Appendix — ITEL Corp. v. District of Columbia

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APPENDIX

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 81-672

ITEL CORPORATION and

UNITED STATES TRUST COMPANY OF NEW YORK,

ITEL CORPORATION, AGENT,

Appellants,

DISTRICT OF COLUMBIA,

Appellee.

Appeal from the Superior Court of the

District of Columbia

(Hon. John D. Fauntleroy, Trial Judge)

(Argued February 24, 1982 Decided July 21, 1982)

Robert H. Koehler, with whom Richard M. Stolbach

was on the brief, for appellants.

Before NEWMAN, Chief Judge, and KERN and BELSON,

Associate Judges.

NEWMAN, Chief Judge: The sole issue in this case is

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century. The current version of that tax is codified at

D.C. Code 1981, § 47-1507. It provides.in pertinent

“On all tangible personal property, . (over and

the cammptins provided fo 147-1800 . there

be paid . . the rate of tax provided by la law.” None of

the exemptions listed in § 47-1508 refers in any way to

personalty located in federal buildings. On its face, the

statutory language encompasses the property that ITEL

contends is exempt.

Nor does the legislative history of either

dicate an intended exemption for such property. On

contrary, this history, although sparse, suggests that

sovereign from “unwanted intrusions” by “lesser govern-

the argument suffers a fatal flaw. The tax at issue here

was enacted not by an independent sovereign, or even a

partially-independent governmental unit such as the Dis-

trict of Columbia government,“ but by the Congress it-

self. It can hardly be said that this amounts to an in-

trusion on federal prerogatives.

Precedential support for this conclusion is found

Mercury Press v. District of Columbia, 84 U.S. App. D. C.

203, 173 F.2d 636 (1948), cert. denied, 337 U.S. 931

(1949). That case upheld the application of D.C.

personalty tax to imported goods, still in the original

package, located in a local warehouse pending transport

to destinations outside the District. Whereas a state

guage like that contained in § 47-1507 would thus be

read so as not to reach appellant’s computers.

ITEL’s argument for this presumption begins with

Art. I, § 8, el. 17 of the U.S. Constitution. It provides

that Congress shall have the power

[t]o exercise exclusive Legislation in all Cases what-

soever, over such District .. as may . . become

the Seat of the Government of the United States,

and to exercise like Authority over all Places pur-

chased by the Consent of the Legislature of the State

in which the Same shall be, for the Erection of Forts,

Magazines, Arsenals, dock-Yards and other needful

Buildings.

This clause provides the constitutional underpinning for

the establishment of certain “federal enclaves” within

which congressional authority to legislate, including the

authority to tax property, is exclusive.

But the language of this clause makes it readily ap-

parent that ITEL’s reliance on it is misplaced. The Dis-

trict of Columbia is treated differently from federal en-

claves within state boundaries, such as various military

bases. Within state boundaries, federal enclaves are

areas owned by the federal government and purchased

with the consent of the state legislature. States may

withhold consent and thereby retain jurisdiction.‘ In con-

trast, all parts of the District of Columbia are within

exclusive congressional jurisdiction,’ regardless of whether

they are privately- or federally-owned. If a presumption

or implied exemption is to be derived from Article I, it

would have to apply to the entire District. If such a

presumption existed, Congress overcame it by enacting

Humble Pipe Line Co. v. Waggoner, 376 .S. 369 (1964),

Surplus Trading Co. v. Cooke, 281 U.S. 647 (1930).

Of course the Congress can delegate authority to legislate

for the District of Columbia, as it has done in the Home Rule Act.

D.C. Code 1981, § 1-227(a).

§ 47-1507, which would otherwise be completely without

effect.

ITEL nevertheless attempts to have § 47-1507 treated

as if the District were a state and the statute had been

enacted by a state legislature. Primary reliance is placed

on two cases regarding state taxes in federal enclaves,

Surplus Trading Co. v. Cooke, 281 U.S. 647 (1930), and

Humble Pipe Line Co. v. Waggoner, 376 U.S. 369 (1964).

Surplus Trading involved a state personal property tax

assessed on surplus blankets bought by a private dealer,

but not yet removed from a military base on the assess-

ment day. The Supreme Court held that the

statute could not be applied to that property, regardless

of statutory intent, since the base was within the exclu-

sive federal jurisdiction under Article I. The base came

within exclusive federal jurisdiction only because the state

legislature had so consented, not merely because it was

federally-owned. The case thus does not stand for the

proposition that federal ownership ipso facto entails ex-

clusive jurisdiction, but the reverse, that federally-owned

land is normally subject to local jurisdiction. The Court’s

analysis employs no presumption, explicit or implicit, of

any kind; state consent is either present or it is not.

