1. In this case, in which a taxpayer did not explicitly
challenge a state tax statute as being repugnant to the Federal
Constitution, treaties or statutes, but challenged a local tax
assessment on the ground that it infringed the taxpayer's federal
rights, privileges or immunities, this Court did not have
jurisdiction under 28 U.S.C. § 1257 of an appeal from a decision of
a state Supreme Court sustaining the validity of the tax; but the
appeal was treated under 28 U.S.C. § 2103 as a petition for
certiorari, and certiorari was granted. Pp.
362 U. S.
629-630.
2. Certain real estate owned by the Reconstruction Finance
Corporation and subjected by § 8 of the Reconstruction Finance
Corporation Act to state and local taxation was declared surplus
and surrendered to the War Assets Administration for disposal under
the provisions of the Surplus Property Act of 1944, which,
inter alia, authorized the War Assets Administration and
its successor, the General Services Administration, to make
disposition of the property on such terms as it saw fit and to
execute and deliver all necessary papers incident to transfer of
title.
Held: even before execution of a quitclaim deed
transferring title from the Reconstruction Finance Corporation to
the United States, such real estate had ceased to be subject to
state and local taxation as "real property of the Reconstruction
Finance Corporation," even though the property was leased to a
private lessee in the name of both the Reconstruction Finance
Corporation and the United States. Pp.
362 U. S.
630-636.
51 Cal. 2d
759, 336 P.2d 521, reversed.
Page 362 U. S. 629
MR. JUSTICE CLARK delivered the opinion of the Court.
The question to be decided is whether real property declared to
be surplus under the Surplus Property Act of 1944, 58 Stat. 765,
but the record title to which is in the Reconstruction Finance
Corporation, continues to be subject to local taxation under the
exemption of § 8 of the Reconstruction Finance Corporation Act, 47
Stat. 5. [
Footnote 1] The
Supreme Court of California and the Supreme Court of Michigan
[
Footnote 2] have held that it
does. The Court of Claims has reached the opposite conclusion.
[
Footnote 3] In view of this
conflict, we agreed to hear this case, but postponed consideration
of the question of jurisdiction to the hearing on the merits. 361
U.S. 859.
On the question of jurisdiction, we believe that appellant did
not make the required
"explicit and timely insistence in the state courts that a state
statute, as applied, is repugnant to the federal Constitution,
treaties or laws. . . . And it has long been settled that an
attack
Page 362 U. S. 630
upon a tax assessment or levy, such as [appellant] here made, on
the ground that it infringes a taxpayer's federal rights,
privileges, or immunities, will not sustain an appeal. . . ."
Charleston Federal Savings & Loan Ass'n v.
Alderson, 324 U. S. 182,
324 U. S. 185
(1945). [
Footnote 4] The appeal
is therefore dismissed. While the case is not properly here by
appeal, we treat the same as a petition for certiorari under 28
U.S.C. § 2103. [
Footnote 5] The
petition is granted. On the merits, we conclude that the property
involved is not within the waiver provision of the federal Act.
The language of § 8 of the Reconstruction Finance Corporation
Act was borrowed from earlier federal legislation dealing with
federal financial institutions. [
Footnote 6] The congressional policy appears to have been
to waive tax
Page 362 U. S. 631
exemption on real property owned by government corporations
whose functions were primarily financial in nature. Originally
conceived for the purpose of making loans to distressed business
concerns, the Reconstruction Finance Corporation was in this
category. Apparently Congress was concerned that property obtained
by the Corporation through its financial operations in aid of
economic recovery policies would lose its taxable status. Through §
8, therefore, Congress preserved the right of state and local
governmental bodies to tax property even though it came into the
hands of the Corporation. Success crowned the economic efforts of
the Corporation, and, as the country approached the critical period
immediately preceding its entry into World War II, Congress, in
1940, extended the Corporation's functions to include the
stockpiling of critical supplies and the operation of plants
engaged in the manufacture of war material. 54 Stat. 573. It was
soon apparent that large tracts of land would be necessary in this
operation, and the waiver was extended to the real estate holdings
of the Defense Plant Corporation, a subsidiary of the
Reconstruction Finance Corporation. 55 Stat. 248.
