Entergy Nuclear Vermont Yankee, LLC et al v. Shumlin et al
Filing
34
OPINION AND ORDER granting 21 Motion to Dismiss for Lack of Subject Matter Jurisdiction. Signed by Chief Judge Christina Reiss on 10/25/2012. (pac)
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DISTRICT OF
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UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
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2UI2 OCT 25 PM 4: 08
ENTERGY NUCLEAR VERMONT
YANKEE, LLC and ENTERGY NUCLEAR
OPERATIONS, INC.,
)
)
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Plaintiffs,
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v.
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PETER SHUMLIN, in his official capacity as )
GOVERNOR OF THE STATE OF
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VERMONT, WILLIAM SORRELL, in his
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official capacity as the ATTORNEY
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GENERAL OF THE STATE OF VERMONT, )
and MARY N. PETERSON, in her official
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capacity as the COMMISSIONER OF THE
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DEPARTMENT OF TAXES OF THE
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STATE OF VERMONT,
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Defendants.
)
Case No. 5: 12-cv-206
OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
(Doc. 21)
This matter comes before the court on the Fed. R. Civ. P. 12(b)(1) motion to
dismiss this case for lack of subject matter jurisdiction filed by Defendants Peter
Shumlin, William Sorrell, and Mary N. Peterson (collectively "the State"). (Doc. 21.)
Plaintiffs Entergy Nuclear Vermont Yankee, LLC and Entergy Nuclear Operations, Inc.,
(collectively, "Entergy") oppose dismissal. The parties completed their filings on
October 18,2012.
On September 11, 2012, Entergy filed a complaint for declaratory and injunctive
relief (Doc. 1) and a motion for a preliminary injunction (Doc. 3), challenging and
seeking to enjoin the implementation of Vermont's Electrical Energy Generating Tax, 32
V.S.A. § 8661, amended and effective as of July 1,2012 (the "EET").
On September 24, 2012, the State moved to dismiss this case (Doc. 21), arguing
that the court lacks subject matter jurisdiction because the Tax Injunction Act, 28 U.S.C.
§ 1341 ("TIA"), prohibits federal courts from enjoining the collection of state taxes
provided the party challenging the tax has a "plain, speedy and efficient remedy" in state
court. 28 U.S.C. § 1341. In opposing dismissal, Entergy contends that the EET is not a
tax, and that even if it is, there is either no remedy before a state agency or state court, or
such remedies are inadequate.
Entergy is represented by Robert B. Hemley, Esq., Matthew B. Byrne, Esq., Hollis
L. Hyans, Esq., Thomas H. Steele, Esq., and Robert A. Salerno, Esq. The State is
represented Assistant Vermont Attorney General Jonathan T. Rose and Assistant
Vermont Attorney General Danforth Cardozo, III.
I.
Factual and Procedural Background.
For purposes of adjudicating the motion to dismiss, the court limits its discussion
to the facts and procedure relevant to the determination of the court's subject matter
jurisdiction.
Entergy's Payments Under the MOUs
Vermont Yankee Station, located in Vernon, Vermont, is the only nuclear power
plant operating in Vermont. It has a capacity of over 600 megawatts of power. Vermont
Yankee Station is authorized by the Federal Energy Regulatory Commission ("FERC") to
sell power into the New England interstate market at market-based rates managed by ISO
New England, a non-profit independent system operator, regulated by FERC, that
administers New England's wholesale electricity markets.
Vermont Yankee Station began operating in 1972 pursuant to a forty-year license
issued by the Atomic Energy Commission, the predecessor of the United States Nuclear
Regulatory Commission (the "NRC"). In 2001, Entergy successfully bid to acquire the
Vermont Yankee Station. Thereafter, the Vermont Public Service Board ("PSB")
approved the sale of Vermont Yankee Station to Entergy and issued a Certificate of
Public Good, permitting Entergy to own and operate it.
2
On February 21,2003, Entergy sought approval from the PSB to modify Vermont
Yankee Station to increase the power output by up to twenty percent (the "Uprate"). On
or about November 2003, as part of its effort to obtain approval for the Uprate, Entergy
entered into a Memorandum of Understanding with the Vermont Department of Public
Service (the "DPS"), under which the DPS agreed to support the Uprate and Entergy
committed to make a series of yearly payments to the State of Vermont from March 2006
through March 2012 (the "2003 MOU"). On March 15,2004, the PSB approved the
Uprate.
