1. Where mining land owned by incompetent Quapaw Indians under a
patent subject to a restriction against alienation was leased on
their behalf with the approval of the Secretary of the Interior,
under the Act of June 7, 1897, to a mining company in consideration
of a royalty or percentage of the gross proceeds to be derived from
sale of ores mined, a state
ad valorem tax assessed to the
lessee on ores mined and in the bins on the land, before sale and
when the royalties or equitable interests of the Indians had not
been paid or segregated, is void as an attempt to tax an agency of
the federal government. P.
271 U. S. 612.
2. Judgment of state court
held reviewable by writ of
error, and certiorari denied. P.
271 U. S.
614.
104 Okla. 271
reversed.
Error to a judgment of the Supreme Court of Oklahoma which
reversed a judgment for the Mining Company in a suit to recover a
tax paid under protest.
Page 271 U. S. 611
MR. JUSTICE BUTLER delivered the opinion of the Court.
The mining company sued in the District Court of Ottawa County
to recover a tax of $2,319.80 paid under protest. The county
treasurer demurred to the petition, asserting that it failed to
state a cause of action. The demurrer was overruled, and judgment
was given for the plaintiff. On appeal to the highest court of the
state, the
Page 271 U. S. 612
judgment was reversed. 104 Okl. 271. The case is here on writ of
error. Section 237, Judicial Code.
Briefly the facts are these: September 26, 1896, pursuant to the
Act of March 2, 1895, c. 188, 28 Stat. 876, 907, there was issued
to Hum-bah-wat-tah Quapaw, a Quapaw Indian, a patent for an
allotment of 40 acres of land in Ottawa county. The patent
contained restrictions against alienation for 25 years, and by the
Act of March 3, 1921, c. 119, 41 Stat. 1225, 1248, that period was
extended for an additional 25 years. The land is owned by the heirs
of the allottee. The company has a mining lease on the restricted
land on terms which provide for the payment of royalties or a
percentage of the gross proceeds derived from the sale of ores
minded. The amount sued for is an
ad valorem tax assessed
by the county officials under § 9814, Compiled Statutes of 1921, on
lead and zinc ores mined by the company in 1920, and which were in
its bins on the land January 1, 1921. This tax is in addition to a
gross production tax paid to the state auditor. It was assessed on
the ores in mass, and the royalties or equitable interests of the
Indians had not been paid or segregated. Prior to the production of
the ores taxed, the Secretary of the Interior determined the Indian
owners to be incapable of managing their property, and assumed
control of it in their behalf. Act of June 7, 1897, c. 3, 30 Stat.
62, 72. Since that time, the royalties have been paid directly to
the Secretary.
The Quapaw Indians are under the guardianship of the United
States. The land and Indian owners are bound by restrictions
specified in the patent and the Acts referred to. It is the duty
and established policy of the government to protect these
dependents in respect of their property. The restrictions imposed
are in furtherance of that policy.
United States v. Noble,
237 U. S. 74;
Goodrum v. Buffalo, 162 F. 817. The lessee is an
Page 271 U. S. 613
agency or instrumentality employed by the government for the
development and use of the restricted land and to mine ores
therefrom for the benefit of its Indian wards.
Choctaw, O.
& G. R. Co. v. Harrison, 235 U. S. 292. It
is elementary that the federal government, in all its activities,
is independent of state control. This rule is broadly applied, and,
without congressional consent, no federal agency or instrumentality
can be taxed by state authority.
"With regard to taxation, no matter how reasonable or how
universal and undiscriminating, the state's inability to interfere
has been regarded as established since
McCulloch v.
Maryland, 4 Wheat. 316."
Johnson v. Maryland, 254 U. S. 51,
254 U. S. 55.
And see Farmers' Bank v. Minnesota, 232 U.
S. 516;
Choctaw, O. & G. R. Co. v. Harison,
supra; Gillespie v. Oklahoma, 257 U.
S. 501,
257 U. S.
505.
This Court has considered a number of cases quite like the one
now before us. In
Choctaw, O. & G. R. Co. v. Harrison,
supra, there was an agreement by the United States that coal
lands belonging in common to the members of the Choctaw and
Chickasaw Tribes should be mined, and that the royalties should be
used for the Indians. The state imposed a tax equal to 2 percentum
on the gross receipts from the total production of coal from the
mine. It was held that it was an occupation or privilege tax, and
that one having a mining lease made in furtherance of the
governmental purpose could not be subjected to that burden. In
Indian Oil Co. v. Oklahoma, 240 U.
