doing anything or performing any act declared by paragraph (1) hereof to be unlawful: Provided, however, That such jurisdiction shall not be exclusive of that which any Federal or State court may otherwise have." GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE, Hon. HARLEY O. STAGGERS, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: This letter is in further reply to your request for the views of this Department concerning H.R. 4972, a bill to amend the Interstate Commerce Act, as amended, in order to make unlawful, as unreasonable and unjust discrimination against and undue burden upon interstate commerce, certain property tax assessments of common carrier property, and for other purposes. The bill would insert a new section 25(a) in the Interstate Commerce Act to prohibit any State or subdivision or agency thereof from assessing, for purposes of a property tax levied by any taxing district, property owned or used by any common carrier subject to this act engaged in transportation of persons or property in interstate commerce at a value which bears a higher ratio to the true market value of such property than the assessed value of all other property in the taxing district subject to the same property tax levy bears to the true market value of all such property. The collection of any tax on the portion of said assessment in excess of such rates would also be declared to be unlawful. The bill further provides that, notwithstanding the provisions of section 1341, title 28, United States Code, or of the constitution or laws of any State, the district courts of the United States would have jurisdiction, upon complaint and after hearing, to issue writs of injunction or other proper process to restrain any State, or subdivision or agency thereof, or any person from doing anything declared by the bill to be unlawful. State and local governments derive substantial revenues from taxes on property owned by common carriers, particularly the railroads and pipelines. Despite State laws requiring uniform tax treatment, in many States railroads and pipelines are discriminated against as compared to other property taxpayers in the same jurisdiction, due in large measure to long-established procedures for assessment of property. Some States apply assessment by a single central agency, which permits a relatively accurate method of assignment of value. However, other States permit local assessment which permits indiscriminate assignment of values and considerable variation in assessments. The Department of Commerce agrees in principle that common carrier property should not face discrimination in property tax assessments. Such discriminations have been a concern of the transportation industry for many years. The scope of this problem was outlined in part VII, chapter 1, pages 465-66, of the report of the Senate Committee on Commerce on national transportation policy (87th Cong., 1st sess., Rept. 445, June 26, 1961), otherwise known as the Doyle report. The Department, however, recognizes that there are difficulties of a tax administration and lack of experience with Federal legislation of this kind. For this reason it does not seem advisable to enact Federal legislation until other alternatives are tested with respect to this problem. It is also possible that other property, such as industrial plants and utility facilities, may face the same situation as railroads and pipelines. Efforts by the Advisory Commission on Intergovernmental Relations resulted In the submittal of draft legislation for State enactment applying to uniform and equitable property taxation. While this approach has not resulted in rapid progress toward the solution of the problem presented by H.R. 4972, the effort should nevertheless be continued. While the Department of Commerce would not recommend the enactment of the bill, we would urge the Congress through public hearings and formal study to encourage States to accelerate reform in those aspects of property tax administration which affect interstate commerce. For the foregoing reasons the Department would not recommend favorable action on H.R. 4972. We have been advised by the Bureau of the Budget that there would be no objection to the submission of our report from the standpoint of the administration's program. Sincerely, ROBERT E. GILES, General Counsel. INTERSTATE COMMERCE COMMISSION, Hon. HARLEY O. STAGGERS, Chairman, Committee on Interstate and Foreign Commerce, DEAR CHAIRMAN STAGGERS: This is in response to your request for the Commission's comments on H.R. 4972, introduced by Congressman Rogers, to amend the Interstate Commerce Act, as amended, in order to make unlawful, as unreasonable and unjust discrimination against and undue burden upon interstate commerce, certain property tax assessments of common carrier property, and for other purposes. I am authorized to submit the following comments: H.R. 4972 would add a new section 25a to the Interstate Commerce Act. This new section 25a would make unlawful, the collection of any tax, levied by any taxing district, on property owned or used by any common carrier subject to the act, when the assessment for the tax bears a higher ratio to the true market value than the assessed value of all other property in the taxing district subject to the same propery tax levy bears to the true market value of all such other property. As we understand it, "true market value" is not a term that is used in all States, but is intended