sentatives for the record. The State would have made formal application to appear before the committee, but we received absolutely no notice of the hearings. First of all, we wish to completely concur and join in the statement and testimony given by Mr. Charles Conlon, of the National Association of Tax Administrators. Wyoming's Congressman, Teno Roncalio was a sponsor of H.R. 5310 which is one of the companion bills to H.R. 4972. We have since notified Congressman Roncalio of our complete opposition to such legislation and our reasons therefor and he has agreed to reconsider his position in the light of the complete testimony before your committee. We did not learn of the hearings on this legislation before we arrived in Washington, D.C., to testify before another committee with regard to H.R. 11798 and then immediately made arrangements to submit our testimony as soon as possible in the hope that the same could be included in the record. In case we are too late we beg that our testimony be inserted anyway if this can possibly be done as we believe that what we have to say will be valuable to the committee. We have been involved in litigation with the Chicago, Burlington & Quincy Railroad and have thus acquired certain information in this regard which will have special pertinence. In the preparation of our case we had occasion to review the history of railroad taxation. When the railroads had virtual monopoly for so many, many years they gave little if no consideration to taxes because they merely passed them on to their customers. Thus this actually was a bit of indirect taxation of the people which was indulged in by both the railroads and the tax administrators; hence any errors which were made by the tax administrators of the various States were left uncorrected, and we submit that this was at least in part the fault of the railroads. Regardless of the skill of the tax administrator in appraising, he cannot possibly learn and know as much about the railroad's property as the railroad itself. Now that the railroads have considerable competition they have begun to object to the ad valorem taxes and there have been consequent reforms and adjustments. There have been tremendous adjustments in the last 10 or more years, but the railroads have tried to take advantage of this situation and push it far beyond the point of fair adjustment. To be sure, some States might still be remiss in their taxation of railroads, but the railroads like any other taxpayer have adequate recourse in State courts. This has been proven in this last year alone in Nebraska and Illinois and probably other States as well. The bill purports to give original jurisdiction to the Federal district courts to hear and determine interstate carrier tax disputes, but does not take the jurisdiction of this subject matter away from the State courts. On the face this seems to be harmless enough, and this is probably why our Congressman was inclined to sign the bill and testify thereon. However, when one looks a little deeper into the situation and the ramifications of the bill the rather substantial and sweeping changes which this provision alone creates become more clear. It would appear that the fundamental rule of law that one must first exhaust his administrative remedies before seeking judicial review is abrogated. This rule of law is steeped in judicial precedent and wisdom. The original tribunal must be given the first chance to correct its mistakes before seeking review. This is especially true concerning administrative agencies which are expert in their field of responsibility. Wyoming like most, if not all other States provides for an administrative protest hearing. This is a very speedy and expeditious remedy. We attach hereto as exhibit I our administrative rule which provides for this hearing. The inference of the bill and some of the testimony before your committee is that the tax administrators are prejudiced against the railroads and that they have a definite interest in collecting as much money for the State as possible from the railroads. We suggest that this is completely unjustified, false and uncalled for. The only interest of the tax administrators is to administer the State tax laws as fairly and proficiently as possible. All the testimony before your committee, especially that of James N. Ogden, president and general counsel for Gulf, Mobile & Ohio Railroad Co., concede that all the taxation laws of all the States are completely satisfactory if properly administered. There is also a very serious inference in the bill and the testimony that State courts do not afford unbiased forums for hearing railroad tax appeals. This is a terrible slap in the face to not only the States, but also to all the lawyers and judges of the various States. We intend to take this matter up with the State and American Bar Associations. There is not one iota of evidence or justification to support this inference. Such suggestions are