The U.S. Court of Appeals for the Ninth Circuit—agreeing with other circuit courts of appeals—today held that a rail carrier may challenge a state’s imposition of a tax on intangible personal property, such as accounting goodwill, as discriminatory under the “Railroad Revitalization and Regulatory Reform Act” (the “4-R Act”).
The Ninth Circuit held that the taxpayer railroad could challenge the Oregon property tax under the 4-R Act, which prohibits taxes that discriminate against rail carriers.
The Ninth Circuit rejected the Oregon Department of Revenue’s argument that the intangible property tax was generally applicable and that the railroad’s challenge was no more than a demand for exemptions offered to other taxpayers. The federal appellate court, however, reasoned that Oregon commercial and industrial taxpayers generally are subject to personal property tax on real and tangible (but not intangible) personal property. Thus, imposing tax on intangible property of railroads was not merely a failure to provide an exemption for railroads, but was a new tax that was imposed on railroads but not on commercial and industrial taxpayers. The Ninth Circuit concluded the intangible personal property tax discriminated against the taxpayer railroad and violated provisions of the 4-R Act.
The case is: BNSF Railway Co. v. Oregon Dept. of Revenue, No. 19-35184 (9th Cir. July 8, 2020). Read the Ninth Circuit’s decision [PDF 105 KB] that includes a concurring opinion.
Today’s decision is part of a line of cases finding that state taxation of railroad property is discriminatory in violation of the 4-R Act. For instance, the Fourth Circuit in May 2020 held that a South Carolina real property tax discriminated against railroads in violation of the 4-R Act. Read TaxNewsFlash
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.