Arkansas-Best Freight System, Inc. Carolina Freight Carriers Corporation Consolidated Freightways Corporation Et & Wnc Transportation Company Overnite Transportation Company Roadway Express, Inc. Ryder Truck Lines, Inc. Spector-Red Ball, Inc. Thurston Motor Lines, Inc. Transcon Lines Yellow Freight System, Inc. Smith Transfer Corporation and Chemical Leaman Tank Lines, Inc. v. Mark G. Lynch, Secretary of Revenue of the State of North Carolina Douglas R. Holbrook, Director, Ad Valorem Tax Division of the North Carolina Department of Revenue Alamance County Buncombe County Burke County Catawba County Durham County Edgecombe County Forsyth County Granville County Halifax County Henderson County Iredell County Martin County Mecklenburg County Moore County Nash County New Hanover County Onslow County Pender County Randolph County Robeson County Rockingham County Rowan County Surry County Union County Wake County Wayne County Wilkes County and Wilson County

Citations: 723 F.2d 365; 1983 U.S. App. LEXIS 14301Docket: 82-1769

Court: Court of Appeals for the Fourth Circuit; December 19, 1983; Federal Appellate Court

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Carriers operating in North Carolina filed a lawsuit against the state Secretary of Revenue and the Director of the Ad Valorem Tax Division, alleging discrimination in property taxes for the years 1980 and 1981 under 49 U.S.C. § 11503a. The district court ruled in favor of the defendants, granting summary judgment, which the appeals court affirmed. The Motor Carrier Act of 1980 prohibits states from taxing motor carrier transportation property at a higher ratio of true market value than that applied to other commercial and industrial properties. This legislative framework, including earlier statutes from 1976 and the Bus Regulatory Reform Act of 1982, aims to alleviate burdens on interstate commerce caused by discriminatory state and local taxation practices.

In North Carolina, real property undergoes reappraisal every eight years, while personal property, including the rolling stock of motor carriers, is reappraised annually. The carriers argued that this system led to their rolling stock being assessed at a higher ratio of true market value compared to commercial and industrial real property. They claimed that rolling stock, appraised annually, reflects current market values, leading to an assessment at 100% of its true market value, whereas real property is assessed at less than 100% due to its longer reappraisal cycle.

Motor carriers assert their claim for relief based on sales assessment ratio studies, which focus exclusively on real estate. They argue that Section 11503a identifies these studies as the preferred proof of tax discrimination, claiming their personal property is taxed at a higher effective rate compared to commercial and industrial real property. However, the statute permits differing tax rates for personal and real property, provided there is equality within each category. Legislative history supports that states can classify property for tax purposes differently, as long as carrier transportation real property is not taxed more than other real property, and similarly for personal and intangible property.

The example given illustrates a scenario where a state could tax real property at a lower rate than carrier real property, which would violate the statute. A relevant case, Clinchfield Railroad Co. v. Lynch, demonstrated a situation where railroad real property was taxed at 100% while other properties were taxed at 72%, revealing a discriminatory practice. However, due to insufficient evidence to distinguish the types of property in that case, the district court reduced the tax burden across the board. The court emphasized that findings from sales assessment ratio studies applied only to real property and could not be indiscriminately applied to personal property.

Motor carriers, therefore, cannot claim discrimination under Section 11503a since they did not demonstrate their personal property is assessed at a higher ratio than other commercial and industrial personal properties. As such, there is no valid claim of discrimination.

The judgment of the district court is affirmed due to no violation found under 49 U.S.C. Sec. 11503a, which prohibits unreasonable burdens on interstate commerce through discriminatory property assessments. This provision mandates that motor carrier transportation property cannot be assessed at a higher value ratio compared to other commercial properties within the same jurisdiction. Subsequent to the initial case, several North Carolina counties were added as defendants. The court acknowledges the relevance of the legislative history of the 4-R Act and refers to Clinchfield Railroad Co. v. Lynch for further discussion. Although some motor carriers own real property in North Carolina, they do not challenge the taxation of that real estate in this case.

The court dismisses a motion by the motor carriers to amend their complaint regarding jurisdiction and merits, asserting that their original complaint already established jurisdiction under Sec. 11503a. The motion aimed to introduce a new theory based on Clinchfield Railroad, which clarified that real property sales assessment ratios should not be applied to personal property unless assessed separately. The motor carriers attempted to demonstrate discrimination in the assessment of their personal property, citing an affidavit by Dr. Ekeblad. However, the court found that Dr. Ekeblad's analysis was limited to real property assessments, and thus, it could not substantiate claims of discrimination against the motor carriers' personal property. The court's conclusion is reinforced by the examination of the district court's findings in Clinchfield Railroad, which indicated that the figures referenced by Dr. Ekeblad were solely related to real property assessments.

The motion to amend by motor carriers is denied. Consent orders of dismissal have been filed for Alamance, Burke, Halifax, Iredell, Randolph, Union, Onslow, and Wilkes Counties prior to this decision. The court finds the motion to amend regarding jurisdiction to be without merit, as the original complaint already established jurisdiction under 49 U.S.C. Sec. 11503a. The motion does not seek to change the jurisdiction basis but introduces a new theory influenced by the Clinchfield Railroad case. In Clinchfield, it was determined that sales-assessment ratio studies were relevant only to the railroad's personal property because the state had not separately assessed both real and personal property. Motor carriers argue that they presented evidence of discriminatory valuation and taxation of their personal property compared to locally assessed property, relying on an affidavit from Dr. Ekeblad. However, the affidavit mistakenly asserted that "all locally-assessed property in North Carolina" was valued at specific ratios, but it only referenced real property, thus lacking relevance to personal property assessments. The court's analysis and the Clinchfield record confirm that Dr. Ekeblad's data was derived solely from real property assessments, which cannot substantiate claims of discrimination against the motor carriers' personal property. Therefore, the motion to amend is ultimately denied.