S. 522, it was held that oil leases of land made by the
Osage Tribe were under the protection of the federal government,
and that the state could not tax such leases either directly or as
represented by the capital stock of the corporation owning them. It
was said (p.
240 U. S.
530):
"A tax upon the leases is a tax upon the power to make them, and
could be used to destroy the power to make them. If they cannot be
taxed as entities, they cannot be taxed vicariously by taxing the
stock, whose only value is their value, or
Page 271 U. S. 614
by taking the stock as an evidence or measure of their value. .
. ."
In
Howard v. Oil Companies, 247 U.S. 503, this Court
affirmed per curiam the judgment of the United States District
Court for the Western District of Oklahoma enjoining the
enforcement of a tax imposed by the state on the gross value of the
production of oil and gas, less the royalty interest, under leases
upon Osage lands made for the benefit of the Indians. In
Large
Oil Co. v. Howard, 248 U.S. 549, this Court reversed per
curiam the judgment of the Supreme Court of Oklahoma (63 Okl. 143)
sustaining a tax on gross value of production of petroleum and gas,
less the royalty interest, where the owner of the property sought
to be taxed was engaged under the authority of the Secretary of the
Interior in the production of oil and gas in what formerly
constituted the tribal lands of the Osage Nation. And in
Gillespie v. Oklahoma, supra, it was held that the net
income derived by a lessee from the sale of his share of the oil
and gas received under leases of restricted Creek and Osage lands
could not be taxed by the state. In each of these cases, the tax
was condemned as an attempt to tax an instrumentality used by the
United States in fulfilling its duties to the Indians.
In this case, the lease was made to secure the development of
the lands and obtain for the benefit of the restricted Indian
owners a percentage of the gross proceeds of the ores to be mined.
The
ad valorem tax here in controversy was assessed on the
ores in mass at the mine before sale, and that was an attempt to
tax an agency of the federal government within the principle of the
cases cited.
From abundance of caution, the company presented a petition for
a writ of certiorari, but, as a writ of error lies, the petition
will be denied.
Gillespie v. Oklahoma, supra, 257 U. S. 506.
Judgment reversed.
Page 271 U. S. 615
MR. JUSTICE McREYNOLDS is of opinion that the effect of the
assailed tax upon the instrumentality of the United States is
remote, and the tax is valid under the doctrine approved in
Central Pac. R. Co. v. California, 162 U. S.
91,
162 U. S.
119.
MR. JUSTICE BRANDEIS, dissenting.
The property taxed is lead and zinc ore in bins. The land from
which the ore was extracted belongs to a Quapaw allottee under the
Act of March 2, 1895, c. 188, 28 Stat. 876, 907. Restrictions on
alienation of the land will not expire until 1946. Act of March 3,
1921, c. 119, § 26, 41 Stat. 1225, 1248. But the allottee may lease
the land for mining and business purposes for ten years unless he
is incompetent, in which case the power to lease is vested in the
Secretary of the Interior. Act of June 7, 1897, c. 3, 30 Stat. 62,
72. The ore in question had been detached from the soil, and is
personal property. It is owned wholly by the Mining Company, a
private Oklahoma corporation organized for profit. The ore is
assessed under the general laws of the state, which lays an
ad
valorem property tax on all property, real or personal, not
exempt by law from taxation. Payment of the tax will not affect the
financial return to the Indian under the lease. No state
legislation exempts this property. There is no specific or general
provision in any act of Congress which purports to do so. If an
exemption exists, it arises directly from the federal Constitution.
Does ownership by an incompetent Indian of the land from which the
ore was taken or ownership of the ore by an instrumentality of the
government create an exemption?
Is the ore exempt because it has been extracted out of
restricted lands? The Quapaw might have conducted the mining
operations himself. If he had been competent, he might, without the
approval of the Secretary of the Interior,
Page 271 U. S. 616
have leased the land to others for mining purposes for a period
of 10 years. If he had operated the mine himself, I see no ground
on which it could be held that his ore in the bins would not have
been taxable to him, like any other unrestricted property to which
he had absolute title. [
Footnote
1] The fact that he was incompetent does not render such
property exempt from taxation. [
Footnote 2] Such incompetency results simply in the
imposition of restrictions upon the alienation of his realty,
exempting that from taxation.
The Kansas
Indians, 5 Wall. 737. But such restrictions cannot
by implication be deemed to extend to personalty, even though the
product of the realty, so as to exempt them from taxation.
