Mr. KNOTT. Certainly, insofar as it requires it to find these funds, I think it would be objectionable. Mr. HILLELSON. That is the only reason for the objection, though? Mr. KNOTT. That and, of course, the Department of Defense has had under study—and that explains my presence here-the Department of the Army in its own right and as agent for the Air Forces in handling its real-estate matters, has worked for several years on similar bills, and those bills for their impact ranged all the way up, as in this particular case, from something over $1 million to a rough estimate of over $115 million on one bill. So, of course, that does have its impact on the Department if the Department is required in any case as it does on the overall national budget. Mr. HILLELSON. What I had in mind is, the Department would make the recommendation that they would be opposed to the bill for the reason that it would cause additional funds to be appropriated? Mr. KNOTT. That is my understanding of this interim report. Mrs. ST. GEORGE. Are there any questions, Mr. Ikard? Mr. IKARD. No questions. Mrs. ST. GEORGE. Are there any other questions, Mr. Hillelson? Mrs. ST. GEORGE. Thank you very much. We will file that report when it comes with the others. Mr. KNOTT. Thank you. Mrs. ST. GEORGE. While we are on that subject, our colleague, Mr. Bolton of Ohio, asked if he might file a statement later on. He has some municipalities out there. Mr. IKARD. I would suggest the committee permit any Member of Congress who wanted to to file a statement at any time. Mrs. ST. GEORGE. I know that is what is done, but he sent a special note up asking for the privilege, and I thought I would make a point of it. However, we certainly will do that. There are about 50 Members of Congress who are vitally interested in this legislation on account of their own districts, and we certainly want to give everyone an opportunity to file a statement who cares to do so. I think you have taken care of that, have you not, Mr. Smith? Mr. SMITH. I have called a number who are specifically interested. I have here a number of letters, telegrams, and other documents which should be included in the record, Madam Chairman. Mrs. ST. GEORGE. Without objection, they will be inserted in the record. (The documents referred to are as follows:) Hon. CLARE E. HOFFMAN, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Committee on Government Operations, House of Representatives. MY DEAR MR. CHAIRMAN: Reference is made to your letter of July 13, 1953, and prior correspondence, requesting the views of the General Accounting Office on H. R. 5605, 83d Congress entitled "A Bill to amend 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." The courts of the United States and of the various States consistently have held that property of the Federal Government may not be taxed by a State or any political subdivision thereof, it being well established that the power to tax can only be exercised on the governed and not on the governing party (M'Culloch v. Maryland, 4 Wheat. 316; Van Brocklin v. Tennessee, 117 U. S. 151). The rule has been applied with equal force where the tax is a special tax or assessment for local improvements-such levy being an exercise of the sovereign power of taxation and like other taxes an involuntary exaction (Lee v. Osceola and Little River Road Improvement District, 268 U. S. 643; Mullen Benevolent Corp. v. United States, 290 U. S. 89). However, it is settled that the lawmaking power of the Nation may waive this exemption wholly or with such limitations as it may deem proper (Austin v. The Alderman, 7 Wall. 694, 699). The Congress by law on several occasions-with respect to certain types of property or property of certain of its particular agencies-has provided that such property may be taxed or has provided for payments in lieu of taxes. By the various acts establishing or authorizing the establishment of the particular corporations enumerated in the bill, the Congress has provided that their realty shall be subject to taxation, the statutory provisions being codified as follows: Central Bank for Cooperatives and Regional Banks for Cooperatives__ Commodity Credit Corporation___. Federal Farm Mortgage Corporation_ Federal land banks.. Federal National Mortgage Association.. Federal Savings and Loan Insurance Corporation__ 12 U. S. C. 1138c 15 U. S. C. 713a-5 12 U. S. C. 1433 12 U. S. C. 931-933 15 U. S. C. 610 15 U. S. C. 610 Also, appropriations made to carry out the Surplus Property Act of 1944 (58 Stat. 765) provided for the payment of amounts in lieu of taxes on property declared surplus by Government-owned corporations under that act and such authority was continued by section 210 (a) (9) of the Federal Property and Administrative Services Act of 1949, as amended by the act of September 5, 1950 (64 Stat. 581, 40 U. S. C. 490). However, no provision has been made by law for similar payments with regard to property declared either excess or surplus after June 30, 1949, under the Federal Property and Administrative Services Act of 1949, as amended. See in this connection Senate Report No. 2140, 81st Congress, at page 10, on S. 3959, which became the act of September 5, 1950, in which it is plainly stated that: "When real property owned by a Government corporation, such as RFC is declared surplus legal title remains in the corporation unless it is conveyed to the United States or sold to outside interests. It has been the practice in the past for Government corporations to pay sums in lieu of taxes on real property, title to which vests in them as distinguished from the United States. It is believed advisable to continue this authority insofar as the inventory of property declared surplus under the provisions of the Surplus Property Act of 1944 is concerned at least until such