Petition — Anderson County v. United States
Supreme Court brief1983
Ask Donna
What actually matters in this document.
Text
Office-Supreme Court, US
83-320 , ©iLeeg
MBE 26 1983
ALEXANDER UL STEVAS,
No. CLERK
IN THE
Supreme Court of the Bnited States
OcTOBER TERM, 1982
ANDERSON COUNTY, TENNESSEE
and
STATE BoaRD OF EQUALIZATION OF TENNESSEE,
Petitioners,
v.
UNITED STATES OF AMERICA
Respondent.
On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Sixth Circuit
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
GeEorGE JOHN KETO WiLLiaAM M. LEECH, Jr.
Counsel of Record Attorney General of
ALvorD & ALVORD Tennessee
918 Sixteenth Street, N.W.
Washington, D.C. 20006
(202) 393-2266
(Additional Attorneys Listed Inside Front Cover)
ee EE ————————————
St. Louis Law Printing Co., inc., 411 No. Tenth Street 63101 314-231-4477
Mike LAWSON
Haynes & ASSOCIATES
140 North Main Street
Goodlettsville, Tennessee
37072
(615) 859-1328
Of Counsel:
URBAN A. LESTER
ALVORD & ALVORD
918 Sixteenth Street, N.W.
Washington, D.C. 20006
(202) 393-2266
Attorneys for Petitioner
Anderson County, Tennessee
Jim G. CREECY
Deputy Attorney General
Counsel of Record
450 James Robertson
Parkway
Nashville, Tennessee 37219
(615) 741- 3160
CHARLES L. LEwis
Assistant Attorney General
450 James Robertson
Parkway
Nashville, Tennessee 37219
(615) 741-2968
Attorneys for Petitioner
State Board of Equalization
of Tennessee
QUESTION PRESENTED
Whether the Sixth Circuit properly reversed and remanded
the district court’s abstention and dismissal of a complaint by
the United States alleging that a real property tax levied against
its federal contractor was invalid on state and constitutional law
grounds while the contractor, at the direction and with the
financing of the United States, was contemporaneously
litigating the validity of the tax on state law grounds in on-going
proceedings in the state courts.
ili
TABLE OF CONTENTS
Page
RUINED 5's pac aat oversea dbs cee aedneueee i
I hus ain dip cs. 0'o ob Coe oe add ee oie ou Ue iii
PINE oc vs a kes cen d kb bw aoa ue ee v
I oss ch cmaa abuser wavelet dsusveDwadh l
CD Sikes aiaCoccac canes si neacd ive bate cee 2
PCL uss. ikwd pedaseverceN eas wih 2
PEI Siiice lh ud kis bb bSeAG ODOT RECO 2
es FeNe GAPINS END WET 6 oo co wk cn ce cbcncek eas 12
I. Pullman Abstention Is Appropriate Here
Because A State Court Determination May
PNG NE TIN oo wad we ki hoes bane eds 14
Il. Burford Abstention Is Appropriate Because
Of Tennessee’s Inherent Interest In Ad-
ministering Its Property Tax Laws.......... 17
Ill. Younger Abstention Is Appropriate Because
Plaintiff Seeks To Enjoin Collection Of State
ii as We hintecne ak ona Rees Reena 22
IV. Dismissal under Colorado River Is Ap-
propriate To Avoid Piecemeal Litigation And
Conserve Judicial Resources............... 25
IE bor ona Sdutad'ex'e.s ow cw once ccdmbeeeene 30
Appendix
A. Opinion of the United States District Court
for the Eastern District of Tennessee, filed
SRT 6 06% cues vhcktaulaceseee ue A-l
Opinion of the United States Court of Ap-
peals for the Sixth Circuit, filed April 20, 1983
Order of the United States Court of Appeals
for the Sixth Circuit, filed June 10, 1983, de-
nying petition for rehearing................
Order of the United States Court of Appeals
for the Sixth Circuit, filed August 9, 1983, de-
I SUT OE III ins oc sce: cb bens wens
Relevant Statutes from Tennessee Code An-
Ng athe in oc a larga dig: a phate ba wit ie
Relevant Statute from United States Code ...
Excerpt from State of Tennessee Assessors
I ins vin aede rey od ass een eR OOK
Order of the United States District Court for
the Eastern District of Tenriessee, filed July
23, 1980, directing parties to appear before
county and state boards of equalization .....
Excerpt from Contract No. W-7405-ENG-26
between Department of Energy and Union
Cereals COCROPMEIOR 6... ec vecesvccccnesss
Appeal by United States to Anderson County
Board of Equalization, dated August 28, 1980
Appeal by United States to State Board of
Equalization of Tennessee, dated January 13,
SE Cee cdvea cavabnsn seks uebatieaeeeeel
Letter of United States withdrawing appeal to
State Board of Equalization, dated January
ME Giduce aru ebensesncteceseeiaeras
A-4
A-42
M. Complaint filed by United States initiating
this case, filed February 12, 1982 in the
United States District Court for the Eastern
i NE So os wie wacdcaedeceee A-50
N. Petition for Review filed by Union Carbide
Corporation in Case No. 82-431-III in the
Chancery Court of Davidson County, Ten-
nessee, filed on March 8, 1982 ............. A-61
O. Opinion of the Chancery Court of Davidson
County, Tennessee in Case No. 82-431-III, fil-
Ne os rela cc ibreckxensdces A-74
TABLE OF AUTHORITIES
Cases
Burford v. Sun Oil Co., 319 U.S. 315 (1943) .......... 17,18
California v. Grace Brethren Church, ____ U.S. ___.,
Ee ee 25
Clearfield Trust Co. v. United States, 318 U.S. 363
SER Ah SIO ee 19
Colorado River Water Conservation District v. United
States, 424 U.S. 800 (1976) ......... 12,14,16,17,23,24,25
Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S.
ee ee se weidhlawe « 23,24
Juidice v. Vail, 430 U.S. 327 (1977) ..............065- 26
In re Levy, 574 F.2d 128 (2nd Cir. 1978) .............. 8
Moore v. Sims, 442 U.S. 415 (1979)... 2... 0.0... 0405- 27
Moses H. Cone Memorial Hospital v. Mercury Con-
struction Corp., ___. U.S. ___, 103 S.Ct. 927
er alr wis wa bare cick ld ccee nd RD 12,25,27,28
vi
Moses Leak Homes, Inc. v. Grant County, 365 U.S. 744
Ne ars <n aa pra gcthal Cn do-ho whee ya bie we 27
Railroad Commission v. Pullman Co., 312 U.S. 496
CE Se Le hs ur Co hues ease caaewen 8,14
Reconstruction Finance Corp. v. Beaver County, 328
Uo iia bib che ces suenesecws 19,20,21,22
United States v. Anderson County, 547 F. Supp. 18
oe ccna coda tne ces ce waeaen 8,9
United States v. Boyd, 378 U.S. 39 (1964) ....... 2,10,21,24,28
United States v. Bureau of Revenue of New Mexico, 291
EE CG, PED oo cc cécacewunsewcccuee 16
United States v. City of Detroit, 355 U.S. 466 (1958) ... 28
United States v. County of Fresno, 429 U.S. 452 (1977) . 28
United States v. Mays, 264 F.2d 317 (10th Cir. 1959) ... 22
United States v. Nevada Tax Commission, 439 F.2d 435
eae ak bee cl/ae tap eueke coneve 15
United States v. New Mexico, 455 U.S. 720(1982) ..... 10,24
United States v. Ohio, 614 F.2d 101 (6th Cir. 1979)..... 8,10,26
United States v. Standard Oil Co., 332 U.S. 301 (1947) . 21
United States v. Township of Muskegon, 355 U.S. 484
i a cw ee ct Mogae. oats ose d 28
United States v. Yazell, 382 U.S. 342 (1966)........... 19
Younger v. Harris, 401 U.S. 37 (1971) ............. 8,11,23,26
Vii
Statutes
Federal (United States Code)
Ee RED i odescchaccessssdeuaeewaes 2
SNE NEE 5.6 cba 0a base ted dwencaenee 24
State (Tennessee Code Annotated)
EL ass cb SONA we Re Oke ceases soe be eane 2
DE twin ap wen kes a eeeea 660s seavebenxal 2,17,18
CTS in wh awainnn gest ia ks banenaeweneen 2,4,14,15
a ENTE Sis en an uP St 2,6,7
§ 67-601(1)....... aes unk pee haa ee ke 2,4,6,8,14,15,19
Pa vic Sdawnvake von vexess sue 2,4,7,8,14,15,19
CS 505 Sanuy ocr avba de ccsdu ss cieahe ee 2,2?
EE, bdvia'y os W.p.0 v0 whe. ou 8a ws «eae 2,6,17
Ee Bikes kc babe bacin bane vee ton eee ee 2,24
Miscellaneous
Rule 19, Tennessee Rules of Appellate Procedure ...... 26
No.
IN THE
Supreme Court of the Bnited States
OcTOBER TERM, 1982
ANDERSON COUNTY, TENNESSEE
and
STATE BOARD OF EQUALIZATION OF TENNESSEE,
Petitioners,
Ve
UNITED STATES OF AMERICA
Respondent.
On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Sixth Circuit
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
The Attorney General of the State of Tennessee, on behalf of
the State Board of Equalization of Tennessee, and Anderson
County, Tennessee, petition for a Writ of Certiorari to review
the judgment of the United States Court of Appeals for the
Sixth Circuit entered in this proceeding on April 20, 1983.
OPINIONS BELOW
The opinion of the District Court (Appendix A at A-1) is
reported at 547 F. Supp. 18 (E.D. Tenn. 1982). The opinion of
the Court of Appeals (Appendix B at A-4) was entered on April
20, 1983 and has not yet been reported.
a, ee
JURISDICTION
The judgment of the Court of Appeals for the Sixth Circuit
was entered on April 20, 1983. The Order denying the peti-
tioners’ timely petition for rehearing with a suggestion for a
rehearing en banc was entered on June 10, 1983. (Appendix C at
A-14). This petition was filed within ninety (90) days of that
date. On August 9, 1983, the Court of Appeals denied peti-
tioners’ motion for stay of mandate pending the filing of this
petition. (Appendix D at A-15). The jurisdiction of this Court is
invoked under 28 U.S.C. § 1254(1).
STATUTES INVOLVED
The pertinent parts of the Tennessee Code Annotated, Sec-
tions 4-5-117, 4-5-322, 67-401, 67-501, 67-601(1), 67-602(6),
67-606, 67-831(3), 67-1805 (Supplement 1980), are set forth in
Appendix E at A-15. 28 U.S.C. § 1341 (1976) is set forth in Ap-
pendix F at A-32.
STATEMENT OF THE CASE
1. The United States owns in fee simple the Oak Ridge Reser-
vation, consisting of 37,185 acres of land in Anderson and
Roane Counties, Tennessee, upon which are located large
federally-owned production and research facilities. Union Car-
bide Corporation (‘‘Carbide’’) has a contract with the United
States Department of Energy (‘‘DOE’’) to perform certain work
and services related to nuclear energy and the production of
nuclear weapons components at the Oak Ridge Reservation.
The contractual relationship between the DOE and Carbide was
described by the Supreme Court in United States v. Boyd, 378
U.S. 39, 41 (1964), as follows:
Carbide’s contract obligates it to manage, operate and
maintain the Oak Ridge plants and facilities in accordance
with such directions and instructions not inconsistent with
the contract as the Commission deems necessary to issue
a ee
from time to time. In the absence of applicable instruc-
tions, Carbide is to use its best judgment, skill and care in
all matters pertaining to performance. Carbide is charged
with the duty of procuring materials, supplies, equipment
and facilities although the Government retains the right to
furnish any of these items. Payment for purchases is to be
made with government funds, and title to all property
passes directly from the vendor to the United States. Car-
bide is generally free to make purchases up to $100,000
without prior approval.
Although Carbide exercises considerable managerial
discretion from day to day in performing the contract, the
Commission retains the right to control, direct and super-
vise the performance of the work and has issued directions
and instructions governing large areas of the operation.
Carbide has no investment in the Oak Ridge facility and at
the time of this litigation employed some 12,000 employees
and supervisors to perform the contract. Its annual fee,
renego.iated periodically, was $2,751,000 at the time of
suit.
Although this Court wrote the Boyd opinion in 1964, the cur-
rent contract between Carbide and the United States has not
materially changed the relationship between the parties. One of
the plants that Carbide manages, operates and maintains under
the contract is the Y-12 Plant, which is located in Anderson
County, Tennessee.
2. On June 3, 1980, the Anderson County property assessor
notified Carbide of the Assessment by the County against the
Corporation’s separate taxable interest in the Y-12 Plant. The
county assessor had concluded that Carbide’s contractual rights
of access, possession, and use of the Government’s Y-12 Plant
in carrying out its contract to produce nuclear weapons com-
ponents are incidents of ownership under the bundle of rights
that make up property or ownership and are taxable ‘‘real pro-
wai
py
perty’’ under Tennessee law.’ While Tennessee purports to tax
all interests in real property pursuant to TENN. CODE ANN.
§§ 67-401, 67-601(1) and 67-602(6), these statutes have never
before been applied to interests in real property apart from a
general freehold, other than leasehold interests.
3. On July 15, 1980, the United States istituted an action in
the United States District Court for the Eastern District of Ten-
nessee, Northern Division in which the Government raised the
issues of whether Anderson County may levy, under Tennessee
law, a real property tax on the interest of Carbide, if any, in the
Y-12 Plant, and whether the United States Constitution pro-
hibits such tax. The United States also sought an injunction
against the County from proceeding with the taxation of Car-
bide. On July 23, 1980, the injunction was denied and the
United States and Anderson County were ordered by the district
court to appear before the Anderson County and Tennessee
State Boards of Equalization to determine the issues and, if
either were not satisfied, to appear again before the district
court. Appendix H at A-34. The United States did not file a
petition for an appeal from the interlocutory order.
The United States, pursuant to the court’s Order, and Car-
bide, at the Government’s direction, then filed appeals before
'The county assessor was guided by the State of Tennessee
Assessors Manual which on page AP-10 (Appendix G at A-33) states:
The term real property refers to the interest, benefits, and rights
inherent in the ownership of the physical real estate.
The benefits of ownership are derived from the Bundle of Rights
Theory, which claims that the owner has the right to use the real
estate, to sell it, to lease it, to enter it, or to give it away as he so
desires.
sy
the County Board.’ A copy of the August 28, 1980 appeal of the
United States before the County Board is at Appendix J at
A-38. In September, 1980, the County Board concluded that
Carbide had a separate taxable interest in the real property of
the Y-12 Plant, and that the value of the interest was
$370,000,000.
4. The United States on January 13, 1981 appealed the Coun-
ty Board’s decision to the State Board of Equalization on state
law grounds that (1) Tennessee law does not provide for taxa-
tion of Carbide, (2) the Y-12 Plant is exempt from taxation
under Tennessee law because it is owned by the United States,
and (3) the County Board assessment was excessive. The United
States then advised the State Board it intended to direct Carbide
to pursue its federal defenses in the federal court. These
defenses were that the County tax was invalid because it was an
illegal attempt to tax property owned by the United States and
that the tax discriminates against the United States. The United
States’ appeal of January 13, 1981 is at Appendix K at A-42.
Carbide filed a substantially identical appeal. The United States
subsequently withdrew its appeal.’
? The contract between the United States and Carbide provides that
the taxes assessed and the costs of any litigation will be allowable costs
if the contractor follows the directions of the United States with
regard to litigation concerning the taxes. See Article XXIV, State and
Local Taxes and Article XVIII, Litigation and Claims, Appendix | at
A-35. Indeed, in its appeals to the County and State Board, the United
States represented that ‘‘insofar as it is able to do so, it will require its
contractor, Union Carbide Corp.., to litigate any federal claims in the
Federal Courts.’’ Appendix J at A-38 and Appendix K at A-43.
Counsel for the United States in its argument before the Sixth Circuit
stated that the costs of Carbide’s litigation before the state courts is
being borne by the United States.
*By a letter dated January 28, 1981, the United States withdrew
from the appeal, neither submitting to the jurisdiction of the State
Board ‘‘nor waiving its sovereign immunity in any manner.’’ (Appen-
dix L at A-47).
a
On June 10, 1981, the Assessment Appeals Commission‘ rul-
ed that (1) the contractual relationship between the United
States and Carbide did not create a separate real property in-
terest in the Y-12 Plant that was taxable to Carbide under the
laws of Tennessee, (2) Carbide was exempt from taxation pur-
suanut to TENN. CODE ANN. § 67-501, which exempts ‘‘all
property of the United States . . . used exclusively for public...
purposes’’, (3) Carbide was an agent of the United States, and
(4) the tax discriminated against the United States and those
with whom it deals.’ The assessment was, accordingly, voided.
