B-120570, JANUARY 3, 1955, 34 COMP. GEN. 319

B-120570: Jan 3, 1955

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

REAL ESTATE TAXES - TRANSFER OF PROPERTY FROM GOVERNMENT CORPORATION TO GENERAL SERVICES ADMINISTRATION PAYMENT OF LOCAL TAXES OR SUMS IN LIEU OF TAXES ON REAL PROPERTY TRANSFERRED TO THE UNITED STATES BY A GOVERNMENT-OWNED CORPORATION AFTER IT WAS DECLARED EXCESS PURSUANT TO THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949. MAY NOT BE MADE EVEN THOUGH THE PROPERTY WAS ALLEGEDLY CONVEYED BY A CITY TO THE GOVERNMENT OWNED CORPORATION IN RELIANCE UPON THE WAIVER OF CONSTITUTIONAL IMMUNITY FROM TAXES. 1955: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 29. REQUESTING A DECISION AS TO WHETHER YOUR ADMINISTRATION IS AUTHORIZED TO PAY THE 1954 TAXES ASSESSED BY THE CITY OF NEW CASTLE.

B-120570, JANUARY 3, 1955, 34 COMP. GEN. 319

REAL ESTATE TAXES - TRANSFER OF PROPERTY FROM GOVERNMENT CORPORATION TO GENERAL SERVICES ADMINISTRATION PAYMENT OF LOCAL TAXES OR SUMS IN LIEU OF TAXES ON REAL PROPERTY TRANSFERRED TO THE UNITED STATES BY A GOVERNMENT-OWNED CORPORATION AFTER IT WAS DECLARED EXCESS PURSUANT TO THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, MAY NOT BE MADE EVEN THOUGH THE PROPERTY WAS ALLEGEDLY CONVEYED BY A CITY TO THE GOVERNMENT OWNED CORPORATION IN RELIANCE UPON THE WAIVER OF CONSTITUTIONAL IMMUNITY FROM TAXES.

ASSISTANT COMPTROLLER GENERAL WEITZEL TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JANUARY 3, 1955:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 29, 1954, WITH ENCLOSURES, REQUESTING A DECISION AS TO WHETHER YOUR ADMINISTRATION IS AUTHORIZED TO PAY THE 1954 TAXES ASSESSED BY THE CITY OF NEW CASTLE, PENNSYLVANIA, AGAINST THE GOVERNMENT-OWNED SURPLUS INDUSTRIAL FACILITY KNOWN AS PLANCOR 765, PRESENTLY UNDER LEASE TO THE UNITED ENGINEERING AND FOUNDRY COMPANY, A GOVERNMENT CONTRACT.

IT APPEARS FROM THE FACTS AS REPORTED IN YOUR LETTER THAT IN 1942 THE SITE ON WHICH THE FACILITY IS LOCATED WAS CONVEYED BY THE CITY TO DEFENSE PLANT CORPORATION, A WHOLLY OWNED SUBSIDIARY OF THE RECONSTRUCTION FINANCE CORPORATION; THAT ON MARCH 1, 1946, THE RECONSTRUCTION FINANCE CORPORATION AS SUCCESSOR TO DEFENSE PLANT CORPORATION DECLARED THE FACILITY SURPLUS TO THE WAR ASSETS ADMINISTRATION ACCEPTED ACCOUNTABILITY FOR THE FACILITY; THAT FROM THE TIME THE FACILITY WAS DECLARED SURPLUS UNTIL DECEMBER 31, 1953, UNITED ENGINEERING AND FOUNDRY COMPANY HAS BEEN IN CONTINUOUS POSSESSION OF THE FACILITY UNDER A SERIES OF LEASES REQUIRING THE LESSEE TO PAY LOCAL TAXES WHICH YOU STATE HAVE AGGREGATED $1,222,824.20 FOR THE YEARS 1943 1953; AND THAT A NEW ONE-YEAR LEASE WAS ENTERED INTO BETWEEN THE SAME PARTIES EFFECTIVE JANUARY 1, 1954, WHICH LEASE OMITS THE REQUIREMENT FOR PAYMENT OF TAXES BY THE LESSEE.

