In the Supreme Court of the United States
CSX TRANSPORTATION, INC., PETITIONER
GEORGIA STATE BOARD OF EQUALIZATION, ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER
PAUL D. CLEMENT
Counsel of Record
PETER D. KEISLER
Assistant Attorney General
THOMAS G. HUNGAR
Deputy Solicitor General
Assistant to the Solicitor
ANTHONY J. STEINMEYER
ROBERT D. KAMENSHINE
Department of Justice
Washington, D.C. 20530-0001
Washington, D.C. 20590
ELLEN D. HANSON
Washington, D.C. 20423
Whether, in an action by a railroad under 49 U.S.C. 11501(b)(1) claiming that a State has assessed the railroad's property at a higher ratio of assessed value to true market value than the ratio for other commercial and industrial prop erties, the district court may, in determining the railroad's true market value, consider evidence of market value derived from accounting methodologies other than those used by the State, or whether, as the court of appeals held, the State's chosen methodology is binding on the district court.
In the Supreme Court of the United States
CSX TRANSPORTATION, INC., PETITIONER
GEORGIA STATE BOARD OF EQUALIZATION, ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER
INTEREST OF THE UNITED STATES
This case concerns the scope of federal protection against discriminatory state taxation provided to railroads by Section 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act), Pub. L. No. 94-210, 90 Stat. 54 (49 U.S.C. 11501). The Surface Transportation Board-the independent federal agency with responsibility for the economic regulation of the Nation's railroads, 49 U.S.C. 721-is charged with fos tering economic conditions that allow rail carriers to earn adequate revenues. The Department of Transportation is the federal agency charged with, among other functions, oversee ing rail safety, 49 U.S.C. 20103 (2000 & Supp. IV 2004), and thus also has an interest in the financial health of the Nation's railroads. The United States has participated as amicus cu riae in previous cases regarding the scope of the 4R Act's protections. See Burlington N. R.R. v. Oklahoma Tax Comm'n, 481 U.S. 454 (1987) (Burlington Northern); Depart ment of Revenue v. ACF Indus., Inc., 510 U.S. 332 (1994) (ACF).
1. The 4R Act was enacted in response to the economic deterioration of the rail industry. See 4R Act § 101, 90 Stat. 33. Section 11501, originally Section 306 of the 4R Act, fo cuses on discriminatory state taxation as a particular cause of that decline. See § 306, 90 Stat. 54 (49 U.S.C. 11501); H.R. Rep. No. 725, 94th Cong., 1st Sess. 78 (1975).1 After 15 years of study, Congress had found that discriminatory state taxa tion of railroad property "constitute[s] an unreasonable and unjust discrimination against, and an undue burden on, inter state commerce." 4R Act § 306, 90 Stat. 54 (49 U.S.C. 26c(1) (1976)). In order to protect those critically important chan nels of interstate commerce, Congress took the extraordinary step of carving out an exception to the Tax Injunction Act, 28 U.S.C. 1341, and empowered federal courts to enjoin prohib ited forms of discriminatory state taxation. 4R Act § 306, 90 Stat. 54 (49 U.S.C. 11501(c)).
Section 11501 specifies certain forms of prohibited discrim ination and also broadly prohibits States from imposing any other "tax that discriminates against a rail carrier providing transportation." 49 U.S.C. 11501(b)(4). With respect to tax assessments (and taxes levied or collected on the basis of such assessments) in particular, the statute requires that a State's (or political subdivision's) assessment of railroad property for purposes of an ad valorem tax be tested by a simple compari son of two arithmetic ratios. Under that test, a State's assess ment practices are unlawfully discriminatory if the ratio of assessed value to "true market value" (assessment ratio) for railroad property exceeds the assessment ratio for "all other commercial and industrial property." 49 U.S.C. 11501(b)(1).
The statute expresses a preference for establishing the assessment ratio for non-railroad commercial and industrial property "through the random-sampling method known as a sales assessment ratio study." 49 U.S.C. 11501(b)(1).2 If the assessment ratio for non-railroad commercial and industrial property cannot be established satisfactorily by that method, the statute then requires the court to enjoin any discrimina tion that is revealed by a comparison of the railroad's assess ment ratio to the assessment ratio for "all other property subject to a property tax levy in the assessment jurisdiction," i.e., a ratio not limited to commercial and industrial property. 49 U.S.C. 11501(c)(1) (emphasis added).3
A federal court that finds state property tax assessments to discriminate against railroads is empowered to enjoin the violation. 49 U.S.C. 11501(c). Congress limited the impact of the anti-discrimination prohibition, however, by barring the district court from granting any relief under Section 11501 unless the assessment ratio for the railroad's property ex ceeds the assessment ratio for other commercial and indus trial property by at least 5%. Ibid.
2. In Georgia, public utilities (i.e., railroads, investor- owned electric utilities, investor-owned telephone companies, pipeline companies, and gas distribution companies) are as sessed at the State level. The State Revenue Commissioner, acting on proposed assessments prepared by the Property Tax Division of the Georgia Department of Revenue (Depart ment), certifies the proposed assessments to each county in which there is taxable property. Pet. App. 2a-3a. Other prop erties, including non-utility commercial and industrial proper ties, are assessed locally. See id. at 2a.
Georgia, like most States, assesses public utilities using the "unit rule," under which the appraiser "values the entire oper ating system * * * as a going concern and integrated whole irregardless of where it is located," Pet. App. 30a, and then multiplies the value of the whole unit "by the percentage of the entity located within Georgia to determine what portion of the company should be allocated to the state," id. at 3a. The alternative "summation" method, employed by some States, is to calculate the value of each individual item of tax able property owned by the taxpayer within the State in isola tion and to then aggregate those discrete values. See Com mittee on Unit Valuation, National Association of Tax Adm'rs, Appraisal of Railroad and Other Public Utility Property for Ad Valorum Tax Purposes 2 (1954) (Unit Valuation Report).
The methods used to value a company under the unit rule "fall into three general categories: the sales comparison ap proach, the cost approach, and the income approach," Pet. App. 3a, which, as their names suggest, derive estimates of value from, respectively, "actual sales of comparable compa nies or properties," the cost of the company's property, or the company's predicted future income stream. Ibid. There are variations within each of those three basic approaches as well. For example, under the cost approach, one could select be tween original cost or reproduction cost. See Unit Valuation Report 7-8.
