Petition for Writ of Certiorari — Lewis County v. United States
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In the
SUPREME COURT OF THE UNITED STATES
October Term, 1998
LEWIS COUNTY , WASHINGTON; BILL BROOKS, County
Assessor, Lewis County, Washington; DONNA KARVIA, Clerk,
Lewis County Superior Court; JOE COOKE, Treasurer, Lewis
County, Washington; GARY ZANDEL, County Auditor, Lewis
County Washington, KEVIN E. MURPHY, BERNICE MURPHY,
Petitioners,
V.
UNITED STATES OF AMERICA,
Respondent.
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT
OF APPEALS FOR THE NINTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
AND APPENDIX
Of Counsel: Douglas E. Jensen
Jeffrey P. Helsdon Counsel of Record
Christopher M. Constantine 360 NW North Street
3730 South Pine Street Chehalis, WA 98532
Tacoma, WA 98409 (360) 740-1240
(253) 471-1200
QUESTIONS PRESENTED
1. Does 7 U.S.C. §1984 waive the immunity of the United States
of America from interest, penalties and foreclosure imposed by
Lewis County, Washington on real property held by respondent?
2. Did the Court of Appeals, in ruling that the waiver of immunity
in 7 U.S.C. §1984 did not extend to interest, penalties and
foreclosure, violate the doctrine of separation of powers?
3. Did the Court of Appeals, in ruling that the waiver of immunity
in 7 U.S.C. §1984 did not extend to interest, penalties and
foreclosure, violate principles of federalism?
4. Should 7 U.S.C. §1984 be liberally construed in favor of the
taxing authority of Lewis County, Washington?
5. Does the commercial character of FSA’s activities preclude any
claim of immunity from interest, penalties or foreclosure?
aie
RULE 29.1 STATEMENT
Pursuant to Supreme Court Rule 29.1, petitioners state that
there are no parent corporations nor any non-wholly owned
subsidiaries of corporate filers.
TABLE OF CONTENTS
Page
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STATUTORY PROVISION INVOLVED ................. Xi
SERIE ALAA aire Pee a DD Pee er ae ee ee i
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REASONS FOR GRANTING THE PETITION .............. 7
I. The Court of Appeals Decision That 7 U.S.C. §1984
Does Not Waive the Immunity of The United States With Respect
to Interest, Penalties and Foreclosure Misinterpreted the Statute’s
Requirement That All Property Acquired or Held by the Secretary
of Agriculture Shall be Subject to Taxation by State and Local
Political Subdivisions in the Same Manner and to the Same Extent
ill
eg RR PP ee re nee 7
II. The Court of Appeals Decision Violated the Doctrine of
SIS GE TS a as osia es HSER 12
III. The Court of Appeals Decision Violated Principles of
POA, o505 60 60d cas cewktin oe sns an Viren eee seds 16
IV. The Court of Appeals Decision is in Conflict With
California State Board of Equalization v. Sierra Summit, Inc.,490
Soa PROD Vs ans haueenseuess ba ucbenenlseeksaeee 17
V. The Court of Appeals Decision Failed to Adequately
Consider the Legislative History of the Statute. ............. 18
VI. The Court of Appeals Decision that 7 U.S.C. §1984
Does Note Waive the Immunity of the United States with Respect
to Interest, is in Conflict With Library of Congress v. Shaw, 478
CO. . BOR. SETS CIS os oe wh Fee MO ES cca 20
VII. The Court of Appeals Decision is in Conflict With
United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979). ....21
VIII. The Court of Appeals Decision Failed to Consider
the Effect of the Commercial Character of FSA’s Activities Upon
Respondent’s Claim of Immunity From Interest, Penalties and
iV
PON. os HT i FAs ooo 22
IX. The Court 0: .°« deals Decision is in Conflict With
Reconstruction Finance Corporation v. Beaver County, 328 U.S.
204 (1946) and Federal Reserve Bank v. City of Richmond, 957
Fis Be GAs ROME 6 obec eccavcdvuccecece douse then 24
X. The Court of Appeals Decision is in Conflict With 7
CF aes SEER ass EPROM <dccscansesetacesneeteteseias 26
XI. The Court of Appeals Decision Misplaced Reliance
Upon United States v. Alabama, 313 U.S. 274 (1941). ........ 27
XII. The Court of Appeals Decision Erred in Concluding
that Petitioners Murphy Were Not Prevailing Parties Under 28
[EERE 0rcenenncvadwencecpnmen an eae manmetc ieee 29
RROD hikes cndek eg ekckaseebisee feces 30
APPENDIX A
- APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
a
TABLE OF AUTHORITIES
Federal
ee | Sree i, ili, Vi, 1X, X, 6, 7, 10-12, 14-22, 23-29
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F es BIPEE sc vedo cccevovecesveeesdudedeset evieween 27
Be Gr Ne hs 0 8S cc kU ewe ec CWO Nw Redes Ch hae ee Os ERe 26
Se iain OE vbwsee cedbansvasrcceaveeeveselesseavecue 17
Se Cres Os 42 silkely a Swe san eet ieee nea 10, 25
FP Ries ORG 685s 0c Furs ve Fees bs Pree era 7
a See re eT er eee eS eee 18
RS eg |) rer errrrre st errr eye X
PI BOSE 666 ocd ckkba cts tvenebeberersetetetaerae 11
Pe ENE ove Cea vivivevesecaccweuweesseas- Venta 24
eR aFare BOON. 6. bec enous vcanveceeseeuueads weenie 1]
Bees BONES Si Nccasoevedvenerstiees sy eneyeneenae 6, 29
eg gk ee ang er pee iv, 8, 26, 27
Figel aes GUO 8 sk 0s eve babes hewn ens eeeueeee iv, 26, 27
State
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ee ED 65 br PUES eeUHR be he Fe anees econ 11
Fk FF PUES TTT OUT TT PTT TTT TEESE ETE Cre 11
Ape PTE Sei cevdetedstesiddedeccevecset sea 11
Case Law
Arizona Department of Revenue v. Blaze Construction, Inc., 67
Cs Wes UE 0 SSCL LERREENS See IUIRLOM Wiee 16
Arkansas v. Farm Credit Services of Arkansas, 520 U.S. 821
() Se pene bee sa perc rs Ape QRS PIER eee bee | 24
BFP v. Resolution Trust Corporation, 511 U.S. 531 (1994) .... 16
California State Board of Equalization v. Sierra Summit, Inc., 490
SRE 6c nove uceksdencnveeeeves iv, 9, 14, 17, 18, 28
Department of Employment v. United States, 385 U.S. 355
SRE OX sv os Sed are he cane hes $y ek mbededeseech bu CsRTs 12
Federal Reserve Bank v. City of Richmond, 957 F.2d 134 (4th Cir.
SR SA va ORs CNUs seek kd iere Sade eeecckabeeedua v, 24
First Agricultural National Bank of Berkshire County v. State Tax
COE, Soe Se. Se CUED 6 08 deck dete dée ceo ecves 14
Graves v. New York, ex rel. O'Keefe, 306 U.S. 466 (1939)...... 9
Jefferson County, Alabama v. Acker, 1999 WL 401256, 7 (U.S.) 14
Library of Congress v. Shaw, 478 U.S. 310 (1986) ........ iv, 20
North Dakota v. United States, 495 U.S. 423 (1990) ......... 13
Vil
Oklahoma Tax Commission v. Texas Company, 336 U.S. 342
Se cheery nei en ie braun amare earn e Weg erie 9
Oklahoma Tax Commission vy. United States, 319 U.S. 598
GUUS a. Ca vvobaWenwandetecaed hobcersaves er etern 9,14
Pearlstein v. SBA, 719 F.2d 1169 (C.A.D.C. 1983) .......... 23
Reconstruction Finance Corporation v. Beaver County, 328 U.S.
PE 55 5 FAR EL eee eaaa eek es v, 8, 10, 24, 25, 28
Rockford Life Insurance Company v. Illinois Department of
I EE As SIE v6 Si ccwnwehadeasibee lean sews s 14
Standard Oil Co. v. United States, 267 U.S. 76 (1925) ........ 19
United States v. Alabama, 313 U.S. 274 (1941) ........... v, 27
United States v. Broward County, 901 F.2d 1005 (11th Cir. 1990)
ee a ee) Ee Or re i Ce eee a eT 12
United States v. California, 932 F.2d 1346 (9th Cir. 1991),
I, EF Cie PUNE own ci cewindewesdneeve sewer 12
United States v. City of Richmond, 957 F.2d 134 (4th Cir.
OE 8:40 44h a de keh otha di ede keene uroencokees ee 26
United States v. Consumers Scrap Iron Corporation, 384 F.2d 62
oo eee rer ha pene e rays Weary Fe 7, 22
United States v. Dansby, 509 F.Supp. 188 (N.D. Ohio 1981) ... 23
United States v. Hynes, 20 F.3d 1437 (7th Cir. 1994) ......... 13
United States v. Kimbell Foods, Inc., 440 U.S. 715
“SRR RA Repeat Pip re ng Ri wa at oe, Vi lgea ak See ae iv, 21-23, 28
United States v. Lewis County, 94 F.3d 654 (9th Cir. 1996) ...x, 5
United Staies v. Marion County, Florida, 826 F.Supp. 1400
Sees WU I Fo ese RE ee cereWehvcacehecan seeueenas 23
United States v. New Mexico, 455 U.S. 720 (1982) ........ 14-16
United States vy. Tipton, 898 F.2d 770 (10th Cir. 1990) ........ 23
Vail v. Brown, 841 F.Supp. 909 (D.Minn. 1994) ............. 23
Wilder's S.S. Company v. Low, 112 F. 161 (9th Cir. 1901)..... 10
mn horiti
Bankhead-Jones Farm Tenant Act of 1937, Act of July 22, 1937,
rp ee FI SON Os EAS aa re eee ears: 19
Black's Law Dictionary (4th Ed.1968) p.1631 ............... 8
Farmers Home Administration Act of August 14, 1946, Ch. 964,
I aetna Re res eee ee aed 19
Public Law 87-128, Title III, Subtitle D § 334, 75 Stat. 315 ....19
Senate Report No. 566, 87th Cong., Ist Sess. ............ 15, 28
eT ns 53 ea ae 30
iX
|
OPINIONS BELOW
The opinion of the Court of Appeals (App. A, Al-A24) is
not yet reported. An opinion of the Court of Appeals in a prior
appeal in this case is reported at 94 F.3d 654. The opinion of the
district court (App. B, B1-B14) is unreported.
JURISDICTION
The Court of Appeals entered its judgment on April 19,
1999. (App. A, Al-A24). The jurisdiction of this Court is invoked
under 28 U.S.C. §1254(1).
STATUTORY PROVISION INVOLVED
7 U.S.C. §1984 provides, in relevant part, as follows:
All property subject to a lien held by the United
States or the title to which is acquired or held by the
Secretary under this title other than property used
for administrative purposes shall be subject to
taxation by State, territory, district and local
political subdivisions in the same manner and to the
same extent as other property is taxed....
STATEMENT
A. The Subject Properties
Petitioner Lewis County is geographically large, but
lightly-populated subdivision of the state of Washington, with
significant portions of its lands in state and federal ownership. It
has been experiencing socio-economic woes within its
timber/agricultural-based economy in sharp contrast to the general
economic panacea enjoyed nationwide. Petitioners Kevin and
Bernice Murphy are residents of Lewis County who purchased a
foreclosure property, as below described, and reestablished a
working dairy farm on the property.
At various times between 1984 and 1990, the Farmers
Home Administration (FmHA)', now known as the Farm Services
Administration (FSA), acting pursuant to the authority conferred
by Congress under the Consolidated Farm and Rural Development
Act, 7 U.S.C. §1921 et seq., acquired title, by various means, to
several parcels of property in Lewis County. Those parcels, known
1. FmHA was succeeded by the Consolidated Farm Service Agency (FSA) in 1994.
7 U.S.C. §6932(a), (b)(3).
as the “Best,” “Curtis,” “Adams,” “Aust,” “Harris,” and “Evans”
properties had, prior to their acquisition by FmHA, been subject to
mortgages in fav rof FmHA.
While the foregoing properties were owned by FSA, Lewis
County continued to levy ad valorem property taxes against those
properties. FSA refused to the taxes on those properties when due.
Consequently, Lewis County imposed interest and penalties
against those properties for nonpayment of the taxes.
On March 20, 1990, Lewis County served FSA with a
Notice of Application for Judgment Foreclosing Tax Liens and
Summons, pursuant to R.C.W. 84.64.050, including the Best
property. The taxes claimed due in the notice were imposed during
FSA’s ownership. On or about June 6, 1990, the Superior Court of
the State of Washington for Lewis County entered a Judgment and
Order of Sale which included the Best property. On or about June
21, 1990, the Lewis County Treasurer issued a Notice of Tax
Judgment Sale which included the Best property. On July 13,
1990, Lewis County conducted a tax sale and purchased the Best
property.
On January 19, 1994, Lewis County published a Notice of
Applicati 2n for Judgment Foreclosing Tax Liens and Summons.
The notice included the Adams, Aust, Curtis and Harris properties.
On or about February 1, 1994, the Office of the United States
Attorney for the Western District of Washington received by
certified mail a copy of the notice. The taxes claimed in the notice
to be due on those properties were imposed during FSA’s
ownership of those properties. A real property tax Judgment and
Order of Sale which included that Adams, Aust, Curtis and Harris
properties was entered by the Superior Court of the State of
Washington for Lewis County on March 25, 1994. On or about
April 18, 1994, the Lewis County Treasurer issued a Notice of Tax
Judgment Sale scheduled for May 13, 1994. The notice included
the Adam, Aust, Curtis and Harris properties. On or about May 5,
1994, FSA paid under protest all the property taxes, penalties,
interest and other charges owing to Lewis County on the Adams,
Aust, and Curtis properties for the tax years 1990-1994. The total
of the taxes, penalties, interest and other charges paid at that time
i by FSA on the Adams, Aust and Curtis properties was $24,958.27.