On March 10,2005, Entergy proposed legislation to the Vermont Legislature for
the purpose of permitting it to seek approval from the PSB to construct a dry fuel storage
facility for spent nuclear fuel on-site at Vermont Yankee Station. As part of its efforts to
obtain support for the legislation and approval of the storage facility, Entergy agreed with
the DPS to enter into a second Memorandum of Understanding (the "2005 MOU"),
which would require Entergy to make quarterly payments to the State of Vermont from
January 2006 through March 2012. On June 21, 2005, Entergy entered into the 2005
MOU with the DPS, and the Governor signed 2005 Vt. Acts & Resolves No. 74 ("Act
74"), which authorized Vermont Yankee Station to seek approval from the PSB to
construct a dry fuel storage facility. On April 26, 2006, the PSB approved the
construction of the dry fuel storage facility.
In addition to authorizing approval for the dry fuel storage facility, Act 74 also
created the Clean Energy Development Fund ("CEDF"), to be administered by the PSB
for the purpose of "promot[ing] the development and deployment of cost-effective and
environmentally sustainable electric power and thermal energy or geothermal resources
for the long-term benefit of Vermont consumers, primarily with respect to renewable
energy resources, and the use of combined heat and power technologies." 30 V.S.A. §
8015(c). Act 74 provided that the CEDF would consist of proceeds from the 2003 MOU,
any MOUs with Entergy entered into before July 1,2005 (thus including the 2005 MOU,
signed on June 21,2005), and "[a]ny other monies that may be appropriated to or
deposited into the fund." Id. § 80 15(a)( 1)(B). The fund could be used "solely for the
3
purposes set forth in [the CEDF,]" not "for the general obligations of government[,]" and
all interest and remaining balances at the end of any fiscal year were to "remain part of
the fund." Id. § 8015(a)(2). Between January 2006 and March 2012, Entergy made
payments under the 2003 and 2005 MOUs.
The Challenged EET
On May 15,2012, Defendant Governor Peter Shumlin signed 2011 Vt. Acts &
Resolves No. 143 (ifAct 143 1f ), which created the challenged EET as set forth in Chapter
213 of Title 32 of the Vermont Statutes Annotated. Act 143 repealed the previous
Electric Generating Plant Education Property Tax and changed the rate of taxing power
generation, effective July 1, 2012. Chapter 213 now provides for the EET as follows:
(a) There is hereby assessed upon electric generating plants constructed in
the state subsequent to July 1, 1965, and having a name plate generating
capacity of 200,000 kilowatts, or more, a state tax at the rate of$0.0025 per
kWh of electrical energy produced. The tax imposed by this section shall
be paid to the commissioner on the electrical energy generated in the prior
quarter on or before the 25th day of the calendar month succeeding the
quarter ending on the last day of March, June, September, and December
by the person or corporation then owning or operating such electric
generating plant.
(b) A person or corporation failing to make returns or pay the tax imposed
by this section within the time required shall be subject to and governed by
the provisions of sections 3202 and 3203 of [Title 32].
32 V.S.A. § 8661. Proceeds from the EET are deposited into the State's general fund and
are not earmarked for any specific purpose. The CEDF, along with many other unrelated
programs, is currently financed by transfers from the general fund.
State Procedures for Challenging a Tax
Vermont law provides the procedure by which taxpayers are notified of either a
deficiency in tax payments or a denial of a requested refund. See 32 V. S.A. § 3203.
After receiving notice of a deficiency or the denial of a refund, a taxpayer has a right to
appeal the initial decision within sixty days to the Commissioner of Taxes (the
"Commissioner"). See 32 V.S.A. § 5883; see also Vermont Dep't of Taxes Organization
and Rules of Procedure (the "Tax Dep't Rules") at Rule 4(a) ("A taxpayer or claimant ...
4
may appeal to the Commissioner any action of the Department for which appeal is
provided by law including assessment, denial in part or whole of a refund claim [.]").1
Upon appeal, a taxpayer is entitled to a hearing on the record before the
Commissioner or a designated hearing officer. This hearing must conform to the
requirements of Vermont's Administrative Procedure Act ("APA"), 3 V.S.A. §§ 801, et
seq. See 32 V.S.A. § 5885(a). At the hearing, the taxpayer may introduce evidence in
support of the taxpayer's claims and may submit proposed findings of fact and
memoranda oflaw. See Tax Dep't Rules at 4(c)-(g). If the Commissioner denies the
appeal or otherwise renders an adverse decision, the taxpayer may appeal that
determination "to the Washington superior court or the superior court of the county in
which the taxpayer resides or has a place of business." 32 V.S.A. § 5885(b).
