Court Opinion

ID: 9482634
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:56:10.684794+00
Date Added: 2024-06-11T17:49:06.796712
License: Public Domain

HILL, Senior Circuit Judge,
dissenting:
By allowing the Commonwealth’s definition of real property to inform the determination of that property which is subject to real property taxes, the Supreme Court in Reconstruction Finance Corp. v. Beaver County, Pa., 328 U.S. 204, 66 S.Ct. 992, 90 L.Ed. 1172 (1946), did not grant the Commonwealth unlimited authority to classify various charges as real property taxes, thus bringing them within the scope of permissible taxation. The focus of the Beaver County opinion is on the assessment of taxes, not their classification. Certainly the Commonwealth of Virginia could not classify the tax imposed upon the income derived from the use of real estate as *138a tax on real estate, thereby bringing an income tax within the scope of what Congress has allowed the Commonwealth to tax. Yet the majority concludes that determination of whether penalties and interest are part of the Commonwealth’s real estate tax “must be governed by the law of the State.” 1
To the extent that federal courts are instructed by Beaver County to look to the state law to find out the amount of real estate tax that may be payable, we should, of course, do just that. There would be no way for the government to pay a state real estate tax without first consulting the state laws to find out if such a tax is exacted and how much is imposed. Yet, when this is done, the answer obtained is the federal answer to a federal question — the interpretation of a federal statute.
When the United States ... pays its debts, it is exercising a constitutional function or power.... The authority [to require the United States to do so] ha[s] its origin in the ... statutes of the United States and [is] in no way dependant on the laws [of any State]. The duties imposed upon the United States ... find their roots in the same federal source[ ]. In the absence of an applicable Act of Congress, it is for the federal courts to fashion the governing rule of law according to their own standards.
United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 1457, 59 L.Ed.2d 711 (1979) (quoting Clearfield Trust Co. v. United States, 318 U.S. 363, 366-367, 63 S.Ct. 573, 574-75, 87 L.Ed. 838 (1943)). The Federal Reserve Bank (FRB) clearly performs a federal function within the meaning of Kimbell. Likewise, it is only through an Act of Congress that the States are permitted to impose a real estate tax upon the FRB. When government activities “aris[e] from and bea[r] heavily upon a federal ... program, the Constitution and Acts of Congress require otherwise than that state law govern of its own force.” Kimbell, 440 U.S. at 727, 99 S.Ct. at 1457 (emphasis added); see United States v. Little Lake Misere Land Co., 412 U.S. 580, 592, 593, 93 S.Ct. 2389, 2396, 2397, 37 L.Ed.2d 187 (1973). Federal law, therefore, ought to determine whether the Commonwealth may impose its penalties and interest under the guise of real estate taxes.
Uniformity in a nationwide federal program is desirable and controlling federal rules ought to be fashioned. See Kimbell, 440 U.S. at 728, 99 S.Ct. at 1458. Congress normally intends uniformity in the application of its laws in order that federal programs may operate unimpaired. See Beaver County, 328 U.S. at 209, 66 S.Ct. at 995. The majority opinion relies upon Beaver County in concluding that the diverse nature of local tax assessment and collection methods renders impossible the assumption that Congress intended nationwide uniformity in allowing the imposition of real property state taxes. This may be so for purposes of assessment, but uniformity has not previously been and is not now impossible to obtain with regard to interest and penalties.
The imposition of penalties and interest seems designed, primarily, to coerce the taxpayer into paying the tax when due. At first glance, this appears to be so related to the tax that it might be classified as a part of the tax. A second glance, however, and we are reminded that the government pays the tax only at its own election. I see no point in the government’s being willing, as a volunteer, to pay the tax and being willing, also, to be coerced into doing what it does only because it is willing to do so. While I am not prepared to say that the Second Branch is not capable of allowing for this, I am unwilling to assume that it has so provided in the present case.
In the absence of an express statutory provision providing otherwise, it is a “well-settled principle that the United States are *139not liable to pay interest on claims against them.” Library of Congress v. Shaw, 478 U.S. 310, 315, 106 S.Ct. 2957, 2962, 92 L.Ed.2d 250 (1986) (quoting United States ex rel. Angarcia v. Bayard, 127 U.S. 251, 260, 8 S.Ct. 1156, 1160, 32 L.Ed. 159 (1888)).2 For well over a century, federal courts, executive agencies and the Congress have recognized that federal statutes are not read to permit interest to run on recovery from the government unless an Act of Congress affirmatively mandates such interest. Without such a mandate, the Commonwealth is powerless surreptitiously to impose penalties and interest. See Shaw, 478 U.S. at 316, 106 S.Ct. at 2962; United States v. N.Y. Rayon Importing Co., 329 U.S. 654, 660, 67 S.Ct. 601, 604, 91 L.Ed. 577 (1947) (“Had Congress desired to permit the recovery of interest [in this situation], it could have so provided. The absence of such a provision is conclusive evidence that the court lacks any power of that nature” (emphasis provided)). No Act of Congress grants the Commonwealth authority to impose interest and penalties upon the FRB for its delinquent payment of real property taxes. Had Congress intended for the power to impose real property taxes to include penalty and interest assessments, it specifically would have so provided. Absent such provision, it is conclusive that the Commonwealth may not charge that which only the Congress may impose. The power to assess penalties and interest does not implicitly exist within the power to collect property taxes. Where Congress allows recovery from the government, that grant of authority, must be narrowly construed. See Shaw, 478 U.S. at 318, 106 S.Ct. at 2963; N.Y. Rayon Importing Co., 329 U.S. at 659, 67 S.Ct. at 604 (“The consent necessary to waive the traditional immunity [from interest charges] must be express and it must be strictly construed”).
Uniformity in this area has existed for the past century: Unless Congress designates otherwise, penalties and interest are not recoverable from the government. I see no reason why a different result should obtain here by deferring to the Commonwealth’s classification of penalties and interest as real property taxation. A thorn by any other name still carries the same barb. I respectfully dissent.

. One might find it satisfactory to leave it to the state to set the tax and to classify it, because what it does applies to its citizens (electorate) who can defend themselves — and, incidentally, the federal taxpayer — at the ballot box. However, citizen interest in classification is not the equivalent of citizen interest in imposition. The citizen must pay the tax however it is classified; the federal institution is willing to pay only that tax properly classified as real estate tax.

. This quote is made in reference to the interest which is attached to the recovery of monetary damages from the government. This situation is analogous to the coercive nature of the penalty and interest which the Commonwealth seeks to attach to the FRB’s delinquent real property taxes. In concluding that uniformity is not achievable in implementing Congress’ grant of authority to impose local real property taxes, the majority’s use of case law focusing on real property assessment does not address this parallel.