3
In 1994, Lewis County, acting pursuant R.C.W. 84.34.108
removed the Adams, Aust and Curtis properties from an
agricultural use classification. Removal of those properties from
an agricultural use classification resulted in both the Aust and
Curtis properties and all but one of the Adams properties being
taxed at a higher rate and in the imposition of a recapture tax and
interest in the amount of $58,356.82. On May 5, 1994, FSA also
paid that amount under protest.
In contrast, FSA did not pay the accrued taxes, penalties
and interest on the Harris property Consequently, on May 13,
1994, petitioners Kevin and Bernice Murphy purchased the Harris
property at the Tax Judgment Sale from Lewis County for $53,500.
Upon acquiring the Harris property from Lewis County,
petitioners Murphy, at their own expense, cleaned and repaired the
property. Thereafter, petitioners Murphy rented the property for
use as a dairy.
B. Proceedings Below
On September 7, 1994, respondent filed a complaint for
declaratory and injunctive relief, restitution and other relief in the
4
United States District Court for the Western District of
Washington. On or about September 30, 1994, petitioners
Murphy filed an Answer and Affirmative Defenses and
Counterclaim.
Petitioners filed a Motion to Dismiss pursuant to Fed R.
Civ. P. 12(b)(1). Petitioner Lewis County joined in the motion of
petitioners Murphy to dismiss. Respondent filed a memorandum
opposing petitioners’ motion to dismiss. Respondent also filed a
Motion for Partial Summary Judgment. The district court in an
unreported decision granted petitioners’ Motion to Dismiss and
denied respondent’s Motion for Partial Summary Judgment.
Respondent appealed. The Court of Appeals reversed and
remanded. United States v. Lewis County, 94 F.3d 654 (9th Cir.
1996).
Upon remand to the district court, petitioners filed a motion
for judgment on the pleadings. Respondent opposed the motion.
The district court in an unreported opinion granted petitioners’
motion. (App. B, B1-B14).
Respondent appealed. Petitioners Murphy filed a cross-
5
appeal. The Court of Appeals affirmed in part, reversed in part,
and remanded. (App. A, Al-A24). The Court of Appeals
concluded that the congressional waiver of immunity in 7 U.S.C.
§1984 did not waive the immunity of the United States from
interest penalties and foreclosure. (App. A, Al2-A20). The Court
of Appeals remanded to the District Court respondent’s claim
regarding imposition by petitioner Lewis County of a higher non-
agricultural tax rate on three of the twenty FSA parcels for the
1994 tax year. (App. A, Al9, A20). The Court of Appeals also
held that respondent need not exhaust state remedies before raising
claims under federal law in District Court. (App. A, A22). The
Court of Appeals left for the District Court’s determination the
issues of exhaustion of state remedies and state limitations on
respondent’s claim for improper classification of FSA lands as
non-agricultural. (App. A, A22). The Court of Appeals also
denied, as premature, the claim of petitioners Murphy for attorneys
fees pursuant to the Equal Access to Justice Act, 28 U.S.C. §2412.
(App. A, A22-A23).
Petitioners timely filed a Petition for Rehearing. The
6
Court of Appeals denied the Petition for Rehearing by Order dated
May 20, 1999. (App. C). Petitioners timely filed a Motion for
Stay of Mandate. The Court of Appeals stayed the mandate by
order filed on June 10, 1999. (App. D). Petitioners thereafter
timely filed this Petition for Writ of Certiorari.
REASONS FOR GRANTING THE PETITION
I. The Court of Appeals Decision That 7 U.S.C. §1984 Does
Not Waive the Immunity of the United States With Respect to
Interest, Penalties and Foreclosure Misinterpreted the
Statute’s Requirement That All Property Acquired or Held by
the Secretary of Agriculture Shall be Subject to Taxation by
State Subdivisions in the Same Manner and to the Same Extent
as Other Property is Taxed.
7 U.S.C. §1984 provides that the subject properties, while
owned by FSA, were “subject to taxation.” The Court of Appeals
decision failed to adequately interpret the term “taxation.” Instead,
the Court of Appeals adopted the Sixth Circuit’s view of the term
“taxes” as announced in United States v. Consumers Scrap Iron
Corp., 384 F.2d 62, 64-65 (6th Cir. 1967). (App. A, Al4). The
7
statute at issue in Consumers Scrap Iron Corp., 15 U.S.C. §646,
did not include the term “taxation.” Moreover, the Court of
Appeals’ reliance on the definition of “taxes” in Consumers Scrap
Iron fails to address FSA’s definition of “tax” in 7 C.F.R. 1925.2.
(App. E).
The Court of Appeals decision apparently makes no
distinction between the statute’s use of the term “taxation” and
“taxes.” Petitioners understand the term “taxation” as referring to
“(t]he process of taxing or imposing a tax.” Black's Law
Dictionary (4th Ed.1968) p.1631. Further, this Court has
construed the term “taxation” in a Congressional waiver of tax
immunity to include assessment, collection and refunding.
Reconstruction Finance Corporation v. Beaver County, 328 U.S.
204, 209 (1946). The failure of the Ninth Circuit Court of
Appeals to recognize the distinction between the words “taxation”
and “‘tax”’ thus seriously undermines the plain intent of the statute;
namely, to secure to local taxing authorities the ability to levy and
timely collect tax revenue from lands acquired by FSA. Review by
this Court is warranted to clarify the meaning of the term
8
“taxation” in the statute.
The Court of Appeals reasoned that “‘taxation’ does not
unequivocally include interest and penalties.” (App. A, Al-A16).
Implicit in the reasoning of the Court of Appeals is the view that
the United States is immune from interest and penalties unless
Congress unequivocally provides otherwise. Such a view is
contrary to the principle, frequently recognized by this Court, in
the area of tax immunity, that “[s]ilence of Congress implies
immunity no more than does silence of the Constitution.” Graves
v. New York, ex rel. O'Keefe, 306 U.S. 466, 480 (1939); Oklahoma
Tax Commission v. United States, 319 U.S. 598, 604 (1943);
Oklahoma Tax Commission v. Texas Co., 336 U.S. 342, 365-67
(1949); California State Board of Equalization v. Sierra Summit,
Inc.,490 U.S. 848, 851-52 (1989). Review by this Court is
therefore warranted to correct the Court of Appeals on this issue.
The Court of Appeals’ extension by way of negative
implication to respondent of immunity from interest, penalties and
foreclosure cannot be reconciled with the rejection of such
reasoning by this Court in Sierra Summit. 450 U.S. 851. Review
9
by this Court is necessary to correct the Court of Appeals’
extension by ‘negative implication’ of immunity to FSA from
interest, penalties and foreclosure.
Addressing the statute’s use of the phrase “in the same
manner,” the Court of Appeals found the language ambiguous.
(App. A, Al6, Al7). In so doing, the Court of Appeals overlooked
the meaning given that phrase by federal precedent. Wilder's S.S.
Co. v. Low, 112 F. 161, 164 (9th Cir. 1901). (“[T]he phrase ‘in the
same manner’ has a well understood meaning in legislation, and
that meaning is not one of restriction or limitation, but of
procedure.”). Further, in Reconstruction Finance Corporation v.
Beaver County, this Court determined the phrase “to the same
extent according to its value as other property is taxed” in 15
U.S.C. §610 as indicating Congressional intent to integrate
Congress’ permission to tax with established local tax assessment
and collection machinery. 328 U.S. 210. Likewise, 7 U.S.C. §1984
evidences, by the similar phrase “in the same manner and to the
same extent,” a Congressional intent to integrate permission to tax
with established state tax collection procedure. Review by this
10
Ao ine >
i
5
:
Court is appropriate to give the phrase “in the same manner and to
the same extent” appearing in 7 U.S.C. §1984 a meaning consistent
with federal precedent.
The Court of Appeals’ narrow construction of 7 U.S.C.
§1984 also fueled the rejection of petitioners’ argument that the
United States must first exhaust state remedies before raising its
claims in federal district court. (App. A, A22). An accurate
reading of 7 U.S.C. §1984, to recognize Congressional consent to
the “manner” and “extent” of state “taxation,” necessarily subjects
property acquired by FSA to the entirety of the State of
Washington’s real property tax code. Review by this Court is
therefore necessary to resolve whether, by reason of the language
of 7 U.S.C. §1984, Congress has thereby subjected property
acquired by FSA to the requirement of payment of the tax under
protest (R.C.W. 84.68.020); statute of limitations (R.C.W. _
84.68.060); and exclusive remedies provision (R.C.W. 84.68.070).
The Court of Appeals supported its conclusion regarding
exhaustion of state remedies by invoking 28 U.S.C. §§1331, 1345.
(App. A, A22). Review by this Court is appropriate to resolve
11
whether the Court of Appeals’ reliance upon general federal
question jurisdiction statutes was warranted in light of the specific
waiver of tax immunity in 7 U.S.C. §1984.
The Court of Appeals, in support of its conclusion that
respondent need not exhaust state remedies, also relied upon
Department of Employment v. United States, 385 U.S. 355, 357-58
(1966) and United States v. Broward County, 901 F.2d 1005 (11th
Cir.1990). (App. A, A22). In Department of Employment, this
Court had no occasion to construe a Congressional waiver of tax
immunity such as 7 U.S.C. §1984. In relying upon Broward
County, the Court of Appeals overlooked its earlier refusal to
follow Broward County in United States v. California, 932 F.2d
1346, 1351-52 (9th Cir. 1991), affirmed, 507 U.S. 746 (1993).
Review by this Court of the Court of Appeals decision is
appropriate to determine whether the Court of Appeals misplaced
reliance upon Department of Employment and Broward County.
Il. The Court of Appeals Decision Violated the Doctrine of
Separation of Powers.
Central to the Court of Appeals decision regarding FSA’s
12
wate! M
So Gee GST OR err. ew #40261
immunity from interest, penalties and foreclosure is that Court’s
application of the principle that waivers of sovereign immunity are
narrowly construed in favor of the sovereign. (App. A, A15-A16).
By invoking a principle of sovereign immunity in developing its
opinion, the Court of Appeals refused to consider or was unaware
that sovereign immunity and tax immunity are distinct concepts.
United States v. Hynes, 20 F.3d 1437, 1444 n.1 (7th Cir.1994) (en
Banc) (Cudahy, J., concurring). Review of the Court of Appeals
decision is appropriate to clarify whether principles applicable to
sovereign immunity are properly invoked on issues of tax
immunity.
Decisions of this Court repeatedly recognize “the primary
role of Congress in resolving conflicts between the national and
state governments.” North Dakota v. United States, 495 U.S. 423,
435 (1990) (citing United States v. County of Fresno, 429 U.S.
452, 467-68 (1977)). The deference afforded by the decisions of
this Court to the primary role of Congress on matters of tax
immunity derives from the doctrine of separation of powers.
United States v. New Mexico, 455 U.S. 720, 737-38 (1982);
13
Jefferson County, Alabama v. Acker, 1999 WL 401256, 7 (U.S.).
The deference due Congress on matters of tax immunity
has prompted this Court to decline recognition of an exemption
from state taxation that Congress has not clearly established.
Rockford Life Ins. Co. v. Illinois Department of Revenue,
482 U.S. 182, 191 (1987); California State Board of Equalization
v. Sierra Summit, Inc., 490 U.S. 851-52; First Agricultural
National Bank of Berkshire County v. State Tax Commission, 392
U.S. 339, 346 (1968): Oklahoma Tax Commission v. United States,
319 U.S. 606-07.
The Court of Appeals decision violates the foregoing
principles by affording FSA an immunity from interest, penalties
and foreclosure where Congress has not clearly established such
immunity. The Court of Appeals recognized such immunity by
simply invoking a rule of statutory construction. The Court of
Appeals made no attempt to support its invocation of a rule of
strict construction of the statute in favor of the federal sovereign
with any language in the text of 7 U.S.C. §1984.
The Court of Appeals found support for FSA’s immunity
14
from foreclosure in the following excerpt from Senate Report No.
566, 87th Cong., Ist Sess.:
Property acquired in liquidation of loans is
disposed of promptly, so that the incident of the tax
does not greatly interfere with the resale of the
property or the recovery of security value. (App. A,
Al8).
The foregoing excerpt from the Senate Report fails to
“1 aS ee ee :
mention anything with respect to foreclosure of FSA properties for
nonpayment of taxes, thus failing to provide the clear expression of
Congressional intent to exempt property from state taxation
required by this Court’s decisions in Rockford and Sierra Summit.
By employing a rule of statutory construction to confer
immunity from interest, penalties and foreclosure, the Court of
Appeals assumed the role of final arbiter of the competing
q demands between two sovereigns. The Court of Appeals has failed
to heed this Court’s admonition that “the political process is
‘uniquely adapted to accommodating the competing demands’ in
; this area.” United States v. New Mexico, 455 U.S. 738 (quoting
15
Massachusetts v United States, 435 U.S. 444, 456 (1978)).
Review by this Court of the Court of Appeals decision will
provide an opportunity for this Court to give needed guidance on
the role of a federal court in construing a Congressional waiver of
tax immunity such as 7 U.S.C. §1984.
Ill. The Court of Appeals Decision Violated Principles of
Federalism.
Principles of federalism require that a federal court take a
narrow approach to questions of governmental tax immunity.
United States v. New Mexico, 455 U.S. 735-36; Arizona
Department of Revenue v. Blaze Construction, Inc., 67 U.S.L.W.
4156, 4157 (1999). The Court of Appeals decision violates those
principles by depriving petitioner Lewis County access to
traditional means of enforcing taxes and raising operating revenue
from properties acquired by FSA. Instead, the Court of Appeals
“assume[s]” that the FSA will “pay its taxes when due,” or at least
before “convey[ing] marketable title,” whenever that date arrives.
(App. A, Al9).
