Taxation and State Taxation -- 2018



BNSF Ry. Co. v. California State Board of Equalization   (N.D. Cal.)

Opposing $45 fee on rail shipments of hazardous materials

BNSF and Union Pacific Railroads filed a complaint on 7/29/16 against California for imposing a $45 per car fee for transportation of hazardous materials. The new law (SB 84) requires railroads to collect the fee from their customers and turn it over to the state, with the proceeds proposed to be used for hazmat training and equipment. The law applies only to rail shipments, not trucks or other conveyances.

The railroads claim that the law is preempted by federal law, which established the Surface Transportation Board as the exclusive regulator of rail carriers and shippers. They also raise a fundamental argument that the fee interferes with interstate commerce under the Commerce Clause, since widespread adoption of such fees by states around the country would impermissibly interfere with interstate trade. Furthermore, they say that the fee violates the federal Hazardous Materials Transportation Act by imposing an unfair fee. Discriminatory taxation of railroads and rail activity also violates the Railroad Revitalization and Regulatory Reform Act of 1976, which was designed to remove the temptation to excessively tax railroads.

The fee currently applies to 25 listed hazardous materials, and will affect more than 150 shippers of industrial products, in addition to many additional shippers of agricultural commodities and consumer products. Some shippers have no ready alternative to rail, and will be forced to absorb the cost or become less competitive with other modes of shipment that may be less safe for hazardous material.

The NAM supported this challenge with a declaration from Robyn Boerstling, our Vice President of Infrastructure, Innovation and Human Resources Policy, who described the disadvantages to shippers, customers and railroads from the new charge. She also explained how the charge runs contrary to the long-standing benefits of federal preemption of transportation-related state statutes, which help manufacturers by keeping transportation costs affordable and competitive.

The court granted a preliminary injunction against the fee, then issued a stay of the case. The California State Board of Equalization appealed the preliminary injunction to the Ninth Circuit on November 22, 2016. In 2018, the Ninth Circuit affirmed, and the opinion should leave no doubt that final judgment should be entered invalidating the charge. The precedent here should be helpful moving forward to all manufacturers wanting to compete fairly across state lines.


Related Documents:
Declaration of Robyn Boerstling (NAM)  (August 1, 2016)
Motion for preliminary injunction  (August 1, 2016)
Complaint  (July 29, 2016)

 


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