           IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Lehigh Valley Rail Management              :
LLC                                        :
                                           :
              v.                           :   No. 2531 C.D. 2015
                                           :   Argued: September 13, 2016
County of Northampton Revenue              :
Appeals Board and County of                :
Northampton                                :
                                           :
Appeal of: County of Northampton           :


BEFORE:       HONORABLE MARY HANNAH LEAVITT, President Judge
              HONORABLE P. KEVIN BROBSON, Judge (P)
              HONORABLE ANNE E. COVEY, Judge

OPINION
BY PRESIDENT JUDGE LEAVITT                                      FILED: February 6, 2018

              Northampton County appeals an order of the Northampton County
Court of Common Pleas (trial court) holding, on remand, that 85.01 acres of utility
realty owned by Lehigh Valley Rail Management LLC (Railroad) were exempt from
the tax on utility realty authorized by the Public Utility Realty Tax Act (PURTA).1
The trial court explained that because this realty was used as an intermodal railroad
yard for moving sealed cargo containers between trains and trucks and could not be
used for any other purpose, it constituted “[r]ailroad beds or rails, land owned or
used by a railroad as a right-of-way for a rail line and superstructures thereon[,]”
and, thus, is exempt from the PURTA tax. Section 1101-A(3)(ii) of PURTA, 72 P.S.
§8101-A(3)(ii).2 We vacate and remand for more specific findings of fact and



1
  Article XI-A of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, added
by Section 3 of Act of July 4, 1979, P.L. 60, as amended, 72 P.S. §§ 8101-A - 8112-A.
2
  The text of Section 1101-A(3)(ii) of PURTA is set forth in the text of the opinion, infra.
reverse the trial court’s holding that Railroad’s office and parking lot are exempt
from the PURTA tax on utility realty.
                                      Background
              Railroad is a public utility that owns and operates an intermodal rail
yard located in the City of Bethlehem on 107.93 acres of land (Property). All of the
activities on the Property are regulated by the Pennsylvania Public Utility
Commission (PUC) as integral components of interstate freight transportation. The
Property is used 365 days a year by inbound and outbound freight trains.
              Freight arrives at this facility in sealed rail-ready containers, by train or
by tractor trailer, and there it is transferred from train to tractor trailer or vice-versa,
without being opened. The transfers take place in “aisles” between the railroad
tracks. Daily and continuously, machines known as “packers” move through the
aisles to transfer the sealed containers to and from rail cars. The packers lift each
container from a truck (or train) and ground it for pick up and attachment to a train
(or truck) for transportation to the next destination. The aisles are specifically sized
and designed for the packers. Without these defined aisles and railroad tracks, there
would be no way to transfer the containers to or from the trains. In addition, the
Property is used to hold the containers until they are transferred. It is impossible to
transfer each container immediately upon arrival. However, containers do not
remain on the ground for more than 24 hours.
              Of the 107.93 acres, 22.92 acres hold a series of railroad tracks laid
parallel to one another. The remaining 85.01 acres are used in several different ways.
These include: the aisles between the railroad tracks where the packers move; the
ground where the containers are placed before being placed on a truck or a train;
steep embankments that provide a level grade for the railroad beds; a water retention


                                             2
pond to manage storm water on the site; a mobile office trailer with a parking lot for
office staff and visitors; and a driveway into the Property used by trucks.
                On June 26, 2013, the Northampton County Assessment Office issued
a “Notice of Change” to Railroad asserting, for the first time, that the 85.01 acres
were subject to local real estate taxes. The notice also asserted that the remaining
22.92 acres of railroad tracks were subject to the utility realty tax authorized by
Section 1102-A(a) of PURTA.3                   Railroad appealed the Assessment Office’s
determination to the County of Northampton Revenue Appeals Board (Appeal
Board).
                After a hearing, the Appeal Board held that all 107.93 acres constituted
utility realty and, as such, are exempt from local taxation. The Appeal Board
referred the question of Railroad’s eligibility for an exemption from the PURTA tax
to the County Assessment Office. In response, the Assessment Office appraised the
85.01 acres of the land at $1,275,200 and held that it was subject to the PURTA tax,
which is collected by the Commonwealth. The Assessment Office appraised the

