Arizona Public Service Co. v. Snead
Encyclopedia
Arizona Public Service Co. v. Snead, 441 U.S. 141
(1979), is a United States Supreme Court decision which held that a New Mexico
tax on the generation of electricity was invalid under the Supremacy Clause
of the United States Constitution
.
located in northwest New Mexico is transmitted for export and sold in neighboring states. In 1975 New Mexico enacted the Electrical Energy Tax Act, which imposed a tax
on the amount of electricity generated by power plants. The tax amounted to about 2 percent of the retail value of electricity. The Act further allowed electric companies in New Mexico to credit the amount of this tax against their existing tax liability from an existing 4 percent gross receipts tax on retail sales of electricity, essentially eliminating the effect of the tax upon New Mexico's in-state users of electricity. Electricity generated from in-state power plants but exported for sale to out-of-state customers did not have any gross receipts tax liability to credit the energy tax against.
The five out-of-state electric companies with an ownership interest in the Four Corners Generating Station, Arizona Public Service Company, Southern California Edison
, Public Service Company of New Mexico
, Salt River Project
, Tucson Electric Power
, and El Paso Electric
, filed an action in the district court of Santa Fe County seeking a declaratory judgment
that the New Mexico energy tax was unconstitutional and void. In addition to the ownership interest in the Four Corners Generating Station, Tucson Electric Power also had a part ownership interest in the San Juan Generating Station and El Paso Electric owned and operated the Rio Grande Generating Station, both of which were also located in New Mexico.
While the state district court case was pending, Arizona
filed a motion with the U.S. Supreme Court regarding the New Mexico energy tax. The motion requested authorization to file an action against New Mexico under the Court's original jurisdiction
. In Arizona v. New Mexico
, 425 U.S. 794 (1976), the Court denied the motion, noting that the pending state court case was the appropriate forum for litigation of the same issues involving the New Mexico energy tax.
After opposing motions for summary judgment were filed in the district court, the court ruled for New Mexico. The electric companies appealed the case to the New Mexico Supreme Court
. While the appeal was pending before the court, the United States Congress
enacted the Tax Reform Act of 1976 and included a provision regarding the New Mexico energy tax. The provision, codified at 15 U.S.C. § 391, stated:
The New Mexico Supreme Court issued a ruling in 1978 and found that the state energy tax was valid. The court concluded, if the total tax burden on the electric companies was considered, that since the tax on electricity generated was applicable to both electricity sold in-state and out-of-state, and that the credit against the state gross receipts tax was available to both in-state and out-of-state electric companies, it did not result in a discriminatory tax burden. The electict companies then appealed to the U.S. Supreme Court, claiming that the tax violated the Commerce
and Export-Import Clauses of the Constitution and was invalid under 15 U.S.C. § 391.
, 379 U.S. 294 (1964), Heart of Atlanta Motel Inc. v. United States, 379 U.S. 241 (1964), and Wickard v. Filburn
, 317 U.S. 111 (1942).
In a concurring opinion
, Justice Rehnquist noted that when 15 U.S.C. 391 had been discussed by the Senate
, it had been stated that the statute had supposedly been drafted to do no more than what the Commerce Clause would accomplish on its own terms. However, the statute did more than that, and forbids the New Mexico energy tax.
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1979), is a United States Supreme Court decision which held that a New Mexico
New Mexico
New Mexico is a state located in the southwest and western regions of the United States. New Mexico is also usually considered one of the Mountain States. With a population density of 16 per square mile, New Mexico is the sixth-most sparsely inhabited U.S...
tax on the generation of electricity was invalid under the Supremacy Clause
Supremacy Clause
Article VI, Clause 2 of the United States Constitution, known as the Supremacy Clause, establishes the U.S. Constitution, U.S. Treaties, and Federal Statutes as "the supreme law of the land." The text decrees these to be the highest form of law in the U.S...
of the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...
.
Background
Most of the electricity generated at the Four Corners Generating StationFour Corners Generating Station
The Four Corners Generating Station is a coal-fired power plant located near Fruitland, New Mexico, United States, on property located within the Navajo Indian Reservation that is leased from the Navajo Nation.-Description:...
located in northwest New Mexico is transmitted for export and sold in neighboring states. In 1975 New Mexico enacted the Electrical Energy Tax Act, which imposed a tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
on the amount of electricity generated by power plants. The tax amounted to about 2 percent of the retail value of electricity. The Act further allowed electric companies in New Mexico to credit the amount of this tax against their existing tax liability from an existing 4 percent gross receipts tax on retail sales of electricity, essentially eliminating the effect of the tax upon New Mexico's in-state users of electricity. Electricity generated from in-state power plants but exported for sale to out-of-state customers did not have any gross receipts tax liability to credit the energy tax against.
The five out-of-state electric companies with an ownership interest in the Four Corners Generating Station, Arizona Public Service Company, Southern California Edison
Southern California Edison
Southern California Edison , the largest subsidiary of Edison International , is the primary electricity supply company for much of Southern California, USA. It provides 14 million people with electricity...
, Public Service Company of New Mexico
PNM Resources
PNM Resources is an energy holding company based in the U.S. state of New Mexico. The acronym PNM by itself usually refers to the PNM Resources subsidiary Public Service Company of New Mexico...