libelous and scandalous, and tend to smack against one of the branches of our Government which has a longstanding heritage steeped in respect and justice. Most, if not all, tax litigation does not involve a jury trial. Checking the history of railroad litigation, only a very small and insignificant number of State railroad cases have been reversed by the Federal courts. As mentioned before, the State courts stand ready and have not been afraid to strike down State railroad tax assessments. We suggest that most of the testimony in favor of the bill has been biased and distorted by railroad interests who are seeking this special legislation. For example, Mr. Ogden's appendix A shows that the State of Wyoming in 1964 assessed railroad property at 60 percent of their true market value and only assessed other property at 20 percent. This is completely untrue. Wyoming attempts to assess all property in accordance with the uniformity requirements in its constitution. We believe that, with the exception of mineral production, no property is assessed in excess of 30 percent of its true value in Wyoming, and there is reliable evidence that the average percentage of assessment to true value is 25 percent. Our tax experts have attempted to assess railroad property at 25 percent of true value. Exact justice in matters of taxation is not possible; however, Wyoming is making a constant effort to equalize all classes of property as is required by law. This brings us to a rather interesting subject, to wit, how to value railroads for ad valorem tax purposes. In our litigation with the Chicago, Burlington & Quincy Railroad, and in hearing and considering protests by other railroads, never did the railroads attack our property valuations as such, rather they challenged our theory of assessment. It has been their contention that the railroad property was worth only what it could produce and that we should only consider income and capital stock values. Of course, income can be hidden and the management efficiency can also cause substantial variations. Further, the average market value of stock does not include the value of complete or even controlling ownership. The plain truth is that a property tax is just that, i.e., a tax on property. A rancher or homeowner must pay a tax on the cost of purchasing their property regardless of whether it earns them a cent. The district court and the Supreme Court of the State of Wyoming stated that logic dictates and the Wyoming taxation laws with regard to railroads provide that certain things should be considered in valuing a railroad, and that as long as this was done and the proper figures used, the tax administrators were acting properly. The court also stated that the administrators were not bound to follow any specific formula or theory such as the railroad attempted to push off on them. By the way, this formula would have left absolutely no discretion to the administrators, but rather would bind them to a mathematical formula. Without attempting to be conceited, we tax administrators are supposed to have at least some special knowledge of taxation and property valuation. The railroads offered such testimony as was given to this subcommittee. Most of it was biased and distorted. The committee should analyze these statistics by asking themselves who gathered and compiled this material and for what purpose. Another example of the type of evidence the railroads produce is actual sales price of various railroads. Upon analyzing these figures it will be seen that they are altogether unreliable because they are either distress or bankrupt sales or are not arm's-length transactions. Even the Supreme Court of Illinois who struck down its State's assessment came to this conclusion concerning these figures. The States are not hideous moneygrabbers as some of the testimony would lead you to believe. Although Wyoming was successful in its litigation with the Chicago, Burlington & Quincy Railroad, its assessed valuations of the railroads continue to be reduced. (The litigation concerned the 1962 assessment. The railroad filed appeals for 1963 and 1964. After the 1965 assessment the railroad not only did not appeal the 1965 assessment, but also dropped the 1963 appeal. Currently we are litigating the 1964 appeal.) Furthermore, of its own volition, the State board of equalization has engaged a professional appraisal firm to completely reevaluate all railroads within the State of Wyoming. This will not be available for the current assessment year, but certainly will be available for the next. Another objection to the bill is that the Federal dockets are usually crowded while the State courts are not. This causes considerable delay and the functions of government must continue regardless of whether or not all the tax moneys are collected. In fact, the Congress in many instances has enacted laws which specifically provide that no injunction can be issued with regard to many Federal