YOU STATE THAT THE OBLIGATION ON THE PART OF THE LESSEE TO PAY LOCAL TAXES WAS DELETED FROM THE CURRENT LEASE IN RECOGNITION OF THE RULE ANNOUNCED IN THE CASE OF THE BOARD OF COMMISSIONERS OF SEDGWICK COUNTY, STATE OF KANSAS V. UNITED STATES, 123 C.1CLS. 304, AND THAT IN ORDER TO AVOID ANY QUESTION AS TO THE TAX-EXEMPT STATUS OF THE FACILITY, THE ADMINISTRATION CAUSED TO BE RECORDED ON DECEMBER 15, 1953, THE QUITCLAIM DEED UNDER WHICH LEGAL TITLE WAS CONVEYED FROM RECONSTRUCTION FINANCE CORPORATION TO THE UNITED STATES.

IN THE SEDGWICK CASE THE SITE WAS ACQUIRED BY DEFENSE PLANT CORPORATION IN 1942, DECLARED SURPLUS TO THE CORPORATION'S NEEDS AND RESPONSIBILITIES ON AUGUST 21, 1946, AND ACCEPTED BY THE WAR ASSETS ADMINISTRATION ON APRIL 16, 1947. THE COURT HELD THAT THE CLOAK OF IMMUNITY FROM LOCAL TAXES DESCENDED UPON THE PROPERTY UPON ITS ACCEPTANCE BY WAR ASSETS ADMINISTRATION ON APRIL 16, 1947, AND THAT NO TAX LIABILITY TO THE COUNTY COULD ARISE THEREAFTER. SINCE IT APPEARS FROM YOUR LETTER AND THE ENCLOSURES THAT THE TAXES NOW CLAIMED REPRESENT TAXES LEVIED AND ASSESSED DURING THE YEAR 1954, AND SINCE RECORD TITLE WAS IN THE UNITED STATES ON DECEMBER 15, 1953, THERE CLEARLY IS NO AUTHORITY OF LAW FOR PAYMENT OF THE 1954 TAXES BY THE UNITED STATES. SEE THE SEDGWICK CASE; 53 P.S. 2025; CF. BOROUGH OF HOMESTEAD V. DEFENSE PLANT CORP., 356 PA. 500, 52 A.2D 581. MOREOVER, SINCE LEGAL TITLE TO THE FACILITY NO LONGER REMAINS IN THE CORPORATION THERE IS NO AUTHORITY OF LAW FOR PAYMENT OF ANY SUM IN LIEU OF THE 1954 TAXES. SEE 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. 32 COMP. GEN. 164, 167.

THE CITY THROUGH ITS MAYOR AND IN ORAL REPRESENTATIONS BEFORE THIS OFFICE, SUPPORTED BY A BRIEF PREPARED BY THE CITY SOLICITOR, HAS ENDEAVORED TO DISTINGUISH THE PRESENT CASE FROM THE SEDGWICK CASE, PRINCIPALLY UPON THE GROUND THAT IN THIS CASE DEFENSE ACQUIRED THE SITE TO THE FACILITY AS A ,GIFT" FROM THE CITY WHEREAS IN THE SEDGWICK CASE DEFENSE PURCHASED THE VARIOUS PARCELS COMPRISING THE SITE IN THAT CASE AND ERECTED A PLANT THEREON. IT IS ASSERTED THAT HERE THE "GIFT" WAS MADE BY THE CITY OF DEFENSE ON THE FAITH OF AN ACT OF CONGRESS (15 U.S.C. 607) WAIVING THE CONSTITUTIONAL IMMUNITY FROM TAXES OF REAL PROPERTY OF THE CORPORATION ( R.F.C.), THUS MAKING THE FACILITY SUBJECT TO TAXES FOR MUNICIPAL PURPOSES; THAT THE CITY HAD A RIGHT TO RELY UPON SUCH ENACTMENT; AND THAT THE UNITED STATES IN GOOD CONSCIENCE CANNOT OBTAIN VALUABLE GRANTS OF REAL ESTATE ON THE FAITH OF SUCH ENACTMENT AND THEREAFTER REPEAL THE STATUTE AND THEREBY RESTORE THE PROPERTY TO A TAX IMMUNITY STATUS.