5. On June 15, 1981, Anderson County filed a petition to
review the decision of the Assessment Appeals Commission with
the State Board of Equalization. On July 20, 1981, the federal
district court dismissed, without prejudice, the United States’
complaint of July 15, 1980 on the ground that neither Anderson
County nor the United States had appeared before the court
within a year. On January 8, 1982, the State Board in a 4-3 deci-
sion reversed the decision of the Assessment Appeals Cominis-
sion, stating the tax assessment was valid. The State Board ad-
judged that (1) the United States had granted to Carbide the
rights and interests of access, possession and use of the Y-12
Plant for the purpose of performing its contract with the United
States and that such rights and interests are real property as
defined by TENN. CODE ANN. § 67-601(1), which rights must
be taxed as real property to Carbide pursuant to TEN'Y. CODE
* The State Board of Equalization pursuant to TENN. CODE
ANN. § 67-831 created the Assessment Appeals Commission and
delegated to the Commission the jurisdiction and duties conferred by
law upon the State Board to hear and act upon complaints and appeals
regarding assessment, classification and value of property for pur-
poses of taxation. Decisions of the Commission are subject to review
by the State Board.
* The Assessment Appeals Commission has five members. Four
members heard this case, three members voted that Carbide was not
taxable and one member abstained.
ANN. § 67-602(6), (2) Carbide was not exempt from taxation
pursuant to TENN. CODE ANN. § 67-501, which exempts ‘‘all
property of the United States . . . used exclusively for public...
purposes’’ because the tax was on Carbide and not the United
States, and (3) Carbide’s status under the contract was that of
an independent contractor and, consequently, the assessment
was not invalid under the United States Constitution.*
6. The United States on February 12, 1982, eighteen months
after its initial complaint, filed a second complaint in the district
court raising similar issues as in its first complaint. The United
States sought a declaration that the contract between Carbide
and the United States neither conveyed nor vested in Carbide
any real property ownership, that the State Board’s interpreta-
tion of the contract was erroneous, the attempted imposition of
tax was unconstitutional because it constituted a discriminatory
tax against the United States, and the tax was void since Car-
bide, under its contract with the Government, acquired only the
privileges of access, possession and use of the Y-12 Plant which
the United States alleged were not taxable under the laws of the
State of Tennessee.’
7. After the United States reinstituted its court action in the
district court, Carbide at the direction of the Government on
March 8, 1982, pursuant to the Tennessee Uniform Ad-
ministrative Procedures Act, filed in the Davidson County
Chancery Court a petition for judicial review of the State
Board’s decision. (Appendix N at A-61). The petition in
paragraph 5, Appendix N at A-64, states:
* Although Carbide did not argue any federal defenses before the
State Board, Anderson County did so because constitutional issues
were involved which had to be considered by the State Board.
’ In this second complaint filed with the district court, the United
States did not seek an injunction against the on-going proceedings.
Appendix M at A-S0. In its first complaint filed July 15, 1980, the
United States had sought such an injunction.
— oo
5. The issues raised in and grounds for this Petition for
Review by Union Carbide Corporation are:
A. The decision of the State Board of Equalization is
violative of Tehnessee statutory law in its resolution of the
following questions.
(a).
(b) Whether Union Carbide Corporation owns any in-
terest, separate from the general freehold, in the Y-12
Plant facility that would, within the meaning of Sec.
67-601(1) or 67-602(6) or any other Tennessee statute,
authorize the assessment of ad valorem real property taxes
against Union Carbide Corpovation.
(c) Whether the valuation of the real property interest of
Union Carbide Corporation as fixed by the Board of
Equalization, if any such real property interest exists, is ex-
cessive.
8. On April 15, 1982, the district court granted the motion of
the State of Tennessee and Anderson County to abstain and
dismiss the complaint of the United States. United States v.
Anderson County, Tennessee, 547 F. Supp. 18 (E.D. Tenn.
1982). The district court concluded that the present case was in-
distinguishable from United States v. Ohio, 614 F.2d 101 (6th
Cir. 1979), where the Sixth Circuit relied on the abstention doc-
trines set forth in Railroad Commission v. Pullman Co., 312
U.S. 496 (1941), and Younger v. Harris, 401 U.S. 37 (1971), and
adopted the approach of the Second Circuit /n re Levy, 574
F.2d 128 (2nd Cir. 1978). The district court found that the at-
tempt of the United States to distinquish Ohio, on the ground
that there was no unsettled question of state law was without
merit, stating,
Union Carbide argues in its petition for review filed in the
Chancery Court that the assessment is contrary to Ten-
nessee law in that the Y-12 Plant is used for a public pur-
a
pose and is, therefore, exempt from taxation pursuant to
Tenn. Code Ann. § 67-501, and further that under Ten-
nessee law it has no taxable interest in the Y-12 Plant. The
issues raised by Carbide are important ones and relate only
to state law. The Sixth Circuit [in Ohio] attached no
significance to the fact that the Government relied only on
Ohio law in its complaint. The Court recognized that the
constitutionality of the state taxation was ‘‘bound to sur-
face.’’* 614 F.2d at 108. In the present case the United
States raised the constitutional issue in its complaint.
547 F. Supp. at 19, Appendix A at A-2—3. The district court
stated that abstention was required where the possibility of fric-
tion between the state and federal governments could thus be
avoided. Then the district court would not be required to make
a constitutional determination based on a speculative interpreta-
tion of state law, and the on-going state proceedings might
moot the constitutional issues. Further, the district court ruled
that ‘‘the United States will not be prejudiced by the Court's
abstention in this case. The United States may seek to intervene
in the state proceeding and the constitutionality of the taxation
can be raised, either by Union Carbide or the United States.’’
$47 F. Supp. at 19-20. On May 6, 1982, the United States ap-
pealed the district court’s ruling to the Sixth Circuit.
9. On February 11, 1983, the Chancery Court of Davidson
County, Tennessee affirmed the State Board decision ruling
that Carbide has a separate interest in real property of the Y-12
Plant under Tennessee law and that the interest is subject to
property taxation in Tennessee and is not exempt under state or
federal law. Although Carbide refrained from raising any
federal defenses before the Chancellor, the State of Tennessee
* In the case at bar, the constitutional issues surfaced and were ruled
on by the State Assessment Appeals Commission, the State Board of
Equalization and the Chancery Court.
—
and Anderson County did argue the constitutional issue,
because the possible immunity of Carbide from State taxation
had to be addressed.’ The Chancellor's Memorandum is at Ap-
pendix O at A-74.
10. On April 20, 1983, the Sixth Circuit reversed the district
court’s absention and dismissal of the United States’ complaint
filed February 12, 1982, stating that a federal forum may ab-
dicate its jurisdictional powers only in the most exceptional cir-
cumstances. The court distinquished United States v. Ohio, 614
F.2d 101 (6th Cir, 1979), stating that while abstention was
recognized in that case, it was because a federal constitutional
issue might have been mooted or presented in a different
posture by a state court determination of pertinent state law. In
discussing Pu//man, the Sixth Circuit concluded there were no
unsettled questions of State law in the Carbide case, stating
‘the relevant sections of the Tennessee Code Annotated are
clear in imposing an ad valorem tax on real property interests
and need no judicial construction’’. Appendix B at A-9. Rather,
the Sixth Circuit concluded that the unsettled question is
whether the contractual relationship between Union Car-
bide and the United States conveyed to Union Carbide any
real property interest in the Y-12 Plant. A negative
response to the inquiry vitiates the necessity of ascertaining
the authority of the State of Tennessee to impose a tax
upon Union Carbide. Further, interpretation of a contract
wherein the United States is a party is a federal issue. (em-
phasis in original)
Appendix B at A-!0.
* In Boyd, supra, Carbide was found by this Court not to be im-
mune, under the same contractual arrangement, from state taxation.
In United States v. New Mexico, 455 U.S. 720 (1982), this Court
found three other DOE management contractors were not immune
from state taxation.
ae
11. The Sixth Circuit then addressed the Younger v. Harris,
401 U.S. 37 (1971), brand of abstention, noting the Younger
doctrine applies where (1) there is an on-going proceeding, (2)
the proceeding is criminal, and (3) no unusual circumstances ex-
ist which would counsel against abstention, such as inability to
raise a constitutional challenge in state proceedings. The court
stated that the second prong of the Younger tests has been ex-
panded to warrant abstention in non-criminal proceedings but
only ‘‘when important state interests are involved.’’ Appendix
B at A-11. The court assumed, without deciding, that the first
prong was satisfied, but then stated the second was not. The
court said that, ‘‘Tennessee’s interest in administering its own
tax laws without federal intervention may qualify as an impor-
tant state interest when the tax is assessed against an entity other
than the United States.’’ Appendix B at A-11.
in hie
REASONS FOR GRANTING THE WRIT
The Sixth Circuit’s reversal of the decision of the district
court to abstain and dismiss the United States’ claim conflicts
with this Court’s guidance enunciated in Colorado River Water
Conservation District v. United States, 424 U.S. 800 (1976), and
Moses H. Cone Memorial Hospital vy. Mercury Construction
Corp., __. U.S. ___, 103 S.Ct. 927 (1983). While the Sixth
Circuit quotes Colorado River, 424 U.S. at 813, stating the
abstention doctrines are ‘‘extraordinary and narrow
exception[s] to the duty [of the federal forum] to adjudicate
[those] controvers[ies] properly’’ asserted, it fails to note the
three general categories this Court discussed in which abstention
is appropriate, each of which applies directly to the case at bar.
Colorado River, 424 U.S. at 813-817.
Moreover, this Court in Moses H. Cone Memorial Hospital,
—__.:;U.S. ___, —__., 103 S.Ct. 927, 836, construed the Co/-
orado River decision to establish a fourth category of absten-
tion. The Court reasoned
that the District Court’s dismissal was proper on another
ground — one resting not on consideration of state-federal
comity or on avoidance of constitutional decisions, as does
abstention, but on ‘‘considerations of [wJise judicial ad-
ministration, giving regard to conservation of judicial
resources and comprehensive disposition of litigation.”’
Dismissal in the case sub judice was appropriate and in accor-
dance with the guidance set forth in Colorado River and Moses
H. Cone.
In the case at bar, the application of uncertain state law to
determine the validity of the real property tax imposed on Car-
bide is the predicate to the emergence of the constitutional issue.
Carbide, at the direction and with the funding of the United
States, has denied its taxability under state law in proceedings
over a three year period before the state agencies and courts.
eee ee
The decision of the Chancery Court of Davidson County, Ten-
nessee in this case is the first ruling ever in this state allowing the
taxation of real property interests such as those involved here.
That case is presently pending before the Tennessee Court of
Appeals and will undoubtedly be appealed to the Tennessee
Supreme Court. Those issues have now been raised and will be
raised again by other taxing authorities in Tennessee, indicating
this is a matter of significant public importance involving a
governmental function, property taxation, inherent to state
government and essential to its continued existence.
The United States in its brief before the Sixth Circuit re-
quested a ‘‘uniform ruling’’ for all its DOE facilities. While
such a ruling would be in contravention of established case law,
as will be detailed below, it is indicative of the importance of
this case in setting precedents for procedures which have been
followed and which have resulted in state and federal jurisdic-
tional conflict, or potential conflict, and confusion as to
previous rulings of this Court.
Since it is important to the State of Tennessee to follow order-
ly and established procedures for property valuation and taxa-
tion, the Sixth Circuit decision marks an unwarranted intrusion
on the right of Tennessee to interpret its own statutes. Further,
a declaratory judgment suit serves to delay the imposition of a
state tax and is counter to the intent of the Anti-Injunction Act.
The procedure followed by the United States of litigating
simultaneously in state and federal proceedings is an unwise use
of judicial resources.
The only reasonable course of action in this case was that
taken by the district court, abstention from and dismissal of the
federal complaint. The decision of the Sixth Circuit would per-
mit needless, expensive and confusing parallel litigation of this
matter in the state and federal courts. No case presents a clearer
justification for abstention and dismissal than does the case at
bar. Presently, Carbide in its brief before the Tennessee Court
an G0 ae
of Appeals, complains of the ‘‘dilemma’’ posed by federal and
state concurrent suits, a dilemma created by the procedures
devised by the United States in directing Carbide’s litigation.
This Honorable Court should exercise its supervisory powers
and resolve this jurisdictional controversy, not only for the
resolution of this particular case, but also for guidance in future
cases of this nature.
I.
Pullman Abstention Is Appropriate Here Because A State
Court Determination May Moot Federal Issues.
In Colorado River, this Court stated:
Abstention is appropriate ‘‘in cases presenting a federal
constitutional issue which might be mooted or presented in
a different posture by a state court determination of perti-
nent state law’’ . . . . Railroad Comm’n of Texas v.
Pullman Co., 312 U.S. 496 (1941).
424 U.S. at 814.
The Sixth Circuit concluded that in this case there are no
unsettled questions of state law nor is there a need for the state
court to interpret an ambiguous state statute because the ‘‘rele-
vant sections of the Tennessee Code Annotated are clear in im-
posing an ad valorem tax on real property interests and need no
judicial construction’’. Appendix B at A-9. The relevant Ten-
nessee laws which the Sixth Circuit finds clear are (1) TENN.
CODE ANN. § 67-401 which states that property shall be taxed
except such as may be specifically exempt,(2) TENN. CODE
ANN. § 67-601(1) which defines ‘‘real property’’ for tax pur-
poses to include land, buildings, structures, affixed machinery
and equipment and ‘‘all rights thereto and interests therein,
equitable as well as legal’’, and (3) TENN. CODE ANN. §
67-602(6) which states that ‘‘all interests of whatsoever
character . . . in real property’’ owned separate from the general
—
freehold, shall be assessed to the owner of that interest as real
property.'° However, while these statutes have been applied by
the Tennessee Supreme Court to tax fee simple titles and
leasehold interests, the issue of whether other interests are tax-
able has never reached that Court.
In the course of this appeal, the Tennessee tax authorities
have differed on whether Carbide’s possession and use of the
Y-12 Plant is taxable under Tennessee law. The Assessment Ap-
peals Commission ruled that Carbide was not taxable, the State
Board of Equalization reversed 4-3, and the Chancery Court af-
firmed. The Chancery Court’s ruling is the first judicial decision
in Tennessee on this point and has been appealed by Carbide to
the Tennessee Court of Appeals.
Faced with the fact that the pertinent Tennessee law has never
been interpreted by any Tennessee appellate court, the Sixth
Circuit cites United States v. Nevada Tax Commission, 439 F.2d
435 (9th Cir. 1971), for the proposition that abstention was
deemed inappropriate where the state taxing statute was facially
unambiguous irrespective of the fact that the statute has never
been construed by the state courts. Yet, the Ninth Circuit in
Nevada Tax Commission, in upholding the district court’s
refusal to abstain, relied heavily on the fact that while ‘‘the use
tax provision had not been considered by the Nevada courts,
there had been consistent rulings on the critical language of the
statute by courts of other states which have similar statutes’’.
439 F.2d at 440. Such interpretation diminished the amount of
ambiguity of the statute in the eyes of the district court. No
party to the judicial proceedings involved in the case at bar,
however, has pointed to a state having a similar statute which
may have had clarifying judicial interpretation.
'° TENN. CODE ANN. §§ 67-401, 67-601(1) and 67-602(6) are
found in Appendix E at A-21—A-26.
—
The Sixth Circuit cited United States v. Bureau 0, Revenue of
New Mexico, 291 F.2d 677 (10th Cir. 1961), for the proposition
that abstention is inappropriate where a state taxing statute is
unambiguous and leaves no room for construction. The Tenth
Circuit in discussing the New Mexico statute states:
The New Mexico statute in express terms makes the tax ap-
plicable for sales of metalliferous mineral ores to the
United States, its department or agencies, and exempts any
such sales made to the State of New Mexico and to
societies, hospitals, fraternal or religious organizations not
organized for profit. The statute is unambiguous and
leaves no room for construction.
291 F.2d at 679.
There was no room for interpretation of the New Mexico
statute, which patently discriminated against the United States.
However, in the case at bar, Carbide before the state courts and
the United States in its complaint disagree with the State
Board’s and the Chancery Court’s interpretation of the Ten-
nessee statute. Moreover, the Tennessee administrative
authorities passing on the issue were sharply divided. The Sixth
Circuit clearly misconstrued the Tennessee law and the pro-
ceedings underway in reaching the conclusion that there is no
unsettled question of state law in this case. Any federal court in-
terpretation of the Tennessee statute at this time is purely
speculative. If the laws of Tennessee are found not broad
enough to cover an interest in real property such as Carbide has
in the Y-12 Plant, the constitutional issues will be moot.
The first category of Colorado River holds that abstention is
appropriate where constitutional issues may be mooted by a
state court decision. Thus, abstention by the federal court was
appropriate.
~ae ee
Il.
Burford Abstention Is Appropriate Because Of Tennessee's In-
herent Interest In Administering Its Property Tax Laws.
In Colorado River, this Court identified a second abstention
category:
Abstention is also appropriate where there have been
presented difficult questions of state law bearing on policy
problems of substantial public import whose importance
transcends the results in the case at bar (citations
omitted) . . . In some cases, however, the state question
itself need not be determinative of state policy. It is enough
that exercise of federal review of the question in a case and
similar cases could be disruptive of state efforts to establish
a coherent policy with respect to a matter of substantial
policy concern.
424 U.S. at 814, citing Burford v. Sun Oil Co., 319 U.S. 315
(1943).
This case is important to the general public in Tennessee,
which has a vital interest in seeing that the tax laws of the state
are administered under a consistent plan that assures uniformity
of taxation so that each taxpayer pays its just share of the taxes.
Toward this end, the Tennessee legislature has established a
system of administrative and judicial review of any complaints
and appeals from the assessment of taxes which centers on the
State Board of Equalization.