This Court has further recognized that to displace
16
a pian itl
ened tl
a NURS eae Sa LRTI SU RIER Re RRR et Se
traditional state regulation, the federal statutory purpose must be
‘clear and manifest’”. BFP v. Resolution Trust Corp., 511 U.S.
531, 544 (1994) (quoting English v. General Electric Co., 496 U.S.
72, 79 (1990)). The Court of Appeals decision makes no pretense
of identifying such purpose in 7 U.S.C. §1984. Review by this
Court of the Court of Appeals decision is therefore needed to
resolve whether 7 U.S.C. §1984 can be said to clearly and
manifestly evidence a Congressional intent to displace petitioner
Lewis County’s access to traditional property tax collection
devices and needed tax revenue.
1V. The Court of Appeals Decision is in Conflict With
California State Board of Equalization v. Summit, Inc., 490 U.S.
844 (1989).
The Court of Appeals’ reasoning with respect to FSA's
claim of immunity from interest, penalties and foreclosure rests on
the premise that “waivers of sovereignty must be strictly construed
in favor of the sovereign.” The Court of Appeals’ adoption of such
a premise places the Court of Appeals’ decision irreconcilably in
conflict with this Court’s decision in Sierra Summit. Central to
17
this Court’s decision in Sierra Summit was a liberal construction of
the Congressional waiver of tax immunity in 28 U.S.C. §960 in
favor of state taxes. 490 U.S. 852 n.9. The Court of Appeals
decision fails to even mention Sierra Summit. Petitioners know of
no plausible reason why the Congressional waiver of tax immunity
in 28 U.S.C. §960 should be afforded a liberal construction in
favor of state taxation by this Court in Sierra Summit, while in this
case the similar Congressional waiver of tax immunity in 7 U.S.C.
$1984 be narrowly construed by the Court of Appeals in favor of
the federal sovereign. Only by undertaking review of the Court of
Appeals decision can this Court resolve the conflict with Sierra
Summit raised by the Court of Appeals’ narrow construction of 7
U.S.C. §1984 in favor of the federal sovereign.
V. The Court of Appeals Decision Failed to Adequately
Consider the Legislative History of the Statute.
The Congressional intent behind 7 U.S.C. §1984 is evident
from the evolution of Congressional enactments in this area.
Congress first spoke on FSA’s exemption from state taxes in
Section 40(1) of the Bankhead-Jones Farm Tenant Act of 1937,
18
Act of July 22, 1937, Ch. 517, 50 Stat. 522, 531. (App. E).
Congress progressed to the limited waiver of tax immunity in
§501(a) of the Farmers Home Administration Act of August 14,
1946, Ch. 964, 60 Stat. 1062. (App. E). Congress expanded the
waiver of tax immunity to its present form by passage of 7 U.S.C.
§1984, adopted in 1961 as Public Law 87-128, Title III, Subtitle
D§334, 75 Stat. 315. (App. E). Thus, it is evident that the policy
of Congress for the past 50 years has been to expand, rather than to
contract, the scope of the waiver of FSA’s immunity from state and
local taxation.
The Court of Appeals decision gives little, if any
recognition to Congress’ expansion of the waiver of FSA’s waiver
of tax immunity. The Court of Appeals’ narrow construction of 7
U.S.C. §1984 therefore cannot be reconciled with the statute’s
history. Review by this Court of the Court of Appeals’ decision
will provide an opportunity for this Court to resolve the conflict
between the Court of Appeals’ decision and the legislative history
of 7 U.S.C. §1984.
19
VI. The Court of Appeals Decision that 7 U.S.C. §1984 Does
Not Waive the Immunity of the United States With Respect to
Interest, is in Conflict With Library of Congress v. Shaw, 478
U.S. 310, 317 n.5 (1986).
In concluding that 7 U.S.C. §1984 did not waive FSA’s
immunity from interest, the Court of Appeals relied upon Library
of Congress v. Shaw, 478 U.S. 310, 319-20 (1986). (App. A,
A15). The Court of Appeals overlooked this Court’s recognition in
Shaw of an exception to the no-interest rule when a federal entity
engages in a commercial activity. “[T]he no-interest rule is simply
inapplicable where the Government has cast off the cloak of
sovereignty and assumed the status of a private commercial
lender.” 478 U.S. 318 n.6 (citing Standard Oil Co. v. United States,
267 U.S. 76, 79 (1925)).
FSA’s activities in this case, in acquiring title to properties
securing loans made by FSA, are clearly commercial in character.
United States v. Kimbell Foods, Inc., 440 U.S. 715, 734-35 (1979).
The Court of Appeals decision fails to recognize the
commercial activity exception to the ‘no- interest rule.’ The Court
20
of Appeals decision is therefore in direct conflict with Shaw.
Review by this Court of the Court of Appeals decision is
appropriate to resolve the conflict created by the Court of Appeals’
failure to apply the commercial activity exception to the no-interest
rule recognized in Shaw.
VII. The Court of Appeals Decision is in Conflict With United
States v. Kimbell Foods, Inc., 440 U.S. 715 (1979).
The Court of Appeals expressed doubt that Congress
intended the outcome whether FSA was subject to interest,
penalties and foreclosure to depend upon varying characterizations
of state law. (App. A, Al4). Such a view of 7 U.S.C.§1984 is at
odds with this Court’s recognition of FSA’s high degree of
integration of its regulations with state law. United States v.
Kimbell Foods, Inc., 440 U.S. 715, 730-31. In Kimbell Foods, the
integration of FSA’s regulations with state law prompted this
Court’s conclusion that a uniform federal rule of priority was
unnecessary to protect FSA’s interests. 440 U.S. 732.
Such a conclusion is no less warranted here. The Court of
Appeals decision fails to identify any activity on the part of FSA
21
that would require departure from this court’s analysis in Kimbell
Foods.
The Court of Appeals cited Kimbell Foods, but did so
without discussion. (App. A, Al2). Instead, the Court of Appeals
chose the view of the Sixth Circuit in Consumers Scrap Iron, 384
F.2d 64-65. The construction given the Small Business Act in
Consumers Scrap Iron must give way to the analysis of that Act in
Kimbell Foods. Review by this Court of the Court of Appeals
decision is therefore necessary to resolve whether 7 U.S.C.§1984
should be construed in accordance with this Court’s opinion in
Kimbell Foods.
VIII. The Court of Appeals Decision Failed to Consider the
Effect of the Commercial Character of FSA’s Activities Upon
FSA’s Claim of Immunity From Interest, Penalties and
Foreclosure.
Conspicuously absent from the Court of Appeals decision
is any meaningful discussion of the commercial character of FSA’s
activities. In Kimbell Foods, this Court concluded that the status
of FmHA as a quasi-commercial lender deprived FmHA of any
22
a
PR ae Se 22 eS ee 2h hh sie ss i pare ad pu iris ay re iia Re ee ne o eden pO
special priority to which the federal sovereign is entitled in its tax
collecting capacity. 440 U.S. 737-38.
Kimbell Foods has provided persuasive authority to federal
courts in resolving claims of tax immunity asserted by federal
lending entities against state or local taxing authorities. United
States v. Tipton, 898 F.2d 770 (10th Cir. 1990); Pearlstein v. SBA,
719 F.2d 1169, 1176-77 (C.A.D.C. 1983); United States v. Dansby,
509 F.Supp. 188, 193-95 (N.D. Ohio 1981); United States v.
Marion County, Fla., 826 F.Supp. 1400, 1402 (M.D., Fla. 1993);
Vail v. Brown, 841 F.Supp. 909 (D.Minn.), affirmed, 39 F.3d 208
(8th Cir. 1994), cert. denied, 515 U.S. 1102 (1995).
More recently, in Arkansas v. Farm Credit Services of
Arkansas, 520 U.S. 821 (1997), this Court again concluded that the
commercial character of a federal lending entity’s activities
deprived the entity of any claim of exemption from the Tax
Injunctions Act. 28 U.S.C. §1341. 520 U.S. 531-32.
The Court of Appeals’ failure to afford any weight to the
commercial character of FSA’s activities in this case places the
Court of Appeals decision in conflict with Kimbell F oods and its
23
progeny and with Farm Credit Services. Review by this Court of
the Court of Appeals decision is therefore necessary to resolve this
conflict.
IX. The Court of Appeals Decision is in Conflict With
Reconstruction Finance Corporation v. Beaver County, 328 U.S.
204 (1946) and Federal Reserve Bank v. City of Richmond, 957
F.2d 134 (4th Cir. 1992).
The Court of Appeals refused to read “taxation” in 7 U.S.C.
$1984 to include interest, penalties and foreclosure. (App. A,
A16). In contrast, in Reconstruction Finance Corporation vy.
Beaver County, 328 U.S. 204 (1946), this Court construed the term
“taxation” in 15 U.S.C. §610° to include assessment, collection and
refunding. 328 U.S. 209. Further, in Beaver County, this Court
concluded that the language of 15 U.S.C. §610 precluded any
assumption that Congress intended a rule of uniform results
regarding the taxation of real property. 328 U.S. 209. Further, in
Beaver County, this Court construed Congress’ use, in 15 U.S.C.
2. 47 Stat. 5, 55 Stat. 248.
§610, of the phrase “to the same extent according to its value as
other real property is taxed” as indicating “an intent to integrate
Congressional permission to tax with established local tax
assessment and collection machinery.” 328 U.S. 210.
The Court of Appeals’ construction of 7 U.S.C. §1984
cannot be reconciled with this Court’s construction in Beaver
County of similar language in 15 U.S.C. §610. Review by this
Court is therefore necessary to provide a construction of 7 U.S.C.
§610 that is consistent with this Court’s decision in Beaver County.
Review by this Court of the Court of Appeals decision is
also necessary to resolve the conflict created by the court of
Appeals’ refusal to follow the reasoning of the Fourth Circuit in
United States v. City of Richmond, 957 F.2d 134 (4th Cir. 1992), in
which the Fourth Circuit followed Beaver County in resolving
whether the term “tax” in 12 U.S.C. §531 included interest and
penalties. 957 F.2d 136.
The Court of Appeals read City of Richmond’s reference to
the State of Virginia’s definition of “tax” to include interest and
penalties as warranting an opposite conclusion under Washington
25
law. (App. A, Al4 n.6). The use of the term “taxation” in 7 U.S.C.
§1984 precludes such a conclusion in this case.
Review by this Court of the Court of Appeals decision is
therefore necessary to resolve the conflict created by the Court of
Appeals’ refusal to follow Beaver County and City of Richmond.
X. The Court of Appeals Decision is in Conflict with 7 C.F.R.
§§1925.2, 1925.4(b).
The Court of Appeals concluded that 7 U.S.C. §1984 does
not waive FSA's immunity from penalties. (App. A, Al6). The
Court of Appeals decision fails to cite FSA’s regulations on point.
7 C.F.R. §1925.4(b) directs FSA officials, in the event the
borrower is unable or unwilling to pay the delinquent tax, to pay
the amount of the delinquent taxes plus the amount of any accrued
penalty. (App. E). The practical effect of the Court of Appeals’
decision regarding penalties is to invalidate 7 C.F.R. §1925.4(b).
Such an outcome represents an unprecedented interference by a
federal court with the powers delegated by Congress to a federal
executive department. 7 U.S.C. §1989. Review by this Court is
therefore necessary to construe 7 U.S.C. §1984 in a manner
26
consistent with FSA’s regulations.
XI. The Court of Appeals Decision Misplaced Reliance Upon
United States v. Alabama, 313 U.S. 274 (1941).
In concluding that 7 U.S.C. §1984 does not waive FSA's
immunity from foreclosure, the Court of Appeals misplaced
reliance on United States v. Alabama, 313 U.S. 274 (1941).
Alabama predates both 7 U.S.C. §1984 and its predecessor statute.
Alabama must therefore be read in light of these subsequent
legislative enactments. Alabama must also be read in light of
Beaver County, Kimbell Foods and Sierra Summit. Review by this
Court of the Court of Appeals decision regarding FSA’s immunity
from foreclosure is therefore warranted.
The Court of Appeals also reasoned that foreclosure against
FSA property would interfere with FSA’s statutory obligation to
offer forfeited property for re-sale to qualified farmers, citing 7
U.S.C. §1985(c)(1)(B). (App. A, A18). The Court of Appeals’
reasoning overlooks FSA’s opportunity to eliminate any such
interference with its statutory mission by simply following the
mandate of 7 U.S.C. §1984 and paying the taxes assessed by Lewis
27
County at the time the taxes were due.
The Court of Appeals supported its reasoning regarding
FSA’s immunity from foreclosure with the following excerpt from
S.Rep. No. 566, 87th Cong., Ist Sess.:
Property acquired in liquidation of loans is disposed
of promptly, so that the incident of a tax does not
greatly interfere with the re-sale of the property or
the recovery of security value. (App. A, A18).
The Court of Appeals’ reliance upon the following excerpt
from the Senate Report cannot be reconciled with FSA’s activities
in this case in holding the subject properties for years. Such
activity cannot fairly be said to constitute the prompt disposal of
property acquired in liquidation of loans contemplated by Congress
in enacting 7 U.S.C. §1984. Review by this Court of the Court of
Appeals’ decision is necessary to resolve whether foreclosure
against FSA property would thwart the intent of Congress.
28
XII. The Court of Appeals Decision Erred in Concluding that
Petitioners Murphy Were not Prevailing Parties Under 28
U.S.C. §2412.
The errors in the Court of Appeals decision discussed
above undermine the Court of Appeals’ conclusion that petitioners
Murphy were not prevailing parties under 28 U.S.C. §2412.
Review of the Court of Appeals decision on the status of
petitioners Murphy as prevailing parties under 28 U.S.C. §2412 is
warranted.
29
CONCLUSION
“And David put his hand in his bag, and took thence a
stone, and slang it ... “(1 Samuel 17:49).
The petition for a writ of certiorari should be granted.
