U.S. Supreme Court

Court Rules Against State in Tax Federalism Case

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The U.S. Supreme Court has ruled that federal courts may consider challenges to state accounting formulas used to value railroad property for tax purposes.

Fox News describes CSX Transportation v. State Board of Equalization as “a federalism case through and through” that would appear to have little impact beyond the immediate dispute.

Lower federal courts had ruled they could not interfere with a state’s taxation policy as long as it wasn’t out of line with other properties, Fox News said. CSX had challenged Georgia’s valuation method under a federal law that bars state tax discrimination against railroads.

The opinion (PDF posted by SCOTUSblog) by Chief Justice John G. Roberts Jr. said that if railroads could not challenge the formulas, states could use techniques that “routinely overestimate the market worth of railroad assets,” SCOTUSblog reports.

“We do not see how a court can go about determining true market value if it may not look behind the state’s choice of valuation methods,” Roberts wrote.

Roberts said courts may scrutinize the tax valuation method “even if important questions of state policy are, as the 11th Circuit believed, ‘intertwined with the selection of a valuation methodology.’ ”

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