taxes. The general rule is that an injunction can only be issued to restrain the collection of an illegal rather than an excessive or otherwise improper tax Even then, a bond must be posted to protect the public revenues. It is not clear that this safeguard must still be followed under the provisions of the bill. We attach several exhibits as appendixes to this statement which are selfexplanatory. SUMMARY We vigorously oppose H.R. 4972 and any similar legislation. There is no need for such legislation and the enactment of the same would disrupt the complete property taxation setup of most of the States. The problem has been distorted and exaggerated out of proportion by the testimony of the railroad interests. The inferences which impinge on the integrity of the State tax adminisrators and State courts are scandalous, libelous, absurd, and completely unjustified and unsupported. The States should be left alone to correct their problems in this very sacred and sovereign area concerning their taxation and revenues, especially because the railroads have just, speedy, and adequate remedies before the State taxing agencies and State courts. We wish to make it clear, however, that the reasons for which we oppose the bill are those hereinbefore set forth. We do not anticipate that the result of any litigation in the Federal courts would differ from the result of the same litigation in the State courts. We hold the integrity and impartiality of the former courts in just as high regard as we do the latter. Finally, we wish to strongly urge that this type of legislation is inconsistent with our federal system. Respectfully submitted. STATE BOARD OF EQUALIZATION FOR THE STATE OF WYOMING, FRANCIS HILLARD, Member, RUDOLPH ANSELMI, Member. Attest: [SEAL] ALEX J. ELIOPULOS, Secretary. EXHIBIT I CHAPTER 11-A-AD VALOREM TAX-ASSESSMENTS BY THE BOARD Section 1. Notice and Hearing. a. All taxpayers assessed for ad valorem tax purposes by the Board shall be notified of their respective final, true and assessed valuations on or before the first week day in June. All taxpayers protesting their respective valuations shall file their protests with the Board no later than eighteen (18) days from and after the date such notification was placed in the United States mails. After receiving a protest, the Board shall set the protest down for oral hearing if it thinks that oral hearing is necessary and shall deposit a notification of the time of hearing in the United States mail with proper postage affixed and properly addressed to the protesting taxpayer no later than seven (7) days before the date of the oral hearing. For the purposes of this section the term "week day" shall mean Monday, Tuesday, Wednesday, Thursday or Friday. b. The filed protests shall include the materials and be in compliance with the requirements of Sections 6 and 7 in Chapter I. c. This rule and any amendments thereto shall appear on and be attached to all notifications of valuation when sent by the Board to a respective taxpayer. EXHIBIT II EXCERPTS FROM THE MINUTES OF THE STATE BOARD OF EQUALIZATION Brief résumé of minute references to Chicago, Burlington & Quincy assess ments since 1924. July 16, 1924: Motion passed denied application of various railroads for reduc tion on basis that real property in State assessed at full and true value as are railroads. July 12, 1926: C.B. & Q. did not appear to protest 1926 valuation which was set for this date so no hearing held. July 25, 1927; C. B. & Q. appeared and protested its 1927 assessment. July 30, 1927: Final valuation on railroads fixed. No change from tentative valuations. June 28, 1928; C.B. & Q. appeared and made oral argument in support of written objection to 1928 value. July 10, 1928: Board used several factors in arriving at railroad valuations including stocks and bonds and net earnings capitalized at 7 percent (see State board of equalization minutes at p. 84 of vol. 9). July 6, 1929: Final valuations on railroads fixed. No mention of any protest by C.B. & Q. July 10, 1930: C.B. & Q. representatives met with board but made no formal objection to 1930 assessment. July 23, 1930: Final valuations on railroads fixed for 1930. July 23, 1931: Final valuations on railroads fixed for 1931. May 28, 1932: Minutes stated: "After considering all the evidence presented on behalf of the railroads (C.B. & Q. was listed as present) the board very carefully made a recheck of the returns submitted and arrived at the final valuations for all railroad companies as hereinafter set out with the express understanding that such value is placed on the property of the various railroad companies in Wyoming on account of the poor financial condition of such companies and not as representing the true value of such property nor as an acknowledgement of precedent for future consideration of the value of such companies." [Emphasis supplied.] June 14, 1932: C.B. & Q. appeared and protested 1933 assessment. June 19, 1933: Final