Earl Warren: Number 26, United States of America and Borg-Warner Corporation, Appellants, versus City Of Detroit, a Municipal Corporation and number 37, United States of America versus Township of Muskegon, a Municipal Corporation. Mr. Fisher.
Roger D. Fisher: Mr. Chief Justice, may it please the Court? These cases, here on appeal from the Supreme Court of Michigan, involved the validity of a Michigan Statute which explicitly imposes a special tax on the lessees and users of tax exempt property. You have three numbers, three cases here, number 26, to the United States and Borg-Warner against Detroit involves a defense plant which is owned by the United States and Detroit and leased to Borg-Warner. Number 37, number 38 are separate appeals by the United States and by Continental Motors involving a defense plant in Muskegon, Michigan which is owned by the United States and occupied and used by the Continental Motors Corporation. Although three cases are here consolidated for argument, you have only two, in substance two cases, the Muskegon case and the Detroit case that is the Continental case in Muskegon and the Borg-Warner case in Detroit. Unlike the case we just were arguing, there is no dispute about the ownership of this property or who owns it or what title means. Again unlike the (Inaudible) case, this is not a general tax levied on everybody equally in Michigan. The facts of the two cases are sufficiently different, so we will have to state them separately. The plant in Detroit is a naval industrial reserve plant owned by the United States for a number of years. In 1947, in the Military Leasing Act, Congress authorized long-term leases on defense plants which should be available on a standby basis which were not currently needed for defense production. Under a negotiated lease effective in 1948, dated 1950, this plant was leased to the Borg-Warner Corporation for five years, and options on their part to extend for three additional terms and five years each. The lease was revived and extended in 1958, until 1958 and 1953 effective till 1958. Under the lease, Borg-Warner leases the bulk, almost all of plant. This includes a storage area in which all the machine tools owned by the United States in the plant are stored and a manufacturing area in which Borg-Warner uses for its own private commercial purposes unconnected with national defense. Borg-Warner has a duty to maintain the storage area and to oil and grease and make sure the equipment there is in an operating, usable condition and upon termination of the lease Borg-Warner must reinstall all the machine tools back to their places in the manufacturing area and throughout the plant. The lease is subject to cancellation upon declaration of a national emergency by the President or upon 120 days notice by the Secretary of the Navy in the interest of national defense. In 1953, Michigan adopted Public Act number 189, an Act to provide for the taxation of lessees and users of tax exempt property. As of January 1, 1954, Detroit assessed the tax against Borg-Warner under this Act. The Board of Assessors valued the property precisely as it would have done had such real property been owned in free simple and occupied by Borg-Warner Corporation. That is the stipulation. They assessed this just as a real property tax assessment. Property was assessed at some $350,000 and the tax was something over $12,000 was imposed. Borg-Warner paid the tax under protest and on September 1954, the United States and Borg-Warner together joined in bringing suit as plaintiffs for a refund of the tax. At the time of the renewal of the lease, effective 1953 which was actually negotiated in 1954, the lease included a provision that United Sates would be responsible for this tax if it were valid, but that it would be contested and Borg-Warner would cooperate in contesting the validity of the tax, full burden of the tax if imposed or if recovered in this case, it subsequently felt benefits or hurts the United State. In the lower -- it was alleged that Act 189 was repugnant to the Constitution and that authorized taxation of property owned by the United States. Both the Circuit Court of Wayne County and the Supreme Court of Michigan upheld the statute. Supreme Court of Michigan stated the tax was not a tax on the property nor on the leasehold interest, but and I quote “A specific tax on the privilege of using the property.” United States and Borg-Warner both appealed to this Court, which noted probable jurisdiction. Numbers 37 and 38 involving the defense plant in Muskegon --
Earl Warren: Mr. Fisher may I ask how it is that the full burden of this tax falls on the government?
Roger D. Fisher: At the time when the first lease was negotiated, it was assumed the taxed property was not taxable and that there would be no tax equivalent to the real estate taxes imposed. The lease was negotiated on that terms. At each five-year interval the terms of lease are subject to renegotiation. When the first five years was over, which occurred in 1953, and negotiated from 1953 to 1954 and adopted the definitive terms, in the renegotiation of the lease rather than raise their -- lower their rent because they were having a burden of a tax or speculate on that because of the tax, it was agreed that the United States would -- by contract the United States assumed full burden of this tax in order to get the lease terms as satisfactory to the United States as they were.
Earl Warren: That wasn't a legal obligation, that is just the --
Roger D. Fisher: That's correct.
Earl Warren: They just decided to do that, didn't they?
Roger D. Fisher: That's correct.
Earl Warren: So we can't proceed here on the theory that if we decide this case against the government that we are throwing the burden on the government as a matter of law.
Roger D. Fisher: Not as matter of law, no, except in this case there was a contract outstanding with the United States (Inaudible), it will pay the tax under the period of the lease, I thought Your Honor would like to note, this was the -- I assume you would, that this is the fact situation here and as a practical matter if a lease that the lessee of property must pay a tax, the amount that is paid for the lease is substantially than the lessee need not pay a tax.
Felix Frankfurter: What you're saying really, is that what you are saying, the question therefore comes down whether when the government does make a contract like that, and it is empowered to make such a contract I take it, it lifts the tax burden from everybody?
Roger D. Fisher: No I am not to saying that the fact that the United States is paying this tax means this is the tax upon the United States.
Felix Frankfurter: No, I am not saying that either, that was my question. On the basis of such a contract which the government is empowered to make, when it chooses to make it, it creates a situation whereby immunity results.
Roger D. Fisher: By contract Borg-Warner does not have to pay this tax, the burden is passed on to the United States.
Earl Warren: Now are those the same thing, is this an answer to what Justice Frankfurter --
Roger D. Fisher: If I understood your question correctly Mr. Justice Frankfurter.
Felix Frankfurter: Well let me put my question again because it is important. Of course the government can give (Inaudible) if it wants to, that's a totally different -- that isn't your proposition here that it came (Inaudible). Your proposition is that when this contract, when this lease was made, which the government was free to make or not free to make, necessarily as a matter of law, immunity results from it, because of the relation of the arrangement to the United Sates. Is that right?
Roger D. Fisher: Let's see if I stated -- the United Sates owned this plant.
Felix Frankfurter: Whatever -- (Inaudible)
Roger D. Fisher: No there was no interest in anyone else except the United States and the naval reserve plant in Detroit. It was every interest within the United States. At that point the United States leased out to Borg-Warner, let them use the plant. The contention of Michigan is they may now impose a tax on that privilege of using the government plant, the tax exempt plant. That -- we contend that this tax is a substantive tax on the plant and that it is not permitted either under the implied immunity or under congressional action in this field.