In addition, in the event a taxpayer has exhausted its administrative remedies or
they do not exist, a taxpayer may seek a direct determination of the constitutionality of a
tax pursuant to Vermont's Declaratory Judgment Act. See 12 V.S.A. § 4711. If the
taxpayer receives an adverse determination from the trial court, he or she may appeal that
determination to the Vermont Supreme Court, and if it involves a question of federal
constitutional law, he or she may petition for review by the United States Supreme
Court. 2
Entergy's Claimed Federal Court Subject Matter Jurisdiction
In its complaint, Entergy "seeks an injunction against the imposition, assessment,
and collection by [the State] of the amounts imposed by the Legislation" creating the
challenged EET. (Doc. 1 at ~ 1). It also seeks a declaration that the EET is
unconstitutional on a number of grounds. (Doc. 1, Prayer for Relief,
~
A.)
I The court takes judicial notice of the Tax Dep't Rules pursuant to Fed. R. Evid. 201, noting that
Entergy has not contested the existence of the Rules or their content, only their applicability and
adequacy.
2 The Vermont Supreme Court has "exclusive jurisdiction of appeals from judgments, rulings,
and orders of the superior court" under 4 V.s.A. § 2(a). The United States Supreme Court has
appellate jurisdiction, under 28 U.S.C. § 1257(a), over "[fJinaljudgments or decrees rendered by
the highest court of a State" when "the validity of a statute of any State is drawn in question on
the ground of its being repugnant to the Constitution."
5
Entergy asserts this court has subject matter jurisdiction "because this action
involves the interpretation of IS U.S.C. § 391 (preempting state taxation of electrical
power that discriminates against interstate commerce), and the Supremacy, Equal
Protection, Commerce and Contract Clause of the United States Constitution." (Doc. 1 at
~
15) (citations omitted). More specifically, it contends the court has subject matter
jurisdiction pursuant to 28 U.S.C. § 1331 (federal question jurisdiction) because this case
involves the interpretation of 15 U.S.c. § 391, and also pursuant to 28 U.S.C. § 1332
(diversity jurisdiction) because the parties have complete diversity of citizenship and the
amount in controversy exceeds $75,000, exclusive ofinterest and costs. Entergy does not
address the applicability of the TIA to its claims in either its complaint or motion for a
preliminary injunction.
The State's Motion to Dismiss and Entergy's Opposition
The State makes a two-pronged argument as to why this case should be dismissed.
First, it argues that Entergy's claims in federal court are barred by the TIA. Second, it
contends that in the event they are not, the court should invoke principles of federal-state
comity and decline to hear this matter in recognition of the federal courts' long-standing
reluctance to interfere in matters of state taxation.
Entergy opposes dismissal, contending the EET is not a "tax" under the TIA.
It contends the EET is instead an impermissible effort by the State to single out Entergy
for discriminatory treatment and to collect payments under the expired MOUs in the
guise of a new levy that affects Entergy, alone, in order to fund the CEDF. See Doc. 24
at 9 (the EET "was enacted as a purported tax in an attempt to force [Entergy] to continue
making payments roughly equivalent to those made under contracts that have expired.
Further, a substantial portion of the funds from the [EET] will go to finance the ...
CEDF, thereby advancing a regulatory agenda. Finally, the [EET] was imposed on
Entergy for improper punitive purposes as part of an ongoing effort to shut down the
Vermont Yankee Nuclear Power Station[.]").
6
II.
Conclusions of Law and Analysis.
A.
Standard of Review.
Entergy bears the burden of establishing this court's subject matter jurisdiction.
See Lujan v. Defenders of Wildlife, 504 U.S 555, 561 (1992). When deciding a Rule
12(b)(1) motion challenging subject matter jurisdiction "at the pleading stage" before any
"evidentiary hearings have been held," the court "must accept as true all material facts
alleged in the complaint and draw all reasonable inferences in [Entergy's] favor."
