A U.S. District Court judge has ruled that she lacks subject matter jurisdiction to rule upon an Entergy (NYSE: ETR) challenge to a fee being assessed to its Vermont Yankee nuclear power plant.
U.S. District Court Chief Judge Christina Reiss ruled Oct. 25 that Entergy Nuclear Operations and Entergy Nuclear Vermont Yankee LLC should take their case against Vermont’s Electrical Energy Generating Tax to the Vermont courts.
The Entergy subsidiaries filed suit in federal district court in September seeking to overturn tax policy affecting the 600-MW nuclear plant, which was passed by the Vermont Legislature in 2012 and subsequently signed into law by the governor.
Entergy maintains that the legislation imposes a new levy on Vermont Yankee, based upon its generation of electricity, which increases its obligations to the state by several million dollars annually. Entergy argues that the agreement that required the plant to pay the annual levy has expired and now the state has merely dressed up the prior levy as a tax, which would apply only to Vermont Yankee.
While the Second U.S. Circuit Court of Appeals has said there is no bright line between assessments that are taxes and those that are not, most courts agree that assessments which are imposed primarily for revenue-raising purposes are ‘taxes.’ Meanwhile levies assessed for regulatory or punitive purposes, even though they may also raise revenues, are generally not taxes, according to the Oct. 25 opinion.
Vermont’s Legislature has authorized the state to impose the electric energy tax (EET) and to collect it through Vermont’s Department of Taxes. The entity that imposes the tax is thus a quintessential taxing authority and acts through its customary tax revenue collecting agency, Judge Reiss held. It is the very type of state taxation activity with which the Tax Injunction Act (TIA) forbids federal court interference.
Although Entergy points out that the EET now applies only to Entergy, it cannot discount the possibility that in the future it could apply to other plants as well, according to the judge’s order. The assessment applies to any electric generating plant that has a nameplate capacity of 200,000 KW or more.
The fact that Entergy is currently the only facility subject to the assessment does not preclude the EET from being a “tax.” Nor does its bar Entergy from arguing before state courts that its status as the sole taxpayer subject to the renders the measure unconstitutional, Judge Reiss said.
Entergy Nuclear Vermont versus Gov. Peter Shumlin, Case No. 5: 12-cv-206.