Of Counsel:
Jeremy Randolph
Lewis County, Washington
Prosecuting Attorney
360 NW North Street
Chehalis, WA 98532
(360) 740-1240
Counsel for Petitioner Lewis
County, Washington
Jeffrey P. Helsdon
Christopher M. Constantine
3730 South Pine Street
Tacoma, WA 98409
(253) 471-1200
Counsel for Petitioners Kevin
and Bernice Murphy
Respectfully submitted
Dougjias E. Jensen
Couhse} of Record
Chyef Civil Deputy, Lewis
County Prosecuting Attorney
360 NW North Street, MSPROO1
Chehalis, WA 98532
(360) 740-1240
Counsel for Petitioner Lewis
County, Washington
30
APPENDIX A
Opinion, United States of America v. Lewis County, U.S.C.A. 9
Nos. 97-35720 and 97-35510 (filed April 19, 1999)
APPENDIX B
Amended Order Granting Defendants Murphys’ Motion for
Judgment on the Pleadings, United States of America v. Lewis
County, U.S.D.C. W.D.WA No. C94-5474FDB
Judgment, United States of America v. Lewis County, U.S.D.C.
W.D.WA No. C94-5474FDB
APPENDIX C
Order Denying Rehearing, United States of America v. Lewis
County, U.S.C.A. 9 Nos. 97-35510, 97-35720 (filed May 20, 1999)
APPENDIX D
Order Staying Mandate, U.S.C.A. 9 Nos. 97-35510, 97-35720
(filed June 10, 1999)
APPENDIX E
Constitutional Provisions, Treaties, Statutes, Ordinances and
Regulations
APPENDIX A
UNITED STATES of America,
Plaintiff-Appellant-Cross-Appellee,
v.
LEWIS COUNTY, WA; Bill Brooks, County Assessor, Lewis
County, Washington; Donna
Karvia, Clerk, Lewis County Superior Court; Joe Cooke,
Treasurer, Lewis County,
Washington; Gary Zandel, Defendants-Appellees,
and
Kevin E. Murphy; Bernice Murphy, Defendants-Appellees-
Cross-Appellants.
Nos. 97-35510, 97-35720.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted July 7, 1998.
Decided April 19, 1999.
Federal government brought action against county,
challenging county's assessment of taxes, interest, and penalties on
farm property acquired by the federal Farm Service Agency (FSA)
l
and county's foreclosure on one parcel. Government also asserted
claims against purchasers who bought one FSA parcel from county
at foreclosure sale. The United States District Court for the Western
District of Washington, Franklin D. Burgess, J., entered judgment for
county and purchasers on the pleadings, and government appealed.
Purchasers cross-appealed. The Court of Appeals, Canby, Circuit
Judge, held that: (1) county could tax property held by FSA; (2)
taxation did not improperly discriminate against federal government
under doctrine of intergovernmental tax immunity; (3) federal
government's waiver of immunity did not extend to interest, penalties,
or foreclosure; (4) whether property was properly characterized as
agricultural had to be determined by state law; and (5) purchasers’
counterclaims were either not properly raised or were premature.
Affirmed in part, dismissed in part, reversed in part, and
remanded.
David English Carmack, Bridget M. Rowan, Tax Division, United
States Department of Justice, Washington, D.C., for plaintiff-
appellant-cross- appellee.
Douglas E. Jensen, Office of the Prosecuting Attorney, Chehalis,
2
Washington, for defendants-appellees.
Christopher M. Constantine, Tacoma, Washington, for defendants-
appellees- cross-appellants.
Appeals from the United States District Court for the Western District
of Washington; Franklin D. Burgess, District Judge, Presiding. D.C.
No. CV-94- 05474-FDB.
Before: CANBY and TASHIMA, Circuit Judges, and TAKASUGI,'
District Judge.
CANBY, Circuit Judge:
A federal statute, 7 U.S.C. § 1984, partially waives the
immunity of the federal government from state taxation by
authorizing state and local governments to tax farm property owned
by the federal Farm Service Agency ("FSA") "in the same manner
and to the same extent as other property is taxed." Id. Lewis County,
Washington, imposed taxes, interest and penalties upon twenty
parcels of farm property acquired by the FSA, and foreclosed on one
of the parcels. The United States filed this action in district court,
1. The Honorable Robert M. Takasugi, Senior United States District Judge for the
Central District of California, sitting by designation.
3
challenging these actions of the County. The United States contends
that, because the County does not tax a comparable state agency, its
tax is discriminatory and does not meet the requirements of § 1984
that the federal property be taxed "in the same manner and to the
same extent as other property.” Id. The United States also argues that,
in any event, § 1984 does not authorize the County to collect interest
and penalties, or to foreclose in the event of delinquency. The United
States also disputed the County's application of a higher
nonagricultural tax rate to three of the parcels. The United States now
appeals from the district court's judgment for the County on the
pleadings, entered pursuant to Fed. R. Civ. Pro. 12(c). We review de
novo. See McGann v. Ernst & Young, 102 F.3d 390, 392 (9th
Cir.1996). We conclude that Lewis County may tax the FSA
properties in issue, but that it may neither impose interest and
penalties nor foreclose on those properties. We also conclude that the
United States may challenge the imposition of the higher non-
agricultural tax rate on the ground that it discriminates against the
United States. Accordingly, we affirm in part, reverse in part, and
remand for further proceedings.
The United States named Kevin and Bernice Murphy as co-
defendants because they had purchased an FSA parcel from Lewis
County during a tax foreclosure sale. As cross-appellants, the
Murphys seek to strike the declaration of a witness and obtain
attorneys fees. They also assert affirmative defenses in their cross
appeal. We do not rule upon most of the Murphys’ contentions
because they are improperly or prematurely raised.
BACKGROUND
The FSA, an agency of the Department of Agriculture, lends
money to farmers and ranchers unable to obtain loans elsewhere.” 7
U.S.C. § 1922 (1988 and Supp.1998). The agency may acquire title
to property securing a particular loan if the borrower defaults. 7
U.S.C. § 1985(a). Title 7 U.S.C. § 1984 provides that:
All property ... the title to which is acquired or held by
the Secretary under this chapter other than property
used for administrative purposes shall be subject to
taxation by State, territory, district, and local political
2. The FSA succeeds the Farmers Home Administration, which Congress abolished in
1994. 7 U.S.C. § 6932 (Supp.1998). Although the events of this case span the
reorganization of the agency, we will refer to the agency only as the FSA.
5
subdivisions in the same manner and to the same
extent as other property is taxed....
Thus, state and local authorities may apply a
nondiscriminatory tax to property acquired by the FSA through loan
default.
Lewis County assessed property taxes against twenty parcels
of farmland held by the FSA. The FSA initially refused to pay the
taxes, as well as the related interest and penalties. The FSA also
objected to the County's taxation of three of the parcels at a higher
nonagricultural rate. The County then initiated foreclosure actions
against the parcels. Under protest, the FSA paid the taxes, penalties,
and interest with regard to nineteen of the parcels in order to pass
clear titles to eligible buyers. The County foreclosed on the remaining
parcel and the Murphys purchased it at the foreclosure sale.
The United States then sued for damages and declaratory
relief. The district court dismissed the complaint for lack of
jurisdiction pursuant to the Tax Injunction Act, 28 U.S.C. § 1341
(1993). This court reversed in an unpublished decision and remanded
for a consideration of the substantive issues. United States v. Lewis
6
a siaidiaieiauaiiel
County, 94 F.3d 654 (9th Cir.1996)(Table). On remand, the Murphys
and the County moved for judgment on the pleadings. The district
court granted the motion, reasoning that 7 U.S.C. § 1984 provided a
broad waiver of the federal government's immunity from state and
local taxation with regard to agricultural property acquired by the
FSA.
DISCUSSION
I. Taxation of FSA Property
A. 7 U.S.C. § 1984
Washington's property tax scheme exempts from taxation
"[a]ll property belonging exclusively to the United States, the state,
any county or municipal corporation." Wash. Rev. Code § 84.36.010
(1991). The state's tax scheme also provides that, notwithstanding §
84.36.010, federally owned property is taxable whenever authorized
by federal law. See id. § 84.40.315.° Thus, property acquired by the
FSA through loan default is taxable pursuant to 7 U.S.C. § 1984.
The United States emphasizes that all state and local
3. A State may not directly tax the United States without the federal government's
consent. See United States v. New Mexico, 455 U.S. 720, 733, 102 S.Ct. 1373, 71
L.Ed.2d $80 (1982).
government property in Washington is tax-exempt, including
property acquired by the Washington State Housing Finance
Commission ("Housing Commission"). The Housing Commission
performs a mission that is similar to the mission of the FSA. The
United States then points out that Lewis County may tax FSA
property only "in the same manner and to the same extent as other
property is taxed." 7 U.S.C. § 1984. It insists that property acquired
by Washington's Housing Commission is the relevant "other
property." It reasons that, because Lewis County may not tax property
held by the Housing Commission, or any other state or local
government property, the County may not tax property held by the
FSA. Thus, the United States would construe "other property" as
"other publicly held property."
We do not read "other property" so narrowly. Congress must
have known that states uniformly exempt state and local property
from taxation. See Van Brocklin v. Tennessee, 117 U.S. 151, 173-75,
6 S.Ct. 670, 29 L.Ed. 845 (1886). If we construe 7 U.S.C. § 1984 to
subject FSA property to taxation only where state and local
government property is also taxed, then the waiver would rarely (if
8
ever) take effect. By enacting 7 U.S.C. § 1984, however, Congress
plainly intended to preserve the local tax base in counties where the
FSA operates. We decline to interpret the provision in a way that
would frustrate the obvious intent of Congress. See Philbrook v.
Glodgett, 421 U.S. 707, 713, 95 S.Ct. 1893, 44 L.Ed.2d 525 (1975);
United States v. Hynes, 20 F.3d 1437, 1442 (7th Cir.1994) (en banc).
"Other property" must mean "other non- exempt property." Thus,
Lewis County did not violate 7 U.S.C. § 1984 because it taxed FSA
property just as it taxed other non-exempt property.’
B. Intergovernmental Tax Immunity
The United States also invokes the general principle of
intergovernmental tax immunity that prohibits discrimination against
a state taxpayer because of that taxpayer's connection with the federal
sovereign. See Davis v. Michigan Dept. of the Treasury, 489 U.S.
803, 816, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989) (citing Phillips
Chem. Co. v. Dumas Indep. Sch. Dist., 361 U.S. 376, 383, 80 S.Ct.
474, 4 L.Ed.2d 384 (1960)). The relevant inquiry in such cases is
4. We are not faced in this case with a contention that the state has established such a
comprehensive system of exemptions that a grossly disproportionate share of the total tax
burden falls on the United States. Our decision does not address such a situation.
9
whether the inconsistent treatment is justified by significant
differences between the class of persons or items taxed and the class
that is not taxed. Id.
Washington's tax scheme undeniably discriminates between
farmland that is held by the FSA and farmland that is similarly held
by the state. State and local governments have traditionally exempted
themselves from state and local taxation, however. See, e.g., Burr v.
Boston, 208 Mass. 537, 538-39, 95 N.E. 208, 209-10 (1911). The
state or local government would gain no revenue, and would incur
some expense, by taxing itself. Taxation of federally owned property,
however, does generate revenue for the state. It is possible that this
distinction might not be sufficiently significant in the absence of
congressional action because, in evaluating the difference in
treatment, " 'the [federal] Government's interests must be weighed in
the balance.’ " Davis, 489 U.S. at 816, 109 S.Ct. 1500 (quoting
Phillips Chemical, 361 U.S. at 385, 80 S.Ct. 474). Here, however,
Congress has made its assessment of the federal interest in 7 U.S.C.
§ 1984 and, as we have already pointed out, that statute reflects an
intent to prevent federal repossession from causing farm land to be
10
removed from the state's tax rolls. Congress's action sufficiently
qualifies the intergovernmental immunity of the United States to
permit the state to make the distinction it has. We see no reason why
state or local governments must engage in a circular process of taxing
themselves in order to impose the tax on the federal government that
Congress has authorized.
It is also worth noting that the County's tax on FSA-owned
farmland is also imposed on privately-owned farmland in general.
Thus there is a political check against excessive taxation. See South
Carolina v. Baker, 485 U.S. 505, 525 n. 15, 108 S.Ct. 1355, 99
L.Ed.2d 592 (1988).
A "political check" is provided when a state tax falls
on a significant group of state citizens who can be
counted upon to use their votes to keep the State from
raising the tax excessively, and thus placing an unfair
burden on the Federal Government. It has been
thought necessary because the United States does not
have a direct voice in the state legislatures.
Washington v. United States, 460 U.S. 536, 545, 103 S.Ct.
11
1344, 75 L.Ed.2d 264 (1983). In the present case, Lewis County
taxed private farmland to the same extent, and in the same manner, as
it taxed FSA farmland.* See Wash. Rev. Code § 84.36.005.
Excessive taxation of the United States is accordingly unlikely.
II. Interest and penalties
The parties dispute whether federal or state law determines the
extent of Congress's waiver of immunity from "taxation" in § 1984.
We agree with the United States that the question of the scope of a
congressional waiver of the federal government's immunity is one of
federal law. See Reconstruction Finance Corp. v. Beaver County, 328
U.S. 204, 208, 66 S.Ct. 992, 90 L.Ed. 1172 (1946) ("What meaning
Congress intended [in its waiver] is a federal question which we must
determine"). As Beaver County indicates, however, Congress may
intend, as a matter of federal law, to apply a state rule. See also
United States v. Kimbell Foods, Inc., 440 U.S. 715, 727-28, 99 S.Ct.
1448, 59 L.Ed.2d 711 (1979).
In Beaver County, the issue was whether Congress, in
5. We address in Section IV, infra, the contention of the United States that the state has
improperly taxed three of its farmland parcels at a higher, non-agricultural rate.