Conyers v. Rossides, 558 FJd 137, 143 (2d Cir. 2009) (internal quotation marks and
citation omitted). "Nevertheless, even 'on a motion to dismiss, courts are not bound to
accept as true a legal conclusion couched as a factual allegation.'" Id. (quoting Sharkey
v. Quarantillo, 541 F.3d 75, 83 (2d Cir. 2008) (internal quotation marks omitted».
"A case is properly dismissed for lack of subject matter jurisdiction under Rule
12(b)(I) when the district court lacks the statutory or constitutional power to adjudicate
it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citation omitted).
B.
The Tax Injunction Act.
The TIA provides that "[t]he 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. The TIA
prohibits declaratory as well as injunctive relief. California v. Grace Brethren Church,
457 U.S. 393,408-11 (1982). The Supreme Court has "interpreted and applied [the TIA]
as a jurisdictional rule and a broad jurisdictional barrier." Arkansas v. Farm Credit
Servs. ofCent. Arkansas, 520 U.S. 821, 826 (1997) (quotation omitted).
"Before the passage of the [TIA], the Supreme Court in Matthews [v. Rodgers, 284
U.S. 521 (1932)] had held that federal courts would not grant equitable relief against the
imposition of state taxes, even when challenged on federal constitutional grounds, as long
as the state provided an adequate remedy." Robinson Protective Alarm Co. v. City of
Philadelphia, 581 F.2d 371, 375 (3d Cir. 1978). "Enactment of the [TIA] was prompted
by the readiness of some lower federal courts to assert jurisdiction over state tax
challenges despite the Supreme Court's admonition in Matthews." Id. (citation omitted).
7
Accordingly, the TIA does not reflect a new congressional approach to federal court
lawsuits over state taxes. To the contrary, the Supreme Court has, itself, "long
recognized the dangers inherent in disrupting the administration of state tax systems."
Grace Brethren Church, 457 U.S. at 410 n.23 (citing Dows v. City o/Chicago, 78 U.S.
108, 110 (1870) ("It is upon taxation that the several States chiefly rely to obtain the
means to carryon their respective governments, and it is of the utmost importance to all
of them that the modes adopted to enforce the taxes levied should be interfered with as
little as possible. Any delay in the proceedings of the officers, upon whom the duty is
devolved for collecting the taxes, may derange the operations of government, and thereby
cause serious detriment to the public.")).
"According to the Supreme Court, the purpose of the TIA is 'to limit drastically
federal district court jurisdiction to interfere with so important a local concern as the
collection of taxes.' Because of this, the Court has noted that the TIA prohibits, in most
circumstances, a federal district court from issuing an injunction preventing the collection
of state taxes." Hattem v. Schwarzenegger, 449 F.3d 423,427 (2d Cir. 2006) (quoting
Grace Brethren Church, 457 U.S. at 408-09).
The Second Circuit has held that two conditions must exist before the TIA can be
invoked. "[F]irst, the surcharges must constitute 'taxes,' and second, the state remedies
available to plaintiffs must be 'plain, speedy and efficient.'" Hattem, 449 F.3d at 427
(citations omitted). The Second Circuit has further explained that "the TIA should be
interpreted to preclude jurisdiction only where 'state taxpayers seek federal-court orders
enabling them to avoid paying state taxes.'" Luessenhop v. Clinton Cnty, 466 F.3d 259,
267 (2d Cir. 2006) (quoting Hibbs v. Winn, 542 U.S. 88, 107 (2004)). In its complaint,
Entergy "seeks an injunction against the imposition, assessment, and collection by [the
State] of the amounts imposed by the Legislation" -- the challenged EET. (Doc. 1 at ~ 1
2). Although Entergy seeks a federal court order enabling it to avoid paying the EET, it
contends that the TIA does not mandate dismissal ofthis case because the EET is not a
"tax" for purposes of the TIA. This argument is somewhat at odds with Entergy's
repeated arguments in its motion for a preliminary injunction that the EET is a "tax" that
8
violates various provisions of the federal Constitution and is preempted by 15 U.S.C. §
3
391. See, e.g., Doc. 3-1 at 21 ("Congress, pursuant to its plenary power over commerce,
has expressly singled out the generation and transmission of energy for protection against
discriminatory tax impositions by enacting 15 U.S.C. § 391[.]"); Doc. 3-1 at 21 ("The
[EET], effective July 1,2012, is in conflict with [Section 391] -- and, therefore, is
preempted -- because it imposes what Vermont describes as a 'tax' with respect to the
generation or transmission of electricity" that is impermissibly discriminatory); and Doc.
