Amendments to the Federal Property and Administrative Services Act of 1949 as Amended (transfers of Real Property)

This authority was continued by section 210 (a) (9) of the Federal Property and Administrative Services Act of 1949 (Public Law 152, 81st Cong., 1st sess.) as amended by the act of September 5, 1950 (64 Stat. 581), and applied to

real property declared surplus by Government corporations, pursuant to the Surplus Property Act of 1944, where legal title to such real property remains in any such Government corporation.

Under the War Assets Administration regulations referred to and the similar provision in the Federal Property and Administrative Act of 1949, it was the policy of the General Services Administration and the War Assets Administration to leave title to real property declared to them as surplus in the name of the corporation until sold or assigned for use by an agency of the Government.

This provision, until recently, prevented loss of taxes to local taxing authorities (in those cases of Government corporation real estate subject to taxes being declared surplus), until title passed from the corporation. If title passed to private ownership, local finances were not upset because of discontinuance of payment of real-estate taxes by the Government corporation. However, on July 15, 1952, the United States Court of Claims, in the case of the Board of County Commissioners of Sedgwick County, State of Kansas, v. the United States, announced a decision which in most cases renders the cited provision ineffective. The case involved a claim by the county of Sedgwick for taxes assessed against real property record title to which was held in the name of Reconstruction Finance Corporation, but which had been declared surplus to War Assets Administration under the Surplus Property Act of 1944. The decision states that, while no change in the tax status of the property (from a taxable one when the property was under Reconstruction Finance Corporation supervision) was effected by the declaration of surplus alone, the acceptance of accountability therefor by War Assets Administration removed the property from taxable status.

On the basis of this decision and one applied later in a specific case by the Comptroller General of the United States, payment of taxes has been and will be suspended in a good many cases that will work a real hardship on local communities. A recent partial canvass of the situation by the General Services Administration showed that 62 cases in 23 States and 50 congressional districts have occurred within the last 5 years in which local communities lost over $2,500,000 in taxes, that they had been receiving from Federal corporations, because the property had been transferred to Federal agencies not authorized by law to pay the taxes.

Typical is the case in my own Missouri Fourth District where the RFC several years ago purchased property which now houses the Bendix Corp. This real property since has been transferred to the Navy, pursuant to Public Law 364, 80th Congress. I have been informed that this amounts to a loss in annual taxes of approximately $191,000 to both Jackson County and Kansas City, Mo. This, of course, would be remedied under this proposed bill.

A complete summary of this bill is as follows:

(1) Provides that when taxable real property that has been on the local tax rolls is transferred by a Government corporation to other Government agencies it shall remain subject to taxation regardless of subsequent transfers to other Federal agencies.

EFFECTIVE DATE AND EXPIRATION OF THIS TITLE

SEC. 706. This title shall take effect on January 1, 1953, and shall expire on December 31, 1955.

Mrs. ST. GEORGE. We have had word from Mr. Ikard that he cannot be with us this morning, but that he wants us to continue, which we are about to do.

First, I am going to call on Mr. Hillelson, the author of the bill, to read his statement.

STATEMENT OF HON. JEFFREY P. HILLELSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSOURI

Mr. HILLELSON. Madam Chairman, H. R. 5605 is a bill that I have introduced after much study and many conferences with members of the staff of Intergovernmental Relations Subcommittee, a subcommittee of the House Government Operations Committee. Also, I have consulted with authorities in different Government agencies concerning the merit and wisdom of this bill.

This bill amends the Federal Property and Administrative Services Act of 1949 to provide that transfers of real property from certain Government corporations to other Government agencies shall not operate to remove such real property from local tax rolls providing the property has before the transfer been on local tax rolls.

In many cases where real estate has been owned by Government corporations and subject to local taxes authorized by the Federal Government to be paid by the corporations, this tax revenue to the local taxing agencies has been lost or terminated when this real property has been transferred to another Federal agency which is not authorized to pay such taxes. It has long been established that Federal property is not subject to State and local taxation without the consent of the Federal Government. However, for many years the Federal Government has given this consent under certain circumstances and, in particular, with respect to real property owned by Government corporations which Congress created or authorized. Many hundreds of war plants were established and operated under the corporate form and were authorized to pay State and local taxes on their real property to the same extent as private industry is required to pay taxes on similar real property. In most cases this afforded local taxing authorities much needed assistance in their tax problems.

At the end of World War II the corporations owning these properties began to dispose of them either by sale, transfer to other Federal agencies, or to the War Assets Corporation or its successor, the General Services Administration, as excess or for handling under the Industrial Reserve Act. In an effort to take care of the tax situation the War Assets Corporation, in regulations promulgated under the Surplus Property Act of 1944, made certain provisions for the payment by the disposal agency of taxes due for periods after assumption of responsibility for surplus real property. Appropriations made to carry out the Surplus Property Act of 1944 (Public Laws 785 and 862, 80th Cong., 1st and 2d sessions) provide for payment of amounts in lieu of taxes on real property declared surplus by Governmentowned corporations under that act.

real property declared surplus by Government corporations, pursuant to the Surplus Property Act of 1944, where legal title to such real property remains in any such Government corporation.

