Liability of the United States for State

and Local Taxes on Seized and Forfeited Property

Property seized by, and ultim ately forfeited to, the federal governm ent is not subject to state and 

local taxes that arise after the date o f the offense that leads to the order of forfeiture.*

July 9, 1991

M e m o r a n d u m O p i n i o n f o r t h e A s s o c i a t e D e p u t y a t t o r n e y G e n e r a l

This memorandum responds to your request for our opinion whether property seized by, and ultimately forfeited to, the federal government is subject 

to taxation by state and local authorities. We conclude that principles of 

intergovernmental tax immunity, combined with longstanding rules governing forfeiture and the express language of modem forfeiture statutes, establish 

that property ultimately forfeited to the federal government is not subject to 

state and local taxes arising after the date of an offense that leads to the 

order of forfeiture.1

Property actually forfeited to the United States is immune from taxation by 

state and local authorities in the absence of express congressional authorization.

* Editor's Note: The views of the Office were later revised in light of United States v. 92 Buena Vista

Ave., 507 U.S. I l l (1993) (plurality and concurring opinions established that the interests of innocent 

owners who acquire property after commission of an act leading to forfeiture are not defeated by the 

forfeiture action). See Memorandum for Cary H. Copeland, Director and Chief Counsel, Executive O ffice for Asset Forfeiture, Re: Liability o f the United States fo r State and Local Taxes on Seized and

Forfeited Property (Oct. 18 1993) ( to be published) ( in civil forfeiture proceedings, the United States is 

obligated to pay liens for state and local taxes accruing after the commission of the offense leading to 

forfeiture and before the entry of a judicial order of forfeiture, if the lien-holder establishes innocent 

ownership o f its interests, but the United States may not pay such liens in criminal forfeiture proceedings 

because state and local tax lien-holders are not bona fide purchasers for value of the interests they would 

assert). See also Memorandum for Cary H. Copeland, Director and Chief Counsel, Executive Office for 

Asset Forfeiture and James Knapp, Deputy Director, Asset Forfeiture Office, Criminal Division. Re:

Authority to Pay State and Local Taxes on Property After Entry o f an Order o f Forfeiture (Dec. 9 1993) 

(to be published) (the Attorney General has discretionary authority under the civil and criminal forfeiture 

statutes to compensate state and local governments for tax revenues lost as a result of a forfeiture).

' Currently, “[t]he [Justice] Department's position is that the doctrine of sovereign immunity precludes 

the payment of State and local taxes on property which has been seized for federal forfeiture.” Memorandum for United States Attorneys Offices from Cary H. Copeland, Director, Executive Office for Asset 

Forfeiture, Re: Forfeiture Policies at 1 (July 3, 1990). Under this policy, the "date of the seizure marks 

the imposition of sovereign immunity.” Id. at 2. The Department, therefore, “will not pay State or local 

taxes incurred after the property is seized for forfeiture.” Id.

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This doctrine finds its classic expression in M ’Culloch v. Maryland, 17 U.S. 

(4 Wheat.) 316 (1819). As the Court has subsequently explained, under 

M ’Culloch “a State cannot constitutionally levy a tax directly against the 

Government of the United States or its property without the consent of Congress.” United States v. City o f Detroit, 355 U.S. 466, 469 (1958). See also

Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 175 (1989) (“[A]bsent 

express congressional authorization, a state cannot tax the United States 

directly.”); United States v. Allegheny County, 322 U.S. 174, 177 (1944) (the 

“possessions, institutions, and activities of the Federal Government itself in 

the absence of express congressional consent are not subject to any form of 

state taxation”).2 Once property is forfeited to the United States, an attempt 

by a state or local government to tax that property in the absence of consent 

by the Congress is plainly invalid under the longstanding doctrine of intergovernmental tax immunity.3

The process of forfeiture presents the question whether that immunity 

might attach before the date on which the forfeiture is perfected by entry of 

an order of forfeiture. We conclude that it does, by operation of the relation 

back doctrine, which is codified in the major federal forfeiture statutes. For 

example, the provisions of federal law relating to civil forfeiture of certain 

drug-related property were amended by the Comprehensive Crime Control 

Act of 1984, Pub. L. No. 98-473, 98 Stat. 1837, 2051 (1984), to provide that 

“[a]ll right, title, and interest in property [subject to forfeiture] shall vest in 

the United States upon commission of the act giving rise to forfeiture under 

this section.” 21 U.S.C. § 881(h). See also 18 U.S.C. § 1963(c) (same); 21 

U.S.C. § 853(c) (same).4

Under this principle, which by 1890 was the “settled doctrine” of the 

Supreme Court with respect to forfeitures,

whenever a statute enacts that upon the commission of a certain act specific property used in or connected with that act 

shall be forfeited, the forfeiture takes effect immediately upon

2 The federal governm ent’s tan immunity has been described as a function of the supremacy of federal 

law under Article VI of the Constitution, United States v. New Mexico, 455 U.S. 720, 733 (1982); 

M ’Culloch, 17 U.S. at 436 (describing tax immunity as "the unavoidable consequence of that supremacy 

which the constitution has declared”); and as a function of sovereign immunity, Kern-Limerick, Inc. v. 

