# Petition — Anderson County v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0320%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1983 - **Citation:** 464 U.S. 1017 ## 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 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: Assistant United States Attorney GLENN L. ARCHER, JR. Assistant Attorney General JOHN J. McCARTHY Special Litigation Counsel CHARLES E. STRATTON Attorney, Special Litigation Tax Division U.S. Department of Justice Washington, D.C. 20530 Telephone: (202) 724-6430 By: Charles E. Stration Attorneys for Plaintiff, United States of America — A-61 — APPENDIX N IN THE CHANCERY COURT FOR DAVIDSON COUNTY, TENNESSEE NO. 82-431-II] Union Carbide Corporation, Petitioner, Vv. Lamar Alexander, Gentry Crowell, William C. Koch, Jr., William Snodgrass, Harlan Matthews, Claude Ramsey, Martha Olsen, John E. Sloan, Jr., Each of whom is sued in his official capacity as a Member of the Board of Equalization of the State of Tennessee; BOARD OF EQUALIZATION OF THE STATE OF TENNESSEE, and ANDERSON COUNTY, TENNESSEE, Respondents. PETITION FOR REVIEW (Filed March 8, 1982) Comes the Petitioner, Union Carbide Corporation, by and through its attorneys, pursuant to T.C.A. 4-5-117, and hereby files this Petition for Review respectfully requesting that this Court review and reverse the decision of the State Board of Equalization which was approved and signed on January 8, 1982, and the Certificate of Assessment entered on January 11, 1982, holding that certain real property located in Anderson County, Tennessee is subject to ad valorem taxation. The property assessed by Anderson County is owned by the United States of America and used by it for the development and production of nuclear weapons parts. Pursuant to the pro- visions of the Atomic Energy Act (42 USC 2061 et seq.) the — A-62 — United States entered into a contract with Union Carbide Cor- poration for the management and operation of the facility which is known as the ‘‘Y-12’’ Plant. In order to perform its contractual duties Union Carbide has a limited right of access to and occupancy of the Plant. The State Board of Equalization, applying possessory interest, use tax cases and analyses, held that this restricted right of access and occupancy amounted to an interest in real property owned separate from the general freehold which interest was taxable under the provisions of T.C.A. 67-602(6). (The Board’s Opinion is attached hereto as Exhibit A) In so holding the majority of the State Board of Equalization in a 4 to 3 decision overruled the unanimous opinion of the Assessment Appeals Commission, which opinion of the Commission distinguished between ad valorem real pro- perty tax statute. and cases and possessory interest, use tax statutes and cases. The Commission’s opinion held that the restricted right of Union Carbide Corporation to go upon and occupy the Y-12 Plant for the sole purpose of performing its contract with the United States of America was not an interest in real property owned separate from the general freehold and therefore was not subject to ad valorem taxation under the pro- visions of T. C. A. 67-601(6). (The Commission’s Opinion is at- tached hereto as Exhibit B) In its 4 to 3 decision the State Board also overruled the Assessment Appeals Commission’s finding that the use of the Y-12 Plant for the development and production of nuclear weapons parts was a use of property of the United States for a public purpose, and that the property was exempt from taxation under the provisions of T. C. A. 67-501. In support of its petition, the Petitioner would show unto the Court the following: 1. The property, against which the ad valorem tax assessment was made, has been certified by the State Board of Equaliza- tion, is known as Parcel 702 in the Second District of Anderson — A-63 — County, Tennessee, and is located within the City of Oak Ridge. Parcel 702 is commonly known as the Y-12 Plant, consisting of approximately 805 acres of land on which approximately 271 buildings and structures are located, all of which property © owned in fee simple by the United States of America and is used by the United States of America for the development and pro- duction of nuclear weapons parts. 