347 U.S. 590, 609 (1954)
Mid-Continent Airlines, Inc., an interstate air carrier incorporated in Delaware with its corporate place of business in Wilmington, operated regularly scheduled flights making fourteen stops per day at Omaha and four at Lincoln, Nebraska.1 The aircraft flew circuits ranging from Minot, North Dakota, to New Orleans, Louisiana, stopping in fourteen states, with the home port registered with the Civil Aeronautics Authority and the overhaul base located at the Minneapolis-St. Paul Airport in Minnesota.2 Mid-Continent neither owned nor maintained facilities for repairing, reconditioning, or storing its flight equipment in Nebraska but rented depot space and hired other services as required.3 The Nebraska stops were of short duration and were utilized only for the discharge and loading of passengers, mail, express, and freight, and sometimes for refueling.4
On August 1, 1952, Mid-Continent merged with Braniff Airways, Inc., which is incorporated in Oklahoma and has its corporate place of business in Oklahoma City.5 Braniff was substituted as the party plaintiff in the litigation.6 Pursuant to the merger, Mid-Continent’s main executive offices were moved from Kansas City, Missouri, and merged with Braniff’s in Dallas, Texas.7 The number of regularly scheduled stops in Nebraska was not affected by the merger.8 The Supreme Court of Nebraska made no distinction as to taxability between years when no flights were made into the state of domicile and those when flights did enter the state of new domicile.9
Nebraska assessed an apportioned ad valorem tax only against regularly scheduled air carriers under Neb. Rev. Stat., 1943, §§ 77-1244 to 77-1250.10 The statute defined flight equipment as aircraft fully equipped for flight and prescribed a formula for allocating the proportion of a carrier’s flight equipment to the state by arithmetical average of three ratios based on scheduled aircraft arrivals and departures, revenue tons handled at airports, and originating revenue within the state.11 Required reports filed by Mid-Continent for 1950 showed that about 9% of its revenue and 11% of the total system tonnage originated in Nebraska and about 9% of its total stops were made in that state.12 Using the statutory formula, the Tax Commissioner arrived at a valuation of $118,901 allocable to Nebraska, resulting in a tax of $4,280.44.13 Since Mid-Continent filed no return for 1951, the same valuation was used and an increased rate resulted in assessment of $4,518.29.1415
Mid-Continent filed a petition for a declaratory judgment of the invalidity of the tax statute and an injunction against collection of taxes assessed under its provisions for previous years as an original action in the Supreme Court of Nebraska.16 The case was tried upon stipulated facts.17 After the merger, Braniff continued the litigation as substituted plaintiff.18 The Supreme Court of Nebraska held the statute not violative of the Commerce Clause and dismissed the petition.19 Braniff appealed to the United States Supreme Court.20
Whether the Constitution bars the State of Nebraska from levying an apportioned ad valorem tax on the flight equipment of an interstate air carrier?21
The Commerce Clause does not immunize interstate instrumentalities from all state taxation, but such commerce may be required to pay a nondiscriminatory share of the tax burden.22 Federal regulation of air commerce under the commerce power does not preclude state taxation consistent with that power.23
No. Nebraska's statute applies only to regularly scheduled air carriers and employs a uniform allocation formula averaging arrivals and departures, revenue tons handled, and originating revenue within the state.24 Mid-Continent's reports showed approximately nine percent of revenue and eleven percent of tonnage originating in Nebraska with nine percent of stops there, producing a valuation of $118,901 and taxes of $4,280.44 for 1950.25 These contacts through eighteen daily stops for passenger and cargo operations establish that the tax relates directly to benefits and protection afforded by the state without discrimination or unreasonable apportionment.26
The Constitution does not bar Nebraska from levying the apportioned ad valorem tax on the flight equipment.27
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Justice Douglas joined the judgment but not the opinion.28 He stressed that ad valorem tax power depends on permanency of property in the state, whether all or a fraction.29 Property in transit moving regularly and continuously may have a taxable fraction always present.30
He explicitly reserved judgment on the validity of the apportionment formula itself.31 An adequate formula for a gross receipts tax might prove inadequate for ad valorem purposes.32 Due process questions cannot be delegated to Congress.33
Justice Frankfurter dissented from the majority's conclusion that the aircraft had attained a taxable situs in Nebraska.34 He argued that brief stopovers of five to twenty minutes do not create the substantial permanent presence required for ad valorem taxation.35 The planes' fleeting presence lacked the closeness and duration of relationship that barges or railroad cars have when spending hours or days in a state.36 The diversity of state apportionment schemes, even when based on relevant factors, imposes an undue burden on interstate commerce.37