Humble Pipe Line Co. v. Waggoner, supra, stands for

the same general proposition, with the result that a state

ad valorem tax could not be applied to private property

on an air force base, where the state legislature had ceded

exclusive jurisdiction to the federal government. The

Court noted that even where federal jurisdiction is ex-

clusive, Congress may consent to the assessment of state

taxes. Since § 47-1507 was enacted by Congress, it would

constitute congressional consent if any were required. In

the words of the D.C. Circuit, [if the consent restric-

tion applies to the statute here involved [§ 47-1507], it

has been met, as consent could be evidenced in no clearer

fashion than by the fact of enactment itself.” Mercury

Press v. District of Columbia, supra at 204, 173 F. ad at

637. Thus even if the analysis used in state cases were

applicable here, the result would still be that the tax

could be applied to personal property on federal land.*

ITEL also cites United States v. District of Columbia,

669 F.2d 738 (D.C. Cir. 1981), in support of its con-

clusion that D.C. property taxes should be treated in a

way similar to state taxes. The U.S. government hired

a private contractor to organize a conference in a D.C.

hotel on a cost-plus basis. Part of the cost passed on was

the D.C. sales tax on the various hotel charges. The

court first concluded that under the “legal incidence”

rule," a state could have collected the tax even though the

U.S. government ultimately bears the cost. It further

decided that Congress, in enacting the D.C. tax code, did

not intend to subject the U.S. to any greater or lesser

scope of potential tax liability than it faces outside the

District.

But treating the District as if it were a state would

not aid appellant. As discussed above, states may nor-

mally impose taxes on privately-owned personal property

*It is worth noting that personalty taxes applied to equipment

leased by non-taxable entities and located on their land have been

upheld under state constitutional provisions. In Kunes v. Samaritan

Health Service, 121 Ariz. 413, 590 P.2d 1359 (1979) (en banc), for

as the taxed equipment was the property of private profitmaking

businesses, and not the tax-exempt hospitals, it could not fall within

the tax immunity that the state constitution authorized the legisla-

ture to extend. The result thus turned on ownership of the property,

not whether it was used by a tax-exempt institution or located on

its tax-exempt land. See also University of Utah v. Salt Lake

County, 647 P.2d 207 (Utah 1976).

on federally-owned land, and even where there is exclusive

jurisdiction, congressional consent waives it. United States

v. District of Columbia also fails to advance appellant’s

cause because it deals with the degree to which the fed-

eral government is made to bear the burden of District

taxes. In contrast, ITEL’s theory rests on the location of

the taxed property or activity, a circumstance that is

unrelated to the rationale applied in United States v.

District of Columbia.

Indeed, to the extent that the case is helpful at all,

it militates in favor of denying a refund to ITEL. It

shows that the federal government’s protection from

D.C. taxes is not territorial, but based on the incidence

of the tax. Moreover, the intrusion on federal interests

is much more substantial where, as in United States v.

cated on federal land.* Finally, the case illustrates that

no special statutory authorization is required for the

general District sales tax to be applied in a specific in-

interests are arguably impinged

This is consistent with our conclusion that no ex-

is required in order for

property tax to be applied to private assets

land.

after this case was argued, the Supreme Court

its decision in United States v. New Merico,

U.S. L. W. 4826 (1982). For present purposes, the

case is more significant for what it does not address than

for it does. It involves a constitutional challenge

to the application of two New Mexico taxes to govern-

ment contractors operating on federally-owned property.

One is levied on the gross receipts of all those doing busi-

ried out, would have to be deemed “federal enclaves.”

However, the court held that the imposition of taxes on

the activities of these private entities on federal land,

and on the property they used in connection therewith,

did not offend the Constitution.

Apparently the petitioners in that case recognized, as

they should, that the state taxes are operative in federally-

owned areas, absent consent to exclusive federal jurisdic-

tion. The tax statutes do not explicitly recite that they

are to be applied on federally-owned lands. See N.M.

Stat. Ann. §§ 72-16A-4, 72-16A-7 (Supp. 1975).° Yet

it is apparent that neither the parties nor the Court

thought it possible that this would bar the operation of

the tax. Instead, the judicial analysis proceeded by iden-

tifying the incidence of the tax, then inquiring whether

any of the taxable entities was an “agency or instru-

mentality so closely connected to the Government that

the two cannot realistically be viewed as separate en-

tities... .” 50 U.S. L. W. at 4330. Finding that none of

the petitioning companies fit this description, the Court

concluded that the taxes could validly be imposed on

them. The case thus underscores the unhelpfulness of

the state tax cases in establishing by analogy a presump-

tion against the application of District of Columbia taxes

to private parties on federal land. Indeed, a presump-

tion against District taxes, especially those enacted by

Congress, would be a constitutional anomaly since the in-

trusion on federal interests is much greater under the

® In conformity with the Supreme Court opinion, we cite the codi-

fication referred to by the parties rather than that now in force.

See N. M. Stat. Ann. §§ 7-9-1 et seq.

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facts of United States v. New Mexico. In that case, the

tax was imposed by an independent state legislature—a

separate sovereign—and the taxes were passed on directly

to the federal government.

Having found no persuasive basis for deviating from

§ 47-1507’s plain meaning,” we conclude that the Dis-

10 Appellant also raises some subsidiary issues which can be

disposed of briefly. It notes that there is no explicit exemption of

federally-owned personal property in either § 47-1507 or § 47-1508,

although all parties agree that such property is not subject to the

tax. It contends that if ITEL is denied a refund on the ground

that there is no explicit applicable exemption, federal property

must also be taxed. This is a complete non sequitur. By no stretch

of the imagination does the possibility that the exemption for

U.S. property may be implicit require that there also be an implied

exemption for appellant’s property. As we have shown above, there

is no persuasive basis for establishing an implicit exemption or

presumption in favor of private personalty on federal land.

