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Vermont Yankee

Court: Tax on Vermont Yankee might be OK

NEW YORK — A federal appeals court in Manhattan said Tuesday that the legality of a tax on Vermont’s only nuclear plant is best left up to a state court. But it rejected some of the plant operator’s arguments against the tax anyway.

The 2nd U.S. Circuit Court of Appeals ruled in a case stemming from a tax affecting the Vermont Yankee nuclear plant. The plant’s owner, Entergy Nuclear Operations Inc., has argued that the electricity tax is unconstitutional and not really a tax but was imposed instead as a punitive fine or regulatory fee in May 2012. Two months earlier, Entergy had stopped making regular payments into designated state funds after Vermont refused to extend regulatory approval for the plant’s continued operation.

A three-judge appeals panel said it would leave to the Vermont courts whether collecting the money is constitutional, but it found that the money is definitely a tax. In an opinion written by Circuit Judge Gerard E. Lynch, the appeals court said the nature of the entity imposing the charge — the state legislature — “cuts strongly in favor of classifying the generating tax as a tax.”

It said the legislature’s role and the fact that the tax is collected by the state’s Department of Taxes and deposited into the state’s treasury rather than a special fund separates it from many tolls, user fees, special assessments and other similar measures. The appeals panel noted that many revenue measures that are indisputably taxes fall on a limited portion of the population. It cited casino revenue taxes as an example.

“Graduated income taxes, or, as in this case, taxes imposed only on entities of a particular size, will often fall only on a limited population, but are nevertheless clearly taxes,” the 2nd Circuit said.

The appeals panel also found “unavailing” the argument that the tax is not a tax because its enactment was the product of local hostility toward the plant. It said “sin taxes” levied on conduct or products the state seeks to discourage “are common, and are unquestionably taxes.”

Lawrence Robbins, an attorney who represented the state, said Vermont was gratified that the appeals court agreed that Vermont Yankee can get a “plain, speedy, and efficient” remedy if it brings the issue to the state court.

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