Under the Tennessee system of taxation, the State Board of
Equalization is charged with the principal responsibility ‘‘to ef-
fect the equalization of assessments, in any taxing jurisdiction
within the State... .’"” TENN. CODE ANN. § 67-831(a)(3).
Judicial review of State Board decisions is taken pursuant to
TENN. CODE ANN. § 4-5-322 of the Uniform Administrative
Procedures Act. The State Board has broad discretion to review
ae ies
all matters of assessment. Its decisions are subject to judicial
review and can be reversed, in essence, for constitutional or
statutory violations, abuse of discretion, or lack of substantial
evidence. TENN. CODE ANN, § 4-5-322(h).
It would be disruptive to the Tennessee taxing procedures and
the efforts of the state to equalize tax assessments if the federal
courts defined the nature of ‘‘real property’’ for tax purposes,
for even to declare that rights do, or do not, exist under the con-
tract, in this instance, would require an interpretation of state
property laws by a federal court, and since they are unsettled,
the State of Tennessee would find its statutes effectively being
fashioned not by its own administrative and judicial procedures
but by a federal court. As Justice Douglas stated in a concurring
opinion in Burford v. Sun Oil Co., 319 U.S. 315, 335 (1943).
The Courts do not sit merely to enforce rights based on
orders of the state administrative agency. They sit in judg-
ment on that agency. That, to me, is the crux of the matter.
If the federal courts undertook to sit in review, so to speak,
of this state administrative agency, they would in effect ac-
tively participate in the fashioning of the state’s domestic
policy. That interference would be a continuing one, as the
opinion of the Court points out. Moreover, divided
authority would result. Divided authority breeds
friction. ...
The Sixth Circuit stated that the unsettled question, rather
than being one of state law, is
whether the contractual relationship between Union Car-
bide and the United States conveyed to Union Carbide any
real property interest in the Y-12 Plant. A negative
response to the inquiry vitiates the necessity of ascertain-
ing the authority of the State of Tennessee to impose a tax
upon Union Carbide. Further, interpretation of a contract
wherein the United States is a party is a federal issue.
United States v. Allegheny County, 322 U.S. 174 (1944).
(emphasis in original)
—
While the interpretation of Carbide’s contractual relationship
and the interest conveyed to Carbide may be a federal issue, it is
not a substantial issue in this case, for all parties to the litigation
agree that the contract conveys to Carbide the right of access
and use in the Y-12 Plant for the performance of its contract
and no contractual interpretation is necessary.'' It is whether
the right of access and use is taxable as real property that is at
issue, and, finally, the real question is whether federal or state
law defines ‘‘real property’’.
Where federal law governs, but there is no Congressional
guidance on the subject, it is for the federal courts to fashion
the governing rule of law according to their own standards.
Clearfield Trust Co. v. United States, 318 U.S. 363 (1943). In
this regard, ‘‘This Court’s decisions applying ‘federal law’ to
supersede state law typically relate to programs and actions
which by their nature are and must be uniform in character
throughout the nation.’’ United States v. Yazell, 382 U.S. 342,
354 (1966). Rights of property ownership are not at all uniform
among the fifty states. Under the federal system, property
ownership is governed by state law. Reconstruction Finance
Corp. v. Beaver County, 328 U.S. 204 (1946).
'‘' Paragraph 34(C) of the United States’ complaint in the district
court states:
(C) Even though Carbide enjoys the privilege of access in and to
the Y-12 Plant and is using the real property of the Y-12 Plant
solely for the purposes of performing work for the Government
under its contract, defendant Anderson County cannot tax
Union Carbide for the privilege because Tennessee law does not
permit taxing private companies for the privilege of possessing
or using tax-exempt real property.
Appendix M at A-59.
Carbide’s brief, in the case pending before the Court of Appeals of
Tennessee, Middle Section, states that the Chancery Court erred
in finding, it being the first Tennessee Court to so hold, that
T.C.A. 67-601(1) and T.C.A. 67-602(6) are broad enough to in-
clude as taxable a possessory interest in real property when the
fee in the property is separately owned by another.
—~ pe
In Reconstruction Finance Corp., Section 10 of the
Reconstruction Finance Corporation Act, as amended, con-
sented to state and county taxation of ‘‘any real property’’ own-
ed by the Corporation, but the statute itself did not define ‘‘real
property’’. A real property tax was levied by Beaver County,
Pennsylvania against machinery used by a lessee of Reconstruc-
tion Finance Corp. for the manufacture of airplane propellers
for the Government. Although the lease contract provided that
the machinery should ‘‘remain personalty notwithstanding the
fact it may be affixed or attached to realty’’, the Pennsylvania
Supreme Court applied a state definition of ‘‘real property’’ so
as to treat machinery, equipment, fixtures and the land on
which a manufacturing establishment is located as an integral
real property unit and upheld the tax.
On appeal, the United States argued to this Court that state
law should not govern the definition of what constitutes ‘‘real
property’ for local taxation, but rather the federal courts
should define the terms ‘‘real property’’ when it is used in a
federal statute, so that Congress’ laws could operate uniformly
throughout the nation and the federal programs remain unim-
paired.'? This Court held in Reconstruction Finance Corp.,
however, that since the federal statute involved did not define
‘‘real property’’, the state law definition must be used, as long
as the state law does not discriminate against the Government or
patently run counter to terms of the Federal Act. The Court
concluded:
Concepts of real property are deeply rooted in state tradi-
tions, customs, habits, and laws. Local tax administration
‘2 In the case at bar, the United States made the identical argument
before the Sixth Circuit, when it defined its interest to be a ‘‘nation-
wide, consistent and uniform interpretation of its Atomic Energy
Contracts, and a uniform and consistent interpretation of its owner-
ship rights in the various atomic energy weapons plants and facilities
in the United States.’’ Page 23 of the United States’ brief before the
Sixth Circuit.
21 —
is geared to those concepts. To permit the states to tax, and
yet to require them to alter their long-standing practice of
assessments and collections, would create the kind of con-
fusion and resultant hampering of local tax machinery
which we are certain Congress did not intend. The fact that
Congress subjected Defense Plant Corporation’s proper-
ties to local taxes ‘‘to the same extent according to its value
as other real property is taxed’ indicated an intent to in-
tegrate Congressional permission to tax with established
tax law assessment and collection machinery.
328 U.S. at 210.
Some seven years after Reconstruction Finance Corporation,
by the Act of August 13, 1953 (Ch. 432, 67 Stat. $75), Congress
repealed former section 9(b) of the Atomic Energy Act of 1946,
which had exempted from state taxation Carbide and the other
Atomic Energy Commission contractors, and placed them in
the same position as other government contractors regarding
taxation by state and local governments, that is, having only
such immunity from taxation as arises by virtue of the Constitu-
tion as interpreted by the courts. United States v. Boyd, 378
U.S. 39, 49 (1964). In repealing section 9(b), Congress did not
provide any guidelines as to the definition of taxable property;
thus Reconstruction Finance Corporation, which left taxation
of real property to state court determination, is appropriate.'’
This Court, in discussing where in its choice of applicable law it
has selected state law, noted in United States v. Standard Oil
Co., 332 U.S. 301, 309 (1947), that
it may fairly be taken that Congress has consented to ap-
plication of state law, when acting partially in relation to
federal interests and functions, through failure to make
'? In the case at bar, the Sixth Circuit erroneously based its decision
in this regard on United States v. Allegheny, 322 U.S. 174 (1944). This
Court has noted the difference between A/legheny and Reconstruction
Finance Corp., See United States v. Yazell, 382 U.S. 341, 354 n. 29.
~~
other provision concerning matters ordinarily so governed.
(citing) Blair v. Commissioner, 300 U.S. 5; Reconstruction
Finance Corp. \. Beaver County, 328 U.S. 204.
Accordingly, in 1959, when the Tenth Circuit was faced with
the issue of whether chattel mortgages of the Commodity Credit
Corporation were entitled to priority over tax liens of Kiowa
County, Colorado, the court noted that the Commodity Credit
Corporation Charter Act, did not define grain storage facilities
financed by the Commodity Credit Corporation as to whether
they were personal or real property and in United States v.
Mays, 264 F.2d 317, 320 (10th Cir. 1959), stated,
And there being no Congressional provision making the
classification for such purpose, in the absence of objec-
tionable discrimination against the security interest of
Commodity, the question whether the buildings con-
stituted personal property for purposes or local taxation
under the state law or constituted integrated elements of
integral real property units for such purpose must be deter-
mined by the law of Colorado. Reconstruction Finance
Corp. v. Beaver County, 327 U.S. 204, 66 S.Ct. 992, 90
L.Ed. 1172.
The importance of this Court’s teachings in Reconstruction
Finance Corporation, and as applied in another context by
Mays, is that the unseemly potential conflicts between federal
and state tribunals interpreting peculiarly state law matters are
avoided when it is left to the state involved to define the
parameters of property interests for tax purposes absent a Con-
gressional mandate that another rule snould apply. Thus, in this
case, these considerations also justify abstention by the district
court.
Ill.
Younger Abstention Is Appropriate Because Plaintiff Seeks To
Enjoin Collection Of State Taxes.
—
In Colorado River, this Court identified a third abstention
category:
Finally, abstention is appropriate where, absent bad faith,
harassment, or a patently invalid state statute, federal
jurisdiction has been invoked for the purpose of restrain-
ing state criminal proceedings. Younger v. Harris, 401
U.S. 157 (1943) . . . or collection of state taxes, Great
Lakes Dredge & Dock Co. \. Huffman, 319 U.S. 293
(1943).
424 U.S. at 816.
The case at bar falls squarely in category three of this Court's
Colorado River abstention analysis. The United States does not
allege, nor can it creditably be claimed, that the state pro-
ceedings involve ‘‘bad faith, harassment or a potentially invalid
State statute.’’ Indeed, the Sixth Circuit dees not even comment
on that issue.
Distinguishing Younger, the Sixth Circuit notes that the
doctrine facially applies where (1) there is an on-going or
pending state proceeding, (2) the proceeding is criminal
and (3) no circumstances exist which would counsel against
abstention, such as prosecution under a flagrantly un-
constitutional statute, bad faith prosecution or inability to
raise the constitutional challenge in the state proceeding.
The second prong of the Younger three-tier test has been
expanded to warrant abstention in non-<riminal pro-
ceedings but only when ‘‘important state interests are in-
volved.’’
The court below assumes, without deciding, that in the ins-
tant cause the first and third prongs are satisfied, but that ‘‘Ten-
nessee’s interest in administering its own tax laws without
federal intervention may qualify as an important state interest
when a tax is assessed against an entity other than the United
States’. (emphasis in the original). Appendix B at A-11). The
=
lower court is in error. In this case, the County has not assessed
the United States, but has assessed Carbide’s separate and
distinct taxable interest in the Y-12 Plant, and Carbide is
litigating the tax in the state courts. This Court has ruled that
Carbide is an independent contractor and is not an instrumen-
tality of the Government. United States v. Boyd, 378 U.S. 39
(1964). Contrary to the opinion of the Sixth Circuit, Carbide
does not stand in the ‘Government's shoes’’ and thus does not
enjoy the Government’s immunity. U.S. v. New Mexico, 455
U.S. 720 (1982). The legal incidence of the real property tax is
upon Carbide. See TENN. CODE ANN. § 67-1805. While the
United States may be a ‘‘party of interest"’, it is solely because it
volunteered pursuant to its contract to assume the economic
burden of the tax. It is clear that Anderson County is
attempting to collect a real property tax from Carbide, not the
United States, and that the United States’ complaint in the
district court is restraining that collection.
This Court's Colorado River third category abstention doc-
trine is implicitly recognized in the Anti-Injunction Act, 28
U.S.C. § 1341 (1976). While the United States has not sought an
injunction or other coercive relief in the state courts, the fact
that it seeks a declaratory judgment in the district court that
Carbide is not taxable under Tennessee law and that the tax is
unconstitutional has the same effect. As this Court stated in
Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293,
299:
It is true that the Act of Congress speaks only of suits ‘‘to
enjoin, suspend, or restrain the assessment, levy, or collec-
tion of any tax’’ imposed by state law, and that the
declaratory judgment procedure may be, and in this case
was, used only to procure a determination of the rights of
the parties, without an injunction or other coercive relief.
It is also true that that procedure may in every practical
sense Operate to suspend collection of the state taxes until
the litigation is ended.
= Po
See California v. Grace Brethren Church, —_. U.S. , 102
S.Ct. 2498 (1982). Abstention in this case is thereby in accord
with this Court’s third abstention category enunciated in Co/-
orado River.
IV,
Dismissal Under Colorado River Is Appropriate To Avoid
Piecemeal Litigation And Conserve Judicial Resources.
Although it is petitioners’ contention that this case requires
abstention under the three categories above, there is an alter-
native fourth ground which requires a reversal of the circuit
court’s decision in the instant case. This Court held in Co/orado
River, 424 U.S. at 817 that:
there are principles unrelated to considerations of proper
constitutional adjudication and regard for federal-state
relations which govern in situations involving the contem-
poraneous exercise of concurrent jurisdictions, either by
federal courts or by state and federal courts. These prin-
ciples rest on considerations of ‘‘{wJise judicial administra-
tion giving regard to conservation of resources and com-
prehensive disposition of litigation’’. Kerotest Mfg. v.
C-O-Two Fire Equipment Co., 342 U.S. 180, 183 (1952).
This Court stated that in balancing jurisdiction, principles
vary in importance from case to case. Avoidance of piecemeal
adjudication is one such principle. See Moses H. Cone
Memorial Hospital v. Mercury Construction Co., _—. U.S.
—___., 103 S.Ct. 927 (1983). For three years, under the Govern-
ment’s direction and financing, Carbide has been, and is today,
challenging in sate proceedings the very taxes the United States
seeks to litigate in the district court. By directing its contractor
to avoid raising constitutional issues in the state proceedings,
and by refusing itself to submit to the jurisdiction of the state as
ordered by the district court, the United States seeks 19 litigate
the case contemporaneously in parallel state and federal pro-
a
ceedings. While the United States reserves the right to raise con-
stitutional issues as well as state issues in the federal court, Car-
bide’s challenge in the state courts inevitably raises questions of
constitutionality that must be addressed. The Tennessee boards
and court have all ruled on the constitutional issues. An attempt
to separate artificially the constitutional questions and reserve
them for a federal forum and also argue state issues in both state
and federal forums is a course of action that will result in confu-
sion as state and federal tribunals rule piecemeal or in toto on
the same issues.
These difficulties were avoided by an earlier ruling of a dif-
ferent Sixth Circuit panel in United States v. Ohio, 614 F.2d 101
(6th Cir, 1979), where that court attached no significance to the
fact that the Government relied only on state law defenses. The
court held that the ‘‘submerged question of the constitutionality
of the state taxation was bound to surface’ and abstained and
dismissed, referring the case to the appropriate Ohio boards and
courts for a decision on all the issues. This case is in-
distinguishable from Ohio and thus the present ruling of the
Sixth Circuit conflicts with its earlier decision.
This Court has stressed that the pertinent inquiry in deciding
whether to apply the Younger doctrine is whether the state pro-
ceedings afford an adequate opportunity to raise constitutional
claims. The irony of this case is that the United States was
ordered by a federal court to proceed through the state ad-
ministrative bodies and courts and, after initially filing with the
County Board of Equalization, refused thereafter to submit to
state jurisdiction, directing its contractor to refrain from argu-
ing constitutional issues in the state courts. Clearly, the oppor-
tunity to raise constitutional issues is present.'* See Juidice v.
'* Rule 19(e) of the Tennessee Rules of Appellate Procedure will
allow the United States to Intervene in the state proceedings. The con-
stitutional issues will already be before the state appellate court.
Vail, 430 U.S. 327, 337-338 (1977). This Court has ruled that if
the opportunity to raise constitutional issues is afforded, proper
deference to the state’s interest in its on-going proceedings in its
own forums requires that its judiciary be allowed to consider
constitutional issues. Moore v. Sims, 442 U.S. 415 (1979).
This Court in Moses H. Cone Memorial Hospital, U.S.
at___, 103 S.Ct. at 937, citing Colorado River, also stated that
litigation should occur in the forum with ‘the greatest ex-
perience and expertise assisted by state administrative officers
acting under state courts’. This case concerns taxation of real
property which, if taxable, will involve valuation. For the state
to have any semblance of equality of its assessments, valuation
must be determined by the County or State Boards of Equaliza-
tion in accordance with TENN. CODE ANN. § 67-606. The
forums having greatest expertise in ad valorem taxation are the
state board and the state courts, and it is those forums that most
likely assure equality in taxation. ‘‘Federal courts may not
assess or levy taxes."’ Moses Lake Homes, Inc. et al. v. Grant
County, 368 U.S. 744, 752 (1961).
Moreover, there are other factors to consider in determining
jurisdiction.
In addition, we noted that other factors in this case tended
to support dismissal - the absence of any substantial pro-
gress in the federa! court litigation; the presence in the suit
of extensive rights governed by state law; . . . and the
Government’s previous willingness to litigate similar suits
in state court.
Moses H. Cone Mem. Hosp., 103 U.S. at 937, citing Colorado
River.
