Offutt Housing Company v. County of Sarpy

PETITIONER:Offutt Housing Company
RESPONDENT:County of Sarpy

DECIDED BY: Warren Court (1955-1956)

ARGUED: Apr 26, 1956 / Apr 30, 1956
DECIDED: May 28, 1956

Facts of the case


  • Oral Argument – April 30, 1956 (Part 1)
  • Oral Argument – April 30, 1956 (Part 2)
  • Audio Transcription for Oral Argument – April 30, 1956 (Part 1) in Offutt Housing Company v. County of Sarpy
    Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

    Audio Transcription for Oral Argument – April 26, 1956 in Offutt Housing Company v. County of Sarpy

    Earl Warren:

    Number 404, Offutt Housing Company versus County of Sarpy.

    Mr. Stern.

    Robert L. Stern:

    May it please the Court.

    It is a pleasure to be back here again and to find the Solicitor General and I still on the same side.

    This is a suit to enjoin the collection of a property tax by the County of Sarpy in Nebraska against imposed upon a housing project built for military tenants and a military reservation subject to the exclusive jurisdiction of United States.

    The taxpayer or petitioner here is a private company which has leased the land and buildings from the United States for a period of 75 years.

    It is our contention in this case that this tax is invalid because it is imposed upon territory which is subject to the exclusive jurisdiction of the United States and that Congress has not waived the immunity from state taxation of that territory for this project.

    And secondly, if the Court should disagree as to that, the only statute which conceivably permits taxation with respect to this project is the one authorizing taxation of the lessee’s interest and this tax here was not imposed upon any lessee’s interest but on the property itself which belongs to the United States.

    The — the project was directed under the Wherry Military Housing Act of 1949.

    William O. Douglas:

    What’s does the Court mean, it’s found at page 199, when it says, “Only plaintiff lessee’s interest in the housing project is involved in this debate.”

    Robert L. Stern:

    I’m not sure what they mean, Your Honor, but I’m sure they’re wrong.

    Because the uncontradicted evidence is that the — they assessed their tax to that — I can tell you what they mean, I — I shouldn’t have said that.

    The — that their opinion as a whole means that they interpret the whole factual language as putting the ownership of these buildings in the petitioner and therefore, they say it is proper to tax the petitioners, lessee — the lessee, the petitioner as owner of — of the — of the — of the buildings.

    And they have to come to that result, Your Honor, in order to sustain the tax because the only Nebraska statute, they sight which would sustain this tax just — was set forth at page 37 of our brief says, a lot of taxation of this such property to the owner and therefore — and that’s the premise of their decision.

    I’ll deal with that at some length.

    Is the assessment there ready?

    Robert L. Stern:

    Oh, yes, the assessment form is the — except that it’s copied on page 144 (a), (b) and (c) of the record, the assessment form.

    What was — what was that?

    Robert L. Stern:

    It says, “Improvements on leased land,” down at the bottom.

    This is the form the assessor filled up but the — our client didn’t fill out any form because we didn’t think we were liable.


    But this is what the assessor (Inaudible)

    Robert L. Stern:


    What — what was it?

    Robert L. Stern:

    It’s called a schedule for personal property taxes in which he puts down his estimate of the value of these things.

    Oh, I see household appliances and so forth.

    Robert L. Stern:

    Yes, and then down — further down improvements on leased land.

    Oh, yes.

    Robert L. Stern:

    And then — the whole thing is under the business classified, apartment house as you can see.

    And apart from — if there’s any doubt as to what that means, the assessor himself testified under examination that he was taxing the value of the building.

    Robert L. Stern:

    He’s talking just about the buildings which as I mentioned —

    Stanley Reed:

    Assessed the improvements of the leased lands.

    Robert L. Stern:


    But he said orally too.

    In the testimony, he was taxing the value of the building.

    So, what — what he was doing is — what you say taxing the value of the buildings do nor rely on.

    Robert L. Stern:

    There’s no question about the land, the value of the buildings but not a lessee’s — but not merely the lessee’s interest in the building.

    Although, if they don’t know the — if the petitioner, we don’t own the buildings, but the Government owns the buildings.