ITEL contends that Congress’ usual practice has been to make

a specific provision for every instance in which the power of the

District government is intended to reach into federally-owned

areas within the District. However, Congress’s “usual practice”

is neither so extensive nor so consistent as to justify a presumption

in appellant’s favor.

Appellant cites D.C. Code 1981, § 4-116, which provides:

The provisions of the several laws and regulations within

the District of Columbia for the protection of public or private

property and the preservation of peace and order are extended

to all public buildings and public grounds belonging to the

United States within the District of Columbia.

However, our decision that the D.C. criminal code applies to acts

committed on federal land did not turn upon the existence of an

explicit provision, although § 4-116 was cited in a footnote. Me-

Eachin v. United States, D.C. App., 482 A.2d 1212, 1216 n.7 (1981).

ITEL also invokes the Buck Act, 4 U.S.C. §§ 104-110 (1976),

which is an explicit authorization of state sales and income taxes

on activities in federal areas. But the legislative history of the

lla

trict of Columbia personal property tax is applicable to

private personalty located on federally-owned land.

Affirmed.

was not included in the definition since Congress is the local

legislature for the District and any sales, use, or income taxes

enacted for the District are applicable in all areas within said

District. [S. Rur. No. 1625, 76th Cong., 8d Sess. 5 (1940).]

D.C. Code 1981, f 1-233(a) is also said to support a presumption

of noninterference in areas of os federal interest. It

provides in pertinent part:

The Council shall have no authority . . . to

(1) Impose tax on property of the United States or any of

the several states;

(3) Enact any act, or enact an act to amend or repeal any

Act of Congress, which concerns the functions or prop-

erty of the United States or which is not restricted in

its application exclusively in or to the District:

But the absence of any exemption for personal property on federal

land argues more persuasively for the contrary result.

Appellant also relies on the part of the Home Rule Act estab-

lishing the National Capital Service Area, in which most but not

all of ITEL’s property is located. D.C. Code 1981, § 9-142. See

note 2, supra. ITEL interprets the statute as extending limited

District authority (not including tax authority) into certain

the Act. D.C. Code 1981, § 9-142(h).

In sum, none of the congressional enactments to which we have

been referred provides a persuasive basis for erecting a presumption

the application of a D.C. tax statute in federal areas.

Rather, the intent behind each statute must govern. Absent a con-

trary indication in the legislative history, a gen ral statute is to be

applied to private parties throughout the District, regardless of

whether the locale of the relevant conduct or personal property

is federal or private land.

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SUPERIOR COURT OF THE

DISTRICT OF COLUMBIA

TAX DIVISION

Docket Nos. 3006

and 3007

ITEL CORPORATION

U.S. Trust COMPANY OF NEw YorkK/ITEL

Filed Apr. 29, 1981]

ORDER

Upon consideration of the motions for summary judg-

ment filed by the parties herein, the statement of ma-

facts as to which it is contended there is no genuine

and the memoranda of points and authorities filed

in support thereof, it is, this 27th day of April, 1981.

ORDERED: That the motion of respondent District

of Columbia for summary judgment be and the same

hereby is granted ; and it is,

FURTHER ORDERED: That petitioners’ motion for

summary judgment be and the same hereby is denied; and

it is

FURTHER ORDERED: That a judgment be, and the

same hereby, is entered in favor of respondent District

of Columbia and against petitioners for the personal

property tax years 1978, 1979 and 1980.

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/8/ John H. Fauntleroy

Judge

Send copies to:

Robert H. Koehler, Esq.

Richard M. Stolbach, Esq.

Patton, Boggs & Blow

2550 M Street, N. W.

Washington, D. C. 20037

Ms. Carolyn Smith

Finance Officer, D.C.

Richard L.

Urenthia M. Power

Assistant Corporation Counsels,

D. C., Dist. Bldg., Rm. 306

Office of the Corp. Counsel

14th & K Sts., N.W.

Washington, D.C.

(202) 737-6255

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GOVERNMENT OF THE DISTRICT OF COLUMBIA

DEPARTMENT OF FINANCE AND REVENUE

[SEAL]

November 27, 1979

Itel Data Products Corporation

1055 Thomas Jefferson Street, N.W.

Washington, D.C. 20007

Gentlemen:

We have received your claims for refund of personal

property taxes for tax years 1978, 1979 and 1980 on the

grounds that personal property located in federally owned

buildings is not subject to taxation.

In our opinion, these items must be reported with all

other personal property located in the District of Colum-

bia for the purpose of determining the personal property

tax.

Therefore, your claims for refund are denied.

Sincerely,

/s/ Jean Oliver

JEAN OLIVER

Acting Associate Director

ce: Patton Boggs & Blow

2550 “M” Street, N.W.

Washington, D.C. 20037

Attn: Richard M. Stolbach

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