United States District Court, M.D. Tennessee, Nashville Division
H. SHARP UNITED STATES DISTRICT JUDGE.
action is brought under Section 306(1)(d) of the Railroad
Revitalization and Regulatory Reform Act of 1976
(“Section 306” or the “4-R Act”), 49
U.S.C. § 11501(b)(4), which prohibits state and local
governments from discriminating against railroads with
respect to taxation. Plaintiff contends that the sales and
use tax assessments imposed by the State are discriminatory
because motor carriers are exempt from the tax, but rail
carriers are not exempt. Plaintiff seeks injunctive and
declaratory relief pursuant to Section 306. The matter is
before the Court on the following motions, which were filed
following remand of this matter by the United States Court of
Appeals for the Sixth Circuit, (Docket No. 107):
Plaintiff Illinois Central Railroad Company's Motion
for Summary Judgment (Docket No. 85);
Defendants' Motion for Summary Judgment (Docket
No. 93); and Defendants' Motion to Exclude Affidavit
and Testimony of Richard Pomp (Docket No. 102).
Court held a bench trial in this matter on June 5 and 11,
2012. In its Findings of Fact and Conclusions of Law, (Docket
No. 59), this Court found that the imposition of Tennessee
sales and use tax on railroad diesel fuel, but not on diesel
fuel used by interstate motor carriers, placed rail carriers
at an overall disadvantage. The Court further found that
Defendants had not provided sufficient evidence that the
differential tax treatment is justified. The Court concluded
that the imposition of the sales and use tax on railroad
diesel fuel violates 49 U.S.C. § 11501(b)(4).
(Id.). By an accompanying order, this Court declared
that the imposition of sales and use taxes authorized by
Tennessee law on Plaintiff's purchases or consumption of
diesel fuel for rail transportation purposes violates §
11501(b)(4). The order further permanently enjoined
Defendants from assessing, levying, or collecting sales and
use taxes on or from Plaintiff on its purchase or consumption
of diesel fuel for rail transportation purposes. See
(Docket No. 60).
appealed the judgment to the Sixth Circuit Court of Appeals.
See Circuit Case No. 13-6348. After briefing and
oral argument, but before the issuance of an opinion by the
Sixth Circuit, the United States Supreme Court issued its
opinion in Alabama Dept. of Revenue v. CSX
Transportation, Inc., 135 S.Ct. 1136, 1143 (2015)
(“CSXT II”), ruling that “an
alternative, roughly equivalent tax is one possible
justification that renders a tax disparity
nondiscriminatory.” Following the Supreme Court's
decision, Plaintiff filed a motion in the Sixth Circuit to
remand the matter to this Court for further proceedings in
light of CSXT II. The Sixth Circuit granted that
motion by order entered May 11, 2015 and remanded the matter
to this Court for further proceedings.
parties then filed a joint motion to schedule a status
conference, which was granted. (Docket No. 77). That status
conference was held on August 20, 2015, and as a result, the
Court issued an order calling for supplemental briefs,
responses to supplemental briefs, and reply briefs.
Illinois Central Railroad Company (“Plaintiff” or
“ICRR”) is an Illinois corporation with its
principal office in Homewood, Illinois. ICRR is engaged in
interstate commerce as a common carrier by railroad. ICRR is
the corporate holding company for some of the U.S. properties
of Canadian National Railway and is the entity that pays
taxes in Tennessee. ICRR does business under the trade name
CN, and CN is sometimes used to refer to the Plaintiff in
Tennessee Department of Revenue (“Department”) is
the department of the State of Tennessee charged with the
responsibility to administer and collect sales and use taxes
within Tennessee. Tenn. Code Ann. § 67-1-101(b). The
Department is also charged with the responsibility to
administer and collect motor fuel taxes within Tennessee.
Id. Defendant Commissioner of Revenue of the State
of Tennessee (“Commissioner, ” or collectively
with the Department, hereinafter, “Defendants” or
the “State”) is named in this action in his
official capacity only. The Commissioner exercises general
supervision over administration of the assessment and
collection of sales and use taxes and motor fuel taxes in
Tennessee. The Tennessee Department of Transportation
(“TDOT”) is charged with building and maintaining
public roads in Tennessee.
Tennessee imposes a tax on the sale, consumption, and use of
tangible personal property in Tennessee. See Tenn.
Code Ann. § 67-6-101 et seq. The sales tax is
collected by the seller at retail from the purchaser and paid
over to the Commissioner by the seller. See Tenn.
