United States District Court, D. South Carolina, Columbia Division
OPINION AND ORDER
Margaret B. Seymour Senior United States District Judge
CSX Transportation, Inc. (hereinafter “CSXT”) is
an interstate common carrier by railroad. Tr. 14:3, ECF No.
80. CSXT operates in twenty-three states, including South
Carolina. Id. at 37:2-14. Defendant South Carolina
Department of Revenue is an agency of South Carolina.
See S.C. Code Ann. § 12-4-10. It is charged by
law to administer and enforce the revenue laws of the state.
Id. Defendant W. Hartley Powell is the Agency
Director of the South Carolina Department of Revenue
(hereinafter together with Defendant South Carolina
Department of Revenue “the State”). This matter
is before the court on remand from the United States Court of
Appeals for the Fourth Circuit. The issue is whether the
South Carolina Reform Act (hereinafter the “SC
Valuation Act” or “Act”), which is codified
at S.C. Code Ann. §§ 12-37-3110 to -3170,
impermissibly discriminates against CSXT in violation of the
4-R Act, 49 U.S.C. § 11501(b).
Railroad Revitalization and Regulatory Reform Act of 1976
(4-R Act), codified at 49 U.S.C. § 11501(b)(4),
prohibits the imposition of any tax that results in the
discriminatory treatment of a railroad. The 4-R Act was
enacted in part to “restore the financial stability of
the railway system of the United States.” CSX
Transp., Inc v. Alabama Dep't of Revenue, 562 U.S.
277, 280 (2011) (CSX I). In crafting this
legislation, Congress observed that the “railroads
‘are easy prey for State and local tax assessors'
in that they are ‘nonvoting, often nonresident, targets
for local taxation,' who cannot easily remove themselves
from the locality.” Dep't of Revenue v. ACF
Indus., Inc., 510 U.S. 332, 336 (1994) (ACF)
(quoting Western Air Lines, Inc. v Bd. of
Equalization, 480 U.S. 123, 131 (1987)). “Section
306 of the 4-R Act, now codified at 49 U.S.C. § 11501,
addresses this concern by prohibiting the States (and their
subdivisions) from enacting certain taxation schemes that
discriminate against railroads.” Id. 336. The
4-R Act provides:
(b) The following acts unreasonably burden and discriminate
against interstate commerce, and a State, subsection 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 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
49 U.S.C. § 11501(b).
(b)(1)-(3) prohibit “the imposition of higher
assessment ratios or tax rates upon rail transportation
property than upon ‘other commercial and industrial
property.'” ACF, 510 U.S. at 337. The term
“commercial and industrial property” means
property, other than transportation property and land used
primarily for agricultural purposes or timber growing,
devoted to a commercial or industrial use and subject to a
property tax levy. 49 U.S.C. § 11501(a)(4). Subsection
(b)(4) has been interpreted broadly and targets all types of
discrimination against railroads. See Alabama Dep't
of Revenue v. CSX Transp., Inc., 135 S.Ct. 1136, 1141-42
(2015) (CSX II). Subsection (b)(4) is
“intended as a catchall provision designed to prevent
discriminatory taxation of a railroad carrier by any
means.” Richmond, Fredericksburg & Potomac R.R.
Co. v. Dep't of Taxation, 762 F.2d 375, 377 (4th
South Carolina Legislature passed the S.C. Valuation Act in
2010. The Act generally limits the permissible increases in
appraised values of commercial and industrial real properties
to no more than 15% within a five-year period for property
tax purposes. Tr. 22:6-10; 54:2-5. The S.C. Valuation Act
excludes “[r]eal property valued by the unit valuation
method.” S.C. Code Ann. § 12-37-3140(D). Railroad
companies, along with utility providers such as water, sewer,
and power companies, are valued under the unit valuation
concept, and thus the real properties of these companies are
not afforded the 15% cap. Tr. 145:12-17.
September 30, 2014, CSXT filed a Verified Complaint seeking
an injunction and declaratory relief with respect to real
property taxes that were imposed by the State. Compl., ECF
No. 1. CSXT alleges that the S.C. Valuation Act's
exclusion of properties valued by the unit valuation method
violates Section 306(1)(d) of the 4-R Act. The case proceeded
to a bench trial, which was held on November 3, 2015. ECF No.
77. At trial, CSXT relied on subsection (b)(4) of the 4-R Act
to argue that the S.C. Valuation Act imposes another tax
“that is directed and targeted at railroads for
disfavored treatment.” Tr. 54:17-25. In the court's
Findings of Fact and Conclusions of Law, ECF No. 86, the
court found that the S.C. Valuation Act does not impose a tax
within the meaning of subsection (b)(4). Rather, the court
concluded the “Act introduces one particular element, a
cap on increases in appraised values, to an already-existing
tax scheme.” Findings of Fact, 8. Accordingly, the
court declined to enter declaratory judgment on CSXT's
behalf and dismissed the complaint with prejudice.
appeal, the Fourth Circuit vacated and remanded this
court's ruling. CSX Transp., Inc. v. South Carolina
Dep't of Revenue, 851 F.3d 320 (4th Cir. 2017). The
Fourth Circuit held that subsection (b)(4) is the proper
vehicle for CSXT to bring its challenge against the S.C.
Valuation Act's 15% cap. Id. at 326. The Fourth
Circuit found that this “court's observation that
the [SC Valuation Act] does not itself impose taxes is
immaterial . . . and that CSXT's action plainly
challenged the imposition of a tax.” Id.
“Thus, if CSXT can prove that the tax imposed was
discriminatory, it will have demonstrated a (b)(4)
violation.” Id. Accordingly, the Fourth
Circuit instructed this court to determine whether CSXT
suffered discrimination from the denial of the S.C. Valuation
Act's 15% cap. Id. at 332.
CSX I, the Supreme Court stated that to determine
whether a subsection (b)(4) suit may go forward, two
questions must be answered: (1) is CSXT challenging
“another tax” within the meaning of the statute;
and (2) if so, might that tax “discriminate”
against railroad carriers by exempting their competitors.
CSX I, 562 U.S. at 283-84. A State's tax
discriminates only where the State cannot sufficiently
justify differences in treatment between similarly situated
taxpayers. CSX II, 135 S.Ct. at 1143. As noted
above, the Fourth Circuit has determined that
“CSXT's action plainly challenged the imposition of
a tax” under subsection (b)(4). CSX Transp.,
851 F.3d at 326. The issue before ...