In Burlington Northern, this Court held that the district court could review a railroad's claim that the State had vio lated the 4R Act's prohibition against discriminatory assess ment ratios by overvaluing the railroad's assets. The Court rejected the State's position that the federal courts must ac cept "whatever the State determines the value of the railroad to be." 481 U.S. at 461-462. Further, the Court held that a railroad need not show that "the overvaluation results from discriminatory intent." Id. at 463.
In so holding, the Court noted that the railroad's "sole challenge [was] to the application of [the State's] methodol ogy." Burlington Northern, 481 U.S. at 463 n.5. Thus, the Court expressed "no view" as to "whether a railroad may * * * challenge * * * the appropriateness of the account ing methods by which the State determined the railroad's value, or is instead restricted to challenging the factual deter minations to which the State's preferred accounting methods were applied." Ibid.
3. Petitioner, a freight rail carrier that has multiple routes through Georgia, brought this action under Section 11501 in the United States District Court for the Northern District of Georgia against Georgia's State Board of Equalization to chal lenge the proposed valuation of the railroad's operating prop erty for ad valorem tax purposes. Pet. App. 24a-25a. Peti tioner claimed that for the tax year 2002 the Georgia tax au thorities had overestimated the true market value of its trans portation property by valuing it at $7.8 billion when its "true market value * * * did not exceed $6 billion." Id. at 7a. As a result, the assessment ratio for its property-when the cor rect market value was used-exceeded the ratio for non-rail road commercial and industrial property within Georgia.
In 2002, the Department's appraiser, Gregg Dickerson, made certain changes to the manner in which the State calcu lated value under the unit rule. Pet. App. 4a. He discarded a "capitalized earnings approach" and a "direct capitalization approach," two income approaches, in favor of another income approach-the discounted cash flow approach (DCF)-and a "market multiple approach," which values the company by multiplying its income by a multiple derived from the ratio of stock price to income for companies engaged in similar lines of business. Pet. App. 35a. Dickerson retained a "stock and debt approach," which the State had already been using. Ibid. For the market multiples approach, Dickerson utilized three different multiples. Id. at 5a. He thus derived "five values from these three methods" which ranged from $8.126 billion to $12.346 billion. Ibid. "As he did with all public utilities that year, Dickerson selected an amount at the lower end of that range," $8.2 billion, in an effort "to avoid potential litiga tion." Ibid. He then deducted $400 million "to account for intangible property not subject to ad valorem taxation" in Georgia, yielding a final taxable valuation of $7.8 billion. Ibid.
In support of its claim, petitioner offered a valuation report prepared by its own appraiser, Thomas Tegarden, whose cre dentials the district court deemed to be "impeccable." Pet. App. 25a. Tegarden used three valuation methods, "(1) a stock and debt approach, (2) a cost approach, and (3) a yield capitalization approach," which is "another variation of the income approach." Id. at 35a. He concluded that "the unit value of the Railroad for tax year 2002 did not exceed $6 bil lion." Id. at 7a.
4. After a bench trial, the district court concluded that the State "ha[d] not discriminated against CSXT in violation of 49 U.S.C. § 11501(b)(1)." Pet. App. 71a. The court held that "the 4-R Act does not generally allow a railroad to challenge the state's chosen methodology." Id. at 42a. Rather, "[a]s long as the Department's chosen valuation methods are rational and were not chosen for the purpose of discriminating against [the railroad], the court will not second guess the Department's choice of methods." Ibid. The court explained that "all five approaches used by CSXT and the Department * * * are widely used to value property" and are "accepted valuation methods." Id. at 38a.
The court emphasized that, in its view, "the Department used essentially the same valuation methods for CSXT that it used for other centrally assessed taxpayers." Pet. App. 40a. Given that "at least three different valuation methods" had been used by each side's expert to "arrive at different con clusions * * * under each method," id. at 41a, it was "clear" to the court "that the determination of the true market value of CSXT * * * is, at best, an educated guess." Id. at 42a. Finally, the court held that the Department's chosen valuation methods, all of which "are widely accepted and used by valua tion experts," ibid., "are rational" and therefore not subject to challenge. Id. at 43a.
5. A divided panel of the court of appeals affirmed. Pet. App. 1a-23a. The court began its analysis by concluding that the principle "that a statute will not be construed to burden states in the exercise of their traditional powers unless it clearly states its intent to do so," id. at 11a, was applicable because, in the court's view, "[t]he selection of a valuation methodology is a part of th[e] fundamental power" of the States to tax, id. at 12a. In the court's view, moreover, "[t]he text of the Act does not clearly state that railroads may chal lenge valuation methodologies." Id. at 14a.
"[T]o the extent [legislative history] ha[d] any relevance to [the] inquiry," the court stated that the legislative history "supports the conclusion that railroads may not challenge state valuation methodologies in federal court." Pet. App. 14a (quoting ACF, 510 U.S. at 345). The court quoted a Senate report on a precursor of Section 306. That report stated that the bill contemplated no change in "assessment standards, assessment practices, or the assessments themselves," but "merely provides a single standard against which all affected assessments must be measured." Ibid. (quoting S. Rep. No. 1483, 90th Cong., 2d Sess. 22 (1968)). Accordingly, the court concluded "that railroads may not challenge state valuation methodologies under subsection (b)(1)." Ibid.
Judge Fay dissented, "disagree[ing] with the * * * hold ing that the 4-R Act bars the Railroad from challenging the valuation methodology chosen by the State." Pet. App. 20a. Noting that "there are many methodologies that can be used in assessing the value of property," id. at 21a, he observed that "[s]urely a state could not use one method to assess the market value of railroad property and a different method to assess other commercial and industrial property if such re sulted in a gross discrimination toward the railroad," id. at 21a-22a. Moreover, he reasoned that "a railroad should be allowed to challenge the method used in an attempt to prove that the result of such a method was not the true market value of its property." Id. at. 23a.
SUMMARY OF ARGUMENT
Section 306 of the 4R Act is an anti-discrimination provi sion that prohibits de facto discrimination against railroads in state property taxation. One form of discrimination against which the Act expressly protects is the practice of assessing railroads at a higher ratio to their true market value than is true generally of other commercial properties. In order to determine whether such discrimination has occurred, the fed eral court must ascertain true market value with respect to both the railroad and other commercial properties. The stat ute expressly contemplates a hearing on that question: it addresses the burden of proof and it specifically references a presumptively preferred method of valuation for other com mercial properties that is to be used if the evidence is "to the satisfaction of the district court." 49 U.S.C. 11501(c). Based on those features of the statute, this Court held in Burlington Northern that the true market value of the railroad is a mat ter to be determined by the federal court. The same reason ing that led the Court to that result also compels the conclu sion that consideration of valuation methodologies different from those of the State can be part of that determination.