3-1 at 23,25 (arguing the EET violates the Commerce Clause because the State has
characterized it as a "tax" and because, among other things, it "bears no relationship to
any services provided by the State"). Nevertheless, Entergy is correct that the court must
first determine whether the EET is a "tax" under the TIA before it may conclude that the
TIA applies.
1.
Whether the EET is a Tax.
"Courts, including the Second Circuit, have broadly defined the word 'tax' under
the Act to include any state or local revenue collection device." Cmty. Hous. Mgmt.
Corp. v. City a/New Rochelle, 381 F. Supp. 2d 313,319 (S.D.N.Y. 2005) (citation
omitted); Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130, 134 (4th Cir. 2000) (holding
"the term 'tax' is subject to a 'broader' interpretation when reviewed under the aegis of
the TIA.") (citations omitted); Tramel v. Schrader, 505 F.2d 1310,1315 (5th Cir. 1975)
(holding the TIA required dismissal of the federal court suit and observing that "for
purposes of the federal statute the narrow 'tax' definition suggested by plaintiffs does not
fit the frame."); Robinson, 581 F .2d at 374-7 6 (under the TIA, the word "tax"
3
15 U.S.C. § 391 provides:
No State, or political subdivision thereof, may impose or assess a tax on or with
respect to the generation or transmission of electricity which discriminates against
out-of-State manufacturers, producers, wholesalers, retailers, or consumers of that
electricity. For the purposes of this section a tax is discriminatory if it results,
either directly or indirectly, in a greater tax burden on electricity which is
generated and transmitted in interstate commerce than on electricity which is
generated and transmitted in intrastate commerce.
9
encompasses any state or local revenue collection device regardless of whether the state
labels it a "tax" or an "assessment" as state labels do not control a federal determination
of what constitutes a "tax" under the TIA).
Entergy invites the court to examine cases from other jurisdictions to determine
whether the EET is a "tax" and argues that "[t]he starting point for the determination of
whether a charge constitutes a 'tax' for purposes of the TIA is San Juan Cellular Tel. Co.
v. Public Servo Comm'n, 967 F.2d 683,685 (Ist Cir. 1992) [San Juan]." (Doc. 24 at 22.)
Although some district courts in the Second Circuit have looked to San Juan for
guidance in determining whether an assessment is a "tax" subject to the TIA or a
"regulatory fee" which is not,4 the Second Circuit, itself, has not adopted San Juan but
has instead cited San Juan for the limited proposition that, "[i]n general, courts have
'tended ... to emphasize the revenue's ultimate use, asking whether it provides a general
benefit to the public, of a sort often financed by a general tax, or whether it provides
narrow benefits to regulated companies or defrays the agency's costs of regulation.'"
Travelers Ins. Co. v. Cuomo, 14 F.3d 708, 713 (2d Cir. 1994) [Cuomo], rev'd on other
grounds New York State Can! a/Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645 (1995) [Travelers] (quoting San Juan, 967 F.2d at 685). For that reason,
the court declines Entergy's invitation to look elsewhere for tests and definitions for a
"tax" under the TIA and instead examines the Second Circuit's controlling precedent on
this issue.
In Cuomo,5 the Second Circuit observed that "[a]lthough there is no bright line
between assessments that are taxes and those that are not, most courts agree that
assessments which are imposed primarily for revenue-raising purposes are 'taxes,' while
See, e.g., IMS Health Inc. V. Sorrell, 2008 WL 2483299, at *3 (D. Vt. June 17,2008); Cmty.
Hous. Mgmt. Corp., 381 F. Supp. 2d at 320; United Food and Commercial Workers Unions and
Food Emps. Benefit Fund v. DeBuono, 101 F. Supp. 2d 74,77 (N.D.N.Y. 2000).
4
In Hattem V. Schwarzennegger, the Second Circuit reaffinned its definition of "tax" as set forth
in Cuomo, noting that "[i]n overruling Cuomo, the Supreme Court made clear in Travelers that it
was not disturbing [the Second Circuit's] holding regarding the TIA." Hattem, 449 F.3d at 427
5
n.3.