Compare McCurdy v. United States, 246 U.
S. 263;
United States v. Gray, 284 F. 103;
United States v. Ransom, 284 F. 108. Any exemption that
attached to the land is limited thereto, and does not extend to the
ore extracted therefrom.
Forbes v. Gracey, 94 U. S.
762,
94 U. S.
765-766.
Compare South Utah Mines v. Beaver
County, 262 U. S. 325.
Is the ore exempt because it is the property of an agency
employed by the government for the benefit of the Indian, its ward?
We are not dealing here with property owned by the United States,
as in
Van Brocklin v. Tennessee, 117 U.
S. 151, or
Lee v. Osceola, etc., Improvement
District, 268 U. S. 643; nor
with an agency all of whose property was acquired and is used
solely for the purpose of serving the government, as in
Clallam
County v. United States, 263 U. S. 341. We
are dealing with a private "corporation having its own purposes as
well as those of the United States and interested in profit
Page 271 U. S. 617
on its own account,"
ibid., p.
268 U. S. 345.
And we are dealing with a property tax, as distinguished from an
occupation tax.
Choctaw, Oklahoma & Gulf Ry. Co. v.
Harrison, 235 U. S. 292;
Oklahoma v. Texas, 226 U. S. 298,
226 U. S. 301.
Whether, under the circumstances, Congress had power to exempt the
ore from the general property tax we need not consider. It has not
done so in terms, and I see no reason for assuming that it intended
to do so.
Compare Mid-Northern Oil Co. v. Walker,
268 U. S. 45,
268 U. S. 49;
Thompson v. Kentucky, 209 U. S. 340;
Swarts v. Hammer, 194 U. S. 441.
In 1873, this Court said:
"It may therefore be considered as settled that no
constitutional implications prohibit a state tax upon the property
of an agent of the government merely because it is the property of
such an agent."
Railroad Co. v.
Peniston, 18 Wall. 5,
85 U. S. 53.
The rule there applied with respect to a railroad incorporated
under a federal charter has since been followed as to other federal
instrumentalities also.
Western Union Tel. Co. v.
Massachusetts, 125 U. S. 530;
Central Pacific Railroad Co. v. California, 162 U. S.
91;
Baltimore Shipbuilding Co. v. Baltimore,
195 U. S. 375;
Gromer v. Standard Dredging Co., 224 U.
S. 362;
Choctaw, Oklahoma & Gulf Ry. Co. v.
Mackey, 256 U. S. 531,
256 U. S. 537.
Compare 76 U. S. Pacific
Railroad, 9 Wall. 579;
National Bank v.
Commonwealth, 9 Wall. 353,
76 U. S. 362.
It has been specifically applied to agencies, such as this mining
company, whose employment was in aid of the government's policy of
protecting and developing the properties of its Indian wards.
Thomas v. Gay, 169 U. S. 264;
Wagoner v. Evans, 170 U. S. 588;
Catholic Missions v. Missoula County, 200 U.
S. 118. Those decisions seem to me controlling in the
case at bar.
The rule that the property of a privately owned government
agency is not exempt from state taxation rests fundamentally upon
the principle that such a tax has only a remote relation to the
capacity of such agencies
Page 271 U. S. 618
efficiently to serve the government. [
Footnote 3] Such a tax, as distinguished from an
occupation or privilege tax, does not impose a charge upon the
privilege of acting as a government agent, and thereby enable a
state to control the power of the federal government to employ
agents and the power of persons to accept such employment. The tax
is levied as a charge by the state for rendering services relating
to the protection of the property, which services are rendered
alike to agents of the government and of private persons. Such a
tax cannot be deemed to be capable of deterring the entry of
persons as agents into the employ of the government. Conceivably an
operating company might pay a higher royalty or bonus if it were
assured that it would enjoy immunity from taxation for the small
quantity of the year's output of the mine which might be in the ore
bins on the day as of which property is assessed. Conceivably also,
the cattle owner in
Thomas v. Gay, supra, might have paid
higher for the grazing rights if the cattle while on the
reservation were immune from taxation. But, in either case, the
effect of the immunity, if any, upon the Indian's financial return
would be remote and indirect. If we are to regard realities, we
should treat it as negligible.
Page 271 U. S. 619
The difference in the legal effect of acts which are remote
causes and of those which are proximate pervades the law. The power
of a state to tax property and its lack of power to tax the
occupation in which it is used exist in other connections. In
Baltimore Shipbuilding Co. v. Baltimore, 195 U.