valuations fixed on railroads. June 8, 1934: Final 1934 valuations on railroads set with no protests noted. June 7, 1935: Final 1935 valuations on railroads set with no protests noted. May 21, 1936: "The board this day determined values of the railroad companies' physical properties (emphasis supplied) in Wyoming for taxation for the year 1936, and set same.” June 12, 1936: Board met with C.B. & Q. representatives relative to tax value for the year 1936. June 16, 1936: Board reviewed the assessment of the C.B. & Q. together with the protest and showing made by said company on June 12 and placed a final value for tax purposes for the year 1936 in the amount of $24,629,841. June 25, 1937: Board reviewed tentative values on C.B. & Q. and others and declared the tentative value as set to be the final value for taxation purposes for the year 1937. June 13, 1938: Discussed C.B. & Q. assessment for 1938 with its representatives and took the matter under advisement. June 15, 1938: Fixed final 1938 valuation on C.B. & Q. same as tentative. June 12, 1939: Tentative valuations on railroads set for 1939. June 28, 1939: C.B. & Q. representatives protested 1939 assessement. June 30, 1939: Final valuations set on railroads for 1939. June 19, 1940: Tentative valuations on railroads set for 1940. July 2, 1940: C.B. & Q. representatives protested 1940 assessment. July 9, 1940: Final valuations set on railroads for 1940. June 16, 1941: Tentative valuations on railroads set for 1941. July 1, 1941: No protest shown by C.B. & Q. on 1941 tentative assessment. July 3, 1941: Final valuations on railroads set for 1941. June 11, 1942: Tentative valuations set on railroads for 1942. June 26, 1942: Final valuations on railroads set for 1942. No protest noted for C.B. & Q. May 19, 1943: Tentative valuations on railroads set for 1943. June 9, 1943: Final valuations on railroads set for 1943. No protests noted. June 11, 1945: Board discussed 1945 tentative valuation of C.B. & Q. with company representatives. June 26, 1945: Final valuations on railroads set for 1945. No protests noted. May 29, 1946: Tentative valuations set on railroads for 1946. June 21, 1946: Final valuations on railroads set for 1946. No protests noted. May 27, 1947: Tentative valuations set on railroads for 1947. June 17, 1947: Representatives of C.B. & Q. appeared and protested 1947 tentative assessment. May 28, 1948: Tentative valuations set on railroads for 1948. June 18, 1948: Representatives of C.B. & Q. appeared and protested 1948 tentative assessment. June 21, 1948: Final valuations set on railroads for 1948. May 31, 1949: Tentative valuations set on railroads for 1949. June 17, 1949: Representatives of C.B. & Q. appeared and protested 1949 tentative valuation and certain adjustments were made (minutes do not show detail). May 20, 1950: Tentative valuations set on railroads for 1950. June 14, 1950: Representatives of C.B. & Q. appeared and protested 1950 tentative valuation. No change made by board (no minute entry on 1951 tentative valuation). June 28, 1951: Representatives of C.B. & Q. appeared and protested 1951 assessment. July 5, 1951: Final valuations set on railroads for 1951. June 6, 1952: Tentative valuations set on railroads for 1952. June 24, 1952: Representatives of C.B. & Q. appeared and protested 1952 assessment. July 8, 1952: Final railroad valuations fixed for 1952. May 29, 1952: Tentative valuations set on railroads for 1953. June 15, 1953: Representatives of C.B. & Q. appeared and protested 1953 assessment and presented a number of exhibits showing net railway operating income and the average market value of securities. July 1, 1953: Final valuations on railroads for 1953 fixed same as tentative. May 28, 1954: Tentative valuations set on railroads for 1954. June 18, 1954: Representatives of C.B. & Q. appeared and protested the 1954 assessment. Final valuations were fixed this day. June 10, 1955: Tentative valuations set on railroads for 1955. June 28, 1955: Representatives of C.B. & Q. appeared and protested its 1955 assessment. Statements and exhibits were presented in support of protest. July 6, 1955: Final valuations on railroads for 1955 fixed with certain adjustments. June 12, 1962: Mr. R. R. Lines, appeared on behalf of the Union Pacific Railroad Co. and the Oregon Short Line Railroad Co, and thanked the board for its consideration in fixing the 1962 valuation on its property. June 20, 1963: Mr. R. R. Lines, appeared on behalf of the Union Pacific Railroad Co. and the Oregon Short Line Railroad Co. and thanked the board for its consideration in fixing the 1963 valuation on its property. Mr. R. R. Lines is the head tax official of the Union Pacific Railroad. EXHIBIT III Chicago, Burlington & Quincy Railroad tonnage handled each year, 1933–631 Tons (2,000 pounds) 23,944, 824 | 1949. Tons (2,000 pounds) 45, 882, 336 49,056, 732 53, 344, 607 1951. 50, 264, 564 1 From annual reports to Public Service Commission. Account 541. |