time as title to the property vests in the United States. It should be pointed out that this authority applies only to real property declared surplus under the Surplus Property Act of 1944, which with certain inapplicable provisions was repealed effective as of June 30, 1949. This means that the authority would not extend to any properties declared excess or surplus on or after July 1, 1949." It seems clear that once real property of a corporation is transferred to the control of another Federal agency which is not authorized to pay taxes on its realty, there is no authority under the current law except as set forth in section 210 (a) (9) of the Federal Property and Administrative Services Act of 1949 to pay taxes or make payments in lieu thereof as to such property, in view of the constitutional immunity of the Federal Government to such State and local taxes. Whether another exception should be made to the said constitutional immunity as provided by the instant bill appears primarily a matter of policy for consideration of the Congress. However, it appears pertinent to point out that had the real property been acquired by purchase from a private owner rather than a Government corporation, the effect on the local taxes would not be dissimilar. In either case, the cloak of constitutional immunity to taxation would have descended on the date when the Federal Government (other than the Government corporation) acquired such property. The effect on the local tax base would be the same and there appears to be little justification for creating any different rule for property acquired from one of the several enumerated corporations than that acquired from privately owned sources. Nor is this Office convinced of the desirability of consenting to special assessments for local im provements as provided by the bill. It appears that there could be commenced thereunder, against the will of the Federal Government and for which no Federal need exists, projects desired by local areas or officials. Also, while such local areas would derive the benefit of such a project, their costs would be borne by the United States which may have no need or desire therefor. Furthermore, the Congress recently enacted Public Law 109, 83d Congress, approved July 10, 1953, providing for the creation of a Commission on Intergovernmental Relations for the purpose of studying the proper role of the Federal Government in relation to the States and their political subdivisions which it is understood from the committee hearings preceding the enactment will inIclude the field of taxation. It would seem that the Congress might well await the study and recommendations of such Commission for solving the seeming inequities resulting from Federal immunity to taxation on an overall and comprehensive basis rather than to give favorable consideration to such a piecemeal approach as the instant bill which might well create at least as serious inequities as those it seeks to correct. Thus no reason is apparent why taxes should be payable as to realty owned by one of the involved Government corporations on or after June 22, 1948, and later transferred to another instrumentality of the Federal Government, while no taxes would be paid as to property similarly owned prior to that date and transferred. Unless the said date was selected to cover a particular piece of property which the bill was intended to encompass, I know of no reason for its selection. Also it is noted that while the property transferred from the several corporations enumerated would be affected, properties transferred from other similar organizations such as the Federal Housing Administration, Federal credit unions, Home Owners' Loan Corporation, Federal Deposit Insurance Corporation, the realty of which is subject to State and local taxation by 12 United States Code 1706b, 12 United States Code 1768, 12 United States Code 1463 (c), and 12 United States Code 264 (p), would not be affected. It is further to be noted that the term "State" is defined in section 702 (a) of the bill to include the District of Columbia. In view of the fiscal relationship between the District and the Federal Government, this Office does not feel that any property located in the District should be included in the proposed legislation. In the light of what is set out above, this Office does not recommend that favorable consideration be given to H .R. 5605. This Office appreciates your invitation to have a representative of the Office testify on the bill. But, aside from the foregoing, this Office has no comment to make on the bill and, inasmuch as the matter is one of policy for consideration of the Congress, the Office does not contemplate sending a representative to appear before the subcommittee. However, should the subcommittee desire such testimony and so notify the Office, I will, of course, be pleased to designate a representative to testify on the matter. This report is being furnished in triplicate. E. L. FISHER, Acting Comptroller General of the United States. Mr. JAMES J. SMITH, HOUSE OF REPRESENTATIVES, Executive Director, New Jersey State League of Municipalities, Trenton, N. J. DEAR MR. SMITH: Thank you for your telegram of July 16, endorsing H. R. 5605, in behalf of the New Jersey State League of Municipalities. The subcommittee is happy to have your views and I will introduce your telegram as a part of the record. Very sincerely yours, Hon. KATHARINE ST. GEORGE, TRENTON, N. J., July 16, 1953. House Office Building, Washington, D. C.: The New Jersey State League of Municipalities heartily endorses H. R. 5605 which provides for the amendment of the Federal Property and Administrative Services Act 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 property tax rolls. Urge your support of this bill when it comes up for