12
as
consenting to local taxation of certain federally-owned "real
property,” permitted Beaver County to tax heavy factory machinery
because under state law such machinery was considered part of the
factory real estate. The Supreme Court held that, the phrase being
undefined by Congress, "the Congressional purpose can best be
accomplished by application of settled state rules as to what
constitutes 'real property." Beaver County, 328 U.S. at 210, 66 S.Ct.
992. Two circuits have held that the rule of Beaver County applies as
well to the question whether interest and penalties were within §
1984's meaning of "taxation." See Federal Reserve Bank of Richmond
v. Richmond, 957 F.2d 134 (4th Cir.1992); Reconstruction Finance
Corp. v. Texas, 229 F.2d 9 (Sth Cir.1956). The Fourth Circuit
concluded that the Federal Reserve Bank must pay interest and
penalties because Virginia law provided that those charges were
taxes. Richmond, 957 F.2d at 137. The Fifth Circuit concluded that
the Reconstruction Finance Corporation was not liable for those items
because interest and penalties were no part of the tax under Jexas
law. Reconstruction Finance Corp. v. Texas, 229 F.2d 9, 11-12 (Sth
Cir.1956).
13
With all due respect, we disagree with the approach of the
Fourth and Fifth Circuits. We do not read Beaver County so broadly.
Its ruling that Congress intended "real estate" to be determined by
state law was grounded in part on the Supreme Court's recognition
that "[c]oncepts of real property are deeply rooted in state traditions,
customs, habits, and laws." Beaver County, 328 U.S. at 210, 66 S.Ct.
992. In contrast, there is a strong federal interest in the question
whether the United States should be subject to state-imposed interest,
penalties and foreclosures, and we doubt that Congress intended the
outcome to depend upon varying characterizations of state law.° We
prefer the view of the Sixth Circuit, which held that the meaning of
a waiver of immunity from state "taxes" was to be determined by
federal law, notwithstanding Beaver County. See United States v.
Consumers Scrap Iron Corp., 384 F.2d 62, 64-65 (6th Cir.1967); see
6. We note, however, that if state law were determinative, the County would fare no
better. The Washington Supreme Court has ruled that "[t]he provision exacting payment
of interest for delinquency in the payment of taxes does not make the interest a part of
the tax." Henry v. McKay, 164 Wash. 526, 533, 3 P.2d 145, 148 (1931). It treats penalties
in the same fashion. See id.; cf. State ex rel. Kern v. Emerson, 90 Wash. 565, 572, 155 P.
579, 582 (1916). A Washington statute defines "tax" to include interest and penalties, but
only for the purpose of an application for refund. Wash. Rev. Code § 84.69.010(2). That
definition permits taxpayers to recover interest and penaities erroneously paid, but does
not purport to characterize the nature of those impositions for other purposes.
14
also Missouri Pacific R. Co. v. Ault, 256 U.S. 554, 565, 41 S.Ct. 593,
65 L.Ed. 1087 (1921) (whether an award is compensation or is a
penalty not included in a waiver of immunity is a question of federal,
not state, law).
As a matter of federal law, there is a long tradition
establishing that "in the absence of constitutional requirements,
interest can be recovered against the United States only if express
consent to such a recovery has been given by Congress.... There can
be no consent by implication or by use of any ambiguous language."
United States v. N.Y. Rayon Importing Co., 329 U.S. 654, 659, 67
S.Ct. 601, 91 L.Ed. 577 (1947); see Library of Congress v. Shaw, 478
U.S. 310, 314-16, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986). The same
principle applies with at least equal force to penalties. See United
States Dept. of Energy v. Ohio, 503 U.S. 607, 615, 112 S.Ct. 1627,
118 L.Ed.2d 255 (1992); Consumers Scrap, 384 F.2d at 65. The
Supreme Court has also repeatedly stated that waivers of sovereign
immunity must be strictly construed in favor of the sovereign. See
United States v. Nordic Village, Inc., 503 U.S. 30, 34, 112 S.Ct. 1011,
117 L.Ed.2d 181 (1992); McMahon v. United States, 342 U.S. 25, 27,
15
72 S.Ct. 17, 96 L.Ed. 26 (1951).
Applying these principles, we conclude that Congress has not
waived the immunity of the United States from interest and penalties.
The term "taxation" does not unequivocally include the assessment
of interest and penalties. A closer question is whether immunity from
interest and penalties is waived by the provision of § 1984 that FSA-
held property is subject to taxation "in the same manner and to the
same extent as other property is taxed." 7 U.S.C. § 1984. There is
some force to the County's argument that this provision is a broad
waiver intended to permit the states to apply their entire system of
enforcement machinery against the United States, "in the same
manner" as the states would apply that machinery against private
taxpayers. See Beaver County, 328 U.S. at 210, 66 S.Ct. 992; but see
Library of Congress v. Shaw, 478 U.S. 310, 319-20, 106 S.Ct. 2957,
92 L.Ed.2d 250 (1986) ("[s]tatutes placing the United States in the
same position as a private party ... have been read narrowly to
preserve certain immunities that the United States has enjoyed
historically"). The difficulty with the County's approach is that, even
though Congress could have entertained that intent, it did not express
16
it unequivocally. The requirement that federally-held property be
subject to taxation "in the same manner" as other property can refer
to the time when the tax is due, the manner of valuation, or any
number of other elements of the state taxing process other than the
imposition of interest, penalties and foreclosure. This plausible
interpretation is sufficient to render the meaning of the phrase "in the
same manner" ambiguous and preclude us from accepting it as an
unequivocal waiver of immunity from interest, penalties and
foreclosure. See Nordic Village, 503 U.S. at 37, 112 S.Ct. 1011;
Dept. of Energy v. Ohio, 503 U.S. at 619-20, 626-27, 112 S.Ct. 1627;
see also Lane v. Pena, 518 U.S. 187, 116 S.Ct. 2092, 2100, 135
L.Ed.2d 486 (1996).’
III. Foreclosure
Foreclosure against federally-owned property is a suit against
the United States, which cannot be prosecuted without its consent.
See United States v. Alabama, 313 U.S. 274, 282, 61 S.Ct. 1011, 85
7. The Third Circuit permitted the imposition of civil penalties on the Postal Service
without an unequivocal waiver, but in doing so the court distinguished the autonomous
Postal Service from the government itself. Pennsylvania v. U.S. Postal Service, 13 F.3d
62, 67 (1993). The Third Circuit recognized that the United States had been held immune
from penalties under the same statute in Dept. of Energy v. Ohio, supra.
17
L.Ed. 1327 (1941). The district court concluded that 7 U.S.C. § 1984
empowered Lewis County to foreclose on FSA property on the
ground that "taxation ... in the same manner" refers to the procedures
for collecting taxes, which include foreclosure. For the reasons
already discussed in the preceding section, we cannot accept that
phraseology as an unequivocal waiver of immunity.
Foreclosure against FSA property would also interfere with
the statutory mission of that agency. The FSA is required, for
example, to offer forfeited property for resale to qualified farmers.
See 7 U.S.C. § 1985(c)(1)(B). A state foreclosing for a tax debt is
under no such compulsion, and thus might frustrate Congress's intent
in imposing the restriction. Congress apparently did not contemplate
any such possibility in enacting § 1984. See S.Rep. No. 566, 87th
Cong., Ist Sess., reprinted at 1961 U.S.C.C.A.N. 2243, 2316
("Property acquired in liquidation of loans is disposed of promptly,
so that the incident of the tax does not greatly interfere with the resale
of the property or the recovery of security value"). We conclude,
therefore, that § 1984 does not waive the immunity of the United
States from foreclosure of its property by the County.
18
It is true that the inability to foreclose impairs the County's
ability to collect its tax. Such dislocations are not unknown when a
taxing authority deals with another sovereign. See Oklahoma Tax
Comm'n v. Potawatomi Tribe, 498 U.S. 505, 514, 111 S.Ct. 905, 112
L.Ed.2d 1112 (1991). We assume, however, that, now that its liability
for taxes (but not interest or penalties) has been established, the
United States will pay its taxes when due. Payment of such taxes
would seem to be a prerequisite to the ability to convey marketable
title.
For these reasons, we reverse the judgment of the district
court with respect to the County's foreclosure.’
IV. Nonagricultural Tax Rate
Lewis County imposed a higher nonagricultural tax rate on
three of the twenty FSA parcels for the 1994 tax year. The County
also imposed a recapture tax on the ground that it should have applied
the higher tax rate in previous years. The United States argued in its
complaint that the higher tax rate was inappropriate because the
8. The Murphys assert that they are entitled to compensation for the improvements that
they made to the property. We leave this question to the district court for consideration
on remand.
19
parcels had remained agricultural. The district court did not address
this claim.
In contrast to the question whether the United States is subject
to interest, penalties, and foreclosure, the question whether the state
properly characterized the land as agricultural must be determined
according to state law. The issue falls directly within Beaver County.
The congressional purposes behind § 1984 are best accomplished by
"application of settled state rules" geared to state real-property
concepts. Beaver County, 328 U.S. at 210, 66 S.Ct. 992. The only
issue to be determined purely as a matter of federal law is whether the
County has discriminated against the United States in the
establishment or implementation of its rules. See id. We remand the
claim concerning the non-agricultural tax rates to the district court for
determination according to these standards.
V. The Murphys’ Cross-Appeal
In addition to joining many of the arguments of the County as
appellees, the Murphys’ cross-appeal from the district court's
judgment. They claim that: (1) the district court erred in ruling on a
motion to strike portions of certain declarations; (2) in the event of
20
remand, they are entitled to relief on their counterclaim for cost of
improvements to the property; (3) the United States failed to exhaust
state administrative remedies and is barred by limitations from doing
so now; and (4) they are entitled to attorneys fees under the Equal
Access to Justice Act.
Claims (1) and (2) are not properly raised because the
Murphys wholly prevailed in district court when the court granted
judgment against the United States on the pleadings. A party who is
not aggrieved by a judgment ordinarily may not appeal from it. See
Deposit Guaranty Natl. Bank v. Roper, 445 U.S. 326, 333, 100 S.Ct.
1166, 63 L.Ed.2d 427 (1980). The rulings challenged by the Murphys
are not collateral matters that fall within an exception to this rule. See
id. at 333-34, 100 S.Ct. 1166.’
For the same reason, claim (3) is not a proper subject of cross-
appeal, although failure to exhaust can be raised in the main appeal
as an alternative argument in support of the district court's judgment.
See Charley's Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc.,
9. Claim (2) is also premature to the extent that it addresses matter to be determined on
remand.
21
810 F.2d 869, 874 (9th Cir.1987) ("We may affirm the district court
on any ground supported by the record, even if the ground is not
relied on by the district court"). With regard to the claims of the
United States that the County violated its sovereign immunity or
discriminated against the United States in violation of its
intergovernmental immunity, the Murphys’ contention is without
merit. The United States need not exhaust state remedies before
raising claims arising under federal law in district court. See 28
U.S.C. §§ 1331, 1345 (1993); Department of Employment v. United
States, 385 U.S. 355, 357-58, 87 S.Ct. 464, 17 L.Ed.2d 414 (1966);
United States v. Broward County, 901 F.2d 1005, 1007-08 (11th
Cir.1990). On the state-law question whether three parcels were
properly classified as non-agricultural land, we prefer to have the
district court rule in the first instance on the question of exhaustion
and state limitations for exhaustion. We therefore leave that matter
for disposition by the district court on remand, as the government
concedes to be appropriate.
With regard to the Murphys’ claim for attorneys fees, the issue
is premature. The Equal Access to Justice Act provides for the award
22
of fees to "a prevailing party ... unless the court finds that the position
of the United States was substantially justified." 28 U.S.C. §
2412(d)(1)(A). In light of our disposition of this appeal, the Murphys
have not established themselves as a "prevailing party." Whether they
prevail to any extent upon remand in a manner to require an award of
fees is yet to be determined; the Murphys may renew their request in
district court at the conclusion of further proceedings.
CONCLUSION
Lewis County may tax property held by the FSA pursuant to
7 U.S.C. § 1984, even though Washington law exempts state and
local government property (including that of the Housing
Commission) from taxation. Congress did not waive federal
sovereign immunity from state or local interest, penalties, and
foreclosure with regard to FSA property in Washington. The
Murphys' cross- appeal is without merit.
The parties will bear their own costs in these appeals.
No. 97-35510 (Main Appeal): AFFIRMED IN PART; REVERSED
IN PART, and REMANDED.
No. 97-35720 (Cross-Appeal): AFFIRMED IN PART; DISMISSED
23
IN PART.
24
APPENDIX B
UNITED STATES of America,
Plaintiff,
v.
LEWIS COUNTY, WA; Bill Brooks, County Assessor, Lewis
County, Washington; Donna
Karvia, Clerk, Lewis County Superior Court; Joe Cooke,
Treasurer, Lewis County,
Washington; Gary Zandel; Kevin E. Murphy;
Bernice Murphy
Defendants.
No. C94-5474FDB
United States District Court,
Western District of Washington at Tacoma.
Filed April 14, 1997.
AMENDED ORDER GRANTING DEFENDANTS
MURPHYS’ MOTION FOR JUDGMENT ON THE
PLEADINGS
This matter comes before the court upon Defendants
Murphys’ Motion for Judgment on The Pleadings. Defendants
|
Lewis County, and named current and former elected officials Bill
Brooks, Assessor; Donna Karvia, Clerk; Joe Cooke, (former)
Treasurer, and Gary Zandell, Auditor join in the Murphys’ Motion.
This matter arises out of the Defendants Murphy’s purchase of
certain property from Lewis County at a tax sale. The property
was formerly owned by the Farmer’s Home Administration
(FmHA)(the predecessor to the Farm Service Agency (FSA).
Defendants took possession of the property, made improvements
on it, and have leased it for use as a diary.
The plaintiff's Complaint contains five counts. Count I
alleges that since real property owned by the State of Washington,
its agencies, or subdivisions is exempt from property taxation, and
: Lewis County does not, therefore, tax that property, the United
States property held by the FmHA is unconstitutional because it
discriminates against the United States in violation of the
Supremacy Clause.