There is nothing sacrosanct about a State's use of a partic ular methodology in determining a railroad's "true market value"; if that is, in fact, a step in the State's assessment pro cess. In fact, the legislative history reflects that the States' use of certain "outdated procedures," which yielded inflated market values for railroads, was one of the problems that Congress sought to address. The court of appeals' ruling that state methodologies are beyond challenge defeats that pur pose. Moreover, the court of appeals' premise-that a State necessarily chooses a single valuation approach-is itself mis taken. The most appropriate valuation approach may vary from property to property based on individual factual circum stances. Moreover, an appraiser often derives multiple indi cations of value utilizing various approaches, which must be weighed in light of the particular facts of the case to arrive at a final value that may not correspond to the value indicated by any single method. In that circumstance, as when a State does not even calculate "true market value" as a step in its assessment process, there is no single State "method" to which to defer.
There is, moreover, no clear line of demarcation between the State's choice of a "method" and its "application." In this case, for example, the seemingly different formulae used by the experts are really different ways of stating the same prin ciple, but with slightly different assumptions about peti tioner's future income. The court of appeals' broad rule that even the choice among different assumptions in the course of a valuation constitutes unassailable "methodology" cannot be reconciled with Burlington Northern and would render state appraisals susceptible to easily implemented, unredressable manipulation.
Federal courts must determine the true market value of property in many different circumstances, a process that nec essarily involves judicial resolution of issues of appraisal methodology. There is nothing problematic about the courts doing so in an action under Section 11501(b)(1) as well. Con trary to the court of appeals' apparent assumption, an action under Section 11501(b)(1) is not an administrative law pro ceeding for deferential review of a state appraiser's valuation, but rather a de novo action to vindicate a federal right to be free from discriminatory state tax assessments. It would be inappropriate in such an action for the federal court simply to defer to the State's valuation.
I. IN DECIDING A CLAIM OF DISCRIMINATORY OVER VALUATION UNDER THE 4R ACT, A FEDERAL COURT IS NOT REQUIRED TO ACCEPT THE STATE'S METHOD OF VALUATION
A. In Providing A Remedy Against De Facto As Well As In tentional Discrimination, Congress Required The Federal Courts To Make Independent Determinations Of True Market Value
Congress enacted Section 306 of the 4R Act to address the problem of "discriminatory state taxation of railroad prop erty." Burlington Northern, 481 U.S. at 457. Thus, Congress provided a remedy against any tax that "results in discrimina tory treatment of a common carrier by railroad." 4R Act § 306, 90 Stat. 54 (emphasis added) (49 U.S.C. 26c(1)(d) (1976)).4 Significantly, as this Court explained in Burlington Northern, Congress forbade "'acts' which 'unreasonably bur den and discriminate against interstate commerce'" without reference "to the intent of the actor." 481 U.S. at 463 (quoting 49 U.S.C. 11501(b)).
With respect to discriminatory assessments, Section 11501(b)(1) forbids, and Section 11501(c) authorizes the fed eral courts to enjoin, States from assessing railroad property "at a value that has a higher ratio to [its] true market value" than the corresponding ratio for "other commercial and indus trial property." 49 U.S.C. 11501(b)(1). As the Court recog nized in Burlington Northern, "[i]t is clear from this language that in order to compare the actual assessment ratios, it is necessary to determine what the 'true market values' are." 481 U.S. at 461. The Court rejected the argument that the federal courts must accept "whatever the State determines the value of the railroad to be." Id. at 461-462. The statutory reference to "true market value" is not a reference to a State's definition of value for its own assessment purposes. Rather, the railroad's "true market value" is a federal ques tion "to be litigated in federal court." Id. at 462.
In Burlington Northern, the railroad had "not challenged the valuation methodology" used by the State to determine the railroad's value, but had limited its challenge to "the ap plication of that methodology." 481 U.S. at 463 n.5. Thus, the Court noted, without deciding, the question "whether a rail road may, in an action under [Section 11501], challenge in the district court the appropriateness of the accounting methods by which the State determined the railroad's value, or is in stead restricted to challenging the factual determinations to which the State's preferred accounting methods were ap plied." Ibid.
Although Burlington Northern reserved the question, its logic requires that the federal court also be able to consider questions of valuation methodology. There is no clear line that separates methodological choices from mere questions of application. Moreover, because, as the district court con ceded, it is the State's choice of "a particular methodology that, to a large extent, predetermines the result," Pet. App. 38a, foreclosing any challenge to the State's methodology would essentially eviscerate the protection afforded by Sec tion 11501(b)(1), particularly if "methodology" is understood in the broad sense employed by the courts below.
The Burlington Northern Court recognized that Section 11501(b)(1) and (c) plainly require the reviewing court to de termine the "true market value" of the railroad's property. There is no indication in the statutory text that Congress intended to bind the federal courts to employ the particular methodological judgments adopted by state or local govern ment appraisers in performing that inquiry. To the contrary, the statute reflects Congress's understanding that a prop erty's "true market value" is a question of fact that is to be decided by the federal court using the best evidence available to it, even if that evidence points to an approach that diverges from the State's chosen method of valuation or demonstrates that the State's methodology is deeply biased or flawed. Moreover, as discussed below, a rule that rests on a purported distinction between method and application, allowing litiga tion of only the latter, would lead to unnecessary litigation and produce standardless and unpredictable decisionmaking regarding the question whether a particular challenge fell on one side or the other of that ephemeral line. The facts of this case amply demonstrate the weaknesses of such a rule.
The text of Section 11501 demonstrates that Congress in tended the federal courts to determine true market value using the best evidence available, even when that evidence departs from the State's various methodological choices. In Burlington Northern, the Court found the language of the 4R Act "clear" in requiring the federal courts "to determine what the 'true market values' are." 481 U.S. at 461. See ibid. (find ing the legislative history "irrelevant" because "the terms of [the] statute [are] unambiguous") (quoting Rubin v. United States, 449 U.S. 424, 430 (1981)). Not only does the 4R Act's directive that federal courts independently determine "true market value" not distinguish between the State's choice of methodology and its application of that methodology-the latter of which is unquestionably subject to federal review, see id. at 462-it affirmatively indicates Congress's presump tive preference for using a particular methodology for deter mining true market value (viz., a sales methodology) when feasible and satisfactory to the court, regardless of the method(s) preferred by the State.