A complete summary of this bill is as follows:

(2) The Government is authorized to pay these local taxes on real property described in this act.

(3) That any Government corporation created after the effective date of this title their real property will be subject to taxation by local taxing authorities to the same extent as other real property unless specifically provided otherwise.

(4) Provides that the effective date of this bill be as of January 1, 1953, and that the date of June 22, 1948, shall be the date which will exclude from the provisions of the proposed legislation any real property owned and disposed of by Government corporations prior to that date.

(5) The Government will make no payments in lieu of taxes on this real property described and also will not be subject to penalties or penalty interest. The real property mentioned in this bill will not be subject to any lien, foreclosure, garnishment, or other proceedings because of its failure to make payments of taxes on such real property. This provision was included to protect the United States Government from paying such penalties which in many cases are common in many taxing authorities. This is necessary so that if Congress should be negligent or tardy in appropriating sufficient funds to take care of the taxes that the Government corporations or Federal agencies would not be penalized for being 1 to 4 or 5 months late, as it is not always possible to have appropriation bills passed by certain dates in order to make prompt payment to taxing authorities.

(6) This act shall expire as of December 31, 1955, unless renewed by Congress. The reason for this expiration date is that it is hoped that this problem of local taxes on Federal property will be included as a subject of study, investigation, and recommendations by the proposed Commission on Intergovernmental Relations.

Mrs. ST. GEORGE. Thank you, Mr. Hillelson.

You have heard no criticism or opposition to this bill, have you, except that I have heard it said that it did not go quite far enough, to accomplish the results.

Mr. HILLELSON. I have heard this, too, Madam Chairman. That is, many people consider it piecemeal where they feel another law on the books would help complicate the whole tax structure of our Government. That is one of the primary reasons why I made it effective only through 1955, because I did not mean it to be a permanent piece of legislation.

Mrs. ST. GEORGE. You do not want it to interfere with a permanent setup that might come later?

Mr. HILLELSON. That is right.

Mrs. ST. GEORGE. I think that is a good explanation because I had heard that was one of the criticisms, that it expired in 1955.

Mr. Meader, have you any questions that you would like to ask Mr. Hillelson?

Mr. MEADER. No, I do not care to ask Mr. Hillelson any questions. When the time comes I would like to make a little statement of my

own.

Mrs. ST. GEORGE. I think we would like you to make your statement now, if you will. I know you have another committee meeting and I think it would be well if you would do it at this time.

36642-53-2

STATEMENT OF HON. GEORGE MEADER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. MEADER. Thank you, Madam Chairman.

First of all, I would like to congratulate my colleague, Mr. Hillelson, for bringing this matter to the attention of the Congress in concrete form, so that we can take specific action with respect to this problem.

I might say that both Mr. Hillelson and I are members of the Intergovernmental Relations Subcommittee of the House Government Operations Committee. I have been very interested, as I know he has, in studying the industrial and commercial activities of the Federal Government and the effect of those activities upon local units of government.

Of course, this is one aspect of these industrial activities and the ownership of industrial property by the Federal Government, which has an adverse effect upon the tax rolls of local units of government.

Let me say in general that I have been very disturbed by the trend in recent years of political power gravitating to the Federal Government in Washington at the expense of the State and local units of government. I say I am disturbed because I believe under our system of government that government which is closest to the people and most easily subject to their control is the best form of self-gov

ernment.

I have also been disturbed by the fact that in the Federal Government the power seems to have gravitated more to the executive branch of the Government than to the Congress. That is why I welcome this hearing today as getting right at the heart of that problem of the relationships between the Federal Government and the State and local governments. It indicates at least a sympathetic attitude on the part of the Congress toward the problems of the local governments, with the aim of assisting them in asserting their jurisdiction and authority and preventing the Federal Government from encroaching upon legitimate public activities of these local units of government.

I do not want to go into detail about the problem as it affects my particular district. I have referred to it repeatedly, not only in the committee during hearings we have had on the industrial activities of the National Government, but also on the floor of the House.

Specifically, there is one plant in my district, in Adrian, Mich., the Bohn Aluminum Plant, which in my judgment permits us to see in a specific case just exactly how this encroachment of the Federal Government has been operating, and how it has adversely affected the city, county, and school districts, who have been deprived of substantial amounts of taxes because of the circumstances Mr. Hillelson referred to in his statement.

I don't intend to refer to the details, because I think it is best for the committee to get those from the mouths of those who are most familiar with the actual facts rather than to get them secondhanded through me.

We have here today the Honorable Claude E. Porter, mayor of the city of Adrian, Mich., and Mr. A. O. Wallace, who is superintendent of the Madison Agricultural School District, which surrounds and adjoins Adrian on the east and the south.

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