In the case at bar, no progress has been made in the federal
court litigation, whereas after three years the state proceedings
—
are pending before the Tennessee Court of Appeals. This
lawsuit concerns extensive rights governed by state law as
discussed under Parts I and II. Prior to this case, the United
States in similar cases has shown a willingness to litigate in state
courts. In United States v. Boyd, 378 U.S. 39 (1964), and other
cases, the Federal Government intevened in state proceedings
on state tax matters. In Boyd, Tennessee sales and contractor
use taxes had been imposed on Carbide as a result of its contrac-
tual relationship with the United States. The Tennessee
Supreme Court held that Carbide was an independent contrac-
tor in the general performance of its contract and not immune
from taxation and that Carbide was liable for contractor use
taxes. Similarly, the United States litigated suits in other state
courts. See, e.g., United States v. City of Detroit, 355 U.S. 466
(1958); United States vy. Township of Muskegon, 355 U.S. 484
(1958); United States v. County of Fresno, 429 U.S. 452 (1977).
These cases exemplify efficient and effective proceedings to
resolve tax disputes between states and taxpayers in which the
United States has an interest. In each case this Court noted pro-
bable jurisdiction and reviewed each decision on constitutional
grounds.
The doctrine of abstention is a mechanism to resolve poten-
tial conflicts between the rights of a person or entity to appeal
for adjudication in the federal courts and the rights of states to
adjudicate matters peculiarly relevant to their interests. The
Sixth Circuit’s opinion asserts that the right of the United States
to have its contract interpreted in a federal court is paramount
to the right of the State of Tennessee to adjudicate a conflict
centering on a possible real property interest of a federal con-
tractor using Government property. With this opinion we
respectfully disagree.
No case presents a clearer jusiification for abstention and
dismissal than does the case at bar. The United States has
sought to pursue litigation in two jurisdictions concurrently on
the same tax matter. The fact that one suit is brought by the
=
contractor at the direction and with the funding of the United
States and the other by the United States should not mask the
primacy of the role of the United States. It is the United States
that has directed Carbide to plead only state law defenses in the
State court while the United States pleads state law defenses and
federal defenses in the federal court. The suits deal with the
same parties, and the same issues. The district court by abstain-
ing and dismissing properly ruled that the suit should be tried in
one jurisdiction and that the state tribunals were uniquely
qualified to adjudicate these issues dealing with unsettled state
law, state property tax assessment and valuation. The United
States through its contractor has not exhausted state remedies
and can itself still intervene in the state proceedings and plead
any defense it deems appropriate. That it has until now refused
to join in the state proceedings is a choice which should not af-
fect the rulings of this Court. By following the course set by the
district court in abstaining and dismissing, thereby referring the
Suit to the state courts, this case can be most advantageously ad-
vanced for final disposition.
= Pe
CONCLUSION
For the foregoing reasons, a writ of certiorari should issue to
review the judgmeni and opinion of the Sixth Circuit.
Respectfully submitted,
WILLIAM M. LEECH, JR.
ATTORNEY GENERAL OF
TENNESSEE
JIM G. CREECY
Deputy Attorney General
Counsel of Record
CHARLES L. LEWIS
Assistant Attorney General
450 James Robertson Parkway
Nashville, Tennessee 37219
(615) 741-2968
Attorneys for Petitioner
State Board of Equalization
of Tennessee
GEORGE JOHN KETO
Counsel of Record
Alvord & Alvord
918 Sixteenth Street, N.W.
Washington, D.C. 20006
(202) 393-2266
OF COUNSEL: MIKE LAWSON
Urban A. Lester Haynes & Associates
Alvord & Alvord 140 North Main Street
918 Sixteenth Street Goodlettsville, Tennessee 37072
Washington, D.C. 20006 (615) 859-1328
Attorneys for Petitioner
Anderson County, Tennessee
APPENDIX
APPENDIX A
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF TENNESSEE
NORTHERN DIVISION
CIV. 3-82-83
United States of America,
Vv.
Anderson County, Tennessee, Et. al.
MEMORANDUM
(Filed April 15, 1982)
Plaintiff brought this action to obtain a declaratory judgment
that a real property tax assessed by Anderson County,
Tennessee is unconstitutional. Defendants have moved the
Court to abstain and to dismiss this case because a case involv-
ing the same issue is pending in the Davidson County, Ten-
nessee Chancery Court.
Plaintiff first instituted this action on July 15, 1980. The issue
in that suit and the present one is whether or not Anderson
County may levy a real property tax on the interest of Union
Carbide Corporation (Union Carbide), if any, in real property
known as the Y-12 Plant located in Anderson County. The land
and plant are owned by the United States. Union Carbide
operates the plant under a contract with the United States. On
July 23, 1980, the case was dismissed so that the United States
and Union Carbide could present their claim to the Anderson
County Board of Equalization. On September 30, 1980 the
Anderson County Board of Equalization ruled that the property
tax on Union Carbide’s interest in the Y-12 Plant was legal and
appraised that interest at $370,000,000. Union Carbide appeal-
ed the decision to the Assessment Appeals Commission which
—_-
reversed the Anderson County Board of Equalization, holding
that Union Carbide had no taxable interest in the Y-12 Piant.
On January 8, 1982 the State Board of Equalization reversed the
Assessment Appeals Commission in a 4-3 decision. The State
Board held that Union Carbide owned a real property interest in
the Y-12 Plant and appraised that interest at $325,000,000. On
February 12, 1982 the United States filed this action. On March
8, 1982, Union Carbide petitioned the Davidson County, Ten-
nessee Chancery Court for review.
In United States v. State of Ohio, 614 F.2d 101 (6th Cir.
1979), the Court held that abstention was proper where govern-
ment contractors challenged a state tax before the Ohio Board
of Tax Appeals and the United States filed an action in federal
district court challenging the same tax. The Court relied on the
abstention doctrines set forth in Railroad Commission v.
Pullman Co., 312 U.S. 496 (1941) and Younger v. Harris, 401
U.S. 37 (1971), and adopted the approach of the Second Circuit
in Jn the Matter of Levy, 574 F.2d 128 (2nd Cir. 1978). There
the Second Circuit held that a district court should not abstain
in a case challenging state taxation if (1) there are no unsettled
questions of state law which affect federal claims; (2) present
state proceedings would not be interrupted by exercise of
federal jurisdiction; (3) and the most important questions of law
presented by the suit are federal, not state, questions. The Sixth
Circuit concluded that none of the criteria was met in that case.
Plaintiff seeks to distinguish the Ohio case on the ground that
there is no unsettled question of state law and by pointing out
that in Ohio the United States’ complaint asserted that the
assessments involved were in violation of state laws. These
distinctions are without merit. Union Carbide argues in its peti-
tion for review filed in the Chancery Court that the assessment
is contrary to Tennessee law in that the Y-12 Plant is used for a
public purpose and is, therefore, exempt from taxation pur-
suant to Tenn.Code Ann. § 67-501, and further that under Ten-
nessee law it has no taxable interest in the Y-12 Plant. The issues
ate a
raised by Union Carbide are important ones and relate only to
state law. The Sixth Circuit attached no significance to the fact
that the Government relied only on Ohio law in its complaint.
The Court recognized that the constitutionality of the state tax-
ation was ‘‘bound to surface.’’ 614 F.2d at 103. In the present
case the United States raised the constitutional issue in its com-
plaint.
None of the three criteria adopted by the Sixth Circuit in-
dicates that abstention is improper in this case. The Ohio case,
which is indistinguishable from the present case, compels that
conclusion that abstention is proper. The reasons for abstention
were succintly stated by the Court in Ohio:
The possibility of friction between state and federal
government could thus be avoided, and the district court
would not be required to make a constitutional determina-
tion based on speculative interpretation of state law.
Id. at 104. Urder the circumstances of this case, dismissal of the
action is required. Jd. at 105-06.
The United States will not be prejudiced by the Court’s
abstention in this case. The United States may seek to intervene
in the state proceeding and the constitutionality of the taxation
can be raised, either by Union Carbide or the United States. /d.
For the reasons stated, it is ORDERED that defendants’
motion to abstain and to dismiss be, and the same hereby is,
granted.
Order Accordingly.
/s/ Robert L. Taylor
United States District Judge
ao Ad wx
APPENDIX B
No. 82-5281
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
United States of America,
Plaintiff-Appellant,
Vx
Anderson County, Tennessee, et al.,
Defendants-Appellees.
On Appeal From the
United States District
Court for the Eastern
District of Tennessee.
Decided and Filed April 20, 1983
Before: Martin and Krupansky, Circuit Judges, and Pratt,
District Judge.*
* Honorable Philip Pratt, United States District Judge, Eastern
District of Michigan, sitting by designation.
Krupansky, Circuit Judge. This is an action by the United
States of America against Anderson County, Tennessee, and of-
ficers thereof, seeking a declaration that a tax imposed by
Anderson County upon Union Carbide Corporation (Union
Carbide), a government contractor, was in violation of Ten-
nessee law and was unconstitutional and void as constituting a
oe
discriminatory tax upon the United States and its contractor.
The district court abstained citing to Railroad Commission of
Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971
(1941) and Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27
L.Ed.2d 669 (1971), as interpreted by this Circuit in United
States v. Ohio, 614 F.2d 101 (6th Cir. 1979), and dismissed the
cause of action.
The United States owns in fee simple the Oak Ridge Reserva-
tion, consisting of 37,185 acres of land situated in Anderson and
Roane Counties, Tennessee, whereupon are located large
federally owned and operated nuclear production and research
facilities principally devoted to development of nuclear energy
and production of nuclear weapon components for national
defense. The Y-12 Plant, located in Anderson County on the
Oak Ridge Reservation, is managed for the United States by
Union Carbide pursuant to Government Contract No.
W-7405-ENG-26 (contract). In return for managing the opera-
tion and maintaining the Government owned facilities, Union
Carbide receives an annual fixed fee plus costs; the fee is
unrelated to the value of the real and personal property managed
or to the amount of weapon components produced. Union Car-
bide performs no work as a private enterpreneur on behalf of
itself or any other private entity at the Y-12 Plant. All obliga-
tions and costs of operating the Y-12 Plant, including costs of
materials and supplies procurred by Union Carbide, are
liabilities of the United States. Union Carbide advances no
funds nor does it commit any of its property to the management
of the facility. Union Carbide is not liable for any loss, damage
or destruction of government property at the Y-12 Plant absent
willful mis-conduct, bad faith or failure to comply with written
instructions. Union Carbide is not obligated to pay any rent,
fee, charge, or other consideration in exchange for its presence
at, and right of access to, the Y-12 Plant for the purpose of per-
forming its duties under its management contract.
— A-§ —
In March, 1980, Anderson County advised Union Carbide
that an ad valorem tax would be assessed upon an alleged real
property interest of Union Carbide in the federally owned Y-12
Plant facility. In July, 1980, the United States initiated an ac-
tion in the United States District Court for the Eastern District
eof Tennessee challenging the tax assessment, whereupon the
district court ordered the parties to pursue state administrative
remedies and, upon exhaustion thereof, to reappear before the
district court for appropriate relief if dissatisfied with the state
agency decision.
A complaint was then filed by Union Carbide before the
Anderson County Board of Equilization (County Board).
However, the United States refused to submit to the jurisdiction
of the state administrative agency to preserve its claim of
sovereign immunity. In September, 1980, the County Board
concluded that the imposed Tennessee tax was legal since no ex-
emption had been procurred by the Division of Property
Assessments, State of Tennessee, as required by T.C.A. §
67-801.
The decision of the County Board was appealed by Union
Carbide to the Assessment Appeals Committee (Appeals Com-
mittee). In a 4:3 decision the latter Committee concluded that
the contractual relationship between Union Carbide and the
United States did not create a property interest in Union Car-
bide which was subject to taxation under the laws of Tennessee
and the assessment was accordingly voided. The constitutionality
of the tax was not addressed.
Anderson County filed z petition for review of the decision of
the Appeals committee to the State Board of Equilization (State
Board). Before the State Board rendered its decision, the district
court dismissed the pending federal action without prejudice,
noting that neither party had pursued its claim before the Court
during the intervening 12 months from the date of its Order
compelling the parties to seek state administrative relief. Ap-
eo oT an
proximately six months thereafter, the State Board in a 4:3 deci-
sion reversed the decision of the Appeals Committee declaring
the tax assessment valid. It was adjudged that (1) Union Carbide
was the owner of a real property interest as defined by T.C.A. §
67-601(1) to which a real property tax attached pursuant to
T.C.A. §67-602(6), (2) Union Carbide was not exempt from tax-
ation pursuant to T.C.A. § 67-501, which exempts ‘‘all property
of the United States . . . used exclusively for public . . . pur-
poses,’’ and (3) Union Carbide assumed the status of an in-
dependent contractor and, consequently, the assessment was
not an act of unconstitutional taxation against the United
States.
Upon this pronouncement from the highest state agency, the
United States reinstituted the instant action in the federal forum
seeking a declaration that (1) the contract between Union Car-
bide and the United States neither conveyed nor created in
Union Carbide any real property ownership and that the
Board’s interpretation of the contract was erroneous and (2) the
attempted imposition of tax was unconstitutional because it
constituted a discriminatory tax against the United States and
was void since Union Carbide acquired no ownership interest at
Y-12 as a result of its contract with the United States Govern-
ment but only a privilege of access to the facility which was not
taxable under the laws of Tennessee. Shortly thereafter, Union
Carbide filed a petition to review the State Board’s decision in
the Davidson County Chancery Court. Within this procedural
context, the district court exercised Pullman and Younger
abstention and dismissed the federal action. This appeal ensued.
The Supreme Court has stated that judicially created doc-
trines of absention, whereby the federal forum may decline or
postpone exercise of jurisdiction, are ‘extraordinary and nar-
row exception(s]to the duty [of the federal forum] to adjudicate
[those] controversies] properly’’ asserted. Colorado River
Water Conservation District v. United States, 424 U.S. 800,
813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976). The ‘‘virtually
oa alll co
unflagging obligation’’ of the federal forum to exercise its
jurisdictional powers may be abdicated out of deference to
parallel litigation in the state forum in only the most exceptional
circumstances. See: Moses H. Cone Memorial Hospital v. Mer-
cury Construction Corp., __. U.S. ___, 103 S.Ct. 927, 935-39
(1983). The federal forum has, on numerous occasions, enter-
tained, without discussing abstention, actions wherein the
United States has challenged imposition of a state tax upon a
federally owned facility or upon a federal contractor. See e.g.,
United States v. New Mexico, U.S. __, 102 S.Ct. 1373
(1982) (citing cases); United States v. California State Board of
Equilization, 683 F.2d316 (9th Cir. 1982). Doctrines of absten-
tion have been expressly rejected in such actions. United States
v. Nevada Tax Commission, 439 F.2d 435 (9th Cir. 1971);
United States vy. Bureau of Revenue of New Mexico, 291 F.2d
677 (10th Cir. 1961). However, this Circuit has recognized, in an
action distinguishable from the case at bar, that abstention may
be appropriate in instances wherein the United States challenges
assessment of a state tax upon its contractor. United States v.
Ohio, 614 F.2d 101 (6th Cir. 1979).
Confronting the propriety of Pu//man abstention in the ac-
tion sub judice, it is noted that the doctrine applies
in cases presenting a federal constitutional issue which
might be mooted or presented in a different posture by a
state court determination of pertinent state law.
Colorado River, supra, 424 U.S. at 814, 96 S.Ct. at 1244. Ac-
cord: Hanna v. Toner, 630 F.2d 442, 445 (6th Cir. 1980).
Pullman abstention may be appropriate to moot a federal issue
in the presence of some unsettled question of state law or when
there is a need to interpret an ambiguous state statute. In United
States v. Ohio, supra, this Court applied Pu//man abstention in
an action wherein governmental agencies had executed con-
tracts with various private corporations. These agreements re-
quired the corporations to purchase, on behalf of the United
me
States, various items of personal property, title to which vested
in the United States at the time of delivery to the contractors.
The Tax Commission of Ohio levied sales and use tax
assessments against the contractors, several of which challenged
the tax before the Ohio Board of Tax Appeals. Shortly
thereafter, and prior to any state administrative resolution, the
United States initiated an action in district court seeking a
declaration that the taxes were improper under Ohio law, i.e.,
that Ohio had violated its own statutes by assessing the tax. Per-
tinently, the United States did not assert in its complaint that
the assessments constituted unconstitutional taxation of the
federal government. The district court ordered state pro-
ceedings stayed in aid of its federal jurisdiction and this Circuit
reversed, observing that ‘‘the submerged question of the con-
Stitutionality of the state taxation was bound to surface in the
course of [the federal] litigation,’ id. at 103, and adjudged that
Pullman and Younger abstention were appropriate.