S. 375,
195 U. S. 382,
where the state had levied a tax upon property conveyed by the
United States to the shipbuilding company on the condition that it
construct a dry dock there for the use of the United States and
that, if such dry dock were not kept in repair, the property should
revert to the United States, this Court said:
"But, furthermore, it seems to us extravagant to say that an
independent private corporation for gain, created by a state, is
exempt from state taxation, either in its corporate person or its
property, because it is employed by the United States, even if the
work for which it is employed is important and takes much of its
time."
I suspect that my brethren would agree with me in sustaining
this tax on ore in the bins but for
Gillespie v. Oklahoma,
257 U. S. 501. The
question there involved was different. Any language in the opinion
which may seem apposite to the case at bar should be disregarded as
inconsistent with the earlier decisions. It is a peculiar virtue of
our system of law that the process of inclusion and exclusion, so
often employed in developing a rule, is not allowed to end with its
enunciation, and that an expression in an opinion yields later to
the impact of facts unforeseen. The attitude of the court in this
respect has been especially helpful when called upon to adjust the
respective powers of the states and the nation in the field of
taxation. [
Footnote 4]
[
Footnote 1]
Pennock v. Commissioners, 103 U. S.
44;
Goudy v. Meath, 203 U.
S. 146.
[
Footnote 2]
Keokuk v. Ulam, 4 Okl. 5. The exemption granted the
personalty of the Indians in
United States v. Rickert,
188 U. S. 432, and
in
United States v. Pearson, 231 F. 270, rested upon the
express ground that title to the property was held by the United
States in trust for the Indians.
[
Footnote 3]
"It is therefore manifest that exemption of federal agencies
from state taxation is dependent not upon the nature of the agents,
or upon the mode of their constitution, or upon the fact that they
are agents, but upon the effect of the tax -- that is, upon the
question whether the tax does in truth deprive them of power to
serve the government as they were intended to serve it, or does
hinder the efficient exercise of their power. A tax upon their
property has no such necessary effect. It leaves them free to
discharge the duties they have undertaken to perform. A tax upon
their operations is a direct obstruction to the exercise of federal
powers."
Railroad Co. v.
Peniston, 18 Wall. 5,
85 U. S. 36.
See T. R. Powell, "Indirect Encroachment on Federal
Authority by the Taxing Powers of the states," 31 Harvard Law Rev.
321, 327; J. H. Cohen and K. Dayton, "Federal Taxation of state
Activities and state Taxation of Federal Activities," 34 Yale Law
Journ. 807.
[
Footnote 4]
See Sonneborn Bros. v. Cureton, 262 U.
S. 506, qualifying
Texas Co. v. Brown,
258 U. S. 466;
Bowman v. Continental Oil Co., 256 U.
S. 642;
Askren v. Continental Oil Co.,
252 U. S. 444;
Standard Oil Co. v. Graves, 249 U.
S. 389;
also Galveston, Harrisburg & San Antonio
Ry Co. v. Texas, 210 U. S. 217,
210 U. S. 226,
qualifying
Maine v. Grand Trunk Ry. Co., 142 U.
S. 217;
Leloup v. Port of Mobile, 127 U.
S. 640,
127 U. S. 647,
qualifying
Osborne v.
Mobile, 16 Wall. 479;
Philadelphia S.S. Co. v.
Pennsylvania, 122 U. S. 326,
qualifying
State Tax on Railway Gross
Receipts, 15 Wall. 284;
Mercantile Bank v. New
York, 121 U. S. 138,
121 U. S. 147,
qualifying
Boyer v. Boyer, 113 U.
S. 689;
Railway Co. v.
McShane, 22 Wall. 444, qualifying
Railway
Co. v. Prescott, 16 Wall. 603.
Compare First
Nat. Bank of Guthrie Center v. Anderson, 269 U.
S. 341,
269 U. S. 348,
explaining
Merchants' National Bank v. Richmond,
256 U. S. 635;
Texas Transport & Terminal Co. v. New Orleans,
264 U. S. 150, and
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292,
245 U. S. 296,
limiting
Ficklen v. Shelby County Taxing District,
145 U. S. 1;
Baltimore & Ohio Southwestern R. Co. v. Settle,
260 U. S. 166,
260 U. S. 173,
qualifying
Gulf, Colorado & Santa Fe Ry. Co. v. Texas,
204 U. S. 403.