Count III alleges that 7 U.S.C. § 1984 does not waive
immunity from imposition of the higher tax rate for nonfarm and
agricultural land, and the imposition of taxes, penalties, and
2
interest against the United States is a violation of the United
States” sovereign immunity.
Count IV alleges that 7 U.S.C. § 1984 does not waive
immunity from imposition of penalties, interests, and other
charges, and imposition of such charges is a violation of the United
States sovereign immunity.
County V alleges that the conducting of tax and/or
foreclosure sales or other collection actions impinging on the
United States’ property interests is prohibited by the Supremacy
Clause and that such foreclosure and sale of the subject property
herein is void ab initio.
The United States prays for (1) declaratory judgment
(Lewis County is prohibited from assessing, collecting, etcetera,
Washington property tax, recapture tax, penalties, interests and
other casts on property owned by the United States and held by the
FmiiA ursier 7 U.S.C. §§ 1921 et seq.; the conveyances of the
subject property at the foreclosure sale is null and void); (2)
injunctive relief (restrain defendants from acting in concert to
assessing, collecting; etcetera, the Washington property taxes); an
3
accounting from the Defendants Murphy; (3) monetary judgment
for the United States for restitution of taxes paid under protest and
for rents earned on the subject property; and (4) judgment quieting
title in the subject property.
There is no dispute about whether the court may entertain a
motion for judgment on the pleadings after remand or the
timeliness of the motion, but Plaintiffs do oppose the motion on its
merits. Each argument will be addressed in turn.
I. Timeliness of Motion
The Plaintiff objects to the attempt to secure a dismissal
prior to undertaking any discovery, and based on comments by this
Court in its earlier order. Plaintiff also objects to the Murphys
challenging the merits of any claims except those in Count V,
because there is no case or controversy with respect to the
underlying tax, the higher tax rate for nonfarm land, and penalties
and interest, as these disputes are solely between the United States
and Lewis County.
Contrary to Plaintiff's argument, the Murphys’ interests in
the subject property are threatened by this lawsuit. The issues
4
raised in Counts I through V are inextricably intertwined. The
issues presented are legal in nature, and there is no showing how a
period of discovery would enhance the Court’s ability to decide a
purely legal issue. Moreover, the parties have thoroughly briefed
the issues, so that the Court is fully advised in the premises without
need to resort to the earlier order, except to note that statements
may have been made therein that would harmonize with the
analysis here.
II Claims for Relief
Plaintiff argues that with respect to Counts I and II, it is
immune from taxation by Lewis County on FSA property, and that
the purported waiver of that immunity in 7 U.S.C. § 1984 is an
affirmative defense that Lewis County must establish.
Alternatively, the taxing statues at issues are discriminatory in
violation of the Supremacy Clause. Plaintiff argues the statute
must be read narrowly and that FSA property is subject to taxation
only “in the same manner and to the same extent as other property
is taxed.” Plaintiff argues that the statute is not a broad waiver of
immunity. Moreover, Plaintiff argues that it cannot be held to
5
know that Washington would set up an instrumentality similar to
FSA, called the Washington Housing Finance Commission, and
give it a tax exemption that it did not give to FSA, but, FSA,
continues, if the State has this exemption, the FSA property is
similar and should have the exemption, too.
Defendants Murphy argue that the United States has
subjected itself to taxation by the State of Washington through 7
U.S.C. §§ 1984 and related 7 C.F.R. §§ 1925.2 and 1925.4(b). The
Section dealing with taxation is found in the Administrative
Provisions subchapter of Chapter 50, Agricultural Credit, which
concerns real estate loans, operating loans, and emergency loans.
The purposes of the loans are for, amount other things, improving
farms, for enterprises needed to supplement farm income, for
refinancing existing indebtedness, for loan closing costs. 7 U.S.C.
§ 1923. Persons eligible for these loans are, inter alia, farmers and
ranchers, farm cooperatives, private domestic corporations, and
partnerships. 7 U.S.C. § 1922. In making loans for the purchase
of farms, preference is to be given persons who have dependent
families and to those capable of making initial down payments. 7
U.S.C. § 1923(a). Against this background, the taxation section
provides:
All property subject to a lien held by the
United States or the Title to which is acquired or
held by the Secretary under this chapter other than
property used for administrative purposes shall be
subject to taxation by State, territory, district, and
local political subdivisions in the same manner and
to the same extent as other property is taxed ... .
7 U.S.C. § 1984. It is difficult to read this statute in any way other
than as a broad waiver of sovereign immunity from taxation by a
State. Defendants note the competing interests of federal
operations being free from local controls and the need for state and
local governments to raise revenues. See S.R.A. Inc. v. State of
Minnesota, 327 U.S. 558, 562 (1946). It also appears appropriate
to consider the commercial character of a federal instrumentality’s
activities when deciding the degree of immunity from state law
enjoyed by the federal entity. See United States v. Kimbell Foods,
Inc., 440 U.S. 715, 733-739 (1979)(The court did not find
-
sutumnneuitumnianne nication ae
convincing the argument that because government lenders make
loans where private entities would not it was entitled to greater
protection.) In determining the scope of a congressional waiver of
sovereign immunity, the commercial character of a federal
instrumentality’s activities have been a determining factor. E.g.,
Federal Deposit Insurance Corp. v. Meyer, 510 U.S. 471 (1994).
The “commercial activity” theory also allows for the assessment of
interest against a Federal entity. See Vail v. Brown, 841 F. Supp.
909 (D.Minn. 1994) affirmed, 39 F.3d 208 (8th Cir. 1994), cert.
den., 115 S.Ct. 2245 (1995). A similar conclusion seems
inescapable as to penalties. FSA’s own regulations direct the
payment of delinquent taxes plus accrued penalties in certain
circumstances. 7 C.F.R. § 1925.4(b) provides:
Prior (usually about 90 days) to the time it is
legally possible for action to be taken that will cause
the borrower to lose title or right of possessions of
the security property or the use of essential water,
the County Supervisor will contact the borrower is
unable or unwilling to pay the delinquent tax with
8
his own funds after every appropriate effort has
been made to have him do so, the County
Supervisor will refer to FmHA or its successor
agency under Public Law 103-354 Instruction 2014-
A and utilize the Type 60 Purchase Order System to
pay the amount of the delinquent taxes plus the
amount of any accrued penalty to bring taxes
current.
(Emphasis supplied.) In Reconstruction Finance Corp. v. Beaver
County, 328 U.S. 204 (1946), the Court was interpreting language
which subjected the Plaintiff to state or local taxation “to the same
extent as other real property is taxed,” and concluded that such
language indicated an intent “to integrate Congressional
permission to tax with established local tax assessment and
collection machinery.” /d. at 210. If the Federal government
entity is not entitled to any greater protection than private
institutions engaging in lending activities, then there is no
principled reason to differentiate between a monetary penalty and
foreclosure sale by a state in order to recoup delinquent taxes. A
9
Federal government entity such as FSA is subject to the same tax
assessment and collection machinery when it subjects itself to State
and local taxation. There is no prohibition in 7 U.S.C. § 1984
against levy, foreclosure, or sale, and Congress is fully capable of
enacting such a provision as it did when waiving tax immunity for
the Federal Deposit Insurance Corporation in 12 U.S.C. § 1825(b)
where levy, attachment, garnishment, foreclosure, or sale of FDIC
property for nonpayment of real property taxes without consent of
FDIC was prohibited. The purposes of the FDIC are different that
the purposes of the FSA, thus the broader waiver provision of FSA
property would seem appropriate.
| Also, as it is such common practice for states to exempt
certain property, 7 U.S.C. § 1984 is most logically viewed as
having been enacted with this knowledge. The only qualification
on the waiver is regarding property used for administrative
purposes. If Congress had meant to subject the FSA property to
taxation only if state property under an entity analogous to FSA is
also subject to taxation, it could have phrased the waiver more
precisely. Such a provision doesn’t make sense, however. A more
10
rational interpretation is that the FSA is acting as a private
commercial lender and will subject itself to the State’s taxation
plan to accommodate the State’s legitimate revenue raising
interests. The State in exempting a state entity has control over the
amount of property it exempts, but it cannot control a Federal
program that proceeds to take an interest on property in the state
and exempts it; it is appropriate under such circumstances when
the government is acting as a commercial entity, to allow its
property to be taxed.
Count III of the Complaint asserts that the United States
has not waived immunity from the imposition of the higher tax rate
for nonfarm and agricultural land and the additional tax imposed
by that provision for the last seven years. The same rationale as
discussed above applies here as to property held by the Secretary
under the relevant chapter. There is no qualification on the type of
tax to be applied to such property.
Count IV of the Complaint asserts that Lewis County’s
imposition of penalties, interest, and other charges against the
United States is an unconstitutional violation of sovereign
ll
immunity. Plaintiff cites Blackburn v. United States, 100 F.3d
1426 (9th Cir. 1996) for the proposition that absent a waiver of
sovereign immunity, the United States is not subject to liability
under state statutes which are penal in nature. There, a diver sued
the United States for injuries he suffered from diving off a bridge
in a national park; his theory was that the National park Service
failed to warn of the dangers of jumping off the bridge, and that it
negligently designed and maintained the bridge and the
watercourse beneath it. The Plaintiff argued that the Assimilative
Crimes Act (ACA) incorporated a state criminal statute that had no
Federal equivalent. The Court held that “absent a waiver of
sovereign immunity, the United States is not subject to liability
under state statutes which are penal in nature.” 100 F.3d at 1435.
The Court reasoned that “[a}pplication of the Resort Act in the
present case would violate the Supremacy Clause by constituting a
direct and intrusive regulation by the State of the Federal
Government’s operation of its property at Yosemite.”’ /d.
Blackburn is not at all analogous to the situation with Lewis
County. An express waiver is provided in 7 U.S.C. § 1984, and
la
taxation of the FSA property is unremarkable and in recognition of
the State’s interest. The discussion under Counts I and II above
regarding penalties is also relevant here.
County V asserts that 7 U.S.C. § 1984 did not waive
immunity from process to collect taxes by foreclosure sales or
other methods. This assertion is not well taken, however, and the
discussion above applies here, also. The United States waived
immunity and subjected property held by the Secretary under
Chapter 50 to taxation “in the same manner and to the same extent
as other property is taxed.” Moreover, “the phrase ‘in the same
manner’ has a well understood meaning in legislation and that
meaning is not one of restriction or limitation, but of procedure.”
Wilder’s S.S. Co. v. Low, 112 F. 161, 164 (9th Cir. 1901). If the
State is entitled to collect taxes on property, when the property
owner fails to pay the taxes, the State must be entitled to collect
them in the same manner from a United States entity as a private
entity, barring a narrower waiver than is present in Lewis County’s
case.
Therefore, pursuant to the foregoing analysis and the
13
arguments presented by the Defendants Murphys, they are entitled
to judgment on the pleadings.
Accordingly, it is hereby
ORDERED: Defendants Murpby’s Motion for Judgment
on the Pleadings is GRANTED and this cause of action against
Defendants Kevin E. Murphy and Bernice Murphy; Lewis County,
Bill Brooks, Donna Karvia, Joe Cooke, and Gary Zandell is
DISMISSED.
DATED and SIGNED the 14th day of April, 1997.
By: Franklin D. Burgess
United States District Judge
14
UNITED STATES of America,
Plaintiff,
v.
LEWIS COUNTY, WA; Bill Brooks, County Assessor, Lewis
County, Washington; Donna
Karvia, Clerk, Lewis County Superior Court; Joe Cooke,
Treasurer, Lewis County,
Washington; Gary Zandel; Kevin E. Murphy;
Bernice Murphy
Defendants.
No. C94-5474FDB
United States District Court,
Western District of Washington at Tacoma.
Filed June 27, 1997
JUDGMENT IN A CIVIL CASE
___Jury Verdict. This action came before the Court for a trial by
jury. The issues have been tried and the jury has rendered its
verdict.
—X_Decision by Court. This action came to consideration before
the Court upon the motion for the Defendants. The issues have
been considered and a decision has been rendered.
IT IS ORDERED AND ADJUDGED
This cause of action against Defendants Kevin E. Murphy and
Bernice Murphy; Lewis County; Bill Brooks; Donna Karvia; Joe
Cooke; and Gary Zandell is DISMISSED.
DATED and SIGNED the 27th day of June, 1997.
By: B. Kay McDermott, Deputy Clerk
APPENDIX C
UNITED STATES of America,
Plaintiff-Appellant/Cross-Appellee,
v.
LEWIS COUNTY, WA; Bill Brooks, County Assessor, Lewis
County, Washington; Donna
Karvia, Clerk, Lewis County Superior Court; Joe Cooke,
Treasurer, Lewis County,
Washington; Gary Zandel,
Defendants-Appellees,
and
Kevin E. Murphy; Bernice Murphy
Defendants-Appellees/Cross-Appellants.
CA Nos. 97-35510, 97-35720
United States Court of Appeals,
i Ninth Circuit.
Filed May 20, 1999.
ORDER
BEFORE: CANBY and TASHIMA, Circuit Judges, and
TAKASUGI,' District Judge.
The petition for rehearing filed by appellees and cross-
appellants is DENIED.
1. The Honorable Robert M. Takasugi, Senior United States District Judge for the
Centrai District of California, sitting by designation.
APPENDIX D
UNITED STATES of America,
Plaintiff-Appellant/Cross-Appellee,
v.
LEWIS COUNTY, WA; Bill Brooks, County Assessor, Lewis
County, Washington; Donna
Karvia, Clerk, Lewis County Superior Court; Joe Cooke,
Treasurer, Lewis County,
Washington; Gary Zandel,
Defendants-Appellees,
and
Kevin E. Murphy; Bernice Murphy
Defendants-Appellees/Cross-Appellants.
