Commonwealth Edison Co. v. Montana, 453 U.S. 609 (1953)
Commonwealth Edison Co. v. Montana
No. 80-581
Argued March 30, 1981
Decided July 2, 1981
453 U.S. 609
APPEAL FROM THE SUPREME COURT OF MONTANA
Syllabus
Montana imposes a severance tax on each ton of coal mined in the State, including coal mined on federal land. The tax is levied at varying rates depending on the value, energy content, and method of extraction of the coal, and may equal, at a maximum, 30% of the "contract sales price." Appellants, certain Montana coal producers and 11 of their out-of-state utility company customers, sought refunds, in a Montana state court, of severance taxes paid under protest and declaratory and injunctive relief, contending that the tax was invalid under the Commerce and Supremacy Clauses of the United States Constitution. Without receiving any evidence, the trial court upheld the tax, and the Montana Supreme Court affirmed.
Held:
1. The Montana severance tax does not violate the Commerce Clause. Pp. 614-629.
(a) A state severance tax is not immunized from Commerce Clause scrutiny by a claim that the tax is imposed on goods prior to their entry into the stream of interstate commerce. Any contrary statements in Heisler v. Thomas Colliery Co., 260 U.S. 245, and its progeny are disapproved. The Montana tax must be evaluated under the test set forth in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279, whereby a state tax does not offend the Commerce Clause if it
is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to services provided by the State.
Pp. 614-617.
(b) Montana’s tax comports with the requirements of the Complete Auto Transit test. The tax is not invalid under the third prong of the test on the alleged ground that it discriminates against interstate commerce because 90% of Montana coal is shipped to other States under contracts that shift the tax burden primarily to non-Montana utility companies, and thus to citizens of other States. There is no real discrimination, since the tax is computed at the same rate regardless of the final destination of the coal and the tax burden is borne according to the amount of coal consumed, not according to any distinction between in-state and out-of-state consumers. Nor is there any merit to appellants’ contention that they are entitled to an opportunity to prove that the tax is not "fairly related to the services provided by the State" by showing that the amount of the taxes collected exceeds the value of the services provided to the coal mining industry. The fourth prong of the Complete Auto Transit test requires only that the measure of the tax be reasonably related to the extent of the taxpayer’s contact with the State, since it is the activities or presence of the taxpayer in the State that may properly be made to bear a just share of the state tax burden. Because it is measured as a percentage of the value of the coal taken, the Montana tax, a general revenue tax, is in proper proportion to appellants’ activities within the State, and, therefore, to their enjoyment of the opportunities and protection which the State has afforded in connection with those activities, such as police and fire protection, the benefit of a trained workforce, and the advantages of a civilized society. The appropriate level or rate of taxation is essentially a matter for legislative, not judicial, resolution. Pp. 617-629.
2. Nor does Montana’s tax violate the Supremacy Clause. Pp. 629-636.
(a) The tax is not invalid as being inconsistent with the Mineral Lands Leasing Act of 1920, as amended. Even assuming that the tax may reduce royalty payments to the Federal Government under leases executed in Montana, this fact alone does not demonstrate that the tax is inconsistent with the Act. Indeed, in § 32 of the Act, Congress expressly authorized the States to impose severance taxes on federal lessees without imposing any limits on the amount of such taxes. And there is nothing in the language or legislative history of the Act or its amendments to support appellants’ assertion that Congress intended to maximize and capture through royalties all "economic rents" (the difference between the cost of production and the market price of the coal) from the mining of federal coal, and then to divide the proceeds with the State in accordance with the statutory formula. The history speaks in terms of securing a "fair return to the public" and if, as was held in Mid-Northern Oil Co. v. Walker, 268 U.S. 45, the States, under § 32, may levy and collect taxes as though the Federal Government were not concerned, the manner in which the Federal Government collects receipts from its lessees and then shares them with the States has no bearing on the validity of a state tax. Pp. 629-633.
(b) The tax is not unconstitutional on the alleged ground that it frustrates national energy policies, reflected in several federal statutes, encouraging production and use of coal, and appellants are not entitled to a hearing to explore the contours of these national policies and to adduce evidence supporting their claim. General statements in federal statutes reciting the objective of encouraging the use of coal do not demonstrate a congressional intent to preempt all state legislation that may have an adverse impact on the use of coal. Nor is Montana’s tax preempted by the Powerplant and Industrial Fuel Use Act of 1978. Section 601(a)(2) of that Act clearly contemplates the continued existence, not the preemption, of state severance taxes on coal. Furthermore, the legislative history of that section reveals that Congress enacted the provision with Montana’s tax specifically in mind. Pp. 633-636.
___ Mont. ___, 615 P.2d 87, affirmed.
MARSHALL, J., delivered the opinion of the Court in which BURGER, C.J., and BRENNAN, STEWART, WHITE, and REHNQUIST, JJ., joined. WHITE, J., filed a concurring opinion, post, p. 637. BLACKMUN, J., filed a dissenting opinion, in which POWELL and STEVENS, JJ., joined, post, p. 638.