Document: 355 U.S. 466 78 S.Ct. 474 2 L.Ed.2d 424 UNITED STATES of America and Borg-Warner Corporation (Detroit Gear Division), Appellants,v.CITY OF DETROIT, a Municipal Corporation. No. 26. Argued Nov. 14, 1957. Decided March 3, 1958. Mr. Roger Fisher, Washington, D.C., for appellant United States america. Glenn M. Coulter, Detroit, Mich., Corp. P. O'Connor, appellee. Justice BLACK delivered the opinion Court. 1 The asks this Court to strike down as unconstitutional tax statute State Michigan applied lessee government property. In general terms statute, Public Act 189 1953, provides that when tax-exempt real property is used by private party in business conducted profit subject taxation same extent though he owned property.1 Here was owner an industrial plant Michigan. It leased portion at stipulated annual rental use latter's manufacturing business. lease provided could deduct from agreed any taxes paid it under or similar state statutes enacted during term lease, but Government reserved right contest validity such taxes. 3 On January 1, 1954, assessed against 189. based on value computed rate calculating Under protest part assessment. Subsequently filed suit court refund amount paid. They charged repugnant Constitution because imposed levy upon discriminated those using lower however upheld Supreme affirmed. 345 Mich. 601, 77 N.W.2d 79. ruled neither discriminatory nor instead lessee's privilege profit. We noted probable jurisdiction appeal decision. 352 962, 353, 319. 4 This has held cannot constitutionally directly its without consent Congress. McCulloch v. Maryland, Wheat. 316, L.Ed. 579; Van Brocklin Tennessee, 117 151, 6 670, 29 845. At time well settled Government's constitutional immunity does not shield parties with whom them merely all financial burden eventually falls Government. See, e.g., James Dravo Contracting Co., 302 134, 58 208, 82 155; Graves People New York ex rel. O'Keefe, 306 466, 59 595, 83 927; Alabama King & Boozer, 314 62 43, 86 3. Of course determining whether actually laid goes beyond bare face taxing consider relevant circumstances. 5 challenged here imposes lessees users who Any due are personal obligation user. liable their payment itself lien if they remain unpaid. So far concerned exempt case seems clear there no attempt treasury. Nevertheless argues since measured should be treated nothing contrivance lay do find argument persuasive. A beneficial property, distinguished itself, long been commonplace country. See Henneford Silas Mason 300 577, 582—583, 57 524, 526—527, 81 814. measuring irregular extravagant resort used; indeed more so than sales sold. apparently designed equalize carried businesses nonexempt Other things being same, obvious enough worth much comparable taxed interval. our judgment impermissible subterfuge permissible exercise power compute used. 7 number decisions support conclusion. For example Curry States, 48, 9, we unanimously contractor government-owned materials although full materials. Similarly Esso Standard Oil Co. Evans, 495, 73 800, 97 1174, valid storing gasoline even which gallons stored taxpayer. While true quantity technical difference meaningful significance prohibits tax. Still other cases further confirm proposition may measure taking into account tax-exempt. Home Insurance York, 134 594, 10 593, 33 1025; Plummer Coler, 178 115, 20 829, 44 998; Educational Films Ward, 282 379, 51 170, 75 400; Pacific Johnson, 285 480, 489—490, 52 424, 425—426, 76 893. 8 urging struck appellants rely primarily Allegheny County, 322 174, 64 908, 914, 88 1209, think controlling. invalid did contend 'anything old widely ad valorem tax' hands bailee. Reviewing circumstances concluded simply forthrightly possessing it. carefully reserving question bailee exercising privileges, stated: 9 'Whether possession view appropriate proceedings decide. 'Actual custody nearly always someone himself acts behalf purposes. He officer, agent, contractor. His advantages relationship way salary, profit, have held.' pages 184, 186, 187, 915, 916. 11 own 'beneficial use' 'advantage.'2 12 undoubtedly true, points out, will able secure high rentals But numerous cases,3 imposition increased not, vitiate Boozer offers striking example. There party, acting contract purchased required him transfer pay his costs plus fixed fee excise levied purchase passed completely Yet despite immediate Court, dissent, 13 aware principles Dravo, subsequent resolve difficulties area intergovernmental immunity, were adopted Government, least complicated, most workable proper standards decision litigated often confused field adhere them.4 14 still remains beginning, fall operates discriminate deals. Cf. 579. applies every uses connection gain. law means persons Federal State, political subdivisions, churches, charitable organizations great host entities.5 class defined arbitrary invidiously one. As suggested before legislature trying equate enterprise Those greater placed owners lessees. absence equalization might given distinct economic preference over neighboring competitors, escaping fair share local responsibility. 583—585, 527—528, Nor showing fact administered federal To contrary undisputed evidence introduced appellees demonstrates also taxed.6 15 Today vast parties. trend reject immunizing these nondiscriminatory matter law. Penn Dairies Milk Control Commission, 318 261, 270, 63 617, 621, 87 748. say Congress, within scope power, confer where exist constitutionally. Wise flexible adjustment calls considerations greatest difficulty delicacy. Such complex problems ones Congress best qualified resolve. out already extensively legislated permitting what would otherwise immune. hold violates improperly impair State. 16 Affirmed. 17 concurring opinions FRANKFURTER HARLAN, see 489, 505, 486, 492. 