B-74100, MARCH 30, 1948, 27 COMP. GEN. 560

B-74100, MARCH 30, 1948, 27 COMP. GEN. 560

REAL ESTATE TAXES - GOVERNMENT CORPORATION PROPERTY DECLARED SURPLUS TO WAR ASSETS ADMINISTRATION - PAYMENT OF PENALTIES AND INTEREST ON DELINQUENT TAXES UNDER THE PROVISIONS OF THE INDEPENDENT OFFICES APPROPRIATION ACT, 1948, MAKING THE FUNDS APPROPRIATED TO THE WAR ASSETS ADMINISTRATION AVAILABLE FOR PAYMENTS TO STATES OR POLITICAL SUBDIVISIONS THEREOF OF SUMS IN LIEU OF AND EQUIVALENT TO TAXES ACCRUING AGAINST REAL PROPERTY DECLARED SURPLUS TO THE WAR ASSETS ADMINISTRATION BY GOVERNMENT CORPORATIONS, THE ADMINISTRATION IS NOT AUTHORIZED OR REQUIRED TO USE APPROPRIATED FUNDS FOR THE PAYMENT OF PENALTIES OR INTEREST ON DELINQUENT TAXES LEVIED AGAINST REAL PROPERTY OF A GOVERNMENT CORPORATION DECLARED SURPLUS TO THE ADMINISTRATION.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, WAR ASSETS ADMINISTRATION, MARCH 30, 1948:

I HAVE YOUR LETTER OF MARCH 1, 1948, WITH ENCLOSURE, REQUESTING A DECISION AS TO WHETHER THE WAR ASSETS ADMINISTRATION IS REQUIRED TO MAKE EXPENDITURES FROM APPROPRIATED FUNDS TO STATE AND LOCAL TAXING AUTHORITIES OF SUMS REPRESENTING PENALTIES AND INTEREST ASSESSED BY THEM BECAUSE OF DELINQUENT PAYMENT ON ACCOUNT OF TAXES ON REAL PROPERTY DECLARED SURPLUS TO THE ADMINISTRATION BY THE RECONSTRUCTION FINANCE CORPORATION FOR DISPOSITION UNDER THE SURPLUS PROPERTY ACT OF 1944, AS AMENDED.

THE INDEPENDENT OFFICES APPROPRIATION ACT, 1948, PUBLIC LAW 269, 80TH CONGRESS, APPROVED JULY 30, 1947, 61 STAT. 587, PROVIDES THAT THE FUNDS APPROPRIATED THEREBY FOR THE PURPOSES OF THE WAR ASSETS ADMINISTRATION SHALL BE AVAILABLE, AMONG OTHER THINGS, FOR---

* * * PAYMENTS TO STATES OR POLITICAL SUBDIVISIONS THEREOF OF SUMS IN LIEU OF AND EQUIVALENT TO TAXES ACCRUING AGAINST THE REAL PROPERTY DECLARED SURPLUS TO THE ADMINISTRATION BY GOVERNMENT CORPORATIONS.

IT IS UNDERSTOOD FROM YOUR LETTER THAT ALTHOUGH THE RECONSTRUCTION FINANCE CORPORATION RETAINS THE LEGAL TITLE TO SURPLUS PROPERTY OF THE TYPE HERE INVOLVED, YET ALL ACTUAL INTEREST IN, AND CONTROL AND DOMINION OVER, SUCH PROPERTY ARE VESTED IN THE WAR ASSETS ADMINISTRATION FROM THE TIME IT IS DECLARED SURPLUS UNTIL DISPOSED OF BY THE ADMINISTRATION AND THAT, WHILE THE RECONSTRUCTION FINANCE CORPORATION PAYS ALL TAXES WHICH ARE DUE PRIOR TO THE DATE OF AN ACCEPTABLE DECLARATION OF A PARTICULAR PIECE OF PROPERTY AS SURPLUS, TAXES BECOMING DUE THEREAFTER ARE PAID BY THE WAR ASSETS ADMINISTRATION EVEN THOUGH THEY COVER A PERIOD OF TIME PRIOR TO THE DECLARATION. ALSO, IT APPEARS THAT THE QUESTION HERE PRESENTED HAS BECOME OF CONSIDERABLE IMPORTANCE BECAUSE OF THE ACTION OF CERTAIN STATE AND LOCAL TAXING AUTHORITIES, PARTICULARLY IN OHIO AND ILLINOIS, IN DEMANDING PAYMENT OF PENALTIES AND INTEREST ON DELINQUENT TAXES IN ADDITION TO THE AMOUNTS TENDERED BY THE WAR ASSETS ADMINISTRATION IN LIEU OF SUCH TAXES, AND THAT THE ADMINISTRATION DOES NOT CONSIDER THAT THE ABOVE-QUOTED STATUTORY PROVISIONS WERE DESIGNED TO REQUIRE THE PAYMENTS OF AMOUNTS EQUIVALENT TO PENALTIES AND INTEREST.