to have the same meaning as "fair market value" or "market value." It appears that H.R. 4972 is intended to shift the final determination of "true market value" of carrier property, as well as that of other property in a taxing district, from State courts to U.S. district courts. The U.S. district courts' determination of true market value might very well be questioned in numerous taxing districts, such as city, county, and State, with the result that the determination of "true market value" might add substantially to the already heavy dockets in many of our U.S. district courts. If, on the other hand, the question of "true market value" were finally determined in a State or local court, then, of course. the question of whether an injunction should issue might more appropriately come before a Federal court. We point this out for the committee's information without suggesting which court should make such a determination. We suggest that H.R. 4972 be amended to prevent a possible conflict with the present provisions of section 202(b) of the act, which provides, among other things, that "nothing in this part shall be construed to affect the powers of taxation of the several States ***." This possible conflict could be resolved by inserting "notwithstanding the provisions of section 202(b)" at the beginning of proposed section 25a. In the Commission's report on "Railroad Passenger Train Deficit," 306 I.C.C. 417, we recommended inter alia, that State and local governments should take such steps as may be required to effect a greater degree of equity with respect to the tax burden imposed on railway properties as compared to that borne by taxpayers generally. Since then, there has been an increased awareness of the problems of the railroad industry which has been evidenced by the enactment by a number of States of legislation granting a measure of tax relief to railroads. It is hoped that more States will take the necessary remedial action to help to preserve and maintain adequate commuter and other passenger train service as well as freight service for local industries. The Interstate Commerce Commission is strongly in favor of any sound proposal to strengthen the national transportation system by eliminating inequitable tax burdens on common carriers. Accordingly, we endorse the objective sought by H.R. 4972. Incidentally, on page 2, line 16, of the bill, it is suggested that the word "court" be inserted after "district" to appropriately identify the tribunal upon which jurisdiction is to be conferred. Sincerely, Hon. HARLEY O. STAGGERS, JOHN W. BUSH, Chairman. DEPARTMENT OF JUSTICE, OFFICE OF THE ATTORNEY GENERAL, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: This is in response to your request for the views of the Department of Justice on H.R. 4972, a bill to amend the Interstate Commerce Act, as amended, in order to make unlawful, as unreasonable and unjust dis crimination against and undue burden upon interstate commerce, certain property tax assessments of common carrier property, and for other purposes. The bill would add a new section 25a to the Interstate Commerce Act for the purpose of rendering unlawful discriminatory property taxes levied by States on common carrier property. Further, the district courts of the United States would have jurisdiction to issue injunctions or other appropriate process as may be necessary to restrain violations. Such jurisdiction would not, however, be exclusive of that which any Federal or State court may otherwise have. Whether this legislation should be enacted involves policy considerations as to which the Department of Justice prefers to make no recommendation. However, it should be noted that paragraph 1(a) of the proposed new section (p. 2, lines 4 to 12 of the bill) declares the assessment of a discriminatory property tax unlawful. Yet, paragraph 1(b) (p. 2, lines 12 and 13 of the bill), which deals with the collection of the property taxes in question, seems to interpret paragraph 1(a) as declaring only the discriminatory portion of the assessment to be unlawful. This apparent inconsistency should be clarified. If the Congress declares the entire assessment unlawful and prohibits the collection of any part of such assessment, there would be no legal problem with regard to this issue. On the other hand, if the Congress decides to make only the discriminatory portion of the tax unlawful and uncollectible, consideration must be given to the holding in Moses Lake Homes, Inc., et al. v. Grant County, 365 U.S. 744 (1961), at page 752 in which the Court stated: "The effect of the Court's remand was to direct the district court to decree a valid tax for the invalid one which the State had attempted to exact. The district court has no power so to decree. Federal courts may not assess or levy taxes. Only the appropriate taxing officials of Grant County may assess and levy taxes on these leaseholds, and the Federal courts may determine, within their jurisdiction, only whether the tax levied by those officials is or is not a valid one. When, as here, the tax is invalid, it 'may not be exacted.'" This opinion leaves unresolved the question of whether the Congress may constitutionally enact such a statute. Therefore, such an enactment could be expected to give rise to litigation to resolve this question. It is noted that the word "courts" should be inserted on line 16 of page 2 after the word "district". The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the