3
  Section 1102-A(a) states:
        A tax is hereby imposed on the State taxable value of utility realty at a millage rate
        calculated under subsection (b). 72 P.S. §8102-A(a).
In turn, “subsection (b)” of Section 1102-A states:
        On or before November 1, 1999, for taxable year 1998, and on or before August 1,
        2000, for taxable year 1999, and every year thereafter, the [D]epartment [of
        Revenue of the Commonwealth of Pennsylvania] shall calculate the millage rate
        for the taxable year and notify the public utility of the millage rate and the State
        taxable value of its utility realty. If an error in addition, subtraction, multiplication
        or division is present in a report or if an entry on a report is inconsistent with another
        entry and it is apparent which entry is correct, the millage rate shall be calculated
        using the correct mathematical result or entry. The public utility shall pay to the
        State Treasurer through the [D]epartment [of Revenue of the Commonwealth of
        Pennsylvania] a tax equal to the product of the millage rate and the State taxable
        value within forty-five days after the mailing date of the notice of determination.
72 P.S. §8102-A(b).
                                                    3
remaining 22.92 acres, consisting of railroad tracks, at $343,900 and held that it was
exempt from the PURTA tax. Railroad appealed. Unexpectedly, the trial court
reversed the Appeal Board’s determination that the 85.01 acres constituted utility
realty and held, instead, that they were subject to local taxation. The trial court
agreed, however, that the 22.92 acres of railroad tracks were exempt from the
PURTA tax. Railroad again appealed.
             This Court reversed. It held that the 85.01 acres constituted utility
realty, as had been held by the Appeal Board. Lehigh Valley Rail Management LLC
v. County of Northampton Revenue Appeals Board, 126 A.3d 1076 (Pa. Cmwlth.
2015) (Lehigh Valley I). We explained that Railroad’s intermodal railroad yard was
the functional equivalent of a rail switching or classification yard, where boxcars are
removed from an incoming freight train and placed on rail sidings where they are
assembled and connected to the appropriate freight train. Historically, these yards
have been exempt from local taxation. Id. at 1084. Accordingly, Lehigh Valley I
remanded the case to the trial court to determine whether any part of the 85.01 acres
was eligible for an exemption from the PURTA tax.
             On remand, the trial court did not take any additional testimony or
evidence. However, it made one additional finding of fact:

             The record indicates, and the site visit by [trial court] confirms,
             that there are no buildings on the Property aside from the
             [mobile] office trailer…which is not affixed to the ground.

Trial Court op., 11/20/2015, at 9. The trial court concluded that the 85.01-acre parcel
was exempt from the PURTA tax because it consisted of “[r]ailroad beds or rails,
land owned or used by a railroad as a right-of-way for a rail line and superstructures
thereon.” 72 P.S. §8101-A(3)(ii). The County appealed.
                                       Appeal
                                          4
               On appeal,4 the County argues that the trial court erred and abused its
discretion in holding that the 85.01 acres were exempt from the PURTA tax. The
County argues that “land owned or used by a railroad as a right-of-way” excludes
the “land appurtenant” to railroad tracks, i.e., the 85.01 acres. 72 P.S. §8101-
A(3)(ii). The County argues that only the two steel rails and the land between them
constitute a railroad “right-of-way” that is exempt from the PURTA tax; the
remaining 85.01 acres are subject to the PURTA tax.
                                        Lehigh Valley I
               Both parties repeat the arguments they presented in Lehigh Valley I,
where the sole issue was whether the 85.01 acres constituted utility realty. In this
appeal, the question is whether the 85.01 acres, or part thereof, constitute the type of
utility realty exempted from the PURTA tax. For clarity, we begin with a review of
Lehigh Valley I.
               Historically, real property used by a utility to furnish a utility service
was exempt from local taxation. On the other hand, real property used by a public
utility for other profit-making ventures, such as a warehouse operation, were not
considered “utility realty” and could be taxed by local taxing authorities. In 1968,
the Pennsylvania Constitution was amended to authorize taxation of utility realty
used to provide a utility service. Article VIII, Section 4 of the Constitution5


4
  When considering a tax assessment appeal, this Court’s review determines whether the trial court
committed an error of law or abused its discretion. In re Appeal of Jubilee Ministries International,
2 A.3d 706, 707 n.5 (Pa. Cmwlth. 2010).
5
  It states as follows:
         The real property of public utilities is subject to real estate taxes imposed by local
         taxing authorities. Payment to the Commonwealth of gross receipts taxes or other
         special taxes in replacement of gross receipts taxes by a public utility and the
         distribution by the Commonwealth to the local taxing authorities of the amount as


                                                 5
contemplates a “plan whereby an amount equivalent to what local taxing authorities
could have raised is collected by the Commonwealth and distributed among local
taxing authorities in an equitable manner.” American Telephone and Telegraph Co.
v. Board of Property Assessment, Appeals and Review of Allegheny County, 337
A.2d 844, 849 (Pa. 1975).
               To determine what is “utility realty,” the legislature provided a detailed
definition. Section 1101-A(3) of PURTA defines utility realty as:

               All lands, together with all buildings, towers, smokestacks, dams,
               dikes, canals, cooling towers, storage tanks, reactor structures,
               pump houses, supporting foundations, enclosing structures,
               supporting structures, containment structures, reactor
               containment outer shells, reactor containment vessels, turbine
               buildings, recovery tanks, solid waste area enclosures, primary
               auxiliary buildings, containment auxiliary safeguard structures,
               fuel buildings, decontamination buildings, and, all other
               structures and enclosures whatsoever which are physically
               affixed to the land, no matter how such structures and enclosures
               are designated and without regard to the classification thereof for
               local real estate taxation purposes, but not including machinery
               and equipment, whether or not housed within such building,

      herein provided shall, however, be in lieu of local taxes upon its real property which
      is used or useful in furnishing its public utility service. The amount raised annually
      by such gross receipts or other special taxes shall not be less than the gross amount
      of real estate taxes which the local taxing authorities could have imposed upon such
      real property but for the exemption herein provided. This gross amount shall be
      determined in the manner provided by law. An amount equivalent to such real estate
      taxes shall be distributed annually among all local taxing authorities in the
      proportion which the total tax receipts of each local taxing authority bear to the
      total tax receipts of all local taxing authorities, or in such other equitable
      proportions as may be provided by law.
               Notwithstanding the provisions of this section, any law which
               presently subjects real property of public utilities to local real estate
               taxation by local taxing authorities shall remain in full force and
               effect.
PA. CONST. art. VIII, §4.
                                                 6
             structure or enclosure, or, after December 31, 1999, land and
             improvements to land that are indispensable to the generation of
             electricity, located within this Commonwealth that at the end of
             the taxable year are owned by a public utility or its affiliate either
             directly or by or through a subsidiary and are used or in the
             course of development or construction for use, in whole or in
             part, in the furnishing, including producing, storing, distributing
             or transporting, of public utility service and which are not subject
             to local real estate taxation under any law in effect on April 23,
             1968: Provided, however, That the following specified items
             shall be exempt from the tax hereby imposed:

                    (i)    Easements or similar interests.

                    (ii) Railroad beds or rails, land owned or used by
                    a railroad as a right-of-way for a rail line and
                    superstructures thereon. This subclause does not
                    include stations, buildings, warehouses, shops,
                    engine houses, plants or miscellaneous structures or
                    the land appurtenant thereto.

                    (iii) Pole, transmission tower, pipe, rail or other
                    lines whether or not said lines are attached to the
                    land or to any structure or enclosure which is
                    physically affixed to the land.

72 P.S. §8101-A(3). In short, a utility’s land that was used to furnish the utility’s
service and, thus, exempt from local taxation prior to 1968 meets the definition of
“utility realty.” Id. Nevertheless, some utility realty was exempted from the new
utility realty tax, just as it had been exempted from local taxation prior to 1968.
             Prior to 1968, the standard for determining whether realty owned by a
railroad utility could be taxed by local authorities was summarized as follows:

             It is only such property belonging to a railroad corporation as is
             appurtenant and indispensable to the construction and
             preparation of the road for use, that can claim to be exempt from
             taxation; such property as is only indispensable to the making of
             profits being liable to taxation.
                                           7
Railroad v. Berks County, 6 Pa. 70, 70 (Pa. 1847). In sum, realty “indispensable” to
the railroad’s operation was exempt, but other realty could be taxed by local taxing
authorities. Our Supreme Court offered examples of how to apply the distinction:

               [W]ater stations and depots--by which latter is to be understood,
               the offices, oil houses, and places to hold cars, and such places
               and buildings as may fairly be deemed necessary and
               indispensable to the construction of the road--are not taxable;
               whilst warehouses, coal-lots, coal-shutes, machine-shops, wood-
               yards, and the like, are taxable.

Id. (emphasis added).
               The question in Lehigh Valley I was whether Railroad’s intermodal
facility would have been taxed by local government prior to 1968.6 This inquiry was
complicated by the fact that intermodal rail facilities did not become a feature of rail
transportation until after 1968.7 This required a study of how analogous rail
operations were treated prior to 1968.


6
  The parties agreed that the intermodal facility satisfied the other definitional requirements for
“utility realty” because it was located in Pennsylvania, owned by a public utility and used, in whole
or part, to furnish the utility’s service. 72 P.S. §8101-A(3).
7
  Before the trial court, Railroad offered the following historical perspective:
         While intermodal transport was first offered during the 1960s, its use did not grow
         substantially until the 1970s and 1980s. ATKINSON, DUNN, HENNESSY, TRAIN: THE
         DEFINITIVE VISUAL HISTORY, 223, (Dorlin Kindersley et al. eds., New York, 2014).
         “[I]n 1957, [intermodal transport] accounted for less than 1% of U.S. rail freight,
         but by the mid 1980s, more than 15% of freight was transported this way.” Id.
         Historians agree that while the concept of self-contained intermodal transport was
         “quite ahead of its time, it didn’t really take off until the 1980s.” STEVE BARRY,
         RAILROAD ROLLING STOCK, 102-3, (Voyager Press, Minneapolis, 2008).
         Moreover, intermodal transport did not have a significant presence in Pennsylvania
         until the late 1990s. Norfolk Southern annexed former Conrail lines in 1999,
         adding more coal traffic through western Pennsylvania from the Allegheny
         Mountains. Id. at 103. Following this annexation, Norfolk Southern moved the