IT WOULD SEEM MOST UNLIKELY THAT THE INSTANT PROBLEM WOULD HAVE ARISEN, AT LEAST SO FAR AS CONCERNS TAXES LEVIED SUBSEQUENT TO THE TIME A PARTICULAR PIECE OF PROPERTY WAS DECLARED SURPLUS, IF THE RECONSTRUCTION FINANCE CORPORATION HAD DIVESTED ITSELF OF TITLE TO ITS SURPLUS PROPERTY AT THE TIME OF THE DECLARATION AND IT IS SUGGESTED, FOR THE PURPOSE OF CLARIFYING THE SITUATION SO FAR AS TAXES HEREAFTER ACCRUING ARE CONCERNED, THAT CONSIDERATION BE GIVEN BY THE AGENCIES CONCERNED TO THE MATTER OF THE TRANSFER TO THE WAR ASSETS ADMINISTRATION OF THE LEGAL TITLE TO SUCH PROPERTY AS HAS BEEN, OR MAY BE, DECLARED SURPLUS BY THE RECONSTRUCTION FINANCE CORPORATION OR OTHER GOVERNMENT CORPORATIONS. THERE HAS NOT BEEN CALLED TO MY ATTENTION ANY PROVISION OF LAW WHICH WOULD PROHIBIT SUCH A TRANSFER.

IN CONSIDERING THE EFFECT OF THE ABOVE-QUOTED STATUTORY PROVISIONS, IT IS TO BE OBSERVED THAT THEY DO NOT STIPULATE FOR THE PAYMENT OF "TAXES" BUT FOR THE PAYMENT OF SUMS "IN LIEU OF AND EQUIVALENT TO TAXES," AND THAT THE LANGUAGE USED BY THE CONGRESS DOES NOT CONSTITUTE A DIRECTION OR COMMAND TO MAKE THE PAYMENTS BUT MERELY GRANTS A PERMISSIVE AUTHORITY TO DO SO. IN OTHER WORDS, THE TERMS OF THE ACT HERE INVOLVED DO NOT PURPORT TO IMPOSE ANY ABSOLUTE OBLIGATION UPON THE WAR ASSETS ADMINISTRATION WITH RESPECT TO THE USE OF APPROPRIATED FUNDS FOR THE PAYMENT OF TAXES BUT ON THE CONTRARY IMPLY A CERTAIN EXERCISE OF DISCRETION ON THE PART OF THE ADMINISTRATION IN CONNECTION WITH THE MATTER. THE WAR ASSETS ADMINISTRATION IS NOT AUTHORIZED TO PAY TAXES AS SUCH.

ALSO, OF EVEN GREATER IMPORTANCE IS THE WIDELY PREVAILING RULE, AS WAS APTLY STATED BY THE SUPREME COURT OF WASHINGTON IN THE CASE OF STATE V. SUPERIOR COURT OF STEVENS COUNTY, 93 WASH. 433, 161 P. 77, THAT---

* * * INTEREST UPON A DELINQUENCY IS NO PART OF A TAX. IT IS SUSTAINED ONLY AS A PENALTY TO INSURE PROMPT PAYMENT. PEOPLE EX REL V. PEACOCK, 98 ILL. 172. AND THIS IS SO WHETHER THE PENALTY BE IN THE WAY OF INTEREST, THE ADDITION OF A CERTAIN PERCENT, OR BY DOUBLING THE TAX.

THE DECISION OF THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF MISSOURI PACIFIC RAILROAD COMPANY, ET AL. V. AULT, 256 U.S. 554, IS DIRECT AUTHORITY FOR THE RULING THAT A STATUTORY PENALTY IMPOSED BY A STATE OR LOCAL STATUTE OR ORDINANCE MAY NOT BE RECOVERED AGAINST THE UNITED STATES UNLESS CONGRESS HAS BY LAW EXPRESSLY PROVIDED THEREFOR.