, Salt River Project
Salt River Project
The Salt River Project is the umbrella name for two separate entities: the Salt River Project Agricultural Improvement and Power District, an agency of the state of Arizona that serves as an electrical utility for the Phoenix metropolitan area, and the Salt River Valley Water Users' Association, a...
, Tucson Electric Power
Tucson Electric Power
Tucson Electric Power is an electric utility company serving southern Arizona in the United States. It is a subsidiary of the UniSource Energy Corporation .Tucson Electric Park, a baseball stadium on Tucson's south side, is named for TEP....
, and El Paso Electric
El Paso Electric
El Paso Electric is an Electric utility that provides electricity to western Texas and southern New Mexico. Its service area covers an area from Van Horn, Texas in the east and goes west to Luna, New Mexico and from the United States-Mexico border north to Holloman Air Force Base...
, filed an action in the district court of Santa Fe County seeking a declaratory judgment
Declaratory judgment
A declaratory judgment is a judgment of a court in a civil case which declares the rights, duties, or obligations of one or more parties in a dispute. A declaratory judgment is legally binding, but it does not order any action by a party. In this way, the declaratory judgment is like an action to...
that the New Mexico energy tax was unconstitutional and void. In addition to the ownership interest in the Four Corners Generating Station, Tucson Electric Power also had a part ownership interest in the San Juan Generating Station and El Paso Electric owned and operated the Rio Grande Generating Station, both of which were also located in New Mexico.
While the state district court case was pending, Arizona
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
filed a motion with the U.S. Supreme Court regarding the New Mexico energy tax. The motion requested authorization to file an action against New Mexico under the Court's original jurisdiction
Original jurisdiction
The original jurisdiction of a court is the power to hear a case for the first time, as opposed to appellate jurisdiction, when a court has the power to review a lower court's decision.-France:...
. In Arizona v. New Mexico
Arizona v. New Mexico
Arizona v. New Mexico, 425 U.S. 794 , is an opinion from the United States Supreme Court which denied a motion from the State of Arizona seeking authorization to file suit against the State of New Mexico by invoking the original jurisdiction of the court.-Background:Most of the electricity...
, 425 U.S. 794 (1976), the Court denied the motion, noting that the pending state court case was the appropriate forum for litigation of the same issues involving the New Mexico energy tax.
After opposing motions for summary judgment were filed in the district court, the court ruled for New Mexico. The electric companies appealed the case to the New Mexico Supreme Court
New Mexico Supreme Court
The New Mexico Supreme Court is the highest court in the U.S. state of New Mexico. It is established and its powers defined by Article VI of the New Mexico Constitution...
. While the appeal was pending before the court, the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
enacted the Tax Reform Act of 1976 and included a provision regarding the New Mexico energy tax. The provision, codified at 15 U.S.C. § 391, stated:
- 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 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.
The New Mexico Supreme Court issued a ruling in 1978 and found that the state energy tax was valid. The court concluded, if the total tax burden on the electric companies was considered, that since the tax on electricity generated was applicable to both electricity sold in-state and out-of-state, and that the credit against the state gross receipts tax was available to both in-state and out-of-state electric companies, it did not result in a discriminatory tax burden. The electict companies then appealed to the U.S. Supreme Court, claiming that the tax violated the Commerce
Commerce Clause
The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...
and Export-Import Clauses of the Constitution and was invalid under 15 U.S.C. § 391.
Decision
The Supreme Court reversed the New Mexico Supreme Court, holding that the New Mexico energy tax was invalid under the Supremacy Clause since it violated 15 U.S.C. § 391. The Court noted that the statute was directed specifically at a state tax on generation or transmission of electricity and not on the overall tax burden of electric companies. As the New Mexico Electrical Energy Tax on generation ensured locally consumed electricity had no tax burden, it violated that statute. The Court stated that Congress, in enacting the ban on these types of state taxes and against the New Mexico tax in particular, had broad authority under the Commerce Clause to regulate interstate commerce, as the Court had held in cases such as Katzenbach v. McClungKatzenbach v. McClung
Katzenbach v. McClung, 379 U.S. 294 , was a case in which the Supreme Court of the United States held that Congress acted within its power under the Commerce Clause of the United States Constitution in forbidding racial discrimination in restaurants as this was a burden to interstate commerce...
, 379 U.S. 294 (1964), Heart of Atlanta Motel Inc. v. United States, 379 U.S. 241 (1964), and Wickard v. Filburn
Wickard v. Filburn
Wickard v. Filburn, 317 U.S. 111 , was a U.S. Supreme Court decision that recognized the power of the federal government to regulate economic activity. A farmer, Roscoe Filburn, was growing wheat for on-farm consumption. The U.S...
, 317 U.S. 111 (1942).
In a concurring opinion
Concurring opinion
In law, a concurring opinion is a written opinion by one or more judges of a court which agrees with the decision made by the majority of the court, but states different reasons as the basis for his or her decision...
, Justice Rehnquist noted that when 15 U.S.C. 391 had been discussed by the Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
, it had been stated that the statute had supposedly been drafted to do no more than what the Commerce Clause would accomplish on its own terms. However, the statute did more than that, and forbids the New Mexico energy tax.