                                                 8
               A railroad switching yard operates in the following manner:

               [I]ncoming trains are broken up and the cars distributed upon
               different sidings according to their destination. From these
               sidings strings of cars are pulled out and moved forward to
               another system of tracks constructed upon the same plan as the
               first, and there distributed upon sidings so as to constitute trains
               to be carried forward by connecting carriers. For trains moving
               in the opposite direction the process is simply reversed. Another
               ladder of sidings in the yard in which the cars were assembled
               into trains becomes a yard for classification, and the
               classification yard becomes the yard in which cars are assembled
               into trains to be carried forward in the opposite direction.

Chicago, B. & Q.R. Co. v. United States, 211 F. 12, 17 (8th Cir. 1913), reversed on
other grounds by United States v. Chicago, B. & Q.R. Co., 237 U.S. 410 (1915).
Prior to 1968, rail switching yards in Pennsylvania were not subject to local taxation.
City of Philadelphia, to Use of Pugh v. Philadelphia & R.R. Co., 1 Pa. Super. 236
(1895).
               In Pugh, the City of Philadelphia placed a lien on property used as the
railroad’s switching yard. The property was described as follows:

               [T]he coal and iron terminal of the defendant company, and …
               the main tracks of the company’s railroad enter the tract at a point
               to the south of the lot in question, and thence by numerous
               diverging branches and switches lead to the wharves, some
               twenty in number, where coal is loaded into vessels for export,
               and iron ore is received from vessels and loaded into cars.




      bulk of its intermodal traffic to the east of the state; trains were moved to twelve
      (12) hubs, before being broken apart into individual trailers.
Reproduced Record at 149a (R.R. ___).
                                                9
Id. at 242.      The City argued that the switching yard was not necessary and
indispensable to the operation of the railroad. The Superior Court disagreed,
explaining as follows:

               [E]ndeavoring to follow the precedents, we confess we can see
               no difference for purposes of taxation between an intermediate
               section and a section at the end of a roadbed; and with our present
               information we are not prepared to say that the several diverging
               branches which lead to the wharves are not an integral part of the
               railroad.

Id. at 246. The Superior Court’s holding was consistent with our Supreme Court’s
instruction that “places [used] to hold cars” are “necessary and indispensable to the
construction of the road …” and, thus, exempt from local taxation. Railroad v. Berks
County, 6 Pa. at 70.8
               Drawing on this precedent, we held in Lehigh Valley I that an
intermodal facility functions like a railroad switching or classification yard. Instead
of using only rail lines for storing, moving and switching boxcars, Railroad uses a
combination of rail lines, truck lanes and a mobile crane unit for storing, moving and
switching rail-ready containers.              Railroad’s facility does for freight rail
transportation what switching yards have done for the past 150 years. This is why
the Interstate Commerce Act defines a “railroad,” inter alia, as “intermodal
equipment used by or in connection with a railroad.” 49 U.S.C. §10102(6)(A).9 In

8
  See also Erie & W.V.R. Co. v. Public Service Commission, 74 Pa. Super. 338, 345 (1920) (track
leading from “main line of a railroad is variously described as a ‘switch,’ a ‘siding,’ a ‘spur’ or a
‘branch.’”).
9
  Section 10102(6)(A) of the Interstate Commerce Act defines “railroad” as “a bridge, car float,
lighter, ferry, and intermodal equipment used by or in connection with a railroad.” 49 U.S.C.
§10102(6)(A) (emphasis added). Further, in a land use case, Choice Fuelcorp, Inc. v. Zoning
Hearing Board of Armstrong County (Pa. Cmwlth., No. 1515 C.D. 2012, filed May 16, 2013), this


                                                10
sum, Railroad’s intermodal facility would have been exempt from local taxation
under pre-1968 law and, thus, satisfied the statutory definition of “utility realty.”10
               Lehigh Valley I reversed the trial court and reinstated the holding of the
County Appeal Board that the 85.01 acres constituted utility realty. We remanded
the matter to the trial court for a determination on whether the 85.01 acres, in part or
whole, were exempt from the PURTA tax, as asserted by Railroad.
               On remand, the trial court held that all 85.01 acres were exempt from
the PURTA tax. The County asserts that the trial court misconstrued PURTA’s tax
exemption.
                               PURTA Taxation Exemption
               We return to the text of PURTA. As noted above, PURTA’s definition
of utility realty contains an exemption from the PURTA tax for some species of
utility realty.11 Section 1101-A(3) states that:

               [T]he following specified items shall be exempt from the tax
               hereby imposed:

               (i) Easements or similar interests.