The termination of the war quickly threw substantial portions of
such property into disuse, there being no further need for the mass
production of war material. The President created the War Assets
Administration for the purpose of disposing of all government
surplus property. [
Footnote 7]
After March 25, 1946, government agencies possessing property
surplus to official needs were required so to declare it and to
transfer it to the Administration for disposal. [
Footnote 8] By declaration of May 29, 1946,
the Reconstruction Finance Corporation declared the subject
property to be surplus to its needs and responsibilities. Under
Page 362 U. S. 632
the Surplus Property Act, this declaration transferred [
Footnote 9] to the War Assets
Administration the functions of: caring for and handling the
property pending disposal (§ 3(g) and § 6); making disposition of
the property on such terms as it saw fit (§ 9(b) and § 15(a)),
including donation under certain conditions (§ 13(b)); and the
power of execution and delivery of all necessary papers incident to
transfer of title (§ 15(b)). It further provided that all funds
derived from such disposition would be covered into the United
States Treasury as miscellaneous receipts (§ 30(a)). Pursuant to
this declaration by the Reconstruction Finance Corporation, the War
Assets Administration took possession of this property on May 29,
1946, and its successor, the General Services Administration,
[
Footnote 10] retained
possession until September 1, 1949, during which period the
property was used as a storage depot and a sales center for surplus
property held by the Administration. On the latter date, the
property was leased to appellant's predecessor. The lease described
the lessor as the
"Reconstruction Finance Corporation . . . and the United States
of America, both acting by and through the General Services
Administrator under . . . the Surplus Property Act of 1944."
Appellees assessed
ad valorem real property taxes on
the realty against the Reconstruction Finance Corporation, as
owner, for the fiscal tax years 1951 to 1955, inclusive. Appellant
paid the taxes [
Footnote 11]
and filed this suit after claims for refund had been denied. The
trial court
Page 362 U. S. 633
entered judgment against appellant. On appeal, the Supreme Court
of California affirmed the judgment of the trial court, and denied
the claim for refund.
51 Cal. 2d
759, 336 P.2d 521, 523.
There would be no question as to the exemption of the real
property involved had the record title been in the name of the
United States. Since March 17, 1955, in fact, it has been so
recorded; on that date, the Reconstruction Finance Corporation
executed and recorded a quit-claim deed to the United States.
The Supreme Court of California correctly posed as the
underlying question, "whether the land ceased to be
real
property of the' Reconstruction Finance Corporation" after it was
declared surplus and became subject to the provisions of the
Surplus Property Act of 1944. That court found that, since no deed
was executed transferring title out of the Reconstruction Finance
Corporation until 1955, it remained "property of the . . .
Corporation," and hence subject to taxation until that time. We
believe the court placed too much reliance on the fact that the
bare record title to the property remained in the name of the
Corporation.
It appears to us that the purpose of the waiver provision was to
permit taxation of real property being used by the Reconstruction
Finance Corporation in the performance of its functions. Such use
was terminated when the property was declared surplus in 1946. At
that time, another agency of the Government took both the occupancy
and complete control of the property for the purpose of management
and disposition. The Reconstruction Finance Corporation, under the
specific provisions of the Surplus Property Act, thereby lost all
power and control over the property, which came into the hands of
the Administrator for the account of the United States, any
proceeds therefrom being ordered paid into the United States
Treasury. Thereafter, the Administrator elected,
Page 362 U. S. 634
as he had the statutory power to do, to lease the property to
appellant's predecessor. The real property, however, remained in
the account of the United States, not the Reconstruction Finance
Corporation. As the Supreme Court of California recognized, the
general rule is "that lands owned by the United States of America
or its instrumentalities are immune from state and local taxation."
We think that the land here was "owned" by the United States.
We believe that California overlooks the fact that, while the
1949 lease was formally made in the name of both the United States
and the Reconstruction Finance Corporation, as lessors, it recited
on its face that the property was "surplus property of the
Government of the United States," and subject to the Surplus
Property Act of 1944. Furthermore, this lease noted that the
property had "been assigned to War Assets Administration for
disposal," and that
"the Department of Air Force has determined that the use of the
leased premises by the Lessee herein is necessary for the
production of military equipment for the National Defense."
Moreover, the property had been occupied by the War Assets
Administration during the two years immediately preceding its
lease. The appellees' contention seems to be that, since the lease
was in the name of the Reconstruction Finance Corporation as well
as the United States, the land was "property of the Corporation."
We hardly think such a conclusion inevitable. We believe that the
appropriate test would turn on practical ownership of the property,
rather than the naked legal title. This is the more necessary with
respect to public property, where the record title may often be in
a government agency or department -- or, for that matter, in an
official of the Government -- rather than in the name of the United
States. Here, the Reconstruction Finance Corporation had no
proprietary interest in the property, no possession or control
thereof, was performing none of
Page 362 U. S. 635
its functions with regard thereto, and could receive none of the
income or future benefits therefrom. Even though it held the record
title, such holding, under the circumstances here, could be only
for the benefit of the United States. All of the incidents of
beneficial ownership ended by the express mandate of the statute
when the property was declared surplus and transferred to another
agency for disposition.
When confronted with the same issue as presented by the instant
case, the Court of Claims reached a conclusion directly contrary to
that of the Supreme Court of California.
Board of County
Comm'rs of Sedgwick County v. United States, 123 Ct.Cl. 304,
105 F. Supp. 995. The Court of Claims there noted that, after the
declaration of surplus, the Reconstruction Finance Corporation had
no "physical possession, control, or custody of the property. It
had neither the use nor the right to use the property." The court
went on to conclude that "[t]here is no indication that Congress
intended to waive immunity from taxation under these
circumstances." 123 Ct.Cl. at 324, 105 F. Supp. at 1001. We agree
with the Court of Claims
"that the cloak of immunity descended upon the property [when it
was declared surplus], and no tax liability for the property could
arise thereafter."
