B-158516, MAR. 7, 1966

B-158516, MAR. 7, 1966

TO ACTING DEPUTY UNDER SECRETARY OF STATE:

BY LETTER OF FEBRUARY 11, 1966, YOU REQUESTED OUR CONCURRENCE IN THE POSITION TAKEN BY THE DEPARTMENTS OF STATE AND JUSTICE IN SUPPORT OF THE GOVERNMENT OF IRELAND WITH RESPECT TO A CONTROVERSY WHICH HAS ARISEN OVER THE TAX STATUS OF CERTAIN PROPERTY PURCHASED BY THAT GOVERNMENT IN THE DISTRICT OF COLUMBIA. THE FACTS IN THE MATTER ARE SUMMARIZED BELOW FROM INFORMATION CONTAINED IN YOUR LETTER AND ENCLOSURES THERETO.

THE PROPERTY IN QUESTION, LOCATED AT 2244 S STREET, N.W., WAS PURCHASED BY THE GOVERNMENT OF IRELAND ON JANUARY 5, 1965, FOR USE AS THE OFFICIAL RESIDENCE OF ITS AMBASSADOR. UPON NOTIFICATION OF SUCH PURCHASE, THE BOARD OF COMMISSIONERS OF THE DISTRICT OF COLUMBIA ORDERED THE PROPERTY EXEMPT FROM TAXES EFFECTIVE JULY 1, 1965. THE REAL ESTATE TAX ASSESSMENT AGAINST THE PROPERTY FOR THE FISCAL YEAR JULY 1, 1964--- JUNE 30, 1965, AMOUNTED TO $3,017.12. UNDER APPLICABLE DISTRICT OF COLUMBIA LAW, HALF OF THE TOTAL ASSESSMENT WAS PAYABLE NO LATER THAN SEPTEMBER 1964 AND THE REMAINING HALF NO LATER THAN MARCH 1965. THE OWNER OF THE PROPERTY PRIOR TO ITS SALE TO THE GOVERNMENT OF IRELAND PAID THE FIRST INSTALLMENT AMOUNTING TO $1,508.56. THE SECOND INSTALLMENT IN LIKE AMOUNT REMAINS UNPAID. THE CONTROVERSY GIVING RISE TO YOUR LETTER LIES IN THE VIEW TAKEN BY THE GOVERNMENT OF IRELAND THAT TO REQUIRE PAYMENT OF THE SECOND INSTALLMENT BY THE GOVERNMENT OF IRELAND VIOLATES SPECIFIC PROVISIONS RELATING TO EXEMPTION FROM TAXES OF THE DULY RATIFIED CONSULAR CONVENTION BETWEEN THE UNITED STATES AND IRELAND OF MAY 1, 1950, AS OPPOSED TO THE DISTRICT OF COLUMBIA VIEW THAT AT THE TIME IRELAND ACQUIRED THE PROPERTY, SUCH PROPERTY WAS SUBJECT TO A VALID, SUBSISTING REAL PROPERTY TAX ASSESSMENT WHICH CONSTITUTES A CHARGE OR ENCUMBRANCE UPON THE REAL ESTATE COLLECTION OF WHICH WOULD NOT CONSTITUTE A TAX AGAINST THE GOVERNMENT OF IRELAND.

AS YOU ARE AWARE, THE QUESTION THUS PRESENTED IS NOT ONE WITHIN THE JURISDICTION OF THIS OFFICE TO RENDER BINDING AND CONCLUSIVE DECISIONS. HOWEVER, WE UNDERSTAND THAT THE BASIC PROBLEM UNDERLYING YOUR REQUEST HAS BEEN A MATTER OF CONSIDERABLE CONCERN TO THE DEPARTMENT OF STATE AND THE GOVERNMENT OF THE DISTRICT OF COLUMBIA FOR SOME TIME AND THAT BOTH YOUR DEPARTMENT AND THE DISTRICT GOVERNMENT DESIRE OUR OPINION ON THE QUESTION BY WAY OF ADVICE RATHER THAN TO SERVE AS AN ULTIMATE DETERMINATION OF THE ISSUE RAISED. IT IS IN THE SENSE OF FURNISHING SUCH AN ADVISORY OPINION RATHER THAN AN AUTHORITATIVE DISPOSITION OF THE MATTER THAT WE PROCEED WITH AN EXAMINATION INTO THE CONTENDING VIEWS SET FORTH. SEE 19 COMP. GEN. 36, 13 ID. 297.