In Ohio the sole issue joined in the federal pleadiiug challeng-
ed the statutory construction of Ohio taxing statutes. An inter-
pretation of the relevant ambiguous legislative enactments by
the state courts offered the opportunity of mooting any
‘‘submerged’’ and unplead constitutional claims. Contrawise,
in the case at bar, unlike Pu//man and Ohio, the relevant sec-
tions of the Tennessee Code Annotated are clear in imposing an
ad valorem tax on real property interests and need no judicial
construction. Compare: United States v. Nevada Tax Commis-
sion, 439 F.2d 435 (9th Cir. 1971) (abstention deemed inap-
propriate where the state taxing statute was facially unam-
biguous irrespective of fact that said statute had never been con-
strued by state courts); United States v. Bureau of Revenue of
State of New Mexico, 291 F.2d 677, 679 (10th Cir. 1961)
(abstention inappropriate where state taxing statute ‘‘is unam-
biguous and leaves no room for construction’’). In Ohio this
Circuit stated:
— A-10 —
We are in agreement with the recent ruling of the Second
Circuit that a district court, confronted with a suit
challenging state taxation, should not abstain from exer-
cise of jurisdiction if (1) there are no unsettled questions of
state law which affect federal claims; (2) present state pro-
ceedings would not be interrupted by exercise of federal
jurisdiction; (3) and the most important questions of law
presented by the suit are federal, not state, questions.
Ohio, supra, 614 F.2d at 105, citing /n re Levy, $74 F.2d 128 (2d
Cir. 1978). In the case at bar, consistent with the principles of
Ohio, ‘‘there are no unsettled questions of state law which af-
fect federal claims.’’ Jd. Rather, the ‘‘unsettled question”’ is
whether the contractual relationship between Union Carbide
and the United States conveyed to Union Carbide any real pro-
perty interest in the Y-12 Plant. A negative response to the in-
quiry vitiates the necessity of ascertaining the authority of the
state of Tennessee to impose a tax upon Union Carbide. Fur-
ther, interpretation of a contract wherein the United States is a
party is a federal issue. United States v. Allegheny County, 322
U.S. 174, 64 S.Ct. 908 (1944).' Accordingly, abstention was in-
appropriate for two reasons: (1) there was no unsettled state
question and, (2) ‘‘the most important questions of law
presented by the suit [were] federal, not state, questions.’’
Moreover, in the event that the district court should adjudge
that Union Carbide’s contractual relationship with the United
States resulted in a real property interest which is taxable under
' The Court stated:
The validity and construction of contracts through which the
United States is exercising its constitutional functions, their con-
sequences on the rights and obligations of the parties, the titles
or liens which they create or permit, all present questions of
federal law not controlled by the law of any state. (numerous
citations omitted)
322 U.S. at 183, 64. S.Ct. at 913-14.
— A-ll —
Tennessee statutes, then, in that event, the federal constitu-
tional issues, predicated upon the Supremacy Clause, would be
joined. These constitutional defenses are appropriate for
disposition in the federal forum. In sum, since the threshold
issue of contractual interpretation is federal, as are the ultimate
constitutional challenges to the state taxation, and since the
underlying state taxation statutes are not ambiguous, Pul/man
abstention is inappropriate.
Confronting the propriety of Younger abstention in the ac-
tion sub judice, it is noted that the doctrine facially applies
where (1) there is an ongoing or pending state proceeding, (2)
the proceeding is criminal and (3) no unusual circumstances ex-
ist which would counsel against abstention, such as prosecution
under a flagrantly unconstitutiona! statute, bad faith prosecu-
tion or an inability to raise the constitutional challenge in the
State proceeding. The second prong of the Younger three-tier
test has been expanded to warrant abstention in noncriminal
judicial proceedings but only when ‘“‘important state interests
are involved.’’ Middlesex County Ethics Committee v. Garden
State Bar Association ___. U.S. ___, —___, 102 S.Ct. 2515,
2521, 73 L.Ed.2d 116 (1982), citing Moore v. Sims, 442 U.S.
415, 423, 99 S.Ct. 2371, 2377, 60 L.Ed.2d 994 (1979), Huffman
v. Pursue, Lid., 420 U.S. 592, 604-05, 95 S.Ct. 1200, 1208, 43
L.Ed.2d 482 (1975). See also: Trainor v. Hernandez, 431 U.S.
434 (1977); J. P. v. DeSanti, 653 F.2d 1080, 1082 (6th Cir.
1981). Assuming, without dec...ng, the existence of an ongoing
or pending state proceeding even though the United States is not
a party to the state proceedings and that the first prong of
Younger has been satisfied, the criteria of the second prong of-
the test has not been fulfilled. Tennessee's interest in ad-
ministering its own tax laws without federal intervention may
qualify as an important state interest when a tax is assessed
against an entity other than the United States. See: Great Lakes
Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 §.Ct. 1070,
87 L.Ed. 1407 (1943). Indeed, the Anti-Injunction Act, 28
— *) eo
U.S.C. § 1341 (1976),’ implicitly recognizes this principle and
preserves state fiscal integrity by precluding the federal forum
from enjoining tax assessments where a state remedy exists. It is
recognized that the Act ‘‘has its roots in equity practice,’’ prin-
ciples of federalism and was promulgated in recognition of the
imperative need of state sovereigns to administer their own
fiscal operations without interference. See: Rosewell v. LaSalle
National Bank, _. U.S. ___, 101 S.Ct. 1221, 1235 (1981).
However, the Anti-Injunction Act does not restrict the United
States from access to the federal forum when it seeks to assert its
own interest or that of its instrumentalities. Department of
Employment v. United States, 385 U.S. 355, 87 S.Ct. 464, 17
L.Ed.2d 414 (1966); Moe v. Confederated Salish and Kootenai
Tribes of Flathead Reservation, 425 U.S. 463, 470, 96 S.Ct.
1634, 1640, 48 L.Ed.2d 96 (1976); United States v. Lewisburg
Area School District, §39 F.2d 301 (3d Cir. 1976); United States
v. Bureau of Revenue of New Mexico, 291 F.2d 677 (10th Cir.
1961). A state may not, consistent with the Supremacy clause,
impose a tax directly upon the United States. United States v.
New Mexico, __. U.S. ____, 102 S.Ct. 1373 (1982); M’Culloch
v. Maryland, 4 Wheat. 316, 431, 4 L.Ed. 579 (1819). This im-
munity extends to private entities who ‘‘stand in the Govern-
ment’s shoes.’’ /d. at ___, 102 S.Ct. at 1383, citing City of
Detroit v. Murray Corp., 355 U.S. 489, 503, 78 S.Ct. 458, 491
(1958). Also,
{i]t remains true, of course, that state taxes on contractors
are consitutionally invalid if they discriminate against the
Federal Government, or substantially interfere with its ac-
tivities. See United States v. County of Fresno, 429 U.S.
452, 463 n.11, 464, 97 S.Ct. 699, 705 n.11, 705, $0 L.Ed.2d
683 (1977); Moses Lake Homes, Inc. v. Grant County, 365
* “The district courts shall not enjoin, suspend or restrain the
assessment, levy or collection of any tax under State law where a
plain, speedy and efficient remedy may be had in the courts of such
State.”’
= Aid —
U.S. 744, 81 S.Ct. 870, 6 L.Ed.2d 66 (1961); City of
Detroit v. Murray Corp., 385 U.S. 489, 495, 78 S.Ct. 458,
461 2 L.Ed.2d 44] (1958),
United States v. New Mexico, supra, ___ U.S. at ___, note } P
102 S.Ct. at 1383, note 11. In the case at bar the United States
has challenged the tax assessment as violative of the Supremacy
Clause. Tennessee's interest in obtaining a state forum to ad-
judicate, without federal intervention, the validity of a tax
assessment against Union Carbide, a contractor of the United
States, is at best concurrent with and at worst totally subservient
to the coexisting interest of the United States to obtain a federal
adjudication of the propriety and constitutionality of said tax.
The principles of comity and federalism which underlie doc-
trines of abstention in general, and Younger abstention in par-
ticular, are absent in the case at bar.
As abstention is inappropriate, the judgment of the district
court dismissing the cause of action is REVERSED and this case
is REMANDED for further proceedings consistent with this
opinion.
= A-l4 —
APPENDIX C
No, 82-5281
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
United States of America,
Plaintiff-Appellant
Vv.
Anderson County, Tennessee,
et al.,
Defendants-Appellees
ORDER
(Filed June 10, 1983)
BEFORE: MARTIN and KRUPANSKY, Circuit Judges, and
PRATT, District Judge*
Presently before the Court is a petition for rehearing. Upon
due consideration, said petition is hereby DENIED.
ENTERED BY ORDER OF
THE COURT
/s/ John P, Hehman
Clerk
* Hon. Philip Pratt, United States District Judge, Eastern District
of Michigan, sitting by designation.
a= AS =
APPENDIX D
NO. 82-5281
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
United States of America,
Plaintiff-Appellant,
¥,
Anderson County, Tennessee, et. al.,
Defendants-Appellees.
ORDER
(Filed August 9, 1983)
BEFORE: MARTIN and KRUPANSKY, Circuit Judges, and
PRATT, District Judge.*
Upon due consideration, the motion of Anderson County,
Tennessee for a stay of mandate pending an application to the
Supreme Court for a writ of certiorari is hereby DENIED.
ENTERED BY ORDER OF THE COURT
/s/ John P. Hehman, Jr.
Clerk
* The Hon. Philip Pratt, United States District Judge, Eastern
District of Michigan, sitting by designation.
a> Aiel§ =
APPENDIX E
Relevant Sections From Tennessee
Code Annotated
4-5-117. Judicial review — Petition — Interim relief —
Record — New evidence — Scope of review. — (a) A person
who is aggrieved by a final decision in a contested case is entitled
to judicial review under this chapter, which shall be the only
available method of judicial review. A preliminary, procedural
or intermediate agency action or ruling is immediately
reviewable if review of the final agency decision would not pro-
vide an adequate remedy.
(6) Proceedings for review are instituted by filing a petition
for review in a chancery court having jurisdiction within sixty
(60) days after the entry of the agency's final order thereon. The
time for filing a petition for review in a court as provided in this
chapter shall not be extended because of the period of time
allotted for filing with the agency a petition to rehear. Copies of
the petition shall be served upon the agency and all parties of
record,
(c) The filing of the petition for review does not itself stay en-
forcement of the agency decision. The agency may grant, or the
reviewing court may order, a stay upon appropriate terms, but
if it is shown to the satisfaction of the reviewing court, in a hear-
ing which shall be held within ten (10) days of a request for hear-
ing by either party, that any party or the public at large may suf-
fer injury by reason of the granting of a stay, then no stay shall
be granted until a good and sufficient bond, in an amount fixed
and approved by the chancellor, shall be given by the petitioner
conditioned to indemnify the other persons who might be so in-
jured and if no bond amount is sufficient, the stay shall be
denied.
(d) Within forty-five (45) days after service of the petition, or
within further time allowed by the court, the agency shall
— * oe
transmit to the reviewing court the original or a certified copy of
the entire record of the proceeding under review. By stipulation
of all the parties of the review proceedings, the record may be
shortened. A party unreasonably refusing to stipulate to limit
the record may be taxed by the court for the additional cost.
The court may require or permit subsequent corrections or addi-
tions to the record.
(e) If, before the date set for hearing, application is made to
the court for leave to present additional evidence, and it is
shown to the satisfaction of the court that the additional
evidence is material and that there were good reasons for failure
to present it in the proceeding before the agency, the court may
order that the additional evidence be taken before the agency
upon conditions determined by the court. The agency may
modify its findings and decision by reason of the additional
evidence and shall file that evidence and any modifications, new
findings or decisions with the reviewing court.
(f) The procedure ordinarily followed in chancery courts will
be followed in the review of contested cases decided by the
agency, except as otherwise provided in this chapter.
(g) The review shall be conducted by the court without a jury
and shall be confined to the record. In cases of alleged ir-
regularities in procedure before the agency, not shown in the
record, proof thereon may be taken in the court.
(h) The court may affirm the decision of the agency or re-
mand the case for further proceedings. The court may reverse or
modify the decision if the rights of the petitioner have been pre-
judiced because the administrative findings, inferences, conclu-
sions or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
— is —
(4) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion; or
(S$) Unsupported by evidence which is doth substantial and
material in the light of the entire record.
In determining the substantiality of evidence, the court shall
take into account whatever in the record fairly detracts from its
weight, but the court shall not substitute its judgment for that
of the agency as to the weight of the evidence on questions of
fact.
(i) No agency decision pursuant to a hearing in a contested
case shall be reversed, remanded, or modified by the reviewing
court unless for errors which affect the mertis of the decision
complained of.
(j) The chancellor shall reduce his findings of fact and con-
clusions of law to writing and make them parts of the record.
[Acts 1974 (Adj. S.), ch. 725, § 17; 1975, ch. 370, §§ 6, 19; 1978
(Adj. S.), ch. 815, § 1; 1978 (Adj. S.), ch. 938, § 13; T.C.A., §
4-523.)
4-5-322. Judicial review. — (a) A person who is aggrieved by
a final decision in a contested case is entitled to judicial review
under this chapter, which shall be the only available method of
judicial review. A preliminary, procedural or intermediate agen-
cy action or ruling is immediately reviewable if review of the
final agency decision would not provide an adequate remedy.
(b) Proceedings for review are instituted by filing a petition
for review in‘a chancery court having jurisdiction within sixty
(60) days after the entry of the agency’s final order thereon.
Provided further, that a person who is aggrieved by a final deci-
sion of the department of human services in a contested case
may file a petition for review in the chancery court located
either in the county of the official residence of the commissioner
or in the county in which any one or more of the petitioners
reside. The time for filing a petition for review in a court as pro-
— A-19 —
vided in this chapter shall not be extended because of the period
of time alotted for filing with the agency a petition for recon-
sideration. Copies of the petition shall be served upon the agen-
cy and all parties of record.
(c) The filing of the petition for review does not itself stay en-
forcement of the agency decision. The agency may grant, or the
reviewing couri may order, a stay upon appropriate terms, but it
it is shown to the satisfaction of the reviewing court, in a hear-
ing which shall be held within ten (10) days of a request for hear-
ing by either party, that any party or the public at large may suf-
fer injury by reason of the granting of a stay, then no stay shall
be granted until a good and sufficient bond, in an amount fixed
and approved by the chancellor, shall be given by the petitioner
conditioned to indemnify the other persons who might be so in-
jured and if no bond amount is sufficient, the stay shall be
denied.
(d) Within forty-five (45) days after service of the petition, or
within further time allowed by the court, the agency shall
transmit to the reviewing court the original or a certified copy of
the entire record of the proceeding under review. By stipulation
of all the parties of the review proceedings, the record may be
shortened. A party unreasonably refusing to stipulate to limit
the record may be taxed by the court for the additional cost.
The court may require or permit subsequent corrections or addi-
tions to the record.
(e) If, before the date set for hearing, application is made to
the court for leave to present evidence, and it is shown to the
satisfaction of the court that the additional evidence is material
and that there were good reasons for failure to present it in the
proceeding before the agency, the court may order that the ad-
ditional evidence be taken before the agency upon conditions
determined by the court. The agency may modify its findings
and decision by reason of the additional evidence and shall file
that evidence and any modifications, new findings or decisions
with the reviewing court.
— A-20 —
(f) The procedure ordinarily followed in chancery courts will
be followed in the review of contested cases decided by the agen-
cy, except as otherwise provided in this chapter.
(g) The review shall be conducted by the court without a jury
and shall be confined to the record. In cases of alleged ir-
regularities in procedure before the agency, not shown in the
record, proof thereon may be taken in the court.
(h) The court may affirm the decision of the agency or re-
mand the case for further proceedings. The court may reverse or
modify the decision if the rights of the petitioner have been pre-
judiced because the administrative findings, inferences, conclu-
sions or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion; or
(S$) Unsupported by evidence which is both substantial and
material in the light of the entire record.
In determining the substantiality of evidence, the court shall
take into account whatever in the record fairly detracts from its
weight, but the court shal! not substitute its judgment for that
of the agency as to the weight of the evidence on questions of
fact.
(i) No agency decision pursuant to a hearing in a contested
case shall be reversed, remanded, or modified by the reviewing
court unless for errors which affect the merits of the decision
complained of.
(j) The chancellor shall reduce his findings of fact and con-
clusions of law to writing and make them parts of the record.
— A-2l —
[Acts 1974 (Adj. S.), ch. 725, § 17; 1975, ch. 370, § 6; 1978
(Adj. S.), ch. 815, § 1; 1978 (Adj. S.), ch. 938, § 13; T.C.A., §
4-$23; Acts 1980 (Adj. S.), ch. 478, §1; T.C.A., § 4-5-117; Acts
1982 (Adj. S.) ch. 874, § 63.]
67-401. Property subject to tax generally. — Al! property,
real and personal, shall be assessed for taxation for state, coun-
ty and municipal purposes, except such as is declared exempt in
§$§ 67-501—67-518, or unless otherwise provided. [Acts 1973,
ch. 226, § $.]
67-501. Government property. — All property of the United
States, all property of the state of Tennessee, of any county, or
of any incorporated town, city, or taxing district in the state that
is used exclusively for public, county or municipal purposes
shall be exempt from taxation.
Provided, however, that all property of any educational in-
stitution owned, operated, or otherwise controlled by the state
of Tennessee as trustee or otherwise, shall be exempt from taxa-
tion. [Acts 1973, ch. 226, § $.]
67-601. Definitions. — For purposes of classification of pro-
perty:
(1) ‘*Real property’’ is hereby defined to include lands,
tenements, hereditaments, structures, improvements; moveable
property assessable under § 67-612; or machinery and equip-
ment affixed to realty (except as otherwise provided for herein)
and all rights thereto and interests therein, equitable as well as
legal.