2. The Petiticiner, Union Carbide Corporation, is a New York corporation, duly domesticated in the State of Tennessee. Under and rursuant to the provisions of Government Contract No. W-7405-Eng 26, with the United States Department of Energy (DOE), Union Carbide Corporation manages and operates the Y-12 Plant. All work performed by Carbide at the Y-12 Plant is United States Government work, all materials us- ed and all personal property lcoated thereon are owned by the United States, all products manufactured are owned by the United States Government, and the United States Government maintains strict control over the operation of the plant through the DOE. 3. Defendants, Lamar Alexander, Gentry Crowell, Harlan Matthews, Martha Olsen, Claude Ramsey, John E. Sloan, Jr., William R. Snodgrass and William C. Koch, Jr. (designated representative of Governor Lamar Alexander) are members of the Board of Equalization of the State of Tennessee, and are sued in their official capacities. The offices of the State Board of Equalization are located at Suite 1400 James K. Polk Office Building, 505 Deadrick Street, Nashville, Davidson County, Tennessee. Defendant, Board of Equalization of the State of Tennessee, is an ‘‘agency’’ as defined in Tennessee Code An- notated 4-5-102. Defendant, Anderson County, Tennessee, is a corporate sovereign and body politic, is a governmental subdivi- sion of the State of Tennessee and can be served by serving the County Executive of Anderson County, David O. Bolling at the Anderson County Courthouse, Clinton, Tennessee. a 4. This is a Petition to Review a final action of the Board of Equalization of the State of Tennessee, and is therefore govern- ed by T. C. A. 67-840 and by the Administrative Rules and Regulations set forth in T.C.A. 4-5-101 et seq. T.C.A. 4-5-117 specifically provides that a person who is aggrieved by a final decision in a contested case [by an agency as defined in T.C.A. 4-5-102] is entitled to judicial review under this chapter. . .”’ 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 Tennessee statutory law in its resolution of the following questions. (a) Whether the real property (Parcel 702 in Ander- son County, Tennessee) upon which the assessment has been certified by the Board of Equalization of the State of Tennessee, and which is owned in fee simple absolute by the United States of America, is used for a public purpose and is therefore exempt from ad valorem real property taxation under the provisions of T.C.A. 67-501. (b) Whether Union Carbide Corporation owns any interest, 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 Corporation. (c) Whether the valuation of the real property in- terest of Union Carbide Corporation as fixed by the Board of Equalization, if any such real property in- terest exists, is excessive. B. The decision of the State Board of Equalization is ar- bitrary and capricious. — A-65 — C. The decision of the State Board of Equalization is un- supported by evidence which is both substantial and material in light of the entire record. 6. By letter dated June 3, 1980, the property assessor of Anderson County, Tennessee, forwarded to Union Carbide Corporation a real property assessment notice for Parcel 702, District 2, Map 14, for the year 1980, showing a 100% valuation of $973,200,000.00. The notice did not reflect the classification of the property. However, the assessor applied a 40% factor to the valuation to arrive at an assessment of $389,280,000.00. As indicated above, Parcel 702 is the Y-12 Plant facility owned by the United States of America in fee simple absolute, is located at Oak Ridge, Anderson County, Tennessee, and is managed and operated by Union Carbide Corporation under and pursuant to provisions of Government Contract W-7405-ENG-26, with the United States Department of Energy. Subsequently, Union Carbide Corporation objected to and appealed both the validity and amount of the Anderson County assessment against it to the Anderson County Board of Equalization. That Board held a hearing on September 29, 1980, and on the very next day, September 30, 1980, determined that the fee simple absolute value of the Y-12 Plant facility was $510,528,000.00. After applying the appraisal ratio existing in Anderson County at that time (38.5%), the Anderson County Board of Equalization established the 1980 tax year assessment against Union Carbide Corporation at $56,980,000.00. 