Arizona Pub. Svc. Co. v. Snead, 441 U.S. 141 (1979)

APPEAL FROM THE SUPREME COURT OF NEW MEXICO

Syllabus

New Mexico has imposed an energy tax on the privilege of generating electricity within the State. This tax applies to all utility companies generating electricity within the State and may be credited against the New Mexico gross receipts tax liability for electricity sold at retail within New Mexico. But where the electricity is transmitted to other States for sale and consumption, there is no gross receipts tax liability against which to offset energy tax liability. A federal statute, 15 U.S.C. § 391, prohibits a State from imposing a tax on the generation or transmission of electricity which discriminates against out-of-state consumers, and further provides that a tax is discriminatory if it "results, either directly or indirectly, in a greater tax burden on electricity" generated and transmitted in interstate commerce than on electricity generated and transmitted in intrastate commerce. Appellant utility companies, owners of New Mexico power plants at which most of the electricity generated is ultimately sold to out-of-state consumers, brought action in a New Mexico state court seeking to have the energy tax invalidated on the ground, inter alia, that it violated the federal statute, but the New Mexico Supreme Court, affirming the trial court, upheld the tax.

Held: The New Mexico energy tax is invalid under the Supremacy Clause by reason of the federal statute. Because the tax itself, through operation of the tax-credit provisions, indirectly but necessarily discriminates against electricity sold outside New Mexico, it violates that statute. The federal statute does not exceed the permissible bounds of congressional action under the Commerce Clause, since Congress had a rational basis for finding that a tax such as New Mexico’s interfered with interstate commerce, and selected a reasonable method to eliminate that interference. Pp. 146-151.

91 N.M. 485, 576 P.2d 291, reversed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined. REHNQUIST, J., filed an opinion concurring in the judgment, in which WHITE, J., joined, post, p. 151.