123 Ct.Cl. at 324, 105 F. Supp. at 1002.
Since the crucial element is the intent of Congress, it is
important to note the enactment of a 1955 statute providing the
States relief from the effects of federal immunity. 40 U.S.C. §§
521-524. The congressional declaration of purpose in that
statute
"recognizes that the transfer of real property having a taxable
status from the Reconstruction Finance Corporation . . . to another
Government department has often operated to remove such property
from the tax rolls. . . ."
"Transfer" was defined to include "a transfer of custody and
control of, or accountability for the care and handling of," the
property,
Page 362 U. S. 636
as well as "transfer of legal title." The statute goes on to
provide for certain payments in lieu of taxes where such a transfer
occurs. The relevance of this statute lies in a congressional
sanction of the rule of the
Sedgwick County case,
construing the waiver provision.
We cannot say that Congress, in 1932, intended to waive the tax
exemption on "real property of the Corporation" after the
Corporation found the property surplus to its needs and
responsibilities and transferred it to another agency, for
management and disposition as United States property. To say that
the Government's land remained taxable merely because no formal
deed was executed transferring title, either to itself or any of
its designated agencies, would but make a local tollgate of a
technicality.
Nor can we agree that the short administrative practice claimed
here continued the waiver in effect. Even if the responsible agency
had permitted the paper title to the Government's property to
remain in the Reconstruction Finance Corporation for the sole
purpose of allowing it to be taxed, the congressional mandate in
the Surplus Property Act of 1944 could not be overridden. As to
such matters, any adjustments between the federal and the local
governments are strictly legislative ones for the Congress,
United States v. City of Detroit, 355 U.
S. 466,
355 U. S. 474
(1958), and not within the discretion of the executive
agencies.
The judgment is therefore reversed, and the cause remanded for
further proceedings not inconsistent with this opinion.
Reversed and remanded.
MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS dissent.
[
Footnote 1]
Section 8 (as amended):
". . . any real property of the Corporation shall be subject to
. . . State, Territorial, county, municipal, or local taxation to
the same extent according to its value as other real property is
taxed."
61 Stat. 205; 15 U.S.C. § 607.
[
Footnote 2]
Continental Motors Corp. v. Township of Muskegon, 346
Mich. 141,
77 N.W.2d
370.
[
Footnote 3]
Board of County Comm'rs of Sedgwick County v. United
States, 123 Ct.Cl. 304, 105 F. Supp. 995. In a case involving
property in a similar posture, the Ninth Circuit reached a result
in accord with
Sedgwick County, and contrary to the
California and Michigan courts.
United States v. Shofner Iron
& Steel Works, 168 F.2d 286. In
Shofner, the
ultimate issue was not tax immunity, but ejectment of a defendant
from government property.
[
Footnote 4]
28 U.S.C. § 1257 provides:
"Final judgments or decrees rendered by the highest court of a
State in which a decision could be had, may be reviewed by the
Supreme Court as follows:"
"
* * * *"
"(2) By appeal, where is drawn in question the validity of a
statute of any state on the ground of its being repugnant to the
Constitution, treaties or laws of the United States, and the
decision is in favor of its validity."
"(3) By writ of certiorari, . . . where any title, right,
privilege or immunity is specially set up or claimed under the
Constitution, treaties or statutes of . . . the United States."
[
Footnote 5]
28 U.S.C. § 2103:
"If an appeal to the Supreme Court is improvidently taken from
the decision of the highest court of a State in a case where the
proper mode of a review is by petition for certiorari, this alone
shall not be ground for dismissal; but the papers whereon the
appeal was taken shall be regarded and acted on as a petition for
writ of certiorari and as if duly presented to the Supreme Court at
the time the appeal was taken. . . ."
[
Footnote 6]
See 13 Stat. 99, 111, 12 U.S.C. § 548 (national banking
associations); 38 Stat. 251, 258, 12 U.S.C. § 531 (Federal Reserve
Banks); 39 Stat. 380, 12 U.S.C. §§ 931, 933 (Federal Land Banks);
42 Stat. 1469, 12 U.S.C. § 1261 (National Agricultural Credit
Corporation).
[
Footnote 7]
See Exec.Order No. 9689, dated Jan. 31, 1946, 11
Fed.Reg. 1265.
[
Footnote 8]
See Surplus Property Act of 1944, 58 Stat. 765.
[
Footnote 9]
The Act did not require the execution of a deed to the
Administration.
[
Footnote 10]
As of July 1, 1949, Congress transferred all of the functions of
the War Assets Administration to the General Services
Administration.
See Federal Property and Administrative
Services Act of 1949, c. 288, 63 Stat. 377.
[
Footnote 11]
By the terms of the lease, the lessee undertook to pay all taxes
legally assessed against the property.