Felix Frankfurter: Which means that if the government -- if the contract -- if the lease didn't provide or if there wasn't a statute which specifically authorized Michigan to impose such a tax, it couldn't.
Roger D. Fisher: That's right and I believe the situation would be exactly the same if Borg-Warner were required to pay the tax by the contract. We are not contending that that makes any difference in the imposition of the tax.
William J. Brennan, Jr.: Well I gather in the -- practical effect is that if this tax has to be paid by someone, the lessee is not going to pay as much rent as otherwise United States could get him to pay.
Roger D. Fisher: That's right, the -- that's correct, Your Honor.
Earl Warren: And that's all there is to it, this conversation we have been having back and forth.
Roger D. Fisher: Yes Your Honor I believe that that the -- whether by contract or indirectly the burden of such arrangement is going to be reflected in United States, here it's reflected directly. The Continental --
Felix Frankfurter: (Inaudible) the government chooses – it confers such a benefit upon the lessee, he has the right too, Constitutional right.
Roger D. Fisher: I agree -- I accept that Your Honor.
William J. Brennan, Jr.: Well aren't there other considerations Mr. Fisher besides the rent that these lessees will pay which determines whether or not the government will lease to a given lessee?
Roger D. Fisher: There are number of considerations and this is one.
William J. Brennan, Jr.: But this is not – this is -- this doesn't optimize that?
Roger D. Fisher: Well the tax on the Continental property is around $900,000.
William J. Brennan, Jr.: I am not thinking of that. I mean the choice of a lessee for one of these government owned arsenals or whatever they maybe is dictated by considerations that is more important than the --
Roger D. Fisher: Than the local taxes.
William J. Brennan, Jr.: Problem of tax.
Roger D. Fisher: I believe that's true Your Honor.
William J. Brennan, Jr.: Or the amount of the rent that the lessee will pay.
Roger D. Fisher: The rent sometimes becomes significant, fairly substantial item.
William J. Brennan, Jr.: Maybe a substantial item but in the choice of lessee is it a significant consideration?
Roger D. Fisher: No I don't believe it, I do not. The critical difference between the Continental case in Muskegon and the Borg-Warner case is that Continental has no lease. Continental is there under a facilities procurement type contract, which we provide the complete plant. Continental makes defense goods in that plant for the United States. It is not, its occupancy is not under -- not governed by the Military Leasing Act of 1947. Everything it manufactures in the plant is for the United States. It is doing the government's business on the government's property for a contract price, making goods. In that cost basis, it cannot reflect any element of cost that comes from the plant or the equipment supplied by the government. Here again the property was valued precisely as it would have been, as the property was owned in fee simple occupied by Continental Motors. The rates for real property taxes in Muskegon took into account the assessment on this and determined tax rate would be. It was treated as a real property tax. In the computation of the tax, the tax -- it was carried on the same real property tax roll. The tax bill sent out was identical to that sent to real property owners. Continental did not pay the tax. A suit was brought by the township of Muskegon, the county of Muskegon and the local school district. United States intervened as the party defendant. Both the County Court and the Supreme Court of Michigan entered judgment for the municipal corporations. The government's position is very clear. The Michigan's Act 189 impinges upon the implied immunity of United States property and state taxation, which exists in the absence of Congressional acts in the field. Both because it is a -- in substance purpose and affects a tax on the real property, the value of the real property and because it is designed as compensatory or retaliatory tax directed solely at tax exempt property. We think under the implied immunity it is there on both of too grounds. Our second argument, it stems from the fact that Congress has legislated in this field. The Military Leasing Act which specifically applies to Borg-Warner plant provides that the lessee's interest shall be made subject to taxation. The legislative history of that act considered by this Court in the (Inaudible) case makes clear that Congress intended to know more in the value of the leasehold interest through the subject of tax for leases made under the military --
Felix Frankfurter: I appreciate the choices that advocate is making their argument but I wonder why you, why you say your second argument is the statute, because if the statute is pretty clear --
Roger D. Fisher: The statute does not --
Felix Frankfurter: -- it takes care of all my worries.
Roger D. Fisher: Mr. Justice Frankfurter the statute by it terms does not apply to the Continental Plant. The -- there they will have no lease whatsoever. There it's a procurement contract under procurement authority of the United States that makes available the plant to them and it's tamable at will as soon as they stop making supply for the United States, as soon as United States which has the option to cancel that contract, they are out, they can be put out the next day. And this is why I direct my argument first that the implied immunity which we believe covers both cases very clearly, and secondly the legislation which specifically applied in one case in which we think reflect a policy that it's applicable to the second case.
Felix Frankfurter: That's a good answer.
Roger D. Fisher: This tax is in substance a tax on property of the United States. The act which appears in our brief for appellants on page 29 is entitled “An act to provide for the taxation of lessees and users of tax exempt property.” And any real property, which for any reason is exempt from taxation is leased et cetera are made available and used by private individual or corporation, in connection with the business conducted for property, then they have exception which is unimportant then it says ‘shall be subject.' Unfortunately in the drafting of this legislative history of this act the predicate to ‘shall be subject' was left out. The Supreme Court of Michigan has told us what should be there and it should -- you should read as inserted in there the lessee or user of such property shall be subject to taxation in the same amount and to the same extent as though the lessee or user or the owner of such property. And the second section provides with or -- I should go on provide explicitly before going shall not apply to federal property for which payments are made in lieu of taxes in amounts equivalent to taxes, which might otherwise be lawfully assessed. Section two provide the taxes to be assessed with such lessees and users and collect in the same manner as the real estate taxes except they shall not become a lien on the property.
Felix Frankfurter: Would you mind telling, if you don't mind what spell that out concretely for which payments are made in lieu of taxes, how are the payments made to --
Roger D. Fisher: Congress has in a large number of cases specifically authorized legislation making payments in lieu of taxes. As to this particular plant in Continental, Congress has authorized payments in lieu of taxes since this case started, there's legislation referred to in both decrees delaying with it.
Felix Frankfurter: Congress just doesn't pay the taxes?