THE BASIC QUESTION HERE REQUIRES A DETERMINATION AS TO THE EFFECT OF THE NEW TAX EXEMPT STATUS OF THE PROPERTY ON TAXES CURRENT FOR THE YEAR IN WHICH THE PROPERTY WAS ACQUIRED BY THE GOVERNMENT OF IRELAND. WHILE THE PRECEDENTS AGREE THAT PROPERTY MAY BE PURCHASED BY A TAX EXEMPT ENTITY WITHOUT OBLIGATION FOR PAYMENT OF CURRENT TAXES, THERE IS A WIDE DIVERGENCE OF OPINION AS TO THE TIME WHEN SUCH PROPERTY MUST BE ACQUIRED TO BE FREE OF THE CURRENT TAX OBLIGATION. THIS DISAGREEMENT STEMS IN LARGE PART FROM THE PREVAILING VIEW THAT THE DECISIVE FACTOR LIES IN WHETHER A LIEN FOR TAXES MAY BE SAID TO BE EFFECTIVE AGAINST THE PROPERTY COUPLED WITH THE LACK OF UNIFORM APPROACH AS TO WHEN SUCH LIENS ARISE. SEE CASES COLLECTED AT 158 A.L.R. 563, 45 A.L.R.2D 554, 54 ID. 996. THE CASE OF DISTRICT OF COLUMBIA V. SAMUEL SUSSMAN, ET AL. (DKT.NO. 18,275) AND DISTRICT OF COLUMBIA V. ARTHUR INVESTMENT CO., INC., ET AL. (DKT.NO. 18,276), DECIDED JULY 26, 1965, BY THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT CONTAINS A FULL DISCUSSION OF THE RATIONALE FOLLOWED IN THE DISTRICT OF COLUMBIA. ALTHOUGH THIS CASE INVOLVED THE ACQUISITION OF LAND BY THE UNITED STATES IN CONDEMNATION PROCEEDINGS--- A SPECIAL SITUATION DISTINCT FROM PROPERTY SOLD AND PURCHASED BY MUTUAL CONSENT--- IT WOULD SEEM TO CONCLUSIVELY ESTABLISH THE PROPOSITION THAT IN THE DISTRICT OF COLUMBIA, LAND ACQUIRED BY A TAX EXEMPT ENTITY (WHETHER PRIVATE OR THE UNITED STATES GOVERNMENT) AFTER JULY 1 OF ANY FISCAL YEAR CARRIES WITH IT THE OBLIGATION FOR TAXES COVERING THE REMAINING PORTION OF THAT FISCAL YEAR.

IN ESTABLISHING THIS PROPOSITION THE COURT ADVERTS TO THE FOLLOWING PRINCIPLES:

1. UNDER THE DISTRICT OF COLUMBIA SYSTEM OF REAL ESTATE TAXATION, CHANGE IN OWNERSHIP OF PROPERTY AFTER JULY 1 DOES NOT AFFECT ITS ANSWERABILITY FOR THE TAX LIABILITY FIXED AS OF THAT DATE.

2. ONLY THE PROPERTY ITSELF, AS DISTINCT FROM THE PERSONAL OBLIGATION OF THE RECORD OWNER ON THE DAY OF ASSESSMENT, IS SUBJECT TO BEING LEVIED UPON TO SATISFY THE LIABILITY.

3. THE COURTS DO NOT HAVE AUTHORITY TO RELIEVE AGAINST PROPERTY TAXES LAWFULLY ASSESSED UNDER EXPLICIT LEGISLATIVE AUTHORITY.

4. ALTHOUGH CONGRESS HAS CONCLUDED THAT FEDERALLY OWNED LAND IN THE DISTRICT OF COLUMBIA SHOULD NOT BE SUBJECT TO LOCAL TAXATION, SUCH EXEMPTION WAS INTENDED TO EXTEND ONLY TO FORESEEABLE YEAR-TO-YEAR TAXES BUT WAS NOT INTENDED TO PLACE UPON DISTRICT TAXPAYERS THE BURDEN OF UNFORESEEABLE MID-YEAR CANCELLATION OF TAX LIABILITY OR TO ARM THE COURTS WITH AUTHORITY TO EFFECT SUCH CANCELLATION.

