Director of Revenue of Missouri v. CoBank ACB

PETITIONER: Director of Revenue of Missouri
RESPONDENT: CoBank ACB
LOCATION: Florida Supreme Court

DOCKET NO.: 99-1792
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: Supreme Court of Missouri

CITATION: 531 US 316 (2001)
ARGUED: Nov 28, 2000
DECIDED: Feb 20, 2001

ADVOCATES:
David C. Frederick - Department of Justice, on behalf of the United States, as amicus curiae, supporting the petitioner
James R. Layton - Jefferson City, Missouri, argued the cause for the petitioner
Richard A. Hanson - Argued the cause for the respondent

Facts of the case

The Farm Credit Act of 1933 created various lending institutions, including banks for cooperatives, which are designated as federally chartered instrumentalities of the United States. CoBank ACB is the successor to all rights and obligations of the National Bank for Cooperatives. In 1996, CoBank filed amended returns on behalf of that bank, requesting an exemption from all Missouri corporate income taxes and refunds on the taxes it paid for 1991 through 1994. CoBank asserted that the Supremacy Clause accords federal instrumentalities immunity from state taxation unless Congress has expressly waived this immunity, which the Act did not expressly do. The state of Missouri denied the request, but the State Supreme Court reversed, stating that because the Act's current version is silent as to the banks' tax immunity, Congress cannot be said to have expressly consented to state income taxation and, thus, the banks are exempt.

Question

Is the National Bank for Cooperatives, which Congress has designated as a federally chartered instrumentality of the United States, exempt from state income taxation?

Media for Director of Revenue of Missouri v. CoBank ACB

Audio Transcription for Oral Argument - November 28, 2000 in Director of Revenue of Missouri v. CoBank ACB

Audio Transcription for Opinion Announcement - February 20, 2001 in Director of Revenue of Missouri v. CoBank ACB

William H. Rehnquist:

The opinion of the Court in No. 99-1792, Director of Revenue of Missouri versus CoBank ACB will be announced by Justice Thomas.

This case comes to us on a writ of certiorari to the Supreme Court of Missouri.

CoBank is the successor to a bank for cooperatives, which is designed as a federally charted instrumentality within the Farm Credit System.

In 1996, CoBank amended returns on behalf of this bank requesting an exemption from all Missouri corporate income taxes and refunds on the taxes paid in 1991 through 1994.

CoBank asserted that the Supremacy Clause accords federal instrumentalities immunity from state taxation, unless Congress has expressly waived this immunity, and that because the Farm Credit Act's current version does not expressly do so, banks for cooperatives are exempt from Missouri's corporate income tax.

The State denied the exemptions, but the Missouri Supreme Court reversed for the reasons asserted by CoBank.

In an opinion filed with the Clerk today, we reverse.

The Farm Credit Act of 1933 subjected banks for cooperatives to state taxation, except when the United States held stock in the banks.

As soon as governmental investment in the banks was repaid as it was by 1968, the banks have to pay state income taxes because the exemption no longer applied.

Congress did not change that rule, when it amended the Act in 1971, nor did the 1985 amendments expressly changed that rule, although Congress deleted the two sentences within the Act that exempted such banks from state taxation when the government held stock in them.

The logical interpretation of this deletion and one that accords with the Act’s more than 50-year history is that Congress merely deleted language that had become superfluous once the United States no longer owned and no longer could own stock in the banks for cooperatives.

It would be surprising if Congress had eliminated the state’s ability to collect revenue from such banks sub silentio.

The Act’s structure confirms that banks for cooperatives are subject to state taxation, because it contains the taxation provision that specifically delineates the tax immunity for each lending institution within the Farm Credit System.

Had Congress intended to confer upon banks for cooperatives, the more comprehensive exemption it provided for other types of institutions, it would have done so expressly.

The opinion of the Court is unanimous.