Roger D. Fisher: Congress says we will make payments in lieu of taxes and they will be worked out in the following fashion. This -- the statute which I referred, public law 388, only applied to plants that were taken from the RFC to United States or to some branch of United States which would make it tax exempt. The Continental plant now operated by Continental in Muskegon was held by the RFC. It was taxable. They were receiving tax payments from it. It was conveyed in liquidation of the RFC was conveyed to the United States, just remove it from the tax rolls, one year later Congress got around and said to make payments in lieu of taxes while considering --
Felix Frankfurter: These are -- these are ad hoc measures, my brother Burton reminds of that in the housing act, there's a general provision --
Roger D. Fisher: We have in our reply brief we have listed legislation effect on various types of payments in the appendix, showing all existing legislation as of this tax day, various types of payments which Congress was authorizing.
Felix Frankfurter: Do you draw any, do you get any comfort out of those specific enactment?
Roger D. Fisher: I certainly do Your Honor, I believe that this is a field in which Congress has repeatedly legislated, dealt with the very plant here involved that is provided for payment for education, the school district which is here as a plaintiff has received payments as federal aid to impacted area that is calculated by the number of children of parents working in the plant receive a certain percentage of aid not in the year in question, but the years before and years of the annual reports of the Commissioner of Education indicate. This tax is a, the assessment procedure the computation of the tax--
Earl Warren: Where does that leaves you to by comparison with this case? You say you take a lot of comfort out of them doing that in a lot of cases now where do you get your comfort in the fact that it hasn't been done in these other cases?
Roger D. Fisher: That Congress has the authority where it sees fit to extend the immunity to contractors as this Court held in Carson against Roane-Anderson where contractors with the Atomic Energy Commission are made exempt from use tax in Tennessee because of -- by Congress' statute said so and necessary and proper clause of authorized functions. Congress can waive the tax. Congress has for a hundred years and particularly in the last 10 years given extreme consideration to this particular problem, assuming that defense plants owned by United States, the value of those plants cannot be taxed. They have -- it's a very difficult problem in which it's hard to appraise the equities. Sometimes the plant is setup in nowhere a community goes around it, which grew its benefit from the plant, they then say we want to tax the whole atomic energy installation here, now we have village, we're assessing the tax, we think we ought to collect revenue. That case is quite different than the case here in Muskegon where there was a plant on tax rolls which comprised half the school district here involved, assessed value or something of that kind, which was taken off the rolls, in that case Congress has legislated providing that payments in lieu of taxes shall be made to the Continental Motors Corporations, it was included in the list of plants covered by this provision and until 1959 and they now have other legislation pending and in the works trying to deal with the problem in a broader way.
Felix Frankfurter: Problem as a general problem or specific, ad hoc?
Roger D. Fisher: They are trying to find legislation dealing with them in a general way, the answer that most bills come to is you have to have some administrative discretion to decide on ad hoc cases --
Felix Frankfurter: What if they are 100 years Mr. Fisher, I'm not greatly impressed by that century because up to the Dravo decision, as Justice Roberts pointed in his dissent Alleghany, you had the whole atmosphere, the whole momentum of the decisions of this Court. It was very different from happened after Dravo, but the whole thing shifted from a, if I may respectfully say to rather abstract discussion of federal state relations to the concreteness of the Dravo and even the concreteness of Alleghany, isn't that true?
Roger D. Fisher: That is -- I agree Your Honor and we have in the back of our reply brief, we have called attention to the particular consideration which Congress has given this in the last five Congresses. Over 100 bills were introduced on it. There are elaborate reports considering payments in lieu of taxes, profit sharing, cost sharing, revenue sharing, devices of every kind.
Felix Frankfurter: Are there many -- are there many such bills in lieu of bills?
Roger D. Fisher: Yes Your Honor there are.
Felix Frankfurter: Well maybe -- would you think it was fantastic for me to draw a contrary inference from yours to say that, that shows that on the whole maybe Congress going about its business the way it does case by case, maybe Congress thereby indicated the immunity is not wisely left to the government, that this Court should reconsider the general problem.
Roger D. Fisher: I think Your Honor if you look at the reports which went with these bills for the in lieu payments that are interim nature that were adopted, you will see that was not the conclusion which was motivating --
Felix Frankfurter: You mean there that the Congress has shown a commendable respect for the decisions of this Court.
Roger D. Fisher: Yeah I believe [Laughter]. If Your Honor if I may say, the Congress in respect for this decisions of this Court recognized that it has the power to grant or waive tax immunity in this field.
Earl Warren: Well Mr. Fisher isn't there a lot of difference between the kind of in lieu taxes that the situations in which the government pays in lieu taxes by congressional enactment say under the Lanham Act or under the Taylor Grazing Act or under the Housing Act and things of that kind where there would be an exemption and where they want to take care of the local governments because they know the necessities of local government where they are furnishing police protection and fire protection, schools and highways and things of that kind for these great industries, isn't that one thing and isn't it quite another thing when you get a situation of this kind and isn't it just as normal to believe that Congress thought that the lessees in cases of this kind were subject to local taxes? Is there anything in the legislative history to show that Congress thought that lessees of this kind are exempt and should be exempt because of the government exemption?
Roger D. Fisher: Yes Your Honor there is very clear legislative history establishing that beyond for a venture. Printed in Appendix A to our reply brief is the discussion in the Senate, first in the House, this is in the Senate Committee, Appendix A considering the Military Leasing Act at 1947. We have reprinted the entire committee colloquy on this point for the use of the courts that I will not be -- might I fear taken out of context, it's fairly -- there are ten pages of discussion. This first statement which is the first time they refer to this problem is Senator Byrd --
Earl Warren: What page?
Roger D. Fisher: On page 26 of my reply brief in 26, 37 and 38. On page 26, Senator Byrd, “I'd like to ask about Section 6 in regard to taxation. Does this mean that if this property is taxed by the state and local governments it would have to be by an act of Congress?” Mr. Kenney, “It would sir” and it goes on and on and Mr. -- Senator Byrd, “This is no authorization.”
Earl Warren: Who was Mr. Kenney?
Roger D. Fisher: He was Assistant Secretory of the Navy.
Felix Frankfurter: John Kenney?
Roger D. Fisher: Yeah John Kenney who was testifying before the administration in presenting the bill. Senate -- to page 27 --
Felix Frankfurter: What does that answer means, if would, that's his understanding of the law?