Scurlock, 347 U.S. 110, 122 (1954).

5 If seized property is not ultimately forfeited to the federal government, the owner of the property 

would remain liable for state and local taxes.

4 Some courts have held that the relation back doctrine, if not expressly set forth in the statute, is 

simply a rule of statutory construction that applies only to those statutes making forfeiture automatic 

rather than permissive. See, e.g.. United States v. Thirteen Thousand Dollars in United States Currency, 733 F.2d 581, 584 (8th Cir. 1984); United States v. Currency Totalling $48,318.08, 609 F.2d 210 

(5th Cir. 1980). See generally Mark A. Jankowski, Note, Tempering the Relation-Back Doctrine: A

More Reasonable Approach to Civil Forfeiture in Drug Cases, 76 Va. L. Rev. 165, 181-83 (1990). 

A fter the adoption of express relation back provisions in the major forfeiture statutes, these holdings 

would appear to be o f limited practical significance.

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the commission of the act', the right to the property then vests 

in the United States, although [its] title is not perfected until 

judicial condemnation; the forfeiture constitutes a statutory

transfer o f the right to the United States at the time the offence is committed; and the condemnation, when obtained, 

relates back to that time, and avoids all intermediate sales and 

alienations, even to purchasers in good faith.

United States v. Stowell, 133 U.S. 1, 16-17 (1890) (emphases added). See

also United States v. Grundy & Thornburgh, 1 U.S. (3 Cranch) 337, 348-54 

(1806); Florida Dealers and Growers Bank v. United States, 279 F.2d 673, 

677 (5th Cir. 1960).

Under the relation back doctrine, the United States’ title to forfeited property, although not perfected until an order of forfeiture is entered, arises on 

the date of the offense giving rise to forfeiture. Florida Dealers and Growers Bank, 279 F.2d at 676 (“At th[e] moment [of the illegal act] the right to 

the property vests in the United States, and when forfeiture is sought, the 

condemnation when obtained relates back to that time . . . .”); United States

v. 6960 Miraflores Ave., 731 F. Supp. 1563, 1567 (S.D. Fla. 1990) (“A final 

judgment of forfeiture merely confirms the government’s interest . . . .”).* 

Because the interest of the United States arises on the date of the offense, 

the federal government’s tax immunity mandates that no state and local tax 

obligations may attach to the property after that date absent congressional 

authorization.

We have identified no congressional authorization sufficient to permit 

payment of state and local tax obligations arising after title to the property 

vests in the United States. Authority to pay state and local taxes on federally-owned property requires “express congressional authorization” to waive 

tax immunity. Cotton Petroleum Corp. v. New Mexico, 460 U.S. at 175. See

also Kern-Limerick, Inc. v. Scurlock, 347 U.S. at 122 (court will not “subject 

the Government or its official agencies to state taxation without a clear 

congressional mandate”).5 None of the relevant statutory provisions contains such authorization.

Although the statutory forfeiture provisions do contain some exceptions, 

none of those exceptions contemplates payment of state and local taxes. 

The exceptions to the criminal forfeiture statutes for a “bona fide purchaser 

for value of such property who at the time of purchase was reasonably 

without cause to believe that the property was subject to forfeiture,” 18

3 An example of such an explicit authorization is 42 U.S C § I490h (“All property . . . the title to 

which is acquired or held by the Secretary under this subchapter other than property used for administrative purposes shall be subject to taxation by a State, Commonwealth, territory, possession, district, 

and local political subdivisions in the same manner and to the same extent as other property is taxed . . . .”).

* Editor’s Note: After this opinion was issued, Miraflores was overruled on other grounds, Republic

N at'l Bank o f Miami v, United States, 506 U.S. 80 (1992).

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U.S.C. § 1963(c), 21 U.S.C. § 853(c), provide no authority for payment of 

state and local taxes. These exceptions not only fail to contain an express 

waiver of tax immunity, but also do not, in their general language, reach the 

asserted interest of taxing authorities in the property, for those authorities do 

not qualify as bona fide purchasers for value.