18 WHITTAKER, BURTON joins (dissenting). 19 I respectfully dissent. Understanding bases my convictions reasons doing requires rather treatment case. Detroit had leased, short term, Borg-Warner, rental, Michigan, quoted, infra, otherwise, rents, 21 recently known 1953 (6 Mich.Stat.Ann.1957 Cum.Supp., § 7.7(5) (6)) which, pertinent part, says: 22 'Taxation Lessees Users Tax-Exempt Real Property. 23 'Sec. 1. When reason loaned made available individual, association corporation except concession relative public * park public, shall (sic) user property: Provided, however, foregoing apply payments lieu amounts equivalent lawfully *. 24 2. Taxes collected manner become due, constitute debt township, city, village, county school district recoverable direct action assumpsit.' (Emphasis supplied.) 25 Acting City calculated applicable estate Protest avail and, after administrative remedies exhausted success, paid, lessee, sued court, contending constituted lessee. trial sustained tax, affirmed (345 79), holding was, instead, comes appeal. 26 today affirms courts, sustains believe only unsound principle opposed precedents quite both contention. me, evident levied, major least, (though, perhaps, indirectly form) interest is, therefore, 579, myriad uniformly conforming decided rendition 1819. 27 nature bound by, permitted solely look to, labels affixed but, rather, pointed 1209: 28 "Where characterization courts Legislatures, relieved duty considering effect asserted.' Carpenter Shaw, 280 363, 367, 368, 50 121, (122) 123, 74 478.' Examination rights asserted appellants, shows purports 'real taxation,' 'made individual profit,' including 'federal (have been) (general valorem) assessed' (§ 1), 'assessed (are) property,' 'shall user.' 30 Thus, case, short-term leasehold in—nor, hence, use—the entire whole amount, 'as property' but—and particular significance—the 'apply waives sovereign pays equivalent. Does really admit interests? create 'on event, hardly establishes taxed. *' supra, page 31 Disregarding form labels, looking substance, think, crystal transparent interests (as estate) commonly on, of, guise construed majority)—granted State—of (though noted, 'use,' property', 1) thus, seeks accomplish indirection prohibited directly. attempted evasion legally succeed. said Miller Milwaukee, 272 713, 715, 47 280, 71 487: 'If avowed purpose self-evident operation (state taxing) follow bonds make up (the State's) inability reach achieving result, must fail special perfectly good.' 393, 173, 400, quoting above language said: 'But, careful point later quoted approval Macallen (Commonwealth of) Massachusetts (279 620, 631, 49 432, 435, 874), 'A very casual different intent aimed them. *" plainly says (not) 'casual (in its) (property) States'; 'aimed (it).' 173. 32 majority principally 814; Harlan separate opinion, read them, Court's citizen another imported interstate commerce commerce, earlier ended. involve interests. storer gasoline, gallonage basis, conducting One customers had, contract, reimburse consequence having gasoline. Thus taxation, derived through contract. cost-plus contractors certain performance entitled lays (Government) enter like present one, then affects shifted contract.' 18, 49. interests—including suffered voluntary assumption 'through (a) contract.'1 'Mesta (a chattels) some legal Government's) mutual benefit.'2 proceeded say: 34 decide.' Id., 915. 35 However, proceed decide chattels, bailee's therein, subjected '* effort segregate Mesta's ownership interest, whatever appraisal attribute leasehold, included taxable either bailee.' 36 undeniable (1) plant, (2) element That instrumentality invalid. Allegheny, 186—189, 915—917. 37 Before one existed namely, fee, inherent use, let continued be, fruits exclusively entitled; granted—or withheld—by grant withhold, nor, regulate tax; contrary, remained immune Allegheny: 38 whose found, citizens (was) Government-owned holds 188, 189, 39 By carved subservient vested regulation, unequal, unreasonable confiscatory—on basis tax.3 40 Here, purport computes estates property.' It, plain thus forbidden instrumentalities States. 41 reasons, reverse court. Now compiled Mich.Stat.Ann.1950 (1957 Cum.Supp.), §§ (6). reads: 'AN ACT provide airport, park, market, ground (sic), state-supported educational institution. places reliance Commonwealth Massachusetts, 279 874. weight precedent substantially impaired narrow distinction 392, reasoning 427, Later Northern Finance Lynch, 290 54 230, 528, indistinguishable Mccallen facts, per curiam kind Macallen. 485—486, 600—601, Helvering Gerhardt, 304 405, 420—422, 969, 975—976, 1427; Mountain Producers Corp., 303 376, 623, 907; Metcalf Eddy Mitchell, 269 514, 46 172, 70 384. brief strongly urged abandon 'economic burden' test, range afield taxes, test 'illusory incapable consistent application.' somewhat detail, belonging subdivisions organizations, scientific institutions, fraternal secret societies (if purposes), libraries, religious societies, cemeteries, agricultural corporations making nonprofit trusts hospital health boy girl scout (up 160 acres), veterans' homes land dedicated use. Mich.Stat. Ann.1950, 7.7, Comp.Laws 1948, 211.7. creates exception 'in manifesting exemption, anything favor, avoids possibility double contribution revenues commercial Moreover, inconceivable another, pass in-lieu taxpayer compelled immaterial authorized thrust arises independently contractual assumption. 'bailee' chattels benefit stands position relation 'lessee,' Mesta Company stated necessity, levying limited first identifying, naturally, done valuation can properly ascribed thereto, equal, reasonable, non-confiscatory, meets fails meet tests Fourteenth Amendment Due Process.

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