of-state railroad companies for the years in question using the substituted valuation basis. The ruling prevents the State from enlarging the statute’s reach by applying a different tax formula to the railroad class, leaving ordinary property taxes unaffected.
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