    They’re taxing all the value of the buildings and they’re taxing the Government’s interest and not the lessee’s interest.

    You got it on a lease?

    Robert L. Stern:

    Yes, Your Honor.

    I will explain — I will explain all that.

    This statute resulted from the fact that housing conditions that are military reservations in 1949 and in some extent still were deplorable and that house — and that military personnel who wish to have their families with them were forced to live under very bad conditions and pay exorbitant rents for housing.

    As they — in order to meet this, to meet the laws of personnel which resulted to the — to the military force which resulted from this and there was testimony before the Congress that this was the — the greatest reason for losing military personnel in adequate housing.

    This — the FHA authority was expanded under the statute to permit it to ensure housing to be built on or adjacent to these reservations.

    When the Secretary of the Defense of the Air Force or whatever it might be certified that there was a need.

    The statute also authorized the leasing of Government land for the construction of this project and this was done for two reasons.

    The first was that land owned by the United States often was the only land close enough and suitable enough for use to fill this demand.

    And the other reason according to the Committee Reports was that that would enable the land to be obtained at nominal cost so that the rents to the military subtenants would be lower.

    The object of course was to provide them with housing at a low cost that was feasible, when this case arises on the Offutt Airbase, the headquarters of the strategic Air Command near Omaha, Nebraska and area subject to the exclusive jurisdiction of the United States.

    The project was — the land was leased to the petitioner for 75 years.

    A nominal rent was charged in order to keep the cost down, a rent with $100 a year.

    The lease provided that the buildings belong to the United States as I’ve said and I have more to say about that later.

    The buildings were completed and occupied by 1952.

    Now, there are many Government — governmental controls left over this project.

    This wasn’t just a lease of land to somebody and then he’s left alone to do what he wanted.

    The Government assumes demand financial risk by assuming the mortgage.

    It limited the amount which could be invested for apartment unit and in the interest rate.

    More importantly, it determines and controls the maximum rentals.

    And the record shows that the rentals were established on the assumption that no property tax would be imposed and if they were the rentals would be raised upward to the military personnel, so they would have to pay for that.

    Robert L. Stern:

    The — not only does the Government determine what the rent shall be or the maximum rent, it determine who may live in the project.

    They’ve got to — we’ve got to let live in the project whatever military employees that commander tells us.

    The lease controls the length of subleases so as to make sure that military tenants can get out after a year on a month-to-month basis or if they’re transferred or if their service is terminated.

    The lease can’t be assigned.

    Government controls standard and maintenance to some extent.

    The property can’t be remodeled without the — or changed any substantial way without Government approval.

    And the commander’s rules with respect to safety and so forth, the commander of the airbase, they must be observed by the petitioner or lessee here.

    Now, the record also shows that the Federal Government or petitioner provides the main governmental services to the land upon which this project is built.

    The Air Force itself provides fire and police protection, sewage, water service are connected with the Air Force main.

    Roads on the project are built by the petitioner and the access roads are built by the Air Force.

    A number of these services, the petitioner pay the Air Force for or the tenants directly or indirectly pay for it through the rent or directly to utility.

    This case doesn’t involve school taxes.

    The area is not in a school district and the reason is that the Federal Government under another statute finances the schooling for the people who have on this project.

    So, the main governmental services which cost money are not provided by Sarpy County.

    And this refutes respondent’s argument, if I may anticipate a little, that it’s unfair not to have local taxes paid by this project.

    On the contrary, the equities are all the other way.

    Since the county doesn’t provide these services and the Federal Government or petitioner do, it would unfair to charge them, to make them pay taxes to what they don’t get.

    And particularly, since the tenants have to pay for a lot of these services as I’ve said once directly to the Federal Government or to petitioner.

    Now, as I’ve also said no return was filed by the petitioner here.

    The assessor filled out a return in which he placed, said what he thought the value of the buildings was, he didn’t say anything about the lessee’s interest and the case was brought in the District Court.

    The District Court for Sarpy County and what I think and not merely because it went our way, is an excellent, of oral opinion which is found in the appendix to our petition for certiorari.

    He held that the tax was imposed on the building.