THAT CASE INVOLVED A SUIT AGAINST THE MISSOURI PACIFIC RAILROAD COMPANY (WITH THE DIRECTOR GENERAL OF RAILROADS AS OPERATOR THEREOF UNDER THE FEDERAL CONTROL ACT OF 1918, SUBSTITUTED AS PARTY DEFENDANT) FOR WAGE COMPENSATION AND PENALTIES FOR WRONGFUL DISMISSAL OF AN EMPLOYEE UNDER AN ARKANSAS STATUTE PROVIDING THAT WHENEVER A RAILROAD DISCHARGED AN EMPLOYEE WITH OR WITHOUT CAUSE, THE RAILROAD WOULD PAY HIM HIS FULL WAGES WITHIN SEVEN DAYS THEREAFTER AND THAT IF PAYMENT WERE NOT MADE "THEN AS A PENALTY FOR SUCH NONPAYMENT OF WAGES OF SUCH SERVANT OR EMPLOYEE SHALL CONTINUE FROM THE DATE OF THE DISCHARGE OR REFUSAL TO FURTHER EMPLOY AT THE SAME RATE UNTIL PAID.' THE FEDERAL CONTROL ACT OF 1918 (ACT OF MARCH 21, 1918, 40 STAT. 451, 456, 458) PROVIDED IN SECTIONS 10 AND 15 THAT THE DIRECTOR GENERAL AS CARRIER "SHALL BE SUBJECT TO ALL LAWS AND LIABILITIES AS COMMON CARRIERS, WHETHER ARISING UNDER STATE OR FEDERAL LAWS OR AT COMMON LAW" AND THAT THE "LAWFUL POLICE REGULATIONS OF THE SEVERAL STATES" SHALL CONTINUE UNIMPAIRED. IN HOLDING THAT THE JUDGMENT OF THE LOWER COURT, SO FAR AS IT PROVIDED FOR RECOVERY OF THE PENALTIES, WAS ERRONEOUS, THE SUPREME COURT OF THE UNITED STATES SAID:

* * * BY THESE PROVISIONS (THE ABOVE-MENTIONED SECTIONS OF THE FEDERAL CONTROL ACT) THE UNITED STATES SUBMITTED ITSELF TO THE VARIOUS LAWS, STATE AND FEDERAL, WHICH PRESCRIBE HOW THE DUTY OF A COMMON CARRIER BY RAILROAD SHOULD BE PERFORMED AND WHAT SHOULD BE THE REMEDY FOR FAILURE TO PERFORM. BY THESE LAWS THE VALIDITY AND EXTENT OF CLAIMS AGAINST THE UNITED STATES ARISING OUT OF THE OPERATION OF THE RAILROAD WERE TO BE DETERMINED. BUT THERE IS NOTHING EITHER IN THE PURPOSE OR THE LETTER OF THESE CLAUSES TO INDICATE THAT CONGRESS INTENDED TO AUTHORIZE SUIT AGAINST THE GOVERNMENT FOR A PENALTY, IF IT SHOULD FAIL TO PERFORM THE LEGAL OBLIGATIONS IMPOSED. THE GOVERNMENT UNDERTOOK AS CARRIER TO OBSERVE ALL EXISTING LAWS; IT UNDERTOOK TO COMPENSATE ANY PERSON INJURED THROUGH A DEPARTURE BY ITS AGENTS OR SERVANTS FROM THEIR DUTY UNDER SUCH LAW; BUT IT DID NOT UNDERTAKE TO PUNISH ITSELF FOR ANY DEPARTURE BY THE IMPOSITION UPON ITSELF OF FINES AND PENALTIES OR TO PERMIT ANY OTHER SOVEREIGNTY TO PUNISH IT. CONGRESS IS NOT TO BE ASSUMED TO HAVE ADOPTED THE METHOD OF FINES PAID OUT OF PUBLIC FUNDS TO INSURE OBEDIENCE TO THE LAW ON THE PART OF THE GOVERNMENT'S RAILWAY EMPLOYEES. * * *

THE PURPOSE FOR WHICH THE GOVERNMENT PERMITTED ITSELF TO BE SUED WAS COMPENSATION, NOT PUNISHMENT. * * * DOUBLE DAMAGES, PENALTIES AND FORFEITURES, WHICH DO NOT MERELY COMPENSATE BUT PUNISH, ARE NOT WITHIN THE PURVIEW OF THE STATUTE. * * *

OBVIOUSLY, THERE IS NO ROOM FOR A CONTENTION THAT THE DECISION OF THE SUPREME COURT OF THE UNITED STATES IN THE AULT CASE IS NOT FOR APPLICATION IN THE CASE OF STATE AND LOCAL PENALTIES OF THE TYPE HERE INVOLVED AND IT MAY NOT BE ASSUMED IN THE ABSENCE OF A STATUTORY PROVISION CLEARLY EVIDENCING SUCH PURPOSE THAT THE CONGRESS INTENDED THAT THE FUNDS APPROPRIATED FOR THE PURPOSES OF THE WAR ASSETS ADMINISTRATION SHOULD BE AVAILABLE FOR PAYMENTS ON ACCOUNT OF TAX PENALTIES OR INTEREST.

ACCORDINGLY, I HAVE TO ADVISE THAT THE WAR ASSETS ADMINISTRATION IS NOT AUTHORIZED OR REQUIRED TO USE APPROPRIATED FUNDS FOR THE PAYMENT OF SUMS REPRESENTING PENALTIES OR INTEREST ON DELINQUENT REAL PROPERTY TAXES.