(2) ‘‘Personal property’’ is hereby defined to include every
species and character of property which is not classified as real
property.
(3) ‘‘Tangible personal property’’ is hereby defined to in-
clude personal property such as goods, chattels, and other ar-
om
ticles of value which are capable of manual or physical posses-
sion, and certain machinery and equipment, separate ang apart
from any real property, and whose value is intrinsic to the arti-
cle itself.
(4) ‘‘Commercial and industrial tangible personal property”’
is hereby defined to include personal property such as goods,
chattels and other articles of value which are capable of manual
or physical possession, and machinery and equipment which is
(1) used essentially and principally for the commercial or in-
dustrial purposes or processes for which it is intended and (2) if
affixed or attached to real property, can be detached without
material injury to such real property.
(5) ‘‘All other tangible personal property’’ is hereby defined
to include all tangible personal property, including that used in
agriculture, except public utility tangible personal property and
commercial industrial tangible personal property.
(6) ‘‘Intangible personal property’’ is hereby defined to in-
clude personal property such as money, any evidence of debt
owed to a taxpayer, any evidence of ownership in a corporation
or other business organization having multiple owners, and all
other forms of property whose value is expressed in terms of
what the property represents rather than its own intrinsic worth.
Intangible personal property shall include all personal property
not defined as tangible personal property.
(7) ‘‘Public utility property’’ is hereby defined to include all
property of every kind, whether owned or leased, and used, or
held for use, directly or indirectly in the operation of a public
utility, which shall include but not necessarily be limited to the
following business entities, whether corporate or otherwise: (1)
railroad companies; (2) telephone, radio common carriers and
telegraph companies; (3) passenger, sleeping, freight and private
car companies which is hereby defined as any business, other
than a railroad company, which owns, uses, furnishes, leases,
rents or operates to, from, through, in or across this state or any
=AB<
part thereof any kind of railroad car, including but not
necessarily limited to, flat, tank, refrigerator, passenger, or
similar type cars; (4) street car companies; (5) power companies,
whether hydroelectric, steam, atomic, or other kinds for the
transmission of power; (6) express companies; (7) pipeline com-
panies; (8) gas companies; (9) electric light companies; (10)
water and/or sewerage companies; (11) motor bus and/or truck
companies holding a certificate of convenience and necessity or
contract hauler’s permit from the Tennessee public service com-
mission or the interstate commerce commission and domiciled
in this state and/or owning or leasing real or personal property
located in this state; (12) taxicab, transit and limousine com-
panies; (13) commercial air carrier companies holding a cer-
tificate of convenience and necessity from the Tennessee public
service commission, civil aeronautics board, federal aviation ad-
ministration, or any other federal or state regulatory agency; ex-
cepting those companies whose operations are solely chartered
operations; and (14) water transportation carrier companies
which operate boats and barges over the waterways of this state
for hire and which hold a certificate of convenience and necessi-
ty as common carriers from the Tennessee public service com-
mission, interstate commerce commission or any other federal
or state regulatory agency.
(8) ‘‘Industrial and commercial property’’ is hereby defined
to include all property of every kind used, directly or indirectly,
or held for use, for any commercial, mining, industrial,
manufacturing, trade, professional, club (whether public or
private), nonexempt lodge, business, or similar purpose,
whether conducted for profit or not. All real property which is
used, or held for use, for dwelling purposes which contains two
(2) or more rental units is hereby defined and shall be classified
as ‘‘industrial and commercial property.’’
(9) ‘‘Residential property’’ is hereby defined to include all
real property which is used, or held for use, for dwelling pur-
poses and which contains not more than one rental unit. All real
— A-24 —
property which is used, or held for use, for dwelling purposes
but which contains two (2) or more rental units is hereby defin-
ed and shall be classified as ‘‘industrial and commercial proper-
eg
(10) ‘‘Farm property’’ is hereby defined to include all real
property which is used, or held for use, in agriculture, in-
cluding, but not limited to, growing crops, pastures, orchards,
nurseries, plants, trees, timber, raising livestock or poultry, or
the production of raw dairy products, and acreage used for
recreational purposes by clubs.
(11) ‘‘Moveable structure’’ is hereby defined to include any
mobile home or such other moveable structure which is con-
structed as a trailer or semitrailer and designed to either be tow-
ed along the highways or to be parked off the highways, and
which may be used, temporarily or permanently, as a residence,
apartment, office, storehouse, warehouse or for any other com-
mercial or industrial purpose; but shall not include self-
propelled vehicles, sleeping and camping facilities attached to,
or designed to be attached to, or drawn by a pick-up truck or an
automobile, and which contains less than three hundred (300)
square feet of inclosed space. [Acts 1973, ch. 226, § 6; 1974
(Adj. S.), ch. 467, §§ 2, 3.]
67-602. Place and function of assessment — person to whom
assessed. — The function of assessment shall be as follows, to
wit:
(1) To assess all property, except such property as shall be
assessed by the Tennessee public service commission, to the per-
son Or persons owning or claiming to own the same on the first
day of January for the year for which the assessment is made, if
known and, if not, to unknown owners, provided that any tem-
porary improvement, or moveable structures that are assessable
under § 67-612, regardless of ownership, shall be assessed as real
property as an improvement to the land where located.
(2) To assess the property held by executors and ad-
ministrators in the county, district, or ward in which the dece-
dent resided at the time of the death until such have been
distributed; but if the deceased lived in another state, then the
property shall be assessed where the personal representative
resides.
(3) To assess personal property held by trustees and guar-
dians of minors and lunatics to each guardian or trustee in the
county, ward, or district where such minor, or lunatic resides, if
a resident of the state; and if a nonresident, then in the county,
ward or civil district in which the guardian or trustee resides,
provided, that guardian held property shall be assessed in the
county where the guardian having control thereof renders his
annual settlement.
(4) The property of all street railroad, gas, electric light com-
panies and other public utility companies, including their fran-
chises used within any town, city or taxing district where the of-
fice of the company is located outside of such incorporated city
or town or taxing district, but with the main property within the
city, shall be taxed in the city, town, or taxing district as if the
office was situated within the city limits, and the property, in-
cluding franchises of the corporations and joint-stock com-
panies that lie wholly or mainly within any incorporated city,
taxing district, or town, or whose chief business is within any in-
corporated city, taxing district, or town shall be assessed for
taxation in such city, taxing district, or town; provided, that all
real property and tangible personal property shall be taxed in
the district where situated; and provided further that public
utility property of every kind (real property, tangible personal
property, and intangible personal property) shall all be assessed
for taxes at fifty-five per cent (55%) of its value.
(5) Leased personal property used by a public utility com-
pany shall be assessed to the public utility company.
eS
(6) All mineral interests and all other interests of whatsoever
character, not defined as products of the soil, in real property,
including the interest which the lessee may have in and to the
improvements erected upon land where the fee, reversion, or re-
mainder therein is exempt to the owner, and which said interest
Or interests is or are owned separate from the general freehold,
shall be assessed to the owner thereof, separately from the other
interests in such real estate, which other interests shall be assess-
ed to the owner thereof, all of which shall be assessed as real
property. [Acts 1973, ch. 226, § 6.]
67-606. Basis of valuation. — The value of all property shall
be ascertained from the evidence of its sound, intrinsic and im-
mediate value, for purposes of sale between a willing seller and a
willing buyer without consideration of speculative values, and
when appropriate subject to the provisions of the Agricultural,
Forest, and Open Space Land Act of 1976, codified in §§ 67-650
— 67-658.
In determining the value of all property of every kind, the
assessor shall be guided by, and follow the instructions, of the
appropriate assessment manuals issued by the state division of
property assessments and approved by the state board of
equalization.
For determining the value of real property, such manuals
shall provide for consideration of the following factors:
(1) location;
(2) current use;
(3) whether income bearing or nonincome bearing;
(4) zoning restrictions on use;
(5) legal restrictions on use;
(6) availability of water, electricity, gas, sewers, street
lighting, and other municipal services;
ae ,
“(7) natural productivity of the soil, except that the value of
growing crops shall not be added to the value of the land; and
(8) all other factors and evidence of values generally recogniz-
ed by appraisers as bearing on the sound, intrinsic and im-
mediate economic value at the time of assessment.
For determining the value of industrial, commercial, farm
machinery and other personal property, such manuals shall pro-
vide for consideration of the following factors:
(1) current use;
(2) depreciated value;
(3) actual value after allowance for obsolescence;
(4) all other factors and evidences of values generally
recognized by appraisers as bearing on the sound, intrinsic and
immediate economic value at the time of assessment.
(5) Notwithstanding the foregoing, all farm personal property
and also all household and kitchen furniture, tableware, musical
instruments, wearing apparel, private passenger.motor vehicles,
jewelry and other personal property of similar character used in
the taxpayer’s own household, together with all intangible pro-
perty, including bank accounts, of thet? payer, may be assum-
ed prima facie by the assessor of property to be of a value not in
excess of seven thousand five hundred dollars ($7,500) per in-
dividua! and fifteen thousand dollars ($15,000) for jointly own-
ed property held by husband and wife in the absence of any tax
return or schedule to the contrary.
It is the legislative intent hereby declared that no appraisal
hereunder shall be inflated values resulting from speculative
purchases in particular areas in anticipation of uncertain future
real estate markets; but all property of every kind shall be ap-
praised according to its sound, intrinsic and immediate
economic value which shall be ascertained in accordance with
—
such official assessment manuals as may be promulgated and
issued by the state division of property assessments and approv-
ed by the state board of equalizan pursuant to law,
Provided, that if the tax computed on an erroneous basis of
valuation or assessment has been paid prior to certification of
the corrected assessment by the assessor, the trustee or
municipal collector shall, within sixty (60) days after receipt of
such certification from the assessor, refund to the taxpayer that
portion of such tax paid which resulted from the erroneous
assessment, such refund to be made without the necessity of
payment under protest or such other requirements as usually
pertain to refunds of taxes unjustly or illegally collected. [Acts
1973, ch. 226, § 6; 1974 (Adj. S.), ch. 771, § 8; 1976 (Adj. S.),
ch, 782, § 13; 1977, ch. 262, § 1.]
67-831. Jurisdiction and duties of state board — Assessment
appeals commission powers and duties. — (a) The state board
of equalization shall have jurisdiction over the valuation,
classification and assessment of all properties in the state, Said
board shall have and perform the following duties:
(1) Receive, hear, consider, and act upon complaints and ap-
peals made to the board;
(2) Hear and determine complaints and appeals made to the
board concerning exemption of property from taxation;
(3) Take whatever steps it deems are necessary to effect the
equalization of assessments, in any taxing jurisdiction within
the state in accordance with the laws of the state; and
(4) Carry out such other duties as are required by law,
(b) In addition to the powers and duties conferred upon the
state board of equalization by subsection (a) of this section or
any other provision of this code, the state board of equalization
may by resolution create an assessment appeals commission
consisting of not less than three (3) nor more than five (5)
= A-29 —
members, and may delegate to such assessment appeals commis-
sion the jurisdiction and duties conferred by law upon the state
board of equalization to hear and act upon all complaints and
appeals regarding the assessment, classification and value of
property for purposes of taxation, including, but not limited to,
complaints and appeals from assessments made by the Ten-
nessee public service commission, complaints and appeals from
actions of local boards of equalization, complaints and appeals
concerning exemption of property from taxation, complaints
and appeals from assessments made by the division of property
assessments, and complaints and appeals concerning the valua-
tion of property for inheritance tax purposes. The assessment
appeals commission authorized by this subsection (b) shall be
composed and shall function as follows:
(1) The members of the assessment appeals commission shall
be appointed by the state board of equalization. Persons who
may be appointed to the assessment appeals commission shall be
residents of the state and at least eighteen (18) years of age.
Members of the state board of equalization, the executive
secretary of the state board of equalization, the director of the
division of property assessment and local and state officials
shall not be precluded from appointment to the said assessment
appeals commission by virtue of their positions. At least one (1)
of the members shall be a person other than a full time state of-
ficial.
(2) The state board of equalization shall designate the chair-
man of the assessment appeals commission.
(3) The members of the assessment appeals commission shall
take office for a term of one (1) year and until their successors
shall take office.
(4) In the event that there is a vacancy in the membership of
the assessment appeals commission, the state board of equaliza-
tion shall fill the vacancy in the same manner as initia! appoint-
ments.
—
(S$) The assessment appeals commission shall meet at the call
of the executive secretary to the state board of equalization. A
majority of the members of the assessment appeals commission
shall constitute a quorum.
(6) The asessment appeals commission shal! follow such rules
and regulations of practice and procedure which may be pro-
mulgated by the state board of equalization.
(7) It shall be the duty of the members to discharge the duties
of the assessment appeals commission without compensation
except that persons who are not officials of the state of Ten-
nessee, who may from time to time serve as members of the
assessment appeals commission shall be paid at the rate of fifty
dollars ($50.00) per day for each day or part of a day in atten-
dance at meetings of the assessment appeals commission. The
members, whether or not they are state officials, shall be reim-
bursed necessary travel and per diem expenses as prescribed in
comprehensive travel regulations by the commissioner of
finance and administration for employees of the state of Ten-
nessee, during such service on the assessment appeals commis-
sion,
(8) At any time prior to, during or after any proceeding
before the assessment appeals commission, authorized by this
subsectin (b), it may certify a question to the state board of
equalization if such question is determinitive or partially deter-
minative of the proceeding and if such question is found by the
assessment appeals commission to be a matter of policy to be
determined by the state board of equalization. Proceedings
before the assessment appeals commission may be suspended
pending the determination of the question certified to the state
board of equalization.
(9) Actions taken by the assessment appeals commission shall
be final as if the actions were taken by the state board of
equalization; provided, however, that the state board of
equalization may, in its sole discretion, within forty-five (45)
—A3l—
days of any final action taken by the assessment appeals com-
mission, enter an order requiring a review of the action of the
assessment appeals commission by the state board of equaliza-
tion, in which the action shall not become final until the state
board of equalization has rendered its final decision in the mat-
ter. A party desiring the state board of equalization to review an
action of the assessment appeals commission must file a written
petition with the executive secretary to the state board of
equalization within fifteen (15) days of that action of the assess-
ment appeals commission. The above shall not be construed to
limit in any way the authority of the state board of equalization
to order a review upon its own motion within forty-five (45)
days of an action of the assessment appeals commission. In the
event that the state board of equalization does exercise its
discretion to review any action of the assessment appeals com-
mission, said review may be upon the record before the assess-
ment appeals commission or in such manner as the state board
shall direct.
(10) If the state board of equalization shall not exercise its
discretion to review a matter heard by the assessment appeals
commission, the assessment appeals commission shall issue a
certificate of assessment or other final certificate of its actions,
which certificate shall be subject to judicial review in the same
manner as are final actions of the state board of equalization.
(11) The assessment appeals commission shall prepare and
maintain records of its proceedings in the form of minutes. The
said minutes, together with all other papers and records of the
assessment appeals commission, shall be kept and maintained in
the office of the executive secretary to the state board of
equalization. [Acts 1973, ch. 226, § 10; 1975, ch. 171 § 1; 1979,
ch. 64, §§ 1, 2; 1980 (Adj. S.), ch. 467, § 1.]
67-1805. Fee exempt from tax on leasehold.— Where there is
assessable under the law a leasehold interest in real estate or any
improvements on real estate, which said real estate is exempt
from taxation in the hands of and to the owner thereof, the
aes
taxes assessed against such leasehold interest or interest in im-
provements on such exempt real estate shall be a lien only upon
such leasehold interest or interest in improvements, and not
upon the interest of the owner of the fee or the remainder or
reversion of the fee. [Acts 1907, ch. 602, § 31; Shan., § 758a3;
Code 1932, § 1333.)
APPENDIX F
Relevant Section From United States Code
28 U.S.C. § 1341
The district courts shall not enjoin, suspend or restrain the
assessment, levy or collection of any tax under State law where a
plain, speedy and efficient remedy may be had in the courts of
such State.
— A-33 —
APPENDIX G
Excerpt From State Of Tennessee Assessors Manual
Pages Ap-10 and Ap-11
REAL ESTATE VS REAL PROPERTY
Generally, the term real estate refers to the physical land and
appurtenances, including structures affixed thereto. The legal
concept of real estate implies that land includes not only the
ground or soil, but everything which is attached to the earth,
whether by course of nature, as trees and herbage, or by the
hand of man, as houses and other buildings. It includes not only
the surface of the earth, but everything under it and over it to
the extent necessary for the full enjoyment and exploitation of
the property.
The term real property refers to the interest, benefits, and
rights inherent in the ownership of the physical real estate.
The benefits of ownership are derived from the Bundle of
Rights Theory, which claims that the owner has the right to use
the real estate, to sell it, to lease it, to enter it, or give it away as
he so desires. These rights are guaranteed by law, but they are
subject to the following governmental restrictions: (1) Taxation;
(2) Eminent Domain - the taking by condemnation of private
property for public use, providing the owner receives just com-
pensation therefor; (3) Police Power - the regulation of property
use for promoting the public’s health, safety, morals and
general welfare (4) Escheat - provision for the reversion of
ownership to the State if the owner does not pay his taxes or if
he dies leaving no will and no known or ascertainable heirs.
Private restrictions can also affect value. These normally take
the form of deed restrictions but may also include easements,
rights of way, etc.
