Opinion ID: 763623
Heading Depth: 2
Heading Rank: 1

Heading: Taxation of FSA Property

Text: 8 Washington's property tax scheme exempts from taxation [a]ll property belonging exclusively to the United States, the state, any county or municipal corporation. Wash. Rev.Code § 84.36.010 (1991). The state's tax scheme also provides that, notwithstanding § 84.36.010, federally owned property is taxable whenever authorized by federal law. See id. § 84.40.315. 3 Thus, property acquired by the FSA through loan default is taxable pursuant to 7 U.S.C. § 1984. 9 The United States emphasizes that all state and local government property in Washington is tax-exempt, including property acquired by the Washington State Housing Finance Commission (Housing Commission). The Housing Commission performs a mission that is similar to the mission of the FSA. The United States then points out that Lewis County may tax FSA property only in the same manner and to the same extent as other property is taxed. 7 U.S.C. § 1984. It insists that property acquired by Washington's Housing Commission is the relevant other property. It reasons that, because Lewis County may not tax property held by the Housing Commission, or any other state or local government property, the County may not tax property held by the FSA. Thus, the United States would construe other property as other publicly held property. 10 We do not read other property so narrowly. Congress must have known that states uniformly exempt state and local property from taxation. See Van Brocklin v. Tennessee, 117 U.S. 151, 173-75, 6 S.Ct. 670, 29 L.Ed. 845 (1886). If we construe 7 U.S.C. § 1984 to subject FSA property to taxation only where state and local government property is also taxed, then the waiver would rarely (if ever) take effect. By enacting 7 U.S.C. § 1984, however, Congress plainly intended to preserve the local tax base in counties where the FSA operates. We decline to interpret the provision in a way that would frustrate the obvious intent of Congress. See Philbrook v. Glodgett, 421 U.S. 707, 713, 95 S.Ct. 1893, 44 L.Ed.2d 525 (1975); United States v. Hynes, 20 F.3d 1437, 1442 (7th Cir.1994) (en banc). Other property must mean other non-exempt property. Thus, Lewis County did not violate 7 U.S.C. § 1984 because it taxed FSA property just as it taxed other non-exempt property. 4
11 The United States also invokes the general principle of intergovernmental tax immunity that prohibits discrimination against a state taxpayer because of that taxpayer's connection with the federal sovereign. See Davis v. Michigan Dep't of the Treasury, 489 U.S. 803, 816, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989) (citing Phillips Chem. Co. v. Dumas Indep. Sch. Dist., 361 U.S. 376, 383, 80 S.Ct. 474, 4 L.Ed.2d 384 (1960)). The relevant inquiry in such cases is whether the inconsistent treatment is justified by significant differences between the class of persons or items taxed and the class that is not taxed. Id. 12 Washington's tax scheme undeniably discriminates between farmland that is held by the FSA and farmland that is similarly held by the state. State and local governments have traditionally exempted themselves from state and local taxation, however. See, e.g., Burr v. Boston, 208 Mass. 537, 538-39, 95 N.E. 208, 209-10 (1911). The state or local government would gain no revenue, and would incur some expense, by taxing itself. Taxation of federally owned property, however, does generate revenue for the state. It is possible that this distinction might not be sufficiently significant in the absence of congressional action because, in evaluating the difference in treatment,  'the [federal] Government's interests must be weighed in the balance.'  Davis, 489 U.S. at 816, 109 S.Ct. 1500 (quoting Phillips Chemical, 361 U.S. at 385, 80 S.Ct. 474). Here, however, Congress has made its assessment of the federal interest in 7 U.S.C. § 1984 and, as we have already pointed out, that statute reflects an intent to prevent federal repossession from causing farm land to be removed from the state's tax rolls. Congress's action sufficiently qualifies the intergovernmental immunity of the United States to permit the state to make the distinction it has. We see no reason why state or local governments must engage in a circular process of taxing themselves in order to impose the tax on the federal government that Congress has authorized. 13 It is also worth noting that the County's tax on FSA-owned farmland is also imposed on privately-owned farmland in general. Thus there is a political check against excessive taxation. See South Carolina v. Baker, 485 U.S. 505, 525 n. 15, 108 S.Ct. 1355, 99 L.Ed.2d 592 (1988). 14 A political check is provided when a state tax falls on a significant group of state citizens who can be counted upon to use their votes to keep the State from raising the tax excessively, and thus placing an unfair burden on the Federal Government. It has been thought necessary because the United States does not have a direct voice in the state legislatures. 15 Washington v. United States, 460 U.S. 536, 545, 103 S.Ct. 1344, 75 L.Ed.2d 264 (1983). In the present case, Lewis County taxed private farmland to the same extent, and in the same manner, as it taxed FSA farmland. 5 See Wash. Rev.Code § 84.36.005. Excessive taxation of the United States is accordingly unlikely.