Section 11501(c) provides that "[t]he burden of proof in determining assessed value and true market value is governed by State law." 49 U.S.C. 11501(c). As the Court has recog nized, "[i]t would be inconsistent to allocate the burden of proof as to an issue which could not be litigated in federal court in the first place." Burlington Northern, 481 U.S. at 462. Section 11501(c) goes on to provide that if satisfactory evidence is available, the federal court should generally utilize "the random-sampling method known as a sales assessment ratio study (to be carried out under statistical principles ap plicable to such a study)" to determine "the ratio of the as sessed value of other commercial and industrial property in the assessment jurisdiction to the true market value of all other commercial and industrial property." 49 U.S.C. 11501(c). In other words, Congress concluded that arms- length sales that take place in the marketplace are presump tively the best evidence of "true market value," and it directed the federal courts to rely on such actual sales information whenever it can be used to determine the ratio of assessed to true market value of non-railroad commercial and industrial property "to the satisfaction of the district court." Ibid. Plainly, it would not be open to a State to object to such evi dence on the ground that, for example, the State had deter mined the true market value of non-railroad commercial and industrial property using the income, rather than sales, method of valuation.
Section 11501(c) thus makes clear that Congress expected the federal courts to calculate the true market value of other commercial and industrial property by employing a sales-based approach whenever that method was satisfactory to the district court-and entirely without regard to the State's preferred method(s), if any, for making that determi nation. It logically follows that Congress's use of the same term-"true market value"-with respect to railroad property likewise refers to the value of the property as determined to the satisfaction of the district court without regard to the methodology utilized by the State. See Powerex Corp. v. Reli ant Energy Servs., Inc., 127 S. Ct. 2411, 2417 (2007) ("identi cal words and phrases within the same statute should nor mally be given the same meaning"). It is inconceivable, for example, that in light of Congress's expressed preference for sales information as evidence of true market value, Congress would have expected or intended that a State's methodological choices could preclude a court from considering the price at which a railroad was sold at the end of the previous year in determining its true market value.
The Court considered and rejected in Burlington Northern the argument that Section 11501(c)'s reference to a particular method for deriving the true market value of other commer cial and industrial property implies, by negative inference, that Congress did not intend the federal courts to determine independently the true market value of railroad property. Rather, "the language of subsection (c) leads to the opposite conclusion." 481 U.S. at 462. The statute makes clear that "assessed value and true market value are subjects for judi cial inquiry, and are to be proved," and the specific reference in subsection (c) to a method for proving the ratio for com mercial property by a statistical sample is simply a "particu lar grant of authority * * * to use statistical methods." Ibid. It "raises no implication whatever that the value of an other kind of property may not be proved at all." Id. at 463. By the same token, it raises no implication that a court is bound by the State's choice of methodology for valuing rail road property, but instead reflects Congress's expectation that federal courts would make a determination concerning "true market value," and that methodological choices, like other aspects of that inquiry, would be matters for judicial resolution "to the satisfaction of the district court."
C. The Legislative History Likewise Reflects Congress's Un derstanding That State Assessments Would Be Measured Against A Federal Standard Of True Market Value, Rather Than The States' "Outdated Procedures"
The legislative history confirms that Congress did not in tend to bind federal courts to the methodologies used by the States to evaluate railroad property. Indeed, the contrary intent is clearly reflected in the Senate Report's recognition that railroads "are discriminated against as compared to other property taxpayers in the same jurisdiction, due in large mea sure to outdated procedures (which are sometimes deliber ately retained) for assessment of property." S. Rep. No. 630, 91st Cong., 1st Sess. 2 (1969) (emphasis added) (quoting In terstate Commerce Commission letter, which quoted the re port on National Transportation Policy, S. Rep. No. 445, 87th Cong., 1st Sess. 451 (1961) (Doyle Report)). The Doyle Report noted that "[c]ost, whether it be original or reproduc tion cost, is poor evidence of system value for railroads," but that it nonetheless "remains in use" by States as a valuation method because "cost is usually a higher figure for railroads than current cash value." Doyle Report 456-457. By "justify[ing] a higher full value" for the railroad through the use of a cost methodology, a State could "in turn appear to produce a lower equalized assessment ratio." Id. at 457.5 Plainly Congress did not forbid the federal courts to scruti nize those same valuation "procedures" that were the cause of the problem Congress sought to remedy.
The Senate Report further reflects the Committee's under standing that the statutory standard of "true market value" was to be the federal standard against which state assess ments would be compared in determining discrimination. S. Rep. No. 630, supra, at 25-26; S. Rep. No. 1483, supra, at 22. The report indicates that the bill did not "require a State to change its assessment standards, assessment practice, or the assessments themselves," but that it did "provide a sin gle standard"-true market value-"against which all affected assessments must be measured." Ibid. True market value "is not a standard for determining value; it is a standard to which values that have already been determined [i.e., the State's assessments] must be compared." Ibid. Thus, "true market value" is not an assessment method or practice that the States were being required by Congress to adopt. States remain free to use any method they like in arriving at the numerator of assessed value. But the denominator of "true market value" is a federal standard as to which States are not owed particular deference. That remains true even if states calcu late a market value or true market value as a step in their assessment. Their assessment, including any calculation of market value, is taken as a given for purposes of the numera tor, but "true market value" in the denominator of Section 11501(b)'s ratio remains a question for the federal court. In deed, as discussed at pp. 26-27, infra, some States do not even attempt to base assessments on true or fair market value. "True market value" is simply the federal standard to which state assessments are to be compared in determining whether a railroad has been subjected to discrimination. Plainly, "true market value" would not be much of a litmus test if the State's own assertions as to true market value were dispositive.
The court of appeals read the above-quoted statement from the Senate Report as "support[ing] the conclusion that rail roads may not challenge state valuation methodologies in fed eral court." Pet. App. 14a; id. at 40a-41a. But the assertion that States are not required to "change" their "assessment standards, assessment practices, or the assessments them selves," S. Rep. No. 630, supra, at 25, cannot plausibly be read to suggest that those matters-including "the assessments themselves"-are binding on the federal courts in the course of making their independent determinations of "true market value." The court of appeals' reading proves too much, as it would entirely nullify the Act (and overrule Burlington Northern) by forbidding any meaningful examination of true market value, at least in the many taxing jurisdictions that purport to "assess" at that value or a fixed proportion thereof.