Roger D. Fisher: And if I may carry Your Honors along with me through this discussion of Senate Committee, Mr. Kenney said at the bottom of page 27, “Well we do under this bill in no way increases or decreases the amount of taxes to which these properties maybe subject to,” pointing out they were in the United States and were not taxable at that time. Senator Baldwin on page 29 of our brief, middle, lower middle of the page, posed, “What would you think about language providing that property leased to private persons, corporate or individuals pursuant to this provisions of this Act shall be subject to state and local taxation in accordance with such state and tax law, would that answer your question” and then Mr. Royale on page 30 --
Earl Warren: Let's with that page 26 for a moment, right after the question and answer you read, Senator Byrd said, “Of course there is a question involved there of taking these plants and leasing them to private companies and the private companies making a profit.” It is a question of whether or not they should not pay taxes to the local and state governments, very much what we have here.
Roger D. Fisher: Right, both --
Earl Warren: And then Mr. Kenney said, “My own feeling is Senator that taxes should be paid on property that is used for that purpose.” The federal government in making its terms of lease should agree with the local authorities that they will pay the amount of taxes that would have otherwise accrued.
Roger D. Fisher: In the next colloquy --
Earl Warren: (Inaudible) your position?
Roger D. Fisher: Yes it does Your Honor. Both of them thought it to be desirable and both of them thought this would not impossible without further legislation. They decided not to put that legislation in this Act, the next colloquy, the next two sentences, Senator Byrd says, “Can you do that legally if the title is vested in the government itself.” Mr. Kenny, “You can do it only if Congress so authorizes.”
Felix Frankfurter: Well, that's his view of the law.
Roger D. Fisher: That is true. The drafting of the sentence which appears at the first sentence of Section 6 of the Military Leasing Act, took place in the committee in the open hearings, pages 35 and 36 of our brief, and there were some suggestion that there is no reason to do this because they can do it already. Senator Tydings on page 35, “As a matter of fact if the government leases to corporation AB a plant for a period of five years without us doing anything about it, they would be taxable by each community of America, the tax of leasehold property, so why put anything in?” Mr. Kenney, “I do not think you should anything in this bill.” Senator Tydings, so forth, they then went on and decided that there ought to be something added to that, and --
Earl Warren: Who said that?
Roger D. Fisher: Senator Tydings, near the top of page 36 on my brief. Senator Hill, “Something ought to going on there,” as it is now which you have the second sentence of Section 6 was all he had. All you do is say in the event, the state does come along and tax one of these lessees you renegotiate the contract and so forth and Mr. Royale, “We would have to do that, they have to know the basis on which they lease it.” Explaining in the absence of this (Inaudible) he would insist on a larger rental and it's the Chairman, “Have you got the wording in shape, now (Inaudible)? This does not read very smoothly,” Senator Tydings, “How would it be to say that the lessee's interest in property maybe subject to tax by a local authority.” Mr. Kenny, “Any interest of the lessee created pursuant to provisions of this Act, maybe subject to local taxation.” Chairman, “Read off in full Mr. Secretary.” Mr. Royale reading, the lessee's interest made or created pursuant to the provisions of this Act shall be made subject to state or local taxation. In the face of the fact they were told they could not tax anymore than the lessee's interest under existing law which could impose a lease or attack on the valuable lease hold, the fact that the bills were then pending in Congress dealing with the general problem, we conclude that for a property under the Military Leasing Act you cannot tax more than the value of the leasehold interest, that is not was what was assessed here.
Felix Frankfurter: Mr. Fisher I'd like to pursue a question I put to you earlier. In as much as these immunizations are implied, as you indicate, we haven't got a case here where the Congress of the United States affirmatively says that they shall not tax. That may raise a question as to whether, to what extent Congress of the United States can withdraw from the taxing power of a state, power that it otherwise enjoys, but assume as I will, because I'm ready to -- that legislation, whatever maybe the answer, argumentatively, congressional explicit legislation could withdraw any time in even remote interest of the United States from the taxing power of the state, we haven't got that situation, we got the reverse situation. We've got immunity derived impliedly from the relation between state and federal government that's correct, isn't it? That's the basis of this, is that correct?
Roger D. Fisher: I think the legislation -- I might put a little more legislative history than you would on it --
Felix Frankfurter: I'm not talking about legislative history --
Roger D. Fisher: The facts are you are right.
Felix Frankfurter: Yes. Though that -- now, since the history of this problem is a history of judicial implications from state, federal relations and one can be as you indicated a little while ago in agreement, I suppose one can't disagree, that Dravo, what I call Dravo, the whole series of Dravo decisions made a considerable shift to the attitude of this Court.
Roger D. Fisher: There's no doubt about
Felix Frankfurter: A considerable shift, or important shift, a far reaching shift, took it out of more or less mechanical or generalized category and wanted to find some real burden, some real incursion, some real hampering or embarrassment, financial or otherwise to the activities of the federal government, you still agree with me, don't you?
Roger D. Fisher: If you put financial in there, I agree. I think that any tax burden is only a financial burden, United States can't by payments avoid any other consequences of taxation.
Felix Frankfurter: But this is not such a Dravo.
Roger D. Fisher: No I know taxes that -- financial burden is no enough, so I don't --
Felix Frankfurter: Dravo destroys the notion that merely the fact that the Secretary of the Treasury has to figure out a few extra dollars or many, many dollars, isn't enough to withdraw -- to give immunity that is correct.
Roger D. Fisher: That is correct.
Felix Frankfurter: Now, after this long speech what I like to put to you is this, this Court has said again and again that we may draw a jural premise from legislation, particularly a series of enactments and if we have in this domain a series of ad hoc provisions and the general attitude on the part of Congress whereby they feel urged or they feel a sense of injustice or they feel unfairness to the state more particular to continue to this immunity, why doesn't that afford us a spring board for working this thing out judiciously so as to carry on the Dravo premise, that's my problem here.
Roger D. Fisher: The every item of legislation Your Honor that has been adopted here by Congress dealing with this problem, reflects the immensity and difficulty of drawing a line between where the equities falls, where a town benefits enormously from a government plan and where it is hurt. Where if as if in the Borg-Warner case there is a lot of government property leased to Borg-Warner for storage against crisis, since it's in the lease property Borg-Warner has to look after it for us. There would been no equity in charging Borg-Warner a tax on that property whereas the national forests, private parties are allowed to use the national forests, to cut some timber off it. We have a sharing arrangement that's been worked out, in which the state gets 25% I believe of the proceeds of such sales. If the state can also tax a party for the privilege of using the national forest, measured by the value of the national forest, the situation is quite different. I believe -- the reason that I think this is -- legislation indicates this is not an area for judicial reconstruction, is any decision of this Court, dealing with this problem would merely add one unexpected complicating feature to a problem with which Congress has the power to deal, is dealing and would have to deal even more comprehensively. The in-lieu payments are not just for defense plants. The in-lieu payments that authorize interim bill and Public Law 388, are for plants which by virtue of the transfer from RFC were taken off tax rolls. Congress recognized a quite different situation where they put a defense plant out in nowhere and a small community has grown around it in and which proposing a tax burden on the value of the entire plant for the benefit of the small community which may or may not be providing services to the plant, is not the way to deal with the problem. You should hold that the state may not tax the property, it may tax the privilege of using the property measured by the property. You would be making this problem one of form not of substance. If you continue to say that government property is immune from taxation directly, but if a state changes ten words, they don't change their administrative machinery, they cause a tax on the privilege of using tax exempt property. And by doing that, you say, oh a state can, that's all right oh this is a tax on a privilege, this is not a tax on the property, it's just measured by the property.