7. On October 16, 1980, Petitioner, Union Carbide Corpora- tion, filed its appeal to the State Board of Equalization. The State Board of Equalization delegated the authority to hear the appeal to the Assessment Appeals Commission of the State of Tennessee, pursuant to the provisions of T.C.A. § 67-831. A full and complete hearing was held before said Commission on February 24, 25, and 26, 1981. Subsequently, on June 10, 1981, the Assessment Appeals Commission rendered its unanimous =e decision holding that the real property being used by Union Carbide Corporation was being used for a public purpose as defined under the provisions of T.C.A. 67-501 and therefore said property was exempt from taxation. The Commission fur- ther held that Union Carbide Corporation did not own any in- terest in real property separate from the general freehold and that Union Carbide’s right of access to and management and operation of the Y-12 Plant facility did not constitute a species of real property subject to ad valorem taxation under Sec. 67-602(6). The Commission also heard evidence regarding valuation, but since it struck the assessment for the 1980 tax year in its entirety, the Commission did not reach the question of value. Anderson County then filed a Petition before the State Board of Equalization to review the Assessment Appeals Commission decision as provided for in T.C.A. § 67-831, which petition was granted. Thereupon, on January 8, 1982, the State Board of Equalization rendered a 4 to 3 decision reversing the holding of the Assessment Appeals Commission. The Board held (1) that the real property assessed was not being used for a public pur- pose as contemplated under T.C.A. 67-501 and was therefore not exempt; (2) that Union Carbide Corporation does own an interest in the real property as contemplated under T.C.A. 67-602(6); (3) and that the value of Union Carbide’s interest in the real property was $325,000,000.00. 8. Union Carbide Corporation insists that the Y-12 Plant was and is used for a public purpose and exemp: from taxation pur- suant to T.C.A. § 67-501 and the Board of Equalization was in error in not so holding. T. C. A. § 67-501 provides, among other things, that ‘‘all property of United States, . . . that is used ex- clusively for public, county or municipal purposes shall be ex- empt from taxation’’. In Pack v. Southern Bell Telephone and Telegraph Company, 215 Tenn. 503, 387 SW 2d 789 (1965) the Supreme Court of Tennessee, quoting Minneapolis Gas Com- pany v. Zimmerman, 253 Minn. 164, 91 NW 2d 642 (1958) defined a ‘‘public purpose’’ as follows: — AG? — What is a ‘‘public purpose’’ that will justify the expen- diture of public money is not capable of a precise defini- tion, but the Courts generally construe it to mean such an activity that will serve as a benefit to the community as a body and which, at the same time is directly related to the functions of government. The mere fact that some private interest may derive an incidental benefit from the activity does not deprive the activity from its public nature if its primary purpose is public. The Y-12 Plant facility is the largest employer in Anderson County with an annual payroll cost of approximately $141,000,000.00, and utilizes the services of 7100 employees of which 2676 are residents of Anderson County. It is part of a federally owned and integrated system of plants and laboratories operated in furtherance of the responsibilities of the Department of Energy to develop and produce nuclear weapons for the national defense and to engage in research ac- tivities incident to the development and production of nuclear weapon parts under and pursuant to the Department of Energy Organization Act. (Public law 95-91) 42 USCA 7101 et. seq. Furthermore, the United States Government has paid $3,599,401 .00 as in lieu of tax payments and financial assistance payments to Anderson County during the years it has carried on these governmental operations. Recognizing such facts, the Assessment Appeals Commission of the State of Tennessee stated in its decision, that ‘‘it is dif- ficult to imagine a greater public purpose than the defense of the free world and certainly the manufacture of nuclear weapons is directly related to an exclusive function of the government.’’ To the contrary, however, and despite the above mentioned facts, the State Board of Equalization held that Union Carbide Corporation was not exempt from taxation by construing T.C.A. 67-501 as merely exempting the real proerty of the Federal Government and not exempting the user of any such property. Such a position is not supported by Tennessee — A-68 — law. Neither the government real property itself, nor the entity using the property are subject to ad valorem taxes under T.C.A. § 67-501 if the property is being used for a public purpose. The Supreme Court of Tennessee has so ruled in a number of cases. see e.g. West v. Industrial Development Board, 206 TN 154, 332 SW 2d 201 (1960). As a result of the ruling in this case and because