Michael Cottone Discusses Challenge to Tennessee Tax Imposed on Rail Carriers

July 12, 2019
State Tax Notes

Bass, Berry & Sims attorney Michael Cottone discussed the decision by the U.S. Supreme Court to not grant certiorari in Illinois Central Railroad Co. v. Tennessee Department of Revenue, a Sixth Circuit case involving claims that Tennessee’s tax scheme for diesel fuel discriminates against rail carriers in violation of the Railroad Revitalization and Regulatory Reform Act of 1976.Bass, Berry & Sims attorney Michael Cottone discussed the decision by the U.S. Supreme Court to not grant certiorari in Illinois Central Railroad Co. v. Tennessee Department of Revenue, a Sixth Circuit case involving claims that Tennessee’s tax scheme for diesel fuel discriminates against rail carriers in violation of the Railroad Revitalization and Regulatory Reform Act of 1976. In Illinois Central, the taxpayer argued that Tennessee’s sales tax on diesel fuel used by rail carriers discriminates against rail carriers even though Tennessee imposed a similar excise tax on fuel used by motor carriers because the proceeds of the two taxes are used for different purposes. The funds from the diesel fuel excise tax paid by motor carriers are used to improve public highways, and thereby benefit the motor carriers, while the revenue generated by the tax on rail carriers does not fund railroad infrastructure. The Sixth Circuit ultimately ruled that the use of a tax’s proceeds is irrelevant in deciding whether rail carriers are being discriminated against.

Michael noted that denials of certiorari are not binding precedent and that the Supreme Court decides not to review cases for a variety of reasons. As Michael pointed out, “it is entirely plausible that the Court denied certiorari because it didn’t think there was enough development in this area of the law yet, and that taxpayers making similar arguments that state fuel taxes are discriminatory don’t necessarily need to give up.”

The full article, “U.S. Supreme Court Rejects Railroad Fuel Tax Appeals,” was published by State Tax Notes on July 1, 2019, and is available online (subscription required).