Felix Frankfurter: (Inaudible) a vast amount of tax law is based just on that distinction?
Roger D. Fisher: And I believe that this fails to meet that, this is not a privilege, the privilege using tax exemption property is not a privilege like being a store of gasoline or being a butcher or a baker or a candle stick maker. The privilege of using federal property is one which the United States has exclusive and decided who it is going to lease this property. This is more like Leslie Miller and Arkansas which you had last year, where the privilege of dealing with the government is something which we confer by our lease. This is a state, this is not a general right which the state can say, oh this is kind of doing business cause, using tax exempt property. First place it is a directed as being taxing it because it's not taxable and we think than under the Miller and Milwaukee and Macallen against Massachusetts, two decision of this Court which where the Justice Holmes in the Milwaukee case said if the abound purpose or self evident operation of a statute is to follow the bonds of the United States and to make up for its inability to reach them directly, by indirectly achieving the same result, the statute must fail, even if but for its purpose or special operations it would be perfectly good. In both that case and the Massachusetts case taxes were found, they looked through the language to find the tax was really directed at tax exempt interest, tax exempt property and both were held invalid for that reason.
Felix Frankfurter: As against that other cases and the tax measures in which state taxes are more heavily fall on -- company theretofore are immune from taxation, because the government owned it. In other words, if an estate has a lot of bonds, they were bonds which as such are immune, you can more heavily impose on a state tax on an estate that include, because of the immunity they have enjoyed the life time of the (Inaudible) and when you say the government, of course the government grants the privilege, but the fellow who gets it, gets something that some other people don't get.
Roger D. Fisher: And we submit and we agree, they can tax the value of what he gets. They can say we are taxing, and I think you could have a tax on the lessee's tax exempt property measured by the value of the interest which the lessee has. I think the Military Leasing Act saying that lessee's interest is taxable is good, I think its declaratory of the implied immunity that exists in assets of that legislation, as Congress plainly saw. I believe that the Borg-Warner case, where Borg-Warner has a 20-year – in effect a 20-year lease subject to five years installments, they now have, I don't know 12 years still to run, that's 11 years. Detroit could tax the same way you would in a condemnation case, a recognized judicial concept of the lessee's interest, the leasehold interest he has certain value and you can tax it. We think the implied immunity of the legislation you can tax it, but if you say that because a man is using government property for the government's business as is being done in the Continental plan, you can tax him for the privilege of using that because he has something of value. I believe you have a hard time distinguishing taxing Secretary McElroy for the privilege of using the Pentagon measured by the value of the Pentagon. Continental is making government equipment in a government plant, excuse me Your Honor.
Harold Burton: You say that Congress couldn't take away that right as to lessee on the value of his lease?
Roger D. Fisher: No, I believe Congress could take away that right --
Harold Burton: They could take that away also --
Roger D. Fisher: I believe under the case which this Court held recently in the connection with Atomic and Carson against Roane-Anderson in 342 U.S. It specifically held that Congress could take -- make contractors with the Atomic Energy Commission, immune from use taxes on goods which they brought into the state, and this Court held that's what the construction of the statute was and that it was valid. So I believe clearly in the necessary and proper powers carrying on legislative function, if we have a plant such as Borg-Warner, a large portion of it merely storing defense equipment, we may want to get a lessee in there free, to use part of the plant in exchange for keeping up our portion of the plant and I think if we couldn't do that about having a large tax burden, additional imposed, Congress can say no it's in connection with this function, the lessee is not, he just cannot be taxed.
Felix Frankfurter: You say, you say there is a real disturb -- it will be disturbing for a judicial pronouncement that the privilege of having a leasehold from the government is taxable, isn't that true, do you think that will be a --
Roger D. Fisher: I think it will be disturbing --
Felix Frankfurter: A crude way for the judiciary to enter into the problem.
Roger D. Fisher: If I may expand on that Your Honor, I think that will be disturbing if you indicated they could tax that privilege measured not by the value of the privilege but by the value of the tax exempt property. Whereas I think that here where a tax is special discriminatorily if I may say directed at tax exempt property, both state tax exempt to be sure and federal tax exempt, but the thrust of it is that federal -- that was true in both the Milwaukee and the Massachusetts cases, there were state taxes on property included and the court still not found a thing discriminatorily directed impact of the federal property.
Earl Warren: But whenever you have a formula to try to keep one particular class of property from escaping, I suppose you could call that a discriminatory -- that discriminatory, but do you have the same sense?
Roger D. Fisher: I very -- to be sure to some extent to which form is important and if the statute were more artfully drawn, you might have more difficulty with it and it might accomplish almost the same result, but I believe that it is plain on its face that this is a real, they do nothing, they don't setup new machinery, they don't setup different evaluation procedures, part of the real property tax system of Michigan, each community in Muskegon is carried under real property tax rolls, they send out real property tax bills. They say Act 189 has the authority for taxing.
Felix Frankfurter: Do they do it as to other leaseholds?
Roger D. Fisher: There were four Detroit cases --
Felix Frankfurter: I am not taking about government leaseholds.
Roger D. Fisher: The Detroit tax record is in the record here, show that under Act 189 there were four properties that were taxed under 189 in Detroit. There was testimony these were either federal or held by corporation exempt under Michigan state law. It's not clear which, which if any.
Earl Warren: Well is there any discrimination or unfair discrimination in a city trying to see whether a manufacturer who comes into the community and who demands fire protection, police protection and all the other services of the city shall not escape taxation? And let's just take -- let's just take some particular --
Roger D. Fisher: To case here --
Earl Warren: I can recall one were the city of 35,000 people, overnight the government brought a contractor in there to build a shipyard, 65,000 people came there to work in the period of a –in a period of year-and-a-half. Schools, highways, housing, hospitals everything that community had to spend money for, for all those people, is there any -- is there anything wrong in the city trying to, to prevent an operator of that kind from paying taxes that will enable it to operate the city government on a somewhat fair basis with other citizens of the community?