they are being used for a public purpose, the land and buildings owned by the City of Nashville and leased to Genesco, Inc. by the Industrial Deveiopment Board are not carried on the ad valorem tax roles of Davidson County and no assessment has been made against the City or Genesco on the property or use thereof. This is true notwithstanding the fact that the property is being used for commercial purposes by a private corporation operating for profit. The operation of the Y-12 Plant facility constitutes a public purpose within the purview of T.C.A. 67-501, and as de® :ed in Pack vy. Southern Bell Telephone, supra. Furthermore, as noted above, the private use of that facility, even if used for a com- mercial purpose, is exempt from ad valorem taxation. 9. Contract No. W-7405-ENG-26 defines and controls Car- bide’s type of ‘‘use’’ of or ‘‘interest’’ in 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 supplies used at the Y-12 Plant have been and remain in the United States Government. Neither Contract 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. 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 Contract No. W-7405-ENG-26. — A-§69 — Neither Contract No. W-7405-ENG-26 nor any other docu- ment provides for or comtemplates the sale by Union Carbide Corporation or the purchase by the United States of the pro- ducts manufactured at the Y-12 Plant. The products manufac- tured at, along with everything else in, the Y-12 Plant, are at all times owned by and controlled by the United States. Union Car- bide is not the owner of any interst in the Y-12 Plant separate and apart from the United States Government. Under the said contract between the United States and Union Carbide no funds of Union Carbide are to be used in any man- ner 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 Corporation 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 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. The State Board of Equalization is in error in its determina- tion that Union Carbide’s right to occupy and use the Y-12 Plant to perform its duties under its contract with DOE, makes Carbide the owner of a separate taxable interest under T.C.A. 67-602(6). That section of the Tennessee Code provides that **. . . all other interests of whatsoever character, . . . owned separate from the general freehold, shall be assessed to the owner thereof. . .’’ Carbide owns no interest separate from the general freehold subject to ad valorem taxation under the Ten- nessee statutes. The Board’s apparent reliance on the existence of a commercial purpose as a reason for subjecting Union Car- bide Corporation to ad valorem taxation is misplaced. 10. The complex of Tennessee ad valorem tax statutes tax ownership of interests in real property which are owned = A — separately from the fee simple ownership of the property. These statutes do not tax interests which are not owned separately from the general freehold whether valuable or not. For exam- ple, a remainder interest is a valuable interest in real property but is now owned separately from the general freehold as con- templated under T.C.A. 67-602(6). Thus, it is not taxable as a separate interest. Sherril/ v. Board of Equalization, 224 Tenn. 201, 452 SW 2d 857 (1970). T.C.A, 67-601(1) and T.C.A. 67-602(6) classify and authorize the assessment of real property interests, whether the fee simple or a lesser interest, which are owned by the taxpayer. For ad valorem tax purposes, the statute cannot lawfully be extended by implication to reach Carbide’s management and operation of exempt real property where Carbide owns no interest in the pro- perty. Neuhoff Packing Co. v. Chattanooga, 191 Tenn. 395, 234 S.W.2d. 824 (1950). To do so, as the State Baord of Equalization did in the instant case, is error. In reaching its decision that Union Carbide Corporation has a separate taxable interest in real property, the State Board of Equalization, as did Anderson County before that, relied on cases interpreting possessery interest and privilege tax statutes, The Tennessee statutes at issue in the instant case clearly tax property ad valorem. They do not purport to tax the use of pro- perty as a privilege and therefore, the application of privilege taxes may not be equated with the application of real property taxes as was done by the Board. This distinction is recognized and weil explained in the opinion of the Assessment Appeals Commission and is made clear in numerous Tennessee deci- sions. see e.g. Madison Suburban Utility District v. Carson, 232 SW 2d 277 (1950). 