Entergy fights to keep suit on generation tax in federal court
When is a tax not a tax? When it’s a “levy.”
That is the argument advanced by Entergy Nuclear in U.S. District Court, as it continued its fight against the state of Vermont’s attempt to move the second Entergy lawsuit to state jurisdiction.
Entergy, citing federal case law, said the narrow focus of the new 2012 generating tax — it currently only applies to Vermont Yankee nuclear plant — meant it didn’t meet the federal definition of a tax.
“The single-payor feature of the new levy should preclude any finding that the new levy is a ‘tax,’” Entergy wrote.
“By calling the new levy a ‘tax’ and imposing it only on electricity generated by Vermont Yankee station, defendants seek to forcibly extend the payment obligations under the expired memorandum of understanding and extract payments comparable,” Entergy said.
Entergy, in a lengthy response filed late Tuesday, said the new law, passed by the 2012 Legislature, and signed into law by Gov. Peter Shumlin in May, was a violation of its constitutional rights and argued for continued federal oversight. The company, it said, was “a politically unpopular business in Vermont.”
Entergy filed its second lawsuit against the state in September in an attempt to head off the new generating tax, which is expected to net the state between $12 million and $15 million. The tax is one quarter of a cent per kilowatt hour of electricity generated.
The state had in turn filed a motion last month to transfer the case back to state jurisdiction, saying it was a state tax that should be decided in state courts or in the existing appeals process before the state tax commissioner.
Entergy, under the new law, is supposed to make a quarterly tax payment of $6 million by Oct. 25, and if it doesn’t, it is subject to penalty and fines, according to the provisions of the law.
Entergy has fought the generating tax, saying it was simply retaliation against Entergy for winning its first lawsuit, which thwarted the Legislature’s efforts to shut down the Vernon reactor on March 21, 2012 — the date its original 40-year license expired.
At the same time, two lucrative memoranda of understanding between the state and Entergy expired, and with it substantial revenue that amounted to $45 million over the past 10 years.
The state has argued that other states have generating taxes — higher — on nuclear power plants, and also noted that the rate applied to Vermont Yankee is actually lower than the rate applied to wind generators.
Entergy countered by saying that because the new tax only applies to the Vermont Yankee nuclear power plant, since it is the only large electrical generator in the state in excess of 200 megawatts, it is actually a fee or levy.
Under federal case law, Entergy’s lawyers argued, tax versus fee is defined by what entity imposes the charge, what group is subject to the charge, and whether the tax or fee is expended for general public purposes.
“It becomes clear that, on the face of the complaint, the new levy is, in fact, not a ‘tax,’” Entergy’s lawyers argued.
And just because a state uses its tax department to collect the revenue does not mean it is a tax under federal law, Entergy said.
Entergy also said that the state’s suggestion that the tax be appealed to the state tax commissioner, and failing that, to the state courts, was not a speedy solution.
And Entergy reiterated its claims last week that it wouldn’t be eligible for a refund under current state law, even though an assistant attorney general testified before the court that it would be.
Because of the time constraints, U.S. District Chief Judge Christina Reiss has given the state five days to respond to Entergy.
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