Kane County, Utah v. United States

United States Court of Federal Claims

No. 14-1204 C

August 12, 2016

)

KANE COUNTY, UTAH, )

) Payment in Lieu of Taxes Act (PILT);

Plaintiff, ) Statutory Formulae To Reimburse;

) Inability To Tax Federal Lands; Budget

Control Act of 2011; Taxpayer Relief

v. ) Act of 2012; Motion To Dismiss for

) Failure To State a Claim

UNITED STATES OF AMERICA, )

)

Defendant. )

)

Alan I. Saltman, Smith, Currie & Hancock LLP, Washington, DC, for plaintiff.

Mark E. Porada, United States Department of Justice, Civil Division, Washington, DC,

for defendant.

OPINION AND ORDER

HODGES, Senior Judge.

The United States Government owns most of the land in Kane County, Utah, through its

Bureau of Land Management, the National Park System, and the National Forest System. This

qualifies plaintiff for reimbursement of cost of services it provides to federal entities within its

confines pursuant to the Payment in Lieu of Taxes Act (PILT). 31 U.S.C. § 6901.

Congress created PILT to compensate local governments such as counties for the loss of

tax revenue stemming from their inability to tax federal lands located within their jurisdictions.

Payments to these local governments are calculated according to statutory formulae that

reimburse counties for their costs of providing services such as power, water, and fire protection

to “entitlement lands” owned by the United States. See 31 U.S.C. § 6901(1)(A).

Congressional appropriations needed to fund PILT Act payments were reduced by

approximately five percent across the board in 2013. Budget Control Act of 2011, Pub. L. No.

112-25, 125 Stat. 240; Taxpayer Relief Act of 2012, 31 U.S.C. § 6901, Pub. L. No. 112-240, 126

Stat. 2313. This left a shortfall of $54,793 in the amount defendant owed Kane County according

to the statutory formula.

Kane County filed a class action on December 16, 2014, contending that the PILT Act

created an obligation binding on the United States Government to pay PILT funds to qualified

counties irrespective of sequestration. The class would comprise all counties in the United States

whose PILT funds were reduced because of the 2013 federal budget sequester. Plaintiff filed a

motion for summary judgment and a motion to certify the class. According to defendant, the

sequestration legislation mandated a spending reduction for all non-exempt programs. As PILT

funds were not exempted by the Taxpayer Relief Act, defendant argues that no obligation

could have been created in Kane’s favor, or in favor of any other county in the putative class.

The motions were transferred to this court in April of this year, along with defendant's cross-

motion to dismiss.

Congress passed amendments in 2012 to make full funding of the PILT program

mandatory through 2013. The amendments provided that payments to Kane County and to other

counties qualified under the PILT program could not be reduced because of insufficient

appropriations in a given year. However, the Taxpayer Relief Act of 2012 contains language that

overrides the 2012 full-funding requirement. The issue therefore is, which statute controls: the

PILT Act amendments in 2008 requiring that payments be fully funded, or the later Taxpayer

Relief Act providing that appropriations be reduced “notwithstanding any other provision of

law.”

For the reasons stated below, we must grant defendant’s motion to dismiss.

BACKGROUND

This case arises from a conflict between Congress’ passage of the Payment in Lieu of

Taxes Act of 1976 (PILT), and its later enactment of the Taxpayer Relief Act of 2012. See 31

U.S.C. § 6901, Pub. L. No. 112-240, 126 Stat. 2313. The PILT Act originally provided that local

governments would be eligible for payments “only as provided in appropriations laws.” 31

U.S.C. § 6906. An amendment in 2008 changed that language to provide that local government

units “shall be entitled to payment,” and that appropriated “sums shall be made available . . . for

obligation or expenditure.” (emphasis added). This effectively made payments to counties and

other eligible PILT-recipient jurisdictions mandatory through 2012. Pub. L. No. 110-343, 122

Stat. 3911, 31 U.S.C. § 6906 (2012). Later, Congress extended the mandatory language through

2013. Pub. L. No. 112-141, 126 Stat. 906, 31 U.S.C. § 6906 (2013).

Congress passed the Budget Control Act in 2011. Pub. L. No. 112-25, 125 Stat. 240. The

Budget Control Act amended the Balanced Budget and Emergency Deficit Control Act of 1985.

2 USCS §§ 901-907. The amendment required Congress to reduce the federal budget deficit by a

stated amount, or direct the Executive Branch to reduce discretionary appropriations and direct

spending across the board. Congress did not propose or pass additional deficit reduction

legislation. However, it did enact the Taxpayer Relief Act of 2012, which set the parameters for

implementation of blanket spending reductions required by the Budget Control Act.

The Taxpayer Relief Act became effective in 2013, providing that the Executive Branch

could sequester or reduce congressional appropriations for direct or discretionary spending

programs “notwithstanding any other provision of law.” Pub. L. No. 112-240, 126 Stat. 2313.

The Act listed a number of programs that were exempt from the automatic sequester provision,

including veterans benefits, retirement and disability accounts, and Social Security. PILT was

not listed among the exempt programs.

-2-

DISCUSSION

Plaintiff contends that the PILT Act created an obligation for the Government to pay

Kane County the full amount calculated by the PILT formula, irrespective of sequestration or

budgetary reductions to appropriations for the program. Defendant asserts that the issue of

whether the Government had an obligation to Kane County is irrelevant because the

sequestration legislation mandated spending reductions for all non-exempt programs, and PILT

payments are non-exempt. This argument begs the central question in dispute -- whether the

sequestration legislation mandated a spending reduction for all non-exempt programs.