11. The State Board of Equalization committed further error in establishing the value of Union Carbide’s interest in the real property owned by the United States Government at $325,000,000.00 for the 1980 tax year. In so doing, the Board —_s determined that the annual fee which Carbide receives for its management of the Y-12 Plant facility has little relevance to the valuation of Carbide’s interest in the Y-12 Plant. The Board's holding was made in spite of the fact that the only right Carbide enjoys by virtue of its contract with the Department of Energy to which a value might be attributed is its right to receive a year- ly fee in the amount of $1,800,000.00 for the management, Operation, and maintenance of the Y-12 Plant facility. ($1,800,000 being the fee received for 1980) Furthermore, it should be noted for the purposes of valuation, that Carbide received from the Anderson County Property Assessor a tax statement in the amount of $3,393,390.00 for 1980. Notice has also been received that an assessment in the amount of $130,000,000.00 has been made against Carbide for 1981 is $3,445,000.00. Assuming for the purpose of discussion that Carbide was operating the facility under a lease, or owned any real property interest, which it does not, and was paid $1,800,000.00 as an operating fee, ($1,800,000 being the fee received for 1980) it is hardly conceivable that an annual tax in an amount almost double the amount of the fee received by the taxpayer could be justified and reasonable, and for the State Board to set such a valuation, is arbitrary, capricious, not sup- ported by the evidence and is error. 12. The rights of the Petitioner, Union Carbide Corporation, has been prejudiced because the findings, conclusions and deci- sions of the State Board of Equalization as shown by its opinion and certificate of assessment issued, are: (a) contrary to the ex- press provisions of T.C.A. § 07-501 exempting from ad valorem taxation real property of the United States Government used for a public purpose; (b) contrary to the provisions of T.C.A. § 67-602(6) which state that only interests in real property ‘‘owned separate from the general freehold’’ are taxable ad valorem in Tennessee; (c) arbitrary and capricious; (d) unsupported by evidence which is both substantial and material in light of the entire record, and in addition, the valuation of Union Carbide’s interest ‘ound to exist by the State Board of Equalization is ex- cessive. nt Ae oe WHEREFORE, PREMISES CONSIDERED, PETI- TIONER PRAYS: (1) That proper process issue and be served upon the defen- dants, Lamar Alexander, Gentry Crowell, William Snodgrass, Harlan Matthews, Martha Olsen, Claude Ramsey, John E. Sloan, Jr., and William C. Koch, Jr., Board of Equalization of the State of Tennessee, and each of them, requiring them to ap- pear and answer this Petition for Review and requiring them to transmit to the Court the original or certified copy of the record in the administrative proceeding in this matter. (2) That this Court, upon review of the record before the Board of Equalization of the State of Tennessee relating to its certificate of assessment entered on January 11, 1982, enter an order reversing and vacating said certificate of assessment and decreeing that the real property which has been assessed for tax- ation is used exclusively for a public purpose, that Union Car- bide Corporation owns no interest in real property separate from the general freehold owned by the United States of America and that for either or both of said reasons, Union Car- bide Corporation is not liable for or subject to ad valorem taxa- tion, (3) That the assessment of Union Carbide Corporation be stricken in its entirety for the 1980 tax year. (4) That the Petitioner be granted such other and further relief as the nature of this case would require and that it have general relief. THIS IS THE FIRST APPLICATION FOR JUDICIAL REVIEW IN THIS CAUSE. G. Wilson Horde, Division Counsel Union Carbide Corporation P. O. Box Y Oak Ridge, Tennessee 37830 — ATS — David L. Oakley, Jr. Erma G. Greenwood Wayne R. Kramer Jackson C. Kramer P. O. Box 629 Knoxville, Tennessee 37901 Attorneys for Petitioner, Union Carbide Corporation OF COUNSEL: KRAMER, JOHNSON, RAYSON, McVEIGH & LEAKE United American Plaza P. O. Box 629 Knoxville, TN 37901 COST BOND We acknowledge ourselves sureties in the above action for costs not to exceed $500.00. KRAMER, JOHNSON, RAYSON, McVEIGH & LEAKE BY: Jackson C. Kramer Partner = Ah APPENDIX O IN THE CHANCERY COURT FOR THE STATE OF TENNESSEE 7TH DIVISION DAVIDSON COUNTY