The civil forfeiture statute’s somewhat broader exception for “innocent 

owners,” 21 U.S.C. § 881(a)(6), as the Department has traditionally interpreted it, does not waive the government’s tax immunity. It consistently has 

been the position of the United States that one cannot qualify as an innocent 

owner if the asserted ownership interest (broadly construed to include liens) 

arose after the date of the offense at issue.6 Given this reading, which we 

have no occasion to question here, there is no statutory basis for permitting 

state and local tax liens arising after the date of the offense to qualify for 

payment under the exception.

We also find no authorization for the payment of state or local taxes in 

either the Attorney General’s authority under 28 U.S.C. § 524(c)(1)(D) to 

pay “valid liens” against forfeited property or his authority under 28 U.S.C. 

§ 524(c)(1)(E) to grant remission or mitigation of forfeiture. Neither of 

these provisions contains the express congressional authorization necessary 

to pay state and local taxes on federal property. Nor do they describe a 

category of permissible actions that might arguably include payment of state 

and local tax claims. Although the lien provision may permit the Attorney 

General to recognize property interests — including tax liens -- in forfeited 

property that existed prior to the date of the offense, it does not make valid 

otherwise invalid attempts by state and local taxing authorities to attach 

liens to property after title has vested in the federal government. In like 

fashion, the Attorney General’s authority to grant remission of forfeiture is 

insufficient to permit payment of tax liens attaching after the relevant offense, for such relief can be granted only if the petitioner “has a valid, good 

faith interest in the seized property as owner or otherwise.” 28 C.F.R. § 9.5(b)(1).7

Our conclusion is consistent with that of courts that have considered related questions. Most directly relevant is the Tenth Circuit’s decision in 

Eggleston v. Colorado, 873 F.2d 242 (10th Cir. 1989), cert, denied, 493 U.S. 

1070 (1990). There, the court held that the state’s tax claims were invalid

6 See, e.g.. In Re One 1985 Nissan, 889 F.2d 1317, 1320 (4th Cir. 1989); United States v. 6960

M iraflores Ave., 731 F. Supp. at 1568 ("The Government contends . . . that the innocent owner provision only applies to claimants who owned the property at the time of the offense, and not to those who 

acquired the property afterward . . . .” ). Most courts that have considered this position have agreed that 

“[t]he innocent owner exception applies only to owners whose interest vests prior to the date of the 

illegal act that forms the basis for forfeiture.” Eggleston v. Colorado, 873 F.2d 242, 248 (10th Cir. 

1989), cert, denied, 493 U.S. 1070(1990). See, e.g.. In Re One 1985 Nissan, 889 F.2d at 1320; United

States v. One 1965 Cessna 320C Twin Engine Airplane, 715 F. Supp. 808, 811 (E.D. Ky. 1989); United

States v. J 314 Whiterock, 571 F. Supp. 723, 725 (W.D. Tex. 1983) Cf. 6960 Miraflores Ave., 731 F. 

Supp. at 1567-69.

7 Although the criteria governing mitigation are somewhat more general (.e.g., “to avoid extreme 

hardship” ), 28 C.F.R. § 9.5(c), nothing in any relevant statute or in the regulations expressly refers to 

state and local tax claims.

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because the asserted state tax liens did not exist until after the event giving 

rise to federal forfeiture. Similarly, the court in United States v. $5,644,540

in United States Currency, 799 F.2d 1357, 1364 (9th Cir. 1986), upheld 

forfeiture of property against the claims of California tax authorities who 

were unaware of the property’s existence until after the date of the offense 

leading to forfeiture.8

We conclude that the federal government’s immunity from state and local 

taxes precludes payment of such taxes that arise after the date of an offense 

that gives rise to forfeiture. We have identified no authority that permits the 

Department to pay tax claims arising after that date.

JOHN C. HARRISON 

Deputy Assistant Attorney General

Office of Legal Counsel

* See also United Slates v. Trotter, 912 F.2d 964, 966 n.2 (8th Cir. 1990) (“Since title vests ‘in the 

United States,’ other creditors, including state agencies, may not claim any part of the funds if the government successfully obtains forfeiture."). It should also be noted that, because tax immunity runs to the 

benefit of the states as against the United States, some federal courts have invalidated federal tax liens 

arising after the date of an offense leading to forfeiture to a state following the relation back doctrine. 

Metropolitan Dade County v. United States, 635 F.2d 512 (5th Cir. Unit B. Jan. 1981). But see United

Statesv. Wingfield, 822 F.2d 1466,1475 (10th Cir. 1987) (“[T]he doctrine of relation back under state law 

cannot be held to subvert the constitutional power to lay and collect taxes.").

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