Throughout the hearings leading up to the enactment of Section 306, state representatives repeatedly objected to an assessment-ratio test like the one ultimately adopted by Con gress, on the precise ground that it would entail independent federal court determinations of value.6 Notwithstanding those objections, Congress enacted the assessment ratio approach into law, signalling its rejection of those concerns. The legis lative history thus confirms that Congress did not intend to limit the discretion of federal courts to employ valuation ap proaches different from those utilized by the States.
II. THE RULE ADOPTED BY THE COURT OF APPEALS IS NEITHER WORKABLE NOR JUSTIFIED
A. The Court Of Appeals' Distinction Between Valuation Methodology and Application Is Ephemeral And Would Lead To Standardless Collateral Litigation
The approach adopted by the lower courts presupposes a meaningful and discernible distinction between a State's unreviewable choice of a valuation "methodology" and its reviewable "application" of that methodology. That purported distinction, however, is far too indeterminate and ephemeral to support the weight that the lower courts would place upon it. As the facts of this case demonstrate, valuation "methodol ogy" and "application" are often indistinguishable in practice, and a rule that makes so much turn on the supposed distinc tion would only invite unnecessary and ultimately standard less collateral litigation about whether various aspects of the State's calculations fall on one or the other side of the line.
The rule adopted by the lower courts-that "[t]he district court was not allowed to consider a valuation methodology different from the methodology of the Board," Pet. App. 15a (emphasis added)-was based on the mistaken premise that "each appraisal is based on a particular methodology." Id. at 38a (emphasis added). See id. at 12a (deference to the State's "selection of a valuation methodology"). Valuation treatises make clear, however, that in general no single method of valu ation produces a property's "true market value." Rather, an appraiser's ultimate estimate of value reflects evidence gath ered from a variety of approaches (and techniques within ap proaches), the relative strength of which the appraiser weighs based on the particular facts and circumstances concerning the property. In most instances, there will be no single state "methodology" to which the court could defer.
"Appraisers develop an opinion of property value with spe cific appraisal procedures that reflect three distinct methods of data analysis: 1. Cost[;] 2. Sales comparison[;] 3. Income capitalization." Appraisal Inst., The Appraisal of Real Estate 62 (12th ed. 2001) (Appraisal Inst.). None of those approaches (or variations on those approaches) yields, in itself, the prop erty's "true market value"; rather, each provides an "indica tion of value," i.e., "evidence of value." Id. at 597; Unit Valua tion Report 3 (emphasis added). In any given appraisal, "more than one approach to value is usually applied, and each approach typically results in a different indication of value." Appraisal Inst. 597; James H. Boykin & Alfred A. Ring, Valu ation of Real Estate 434 (4th ed. 1993) (Boykin) ("[T]he ap praiser proceeds with an analysis of the data under each of the value approaches"). Indeed, "several value indications may be derived in a single approach," such as different indica tions of value derived "from applying income multipliers to specific types of income, directly capitalizing net income, and discounting cash flows." Appraisal Inst. 597.
The ultimate task of the appraiser is to reconcile the dis tinct indications of value generated by the different ap proaches to reach a final estimate of value. The process of reconciliation is not simply "a mathematical process involving mere averaging of the estimates derived under the independ ent value approaches." Boykin 434; see Appraisal Inst. 597- 598. The appraiser's "task is to weigh the pertinency of such evidences and to make an objective analysis of each." Unit Valuation Report 59. "The appraiser weighs the relative sig nificance, applicability, and defensibility of each value indica tion and relies most heavily on the approach that is most ap propriate to the nature of the appraisal problem." Appraisal Inst. 600. The final opinion of value "need not be identical to the value produced by" any single approach. Ibid.
Thus, the lower courts' assumption that there will be a single "state methodology" to which to defer is mistaken. In any given appraisal, the State's final opinion of value often will not represent the figure that a single approach would generate, but rather the appraiser's weighing of the different "evidences of value." That weighing process should reflect the appraiser's consideration of all the relevant facts, includ ing the strength of the data upon which the calculations were derived and the nature of the property or enterprise being evaluated. Appraisal Inst. 600. It is impossible to discern where, in such a situation, the State's purportedly unreview able "choice of methodology" ends and where its "application" begins.7
The facts of this case demonstrate the difficulty of identify ing a principled basis for distinction. Here, it was undisputed that Georgia did not value all properties in Georgia, or even all centrally assessed properties, according to a single valua tion approach. For each centrally assessed property, the State "calculat[ed] five values under three different methods and select[ed] a figure at the low end of the resulting range." Pet. App. 17a. The lowest figure could have been generated by the income approach in the case of one utility, by the stock and debt approach in the case of another, and by the market multiples approach in the case of a third. As the court of ap peals recognized, in this case, the State's selection "of an ap praisal amount nearest to the discounted cash flow number did not reflect the conclusion that discounted cash flow was the most accurate of the methods used, only that it was the lowest." Id. at 18a. It is at best awkward to describe the State's approach-always to choose the lowest of the calcu lated figures-as an "accounting method" or "valuation methodology" to which the courts must defer. And if defer ence is due here, it would seem equally applicable to a State's decision always to choose a particular method that is well- established to overvalue railroads relative to other commer cial property.
The lower courts' refusal to consider the "yield capitaliza tion" valuation proposed by petitioner's expert, Tegarden, on the ground that it was a different methodology from the State's DCF approach further demonstrates the difficulty of drawing the line that is at the heart of the court of appeals' rule. The district court recognized Tegarden's "yield capital ization" analysis as a "cousin" to the "discounted cash flow" analysis used by the State, because both are versions "of the income approach." Pet. App. 35a-36a. The court nonetheless concluded (and the court of appeals agreed, id. at 15a-18a) that Tegarden's was "a different valuation method" that could not be considered, id. at 45a.