PART THREE No. 82-431-IIl Union Carbide Corporation VS. Lamar Alexander, et al. and Board of Equalization of the State of Tennessee, and Anderson County, Tennessee MEMORANDUM This case concerns the taxability of Union Carbide Corpora- tion’s interest in the United States Department of Energy’s Y-12 plant at Oak Ridge in Anderson County, Tennessee. Carbide, which operates the plant under contract with the United States government, has appealed a decision of the state Board of Equalization which (1) held that Carbide’s interest in the government’s real property is taxable to Carbide and (2) set the value of Carbide’s interest at $325,000,000.00 for 1980. Review by this Court is pursuant to the Uniform Administrative Pro- cedures Act, T.C.A. § 4-5-322. The fundamental issue is whether Carbide owns an interest in the real property at Y-12 separate from the ownership interest of the government. At the outset, it should be noted that two prior suits involving taxation of Union Carbide at Oak Ridge, originating in this Court, have been decided by both the Tennessee Supreme Court and the United States Supreme Court. Carbide and Carbon — A-1$ Chemical Corp. v. Carson, 192 Tenn. 150, 239 S.W.2d 27 (1951) aff'd. sub nom; Carson v. Roane-Anderson Co., 342 U.S. 232, 72 S. Ct. 257, 96 L. Ed. 257 (1952); United States v. Boyd, 211 Tenn. 139, 363 S.W.2d 193 (1962); aff'd. 378 U.S. 39, 84S. Ct. 1818, 12.L. Ed. 2d 714 (1964). In Boyd, a suit in- volving a Tennessee contractor’s use tax, the United States Supreme Court held that Union Carbide is not an agent or in- strumentality of the government but rather an independent con- tractor engaging in a separate, distinct and taxable acitivity at Oak Ridge. Union Carbide'’s Separate Taxable Interest The taxing statutes’ definition of real property includes ‘‘all rights thereto and interests therein.’’ T.C.A. § 67-601(1). The statutes explicitly direct that ‘‘interests of whatsoever character . . in real property . . . owned separate from the general freehold, . . . be assessed to the owner thereof separately from the other interests in such real estate . . . as real property.’’ T.C.A. § 67-602(6). The specific language of the statutes is important. A taxable interest in real property is not limited to fee ownership or even to lesser estates such as leaseholds. The definition includes a// rights and interests; the legislature has directed that all interests of whatsoever character be taxed. That is an an apparent expres- sion of intent by the legislature to extend taxation of real pro- perty to the maximum extent possible. The definition is broad enough to include a possessory interest when the fee is separately owned by another. Property ownership is often explained by using the ‘‘bundle of rights’’ theory. The bundle of rights is compared to a bundle of sticks with each representing ownership of one property right. Those rights in the bundle are divisible, and different rights can be separately owned by different entities. The six basic rights of property ownership are: os AT — (1) The right to use. (2) The right to sell. (3) The right to lease or rent. (4) The right to enter or leave. (S) The right to give away. (6) The right to refuse to do any of these. Property Assessment Valuation, International Association of Assessing Officers (1977) p. 13. To determine Carbide’s rights in Y-12, the Carbide- Department of Energy relationship must be examined. Y-12 is a nuclear weapons plant consisting of 805 acres of land and ap- proximately 271 buildings, all of which are owned in fee simple by the United States government. It is one of three major Oak Ridge plants and the only one in Anderson County. Carbide has managed, operated, and maintained the plant under contract with the government continuously since 1947. The government’s role in the plant’s operation is miniscule. Carbide employs 7,109 employees at Y-12; the government employs less than 100. The Department of Energy pays Carbide all allowable costs incurred by Carbide plus a negotiated fee. The fiscal year 1980 costs for Y-12 were $272,642,000.00. For the year ending September 30, 1980, Carbide received a fee of $7,000,000.00 for the Oak Ridge operation, and it is estimated that $1,800,000.00 of the fee is attributable to Y-12. The contract can be ter- minated on six months notice by the government and on one year notice by Ca;*ide. At the time of the evidentiary hearings below, there was no indication Carbide would cease its long term possession of Y-12.' ‘On May 3, 1982, well after all administrative proceedings in this case were concluded, Union Carbide announced its intention to withdraw as the contractor at Oak Ridge. Carbide has offered to ex- tend the current contract three years beyend the September 30. 