Only Congress possesses the comprehensive legislative power needed to devise a uniform apportionment binding on all states.38 Judicial process is ill-suited to resolve these novel problems of air transportation taxation because courts lack instruments delicate enough to weigh the economic factors in a complicated economic setting.39
Justice Jackson dissented for the reasons stated in his concurring opinion in Northwest Airlines v. Minnesota.40 In that opinion he had emphasized that Minnesota as the domicile of the air carrier could tax the entire fleet because it was not shown that a defined part of the domiciliary corpus had acquired a permanent location or taxing situs elsewhere.41 He viewed the doctrine of tax apportionment for instrumentalities engaged in interstate commerce as inapplicable because no property or portion of fungible units was permanently situated in a state other than the domiciliary state.42
This position would have led to a different result where Nebraska sought to tax on an apportioned basis.43
Whether federal statutes governing air commerce enacted under the commerce power preempt the field of regulation and preclude Nebraska from imposing such a tax on flight equipment?44
Federal air-carrier regulation rests on the commerce power rather than national ownership of navigable airspace.45 The Civil Aeronautics Act asserts sovereignty in airspace but does not expressly exclude state sovereign powers, and federal regulation of interstate carriers has never been deemed to deny all state power to tax their property.46
No. The Civil Aeronautics Act of 1938 declares complete national sovereignty in airspace and a public right of freedom of transit yet contains no provision ousting state taxation.47 The Air Commerce Act of 1926 originated the sovereignty declaration without excluding state powers.48 More than twenty states adopted the Uniform Aeronautics Act preserving state sovereignty except where ceded by constitutional grant.49 Nebraska's tax statute follows the uniform allocation formula recommended by the Civil Aeronautics Board and Council of State Governments, confirming that federal regulation does not occupy the field to the exclusion of consistent state taxation.50
Federal statutes do not preempt Nebraska from imposing the apportioned ad valorem tax on flight equipment.51
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Justice Frankfurter dissented on grounds that the Civil Aeronautics Board's report demonstrated the need for congressional legislation to create a uniform apportionment scheme binding on all states.52 He noted that individual state formulas, even those reflecting Board-recommended factors, produce diverse and fluctuating burdens that only Congress can prevent.53 The judicial process lacks instruments delicate enough to weigh the economic factors involved in this complicated setting.54
Congress alone can ensure a scheme of apportionment that avoids undue burdens on air commerce.55
Whether the aircraft used by the air carrier attained a taxable situs in Nebraska for purposes of state ad valorem taxation?56
The limitation imposed by the Due Process Clause is whether the tax in practical operation has relation to opportunities, benefits, or protection conferred or afforded by the taxing state.57 Regular contact through habitual employment of the property within the state is sufficient to establish taxing power even though the same aircraft do not land every day and none is continuously within the state.58
Yes. Mid-Continent's aircraft made eighteen regularly scheduled stops daily at Omaha and Lincoln for discharge and loading of passengers, mail, express, and freight, sometimes for refueling.59 These stops generated about nine percent of system revenue and eleven percent of tonnage in Nebraska.60 The carrier rented depot space and purchased fuel there, placing it in the position of other carriers that pay for local facilities to exploit commerce originating in the state.61
Such habitual employment supplies the required relation to opportunities and benefits conferred by Nebraska.62
The aircraft attained a taxable situs in Nebraska for purposes of state ad valorem taxation.63
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Justice Douglas concurred in the judgment.64 He clarified that property in transit may move so regularly and continuously that a fraction of it is always in the state and therefore subject to fractional ad valorem taxation.65 Property that is merely in transit without such regularity remains nontaxable.66
The power to lay an ad valorem tax turns on the permanency of the property in the state, whether all the property or only a fraction of it.67
Justice Frankfurter dissented.68 He maintained that planes pausing only five to twenty minutes lack the closeness and duration of relationship that barges or railroad cars have when they spend hours or days in a state.69 Nebraska failed to show any substantially permanent presence sufficient to support the tax without casting an inroad upon the Commerce Clause.70
Only those with a sufficiently substantial relation to the state may be taxed because they partake of its benefits as an ordered society.71