Roger D. Fisher: I see nothing unfair in their trying to tax the operator on what he has. I do think that if a government plant, whether it's army air base, or whether it's defense plant is located in a town and imposes a burden on that town, I do think that you should not tax someone who does not have something himself for the value of the government property. I think as I suggest here, Borg-Warner has a long-term lease. They are operating for their own private business. We would, admit and uphold the validity of any statute that assessed the value of that leasehold interest which is substantial. In (Inaudible) case this Court held that the lessee had the full, lessee's interest with the full value of the buildings there involved which had a life shorter than lease. I don't know about how the machinery here would work out, how the building would work out.
Felix Frankfurter: If it worked out some sophisticated formula which would gain a large proportion of this tax, do you think it was all right?
Roger D. Fisher: It because they would be -- not be taxing the government's property because of the government's property they would be taxing the value of something it's non taxable, a taxable person has because of that value.
Felix Frankfurter: You are saying that Michigan in effect said we can't tax this as such, but we've taxed this by saying, in fact it is just as much as it were a tax as such by saying it's a privilege for having it.
Roger D. Fisher: That's right.
Felix Frankfurter: You say that's a crude thing, but a sophisticated formula would be all right.
Roger D. Fisher: No, not just a sophisticated formula.
Felix Frankfurter: I don't mean, I don't mean an invasive one, but one that tried to work out the cash value of having this privilege?
Roger D. Fisher: Of what the lessee had, as a property interest if it is a property tax. In order to – they can have a privilege tax for being an aircraft manufacturer in Michigan, they can charge a privilege tax based on being an aircraft manufacturer. But the tax of privilege tax on being an aircraft manufacturer on government tax again property measured by the value of the government property, it's just too much like taxing a government property.
Earl Warren: But suppose you had another, suppose you had another client alongside Borg plant that was exactly the same in size and construction and that was conducted on it exactly the same kind of an operation. Only it was a private individual and was individually owned. How can you say that it would be unreasonable to charge this man the same if he has a complete use of this property, the same as you would charge the other man?
Roger D. Fisher: The same way it would be unreasonable tax an air base which was or a post office which is engaged in delivering business, delivering packages and a railway express company engaged in delivering packages, they are both doing the same business and the community cannot tax the post office, it can tax railway express. This, the --you cannot tax that -- and I suppose -- this tax is only on tax against property. It cannot impose a tax on the property. They think that, they think that this is not something of substance, they think there is no -- Michigan treats this as a matter of simply a form that whenever a person is being paid and making a profit for using tax exempt property you can tax him for the whole privilege of that based on the full value of the property. Now Continental is here at will making government property on -- with government machines and a government plant. It is not selling anything commercially. We go over there costs down to the bone, to keep them as low as we can, and there is, they cannot reflect any item of our machinery in that cost figure. Now to say that to impose a tax on the theory this is a privilege of using the government property equal to the tax that they try to impose on Borg-Warner who has a 20 year lease using industrial plant for its own commercial purposes, I think you are not taxing property. I think if you have an aircraft manufacturer's privilege tax, state tax, you can tax that, but you cannot make the use of tax exempt property, a taxable privilege when it's all the lease gives. They have set in the appellee's brief here that the privilege of use is not the lessee's interest. Oh no we are taxing two different things. Of course the Military Leasing Act might limit us the value of the leasehold interest and the (Inaudible) case I might say explicitly in the opinion stated that under the Military Leasing Act, value attributable to a period beyond the lessees interest must be excluded from the tax since it represents the government ownership interest, that's in the footnote discussing this problem. The, they are not taxing the lessee's interest. They are taxing the privilege of use. But what is that, the lease gives that Borg-Warner a privilege of use. The only privilege of use he has is that defined in the lease, it's the same thing. Now there maybe, we may have an occasion when the legal incidence of tax makes a difference, but surely calling the right which the lessee has to the use plant by virtue of the lease calling that a privilege of use doesn't make any difference, it is the lessee's interest. He has no other interest in that plant other than the lease he gives him, he has no other right to use it, no other privilege to use that plant other than the lessee' and other that what the lease gives him and Congress has said that under the Military Leasing Act the lessee's interest the value of it -- clear we think, the legislative history has the value of that interest, there is a limit (Inaudible) to tax and we submit that --
William J. Brennan, Jr.: Mr. Fisher if that was so would the value of that interest be a constant over the period of the lease?
Roger D. Fisher: I would think not, but I would say that a leasehold interest is something that is regularly appraised in condemnation cases, every condemnation case --
William J. Brennan, Jr.: Well I mean probably it'd be of greater value at the first year then the --
Roger D. Fisher: That's right.
William J. Brennan, Jr.: Then (Inaudible) doesn't help the municipality in anyway does it?
Roger D. Fisher: That is the private, it may not help them very much, in the Congress and in fact as the Continental plant they are currently receiving for in lieu payment by act of Congress and the school district is receiving until that time, they've receiving at least for three years they received payments based on the impact of this plant on their school system. The equities, then they've decided to measure the -- Congress has decided to measure the aids of the Orchard View School District by the number of children whose parents work in the government plant. Orchard View School District has decided they want to measure that payment by the value of the entire government plan. I think when a conflict comes between the standard which Congress has set by legislation dealing with this very school district among all school district here, federally impacted area, I think that the congressional standard controls, they clearly can control. Our basic point is that in the Borg-Warner case that's covered by the implied immunity, but explicitly by the Military Leasing Act and that in the Muskegon case involving Continental. The Continental interest which is at will (Inaudible) at will to make government property on a government plant, does not subject the entire value of the defense plan owned by the United States there to a greater tax than the Muskegon, There is no greater interest in Continental, they have a less of interest than Borg-Warner had, and we believe that Congress in legislating understood only if lesser interest could be taxed, only the lessee interest. I'll save the balance of my time for rebuttal.
Earl Warren: Mr. O'Connor.