=~ A-34 —
For purposes of this manual, the terms real estate and real
property are used interchangeably, and the sample appraisals
assume the property is owned in ‘‘fee simple,’’ which is the
highest estate of ownership and infers the entire bundle of rights
is intact.
APPENDIX H
IN THE UNITED STAT” DISTRICT COURT FOR THE
EASTERN DISTRICT OF TENNESSEE
NORTHERN DIVISION
CIV. 3-80-303
United States of America
vi
Anderson County, Tennessee,
et al
ORDER
(Filed July 23, 1980)
The parties in this case will appear before the County
Equalization Board for determination of the issues involved.
After that, either side may go to the State Equalization Board.
When the State Equalization Board resolves the issues, and if
either side is dissatisfied, that side will immediately appear
before the Court and ask for the appropriate relief.
Enter:
/s/ Robert Taylor
United States District Judye
ay |
APPENDIX I
Excerpts From Contract No. W-7405-ENG-26
ARTICLE XXIV - STATE AND LOCAL TAXES
(a) The Corporation agrees to notify DOE of any State or
local tax, fee, or charge levied or purported to be levied on or
collected from the Corporation with respect to the contract
work, any transaction thereunder, or property in the custody or
control of the Corporation and constituting an allowable item
of cost if due and payable, but which the Corporation has
reason to believe, or DOE has advised the Corporation, is or
may be inapplicable or invalid; and the Corporation further
agrees to refrain from paying any such tax, fee, or charge unless
authorized in writing by DOE. Any State or local tax, fee, or
charge paid with the approval of DOE or on the basis of advice
from DOE that such tax, fee, or charge is applicable and valid,
and which would otherwise be an allowable item of cost, shall
not be disallowed as an item of cost by reason of any subsequent
ruling or determination that such tax, fee, or charge was in fact
inapplicable or invalid.
(b) The Corporation agrees to take such action as may be re-
quired or approved by DOE to cause any State or local tax, fee,
or charge referred to above to be paid under protest and to take
such actions as may be required or approved by DOE to seek
recovery of any payment made, including assignment to the
Government or its designee of all rights to an abatement or re-
fund thereof, and granting permission for the Government to
join with the Corporation in any proceeding for the recovery
thereof or to sue for recovery in the name of the Corporation. If
DOE directs the Corporation to institute litigation to enjoin the
collection of or to recover payment of any such tax, fee, or
charge referred to above, or if a claim or suit is filed against the
Corporation for a tax, fee, or charge it has refrained from pay-
ing in accordance with this article, the procedures and re-
quirements of the article entitled ‘‘Litigation and Claims’’ shall
— A-36 —
apply and the costs and expenses incurred by the Corporation
shall be allowable items of cost, as provided in this contract,
together with the amount of any judgment rendered against the
Corporation.
(c) The Government shall save the Corporation harmless
from penalties and interest incurred through compliance with
this article. All recoveries or credits in respect of the foregoing
taxes, fees, and charges (including interest) shall inure to and be
for the sole benefit of the Government.
ARTICLE XVIII - LITIGATION AND CLAIMS
(a) Initiation ~* Litigation. The Corporation may, with the
prior written authorization of the Contracting Officer, and
shall, upon the request of the Government, initiate litigation
against third parties, including proceedings before ad-
ministrative agencies, in connection with this contract. The Cor-
poration shall proceed with such litigation in good faith and as
directed from time to time by the Contracting Officer.
(b) Defense and Settlement of Claims. The Corporation shall
give the Contracting Officer immediate notice in writing (1) of
any action, including any proceeding before an administrative
agency, filed against the Corporation arising out of the perfor-
mance of this contract, and (2) of any claim against the Cor-
poration the cost and expense of which is allowable under any
provision of this contract. Except as otherwise directed by the
Contracting Officer, in writing, the Corporation shall furnish
immediately to the Contracting Officer copies of all pertinent
papers received by the Corporation with respect to such action
or claim. To the extent not in conflict with any applicable policy
of insurance, the Corporation may with the Contracting Of-
ficer’s approval settle any such action or claim, shall effect at
the Contracting Officer's request an assignment and subroga-
tion in favor of the Government of all the Corporation’s rights
and claims (except those against the Government) arising out of
a AT
any such action or claim against the Corporation, and, if re-
quired by the Contracting Officer, shall authorize represen-
tatives of the Government to settle or defend any such action or
claim and to represent the Corporation in, or to take charge of,
any action. If the settlement or defense of an action or claim
against the Corporation is undertaken by the Government, the
Corporation shall furnish all reasonable assistance in effecting a
settlement or asserting a defense. Where an action against the
Corporation is not covered by a policy of insuranc the Cor-
poration shall, with the approval of the Contractin Officer,
proceed with the defense of the action in good faith; an@in such
event the defense of the action shall be at the expense of the
Government: Provided, however, That the Government shall
not be liable for such expense to the extent that it would have
been compensated for by insurance which was required by law
or by the written direction of the Contracting Officer, but which
the Corporation failed to secure through its own fault or
negligence.
— A-38 —
APPENDIX J
MCF:JJMcC: CEStratton:pjc Washington, D.C. 20530
2365174444
CMN: 8014328 August 28, 1980
Anderson County Board of Equalization
c/o Anderson County Tax Assessor’s Office
Anderson County Courthouse
100 Main Street
Clinton, Tennessee 37716
Re: Objection and Appeal to the Anderson County Board
of Equalization Regarding Tennessee Tax Assessment
Issued To Union Carbide Corporation With Respect
To Real Property Owned by the United States of
America (Y-12 Nuclear Weapons Plant)
Dear Sir:
By reason of the July 23, 1980 Order of the Honorable Robert
Taylor, United States District Judge, United States District
Court for the Eastern District of Tennessee, Northern Division,
the United States of America hereby serves this objection on the
Anderson County Board of Equalization and appeals to said
Board that the Anderson County real property ad valorem
assesment issued against the Union Carbide Corp., with respect
to the real property of the United States known as the Y-12
Nuclear Weapons Plant, be declared and found to be invalid
and, alternatively, excessive. The United States reserves its
rights to litigate its federal claims in the Federal Courts and fully
intends to do so. In addition, insofar as the United States is able
to do so, it will require its contractor, Union Carbide Corp., to
litigate any federal claims in the Federal Courts. This objection
and appeal is made upon the following grounds:
— A-39 —
STATE LAW GROUNDS
(1) Tennessee law does not allow real property ad valorem
tax assessments against persons or corporations with no owner-
ship interests in such real property and Union Carbide Corp.
has no ownership interest in the United States Government’s
Y-12 Nuclear Weapons Plant.
(2) The real property owned by the United States (the
Government’s Y-12 Nuclear Weapons Plant), which is the basis
of the real property assessment against Union Carbide Corp.., is
used for public purposes, and is therefore exempt under the pro-
visions of Section 67-501, Tennessee Code annotated.
(3) The subject assessment is excessive.
FEDERAL LAW GROUNDS
(4) The real property tax assessment presently issued against
Union Carbide Corp. is in violation of the Federal Constitution
because it is in reality an illegal attempt by Anderson County to
tax property owned by the United States, rather than an attempt
to lawfully tax any possible limited ‘‘interest’’ in or ‘‘use’’ of
United States Government property.
(See discussion United States v. State of Colorado, CCH Col-
orado State Tax Reporter, Paragraph 200-151 — the County at-
torney, Mike Lawson has a copy of this opinion.)
(5) The real property tax assessment issued against Union
Carbide Corp. is unconstitutional because it discriminates
against the United States and its federal contractor in that (1)
Section 7-53-305, Tennessee Code annotated exempts the pro-
perty of municipalities & counties in Tennessee, but not the pro-
perty of the United States and (2) property owned by others
similarly situated is not treated the same as the subject property.
ee es
Please take notice nat the United States will appear at the
September 8, 1980 hearing that you scheduled (or any other
scheduled hearing) with regard to this subject to discuss this
protest and to assist you in arriving at a correct decision. The
United States will be represented by attorneys from the Tax
Division of the United States Department of Justice and at-
torneys from the Department of Energy. If you need any infor-
mation, have questions or wish to discuss this matter prior to
the hearing, please contact Charles E. Stratton of this office at
(202) 724-6562.
Sincerely yours,
M. CARR FERGUSON
Assistant Attorney General
Tax Division
By: /s/ JOHN J. McCARTHY
Chief
Special Litigation
cc: Mike Lawson, Esquire
Anderson County Attorney
226 North Main Street
Clinton, Tennessee 37716
John H. Cary, Esquire
United States Attorney
P.O. Box 872
Knoxville, Tennessee 37901
Attention:
Jimmie Baxter, Esquire
Assistant United States Attorney
Richard A. Correa, Esquire
U. 8S. Department of Energy
Room 6B222, Forrestal Building
Washington, D. C. 20585
- A-4i —
William Snyder, Esquire
Office of Chief Counsel
U. S. Department of Energy
P.O. Box E
Oak Ridge, Tennessee 37830
Jackson C. Kramer, Esquire
David L. Oakley, Esquire
KRAMER, JOHNSON, RAYSON,
McVEIGH & LEAKE
Suite 2521
United American Plaza
Knoxville, Tennessee 37929
G. Wilson Horde, Esquire
Division Counsel
Union Carbide Corporation
Box Y
Oak Ridge, Tennessee 37830
— A-42 —
APPENDIX K
MCF:JJMcC: CEStratton:pjc Washington, D.C. 20530
236517-44-44
CMN: 8014328 January 13, 1981
Mr. Jerry C. Shelton
Executive Secretary
State Board of Equalization
State of Tennessee
289 Plus Park Boulevard
Nashville, Tennessee 37217
Re: Complaint, Objection and Appeal to the Tennessee
State Board of Equalization Regarding the Anderson
County Tennessee Tax Assessment Issued Against
Union Carbide Corporation With Respect To Real
Property Owned by the United States of America
(Y-12 Nuclear Weapons Plant) (described as Parcel
702, District 2, Map p-14, Anderson County)
Dear Mr. Shelton:
By reason of the July 23, 1980 Order of the Honorable Robert
Taylor, United States District Judge, United States District
Court for the Eastern District of Tennessee, Northern Division,
in the case of United States v. Anderson County Tennessee, et
al., Civil No. 3-80-303 (USDC ED Tenn., P. Div.), regarding
the above-described Anderson County Tax Assessment, and
because of the Sept. 30, 1980 erroneous decision made by the
Anderson County Board of Equalization, the United States of
America hereby serves this complaint, objection, and appeal on
the Tennessee State Board of Equalization; the Anderson Coun-
ty real property ad valorem assessment issued against the Union
Carbide Corp. with respect to the real property of the United
States known as the Y-12 Nuclear Weapons Plant should be
declared and found to be illegal, invalid, and, alternatively, ex-
— A-43 —
cessive and the Anderson County Board's September 30, 1980
decision (or assessment, should be declared erroneous and over-
turned. The United States reserves its rights to litigate its federal
claims in the Federal Courts and fully intends to do so. In addi-
tion, insofar as the United States is able to do so, it will require
its contractor, Union Carbide Corp., to litigate any federal
claims in the Federal Courts. This objection and appeal is made
upon the following grounds:
STATE LAW GROUNDS
(1) Tennessee law does not provide for real property ad
valorem tax assessments against persons or corporations with
no ownership interests in real property. Union Carbide Corp.
has no ownership interest, including no leasehold interest, in the
United States Goverr=ent’s Y-12 Nuclear Weapons Plant;
Union Carbide Corp. has only a right of access to the Govern-
ment’s real property as the Government’s contractor.
(2) The real property owned by the United States (the
Government’s Y-12 Nuclear Weapons Plant), which is the basis
of the real property assessment against Union Carbide Corp., is
used for public purposes, and is therefore exempt under the pro-
visions of Section 67-501, Tennessee Code annotated.
(3) The subject assessment is excessive.
FEDERAL LAW GROUNDS
District Judge Robert Taylor indicated that he desired action
by the Anderson County Board of Equalization and the Ten-
nessee State Board of Equalization before he would decide the
Federal issues raised by the Federal Government in the above-
mentioned Federal Court action. (The following description of
Federal law grounds is given for the sole purpose of putting the
Tennessee State Board of Equalization on notice of the Federal
law grounds that the Government intends to pursue in Federal
ai: ta
Court. The Government does not ask the Board, and believes
the Board has no authority, to rule on the Federal! law ques-
tions).
(1) The real property tax assessment presently issued against
Union Carbide Corp. is in violation of the Federal Constitution
because it is in reality an illegal attempt by Anderson County to
tax property owned by the United States, rather than an attempt
to lawfully tax any possible limited ‘‘interest’’ in or ‘‘use’’ of
United States Government property. (See discussion United
States v. State of Colorado, CCH Colorado State Tax Reporter,
Paragraph 200-151; presently on appeal to the United States
Supreme Court.)
(2) The real property tax assessment issued against Union
Carbide Corp. is unconstitutional because it discriminates
against the United States and its federal contractor in that (A)
Section 7-53-305, Tennessee Code annotated exempts the pro-
perty of municipalities & counties in Tennessee, but not the pro-
perty of the United States and (B) property owned by others
similarly situated is not treated the same as the subject property.
Please take notice that the United States will appear at the
hearing that is tentatively scheduled for the week of February
23, 1981 (or any other scheduled hearing) with regard to this
subject, to discuss this and to assist the Board with any informa-
tion that it may need. The United States will be represented by
attorneys from the Tax Division of the United States Depart-
ment of Justice, attorneys from the Department of Energy, and
possibly a representative from the United States Attorney’s Of-
fice. If you need any information, have questions or wish to
discuss this matter prior to the hearing, please contact Charles
E. Stratton of this office at (202) 724-6430.
a
-
cc:
— Ath ~
Sincerely yours,
M. CARR FERGUSON
Assistant Attorney General
Tax Division
By: JOHN J. McCARTHY
Chief
Special Litigation
uke Lawson, Esquire
Anderson County Attorney
226 North Main Street
Clinton, Tennessee 37716
John H. Cary, Esquire
United States Attorney
P.O. Box 872
Knoxville, Tennessee 37901
Attention: Jimmie Baxter, Esquire
Assistant United States Attorney
Richard A. Correa, Esquire
U. S. Department of Energy
Mail Station 6F094
Forrestal Building
1000 Independence Avenue
Washington, D. C. 20585
William Snyder, Esquire
Chief Counsel, Oak Ridge Operations Office
U. S. Department of Energy
P.O. Box E
Oak Ridge, Tennessee 37830
~~
Jackson C. Kramer, Esquire
David L. Oakley, Esquire
KRAMER, JOHNSON, RAYSON,
McVEIGH & LEAKE
Suite 2521
United American Plaza
Knoxville, Tennessee 37929
G. Wilson Horde, Esquire
Division Counsel
Union Carbide Corporation
Box Y
Oak Ridge, Tennessee 37830
John Keto, Esquire
918 16th Street, N.W.
Suite 200
Washington, D.C. 20006
-
=~ Ad? —
APPENDIX L
U.S. Department of Justice
Tax Division
JFM:JJMcC: CEStratton:pjc Washington, D.C. 20530
236517-44-44
CMN: 8014328 January 28, 1981
Mr. Jerry C. Shelton
Executive Secretary
State Board of Equalization
State of Tennessee
James K. Polk Office Building
505 Dedrick Street
Nashville, Tennessee 37219
Re: Addendum To Complaint, Objection and Appeal to
the Tennessee State Board of Equalization Regarding
the Anderson County, Tennessee, Tax Assessment
Issued Against Union Carbide Corporation With
Respect To Real Property Owned by the United
States of America (Y-12 Nuclear Weapons Plant)
(Described As Parcel 702, District 2, Map P-14,
Anderson County)
Dear Mr. Shelton:
This letter is intended to clarify questions raised concerning
the position of the United States in the matter of the appeal by
Union Carbide Corporation to the State Board of Equalization
of the Anderson County, Tennessee, tax assessment issued
against it. Although our January 13, 1981, letter to you is styled
“Complaint, Objection and Appeal . . .’’, the United States
does not want to become a party to this action or be joined with
Union Carbide Corporation as co-appellant before the State
Board of Equalization. The United States is not submitting to
-— Att —
the jurisdiction of the State Board of Equalization, nor waiving
its sovereign immunity in any manner. The reason for our
January 13, 1981, letter to you and our appearance at the
February 24, 1981, hearing, as explained more fully in the first
paragraph of that letter, is that the Federal District Court,
Judge Taylor presiding, requested this matter be brought to the
attention of the Anderson County Board of Equalization and
the State Board of Equalization before the Federal Court passed
on this matter. Accordingly, the United States has and is mak-
ing its position known to this Board and will continue to assist
this Board with any factual information that it may need before
proceeding further in the Federal District Court. A copy of
Judge Taylor’s July 23, 1980 Order is attached to this letter for
the convenience of the Board.