The question of whether defendant was obligated to pay Kane County a sum calculated

by the PILT statute for 2013 is one of statutory construction. The amendments to the PILT Act in

2008 were clearly intended to achieve that result, but the later-enacted language of the Taxpayer

Relief Act of 2012 includes the “notwithstanding” language described above. Does the language

of the Taxpayer Relief Act, “notwithstanding any other provision of law,” negate the PILT

amendments’ attempt by Congress to guarantee full payment of PILT funds to counties and other

local governments?

The parties agree that PILT is not listed as an exempt program by the Budget Control Act

or Taxpayer Relief Act. Kane County contends instead that the PILT Act created a federal

government obligation to pay the funds to eligible counties irrespective of sequestration or

budgetary reductions to congressional appropriations made to fund the program. Plaintiff argues

that the 2008 amendments to the PILT Act created an “unconditional” obligation that compelled

the Government to fund annual PILT payments in full for each fiscal year through 2012, and by

later amendments through 2013. Furthermore, the appropriation for PILT had already been made

before the fiscal year 2013 extension of the mandatory language of the 2008 PILT amendments.

Any reductions to the availability of those funds by the sequestration legislation could not

terminate the Government’s “valid and binding” obligation to pay PILT funds to the counties.

The Government responds that the 2013 extension of the 2008 PILT amendments is

irrelevant to the question of whether the full appropriation of funds to PILT was available, and

whether an obligation binding on the Government to disburse those funds existed. The Taxpayer

Relief Act mandated sequestration of all non-exempt programs, including PILT, by rescinding

prior statutory authorizations to them and by subjecting them to across-the-board spending

reductions. The Taxpayer Relief Act is the more recently-passed law, and it mandated deficit

reduction “notwithstanding any other provision of law.”

The Court of Appeals for the Federal Circuit decided a case similar to this one in 2007.

See Greenlee County v. United States, 487 F.3d 871 (Fed. Cir. 2007). The Greenlee decision was

issued prior to congressional enactment of the 2008 amendments however, and did address the

situation where a later-enacted statute conflicts with existing laws. As a general principle, later

expressions of legislative intent are considered to be binding on laws enacted earlier. See, e.g.,

Dorsey v. United States, 132 S. Ct. 2321, 2331 (2012) (“statutes enacted by one Congress cannot

bind a later Congress, which remains free to repeal the earlier statute, to exempt the current

statute from the earlier statute, to modify the earlier statute, or to apply the earlier statute but as

modified.”); Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569, 1577 (Fed. Cir. 1997)

(stating, “because the legislature has absolute authority and acknowledges no superior power, it

cannot be bound by acts of a prior legislature.”). One effect of plaintiff’s arguments would be to

-3-

add PILT appropriations to the list of exempt entities in the sequestration statute. Where

exceptions to a statute exist, however, it is presumed that the listed exceptions are the only

exceptions intended. See, e.g., Ventas, Inc. v. United States, 381 F.3d 1156, 1161 (Fed. Cir.

2004) (“Where Congress includes certain exceptions in a statute, the maxim expressio unius est

exclusio alterius presumes that those are the only exceptions Congress intended.”).

The 2008 amendments did provide that payments could no longer be limited by overall

amounts appropriated by Congress in fiscal years 2012 and 2013. Those amendments used

mandatory language to direct payment under PILT irrespective of reduced appropriations

because qualified recipients “shall be entitled to payment under” PILT. Also, “[s]ums shall be

made available to the Secretary of the Interior for obligation or expenditure.” However, by

providing that the Budget Control Act “shall” be implemented “notwithstanding any other

provision of law,” Congress required reductions to the non-exempt PILT program,

notwithstanding the 2008 amendments to PILT.

The Taxpayer Relief Act altered the mandatory nature of PILT’s funding payout regime

for 2013. Language of the Budget Control Act and the Taxpayer Relief Act stated that

“[b]udgetary resources sequestered from any account shall be permanently cancelled.” 2 U.S.C.

§ 906(k)(1). This created a result for 2013 similar to that discussed by the Federal Circuit in

2007, in that funding for PILT was limited to the reduced funds available under the sequester. By

passage of the Taxpayer Relief Act, Congress diminished funds available to PILT and other

spending programs, and altered their funding authority as well.

CONCLUSION

This case requires resolution of a conflict between Congress’ intent as established by

PILT amendments enacted in 2008 and 2012, and Congress’ intent in enacting the Taxpayer

Relief Act of 2012. The discussion above establishes that normally, later expressions of

Congress will control. Moreover, when a statute provides exceptions to its mandate, we must

assume that exceptions listed in the statute are the only exceptions intended.

Following sequestration, counties across the nation were faced with reductions in

reimbursements for their services to federal government entities, even though their payments had

been established by Congress and guaranteed later by strengthening amendments. These local

governments, of course, must include plaintiff Kane County.

Defendant’s motion to dismiss is GRANTED. Plaintiff's motion for summary judgment is

DENIED. Plaintiff's motion to certify the class is MOOT and therefore DENIED. The Clerk of

Court will dismiss plaintiff's case according to the terms of this Opinion and Order.

IT IS SO ORDERED.

s/Robert H. Hodges, Jr.

Robert H. Hodges, Jr.

Senior Judge

-4-