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levies assessed for regulatory or punitive purposes, even though they may also raise
revenues, are generally not 'taxes.'" Cuomo, 14 F.3d at 713. Accordingly,
"[n]otwithstanding the primary purposes ascribed to [assessments] by the State," those
that "raise revenue which is ultimately paid into the State's general fund ... serve general
revenue-raising purposes [and thereby] constitute 'taxes' for purposes of the TIA." Id.
Here, the EET raises revenue on behalf of the State which is paid into the State's
general fund which, in tum, is used for a variety of public purposes. As a result, in
accordance with the Second Circuit's definition, the EET is a "tax" subject to the TIA.
Cuomo, 14 F.3d at 713-14 (holding "tax" for purposes of the TIA is "any state or local
revenue collection device" that serves "general revenue-raising purposes.") (citation
omitted).
Were the court to apply the San Juan three-factor test, 6 the outcome would be no
different. Vermont's Legislature has authorized the State to impose the EET and to
collect it through Vermont's Department of Taxes. The entity that imposes the tax is thus
a quintessential taxing authority and acts through its customary tax revenue collecting
agency. It is the very type of state taxation activity with which the TIA forbids federal
court interference. The EET is thus not similar to the "periodic" specialized fee imposed
by a regulatory agency for purposes of carrying out its regulatory duties considered in
San Juan. San Juan, 967 F.2d at 686.
The second San Juan factor focuses on the population subject to the charge.
Although Entergy points out that the EET now applies only to Entergy, it cannot discount
the possibility that in the future it could apply to other electric generating plants as well.
By its terms, the EET applies to any "electric generating plant[] constructed in the state
subsequent to July 1, 1965, and having a name plate generating capacity of200,000
kilowatts, or more." 32 V.S.A. § 8661(a). Courts have held that "an assessment upon a
The San Juan analysis calls for consideration of three factors: (1) the nature of the entity that
imposes the charge; (2) the population subject to the charge; and (3) whether the charge is
expended for general public purposes or whether it is for the regulation, benefit, or punishment
of those upon whom the assessment is imposed consistent with a regulatory purpose. San Juan,
967 F .2d at 686.
6
11
narrow class of parties can still be characterized as a tax under the TIA." Bidart Bros. v.
California Apple Com 'n, 73 F.3d 925, 931 (9th Cir. 1996) (collecting cases and noting
that fees imposed upon parolees for supervision and victims compensation; assessments
on street's residents for street improvements; fees imposed on landfill owners; and jury
fees imposed on plaintiffs have all been determined to be "taxes" for purposes ofTIA);
see also Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc., 651 F.3d 722, 728
(7th Cir. 2011) (en banc) (statute requiring riverboat casinos to deposit three percent of
revenues in special state fund imposes a "tax" under TIA); Cumberland Farms, Inc. v.
Tax Assessor, State ofMe., 116 F.3d 943,947 (Ist Cir. 1997) (surcharge applied only to
limited class of milk producers is a "tax" for purposes ofTIA); Robinson Protective
Alarm Co., 581 F .2d at 372 (assessment directed solely at "private alarm signal system
licensee[ s]" for use of underground wires in Philadelphia was a "tax" for purposes of
TIA). Accordingly, the fact that Entergy is currently the only electric generating plant
subject to the EET does not preclude the EET from being a "tax" under the TIA, 7 nor
does it foreclose Entergy from arguing before the state courts that its status as the sole
taxpayer currently subject to the EET renders the EET unconstitutionaL
As for the final San Juan factor, whether the assessment is expended for general
public purposes, the EET produces revenue for Vermont's general fund. It does not
provide "more narrow benefits to regulated companies or defray[ ]the agency's costs of
regulation." Cuomo, 14 F.3d at 713 (quoting San Juan, 967 F.2d at 685). The fact that
Entergy relies heavily on the Fourth Circuit's decision in GenOn Mid-Atlantic, LLC v.
Montgomery Cty, Md., 650 F.3d 1021 (4th Cir. 2011) wherein the court considered a county tax
that applied to a single taxpayer and determined that it was part of a "regulatory scheme" where
the preamble of the tax itself stated its purpose was to achieve "an 80% reduction in greenhouse
gas emissions by 2050" and to reflect "programmatic efforts to reduce those emissions," Id. at
1025, and thus reflected a "punitive and regulatory fee" which sought to "serve regulatory
purposes directly by, for example, deliberately discouraging particular conduct by making it
more expensive." Id. at 1026. The facts of this case are not only distinguishable, but the Second
Circuit has clearly adopted a different approach which focuses on whether the purpose and use of
the assessment can be characterized as serving general revenue raising purposes for a general
fund. See Cuomo, 14 F.3d at 713 (those assessments that "raise revenue which is ultimately paid
into the State's general fund ... serve general revenue-raising purposes [and] constitute 'taxes'
for purposes of the TIA.").
