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SOUTHEASTERN PENN. TRANSP. v. BOARD OF REV.

April 8, 1999

SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY
v.
BOARD OF REVISION OF TAXES OF THE CITY OF PHILADELPHIA, ET AL.



The opinion of the court was delivered by: Bartle, District Judge.

MEMORANDUM

Plaintiff Southeastern Pennsylvania Transportation Authority ("SEPTA") seeks a declaration that its headquarters and all other property it owns is exempt from local real estate taxes. It also requests an injunction to prohibit the assessment and levying of such taxes. Before the court is the motion of the defendants to dismiss for lack of subject matter jurisdiction because of the Tax Injunction Act, 28 U.S.C. § 1341, and for lack of ripeness.

According to the complaint, SEPTA is a metropolitan transportation authority, a body corporate and politic, created under the laws of the Commonwealth of Pennsylvania to provide commuter rail service to the City of Philadelphia ("City") and neighboring suburban counties. See 74 Pa. Cons.Stat. Ann. §§ 1711 et seq. Its headquarters, which is a subject of the present dispute, is located at 1234 Market Street in Philadelphia. Since SEPTA does not presently require the use of the entire building, it leases a portion to the City and other tenants. In May, 1994, SEPTA filed an application for a real estate tax exemption with the Philadelphia Board of Revision of Taxes, which granted SEPTA an exemption for 85% of the value of the premises. Dissatisfied with this result, SEPTA has appealed to the Court of Common Pleas of Philadelphia County.

In the present action, SEPTA contends that it is entitled to be free of local real estate taxes not only pursuant to state law but pursuant to federal law as well. SEPTA relies on 49 U.S.C. § 24301(f) which provides:

  Tax exemption for certain commuter authorities.
  — A commuter authority that was eligible to make a
  contract with Amtrak Commuter to provide commuter
  rail passenger transportation but which decided to
  provide its own rail passenger transportation
  beginning January 1, 1983, is exempt, effective
  October 1,

  1981, from paying a tax or fee to the same extent
  Amtrak is exempt.

Defendants do no challenge that SEPTA is a commuter authority described under § 24301(f).*fn1 Thus, for local tax purposes, § 24301(f) treats SEPTA in the same way as it treats Amtrak. Under 49 U.S.C. § 24301(l)(1), Amtrak is exempt from local real estate taxes:

  Amtrak, a rail carrier subsidiary of Amtrak, and any
  passenger or other customer of Amtrak or such
  subsidiary, are exempt from a tax, fee, head charge,
  or other charge, imposed or levied by a State,
  political subdivision, or local taxing authority on
  Amtrak, a rail carrier subsidiary of Amtrak, . . .
  after September 30, 1981. In the case of a tax or fee
  that Amtrak was required to pay as of September 10,
  1982, Amtrak is not exempt from such tax or fee if it
  was assessed before April 1, 1997.

Congress enacted this tax exemption as part of comprehensive legislation to save the nation's dying rail passenger system. See Nat'l R.R. Passenger Corp. v. Commw. of Pa. Pub. Util. Comm'n, 848 F.2d 436, 438 (3d Cir. 1988). Through tax relief, it has sought to help financially strapped rail passenger commuter authorities and to place part of the burden on the communities benefiting from their presence. See Southeastern Pa. Transp. Auth. v. Pa. Pub. Util. Comm'n, 802 F. Supp. 1273, 1278-79 (E.D.Pa. 1992).

Defendants argue, however, that even if SEPTA is exempt from local taxes, the Tax Injunction Act bars a federal court from hearing this action. The Act reads:

  The district courts shall not enjoin, suspend or
  restrain the assessment, levy or collection of any
  tax under State law where a plain, speedy and
  efficient remedy may be had in the courts of such
  State.

28 U.S.C. § 1341. Defendants contend that it would violate the Act for this court to interfere with the City of Philadelphia's collection of local real estate taxes when, it is undisputed, SEPTA has a "plain, speedy and efficient remedy" to challenge the tax in the courts of Pennsylvania.

In support of its position, defendants cite the Supreme Court's decision in Tully v. Griffin, Inc., 429 U.S. 68, 73, 97 S.Ct. 219, 50 L.Ed.2d 227 (1976), and its progeny, that the Tax Injunction Act is to be interpreted broadly. It "has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations." Tully, 429 U.S. at 73, 97 S.Ct. 219. In keeping with the Act's purpose, it has been read not only to prohibit injunctions but declaratory judgments as well. See Behe v. Chester County Bd. of Assessment Appeals, 952 F.2d 66, 68 (3d Cir. 1991). The Tax Injunction Act, when applicable, is a jurisdictional bar to an action in the federal courts. See id.

Despite the Tax Injunction Act, 49 U.S.C. § 24301(l)(2) provides that "[t]he district courts of the United States have original jurisdiction over a civil action Amtrak brings to enforce this subsection [prohibiting local taxes] and may grant equitable or declaratory relief requested by Amtrak." In its previous enactment as 45 U.S.C. § 546(b), the section contained the additional language that the federal courts had authority to enforce this tax exemption provision "[n]otwithstanding the provision of section 1341 of Title 28 [the Tax Injunction Act]." The present version omits the reference to the Tax Injunction Act. Nonetheless, the congressional report accompanying the amendments explained that the specific reference to the Act was simply omitted as surplusage. See H.R.Rep. No. 103-180, at 123 (1994), reprinted in 1994 U.S.C.C.A.N. 4, 940. Thus, it is clear that the Tax Injunction Act does not prevent a federal action by Amtrak to enjoin states and their political subdivisions from taxing it.

The question remains whether the access to the federal courts afforded Amtrak also applies to commuter authorities such as SEPTA. While § 24301(l)(2) does not specifically refer to suits by such entities, we do not view this deficiency as controlling. For purposes of local taxation, § 24501(g) treats SEPTA like Amtrak: a commuter authority "is exempt . . . from paying a tax or fee to the same extent Amtrak is exempt." Under the legislative scheme designed to save financially threatened commuter authorities, it would be anomalous for Congress to have required local tax exemptions and then to have withheld from the authorities the right to enforce those exemptions in the federal courts. In Southeastern Pa. Transp. Auth., 802 F. Supp. at 1278-79, Judge Louis Pollak of this court faced the same issue as we confront here. He held, correctly in our view, that subject matter jurisdiction existed to enjoin the Pennsylvania Public Utility Commission ("PUC") from making certain assessments against SEPTA. The Court of Appeals ultimately affirmed the District Court's injunction against the PUC. Southeastern Pa. Transp. Auth. v. Pa. Pub. Util. Comm'n, 826 F. Supp. 1506 (E.D.Pa. 1993), aff'd, 27 F.3d 558 (3d Cir. 1994). Although the Court of Appeals did so with an unpublished opinion, the very act of affirmance necessarily signified that subject matter jurisdiction existed ...


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