MONTPELIER — Any lawsuit against an increased state electrical generation tax on the Vermont Yankee nuclear plant belongs in state court, not federal court, according to the state’s motion to dismiss the latest lawsuit filed by Entergy Nuclear.

“Challenges to state taxes do not belong in federal court,” was the first line in the state’s motion to dismiss the suit filed by Entergy Nuclear Vermont Yankee LLC and Entergy Nuclear Operations Inc. in U.S. District Court.

“As this court and the 2nd Circuit (Court of Appeals) have both repeatedly recognized, Vermont’s administrative and judicial processes are the appropriate forum to litigate disputes,” wrote Jonathan T. Rose, an assistant attorney general, and Danforth Cardozo, an assistant attorney general with the Vermont Department of Taxes.

The state tax appeal system satisfies the federal tax law’s requirement for a “plain, speedy and efficient remedy,” Rose added.

Entergy Nuclear, shortly after filing the lawsuit earlier this month, also filed a motion for a preliminary injunction, seeking to “preserve the status quo.” A hearing on the lawsuit, which was filed Sept. 12, will be held Oct. 1 in U.S. District Court in Rutland.

Entergy, in its motion for a preliminary injunction, claimed it would “suffer irreparable harm... by an illegal and burdensome new exaction.”

Entergy Nuclear had paid the state $5 million under two memorandums of understanding, both of which expired on March 21. Under the new state law, passed by the 2012 Vermont Legislature and signed into law by Gov. Peter Shumlin, Entergy’s generation tax would jump to $12.8 million, money that is earmarked for the state’s clean energy fund.

The law applies only to “large generators” making more than 200 megawatts of electricity, of which there is only one such large generator in the state — Vermont Yankee.

The state asserted in its response that the federal court lacked “subject matter jurisdiction,” and the suit should be dismissed because Entergy’s claims are barred by federal law.

“Plaintiffs clearly are entitled to raise their federal challenges to the electrical energy generating tax at the Vermont Department of Taxes and to seek review of any administrative ruling in the Vermont state courts,” the state wrote.

The new assessment calls for a quarter penny tax for every kilowatt hour of electricity generated. The law says that the state may assess interest and penalties if the taxpayer failed to pay a tax liability.

Entergy has two options it can follow to challenge the new generating tax, the state said. It can pay the tax and then claim a refund, claiming the tax is “invalid” under federal law, or it can refuse to pay the tax and appeal any notice of delinquency to the Department of Taxes.

“In either case, plaintiffs would be entitled to a full review of their claims by the Department of Taxes,” and if necessary, ultimately to the U.S. Supreme Court, the state said.

Vermont Yankee has been paying a generating tax for many years, even before Entergy Nuclear bought Vermont Yankee in 2002 from a group of New England utilities led by Central Vermont Public Service Corp. and Green Mountain Power.

The former owner, Vermont Yankee Nuclear Power Corp. filed an appeal with the state over the generating tax in 1997, making similar federal constitutional arguments, but the commissioner of taxes upheld the tax at that time, the state’s response said.

In an interesting turn of events, U.S. District Judge J. Garvan Murtha, who ruled against the state on the earlier Entergy lawsuit challenging the state’s authority over Yankee’s future operation, assigned this case to Chief Judge Christina Reiss “for all further proceedings.” Murtha was chief judge before he assumed senior status.

susan.smallheer@ rutlandherald.com