THE FACTS AS DISCLOSED BY THE CORRESPONDENCE ATTACHED TO YOUR LETTER INDICATE THAT THE DEED UNDER WHICH THE CITY CONVEYED THE SITE TO DEFENSE RECITES A CONSIDERATION OF $13,000 AND THAT PAYMENT OF THAT AMOUNT ACTUALLY WAS MADE TO THE CITY. HOWEVER, THE CITY CONTENDS THAT AT THE TIME OF SUCH CONVEYANCE THERE WERE LOCATED ON THE SITE CERTAIN STEEL PLATES WORTH $9,000 AND SCRAP MATERIAL WORTH $4,000; THAT THE CITY TURNED BOTH OF THESE ITEMS OVER TO DEFENSE; AND THAT THEREFORE THE CITY ACTUALLY MADE A GIFT OF THE SITE TO DEFENSE. THIS VERSION OF THE TRANSACTION IS AT SOME VARIANCE WITH STATEMENTS MADE IN LETTER OF JUNE 28, 1954, TO THE CITY SOLICITOR FROM MR. HENRY CRAWFORD, WHO REPRESENTED DEFENSE DURING THE NEGOTIATIONS LEADING UP TO THE CONVEYANCE OF THE SITE TO DEFENSE. IN ANY EVENT, THE VALIDITY OF THE DEED HAS NOT BEEN QUESTIONED AND IT WOULD SEEM IMMATERIAL INSOFAR AS THE PRESENT MATTER IS CONCERNED WHETHER THE CONSIDERATION WAS MERELY A NOMINAL ONE OR THE ACTUAL VALUE OF THE SITE. 26 C.J.S. DEEDS, SECTION 16 AND 20.

THE TERMS OF THE DEED UNDER WHICH THE CONVEYANCE WAS MADE TO DEFENSE ARE NOT SET FORTH IN YOUR LETTER. HOWEVER, IT IS ASSUMED THAT THE DEED WAS AN ABSOLUTE ONE AND THAT IT CONVEYED AN ABSOLUTE TITLE. IN SUCH EVENT, IT WOULD SEEM CLEAR THAT THE GRANTEE WAS NOT LEGALLY BOUND TO RETAIN TITLE TO THE FACILITY AD INFINITUM AFTER THE PURPOSE FOR WHICH IT ACQUIRED THE SITE HAD BEEN SERVED. ALSO, IT WOULD SEEM CLEAR THAT THEREAFTER THE GRANTEE LEGALLY COULD TRANSFER THE FACILITY TO THE UNITED STATES ACTING THROUGH THE GENERAL SERVICES ADMINISTRATION AS SURPLUS PROPERTY IN WHICH EVENT THE CLOAK OF IMMUNITY WOULD DESCEND UPON THE PROPERTY AND NO TAX LIABILITY WOULD ARISE THEREAFTER.

IT IS APPRECIATED THAT THE TERM OF EVENTS HAS PLACED THE CITY IN A DIFFICULT SITUATION FROM A FISCAL STANDPOINT ARISING FROM THE UNEXPECTED TRANSFER OF THE FACILITY TO THE GENERAL SERVICES ADMINISTRATION. HOWEVER, ANY RELIEF FROM THE SITUATION BROUGHT ABOUT BY THE TRANSFER OF THE CONTROL AND LEGAL TITLE TO THE FACILITY TO YOUR ADMINISTRATION WOULD HAVE TO BE GRANTED BY THE CONGRESS AND NOT THIS OFFICE. AS YOU NO DOUBT ARE AWARE THERE HAVE BEEN INTRODUCED IN THE CONGRESS OVER THE PAST SEVERAL YEARS VARIOUS BILLS INTENDED TO FURNISH RELIEF FOR LOCAL TAXING AUTHORITIES IN SOMEWHAT SIMILAR SITUATIONS. SEE IN THIS CONNECTION H.R. 5605, 83D CONGRESS, AND HOUSE AND SENATE REPORTS, NUMBERED 1217 AND 1966 ACCOMPANYING THAT BILL. HOWEVER, THAT BILL FAILED OF ENACTMENT AND TO DATE NO OTHER LEGISLATIVE RELIEF FOR THIS TYPE OF SITUATION HAS BEEN ENACTED INTO LAW.

ACCORDINGLY, YOU ARE ADVISED THAT PAYMENT BY THE GENERAL SERVICES ADMINISTRATION OF THE 1954 TAXES OR SUMS IN LIEU THEREOF IS NOT AUTHORIZED.