Court looked to a different subsection of the same definition that defines “railroad” to include a
“switch, spur, track, terminal, terminal facility, and a freight depot, yard, and ground, used or
necessary for transportation.” 49 U.S.C. §10102(6)(C).
10
   We held the embankments and stormwater management pond to constitute utility realty because
without that land, graded to meet the requirements for railroad tracks, Railroad could not be a
“complete and perfect railroad.” Lehigh Valley I, 126 A.3d at 1084 n.9 (quoting Cumberland
Valley Railroad Co. v. McLanahan, 59 Pa. 23, 29 (1868)).
11
   It is well established that “[t]axing statutes should receive a strict construction.” Commonwealth
v. Philadelphia Rapid Transit Company, 134 A. 455, 456 (Pa. 1926). On the other hand, where a
“taxing provision is an ‘exemption’ [it is] to be strictly construed against [t]axpayers.” Adelphia
House Partnership v. Commonwealth, 709 A.2d 967, 970 (Pa. Cmwlth. 1998). Here, we consider
the meaning of “[r]ailroad beds or rails, land owned or used by a railroad as a right-of-way for a
rail line and superstructures thereon,” which is an exemption. 72 P.S. §8101-A(3)(ii).


                                                11
             (ii) Railroad beds or rails, land owned or used by a railroad as
             a right-of-way for a rail line and superstructures thereon. This
             subclause does not include stations, buildings, warehouses,
             shops, engine houses, plants or miscellaneous structures or the
             land appurtenant thereto.
             (iii) Pole, transmission tower, pipe, rail or other lines whether or
             not said lines are attached to the land or to any structure or
             enclosure which is physically affixed to the land.

72 P.S. §8101-A(3)(i)-(iii) (emphasis added).
             The County argued that the phrase “[not the] land appurtenant thereto”
in the second sentence of Subsection (ii) applied also to the first sentence therein.
Accordingly, the aisles and embankments “appurtenant” to the railroad tracks did
not fall within the exemption.
              The trial court rejected the County’s argument. It construed Section
1101-A(3)(ii) as follows:

             Given the placement of the words “the land appurtenant thereto”
             in the sentence which clarifies what is not exempt, we construe
             the phrase to refer to the land appurtenant to “stations, buildings,
             warehouses, shops, engine houses, plants or miscellaneous
             structures” and not the land appurtenant to “railroad beds or
             rails, land owned or used by a railroad as a right-of-way for a
             rail line and superstructures thereon.”

Trial Court op., 11/20/2015, at 24 (emphasis added). The trial court explained that

             we decline to find that the phrase ‘land appurtenant thereto’
             applies to negate the exemption provided for in the first sentence
             of the subclause by rendering taxable ‘land appurtenant’ to
             railroad beds or rails, land owned or used by a railroad as a right-
             of-way for a rail line and superstructures thereon.

Id. Rather, the trial court held that the phrase “land appurtenant thereto” applied
only to “stations, buildings, warehouses, shops, engine houses, plants or
                                          12
miscellaneous structures,” i.e., the second sentence in subsection (ii). 72 P.S. §8101-
A(3)(ii). We agree.
             The County next argues that the “railroad beds or rails, land owned or
used by a railroad as a right-of-way for a rail line and superstructures thereon” does
not include Railroad’s intermodal facility, save for the railroad tracks themselves.
Railroad argues that the County conflates the meaning of “right-of-way” with
railroad tracks.
             PURTA does not define “railroad beds,” “rails,” “land owned or used
by a railroad as a right-of-way for a rail line,” or “rail line.” However, we have close
to 200 years of jurisprudence that has given meaning to these terms. The legislature
drew on that precedent to fashion the tax exemption set forth in Section 1101-A(3)
of PURTA. For example, in Railroad v. Berks County, 6 Pa. at 70, our Supreme
Court held that “warehouses,” “machine shops” and “the like” are taxable by local
taxing authorities notwithstanding their ownership by a utility. Section 1101-A(3)(ii)
retains that precedent by clarifying that the PURTA tax exemption does not apply to
“stations, buildings, warehouses, shops, engine houses, plants or miscellaneous
structures” owned by a railroad utility. 72 P.S. §8101-A(3)(ii).
             A railroad “right-of-way” is broader in scope than a pair of steel
railroad tracks. St. Louis, Kansas City & Colorado Railroad Company v. Wabash
Railroad Company, 217 U.S. 247, 253 (1910) (noting that a railroad right-of-way
describes the entire owned or leased strip or tract used for a railroad purpose, not
“the limited part thereof upon which its main track or other specified improvements
are located.”) (citations omitted). The dimensions of a railroad right-of-way vary.
For example, in Borough of Mt. Pleasant v. Baltimore & Ohio Railroad Company,
20 A. 1052 (Pa. 1891), our Supreme Court described a railroad’s right-of-way as a