CA Nos. 97-35510, 97-35720
United States Court of Appeals,
Ninth Circuit.
Filed June 10, 1999.
ORDER
BEFORE: CANBY and TASHIMA, Circuit Judges, and
TAKASUGI,' District Judge.
Appellees and cross-appellants’ motion to stay the mandate
is GRANTED. Pursuant to Fed. R. App. P. 41(b), the issuance of
the mandate is stayed for thirty (3) days from the date this order is
filed. If, within that period, the Clerk of the Supreme Court
advises the Clerk of this Court that a petition for certiorari has been
filed, then the mandate shall be further stayed until final
disposition of the matter by the Supreme Court.
The Honorable Robert M. Takasugi, Senior United States District Judge for the Central
District of California, sitting by designation.
APPENDIX E
CONSTITUTIONAL PROVISIONS
FEDERAL
United States Constitution, Article III, Section 1:
The judicial Power of the United States, shall be vested in one
supreme Court, and in such inferior Courts as the Congress may
from time to time ordain and establish ...
United States Constitution, Article VI, Cl. 2:
This Constitution, and the Laws of the United States which shall be
made in Pursuance thereof; and all Treaties made, or which shall
be made, under the Authority of the United States, shall be the
supreme Law of the Land, and the Judges in every State shall be
bound thereby, and Thing in the Constitution or Laws of any State
to the Contrary notwithstanding.
United States Constitution, Amendment X:
The powers not delegated to the United States by the Constitution
nor prohibited by it to the States, are reserved to the States
respectively, or to the people.
STATE
Washington Constitution, Article VII, Section 3:
The United States and its agencies and instrumentalities, and their
property, may be taxed under any of the tax laws of this state,
whenever and in such manner as such taxation may be authorized
or permitted under the laws of the United States, notwithstanding
anything to the contrary in the Constitution of this state.
STATUTES
FEDERAL
7 U.S.C. §1921:
The Congress finds that the statutory authority of the Secretary of
Agriculture, hereinafter referred to in this chapter as the
“Secretary,” for making and insuring loans to farmers and ranchers
should be revised and consolidated to provide for more effective
credit services to farmers.
7 U.S.C. §1984:
All property subject to a lien held by the United States or the title
to which is acquired or held by the Secretary under this title or
other than property used for administrative purposes shall be
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subject to taxation by State, territory, district, and local political
subdivision in the same manner and to the same extent as other
property is taxed: Provided however, That no tax shall be imposed
or collected on or with respect to any instrument if the tax is based-
(1) the value of any notes or mortgages or other lien
instruments held by or transferred to the Secretary;
(2) any notes or lien instruments administered under this
title which are made, assigned, or held by a person
otherwise liable for such tax; or
(3) the value of any property conveyed or transferred to the
Secretary,
Whether as a tax on the instrument, the privilege of conveying or
transferring or the recordation thereof; nor shall the failure to pay
or collect any such tax be a ground for refusal to record or file such
instruments, or for failure to impart notice, or prevent the
enforcement of its provisions in any State or Federal court.
7 U.S.C. §1985:
(c) Sale of property. (1) In general. Subject to this subsection and
subsection (e)(1)(A), the Secretary shall offer to sell real property
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that is acquired by the Secretary under this title using the following
order and method of sale:
(B) Beginning farmer or rancher. (i) In general. Not later than 75
days after acquiring real property, the Secretary shall offer to sell
the property to a qualified beginning farmer or rancher at current
market value based on a current appraisal.
(11) Random selection. If more than 1 qualified beginning farmer
or rancher offers to purchase the property, the Secretary shall select
between the qualified applicants on a random basis.
(iii) Appeal of random selection. A random selection or denial by
the Secretary of a beginning farmer or rancher for farm inventory
property under this subparagraph shall be final and not
administratively appealable.
7 U.S.C. §1989:
The Secretary is authorized to make rules and regulations,
prescribe the terms and conditions for making or insuring loans,
security instruments and agreements, except as otherwise specified
herein, and make such delegations of authority as he deems
necessary to carry out this title.
7 U.S.C. §6932(a)(b)(3):
(a) Establishment: The Secretary is authorized to establish and
maintain in the Department of Consolidated Farm Service Agency.
(b) Functions of the Consolidated Farm Service Agency: If the
Secretary establishes the Consolidated Farn Service Agency under
subsection (a), the Secretary is authorized to assign to the Agency
jurisdiction over the following functions ...
(3) Agricultural credit programs assigned before the date of
the enactment of this Act [enacted Oct. 13, 1994] by law to
the Farmers Home Administration ownership and
operating, emergency, and disaster loan programs) and
other lending programs for agricultural producers and
others engaged in the production of agricultural
commodities.
12 U.S.C. §531:
Federal reserve banks, including the capital stock and surplus
therein and the income derived therefrom shall be exempt from
Federal, State, and local taxation, except taxes upon real estate.
15 U.S.C. §610 (Repealed):
SEC 10. Any and all notes, debentures, bonds, or other such
obligations issued by the corporation shall be exempt both as to
principal and interest from all taxation (except surtaxes, estate,
inheritance, and gift taxes) now or hereafter imposed by the United
States, by any Territory, dependency, or possession thereof, or by
any State, county, municipality, or local taxing authority. The
coproration, including its franchise, its capital, reserves, and
surplus, and its income shall be exempt from all taxation now or
hereafter imposed by the United States, by any Territory,
dependency, or possession thereof, or by any State, county,
municipality, or local taxing authority; except that any real
property of the corporation shall be subject to State, Territorial,
county, municipal, or local taxation to be the same extent
according to its value as other real property is taxed.
15 U.S.C. §646:
Any interest held by the Administration in property, as security for
a loan, shall be subordinate to any lien on such property for taxes
due on the property to a State, or political subdivision thereof, in
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any case where such lien would, under applicable State law, be
superior to such interest if such interest were held by any party
other than the United States.
28 U.S.C. §960:
Any officers and agents conducting any business under authority of
a United States court shall be subject to all Federal, State and local
taxes applicable to such business to the same extent as if it were
conducted by an individual or corporation.
28 U.S.C. §1254(1):
Cases in the courts of appeals may be reviewed by the Supreme
Court by the following methods:
(1) By wnt of certiorari granted upon the petition of any
party to any civil or criminal case, before or after rendition
of judgment or decree;
28 U.S.C. §1331:
The district courts shall have original jurisdiction of all civil
actions arising under the Constitution, laws or treaties of the
United States.
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.
28 U.S.C. §1345:
Except as otherwise provided by Act of Congress, the district
courts shall have original jurisdiction of all civil actions, suits or
proceedings commenced by the United States, or by any agency or
officer thereof expressly authorized to sue by Act of Congress.
28 U.S.C. §2412:
(a) (1) Except as otherwise specifically provided by statute, a
judgment for costs, as enumerated in section 1920 of this
title, but not including the fees and expenses of attorneys,
may be awarded to the prevailing party in any civil action
brought by or against the United States or any agency or
any Official of the United States acting in his or her official
Capacity in any court having jurisdiction of such action. A
judgment for costs when taxed against the United States
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(2)
shall, in an amount established by statute, court rule, or
order, be limited to reimbursing in whole or in part the
prevailing party for the costs incurred by such party in the
litigation.
A judgment for costs, when awarded in favor of the United
States in an action brought by the U.ited States, may
include an amount equal to the filing fee prescribed under
section 1914(a) of this title. The preceding sentence shall
not be construed as requiring the United States to pay any
filing fee.
Unless expressly prohibited by statute, a court may award
reasonable fees and expenses of attorneys, in addition to
costs which may be awarded pursuant to subsection (a), to
the prevailing party in any civil action brought by or
against the United States or any agency or any official of
the United States acting in his or her official capacity in any
court having jurisdiction of such action. The United States
shall be liable for such fees and expenses to the same extent .
that any other party would be liable under the common law
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or under the terms of any statute which specifically
provides for such an award.
(c) (1) Any judgment against the United States or any agency and
any official of the United States acting in his or her official
capacity for costs pursuant to subsection (a) shall be paid as
provided in sections 2412 and 2517 of this title and shall be
in addition to any relief provided in the judgment.
(2) Any judgment against the United States or any agency and
any official of the United States acting in his or her official
capacity for fees and expenses of attorneys pursuant to
subsection (b) shall be paid as provided in sections 2414
and 2517 of this title, except that if the basis for the award
is a finding that the United States acted in bad faith, then
the award shall be paid by any agency found to have acted
in bad faith and shall be in addition to any relief provided
in the judgment.
(d) (1) (A) Except as otherwise specifically provided by statute, a
court shall award to a prevailing party other than the United
States fees and other expenses, in addition to any costs
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CSRS
awarded pursuant to subsection (a), incurred by that party
in any civil action (other than cases sounding in tort),
including proceedings for judicial review of agency action,
brought by or against the United States in any court having
jurisdiction of that action, unless the court finds that the
position of the United States was substantially justified or
that special circumstances make an award unjust.
(B) A party seeking an award of fees and other expenses
shall, within thirty days of final judgment in the action,
submit to the court an application for fees and other
expenses which shows that the party is a prevailing party
and is eligible to receive an award under this subsection,
and the amount sought, including an itemized statement
from any attorney or expert witness representing or
appearing in behalf of the party stating the actual time
expended and the rate at which fees and other expenses
were computed. The party shall also allege that the
position of the United States was not substantially justified.
Whether or not the position of the United States was
1]
substantially justified shall be determined on the basis of
the record (including the record with respect to the action or
failure to act by the agency upon which the civil action is
based) which is made in the civil action for which fees and
other expenses are sought.
(C) The court, in its discretion, may reduce the amount to
be awarded pursuant to this subsection, or deny an award,
to the extent that the prevailing party during the course of
the proceedings engaged in conduct which unduly and
unreasonably protracted the final resolution of the matter in
controversy.
(D) If, in a civil action brought by the United States or a
proceeding for judicial review of an adversary adjudication
described in section 504(a)(4) of title 5, the demand by the
United States is substantially in excess of the judgment
finally obtained by the United States and is unreasonable
when compared with such judgment under the facts and
circumstances of the case, the court shall award to the party
the fees and other expenses related to defending against the
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SSE Ee TE
(2)
excessive demand, unless the party has committed a willful
violation of law or otherwise acted in bad faith, or special
circumstances mai. an award unjust. Fees and expenses
awarded under this subparagraph shall be paid only as a
consequence of appropriations provided in advance.
For the purposes of this subsection -
(A) “fees and other expenses” includes the reasonable
expenses of expert witnesses, the reasonable cost of any
study, analysis, engineering report, test, or project which is
found by the court to be necessary for the preparation of the
party’s case, and reasonable attorney fees (The amount of
fees awarded under this subsection shall be based upon
prevailing market rates for the kind and quality of the
services furnished, except that (i) no expert witness shall be
compensated at a rate in excess of the highest rate of
compensation for expert witnesses paid by the United
States; and (ii) attorney fees shall not be awarded in excess
of $125 per hour unless the court determines that an
increase in the cost of living or a special factor, such as the
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limited availability of qualified attorneys for the
proceedings involved, justifies a higher fee.);
(B) “party” means (i) an individual whose net worth did not
exceed $2,000,000 at the time the civil action was filed, or
(ii) any owner of an unincorporated business, or any
partnership, corporation, association, unit of local
government, or organization, the net worth of which did not
exceed $7,000,000 at the time the civil action was filed, and
which had not more than 500 employees at the time the
civil action was filed; except that an organization described
in section 501(c)(3) of the Internal Revenue Code of 1954
(26 U.S.C. 501(c)(3)) exempt from taxation under section
501(a) of such Code, or a cooperative association as
defined in section 15(a) of the Agricultural Marketing Act
(12 U.S.C. 114(a)), may be a party regardless of the net
worth of such organization or cooperative association or for
purposes of subsection (d)(1)(D), a small entity as defined
in section 601 of title 5;
(C) United States” includes any agency and any official of
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the United States acting in his or her official capacity;
(D) position of the United States” means, in addition to the
position take by the United States in the civil action, the
action of failure to act by the agency upon which the civil
action is based; except that fees and expenses may not be
awarded to a party for any portion of the litigation in which
the party has unreasonably protracted the proceedings;
(E) “civil action brought by or against the United States”
includes an appeal by a party, other than the United States,
from a decision of a contracting officer rendered pursuant
to a disputes clause in a contract with the Government or
pursuant to the Contracts Disputes Act of 1978;
(F) “court” includes the United States Claims Court
[United States Court of Federal Claims] and the United
States Court of Veterans Appeals;
(G) “final judgment” means a judgment that is final and
not appealable, and includes an order of settlement;
(H) “prevailing party,” in the case of eminent domain
proceedings, means a party who obtains a final judgment
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(3)
(other than by settlement), exclusive of interest, the amount
of which is at ieast as close to the highest valuation of the
property involved that is attested to at trial on behalf of the
property owner as it is to the highest valuation of the
property involved that is attested to at trial on behalf of the
government; and
(1) “demand” means the express demand of the United
States which fed to the adversary adjudication, but shall not
include a recitation of the maximum statutory penalty (i) in
the complaint, or (11) elsewhere when accompanied by an
express demand for a lesser amount.
In awarding fees and other expenses under this subsection
to a prevailing part in any action for judicial review of an
adversary adjudication, as defined in subsection (b)(1)(C)
of 504 of title 5, United States Code, or an adversary
adjudication subject to the Contract Disputes Act of 1978,
the court shall include in that award fees and other expenses
to the same extent authorized in subsection (a) of such
section, unless the court finds that during such adversary
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(4)
adjudication the position of the United States was
substantially justified, or that special circumstances make
an award unjust.
Fees and other expenses awarded under this subsection to a
party shall be paid by any agency over which the party
prevails from any funds made available to the agency by
appropriation or otherwise.
