Court Opinion

ID: 9505611
Source: CourtListenerOpinion
Date Created: 2023-08-06 20:13:06.260682+00
Date Added: 2024-06-11T09:04:39.244179
License: Public Domain

BOEHM, Justice,
dissenting.
I agree in large part with the majority’s account of tax immunity doctrine past and present. And the majority’s result is inviting. As the majority explains, PCAs enjoy only limited immunity from state and local taxation, but FLBAs enjoy complete immunity. One can imagine that an ACA, as the product of a merger of these two, might enjoy tax immunity for those activities traditionally conducted by FLBAs, but not for those historically performed by PCAs. Nonetheless, it seems clear to me that Mid-America, as an ACA, is a new entity, albeit one formed by the merger of a PCA and an FLBA. Neither party in this lawsuit contends that ACAs enjoy partial immunity from state taxation and I cannot find a statutory basis for the majority’s result that splits Mid-America’s tax liability based on long-term versus short-term lending. Forced to choose between the poles of complete taxability and total immunity for ACAs, I believe taxability is more consistent with the statutory pattern that gives rise to this question of federal law. Moreover, it seems to me that the majority’s Solomonic solution will lead to endless disputes as to the character of various transactions as the creative juices of accountants, tax lawyers, and revenuers begin to flow.
The majority points out that in evaluating a claim of immunity current Supreme Court law requires us to “examine the nature of the instrumentality, and the activity being taxed.” Indiana Dep’t of State Revenue v. Farm Credit Servs., 734 N.E.2d 551, 556 (Ind.2000). I agree with that standard but disagree as to the result it produces. An ACA is a privately owned entity operated for the benefit of private interests. I believe this strongly suggests a taxable entity. And the nature of an ACA’s activities — financing farmland acquisitions and short-term borrowings— points in the same direction. These activities are conducted by a myriad of other privately owned taxable entities. Thus, both the nature of the entity and its aetivi*562ties, in the interest of competitive fairness, suggest taxability, not immunity. It is of course true that all of these activities were once immune from state taxation if conducted by a PCA or an FLBA. But that was by reason of the nature of the entity and/or by express congressional mandate, not by reason of the activity itself. I also think it is significant that we are interpreting a relatively recently enacted statute. It seems improbable to me that immunity was intended by omission in this era of legislative moves toward privatization and reliance on market forces.
Nor can I find support for immunity in the express language of the statute authorizing the merger of PCAs and FLBAs into ACAs. Congress has been deafeningly silent on the issue of state taxation of ACAs. Citing United States v. Allegheny County, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209 (1944), Mid-America claims that in the absence of an expression of congressional opinion it is entitled to immunity as a “federal instrumentality.” The Department urges that, even though some earlier cases found tax immunity despite congressional silence, the current statutes governing the Farm Credit System expressly address this subject and confer varying degrees of immunity on the several farm credit entities. See 12 U.S.C. §§ 2001 to 2279 (1994). The Department maintains that in the absence of an explicit conferral of immunity, we should conclude there is none.
As the Supreme Court held, status as a federal instrumentality does not confer automatic immunity under the Tax Injunction Act. See Arkansas v. Farm Credit Servs., 520 U.S. 821, 831-32, 117 S.Ct. 1776, 138 L.Ed.2d 34 (1997). And, as the majority notes, recent Supreme Court cases make clear that this status carries no talismanic defense to a state revenue agent. See Farm Credit Sews., 734 N.E.2d at 556-57. These cited statutory provisions produce, at best, a standoff, and no other statutory language seems to me to bear on this issue. The majority points out that the statute specifies that the merged association will “possess all powers granted under this chapter to the associations forming the merged association” and “be subject to all of the obligations imposed under this chapter on the associations forming the merged association.” 12 U.S.C. § 2279c-l. I find neither provision relevant here. It is an odd if not distorted usage to speak of a tax immunity as either a “power” or an “obligation” of a corporate entity. One thinks of the former as referring to the activities and actions the entity may undertake, and the latter as referring to the debts, contractual and other acquired obligations, of the predecessor. Neither, in conventional usage, refers to a status such as immunity from taxes. And, as the Fourteenth Amendment witnesses, the terms to confer an immunity have long been familiar to legislators and even the drafters of constitutions, but are glaringly absent here.
In sum, in today’s world, given the trends identified by the majority against implied immunity, it seems more probable to me that if Congress had intended to provide immunity for some activities of an ACA but not for others, it would have said so explicitly. Congress did something like this with respect to PCAs, whose obligations are exempt from state taxation in the hands of their holders, but whose activities are subject to state taxation. See id. § 2077. We thus have a statutory scheme in which two farm credit entities are explicitly exempted from all state taxation, two are explicitly partially exempt from taxation, and one — the ACA — enjoys no explicit exemptions. See id. §§ 2023, 2077, 2098, 2134. As the Supreme Court put it, “Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Rodriguez v. United States, 480 U.S. 522, 525, 107 S.Ct. 1391, 94 L.Ed.2d 533 (1987) (per *563curiam) (quoting Russello v. United States, 464 U.S. 16, 22-23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983)). If Congress had intended to exempt the newly created ACAs from state and local taxation, I believe it would have said so.
All of the foregoing applies to the tax years before 1999. Mid-America, whether for tax or other reasons, has now apparently dropped its operations into two wholly owned subsidiaries. One of these is a Federal Land Credit Association and, therefore, like an FLBA, is exempt by virtue of its status. The other is a taxable PCA. How these tax statuses affect a consolidated return, if one is required or electable, is a matter for another day. For now, the issue is solely Mid-America’s pre-reorganization tax status, which I would conclude is that of a fully taxable entity like any other private enterprise. Accordingly, I respectfully dissent.
SULLIVAN, J., concurs.