IT MAY BE NOTED THAT THE DISTRICT TAXING SCHEME IS NOT SO DEVOID OF PROVISION FOR PRORATING TAXES AS THE MAJORITY OPINION SUGGESTS. SEE SECTION 711 OF TITLE 47, DISTRICT OF COLUMBIA CODE, WHICH PROVIDES FOR RELIEF FROM TAXES WHERE PROPERTY IS DESTROYED OR DAMAGED WITHIN THE FIRST SIX MONTHS OF THE TAX YEAR.

IN A CONCURRING OPINION, CHIEF JUDGE BAZELON, STATES THAT WHILE TAXES MAY BE IMPOSED UPON THE FEDERAL GOVERNMENT ONLY WITH ITS CONSENT, SUCH CONSENT HAS BEEN FOUND WITH RESPECT TO STATE PROPERTY TAXES DURING THE YEAR OF FEDERAL PURCHASE WHERE THE STATE HAD IMPOSED A TAX LIEN PRIOR TO THE PURCHASE. THE CHIEF JUDGE CONCLUDES THAT ALTHOUGH THE DISTRICT STATUTE DOES NOT EXPLICITLY CREATE A LIEN PRIOR TO THE OCCURRENCE OF A DELINQUENCY, THE CONGRESS, IN ENACTING THE DISTRICT TAX STATUTE, HAS IMPLICITLY CONSENTED TO TAXATION DURING THE TAX YEAR IN WHICH THE FEDERAL GOVERNMENT TAKES PROPERTY IN THE DISTRICT.

THE VARIOUS VIEWS TAKEN IN THE DISTRICT OF COLUMBIA AND THROUGHOUT THE REMAINDER OF THE UNITED STATES ARE COMPATIBLE WITH THE GENERAL CONCEPTION THAT "EXEMPTION FROM TAXATION" RELATES TO EXEMPTION ONLY FROM TAX ASSESSMENT WHILE THE OWNER OF RECORD IS A TAX EXEMPT ENTITY. THE CASES DO NOT ATTEMPT TO CONSTRUE PAYMENT IN DISCHARGE OF A LIEN FOR TAXES COVERING A PERIOD DURING WHICH THE OWNER IS A TAX EXEMPT ENTITY AS BEING OTHER THAN PAYMENT OF A TAX FOR SUCH PERIOD. THE CRITERIA UNIVERSALLY LOOKED TO ARE WHETHER A VALID ASSESSMENT AND LEVY HAVE BEEN MADE AND WHETHER A LIEN MAY BE SAID TO EXIST AGAINST THE PROPERTY, BUT FUNDAMENTALLY IT IS RECOGNIZED THAT WHERE THESE CRITERIA HAVE BEEN APPROPRIATELY MET THE PAYMENT EXACTED CONSTITUTES A TAX. IT SEEMS THAT THE RATIONALE UNDERLYING THE CASES IS PREMISED UPON THE UNWILLINGNESS OF THE COURTS TO DISTURB LOCAL TAX REVENUES DERIVING FROM TAXES LEVIED PURSUANT TO PROPER AUTHORITY. THIS IS SO EVEN AS AGAINST THE UNITED STATES GOVERNMENT WHOSE EXEMPTION FROM TAXATION DERIVES FROM ITS SOVEREIGN STATUS RATHER THAN BEING DEPENDENT UPON LOCAL GOVERNMENT STATUTE. SEE UNITED STATES V. ALABAMA (1941) 313 U.S. 274.

DOES THE FACT THAT THE GOVERNMENT OF IRELAND IS EXEMPT FROM TAXES BY VIRTUE OF TREATY ARRANGEMENTS SERVE TO PLACE THAT GOVERNMENT IN A DIFFERENT STATUS FROM ANY OTHER TAX EXEMPT NTITY? WITHOUT ATTEMPTING TO RESOLVE THIS QUESTION WITH RESPECT TO JURISDICTIONS THROUGHOUT THE UNITED STATES GENERALLY, WE WOULD CONCLUDE THAT FOR THE DISTRICT OF COLUMBIA, AT LEAST, THE TREATY PROVISIONS THROUGH WHICH THE GOVERNMENT OF IRELAND GAINS ITS TAX EXEMPT STATUS REQUIRE A RESULT DIFFERENT FROM THAT WHICH IS ORDINARILY REACHED.