1983 in iT aun Care, custody, and possession of the property is vested in Union Carbide which is responsible for safe-guarding and pro- tecting it. Carbide is liable for loss, destruction, or damage to the property if caused by misconduct of its corporate officers or supervising representatives. The company is required to main- tain guard and fire fighting forces. Carbide is granted limited rights in technical data and patents developed in performing its contract at Oak Ridge. Although Carbide uses and possesses the plant for the government, it does so largely to the exclusion of the govern- ment. Carbide has an independent profit making purpose and existence at Y-12.* Carbide makes the day-to-day management decisions but must use the property as directed by the govern- ment either through the contract or through a specific direction. Here the taxing authorities are dealing with an unusual ar- rangement. It is difficult to apply traditional concepts of pro- perty ownership which evolved from a medieval, feudal society to this post-World War II arrangement between the government and a contractor for the manufacture of nuclear weapons. Per- suasive and logical arguments have been made by both sides, ex- perts have expressed differing opinions, and different tribunals have reached different results.’ The Board of Equalization itself was sharply divided.‘ The legislature has vested the Board of Equalization with authority to resolve real property tax disputes, and the role of a ’ See United States v. Boyd, supra. ' The Assessment Appeals Commission decided in favor of Carbide, holding that Carbide does not have a separate taxable interest in the real property. * The Board of Equalization vote was 4 to 3. ——, reviewing court is quite limited.’ Having weighed all the factors, the Board concluded that Carbide does have a taxable interest in Y-12 separate from that of the government’s fee ownership. Carbide enjoys two significant rights in Y-12 — the right to use it and the right to enter or leave it. The contract itself expressly gives Carbide possession of the plant. This Court cannot con- clude that the Board’s decision is in error. Exemption Union Carbide asserts that any taxable interest it has in the real property is exempted by state law from taxation because it is ‘property of the United States . . . used exclusively for public . . « purposes,’’ property specifically exempted by T.C.A. § 67-501. Since Carbide’s property interest in Y-12 is separate from the government's, Carbide’s property interest is not ‘‘pro- perty of the United States.’’ Moreover, it is not used ‘‘exclusive- ly’? for public purposes. In addition to the public purpose of providing for the national defense, the property is used for the private purpose of providing a profit to Union Carbide. United States v. Boyd, supra 378 U.S. at 46. The same Tennessee law exemption argument made by Car- bide in this case was rejected by the United States Supreme Court in Jetton v. University of the South, 208 U.S. 489, 28 S. Ct. 375 (1908), in which the Court interpreted Tennessee’s tax * A reviewing court may reverse or modify an agency decision on five grounds. The agency decision must be: (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 discre- tion or clearly unwarranted exercise of discretion; or (5) Unsupported by evidence which is both substantial and material in light of the entire record. T.C.A. § 4-5-322(h). —e exemption statute. In upholding Franklin County’s taxation of leasehold interests in the university’s tax exempt real property, the Court states: As long as different interests may exist in the same land, we think it plain that exemption granted to the owner of the land in fee does not extend to an exemption from taxa- tion of an interest in the same land, granted by the owner of the fee to another person as a lessee for a term of years. The two interests are totally distinct, and the exemption of one from taxation plainly does not thereby exempt the other. 302 U.S. at 500. Neither is Carbide’s interest exempt as a matter of federal law. In 1953 Congress amended the Atomic Energy Act to remove the provision which had been interpreted as prohibiting state taxation of Union Carbide’s Oak Ridge operation.