                                          13
“narrow strip of ground.”12 In comparison, the General Railroad Right-of-Way Act
of 1875 granted railroads rights-of-way across public lands of the United States “‘to
the extent of one hundred feet on each side of the central line of said road.’” Marvin
M. Brandt Revocable Trust v. United States, 134 S.Ct. 1257, 1261 (2014) (quoting
43 U.S.C. §934 (repealed)). Similarly, Section 10 of Pennsylvania’s Railroad Act13
stated that “the president and directors of such company shall have power and
authority … to survey, ascertain, locate, fix, mark, and determine such route for a
railroad as they may deem expedient … and not except in the neighborhood of deep
cuttings, or high embankments, or places selected for sidings, turnouts, depots,
engine or water stations, to exceed sixty feet in width, and thereon to lay down, erect,
construct and establish a railroad....” Formerly 67 P.S. §271 (repealed) (emphasis
added). Stated otherwise, the 60-foot width for a railroad “route” was to be
expanded where necessary for the embankments and sidings needed for the railroad.
Our Superior Court specifically construed Section 10 of the Railroad Act to mean
that a “railroad right of way is not confined to the portion of ground occupied by its
tracks.” Lacy v. Montgomery, 124 A.2d 492, 497 (Pa. Super. 1956).14




12
   Borough of Mt. Pleasant involved a municipal assessment upon adjacent property owners for
the cost of paving a road or “footway.” Where the adjacent property is a “road-bed or right of way
of a railroad company,” it cannot be “the subject of a claim for paving.” Borough of Mt. Pleasant,
20 A. at 1053. By contrast, a railroad company’s ground “used as a lumberyard” may be assessed.
Id. The Supreme Court held this was logical because the paved road or sidewalk would benefit
those making their way to the lumberyard.
13
   Act of February 19, 1849, P.L. 79, as amended, 67 P.S. §271. The Railroad Act was replaced,
in part, by the Public Service Company Law, Act of July 26, 1913, P.L. 1374, which was later
replaced by the Public Utility Code, 66 Pa. C.S. §§101-3316.
14
   The Superior Court specifically noted that the general 60-foot width of a right-of-way did not
apply “in the neighborhood of deep cuttings or high embankments or places selected for sidings,
turnouts, depots, engine or water stations.” Lacy, 124 A.2d at 497 (emphasis added).
                                               14
             In Rodgers v. Pittsburgh, Fort Wayne & Chicago Railway Company,
100 A. 271, 272 (Pa. 1917), our Supreme Court held that a railroad company could
establish a right-of-way “indefinite in width.” The amount of land taken for this
purpose could be of “such width” as the “board of directors, in the exercise of their
honest judgment, deemed necessary for the future as well as for then existing railroad
purposes.” Id. at 271. The Supreme Court upheld the trial court’s conclusion that
the railroad’s right-of-way was 80 feet wide, notwithstanding the fact that for many
years it had used only 32 of the 80 feet in its right-of-way.
             In short, a “railroad right-of-way” is not co-terminus with the railroad
bed and steel tracks, as argued by the County. Further, the width of a “railroad right-
of-way” is not a fixed dimension; it changes with the railroad’s needs. As the
Superior Court has observed, the “‘right of way of a railroad company, whatever its
established width, as soon as acquired is impressed with a public use; it constitutes
a public highway.’” PA Energy Vision, LLC v. South Avis Realty, Inc., 120 A.3d
1008, 1014 (Pa. Super. 2015) (quoting Conwell v. Philadelphia and Reading
Railway Company, 88 A. 417, 418 (Pa. 1913) (emphasis added)).
             In CSX Transportation, Inc. v. Delaware County Board of Assessment
Appeals, 104 A.3d 612 (Pa. Cmwlth. 2014), this Court noted that land acquired for
sidings and turnouts could be termed part of the road bed:

             See Borough of Aliquippa v. Pittsburgh & Lake Erie R.R. Co., 94
             Pa. Super. 279, 288 (1928) (“A railroad company is authorized
             to condemn by appropriate proceedings for roadbed a strip of
             land of the width authorized by statute; and it may, in addition,
             acquire land for sidings and turnouts for the speedy and safe
             passage of its cars; land so acquired would properly be termed
             roadbed, and be exempt from taxation[.]”) In Aliquippa,
             although a slope adjacent to the track was deemed necessary to
             the stability of the track and was exempt from a municipal claim
             for paving, the railroad admitted that the station house portion of

                                          15
             the subject property was subject to assessment. The Court
             determined that the lower court had properly found the
             exemption did “not extend to station houses, platforms and other
             property of the railroad, not absolutely necessary to the exercise
             of the franchise of the corporation.” Id. at 286.

