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Bnsf Railway Co. v. Tennessee Department of Revenue

United States District Court, M.D. Tennessee, Nashville Division

October 10, 2014

BNSF RAILWAY COMPANY, Plaintiff,
v.
TENNESSEE DEPARTMENT OF REVENUE and RICHARD ROBERTS, Commissioner of Revenue of the State of Tennessee, Defendants.

MEMORANDUM

KEVIN H. SHARP, District Judge.

Plaintiff BNSF Railway Company ("Plaintiff" or BNSF") has brought this action against Tennessee Department of Revenue, and Richard Roberts, Commissioner of Revenue of the State of Tennessee (collectively the "Defendants" or the "Commissioner") as a result of the recently enacted Tennessee Transportation Fuel Equity Act (the "Act"), which allegedly violates Section 306(1)(d) of the Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. § 11501(b)(4). This matter is presently before the Court on Plaintiff's Motion for a Preliminary Injunction (Docket Entry No. 11), to which Defendants have filed a brief in opposition (Docket Entry No. 21), and Plaintiff filed a reply (Docket Entry No. 28). Plaintiff seeks injunctive relief enjoining Defendants, their officers, agents, and employees, and all those acting in concert or participation with them, from assessing, levying or collecting taxes imposed on BNSF's railway fuel by the Tennessee Transportation Fuel Equity Act.

On August 29, 2014, the Court conducted a hearing on the motion. Having reviewed all the papers filed in support of, and in opposition to, Plaintiff's motion, and having considered the oral arguments of counsel, the Court hereby denies Plaintiff's motion for preliminary injunction.

I. FACTUAL BACKGROUND

Parties

According to the Complaint, BNSF is a Delaware corporation with its principal place of business located in Ft. Worth, Texas. BNSF is engaged in interstate commerce as a common carrier by railroad. The Tennessee Department of Revenue is the department of the State of Tennessee charged with the responsibility to administer and collect the taxes challenged in such instance. Richard Roberts is the Department's Commissioner and exercises general supervision over administration of the assessment and collection of non-property taxes in Tennessee. (Docket Entry No. 1, Complaint at ¶¶ 5-7).

Background

Since 1941, Tennessee has imposed a cents-per-gallon "excise" tax on motor vehicle fuel, which is dedicated to the construction and maintenance of highways in Tennessee. See §§ 2, 3 of Chapter 73, Public Acts of 1941. This tax has, from its inception, been limited to fuel consumed "on the public highways." See id. § 1(b). Such taxes are often described as "motor fuel" or "highway user" taxes. The current "Highway User Fuel Tax" is codified at Tenn. Code Ann. § 67-3-1201, et seq. It includes the "Gasoline tax" of 20¢ per gallon imposed by Tenn. Code Ann. § 67-3-201, and the "Diesel tax" of 17¢ per gallon imposed by Tenn. Code Ann. § 67-3-202. See Tenn. Code Ann. § 67-3-1201(2) & (4).

Prior to July 1, 2014, the purchase and use of railroad diesel fuel was subject to the Tennessee sales and use tax imposed by Chapter 6 of Title 67 of the Tennessee Code. On August 27, 2013, this Court issued an injunctive and declaratory order that the imposition of Tennessee sales and use taxes on the diesel fuel of the Illinois Central Railroad Company violated Section 306. See Illinois Central Railroad Co. v. Tennessee Dept. of Revenue, 969 F.Supp.2d 892 (M.D. Tenn. 2013).[1] In reaction to the Order, Plaintiff claims that on May 13, 2014, Tennessee Enacted the Transportation Fuel Equity Act, as part of Public Chapter 908 of the Public Acts of 2014. The Act became effective on July 1, 2014. Section 11 of Public Chapter 908 repeals the sales and use tax on railroad diesel fuel, and instead imposes a tax of 17¢ per gallon on diesel fuel used by railroads in the State.[2] See (Docket Entry No. 1 at ¶¶ 8-10).

The Act exempts the water ways from its coverage. Water carriers and railroads use fuel dyed in accordance with federal regulation to power their marine vessels and locomotives. See ( Id. at 12-13). Plaintiff contends that although the Act purports to impose a tax on "commercial carriers, " in reality railroads will be the only commercial carriers paying tax on dyed diesel fuel. And furthermore, Plaintiff continues, although fuel used by interstate motor carriers is subject to a diesel tax under T.C.A. § 67-3-202, as amplified by the Highway User Fuel Tax, T.C.A. § 67-3-1201 et seq., the motor carriers, unlike railroads, do not use dyed fuel but instead use clear diesel fuel, which is taxed in order to support and maintain the highways used by the motor carriers. ( Id. at ¶¶ 12-15).

II. ANALYSIS

A. Legal Standard for Preliminary Injunction

For a party seeking injunctive relief under the 4-R Act, "a railroad need only demonstrate that there is reasonable cause' to believe a violation of the 4-R Act has occurred or is about to occur." CSX Transp., Inc. v. Tennessee State Bd. of Equalization, 964 F.2d 548, 551 (6th Cir. 1992). A mere "possibility" of a violation of the 4-R Act is not sufficient. Tennessee State Bd. of Equalization, 964 F.2d at 555.

B. Discussion

At this juncture, the Court is not deciding the merits of Plaintiff's case, but rather the Court is called upon to determine whether Plaintiff has shown reasonable cause to believe that Section 306(1)(d) of the Railroad Revitalization and Regulatory Reform Act of 1976, ...


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