That conclusion expands the scope of "methodology" into the realm of mere assumptions made by appraisers. While Dickerson and Tegarden expressed their respective ap proaches by different formulae, see Pet. App. 36a, the latter is simply a mathematical shorthand of the former if one as sumes, as Tegarden did, that petitioner's income would re main level. See J.A. 80-81 (setting out Dickerson's DCF for mula, and noting that "[w]here income has the characteristics of a perpetuity * * * , the universal capitalization formula, Value = Income â Rate, can be used").8 Tegarden's calcula tions could likewise have been expressed in Dickerson's lon ger form, with the numerator remaining constant each year. Thus, the difference between the two formulae boils down to the appraisers' differing assumptions regarding the growth of petitioner's future income. An approach that deems ap praisers' mere assumptions to qualify as unreviewable "meth odology" would effectively preclude any meaningful review of state determinations of true market value, because the as sumptions made by the appraiser at each step of the process ultimately determine the outcome of any valuation approach. See Metlyn Realty Corp. v. Esmark, Inc., 763 F.2d 826, 835 (7th Cir. 1985) (Easterbrook, J.) ("It is a simple matter to increase or reduce the outcome of a cash flow analysis by 200% by making changes in assumptions [such as the firm's costs, rate of growth, and the discount rate] that appear by themselves to be insignificant.").
In an attempt to justify its conclusion that Tegarden's ap proach could not be considered, the court of appeals held that "all nonfactual determinations involved in constructing a valu ation process, regardless of how broad or narrow they may be," qualify as "accounting methods" that a railroad may not challenge. Pet. App. 17a. In the first place, however, there is no basis for the court of appeals' view that an appraiser's par ticular assumptions about the best way to value a particular taxpayer's property are "nonfactual determinations"-surely the question whether a railroad's income should be held con stant or assumed to increase in future years is more factual than legal in nature, as are most, if not all, of the myriad of other assumptions that appraisers must make in selecting, applying, and weighing various valuation approaches.
Under the court of appeals' rule, moreover, any valuation rule that a State can articulate in general terms would appar ently become unassailable. For example, if the State were to adopt a general rule to treat property as obsolete only in cer tain circumstances, it could foreclose challenge to its refusal to make deductions for obsolescence for property that did not satisfy the rule as articulated by the State. Likewise, if the State adopted a "methodology" for determining the discount rate in DCF calculations, such as using the Federal Reserve Board's federal funds rate, that "nonfactual determination * * * in constructing [the] valuation process," Pet. App. 17a, would seemingly be immune from judicial scrutiny.
Plainly, the court of appeals' rule cannot be squared with this Court's holding in Burlington Northern, in which the Court specifically held that the district court could adjudicate petitioner's challenges to "the State's evaluation of the cost of capital" and its "refusal to make deductions for property which petitioner claims is obsolete." 481 U.S. at 463 n.5. Yet there is no other obvious place to draw a principled, meaning ful, and judicially manageable line between that which is sub ject to judicial review and that which is not.
B. The Determination Of A Property's True Market Value Is A Common Judicial Function That The Courts Cannot Escape Under Section 11501
The court of appeals' reluctance to undertake judicial re view of valuation methodologies reflects its view that such an inquiry would amount to inappropriate "freewheeling judicial second-guessing." Pet. App. 17a. The district court likewise believed that it was being asked to "dictate a particular valua tion method to the Department," which it was not qualified to do. Id. at 42a. But the valuation of property is a function that courts routinely undertake, in numerous contexts. Moreover, because States need not make any attempt to calculate "true market value" in the course of making property assessments, but instead can use an assessment formula driven by other factors, such as historical sales prices, courts applying Section 11501 will sometimes have no choice but to make an independ ent determination of "true market value," which necessarily will entail making determinations regarding methodology. The court's role in assessing "true market value" for purposes of the federal-law denominator is not materially different whether or not a State calculates market value as a step in its assessment process. The federal court's role under Section 11501 is not that of a state court deferentially reviewing ad ministrative agency action; rather, it is to conduct a de novo hearing on whether the State has violated the railroad's fed eral right against de facto discrimination.
The federal courts are routinely called upon to decide ques tions of property valuation in contexts other than Section 11501. See, e.g., United States v. 50 Acres of Land, 469 U.S. 24, 29-30 (1984) (Just Compensation Clause); VFB LLC v. Campbell Soup Co., 482 F.3d 624, 632 (3d Cir. 2007) (action in bankruptcy to set aside sale of corporate division as fraudu lent); Citicorp Real Estate, Inc. v. Smith, 155 F.3d 1097, 1106 (9th Cir. 1998) (determination of property's fair value in suit for deficiency judgment); McMurray v. Commissioner, 985 F.2d 36, 40 (1st Cir. 1993) (valuation of land donated to char ity in action for tax deficiency). There is no reason to believe that federal courts are any less competent to weigh expert testimony regarding valuation issues in litigation under Sec tion 11501 than they are in those other contexts.
The courts below believed that Congress intended that federal courts not make determinations regarding valuation methodology pursuant to Section 11501(b)(1). To the con trary, however, by making a determination of "true market value" an essential component of any suit under Section 11501(b)(1), and without requiring States to undertake such a calculation, Congress plainly contemplated that the determi nation of value (which necessarily entails judgments regard ing methodology) was one for the federal courts to make.
Although most States do determine some version of market value as part of their assessment processes, that is not neces sarily the case. Historically, some taxing jurisdictions simply "estimate[d] the 'fractional' valuation directly without even attempting to first determine full value." Note, Inequality in Property Tax Assessments: New Cures for an Old Ill, 75 Harv. L. Rev. 1374, 1379 (1962); see In re Kents 2124 Atl. Ave., Inc., 166 A.2d 763, 767 (N.J. 1961) (when "they valued new construction, the assessors expressly eschewed any con ception of the value of the properties" in favor of drawing an "assessment" value directly from comparable properties); Batson v. Pearl River County, 35 S. 2d 712 (Miss. 1948) (up holding "arbitrary assessment value of $2.50 per acre" for "all cut-over lands in the county"). More recently, in Nordlinger v. Hahn, 505 U.S. 1 (1992), the Court upheld a state constitu tional amendment that made it the express policy of the State not to tax properties as a percentage of their market value, but according to a formula based upon their historical value. Id. at 5-6, 18.
Actions under Section 11501 likewise illustrate that not all States calculate "true market value" within the meaning of the 4R Act. See, e.g., Louisville & Nashville R.R. v. Depart- ment of Revenue, 736 F.2d 1495, 1499 (11th Cir. 1984) (holding that "full market value" rather than "just value" represents "true market value for purposes of section "). Cf. Con solidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 476 (2d Cir. 1995) (noting New York's practice of assessing rail road property as a percentage of "taxable value," which dif fered from "true market value"). In fact, in the case at bar, the court of appeals recognized that the figure used by the State "did not reflect the conclusion that discounted cash flow was the most accurate of the methods used, only that it was the lowest." Pet. App. 18a. Thus, federal courts simply can not avoid their responsibility in an action under Section 11501(b)(1) to determine the railroad property's "true market value" for purposes of the federal statute.