CSX, 104 A.3d at 622, n.5 (emphasis added). At times, “road bed” and “right-of-
way” have been used interchangeably.
             The term “rails” refers to bars of steel forming the track to carry railroad
cars.   Southern Pacific Transportation Company v. Commissioner of Internal
Revenue, 75 T.C. 497, 709 (1980), supplemented sub nom. Southern Pacific
Transportation Company v. Commissioner of Internal Revenue, 82 T.C. 122 (1984)
(“Rail is the portion of the railroad track structure which carries the wheels of
railroad rolling stock; it is the load-carrying steel member of the track.”).
             Finally, precedent teaches that the term “rail line” refers to the route of
the railway, not a track. See Quarry Office Park Associates v. Philadelphia Electric
Company, 576 A.2d 358, 359 (Pa. Super. 1990) (“The rail line was established in
1851 and 1852 … [t]he rail line extends for approximately seven miles, from
Tredyffrin Township in Chester County on the western end to King of Prussia,
Montgomery County on the eastern end.”).            Stated otherwise, the “rail line”
constitutes the “main tracks of the company’s railroad.” Pugh, 1 Pa. Super. at 242.
             The terms “railroad beds,” “rails,” and “land owned or used by a
railroad as a right-of-way for a rail line,” as used in Section 1101-A(3)(ii) of
PURTA, denote different things. We reject the County’s argument that the PURTA
tax exemption is limited to the land occupied by the steel rails and the land beneath
them.   The legislature could have chosen this simple way to express the tax
exemption, but it did not. The County’s narrow interpretation of the exemption
would render most of the words in Section 1101-A(3)(ii) surplusage. Matter of

                                          16
Employees of Student Services, Inc., 432 A.2d 189, 195 (Pa. 1981) (“Each word in a
statutory provision is to be given meaning and not to be treated as surplusage.”).
              The County next directs this Court to CSX Transportation, 104 A.3d
612, to support its contention that the 85.01 acres of Railroad’s Property are subject
to the PURTA tax. In that case, this Court considered whether realty owned by CSX
Transportation (CSXT) could be taxed by local taxing authorities. Of the 90.2 acres,
60.98 acres were paved with macadam; 8.62 acres were occupied by railroad tracks,
railroad beds and land thereunder; and 7.883 acres, commonly referred to as “the
thermometer,” was used to move automobiles to their assigned parking spaces on
the 61-acre macadam parking lot. This Court concluded that “the 72.63 acres which
includes the ‘thermometer’ … is not part of CSXT’s railroad right-of-way,” but
rather akin to a warehouse and, thus, subject to local real estate taxation. Id. at 622-
23. In short, it was not utility realty.
              In Lehigh Valley I, this Court distinguished an intermodal facility from
a thermometer. This Court held that the land on which the packers operate was part
of the Railroad’s intermodal facility and explained that

              [i]nstead of using miles of rail lines for storing, moving and
              switching boxcars, Railroad uses a mobile crane unit to pull
              containers from trucks or trains and place them on the ground for
              temporary storage until they can be switched.

Id. at 1084. Further, with regard to the land on which the packers operate, this Court
stated, “[t]here is no building or warehouse involved in the intermodal transfer of
containers, and the intermodal facility bears no similarity to a warehouse.” Id. at
1083.
              There is a key factual difference between the thermometer in CSX
Transportation and the intermodal facility at issue in Lehigh Valley I. Freight was

                                           17
unloaded from the train when it reached the thermometer. By contrast, freight is not
unloaded in the intermodal facility.       The goods remain locked up in sealed
containers. The intermodal facility is a stop along the train’s journey from point A
to point B. It functions as a switching, or classification, railroad yard.
             More importantly, CSX Transportation states that the PURTA tax
exemption applies to “those essential, indispensable parts necessary to operate the
railroad.” CSX Transporation, 104 A.3d at 622. “Places [used] to hold [railroad]
cars” are “necessary and indispensable … to the road.” Berks Co., 6 Pa. at 70. This
is why railroad switching yards were historically exempt from taxation as
“railroads.” Pugh, 1 Pa. Super. 236 (1895). Lest there be any doubt, a “railroad
right-of-way is not confined to the portion of ground occupied by its tracks.” Lacy,
124 A.2d 492, 497 (Pa. Super. 1956). In short, CSX Transportation does not support
the County’s contention that the entirety of the 85.01 acres is taxable under PURTA.
             Land is exempt from the PURTA tax only if it is an “essential,
indispensable part[ ] necessary to operate the railroad.” CSX Transportation, 104
A.3d at 622. Several parts of the 85.01 acres meet that definition. This includes the
aisles between the railroad tracks where the packers move, the ground where the
containers are placed before being loaded on a truck or train, the steep embankments
that provide a level grade for the railroad beds and the water retention pond.
             There are no “stations, buildings, warehouses, shops, engine houses,
[or] plants” on the 85.01 acres of Railroad’s Property at issue. 72 P.S. §8101-
A(3)(ii). However, the Property does contain “miscellaneous structures [and] land
appurtenant thereto.” Id. Specifically, there is an office trailer and an adjacent
parking lot, with approximately 16-17 spaces, for employees. The trial court