*® After that change in the statute, the United States Supreme Court re- jected Carbide’s federal immunity contention in United States v. Boyd, supra. Union Carbide correctly stresses that the tax here-in question is a tax on ownership of an interest in real property and not a privilege tax or a use tax as in Boyd. Although the conclusion that Carbide has a separate interest in the real property is not in- consistent with the Boyd decision, that decision does not ad- * Section %b) of the Atomic Energy Act stated: The [Atomic Energy] Commission, and the property activities, and income of the Commission, are hereby expressly exempted from taxation in any manner or form by any State, county, municipality, or any subdivision thereof. 42 U.S.C. § 180%(b) (1952 Ed.), repealed by act of August 13, 1953, 67 Stat. $75. The United States Supreme Court held that the former statute pro- hibited Tennessee's taxation of Union Carbide’s activities at Oak Ridge. Carson v. Roane-Anderson Co., supra. — A-80 — dress the issue of a taxable interest in the real property. It does, however, directly address the issue of exemption of Union Car- bide’s operation at Oak Ridge as a matter of federal law. Once it is established that Carbide has a taxable interest in the real property apart from that of the government, the holding in Boyd ovecomes fully applicable to the federal exemption issue in this case. The principle is the same; a tax on Union Carbide’s separate activity Or separate interest is not a tax on the United States government. The Supreme Court has recently even nar- rowed the circumstances in which government contractors can escape state taxation on federal exemption grounds. United States v. New Mexico, ____ U.S. » SRS. CR. UST By ccc Be Ed. 2d _____ (1982), another suit involving a Department of Energy cost plus fixed fee contract. Value of Union Carbide’s Interest Two experts testified at the hearing before the Assessment Appeals Commission, one for Anderson County and one for Union Carbide. Because the Commission decided that Carbide did not have a separate taxable interest in the plant, the Com- mission did not fix the value of that interest. The Board of Equalization valued Carbide’s interest at $325,000,000.00, the estimate made by the County’s expert. Anderson County retained J. D. Hollingsworth and Associates of SNashville to conduct an appraisal. The appraisal was not prepared before the County Board’s hearing but was presented for the first time to the Assessment Appeals Commis- sion. Mr Hollingsworth considered the three approaches to determine value — market, income, and cost — and concluded that the uniqueness of the property made the cost approach the most reasonable to use. He arrived at a value for the fee simple of $693,560,000.00. He then examined Carbide’s interest in the real property and the relationship between Carbide and the government and considered the severe restrictions placed on Carbide’s use of Y-12. He then arrived at a value of Carbide’s separate interest. — As) — It is the responsibility of the administrative tribunal, not the reviewing court, to resolve issues of fact; the reviewing court is specifically prohibited from substituting its judgment from that of the agency’s on questions of fact.” Hollingsworth’s testimony and his report amply support the Board's decision. Moreover, there appear to be sound reasons for accepting Hollingsworth’s appraisal over Carbide’s. Mr. Hollingsworth is an experienced, qualified career appraiser. Carbide’s expert is a realtor. Though he is obviously a competent one, skilled in sell- ing industrial property, he does not share Hollingsworth’s ap- praiser credentials. The contract between the Department of Energy and Carbide is crucial to valuing Carbide’s interest. Car- bide’s expert had not even reviewed the contract; Mr. Holl- ingsworth had considered it in some detail. Finally, Carbide asserts that its May 1982 announcement, that it is withdrawing from Oak Ridge within several years, should be considered by this Court and that this Court should remand the case for a revaluation in light of the announcement. The instant case involves taxes for 1980; the relevant facts are those which existed then, not now. ’ The Administrative Procedures Act states: 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. T.C.A. § 4-5-322(h). — A-82 — CONCLUSION The decision of the Board of Equalization is affirmed. Counsel for the Board will prepare the decree. s/ Robert S. Brandt, Chancellor February 2, 1983 cc: Jackson C. Kramer G. Wilson Horde George John Keto Mike Lawson Charles L. Lewis --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0320%3A1. Public record. Not legal advice.