B-102460, MAY 8, 1951, 30 COMP. GEN. 439

B-102460, MAY 8, 1951, 30 COMP. GEN. 439

TAXES - REAL PROPERTY CONVEYANCES - GOVERNMENT TAX EXEMPTION RIGHTS UNDER A CONTRACT EXPRESSLY PROVIDING THAT THE UNITED STATES SHALL BEAR ALL COSTS AND EXPENSES IN THE CONVEYANCE OF REAL PROPERTY IN CONNECTION WITH THE RELOCATION OF A RAILROAD LINE, THE CONTRACTOR MAY BE REIMBURSED THE COST OF DOCUMENTARY STAMPS, REQUIRED TO BE AFFIXED TO ALL DEEDS BY THE INTERNAL REVENUE CODE WHICH SPECIFICALLY EXEMPTS THE UNITED STATES FROM SUCH LIABILITY, NOT AS REIMBURSEMENT OF A TAX IMPOSED BY THE UNITED STATES BUT AS AN ITEM OF THE COST OF RELOCATING THE RAILROAD LINE.

COMPTROLLER GENERAL WARREN TO. R. W. GRIBBENS, DEPARTMENT OF THE INTERIOR, MAY 8, 1951:

REFERENCE IS MADE TO YOUR LETTER DATED MARCH 19, 1951, WITH ENCLOSURES, FORWARDED BY LETTER DATED MARCH 29, 1951, FROM THE DIRECTOR OF PROGRAMS AND FINANCE, BUREAU OF RECLAMATION, REQUESTING ADVANCE DECISIONS AS TO WHETHER YOU ARE AUTHORIZED TO CERTIFY FOR PAYMENT A VOUCHER FOR $1,236.40 IN FAVOR OF THE UNION PACIFIC RAILROAD COMPANY COVERING THE COST OF DOCUMENTARY STAMPS AFFIXED TO A BARGAIN AND SALE DEED CONVEYING CERTAIN REAL PROPERTY TO THE RAILROAD FROM THE UNITED STATES UNDER CONTRACT NO. LR -1390, DATED SEPTEMBER 15, 1941.

YOUR LETTER STATES THAT WHEN THE EXCHANGE OF DEEDS WAS EFFECTED THE RAILROAD COMPANY WAS REQUIRED TO AFFIX THE DOCUMENTARY STAMPS TO BOTH DEEDS AS REQUIRED BY THE PROVISIONS OF 26 U.S.C.A. 3480 AND 3482, BECAUSE OF THE PROVISION IN 26 U.S.C.A. 1809 (A) AND SECTION 113.2 (A) OF THE REGULATIONS OF THE BUREAU OF INTERNAL REVENUE EXEMPTING THE UNITED STATES FROM LIABILITY FOR AFFIXING SUCH STAMPS. THE RAILROAD COMPANY WAS ADVISED THAT IT MIGHT SUBMIT A CLAIM FOR THE COST OF THE STAMPS AFFIXED TO THE DEED FROM THE UNITED STATES TO THE COMPANY FOR CONSIDERATION UNDER PARAGRAPH 5 (A) OF THE CONTRACT.

GENERALLY, THE CONTRACT PROVIDES FOR THE RELOCATION OF A PORTION OF THE IDAHO NORTHERN BRANCH OF THE UNION PACIFIC RAILROAD COMPANY NEAR THE TOWN OF CASCADE, IDAHO, SOLELY AS AN INCIDENT TO THE CONSTRUCTION BY THE BUREAU OF RECLAMATION OF THE CASCADE DAM AND RESERVOIR ON THE NORTH FORK OF THE PAYETTE RIVER. IT IS PROVIDED IN PARAGRAPH 5 (A) THAT " THE UNITED STATES SHALL, AS ITS SOLE COST AND EXPENSE * * * ACQUIRE AND CONVEY, OR CAUSE TO BE CONVEYED, TO THE RAILROAD COMPANY, ITS SUCCESSORS AND ASSIGNS, BY GOOD AND SUFFICIENT DEED OR DEEDS IN FEE SIMPLE," THE REAL PROPERTY REQUIRED FOR THE RELOCATION OF THE RAILROAD LINE.

SECTION 1809 (A) OF THE INTERNAL REVENUE CODE, 26 U.S.C. 1809 (A) PROVIDES:

THE TAX IMPOSED BY THIS CHAPTER SHALL BE PAID BY ANY PERSON WHO MAKES, SIGNS, ISSUES, SELLS, REMOVES, CONSIGNS, OR SHIPS ANY OF THE DOCUMENTS, INSTRUMENTS, MATTERS, AND THINGS MENTIONED AND DESCRIBED IN SECTIONS 1801 TO 1807, INCLUSIVE, OR FOR WHOSE USE OR BENEFIT THE SAME ARE MADE, SIGNED, ISSUED, SOLD, REMOVED, CONSIGNED, OR SHIPPED. THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY THEREOF SHALL NOT BE LIABLE FOR THE TAX WITH RESPECT TO AN INSTRUMENT TO WHICH IT IS A PARTY, AND AFFIXING OF STAMPS THEREBY SHALL NOT BE DEEMED PAYABLE FOR THE TAX, WHICH MAY BE COLLECTED BY ASSESSMENT FROM ANY OTHER PARTY LIABLE THEREFOR.

THIS PROVISION REQUIRES PAYMENT OF THE TAX IMPOSED BY SECTIONS 1801 THROUGH 1807 OF THE INTERNAL REVENUE CODE, 26 U.S.C. 1801-1807, BY ANY PARTY TO THE TRANSFER INSTRUMENTS, BUT BY ITS PLAIN TERMS, THE UNITED STATES IS SPECIFICALLY EXEMPT FROM ANY LIABILITY FOR THE TAX ON AN INSTRUMENT TO WHICH IT IS A PARTY. CONSEQUENTLY, IN THE ABSENCE OF ANY OTHER AUTHORITY OR REQUIREMENTS, THE LEGAL INCIDENCE OF THE TAX IN SUCH A CASE RESTS UPON THE OTHER PARTY TO THE INSTRUMENT AS PROVIDED THEREIN AND IN THE REGULATIONS OF THE BUREAU OF INTERNAL REVENUE, 26 C.F.R. 113.2 (C).

IT IS APPARENT THAT THE RELOCATION OF THE RAILROAD LINE WAS REQUIRED BY THE GOVERNMENT IN FURTHERANCE OF ITS RECLAMATION PROJECT, WITHOUT ANY PLANNED BENEFITS TO THE RAILROAD COMPANY, AND AT THE EXPENSE OF THE GOVERNMENT. IN SUCH CIRCUMSTANCES, AND AS THE CONTRACT EXPRESSLY PROVIDES THAT THE UNITED STATES SHALL BEAR ALL COSTS AND EXPENSE IN THE CONVEYANCE TO THE COMPANY OF THE REAL PROPERTY INVOLVED, THIS OFFICE IS NOT REQUIRED TO OBJECT IN THIS INSTANCE TO THE PAYMENT TO THE CONTRACTOR OF AN AMOUNT EQUIVALENT TO THE VALUE OF THE DOCUMENTARY STAMPS AFFIXED TO THE DEED, NOT AS REIMBURSEMENT OF A TAX IMPOSED BY THE UNITED STATES, BUT AS AN ITEM OF THE COST OF RELOCATING THE RAILROAD LINE. CF. 22 COMP. GEN. 583.

ACCORDINGLY, THE VOUCHER FOR $1,236.40, WHICH IS RETURNED HEREWITH, MAY BE CERTIFIED FOR PAYMENT, IF OTHERWISE CORRECT.