7
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the State's general fund, in tum, funds the CEDF and numerous other public programs,
functions, and activities is irrelevant. Indeed, Entergy's argument that partial use of the
general fund to fund the CEDF would mean that any use of the general fund for a
regulatory program renders all of the taxes contributing to the general fund regulatory
fees. No court has adopted this approach. To the contrary, courts have examined
whether the revenue generated is earmarked for achieving an explicit regulatory purpose.
For example, in GenOn Mid-Atlantic, LLC v. Montgomery County, Md., 650 F.3d 1021
(4th Cir. 2011), in finding an assessment was a regulatory fee not a tax, the court noted
that while fifty percent of the funds raised by the challenged assessment would be
dedicated to the general fund, the remainder was "earmarked for the County's greenhouse
gas reduction programs," Id. at 1024, and were thus specifically devoted to a regulatory
function. In contrast, the EET's ultimate use "provides a general benefit to the public, of
a sort often financed by a general tax[.]" San Juan, 967 F.2d at 685. Applying the San
Juan analysis, the EET clearly remains a "tax" for purposes of the TIA.
2.
Whether There is an Adequate State Remedy.
The Supreme Court has noted that courts "must construe narrowly the 'plain,
speedy and efficient' exception to the Tax Injunction Act," Grace Brethren Church, 457
U.S. at 413, and therefore must find a state remedy adequate if the taxpayer "can seek a
refund ... through administrative and judicial procedures" and "[i]fthe taxpayer is
unsuccessful ... he may appeal the decision to higher state courts" and "ultimately seek
review" in the Supreme Court. Id. at 414. Provided nothing precludes the taxpayer from
"'rais[ing] any and all constitutional objections to the tax' in the state courts" Id. (quoting
Rosewell v. LaSalle Nat 'I Bank, 450 U.S. 503, 522 (1981), the TIA "contemplates
nothing more." Id. (quoting Rosewell, 450 U.S. at 515 n.19). Under the TIA, a plaintiff
bears the burden of showing the absence of an adequate state law remedy. See Franchise
Tax Bd. o/Cal. v. Alcan Aluminum Ltd., 493 U.S. 331, 340 (1990). "Mere speculation"
about the insufficiency of state review will not suffice. Id. at 341.
The EET provides that "[a] person or corporation failing to make returns or pay
the tax imposed by this section within the time required shall be subject to and governed
13
by [32 V.S.A. § 3203]." 32 V.S.A. § 8661(b). 32 V.S.A. § 3203 provides for
notifications of deficiency or denials of refund requests, and this statute is, in tum,
expressly incorporated into 32 V.S.A. § 5883, which provides for a full hearing and
Commissioner review of notifications of deficiency and denials of refunds. The
Commissioner's decision under 32 V.S.A. § 5883 is expressly made reviewable in the
Vermont Superior Court by 32 V.S.A. § 5885(b). More generally, the Commissioner is
also provided with the authority to "[h]old hearings, administer oaths and examine under
oath any person relating to his or her business or relating to any matter within the
commissioner's jurisdiction," 32 V.S.A. § 3201(a)(3), and to "[a]ssess, determine, revise
and readjust the taxes imposed in this title." 32 V.S.A. § 3201(a)(7).
Entergy contends these remedies are not applicable to Section 8661 (b) because
that section refers only to the failure to pay taxes and does not mention refunds thereby
supporting a conclusion that the Vermont Legislature sought to preclude EET taxpayers
from seeking a refund. Not only do the relevant statutes fail to reflect this alleged intent,
Entergy's interpretation contravenes Section 8661 (b)' s specific incorporation of 32
V.S.A. § 3203 and well-established Vermont law that "appeal rights are to be liberally
construed in favor of persons exercising those rights." Casella Const. Inc. v. Dep 't of
Taxes, 2005 VT 18 ~ 5,178 Vt. 61, 63,869 A.2d 157, 159 (2005) (quoting In re Hignite,
2003 VT 11, ~ 9, 176 Vt. 562, 844 A.2d 735 (2003) (mem.)); see also Langrock v. Dept.
ofTaxes, 423 A.2d 838,839 (Vt. 1980) ("It is ... a well stated rule oflaw that in
construing an ambiguous statute doubts are to be resolved against the taxing power and in
favor of the taxpayer.").