Sincerely yours,
JOHN F. MURRAY
Acting Assistant Attorney General
Tax Division
By: JOHN J. McCARTHY
Chief
Special Litigation
cc: Mike Lawson, Esquire
Anderson County Attorney
226 North Main Street
Clinton, Tennessee 37716
John H. Cary, Esquire
United States Attorney
P.O. Box 872
Knoxville, Tennessee 37901
Attention: Jimmie Baxter, Esquire
Assistant United States Attorney
— A-49 —
Richard A. Correa, Esquire
U. S. Department of Energy
Mail Station 6F094
Forrestal Building
1000 Independence Avenue
Washington, D. C. 20585
William Snyder, Esquire
Chief Counsel, Oak Ridge Operations Office
U. S. Department of Energy
P.O. Box E
Oak Ridge, Tennessee 37830
Jackson C. Kramer, Esquire
David L. Oakley, Esquire
KRAMER, JOHNSON, RAYSON,
McVEIGH & LEAKE
Suite 2521
United American Plaza
Knoxville, Tennessee 37929
G. Wilson Horde, Esquire
Division Counsel
Union Carbide Corporation
Box Y
Oak Ridge, Tennessee 37830
John Keto, Esquire
918 16th Street, N.W.
Suite 200
Washington, D.C. 20006
— A-50 —
APPENDIX M
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF TENNESSEE
NORTHERN DIVISION
CIVIL ACTION NO. 3-82-83
United States of America,
Plaintiff
Vv.
Anderson County, Tennessee;
David O. Bolling, Anderson
County Executive; Patsy Stair,
Anderson County Trustee;
Owen Richardson, Anderson
County Property Assessor;
Clyde Clairborne, Robert
Jolley, Jerry George, Everett
Sharp, Charlotte Hayes, Helen
Norman, Ernie Phillips, Q. V.
Leinart, Kenneth Wallace,
Darell Copeland, Jim Hackworth,
Jack Keeney, and Jack Rains,
County Commissioners of
Anderson County; Charles Oldham,
K. E. Jones, R. R. Tippy, Harry
Young and Tom F. Mullinix, The
Anderson County Board of
Equalization; The Board Of
Equalization Of The State Of
Tennessee, and its members,
— A-51 —
Lamar Alexander, Gentry Crowell,
William C. Koch, Jr., William
Snodgrass, Harlan Matthews,
Claude Ramsey, Martha Olsen,
and John E. Sloan, Jr.,
Defendants
COMPLAINT FOR A DECLARATORY JUDGMENT
(Filed Feb. 12, 1982)
The plaintiff, United States of America, by and through its
undersigned attorneys, complains and alleges as follows:
1. This is a civil action instituted by the United States of
America for the purpose of obtaining a declaratory judgment
that (a) the contract between the United States and Union Car-
bide Corporation creates in or conveys to Union Carbide no real
property ownership interest or leasehold interest in the United
States’ plants and facilities in Tennessee which are managed by
Union Carbide Corporation; and (b) that the defendants are
prohibited from imposing ad valorem real property taxes on or
with respect to the real property of the United States on which is
situated the Y-12 nuclear weapons plant because all real proper-
ty ownership interests in the plant are owned by and are titled in
the United States, and the imposition of any such ad valorem
real property taxes on said property would constitute taxation
on property of the United States in violation of the Consitution
of the United States; and (c) that the recent decision issued by
the Tennessee State Board of Equalization declaring Union Car-
bide to have an interest in the real property on which is situated
the United States’ Y-12 nuclear weapons plant is erroneous, il-
legal, null and void.
2. This action is commenced at the request of the plaintiff’s
Department of Energy (hereinafter ‘‘DOE’’), is under the direc-
tion of the Attorney General of the United States and is brought
to vindicate the sovereign rights and pecuniary interests of the
United States.
— A-52 —
3. This Court has jurisdiction over this action under Sections
1331, 1345 and 2201 of Title 28, United States Code, because
this action is brought by the United States, involves a controversy
which exceeds $10,000.00, in amount exclusive of interest and
costs, and arises under the United States Constitution.
4. An actual controversy, as is more fully described below,
has arisen and now exists between the United States and the
defendants concerning their respective rights and claims.
5. The plaintiff, United States of America, is a corporate
sovereign and body politic.
6. The defendant, Anderson County, Tennessee, is a cor-
porate body politic, is a governmental subdivision of the State
of Tennessee and is within the jurisdiction of this Court.
7. The defendant, County Executive of Anderson County,
Tennessee, is the chief accounting and financial officer of the
County, and is charged by Tennessee law with the responsibility
of assuring that all taxes due the County are collected.
8. The defendant, County Trustee of Anderson County, is
charged by Tennessee law with the specific responsibility of col-
lecting the taxes in dispute in this action.
9. The defendant, Property Assessor of Anderson County,
acting under color of Ten*essee law, issued an assessment with
respect to real property of the United States located in Ander-
son County.
10. The defendant, County Commissioners of Anderson
County, is the legislative body of Anderson County. Under
Tennessee law, the County Commissioners are charged with the
responsiblity of overseeing the tax collection activities of the
County Executive and providing for the collection of taxes at
the rates and in the manner authorized by law 2nd set by them.
11. The defendant, Anderson County Board of Equalization,
is charged with the responsibility of taking action on complaints
a eG) om
made by those receiving real property tax assessments in Ander-
son County and making final decisions pertaining to such com-
plaints that are reviewable by the State Board of Equalization.
12. The defendant, State Board of Equalization of the State
of Tennessee, and its members, Lamar Alexander, Gentry
Crowell, William C. Koch, Jr., William Snodgrass, Harlan
Matthews, Claude Ramsey, Martha Olsen, and John E. Sloan,
Jr., sued herein solely in their official capacities as members of
the Board of Equalization, are charged with the responsibility
of making the final administrative decision of the State of Ten-
nessee with respect to complaints concerning classification,
valuation and assessment of real property in Tennessee.
13.The United States, through the DOE, owns 37,185 acres of
land spread over Anderson and Roane Counties, Tennessee,
known as the Oak Ridge Reservation, on which large
Government-owned production and research facilities exist.
The Oak Ridge Reservation was acquired by the United States
in 1943 and its facilities have been in operation since World War
Il, performing functions related primarily to the development
of nuclear energy and to the production of nuclear weapon
components for national defense. The principal facilities on the
Oak Ridge Reservation are the Y-12 nuclear weapons plant
(hereinafter ‘‘Y-12 Plant’’), located in Anderson County, the
Oak Ridge National Laboratory and the Oak Ridge Gaseous
Diffusion Plant, both of which are located in Roane County.
14. The United States Government facility which is the sub-
ject of this action is the Y-12 Plant, which is dedicated primarily
to the production of nuclear weapon components. At the pre-
sent time, the portion of the Government’s Oak Ridge Reserva-
tion comprising the Y-12 Plant in Anderson County consists of
approximately 811 acres of land and approximately 300
buildings and structures, all of which are owned in fee simple by
the United States.
|
15. The total Government real property and associated equip-
ment at the Y-12 Plant are presently valued on the
Government’s books as follows:
Acquisition Value $656,095 000.00
Depreciated Value $275,308 ,000.00
16. The Y-12 Plant, two other plants located on the Oak
Ridge Reservation which are situated in Roane County, Ten-
nessee, and one plant located in Kentucky are managed for the
United States’ DOE by the Union Carbide Corporation
(hereinafter sometimes referred to as ‘‘Carbide’’) under Con-
tract No. W-7405-ENG-26. This contract which was originally
executed in 1943, with a term of several years, has been reex-
ecuted and renewed every three to five years since 1943, and ex-
pires on September 30, 1983, unless extended. The current con-
tract in effect today is designated Modification No. A057 of
Contract No. W-77405-ENG-26 and is operative for the period
October 1, 1978 through September 30, 1983. Under this con-
tract, Union Carbide Corporation manages the United States’
Y-12 Plant under Government direction, and performs work
and services for the Government.
17. Modification No. A057 to Contract No. W-7405-ENG-26
defines and controls the activities which Carbide performs for
the United States at the DOE Y-12 Plant and the relationship
between DOE and Union Carbide Corporation. Carbide per-
forms no work at the DOE Y-12 Plant other than that perform-
ed for the United States Government (DOE) pursuant to
Modification No. A057 of Contract No. W-7405-ENG-26. No
part of the Y-12 Plant or equipment located therein is utilized
for any work done by Carbide for its own account or as a
private entrepreneur. The declaration of R. J. Hart and
Modification No. A057 to Contract No. W-7405-ENG-26 are
attached hereto as Exhibit A.
18. Modification No. A057 to Contract No. W-7405-ENG-26
defines and controls Carbide’s type of ‘‘use’’ of or ‘‘interest’’ in
- ss
the United States’ Y-12 Plant. At all times, title to the land on
which the Y-12 Plant is located, title to all the buildings that
comprise the Y-12 Plant, and title to all the equipment and sup-
plies used at the Y-12 Plant have been and remain in the United
States Government. Neither Modification No. A0S7 to Con-
tract No. W-7405-ENG-26 nor any other agreement, oral or
written, nor any deed, lease, conveyance, license, nor any other
document confers or purports to confer upon Carbide any
estate, leasehold, license, permit, or any other right, title or in-
terest in or to the Y-12 Plant or any portion thereof.
19. Carbide does not pay and is not obligated to pay any rent,
fee, charge, or other consideration, in exchange for its presence
Or activities at the Y-12 Plant. Union Carbide Corporation does
not own, or have any interest in, the real or personal property at
the Y-12 Plant to perform its duties pursuant to Modification
No. A0S7 to Contract No. W-7405-ENG-26.
20. Neither Modification No. A0OS7 to Contract
W-7405-ENG-26 nor any other document provides for or com-
templates the sale by Union Carbide Corporation or the pur-
chase by the United States of the product of the Y-12 Plant or
any other product or commodity. The product manufactured
at, along with everything else in, the Y-12 Plant, is at all times
owned by and controlled by the United States.
21. Under the said contract between the United States and
Union Carbide no funds of Union Carbide are to be used in any
manner with respect to the Y-12 Plant. Expenses of operating
the Y-12 Plant are paid by drafts drawn on the United States’
funds on deposit in a United States owned bank account. Under
this contract with the United States, Union Carbide Corpora-
tion is obligated to manage, staff, maintain, and operate the
Y-12 Plant within the limits of available Government funds and
as directed by the United States. Pursuant Modification No.
A057 to Contract W-7405-ENG-26, the tax which is the subject
of this suit, if paid, would be paid directly from the funds of the
United States.
—
22. For its services under the said contract, Union Carbide
Corporation is paid a fixed management fee annually. In Fiscal
Year 1982, Carbide will receive a total fee of $8 million for its
services under Modification No. A057 to Contract
W-7405-ENG-26 for operating the three Oak Ridge Reservation
plants, including the Y-12 Plant, and the one plant in Kentucky.
No attempt is made under the contract to apportion the $8
million fee to any one of the four plants, but it is estimated that
the portion of the fee attributable to operating the Y-12 Plant is
approximately $2.0 million. Carbide receives no other income
or compensation for its services in operating these DOE plants,
other than the said management fee.
23. Prior to 1980, Anderson County had not attempted to im-
pose or assess any type of real property taxes with respect to the
Government’s Y-12 Plant, nor had it attempted to collect such
taxes from either the United States or its operating contractor,
Union Carbide Corporation.
24. In 1980, Anderson County sought to impose real property
taxes with respect to the Government’s Y-12 Plant. By letter
dated June 3, 1980, from defendant, Anderson County Proper-
ty Assessor, Union Carbide was notified that it was being assess-
ed for its interest in the real property at the Y-12 Plant for the
year 1980. That assessment assumed a market value of
Carbide’s interest of $973,200,000.00 and an assessed value of
$389,280,000.00.
25. Anderson County’s action was based on its conclusion
that Union Carbide’s presence at and management of the Y-12
Plant was an interest in real estate that could be taxed under
Tennessee law. Although possession of and use of real property
is taxable as a privilege in many states, the Tennessee
Legislature rejected imposing such a privilege tax in 1979, and
no such privilege tax exists in Tennessee today. Accordingly, the
tax involved herein can only be imposed if Union Carbide Cor-
poration has some legal interest in the realty upon which the
eT
Y-12 Plant is situated. Since the aforementioned contract
whereby Union Carbide manages the Y-12 Plant for the United
States does not grant any legal interest in the realty to Union
Carbide, the tax being asserted is being levied on property of the
United States and thus is unconstitutional.
26. On July 15, 1980, the plaintiff filed an action in this Court
seeking a declaratory judgment that defendant Anderson Coun-
ty’s assessment was unconstitutional! and praying for an injunc-
tion prohibiting defendant Anderson County from taking any
action with respect to the assessment until a final judgment was
issued in the matter. That action was designated Civ. 3-80-303.
27. On July 23, 1980, this Court ordered the plaintiff and its
contractor, Union Carbide Corporation, to pursue the matter
with the defendant Anderson County Board of Equalization
and defendant State Board of Equalization, but stated that
either party could return to this Court if not satisfied with the
decision of these bodies.
28. Union Carbide appeared before the defendant, Anderson
County Board of Equalization, challenging the finding and the
assessment of Union Carbide’s interest in the Y-12 Plant. On
September 30, 1980, the defendant, Anderson County Board of
Equalization, determined that Carbide owned an interest in the
real property of the Government’s Y-12 Plant and that the ap-
praised value of such interest was $370,000,000.00. The opinion
is attached hereto as Exhibit B.
29. Plaintiff’s contractor, Carbide appealed both the validity
of the tax and the amount of the assessment to the defendant
State Board of Equalization.
30. On February 24, 25, and 26, 1981, a hearing was held
before the Assessment Appeals Commission, a body created by
defendant State Board of Equalization as authorized by TCA §
67-831 to hear appeals regarding assessment, classification and
valuation of property. On Jfine 10, 1981, the Assessment Ap-
— A-58 —
peals Commission reversed the decision of the defendant
Anderson County Board of Equalization, holding unanimously
that Union Carbide Corporation owned no real property in-
terest in the Y-12 Plant and, accordingly, making no finding as
to the value of any such interest. A copy of this decision and the
supporting opinion is attached hereto as Exhibit C.
31. On June 17, 1981, defendant Anderson County Board of
Equalization petitioned defendant State Board of Equalization
to review the decision of the Assessment Appeals Commission,
and such petition was granted on June 22, 1981.
32. On July 29, 1981, this Court dismissed, without prejudice,
plaintiff's action of July 15, 1980.
33. On January 8, 1982, defendant State Board of Equaliza-
tion issued a decision, deciding 4 to 3, reversing the opinion of
the Assessment Appeals Commission. The State Board conclud-
ed that Union Carbide Corporation owned a real property in-
terest in the Y-12 Plant, which interest had an appraised value
-of $325,000,000.00 for the tax year 1980. A copy of the notice
and decision is attached hereto as Exhibit D.
34. The attempted imposition, assessment or collection by the
defendants of the subject ad valorem real property taxes from
either the United States or from Union Carbide Corporation,
the United States’ operating contractor, was and is in violation
of the Federal Constitution, unlawful, void and of no effect
because:
(A) Modification No. A0OS7 to Contract
W-7405-ENG-26 between DOE and Union Carbide con-
veys no real property ownership interests, leasehold, or
other property interests in the Y-12 Plant to Union Car-
bide. The attempt by defendant Anderson County to tax
an ownership, leasehold, or other property interest in the
Y-12 Plant is an attempt to tax the real property of the
United States.
at ln
(B) The amount of the assessment, $325,000,000.00, ex-
ceeds even the Government’s depreciated book value of
the Plant, and means that the interest in the real property
of the Plant which Anderson County is seeking to tax is the
interest of the United States.
(C) Even though Union Carbide enjoys the privilege of
access in and to the Y-12 Plant and is using the real proper-
ty of the Y-12 Plant solely for purposes of performing
work for the Government under its contract, defendant
Anderson County cannot tax Union Carbide for that
privilege because iennessee law does not permit taxing
private companies for the privilege of possessing or using
tax-exempt real property.
(D) By attempting to levy such a tax, defendant Ander-
son County is discriminating against the United States and
the contractors with whom it deals.
WHEREFORE, plaintiff United States of America prays as
follows:
1. That this Court enter a judgment declaring that the con-
tract between plaintiff United States of America and Union
Carbide Corporation neither conveys to nor creates in Union
Carbide Corporation any real property ownership, leasehold or
any other property interest in the Government’s Y-12 Plant and
that the defendant State Board of Equalization’s interpretation
of the subject Government contract is in error.
2. That this Court enter a judgment declaring that the attemp-
ted imposition, assessment or collection by the defendants of ad
valorem real property taxes from either the United States or
from Union Carbide Corporation, its operating contractor, was
and is in violation of the Federz] Constitution, unlawful, void
and of no effect because:
A. The instant real property tax assessment is in reality
an unconstitutional attempt by Anderson County to Tax
property interests owned by the United States.
—
B. The amount of the assessment, $325,000,000.00, ex-
ceeds even the Government’s depreciated book value of
the Plant, and illustrates that the interest in the real pro-
perty of the Plant which Anderson County is seeking to tax
is, in reality, the interest of the United States.
C. The interest which Union Carbide has in the Y-12
Plant is not an ownership, leasehold or any other property
interest in real estate, but is a privilege of access to and use
which is not taxable under the laws of Tennessee.
D. The attempt by Anderson County to levy such a tax
unconstitutionally discriminates against the United States
and the contractors with whom it deals.
3. That this Court grant the plaintiff its costs in this action
and that this Court grant such other and further relief as is just,
equitable and proper.
JOHN W. GILL, JR.
United States Attorney
By:
Assistan
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.