administration's program. Sincerely, Hon. HARLEY O. STAGGERS, RAMSEY CLARK, Deputy Attorney General. EXECUTIVE OFFICE OF THE PRESIDENT, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Rayburn House Office Building, Washington, D.C. DEAR MR. CHAIRMAN: This is in reply to the committee's request for the views the Bureau of the Budget on H.R. 4972, a bill to amend the Interstate Commerce Act, as amended, in order to make unlawful, as unreasonable and unjust discrimination against and undue burden upon interstate commerce, certain property tax assessments of common carrier property, and for other purposes. Although the objective of this bill is laudable, it is doubtful that the proposal offers a workable solution to the problem of determining equitable tax valuations for common carrier property. The bill would declare unlawful any assessment of carrier property which resulted in a ratio of assessed to actual value (assessment ratio) higher than the comparable ratio for other property in a taxing district. A determination of unlawfulness would therefore require knowledge of (a) a carrier's system valuation, (b) the pro rata share of that valuation assignable to carrier property located in a particular taxing district, and (c) the average assessment ratio of all other property in the district. All three items require complex technical determinations. Such determinations are better suited to administrative than judicial remedies. Moreover, to lodge responsibility for making such judgments with the Federal judiciary would place a heavy burden on the court system. Aside from these difficulties, the Department of Commerce points out in its report to your committee that the problems inherent in this kind of legislation make it advisable to test other alternatives first. In addition, the Advisory Commission on Intergovernmental Relations, in views to this Office, has expressed doubt that H.R. 4972 represents the best approach to equalization. The Commission has proposed State legislation to deal with assessment inequities. Finally, the Department of Justice, in its report to your committee, notes technical inconsistencies in the bill and questions its constitutionality. In view of the above considerations, the Bureau of the Budget recommends against enactment of H.R. 4972. Sincerely yours, PHILLIP S. HUGHES, Assistant Director for Legislative Reference. ADVISORY COMMISSION ON INTERGOVERNMENTAL RELATIONS, Hon. HARLEY O. STAGGERS, Chairman, House Committee on Interstate and Foreign Commerce, Rayburn Office Building, Washington, D.C. DEAR MR. CHAIRMAN: We are pleased to respond to your request for the views of this Commission on H.R. 4972, a bill to amend the Interstate Commerce Act, as amended, in order to make unlawful, as unreasonable and unjust discrimination against and undue burden upon interstate commerce, certain property tax assessments of common carrier property, and for other purposes. The Advisory Commission has devoted substantial resources to exploring ways and means to improve property tax administration. The Commission's interest in this matter arises out of the major role played by the property tax in financing local government needs and the critical importance of the adequate financing of the needs to the strength of our federal system. This one tax alone accounts for over 85 percent of local tax revenue and in many jurisdictions common carrier property represents a significant proportion of the revenue base. H.R. 4972 would forbid and declare unlawful the discriminatory assessment for State and local tax purposes of the property of common carriers and would give Federal courts jurisdiction over litigation pertaining to such assessments. The subject matter of the proposed legislation is a longstanding problem involving in part State-local relations. While virtually all States have now relinquished the property tax as a major revenue source, most have retained responsibility for the assessement of some types of property that typically cross local taxing district and State lines, chiefly railroads and utilities. In surrendering their direct revenue stake in this tax, the States appear to have lost also some of their motivation to supervise and coordinate local assessment administration. The lack of State interest, in turn, may have contributed to the spread of inconsistent valuation practices between States, among taxing districts within States, and among properties within taxing districts. A contributing factor has been the outmoded but deeply rooted tradition that every taxing district ought to be free to handle its fiscal problems in its own way. There is as yet little recognition of the fact that in today's economically interdependent America property taxation affects competitive business relationships and requires the uniform application of consistent valuation principles in fixing assessment values. The Advisory Commission's recommendations for reforming the assessment of properties for tax purposes are embodied in a two-volume report on The Role of the States in Strengthening the Property Tax,' and in suggested State legislation that has been drafted to facilitate the implementation of the Commission recommendations. These have been widely disseminated and are receiving active consideration by legislative and other groups, including the railroad industry, in a substantial number of States. The Commission's program seeks to conform property taxation to today's requirements by urging the States to assume responsibility for inaugurating professional standards and supervising, assisting, and coordinating local assessment practices. The overall objective of this program is uniform assessments within a jurisdiction and desirably within a State, on the basis of generally accepted professional valuation principles. 