Roger P. O'Connor: Mr. Chief Justice, Associate Justices, may I please the Court. I think I would like to at the outset of this case, clarify the contentions of the parties and then analyze this Act 189 which is unique and peculiar and is special legislation but not aimed at United States property but aimed at the purpose of eliminating a discrimination between lessees of users, lessee and users of private and public property. First of all a contention of the United States is that Act 189 imposes an ad velorem tax on the United States, since the full value of the property is used as a measure of the tax. It is the City of Detroit's contention that Act 189 imposes a specific tax, not a property tax, on the tax exempt property in connection with the business conducted for a profit and that clause is very important and that such a tax under such cases as Plummer versus Coler, Home Insurance Company, these all are decided by this Court. Home Insurance Company versus New York, Educational Films Corporation, Pacific versus Johnson, Plynth versus (Inaudible), Tracy and last but not least Esso Corporation.
William J. Brennan, Jr.: Mr. O'Connor what's the rate that's supplied, is it the local Detroit rate, tax rate?
Roger P. O'Connor: Yes it is.
William J. Brennan, Jr.: And is that arrived at by including in the ratables the values of these properties?
Roger P. O'Connor: That's right. But it must be born in mind of course that this is tax on a privilege and property of the United States maybe used as a measure of a tax on the privilege as provided under these cases. Now a privilege tax does not have to be proportional to the values of the same tax. The same tax in most of instances of course is the privilege of using the property. Congress, or rather the legislature of Michigan, to accomplish its purpose, namely to avoid discrimination between lessees of users and of private and public property and put them on an equal footing, may choose any sum it wishes, providing it's reasonable to accomplish the result intended. It so happened that in this case --
William J. Brennan, Jr.: Any private property pay a real estate tax?
Roger P. O'Connor: The lessee of private property does pay a real estate tax, either in the rent charge or in addition with the rent, in consideration of a reduction in rent (Inaudible)
William J. Brennan, Jr.: As far as Detroit is concerned, Detroit gets no real estate tax from the lessee though, does it?
Roger P. O'Connor: Well in this particular case, yes it would in this particular case under this Act.
William J. Brennan, Jr.: No I mean a private, a lessee of private property (Inaudible) no real estate tax for the City of Detroit, does he?
Roger P. O'Connor: No, but the lessee by virtue or leasing property from a private lessor, that lessee either pays the tax on that profit, which is included in the rent charge or is paid in addition --
William J. Brennan, Jr.: Yes but as far municipal revenues are concerned, raised by taxes, no part of those revenues are contributed by lessees of private property.
Roger P. O'Connor: Frankly I'm not certain of that at this point Your Honor.
William J. Brennan, Jr.: Well the owner of the property I take it pays the real estate taxes.
Roger P. O'Connor: The owner of the property pays the real estate taxes.
William J. Brennan, Jr.: Although it's from him and to him that Detroit looks for the payment of the taxes on that profit.
Roger P. O'Connor: Under general ad valorem of property taxes yes, but under this special Act that is not the situation.
William J. Brennan, Jr.: Well the thing is --
Roger P. O'Connor: This Act has --
William J. Brennan, Jr.: As a practical matter you told me that the values of these publically owned properties where they are leased enter into the general ratables upon -- which formed the base from which the tax rate is computed.
Roger P. O'Connor: Yeah that's --
William J. Brennan, Jr.: The practical effect of this is that the lessee of this publically owned property does pay the real estate tax upon that property.
Roger P. O'Connor: No it does not. It pays the tax on the privilege of using that property.
William J. Brennan, Jr.: Well that's the words you use, but the practical effect of it is that he is paying the taxes on the property.
Roger P. O'Connor: Well --
William J. Brennan, Jr.: If the ratables of the values of property goes into ratables and the tax rate is struck on ratables which include the value for those properties, why isn't he paying the real estate (Inaudible)
Roger P. O'Connor: Well if you desire to take that position, if Your Honor please I can understand --
William J. Brennan, Jr.: I'm not deciding to take any position.
Roger P. O'Connor: Well I can understand the practical affect of it, yes. What you say is possibly true from the practical effect of it, but when you have a privilege tax, you can do that very thing, by you using the government's property as a measure of the tax. Now that is the only way, if Your Honors please, that the State of Michigan could eliminate the discrimination between lessees of private and public property by fixing some sum equal to the amount of tax paid on the real estate. Now the fact that it's equal to the amount paid on the real estate does not necessarily mean that the tax is on the real estate of the United States. It could have been, Michigan legislature could have imposed a larger for the privilege used. Now I'm giving, digressing some what --
Hugo L. Black: May I ask you this, the real effect of this is, whether it's right or wrong, that Michigan has a use tax which implies that nobody in the state, except those who have leased government tax exempt property.
Roger P. O'Connor: This Act applies to tax exempt property used in connection with the business, conducted for profit.
Hugo L. Black: The affect is if you have a (Inaudible) which applies, maybe it's all right, (Inaudible) did you have an Act which the legislature passed, for the use tax upon industrial uses of government property, for the use of government property?
Roger P. O'Connor: Yes in connection with the business conducted for profit.
Hugo L. Black: It applies for no one else in the state except that.
Roger P. O'Connor: No, it applies to the United States property as well as any properties owned by the State of Michigan or any of its political subdivisions, when leased or used in connection with a business conducted for the profit to a private individual, corporation or association.
Hugo L. Black: Is there any tax imposed on?
Roger P. O'Connor: The tax is imposed upon the lessee or user of the property, for the privilege of using that property.
Hugo L. Black: Are there any people, any industrial companies in the City of Detroit, this is Detroit taxes?
Roger P. O'Connor: Yes, now --
Hugo L. Black: Are there any uses of properties that are of state property that have to pay this tax?
Roger P. O'Connor: Yes, first of all let me refer Your Honor to the record, page 97 thereof, which is the personal property assessment roll for 1954 involved --
Hugo L. Black: Page what?
Roger P. O'Connor: Page 97. Now, Your Honors will note the first parcel of property appearing on that assessment roll is the Borg-Warner property. Your Honors will further note in connection with the Borg-Warner property --
Earl Warren: Where is that?
Felix Frankfurter: Where is this pulled --
Roger P. O'Connor: Page 97.
Felix Frankfurter: Of what?
Roger P. O'Connor: Of the record.
Felix Frankfurter: Oh all right.
Roger P. O'Connor: MI'm sorry Your Honor. In the Borg-Warner case, that's the brown, that's a brown book.
Hugo L. Black: Brown record in number 26.
Roger P. O'Connor: Mr. Justice Black you have that --
Hugo L. Black: Yes I got it.
Roger P. O'Connor: You have it Mr. Justice Whitaker, that's correct.
Felix Frankfurter: All right, what page was it?
Roger P. O'Connor: Page 97.
Felix Frankfurter: Thank you.