Whereas the court of appeals would preclude review of the State's chosen methodology altogether, Pet. App. 15a, the district court attempted to chart a middle course, allowing review to determine whether the State's methodology is un reasonable or purposefully discriminatory. The district court's attempt to reintroduce a threshold element of discrim inatory intent into Section 11501(b)(1) runs directly contrary to this Court's holding in Burlington Northern. Moreover, the district court's approach, which is analogous to the stan dard a court might apply in reviewing agency action, is inap propriate for a statute that creates a federal right against de facto discrimination by the State. The courts of appeals have recognized as much in selecting the appropriate standard of proof to govern claims under Section 11501. See CSX Transp., Inc. v. Board of Public Works, 95 F.3d 318, 323 (4th Cir. 1996) (action under Section 11501(b)(1) is "an original action" and "does not involve review of an assessment by a state agency or other comparable body"); Burlington N. R.R. v. Bair, 766 F.2d 1222, 1226 (8th Cir. 1985) (rejecting stan dard for administrative review in favor of that for "de novo review in state court"). But see Burlington N. R.R. v. De partment of Revenue, 23 F.3d 239, 241 (9th Cir. 1994) (apply ing Washington's "clear, cogent, and convincing evidence" standard for review of tax assessments).9
Ironically, the approach adopted by the court of appeals grants state assessors more deference in an action under the 4R Act's anti-discrimination provision than they enjoy when their assessments are appealed to Georgia's own courts. As the Georgia courts have repeatedly held, "[j]ust and fair valu ation of property is a question to be determined by the factfinder, [i.e.], the trial court." Dougherty County Bd. of Equalization v. Casto Dev. Co., 491 S.E.2d 483, 485 (Ga. Ct. App. 1997). In the "de novo investigation" before the trial court, the burden is on the initiating party, but "neither party is entitled to any prima facia presumption regarding the cor rectness of its evidence of valuation." Hirsch v. Joint City County Bd. of Assessors, 463 S.E.2d 703, 705 (Ga. Ct. App. 1995) (citation omitted). Taxpayers may present the opinions of their own experts, who are free to offer testimony based on valuation methods different from those of the State. See, e.g., Casto Dev. Co., 491 S.E.2d at 484 (noting that taxpayer's ex pert had criticized "the county's cost approach" and offered his own multi-approach analysis that "ascribe[d] more weight to the income approach"). Like an action in Georgia court, an action in federal court under the 4R Act is a "de novo" pro ceeding, in which the railroad should be permitted to prove its claim of discriminatory taxation with any competent evidence.
C. The Court Of Appeals' Reliance On Concerns Of Federal Comity Is Misplaced
The court of appeals believed that its curtailment of federal court review was compelled by principles of federalism and respect for the States' sovereign interest in setting tax policy. Pet. App. 12a-13a. This Court rejected that argument in Burlington Northern and it should do so here as well.
In Burlington Northern, the State urged that "injunctive relief against state taxation offends the principles of comity." 481 U.S. at 464 (citation omitted). The Court disagreed, ex plaining that while such "policy considerations * * * may have weighed heavily with legislators who considered the Act," the Court was "not free to reconsider them now." Ibid. The 4R Act itself, which creates an express exception to the Tax Injunction Act, 28 U.S.C. 1341, see 49 U.S.C. 11501(c), makes clear that Congress fully intended to authorize the federal courts to enjoin prohibited forms of discriminatory state taxation. Moreover, as Burlington Northern held, the statute unambiguously establishes "true market value" as an element of the railroad's federal claim that must be proved to the district court's satisfaction. 481 U.S. at 462-464. There is no basis for the court of appeals' insistence that Congress also specify in a "clear statement" (Pet. App. 14a) each element of "true market value" that the federal court is to determine.
The court of appeals believed that this Court's more recent decision in ACF, rather than Burlington Northern, was the more apposite, but its reliance on ACF was misplaced. There, the Court held that a State does not violate the 4R Act's pro hibition against "another tax that discriminates against a rail carrier," 49 U.S.C. 11501(b)(4), when it exempts certain non- railroad property from a generally applicable ad valorem tax without providing a similar exemption for railroad property. 510 U.S. at 347-348. The Court reasoned that "[i]t would be illogical to conclude that Congress, having allowed the States to grant property tax exemption in subsections (b)(1)-(3), would turn around and nullify its own choice in subsection (b)(4)," which did "not speak with any degree of particularity to the question of tax exemptions." Id. at 343. By contrast, the statutory text and structure of Section 11501(b)(1) and (c) makes evident that Congress expected the federal courts to make an independent determination of "true market value," which includes considerations of methodology.
The court of appeals believed that ACF, rather than Burlington Northern, was more relevant because federal review of the State's choice of valuation methodology is more intrusive than review of the State's application of that meth odology. Pet. App. 11a-12a. In ACF, the Court stressed that "[p]roperty tax exemptions are an important aspect of state and local tax policy." 510 U.S. at 344. But the only "[i]mpor tant question of state policy" that the court of appeals iden tified regarding valuation methodologies was the possibility that a State would choose "a simple valuation methodology rather than a complicated one" due to budget constraints. Id. at 12a. There is no indication that Congress believed that a State's refusal to expend resources on an accurate appraisal should be a defense against a claim of de facto discrimination under the 4R Act. Indeed, among the problems that the Sen ate Report identified and to which the 4R Act was addressed were the States' "outdated procedures." S. Rep. No. 630, supra, at 2. Nor is there any reason to conclude that the State's "methodology" of choosing the lowest of five calcu lated values, or its fortuitous use of the discounted cash flow approach in this case, reflects an "[i]mportant question of state policy" that implicates the "fundamental power of the state." Pet. App. 12a.
The judgment of the court of appeals should be vacated.