As the State further points out, Entergy's claim that a refund is unavailable is
particularly untenable in light of its predecessor's use of these very same allegedly
unavailable review procedures to raise substantially the same challenges to a previous tax
and to claim a refund. See In re Vt. Yankee Nuclear Power Corp. Elec. Generating Tax,
ATC-91-103 (1997) (administrative decision reviewing the denial ofVYNPC's request
for a tax refund, based on the purported unconstitutionality of32 V.S.A. §§ 8661-62).
14
Moreover, in the absence of an adequate state administrative remedy, Entergy
would still have a "plain, speedy and efficient" state remedy for purposes of the TIA
because its challenge to the EET could be brought directly in Vermont's state courts
under Vermont's Declaratory Judgments Act. 12 V.S.A. § 4711. The Vermont Supreme
Court has held that the Act authorizes facial challenges to the constitutionality of a
statute. Travelers Indemnity Co. v. Wallis, 2003 VT 103, ~ 18, 176 Vt. 167, 175, 845
A.2d 316,323 (2003). The Second Circuit has recognized this as well. See Murray v.
McDonald, 157 F.3d 147, 148 (2d Cir. 1998) ("We are now satisfied that the courts of
Vermont are empowered to decide constitutional questions, even when reviewing
determinations made by administrative agencies that lack such power."). This alone, is
sufficient to satisfY the TIA' s requirement of a "plain, speedy and efficient remedy." See
Tully v. Griffin, Inc., 429 U.S. 68, 76 (1976) (finding New York's Declaratory Judgment
Act was a "plain, speedy and efficient remedy" for the purposes of the TIA).
Under the TIA, the remedy is sufficient if the state provides "a full hearing and
judicial determination at which [a taxpayer] may raise any and all constitutional
objections to the tax." Long Island Lighting Co. v. Town ofBrookhaven, 889 F.2d 428,
431 (2d Cir. 1989) (internal quotation marks and citation omitted). Here, that standard is
clearly satisfied. Indeed, as the State points out, the Second Circuit has repeatedly
concluded that Vermont's tax appeal procedures provide a "plain, speedy and efficient"
remedy for challenges to the State's tax laws sufficient to preclude federal court
jurisdiction under the TIA. See Boivin v. Town ofAddison, 366 Fed. App'x 201 (2d Cir.
2010) (affirming district court's conclusion that taxpayer had a "plain, speedy and
efficient" remedy under Vermont law and noting that "Boivin has admitted on appeal that
Vermont state courts are empowered to consider constitutional claims; this is all that is
necessary for the state court's remedies to be adequate under the [TIA]."); Murray, 157
F.3d at 147-48 (concluding that because "the courts of Vermont are empowered to decide
constitutional questions" this provides a "plain, speedy and efficient remedy" for
purposes of the TIA). Against this backdrop, Entergy has failed to establish that the
15
narrow exception to the TIA applies because state remedies to challenge the EET are
inadequate.
In summary, because the EET is a "tax" for purposes of the TIA and because
Entergy has a "plain, speedy and efficient" state court remedy, this court lacks subject
matter jurisdiction to consider Entergy's requests for injunctive and declaratory relief
whereby Entergy seeks to avoid payment of the EET based upon a federal court
determination that it is unconstitutionaL 8
CONCLUSION
F or the reasons stated above, the State's motion to dismiss (Doc. 21) is hereby
GRANTED and this case is hereby DISMISSED.
SO ORDERED.
slv-
Dated at Rutland, in the District of Vermont, this ~ day of October, 2012.
~
Christina Reiss, Chief Judge
United States District Court
The court does not reach the State's alternative argument that this case should be dismissed in
order to further principles of federal-state comity. See Levin v. Commerce Energy, Inc., 130 S.
Ct. 2323, 2330 (2010) ("Comity's constraint has particular force when lower courts are asked to
pass on the constitutionality of state taxation of commercial activity."); Rosewell, 450 U.S. at
525 n.33 (even where the TIA does not explicitly "bar federal-court interference in state tax
administration, principles of federal equity may nevertheless counsel the withholding of relief.").
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