ARTICLE 7/1) OF THE CONSULAR CONVENTION BETWEEN THE UNITED STATES AND IRELAND PROVIDES FOR THE ACQUISITION OF CONSULAR PROPERTY AND ARTICLE 12/1) PROVIDES THAT:

"NO TAX OR OTHER SIMILAR CHARGE OF ANY KIND, NATIONAL, STATE, PROVINCIAL, MUNICIPAL, OR OTHER, SHALL, IN THE TERRITORY, BE COLLECTED FROM THE SENDING STATE OR ANY NATURAL OR JURIDICAL PERSON ACTING ON ITS BEHALF IN RESPECT OF LAND, BUILDINGS, PARTS OF BUILDINGS, OR APPURTENANCES OWNED OR OTHERWISE HELD OR OCCUPIED BY OR ON BEHALF OF THE SENDING STATE, AND USED EXCLUSIVELY FOR ANY OF THE PURPOSES SPECIFIED IN PARAGRAPH (1) OF ARTICLE 7, EXCEPT TAXES OR OTHER ASSESSMENTS LEVIED FOR SERVICES OR LOCAL PUBLIC IMPROVEMENTS BY WHICH AND TO THE EXTENT THAT THE PREMISES ARE NEFITED.'

THIS EXEMPTION FROM TAXATION IS ABSOLUTE. BUT SINCE THE EXEMPTION WHICH THE UNITED STATES ENJOYS BY VIRTUE OF ITS SOVEREIGNTY IS LIKEWISE ABSOLUTE, IT MIGHT WELL BE ARGUED THAT WHERE THE UNITED STATES WOULD BE REQUIRED TO BEAR A PARTICULAR TAX IN A GIVEN SITUATION NOTWITHSTANDING SOVEREIGN EXEMPTION, IT WOULD BE INAPPROPRIATE TO RELIEVE IRELAND FROM SUCH TAX SINCE IRELAND'S EXEMPTION STEMS BY GRANT FROM THE VERY SAME SOVEREIGN STATUS OF THE UNITED STATES. CONCEDING THE APPEAL OF THIS ARGUMENT, WE DO NOT BELIEVE IT SHOULD BE REGARDED AS CONTROLLING OF THE ISSUE IN THE DISTRICT OF COLUMBIA.

THE SUSSMAN AND ARTHUR INVESTMENT CO. CASE, ABOVE, AND THE CASES CITED THEREIN IN SOME MEASURE RELY UPON THE VIEW THAT AUTHORIZED LOCAL TAX ASSESSMENTS GIVING RISE TO LIENS AGAINST THE TAXED PROPERTY SHOULD NOT NOT DISTURBED BY THE COURTS. THIS VIEW IS READILY UNDERSTANDABLE WHEN APPLIED TO THE PURCHASE OF PROPERTY BY PRIVATE TAX EXEMPT ORGANIZATIONS WHOSE EXEMPT STATUS DERIVES FROM THE SAME AUTHORITY UNDER WHICH THE TAX IS IMPOSED IN THE FIRST INSTANCE. IT HAS BEEN STATED THAT THERE IS NO REASON FOR TREATING THE UNITED STATES DIFFERENTLY. UNITED STATES V. ALABAMA, ABOVE. BUT IMPLICIT IN TREATING THE UNITED STATES ALIKE WITH PRIVATE ORGANIZATIONS DEPENDENT UPON LOCAL STATUTE FOR THEIR EXEMPT STATUS IS THE RECOGNITION OF AN ELEMENT OF CONSENT ON THE PART OF THE UNITED STATES. FOR REGARDLESS OF HOW THE MATTER IS VIEWED, THERE CAN BE NO ESCAPING THE FACT THAT A TAX UPON PROPERTY COVERING A PERIOD DURING WHICH THAT PROPERTY IS OWNED BY A TAX EXEMPT ENTITY REQUIRES THE TAX EXEMPT ENTITY TO DIRECTLY BEAR THE BURDEN OF THE VERY TAX FROM WHICH IT HAS BEEN EXEMPTED. PARTICULARLY IS THIS SO WHERE, AS IN THE DISTRICT OF COLUMBIA, IT IS ONLY THE PROPERTY ITSELF WHICH IS SUBJECT TO BEING LEVIED UPON TO SATISFY ANY LIABILITY.

