Railroads Cry Foul|Over Calif. Haz-Mat Tax

     SAN FRANCISCO (CN) — BNSF and Union Pacific Railway have sued the California Board of Equalization over a tax that they say unfairly targets trains carrying hazardous waste, but not more accident-prone trucks.
     The two rail giants that newly enacted Senate Bill 84 “compels railroads to collect from their customers and turn over to the state — under pain of civil and criminal penalty — a charge on the transportation of certain hazardous materials by rail,” the lawsuit says. “The charge is levied as a flat amount for each loaded rail car, regardless of how far it travels in the state, so long as it is loaded within or crosses California’s borders.”
     The California Board of Equalization administers the state’s tax scheme on fuel, alcohol and tobacco, among other things — including the rail tax.
     According to the rail companies, the disputed “charge is uniquely imposed on rail transportation and only rail transportation. A truck loaded with hazardous materials incurs no such fee, despite presenting a far greater risk of accident,” the complaint says.
     SB 84 mandates that the taxes will “fund training and equipment suitable for response to hazardous material incidents associated with rail,” but the rail companies say that trucks should not be exempt from this tax and that “such training and equipment can equally serve in responding to the (far more frequent) incidents involving trucks, and state officials have already endorsed renting out that expensive equipment for non-rail purposes for a nominal fee.” (Parentheses in complaint.)
     The rail companies say federal laws “forbid a state from levying unique charges on rail activity that rail’s competitors — like trucks — do not have to pay.”
     They add, “The Interstate Commerce Clause and the Hazardous Materials Transportation Act forbid states from discriminating against interstate commerce and in favor of intrastate activity. And the federal Railroad Revitalization and Regulatory Reform Act recognizes that out-of-state railroads are easy prey for local tax assessors, and so forbids states from enforcing tax schemes that single out railroad activity for disfavored treatment.”
     The rail companies say that if the hazmat charge is considered a fee rather than a tax, then it questions “whether federal law preempts SB 84 and whether the hazmat charge is imposed in violation of the U.S. Constitution.”
     And if the charge is considered a tax, then “the Railroad Revitalization and Regulatory Reform Act of 1976 confers jurisdiction on federal courts to ‘prevent a violation’ of its provisions notwithstanding the Tax Injunction Act.”
     The companies say in their complaint that “based on historical experience, Union Pacific anticipates that more than 77,000 units that it carries would be subject to the hazmat charge each year.” The charge would apply to 200 Union Pacific units, they say.
     “In the end, California’s scheme will disserve the public interest, either by encouraging shippers to switch to riskier modes of transportation, or by simply discouraging interstate commerce in hazardous materials that are vital to the nation’s industrial and agricultural economy,” the companies say. “The SB 84 hazmat charge is unlawful and should be enjoined.”
     The suit also names state Attorney General Kamala Harris and Mark Ghilarducci of the Governor’s Office of Emergency Services as defendants.
     Fiona Ma, chairwoman of the California State Board of Equalization, did not reply to an email requesting comment.
     The companies are represented by Benjamin Horwich, John Muller and David Feder of the firm Munger, Tolles & Olson in San Francisco.

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