PAUL D. CLEMENT
PETER D. KEISLER
Assistant Attorney General
THOMAS G. HUNGAR
Deputy Solicitor General
Assistant to the Solicitor
ANTHONY J. STEINMEYER
ROBERT D. KAMENSHINE
Washington, D.C. 20590
ELLEN D. HANSON
1 The statutory language of the original 4R Act was altered slightly when Section 306, originally codified at 49 U.S.C. 26c (1976), was recodified in 1978 at 49 U.S.C. 11503 (1994) as part of the positive enactment of Title 49. See Act of Oct. 17, 1978 (1978 Act), Pub. L. No. 95-473, 92 Stat. 1337. The restatement of prior law effected by the 1978 reenactment was "without substantive change." 1978 Act § 3(a), 92 Stat. 1466. In 1995, the provisions of Section 11503 were again reenacted without substantive change but renumbered as Section 11501, as part of a general amendment of Subtitle IV of Title 49 that abolished the Interstate Commerce Commission and created the Surface Transportation Board. ICC Termination Act, Pub. L. 104-88, § 102(a), 109 Stat. 804.
2 A "sales assessment ratio study" compares the assessed value to the actual sale price for a representative and statistically valid sample of property within the assessment jurisdiction. See International Ass'n of Assessing Officers, Improving Real Property Assessment: A Reference Manual 122-155 (1978).
3 Section 11501(c)(1) contains a scrivener's error, which was introduced when Title 49 was recodified and enacted as positive law in 1978. In the original 4R Act, Congress provided unambiguously that the alternative comparison ratio (if a sales assessment ratio study of commercial and industrial property was inadequate) was the ratio of assessed value to true market value of "all other property in the assessment jurisdiction" subject to tax, i.e., not just the ratio of assessed to market value of other commercial property. See 4R Act § 306, 90 Stat. 55 (49 U.S.C. 26c(2)(e) (1976)). In 1978, when Congress re codified Title 49, the words "commercial and industrial" were inserted into the description of the denominator of that alternative ratio, but no similar limitation was added to the numerator, which continues to refer to "all other property subject to a property tax." 1978 Act § 11503(c)(1), 92 Stat. 1446 (49 U.S.C. 11501(c)(1)). The House Report made no reference to the change. See H.R. Rep. No. 1395, 95th Cong., 2d Sess. 179 (1978). Comparison of the railroad's assessment ratio to the ratio indicated by the literal terms of the statute would be nonsensical, because the latter ratio would be a meaningless apples-to-oranges comparison of vastly disparate classes of property. Because the statute would be absurd if applied as written, and because Congress specified that the enactment of Title 49 was a restatement of prior law "without substantive change," that could "not be construed as making a substantive change in the laws replaced," § 3(a), 92 Stat. 1466, the reenactment's introduc tion of the words "commercial and industrial" in the denominator of the comparison ratio in Section 11501(c)(1) must be deemed a scrivener's error. Although this Court quoted the "commercial and industrial" language from Section 11501(c)(1) in Burlington Northern, 481 U.S. at 462, that language was not itself at issue and the Court did not analyze the significance of the statutory change.
4 The 1978 Act replaced the words "results in discriminatory treatment" with "discriminates," see 1978 Act § 11503(b)(4), 92 Stat. 1446 (49 U.S.C. 11501(b)(4)), but that "change 'may not be construed as making a substantive change in the laws replaced.'" Burlington Northern, 481 U.S. at 457 n.1 (quoting 1978 Act § 3(a), 92 Stat. 1466).
5 The Second Circuit's decision in Consolidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473, cert. denied, 515 U.S. 1122 (1995), exemplifies the cost meth odology' potential to overvalue a railroad's property. In that case, the New York State Board of Equalization and Assessment, using a "cost approach," determined that Conrail's property in New York had a "true market value of $974 million," which was more than twice the $451 million value indicated by the "stock and debt" and "income capitalization" methods. Id. at 480.
6 See Discriminatory Taxation of Common Carriers: Hearings on S. 927 Before the Subcomm. on Surface Transp. of the Senate Comm. on Commerce, 90th Cong., 1st Sess. 114 (1967) (statement of Charles F. Conlon); State Tax Discrimination Against Interstate Carrier Property: Hearing on S. 2289 Before the Subcomm. on Surface Transp. of the Senate Comm. on Commerce, 91st Cong., 1st Sess. 99, 102 (1969) (statement of George Kinnear).
7 At the highest level of generality, when a State is making the initial deter mination whether to use the unit rule or the summation method to value railroad or other property, it may be fair to say that the choice is purely one of methodology, or perhaps even that it is part of the logically prior decision of what property the State is going to tax. One might argue that there is also a sufficiently clear methodological dichotomy between a "cost" approach, on the one hand, and an "income" or "sales" approach, on the other. See Unit Valuation Report 3 ("The cost approach is a summation appraisal, and as such may not be regarded as a measure of unit value."). Even at that level, however, the distinction becomes much less clear, because although cost is not itself an indication of unit value, it is "good information to guide judgment, and therefore is a proper evidence to consider in finding value." Ibid. As discussed above, most appraisers use a cost approach as just one of many evidences of value, with the final value opinion being derived from no one approach alone. There is even more practical overlap between the income and sales approaches, and moreover the choice of approach even at that high level of generality may reflect a fact-based assessment of the particular circumstances of the entity to be valued. In any event, there is simply no discernible line between "methodol ogy" and "application" once the appraiser moves past the threshold question of cost, income, and/or sales methods and begins selecting sub-approaches (e.g., DCF versus yield ratio), choosing techniques (e.g., for determining a discount rate), and making assumptions and judgments based on the particular facts and circumstances.
8 The district court's representation of Dickerson's discounted cash flow formula (Pet. App. 36a) contains an error. The court failed to compound the discount rate in each successive year. Under the correct formula, the denominator (1 + discount rate) should be squared in year two, cubed in year three, etc. See Appraisal Inst. 688.
9 Section 11501(c) provides that the "burden of proof in determining assessed value and true market value is governed by State law." 49 U.S.C. 11501(c). Arguably, the reference to "burden of proof" refers to the question of which party bears the "burden," not to the separate question of the standard of proof that party must bear. Alternatively, if read as referring to the standard of proof, it should be the State standard for civil proceedings generally, not for assessment appeals. See Bair, 766 F.2d at 1226. Were it otherwise, a State might effectively immunize itself from challenge under Section 11501(b)(1) by imposing an impossibly high standard of proof on those who challenge assessments in its own courts. In any event, that question is not presented in this case because Georgia permits a de novo hearing, with no presumption in favor of the State's assessment or its valuation methodology. See p. 28, infra.