Code Ann. §§ 67-6-502 -504. The Tennessee sales tax
applies unless a sales tax on such property has previously
been paid in another jurisdiction. Tenn. Code Ann.
§§ 67-6-201(2) and (5), 67-6-202, and 67-6-203.
are subject to sales or use tax on their purchase,
consumption, or use of diesel fuel in Tennessee. For years
2006 through June 2014, the tax was imposed by the State at
the rate of 7% of the retail price. ICRR holds a direct pay
permit issued by the Department and pays state sales and use
taxes upon its purchase of diesel fuel within this State
directly to the Commissioner.
motor carriers compete with rail carriers for the
transportation of property in interstate commerce in
Tennessee. Motor carriers are exempt from the Tennessee sales
and use tax imposed by chapter 6 of Title 67 on the purchase
or consumption of diesel fuel in Tennessee. See
Tenn. Code Ann. § 67-6-329 (a)(2).
of the sales tax, motor carriers pay a motor fuel tax
totaling 18.4¢ a gallon. Tenn. Code Ann. § 67-3-202
-205. Under Tenn. Code Ann. §§ 67-3-203 and 204,
1¢ of the 18.4¢ is a special privilege tax, and
0.4¢ is an environmental assurance fee. Approximately
70% of the motor fuel taxes collected from motor carriers is
allocated to the Tennessee Department of Transportation.
Approximately 28% is allocated to cities and counties and
designated for use on roads. Approximately 2% is allocated to
the general fund. In addition to the sales and use tax,
railroads also pay the 1¢ special privilege tax and
0.4¢ environmental assurance fee imposed under Tenn.
Code Ann. §§ 67-3-203 and 204.
motor fuel tax was first enacted in 1941 and has been applied
to motor carriers since then. The broadly applicable sales
and use tax, which applies to railroads, was first enacted in
1947, and motor carriers have always been exempt from that
tax. Under the respective tax rates (17¢ per gallon for
motor carriers, in contrast to 7% of the purchase price for
railroads) in effect since before 2006 through June 30, 2014,
motor carriers were taxed more per gallon of diesel fuel than
railroads were taxed unless fuel prices exceeded $2.62 per
gallon. In fact, from 1941 through 2010, motor carriers
actually paid more tax per gallon than railroads paid in
every year except one, which was in 2008 when fuel prices
spiked. The State of Tennessee has no control over the price
of diesel fuel.
along with the other 47 contiguous states and bordering
Canadian provinces, is a party to the International Fuel Tax
Agreement (“IFTA”), the purpose of which is to
simplify the collecting and reporting of taxes on motor fuel
used by motor fuel carriers operating in more than one
jurisdiction. State participation in IFTA is essentially
mandated by federal legislation. See 49 U.S.C.
§§ 31701-07. IFTA requires that the fuel use tax
imposed by member jurisdictions be measured by the
consumption of fuel in a motor vehicle. See 49
U.S.C. § 31701(2). Motor carriers register and file tax
returns in a single base jurisdiction, which, in turn, is
responsible for distributing the tax proceeds to other
jurisdictions in which the carrier operates. Motor carriers
receive in each jurisdiction a credit or refund for taxes
paid on fuel used outside the jurisdiction where it was
purchased. There is no similar multi-state agreement with
respect to fuel purchased, used, or consumed by railroads.
Motion to Exclude Affidavit and Testimony of Richard
preliminary matter, Defendants have moved to exclude the
affidavit of Plaintiff's expert, Richard Pomp, under
Rules 702 and 703 of the Federal Rules of Evidence. The Court
will first address this issue and then move on to the
engaged Professor Richard Pomp, law professor at the
University of Connecticut Law School and adjunct professor at
NYU Law School in the L.L.M. Program for Taxation, to render
an expert opinion regarding “the meaning of a
‘comparable' or ‘roughly equivalent' tax
as that term is understood by practitioners and scholars in
the field of state taxation.” (Docket No. 90 at ¶
argue that “[b]eyond a bare recitation of
qualifications and facts, the affidavit consists entirely of
a discussion of purportedly applicable law, legal
conclusions, and arguments concerning the central legal issue
now before the Court-whether the sales tax paid by railroads
on diesel fuel purchases in Tennessee and the motor fuel
excise tax paid by trucks are “alternative, roughly
equivalent” taxes within the meaning of [CSXT
II].” (Docket No. 103 at 1). Plaintiff counters
that “Professor Pomp does not opine on the ultimate
legal issue of whether the sales tax assessed to ICRR is
discriminatory[.]” (Docket No. 105 at 2). Regardless,