Roger P. O'Connor: Now you will note on that personal property assessment roll of the Borg-Warner property is the first parcel appearing thereon. You will note also that right next to that name appears the words, Act 189 PA 1953, leased land bill. That applies in cases of all the four parcels on that assessment roll. Now the reason that was put on there was to distinguish it from ordinary personal property put on a personal property assessment roll and that which would be subject to the ordinary provisions of the statutes concerning personal property if it were not for that notation placed around calling all persons to attention -- the attention of all persons to the fact that that property is being leased under Act 189. Now Jefferson, the next parcel of property which is written in ink, Feldman Mitchell looks like 105 but it's actually 905 (Inaudible), that parcel of real estate is owned by the State of Michigan and it is leased to Mr. Feldman for a parking lot. The next parcel of real estate which appears in the name of Houston Hayes Land Company belongs to the City of Highland Park and that parcel of real estate is leased to Houston Hayes for a customer parking lot in connection with its business conducted for profit. The next parcel of property appearing on the assessment roll is Jefferson Corporation. That case is -- the property involved in that case is owned by the United States. There is a suit pending on that case presently pending in the City of Detroit awaiting the outcome and decision of this Borg-Warner case.
Hugo L. Black: What's that last one?
Roger P. O'Connor: The last one Feldman Mitchell --
Hugo L. Black: Yes.
Roger P. O'Connor: There was error made there judge and you can see where it's transpired up.
Hugo L. Black: What was that error?
Roger P. O'Connor: That was a parcel of property owned by the State of Michigan and leased to Mr. Feldman for a parking lot in connection with the business conducted for profit.
Hugo L. Black: (Inaudible)
Roger P. O'Connor: Same as the second.
Hugo L. Black: In other words you had a duplication?
Roger P. O'Connor: Yes that's right, they made a mistake apparently down on the lower or rather originally it was listed in Silverware Company, you'll notice the last, the last name appearing thereon, well that was a management company.
Hugo L. Black: Then what you are saying is that you have a tax, a use tax on – that you described, which contains within its classification not merely leased property or the use of property leased for the United States, leased for Michigan on any of its subsidiaries.
Roger P. O'Connor: That's correct Your Honor. So it doesn't necessarily and it doesn't aim at the United States property in particular whether it includes all other properties of the State of Michigan or any of its political subdivisions leased in connection with the business conducted for profit.
Hugo L. Black: And the property which is leased from the State of Michigan based on the same basis, the same rate as though it was leased from the government.
Roger P. O'Connor: Yes, yes, yes.
Felix Frankfurter: One of these properties was exempt, was exempted properties -- exempted under Michigan law, one of them was municipally exempted, would you mind stating in a word what the basis of municipal exemption was?
Roger P. O'Connor: One of these parcels appearing on this roll?
Felix Frankfurter: Yes didn't you say that one of them was exempted by some municipal -- under some municipal was leased -- property leased by a city which enjoyed exemption, one of these things.
Hugo L. Black: Houston Hayes.
Earl Warren: Yes.
Hugo L. Black: Houston Hayes, I understood you to say that they leased it from the city of, City of Detroit or State of Michigan or whatever it was and then under Michigan law that property is exempt from taxation as to --
Felix Frankfurter: Highland Park.
Roger P. O'Connor: Yes Highland Park --
Felix Frankfurter: Is that a city?
Roger P. O'Connor: Yes that's a city Your Honor and --
Felix Frankfurter: And the property was exempt, wasn't it?
Roger P. O'Connor: And it was owned by Highland Park?
Felix Frankfurter: Why was it exempt?
Roger P. O'Connor: Why was it exempt?
Felix Frankfurter: Yes, what --
Roger P. O'Connor: Because it was owned by the city of Highland park.
Felix Frankfurter: I see.
William J. Brennan, Jr.: (Inaudible)
Roger P. O'Connor: That's right. That's right that lessee would pay the tax because the charitable institution would not be using it for those purposes. It would be leasing it out to a private person in connection with a business conducted for profit and rightfully they should be taxed.
Felix Frankfurter: So you are saying --
Roger P. O'Connor: Those lessees should bear some of the burden.
Felix Frankfurter: So that you are going to say this is not an evasion for hitting federally exempt property, is that --
Roger P. O'Connor: I say that very thing, Your Honor. Now you may recall in some of these other cases the Macallen versus Massachusetts, Milwaukee case that the Court said the tax may very well be valid even though it might incidentally affect bonds providing us – not aim at those bonds of the United States but was passed with a different intent and purpose. Now the intent and purpose here as I have explained of the legislature of the State of Michigan was to impose this tax to seek to avoid discrimination between lessees of public and private properties.
Felix Frankfurter: But you could, you could say these about the Macallen case --
Roger P. O'Connor: Yes I am sure.
Felix Frankfurter: Yes you could say many things about that.
Earl Warren: I suppose that any of the land that is given -- allotted to the State of Michigan such as school lands or other lands if the state leased those properties the same tax would apply to them, would it?
Roger P. O'Connor: Except there are certain -- there is a certain exception in the act and the state supported educational institutions are not subject to the tax.
Earl Warren: No, we are talking about for purposes like this, taking about for manufacturing plants or anything of that kind.
Roger P. O'Connor: Yes, Your Honor.
Earl Warren: If you leased any of those school lands, the lessee would be subject to this tax just the same as --
Roger P. O'Connor: That is correct as long he is using them for that purpose. Now there is a vast distinction as Your Honors may well know, between a privilege tax and an ad valorem tax on the property itself. An ad valorem tax goes on ad infinitum whether the property is being using or not. In connection with Act 189, as long -- when the property is no longer used then there is no tax imposed under this act. It has to be used in connection with the business conducted for profit.
Hugo L. Black: Aside from the difference in name between this tax and the other taxes you had put us through, is there any valid distinction?
Roger P. O'Connor: Yes in this case we contend this is a privilege tax in the Murray prior there too that involved a different statute entirely of the City of Detroit or a charter provision statute, both, which was the regular ad valorem personal property tax statute which provides for a lien on property. This --
Hugo L. Black: (Inaudible) precisely the same rate of taxation that's in this county, does it not?
Roger P. O'Connor: Yes it does Mr. Justice Black.
Hugo L. Black: And does the same in everything except the preference for which it's clear to be levied.
Roger P. O'Connor: Yes that was an ordinary ad valorem general property tax statute on the property itself. This is special legislature which is passed for taxing the privilege of using and not aimed at the United States property in any (Inaudible) whatsoever. Now --
Earl Warren: We'll recess, we'll recess now Mr. O'Connor.