IN ANY EVENT, SUSSMAN AND ARTHUR INVESTMENT CO. INSTRUCT US TO THE EFFECT THAT WHATEVER THE RATIONALE MAY BE IN OTHER JURISDICTIONS, THE ELEMENT OF CONSENT BY THE UNITED STATES IS CRUCIAL TO THE RIGHT OF THE DISTRICT OF COLUMBIA TO COLLECT TAXES COVERING ANY PERIOD DURING WHICH THE UNITED STATES OWNS PROPERTY IN THE DISTRICT. IT WAS RECOGNIZED THAT THE DISTRICT OF COLUMBIA STATUTES DO NOT PROVIDE FOR A LIEN AGAINST PROPERTY SUBJECT TO TAX ASSESSMENT EXCEPT AS TO TAXES PAST DUE; BUT TO THE EXTENT THAT EXISTENCE OF A LIEN WAS NECESSARY TO THE CONCLUSION REACHED IN THE CASE, THE COURT FOUND SUCH IN THE GENERAL TAX SCHEME AND THE IMPLIED CONSENT OF THE CONGRESS FOR UNITED STATES PROPERTY TO BE SUBJECTED THERETO. ALTHOUGH THE COURT'S CONCLUSIONS WERE STATED IN THE CONTEXT OF A CASE ARISING OUT OF CONDEMNATION PROCEEDINGS, WE DISCERN NO REASON FOR NOT APPLYING THE REASONING EMPLOYED IN SITUATIONS INVOLVING THE ORDINARY PURCHASE OF PROPERTY.

IT IS WELL-ESTABLISHED THAT WORDS AND PHRASES IN TREATIES ARE TO BE GIVEN THEIR USUAL MEANING UNLESS A CONTRARY PURPOSE IS EVINCED BY THE CONTEXT OF THE TREATY OR OTHER EVIDENCE. A REASONABLE, AS DISTINGUISHED FROM A RESTRICTED OR TECHNICAL, CONSTRUCTION IS THE USUAL PRACTICE. AND INTERPRETATIONS BY THE EXECUTIVE BRANCH OF THE GOVERNMENT ARE GIVEN GREAT WEIGHT. HACKWORTH, DIGEST OF INTERNATIONAL LAW, VOL. V, PP. 222,223. THE TREATY PROVISIONS IN QUESTION GRANT AN EXEMPTION FROM THE TYPE OF TAX HERE INVOLVED AS ABSOLUTE AS IT WAS WITHIN THE POWER OF THE UNITED STATES TO GRANT. THE GOVERNMENT OF IRELAND PURCHASED THE SUBJECT PROPERTY FREE OF ANY STATUTORY LIEN FOR TAXES AND MAY NOT REASONABLY BE CONSIDERED AS HAVING CONSENTED TO LIABILITY FOR TAXES FOR ANY PERIOD, REGARDLESS OF HOW THE VAGARIES AND PECULIARITIES OF THE STATUTORY SCHEME UNDER WHICH DISTRICT OF COLUMBIA TAXES ARE ASSESSED, LEVIED AND ULTIMATELY PAID MAY BE CONSTRUED TO IMPLY SUCH A CONSENT ON THE PART OF THE UNITED STATES. SINCE THE PRIOR OWNER WAS NOT LIABLE FOR ANY TAXES ON THE PROPERTY PRIOR TO THE TRANSFER OF TITLE TO IRELAND AND EXCEPT FOR A SHORT PERIOD OF FIVE DAYS THERE WERE NOT TAXES ACCRUED AGAINST THE FORMER OWNER AT THE TIME OF TRANSFER, IT IS OUR OPINION THAT TO CHARGE THE PROPERTY WITH LIABILITY FOR TAX BEYOND THE FIVE DAYS MENTIONED IS TO IMPROPERLY VIOLATE THE LETTER AND SPIRIT OF THE CONSULAR CONVENTION OF 1950 WHICH BY CONSTITUTIONAL PROVISION FORMS A PART OF THE SUPREME LAW OF THE LAND. A COPY OF THIS LETTER IS BEING SENT TO THE ACTING CORPORATION COUNSEL OF THE DISTRICT OF COLUMBIA.