Offutt Housing Co. v. County of Sarpy, 351 U.S. 253 (1956)

MR. JUSTICE DOUGLAS, with whom MR. JUSTICE REED, MR. JUSTICE BURTON, and MR. JUSTICE HARLAN concur, dissenting.

There are two reasons why I dissent in this case.

First. The legislative history of the Wherry Act makes clear that the purpose of the legislation was to encourage military personnel to remain in the Armed Forces by providing clean, adequate, and inexpensive housing for them. H.R.Rep.No.854, 81st Cong., 1st Sess., pp. 2, 4; S.Rep.No.410, 81st Cong., 1st Sess., pp. 2, 4-5. There is nothing to indicate that Congress departed from the established practice, Surplus Trading Co. v. Cook, 281 U.S. 647, and consented to local taxation on the federal enclaves. Taxation by local authorities of a housing project is one sure way of increasing its cost and hampering the federal program. If that had been intended, I would expect plain language revealing the purpose. The Court finds no plain language, but relies only on adumbration and reasoning from elaborate implication. Yet the

doctrine of sovereign immunity is so embedded in constitutional history and practice that this Court cannot subject the Government or its official agencies to state taxation without a clear congressional mandate.

Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, 122.

To be sure, the Wherry Act and the Military Leasing Act are intertwined, and § 6 of the Leasing Act makes the "lessee’s interest" subject to local taxation. But the intertwining of the two Acts is very limited. Section 805 of the Wherry Act authorizes the Secretaries of the Armed Forces to make leases under the authority of the Leasing Act, without regard to the limitations imposed by it as respects the term or duration of the lease. But the authority to lease and the limitations imposed on leases are contained in § 1 of the Leasing Act. Nothing in the language of § 805 requires the balance of the Act to be incorporated. We strain beyond the normal demands of language to pull § 6 of the Leasing Act into the Wherry Act. Section 807 of the Wherry Act deals with taxation. It allows local taxation of real property acquired by the Federal Housing Commissioner. I would suppose that, if local taxation is specifically allowed in one instance, the waiver of immunity is limited, not general. We usurp the function of the lawmakers when we hold to the contrary.

Second. Even if the Wherry Act be read as including § 6 of the Leasing Act, we should rebel at the application now given it. Section 6 of the Leasing Act, if applicable, only subjects the "lessee’s interest" to local taxation. Yet the Court allows the local tax to be placed on the entire value of the property. Its justification apparently is the low annual rental charged by the United States to the lessee, the length of the lease, and the useful life of the buildings and improvements. The "enjoyment of the entire worth" of the property will be the lessee’s, says the Court. The interest of the Federal Government is therefore nominal. For these reasons, the "lessee’s interest" is held to include the entire value of the property.{1}

This formalism misses the entire point. The Government’s stake here cannot be measured by bare legal title. It has vast and important interests in these projects. It owns the controlling stock in the lessee. It prescribes the maximum rentals. It determines what persons may occupy the living quarters. It assumes most of the financial risks of these housing projects by insuring the mortgagees. It provides police and fire protection, sewerage and water service, and access roads. The United States is not a mere lessor who, having leased the property, allows it to be managed by the lessee. The great decisions as to management are made by the Government. The lessee is, indeed, a managing agent.

The lease makes the buildings and improvements property of the United States. That reservation of title may not be challenged here as colorable. See Kern-Limerick, Inc. v. Scurlock, supra,116-123. It was made to protect the large interests of the United States in low-cost housing on federal enclaves -- a purpose now partially defeated by what we do today. For, once the local taxes are imposed, the rentals to the servicemen rise unless the United States pays the bill. Ironically, the rents rise without the servicemen receiving more benefits of local government than even transients receive. The tax is a windfall to the local Nebraska authorities as the Federal Government provides the governmental services protective of the property taxed.{2}

1. It is of interest that an effort was made in the Senate Committee on Armed Services to provide in the Leasing Act that, when property was leased by the Government, the entire value be subject to local taxation. See Hearings, Senate Committee on Armed Services on S. 1198, 80th Cong., 1st Sess., pp. 27-32. But that proposal was rejected by the Senate Committee.

2. Under the Buck Act, 54 Stat. 1059, as amended, 4 U.S.C. §§ 104-110, residents of military reservations pay state sales, use, income, and gasoline taxes.