(e) The provisions of this section shall not apply to any
costs, fees, and other expenses in connection with any
proceeding to which section 7430 of the Internal Revenue
Code of 1954 [26 USCS § 7430] applies (determined
without regard to saleonesbions (b) and (f) of such section (26
USCS § 8430(b), (1)]). Nothing in the preceding sentence
shall prevent the awarding under subsection (a) 2412 of
title 28, United States Code, of costs enumerated in section
1920 of such title (as in effect on October 1, 1981).
(f) If the United States appeals on an award of costs or fees
and other expenses made against the United States under
this section and the award is affirmed in whole or in part,
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interest shall be paid on the amount of the award as
affirmed. Such interest shall be computed at the rate
determined under section 19161(a) of this title, and shall
run from the date of the award through the day before the
date of the mandate of affirmance.
Act of July 22, 1937, Chapter 517:
SEC. 50. (a) All property which is being utilized to carry out the
purposes of title I or title II of this Act (other than property used
solely for administrative purposes) shall, notwithstanding that legal
title to such property remains in the Secretary or the Corporation,
be subject to taxation by the State, Territory, District, dependency,
and political subdivision concerned, in the same manner and to the
same extent as other similar property is taxed.
(b) All property to which subsection (a) of this section is
inapplicable which is held by the Secretary or the Corporation
pursuant to this Act shall be exempt from all taxation now or
hereafter imposed by the United States or any State, Territory,
District, dependency, or political subdivision, but nothing in this
subsection shall be construed as affecting the authority or duty of
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the Secretary under any other law to make payments in respect of
any such property in lieu of taxes.
Farmers Home Administration Act of August 14, 1946,
Chapter 964:
Sec. 50. (a) All property which is being utilized to Carry out the
purposes of title I of this Act (other than property used solely for
administrative purposes) shall, notwithstanding that legal title to
such property remains in the Secretary, be subject to taxation by
the State, Territory, district, dependency, and political subdivision
concerned, in the same manner and to the same extent as other
similar property is taxed.
(b) All property to which subsection (a) of this section Is inap-
plicable which is held by the Secretary pursuant to this Act shall be
exempt from all taxation now or hereafter imposed by the United
States or any State, Territory, district, dependency, or political
subdivision, but the Secretary shall make payments in respect of
any such property In lieu of taxes.
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STATE
R.C.W. 84.34.108:
(1)When land has once been classified under this chapter, a
notation of such classification shall be made each year upon the
assessment and tax rolls and such land shall be valued pursuant to
RCW 84.31.060 or 84.34.065 until removal of all or a portion of
such classification by the assessor upon occurrence of any of the
following:
(a)Receipt of notice from the owner to remove all or a portion of
such classification;
(b)Sale or transfer to an ownership, except a transfer that resulted
from a default in loan payments made to or secured by
a..governmental agency that intends to or is required by law or
regulation to resell the property for the same use as before, making
all or a portion of such land exempt from ad valorem taxation;
(c)Sale or transfer of all or a portion of such land to a new owner,
unless the new owner has signed a notice of classification
continuance, except transfer to an owner who is an heir or devisee
of a deceased owner shall not, by itself, result in removal of
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a
classification. The signed notice of continuance shall be attached to
the real estate excise tax affidavit provided for in *RCW
82.45.120, as now or hereafter amended. The notice of continuance
shall: be on a form prepared by the department of revenue. If the
notice of continuance is not signed by the new owner and attached
to the real estate excise tax affidavit, all additional taxes calculated
pursuant to subsection (3) of this section shall become due and
payable by the seller or transferor at time of sale. The county
auditor shall not accept an instrument of conveyance of classified
land for filing or recording unless the new owner has si gned the
notice of continuance or the additional tax has been paid. The
seller, transferor; or new owner may appeal the new assessed
valuation calculated under subsection ( 3) of this section to the
county board of equalization. Jurisdiction is hereby conferred on
the county board of equalization to hear these appeals;
(d) Determination by the assessor, after giving the owner written
notice and an opportunity to be heard, that all or a portion of such
land no longer meets the criteria for classification under this
chapter. The criteria for classification pursuant to this chapter
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continue to apply after classification has been granted.
The granting authority, upon request of an assessor, shall provide
reason able assistance to the assessor in rnaking a determination
whether such land continues to meet the qualifications of RCW
3134.020 (1) or (3). The assistance shall be provided within thirty
days of receipt of the request.
(2) Within thirty days after such removal of all or a portion of such
land from current use classification, the assessor shall notify the
owner in writing, setting forth the reasons for such removal. The
seller, transferor, or owner may appeal such removal to the county
board of equalization.
(3)Unless the removal is reversed on appeal, the assessor shall
revalue the affected land with reference to full market value on the
date of removal from classification. Both the assessed valuation
before and after the removal of classification shall be listed and
taxes shall be allocated according to that part of the year to which
each assessed valuation applies. Except as~ provided in subsection
(5) of this section, an additional tax, applicable interest, and
penalty shall be imposed which shall be due and payable to the
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county treasurer thirty days after the owner is notified of the
amount of the additional tax. As soon as possible, the assessor
shall compute the amount of such an additional tax, applicable
interest, and penalty and the treasurer shall mail notice to the
owner of the amount thereof and the date on which payment is due.
The amount of such additional tax, applicable interest, and penalty
shall be determined as follows:
(a)The amount of additional tax shall be equal to the difference
between the property tax paid as open space land, “farm and
agricultural land” or “timber land” and the amount of property tax
otherwise due and payable for the seven years last past had the land
not been so classified;
(b)The amount of applicable interest shall be equal to the interest
upon the amounts of such additional. tax paid at the same statutory
rate charged on delinquent property taxes from the dates on which
such additional tax could have been paid without penalty if the
land had been assessed at a value without regard to this chapter;
(c)The amount of the penalty shall be as provided in RCW
84.34.080. The penalty shall not be imposed if the removal
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satisfies the conditions of RCW 84.34.070. (4)Additional tax,
applicable interest, and penalty, shall become a lien on such land
which shall attach at the time such land is removed from
classification, under this chapter and shall have priority to and shall
be fully paid and satisfied before any recognizance, mortgage,
judgment, debt, obligation or responsibility to or with which such
land may become charged or liable. Such lien may be foreclosed
upon expiration of the same period after delinquency and in the
same manner provided by law for foreclosure of liens for
delinquent real property taxes as provided in RCW 84.64.050 now
or as hereafter amended. Any additional tax unpaid on its due date
shall thereupon become delinquent. From the date of delinquency
until paid, interest shall be charged at the same rate applied by law
to delinquent ad valorem property taxes.
(5)The additional tax, applicable interest, and penalty specified in
subsection (3) of this section shall not be imposed if the removal of
classification pursuant to subsection (1) of this section resulted
solely from:
(a)Transfer to a government entity in exchange for other land
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located within the state of Washington;
(b)(i) A taking through the exercise of the power of eminent
domain, or (ii) sale or transfer to an entity having the power of
eminent domain in anticipation of the exercise of such power, said
entity having manifested its intent in writing or by other official
action;
(c) A natural disaster such as a flood, windstorm, earthquake, or
other such calamity rather than by virtue of the act of the
landowner changing the use of such property;
(d) Official action by an agency of the state of Washington or by
the county or city within which the land is located which disallows
the present use of such land;
(e) Transfer of land to a church when such land would qualify for
exemption pursuant to RCW 84.36.020;
(g) Acquisition of property interests by state agencies or agencies
or organizations qualified under RCW 84.34.210 and 64.04.130 for
the purposes enumerated in those sections: PROVIDED, That at
such time as these property interests are not used for the purposes
enumerated in RCW 84.34.210 and 64.04.130 the additional tax
25
specified in subsection (3) of this section shall be imposed; or
(g) Removal of land classified as farm and agricultural land under
RCW 84.34.020(2)(d).
R.C.W. 84.64.050:
After the expiration of three years from the date of delinquency,
when any property remains on the tax rolls for which no certificate
of delinquency has been issued, the county treasurer shall proceed
to issue certificates of delinquency on said property to the county
treasurer, with the consent of the county legislative authority, may
elect to issue a certificate for fewer than all years’ taxes, interest,
and costs to a minimum of the taxes, interest, and costs for the
earliest year.
The county treasurer may include in the certificate of
delinquency any assessments which are due on the property and are
the responsibility of the county treasurer to collect. For purposes
of this chapter, “taxes, interest, and costs” include any assessments
which are so included by the county treasurer.
The change to a three-year grace period shall first be effective on
May 1, 1983. Prior to that date, the county treasurer shall send a
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notice to all taxpayers with taxes delinquent for two years or more,
notifying them of the change in the grace period. The treasurer
shall file said certificates when completed with the clerk of the
court, and the treasurer shall thereupon, with such legal assistance
as the county legislative authority shall provide in counties having
a population of thirty thousand or more, and with the assistance of
the county prosecuting attorney in counties having a population of
less than thirty thousand, proceed to foreclose in the name of the
county, the tax liens embraced in such certificates, and the same
proceedings shall be had as when held by an individual: Provided.
That notice and summons must e served or notice given in a
manner reasonably calculated to inform the owner or owners, and
any person having a recorded interest in or lien of record upon the
property, of the foreclosure action. Either (1) personal service
upon the owner or owners and any person having a recorded
interest in or lien of record upon the property, or (2) publication
once in a newspaper of general circulation, which is circulated in
the area of the property and mailing of notice by certified mail to
the owner or owners and any person having a recorded interest in
27
or lien of record upon the property, or, if a mailing address is
unavailable, personal service upon the occupant of the property, if
any, is sufficient. In addition to the legal description on the tax
rolls, the notice must include the local street address, if any. It
shall be the duty of the county treasurer to mail a copy of the
published summons, within fifteen days after the first publication
thereof, to the treasurer of each city or town within which any
property involved in a tax foreclosure is situated, but the
treasurer’s failure to do so shall not affect the jurisdiction of the
court nor the priority of any tax sought to be foreclosed. Said
certificates of delinquency issued to the county may be issued in
one general certificate in book form including all property, and the
proceedings to foreclose the liens against said property may be
brought in one action and all persons interested in any of the
property involved in said proceedings may be made codefendant’s
in said action, and if unknown may be therein named as unknown
owners, and the publication of such notice shall be sufficient
service thereof on all persons interested in the property described
therein, except as provided above. The person or persons whose
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name Or names appear on the treasurer’s rolls as the owner or
owners of said property shall be considered and treated as the
owner or owners of said property for the purpose of this section,
and if upon said treasurer’s rolls it appears that the owner or
owners of said property are unknown, then said property shall be
proceeded against, as belonging to an unknown owner or owners,
as the case may be, and all persons owning or claiming to own, or
having or claiming to have an interest therein, are hereby required
to take notice of said proceedings and of any and all steps
thereunder: Provided, That prior to the sale of the property, if such
property is shown on the tax rolls under unknown owners or as
having an assessed value of three thousand dollars or more, the
treasurer shall order or conduct a title search of the property to be
sold to determine the legal description of the property to be sold
and the record title holder, and if the record title holder or holders
differ from the person or persons whose name or names appear on
the treasurer’s rolls as the owner or owners, the record title holder
or holders shall be considered and treated as the owner or owners
of said property for the purpose of this section, and shall be entitled
29
to the notice provided for in this section.
The county treasurer shall not issue certificates of delinquency
upon property which is eligible for deferral of taxes under chapter
84.38 RCW but shall require the owner of the property to file a
declaration to defer taxes under chapter 84.38 RCW.
R.C.W. 84.68.020:
In all cases of the levy of taxes for public revenue which are
deemed unlawful or excessive by the person, firm or corporation
whose property is taxed, or from whom such tax is demanded or
enforced, such person, firm, or corporation may pay such tax or
any part thereof deemed unlawful, under written protest setting
forth all of the grounds upon which such tax is claimed to be
unlawful or excessive; and thereupon the person, firm or
corporation so paying, or their legal representatives or assigns, may
bring an action in the superior court or in any federal court of
competent jurisdiction against the state, county or municipality by
whose officers the same was collected, to recover such tax, or any
portion thereof, so paid under protest: Provided That R.C.W.
84.68.010 through 84.68.070 shall not be deemed to enlarge the
30
grounds upon which taxes may now be recovered: And provided
further, That no claim need be presented to the state or county or
municipality, or any of their respective officers, for the return of
such protested tax as a condition precedent to the institution of
such action.
R.C.W. 84.68.060:
No action instituted pursuant to this chapter or otherwise to recover
any tax levied or assessed shall be commenced after the 30th day
of the next succeeding June following the year in which said tax
became payable.
R.C.W. 84.68.070:
Except as permitted by RCW 84.68.010 through RCW 84.68.070
and chapter 84.69 RCW, no action shall ever be brought or defense
interposed attacking the validity of any tax, or any portion of any
tax: Provided, however, That this section shall not be construed as
depriving the defendants in any tax foreclosure proceeding of any
valid defense allowed by law to the tax sought to be foreclosed
therein except defenses based upon alleged excessive valuations,
levies or taxes.
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REGULATIONS
FEDERAL
7 C.F.R. §1925.2:
For the purpose of this instruction, the word “tax” means all taxes,
assessments, levies, irrigation and water charges or other similar
obligations which are or will, on nonpayment, become a lien upon
the real estate prior to the mortgage securing the Farmers Home
Administration or its successor agency under Public Law 103-354
(FmHA or its successor agency under Public Law 103-354) loan.
7 C.F.R. §1925.4(b):
Prior (usually about 90 days) to the time it is legally possible for
action to be take that will cause the borrower to lose title or nght of
possession of the security property or the use of essential water, the
County Supervisor will contact the borrower and definitely
‘letermine if he will pay the delinquent tax immediately. If the
borrower is unable or unwilling to pay the delinquent tax with his
own funds after every appropriate effort has been made to have
him do so, the County Supervisor will refer to FmHA Instruction
2024—-A and utilize the Type 60 Purchase Order system to pay the
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amount of the delinquent taxes plus the amount of any accrued
penalty to bring taxes current.
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.