                                          18
acknowledged that the office trailer is a “structure.” Trial Court op., 11/20/2015, at
24-25. Finally, the Property has a driveway used for truck ingress and egress.15
               Under PURTA, “buildings, warehouses ... or miscellaneous structures”
are not necessary to operate a railroad and, thus, not eligible for the tax exemption.
72 P.S. §8101-A(3)(ii). Accordingly, the land dedicated to the mobile office trailer
and parking lot is subject to the PURTA tax. The Railroad’s office trailer is not
exempt from the PURTA tax because it constitutes a “building” or “miscellaneous
structure.” 72 P.S. §8101-A(3)(ii). The parking lot is land “appurtenant thereto,”
i.e., to the office trailer. According to the affidavit of Patrick R. Loughlin, which
was submitted by Railroad, the area occupied by the trailer and staff parking is
approximately 70’ by 300’ (21,000 square feet +/- 0.5 acres). R.R. 276a-278a. This
portion of the 85.01 acres is subject to the PURTA tax.
               When this Court ordered a remand in this appeal, it was not known how
many acres constituted the driveway used to enter the intermodal railroad yard; how
many feet separated the tracks, i.e., the width of the aisles between the tracks; the
total acreage of the aisles for packers; or how many acres are dedicated to the
embankments and retaining pond, which are “necessary to operate a railroad.” 72
P.S. §8101-A(3)(ii). The trial court did not make factual findings on the dimensions
of each separate use of the 85.01-acre parcel, which are needed to determine the
acreage that is subject to the PURTA tax and the acreage that is exempt.
Accordingly, we remand this matter to the trial court to determine the dimensions of
the various uses of the land that make up the 85.01 acres of the Property and, then,
make conclusions of law, consistent with this opinion, on whether each acre
committed to that use satisfies the exemption in Section 1101-A(3)(ii) of PURTA.

15
  The record established that Railroad does not own any of the trucking businesses that deposit or
remove containers, and it does not profit from their activities.
                                               19
                                    Conclusion
             For the above-stated reasons, we again remand this matter to the trial
court. Specifically, on remand, the trial court shall determine the dimensions of the
following: (1) the aisles between the railroad tracks where packers move; (2) the
ground where the containers are placed before being loaded onto a truck or train; (3)
the steep embankments that provide a level grade for the railroad beds; (4) the water
retention pond; (5) the office trailer and parking lot; and (6) the driveway into the
Property used by trucks. In addition, the trial court shall determine the dimensions
of all other areas of the Property not described herein and render conclusions of law,
consistent with this opinion, on whether each area satisfies the exemptions listed in
Section 1101-A(3)(ii) of PURTA for “railroad beds or rails, land owned and used by
a railroad as a right-of-way for a rail line and superstructures thereon.” 72 P.S.
§8101-A(3)(ii). We reverse the trial court, insofar as it held that the land on which
the trailer and the staff parking lot are exempt.
                                      ______________________________________
                                      MARY HANNAH LEAVITT, President Judge




                                         20
          IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Lehigh Valley Rail Management             :
LLC                                       :
                                          :
             v.                           :   No. 2531 C.D. 2015
                                          :
County of Northampton Revenue             :
Appeals Board and County of               :
Northampton                               :
                                          :
Appeal of: County of Northampton          :

                                     ORDER

             AND NOW, this 6th day of February, 2018, the order of the Court of
Common Pleas of Northampton County, dated November 20, 2015, is VACATED.
The matter is REMANDED to the trial court to determine the dimensions of the
various uses of the 85.01-acre parcel and to make conclusions of law regarding
whether each use satisfies the exemption in Section 1101-A(3)(ii) of the Public
Utility Realty Tax Act, Article XI-A of the Tax Reform Code of 1971, Act of March
4, 1971, P.L. 6, as amended, added by Section 3 of Act of July 4, 1979, P.L. 60, as
amended, 72 P.S. §8101-A(3)(ii), as set forth in further detail in the attached opinion.
In addition, we REVERSE the trial court, in part, and hold that the land on which
the trailer and the staff parking lot are located is subject to the PURTA tax.
             Jurisdiction relinquished.
                                    ______________________________________
                                    MARY HANNAH LEAVITT, President Judge