consideration. Respectfully, JAMES J. SMITH, Executive Director, New Jersey State League of Municipalities. STATEMENT OF HENRY G. WALTEMADE, CHAIRMAN, REALTORS' WASHINGTON COMMITTEE OF THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS Madam Chairman and members of the committee, our association wholeheartedly endorses H. R. 5605. We view with increasing alarm the trend toward removing Federal property from local tax rolls. We all know that a municipality depends upon real estate taxes for its operation. The police department, fire department, sewerage and sanitation, schools, and other housekeeping necessities of municipal operation, obtain more than twothirds of their budgets from real estate taxes. The financial conditions of localities is increasing precariously. The Tax Foundation, based upon data of the United States Commerce Department, tells us that expenditures by local governments in 1952 were $10,800,000,000; tax receipts in the same year $9,400,000,000. It is estimated that approximately the same relative deficit position will exist in estimated expenditures and receipts for 1953. The Bureau of Census in its report, "Governmental debt in 1952," states that governmental debt as of June 30, 1952, for cities was $12,437,000,000. Indebtedness of local governments rose to a new record level of $22,600,000,000. This compares with the total of $16.7 billion reported for the period 1932 through 1940. We mentioned our alarm at the increasing amount of Federal property coming off the local tax rolls. We have just completed a survey, with reports from 23 cities in 18 States, on tax losses due to public housing. Public Law 171 of the 81st Congress provides that payments up to 10 percent of the net shelter rent of public housing projects may be paid in lieu of taxes to a local community. We asked our local real estate boards to confer with local tax officials and housing authorities to determine the valuation of the property for assessment purposes. We asked them to deduct the payments made in lieu of taxes and to record the tax losses as against the revenue if the properties were privately owned. The attached list is a result of this survey. For example, in Louisville, Ky., if the present public housing projects were privately owned they would be taxed in the amount of $418,581; yet they pay in lieu of taxes only $83,242 annually, resulting in an annual tax loss to the city of Louisville of $335,339. This loss obviously must be made up by the other taxpayers within the community. San Francisco reports a $264,408.49 loss; Denver, Colo., $240,450; Birmingham, Ala., $233,562.70. These are but a few. Think of it-more than a quarter of a million dollars annually lost in each of these cities because of tax exemption of Federal public housing only. Now add the tax losses resulting from the transfer of properties which H. R. 5605 seeks to correct. Add also the losses due to military ownership, and the 5,500 buildings owned and operated by the General Services Administration, and you get something of the size of the tax exempt problem. It appears to us that if Federal ownership requires services from a local community, such as police, fire, sewerage, water, safety, schools, then it should be required to pay taxes on the same basis as any other property owner. We hope the committee will approve H. R. 5605. Estimates of local tax losses per year due to Federal public housing $329, 584.00 93, 383. 28 421, 942. 37 63, 626. 91 Savannah, Ga.. Burlington, Iowa. 68, 879. 18 66, 760. 11 Louisville, Ky. Pontiac, Mich. St. Paul, Minn. St. Louis, Mo. Buncombe County, N. C. Akron, Ohio. 14, 000. 00 36, 730. 00 Kitsap County, Wash. Cincinnati, Ohio. Harrisburg, Pa. Corpus Christi, Tex. Dallas, Tex. King County, Wash. Huntington, W. Va.. NOTE.-The figures were supplied by local real estate boards after consultation with local tax officials and housing authorities. 159, 705. 00 134, 045. 45 37, 890. 26 51,000.00 87,163.00 106,031. 34 12,000.00 10, 123.00 146, 705. 00 96, 045. 45 Hon. CLARE E. HOFFMAN, Chairman, House Committee on Government Operations. DEAR MR. HOFFMAN: This is in further response to your letters of July 2, 1953, and July 13, 1953, requesting the views of the Atomic Energy Commission on H. R. 5605, which would amend 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. In the case of most agencies of the Federal Government, the exemption of their property from State or local taxes rests upon an immunity under the Constitution of the United States. Property of the Atomic Energy Commission is, however, expressly exempted from State or local taxes by section 9 (b) of the Atomic Energy Act of 1946 which provides in part: “*** The Commission, and the property, activities, and income of the Commission, are hereby expressly exempted from taxation in any manner or form by any State, county, municipality, or any subdivision thereof." It is not clear whether H. R. 5605 is intended to operate so as to remove from the scope of the section 9 (b) exemption property which may be required by the Commission from Government corporations. The purpose of Congress in enacting section 9 (b)—to exempt the Commission, its activities, and its property from State and local taxes, does not seem to be consistent with making distinctions among the property owned by the Commission based upon the source of acquisition. We respectfully suggest that it would be appropriate to amend H. R. 5605 to avoid the possible incidental modification of a specific policy deliberately adopted by Congress for application in a special set of circumstances. Because of the shortness of time, we have not been able to obtain the views of the Bureau of the Budget as to the relationship of this report to the legislative program of the President. Sincerely yours, LEWIS L. STRAUSS, Chairman. |