1 The document referred to will be found in the committee files. It should be emphasized that the focus of this program as of the bill before your committee is the termination of discriminatory assessment practices. The Commission does not question the rights of States in the exercise of their sovereign taxing powers to differentiate in the rates of taxation on defined classes of property or to prescribe differential rates of assessment explicitly for the purpose of giving effect to differential tax burdens. The Commission's concern is directed to the lack of conformity between assessment law and administrative practice and to the unlawful differentiation in tax burdens that result from it. In short, it is in accord with the objectve of H.R. 4972. The Commission's studies have produced ample evidence that present assessment practices discriminate against some railroad properties in some taxing jurisdictions. The practice, however, is by no means universal. A few States have taken steps to equalize centrally assessed railroad property with locally assessed property. Oregon, for example, is reported to have brought the level of State and locally assessed property to a common level by a gradual process extending over several years. California and Kentucky are reported to be carrying out similar programs currently. It bears emphasis that in consequence of State leadership, significantly accelerated in the last few years, the professional quality and uniformity of assessments is improving in many places. Moreover, in the last few years the State courts have been contributing effectively to this development. Florida and Kentucky courts have handed down decisions which, in effect, require local assessments to be raised to the legal standard thereby wiping out the possibility of discrimination between assessments determined locally and centrally. The courts in at least eight other States have recognized the right of the property owner to relief from discriminatory assessment even though his assessment is not in fact in excess of the legal standard. Several of these cases involved the assessment of railroad property. Last month a further avenue for relief from discriminatory assessment practices may have been opened by the decision of a Federal court invalidating discriminatory railroad assessments in Tennessee on the grounds that the taxpayer was entitled to equal protection of the laws. A similar suit is reported to have been filed this week in a Federal court in Louisiana. Although the need for eliminating discriminatory assessments on railroad property persists, as these court decisions would indicate, the immediate need for Federal legislation is less evident. State courts have traditionally handled the issue. In the process they have developed some of the expertise required for the adjudication of suits involving alleged assessment discrimination. Recognizing the complexities involved in adjudicating assessment disputes, the Advisory Commission is recommending the establishment of specialized State tax courts on the basis of the successful experience with such courts in Oregon, Massachusetts, and the District of Columbia. If enacted, H.R. 4972 would be a move in the opposite direction in that it would channel technical tax issues to Federal courts of general Jurisdiction. In our view, property assessment reform is proceeding at an accelerating pace. If the momentum achieved in recent years can be maintained, relief will be forthcoming in an increasing number of States. In view of their past successes, railroads, utilities, and other businesses can be expected to continue pressing for redress and contribute thereby to the reform movement. A significant obstacle to rapid compliance with the uniformity requirement continues to be the potentially disruptive effect of such action on the finances of some local governments. The problem is particularly difficult in those local jurisdictions where railroad assessments constitute a significant portion of the tax base and where the disparity between railroad and other property assessments is large. Where these jurisdictions are limited to their local tax resources, disruption of local governmental services can be minimized only by spreading the process of reform gradually over a number of years. The States, to be sure, can help to effectuate a smooth transition by sharing with their local governments some of the revenue burden and they are urged to do so, if only because they have been a party to the development of the present assessment situation. There is evidence that increasingly more States, some on their own initiative, some as the result of litigation, are recognizing their responsibility in this field. This development has improved the railroads' and other similarly situated property owners' prospects for effective relief from inconsistent valuation practices. In our view, the approach to remedy represented by these developments accords with the basic principles of this Federal system and if it holds a reasonable prospect for providing the required relief over the next few years, as we believe |