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Sutherland Successfully Argues that County Imposition is a Penalty, Not a Tax

August 3, 2011

WASHINGTON (Wednesday, August 3, 2011) – Just weeks after a federal court of appeals sided with Sutherland Asbill & Brennan LLP attorneys in a lawsuit centering on the constitutionality of an "excise tax" on greenhouse gas emissions enacted by Montgomery County, Maryland – which specifically targeted GenOn Mid-Atlantic, LLC (formerly Mirant Mid-Atlantic) – the Montgomery County Council voted unanimously to repeal the so-called "tax" and refund more than $10 million to GenOn, including interest.

The legislation to repeal the levy follows a decision issued in June by the U.S. Court of Appeals for the Fourth Circuit. In that decision, the court agreed with GenOn that the county’s "tax" imposed on only one entity was not a "tax" at all, but rather a fee or a penalty. While the court did not reach the ultimate question of whether the County's levy was illegal, the well reasoned decision prompted the county to repeal the levy.

"We are extremely pleased with the outcome of this case," said Sutherland Litigation Partner Lewis S. Wiener. "The court's ruling supported our argument that the county was attempting to generate a fee or impose a penalty, not levy a legitimate tax. Consequently, we believe that, too, would have been deemed unconstitutional."

Sutherland State and Local Tax (SALT) Partner Jeffrey A. Friedman added "this case is a significant win for taxpayers seeking relief in federal court and overcoming an attempt by a taxing authority to block a federal court from hearing a case with significant U.S. Constitutional issues."

The legislation, passed by the Montgomery County Council, refunds more than $10 million paid by GenOn since early 2010, when the levy was first passed. As a result of the targeted levy, the County had assessed a fee of $5 per ton of carbon dioxide emissions from Mirant’s Dickerson facility, which is now owned by GenOn.

"This case clearly demonstrates Sutherland’s ability to assist clients in navigating complex state tax issues in federal and state courts," said Mr. Friedman. "With experience in tax law dating back more than 80 years, we have the breadth of tax knowledge and litigation experience that our clients have come to rely on to solve the most challenging issues."

For more information about SALT, visit:

One of three electric generating stations on the Potomac River in the greater Washington, D.C., region, the plant generates electricity for Washington, D.C., and most of Montgomery and Prince George’s Counties in Maryland. It is located approximately two miles west of Dickerson, Maryland.

Sutherland Asbill & Brennan LLP is a law firm with global reach known for solving challenging business problems and resolving sophisticated legal issues for many of the world’s largest companies. Founded in 1924, the firm handles matters throughout the United States and worldwide. Seven major practice areas—corporate, energy and environmental, financial services, intellectual property, litigation, real estate, and tax—provide the framework for an extensive range of focus areas, allowing Sutherland attorneys to serve a diverse client base that ranges from small and medium-sized start-up businesses to a significant number of Fortune 100 companies.

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Eversheds Sutherland is an international law firm helping the Fortune 100, industry leaders, sector innovators and business entrepreneurs solve their biggest challenges and reach their business goals. Dedicated to unfaltering excellence in client service, we are known for our business savvy and industry intelligence, providing creative and custom solutions for each of our clients. Industry and business experience makes the difference for our clients.

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Adam C. Pollet, Associate
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