    There was no attempt to attack the lessee’s interest that the buildings were the property of the United States that the lessee’s in the statute couldn’t possibly be applicable and he expressed in his opinion some doubt as to whether it would be anyhow and that therefore, the tax was void.

    Nebraska Supreme Court reversed primarily on the ground, as I read its opinion, that the interest of the United States in this property was a purely paper interest.

    The United States didn’t really own the property and that therefore, the tax could be justified as a tax in the lessee’s interest.

    In the first question, I want to touch because it sort of underlie the theory of the decision below is, the question as to whether the United States or the petitioner owns the property.

    Because that was the premise upon which the decision below rested.

    Now, the usual rule as this Court doubtless knows is that the lessor owns buildings constructed on leased land though that again is subject to the intention of the parties.

    They can alter that by contract if they want to.

    But here the parties did take care of it by contract but instead of altering the usual rule they made perfectly clear that the buildings were to belong to the lessor, the Government as they were built.

    Robert L. Stern:

    Paragraph 11 of the lease which is set forth at pages 7 and 8 of our brief provides — and I begin on page 8, second sentence that the buildings and improvements erected by the lessee shall be and become as — as completed real estate and part of the leased lands and public buildings of the United States.

    And the prior sentence said that upon the expiration of the lease, the building shall remain.

    The property of United States and they couldn’t remain the property of United States if they’ve never been the property of the United States.


    Robert L. Stern:

    Primarily, the Court said the lease is for 75 years and there were some testimony that it wouldn’t be economical to maintain the buildings for more than 35 years and therefore, they said it was a fictitious lease adopted just for the purpose of avoiding taxes.

    The testimony at greater length of the — the — there was other testimony, however that the buildings could be maintained for more than 35 years under proper conditions and maintenance.

    I think if you put all that together, you come out with the conclusion, it might not be economical for a businessman to do so but the building could last longer than 75 years and we all know that Government buildings often do last longer than they’re suppose to, from our experience in the District of Columbia.

    Now, in the court below respondent admitted that under the term, as I read their briefs, under the terms of the lease, the Government was the owner of the building, they purported to be the owner of the building, but they said that this was a sham and a fraud for the reason that I’ve indicated.

    Well, if it is a sham or a fraud, it isn’t — it isn’t the fraud or our client because these was all done in a Government’s form lease but we think it obvious that there wasn’t any sham or fraud to it even if the purpose of shaping the contract in this way was to evade or not to evade but to avoid local taxes.

    That, we think, is immaterial under the decision of this Court in the Kern-Limerick case in 347 U.S. often title is determined by contracts, by the form of contracts.

    And if property rights are to be determined by contract, the contract is controlling and nonetheless so because Government lawyers, like other lawyers perhaps contracts with an awareness of these problems and with a purpose to do what they think will be in the best interest of their client.

    But we think the — apart from the mere language of the contract in order to show that that language should be disregarded or the other side, this county here must sustain the burden of proving that the Government’s interest is less than that of an ordinary lessor who conceivably has an interest in the — in property and its interest has never regarded a sham or fraudulent.

    Here on the contrary, it’s easy to see, I think, from the facts which I’ve outlined that the Government’s interest in this property is greater than that of the ordinary lessor — lessor because the ordinary lessee isn’t restricted the way that lessee of this project is by the lessor.

    The most important that the bundles of — bundle of rights normally vested in a lessee are not unrestricted here.

    They’re controlled by the Government.

    The ordinary lessee can do what he wants with the property that he leases and can at least rent it or for what he chooses in order to take advantage of economic forces and make as much money as he wants to.

    That’s —

    What — what do they lease for the Government?

    Robert L. Stern:

    The Government leased to petitioner.

    The Government leases 63 acres of land.

    And nothing else.

    Robert L. Stern:

    And — and — on the land, petitioner built buildings.

    As its own expense.

    Robert L. Stern:

    At its own expense, not well.

    And if —

    Robert L. Stern:

    They borrowed the money from a mortgagee and the mortgage is insured by the Government.


    But that its own expense.

    Robert L. Stern:

    Yes, Your Honor.

    Then, however, the —

    And it agreed that the end of the time —

    Robert L. Stern:


    No, the lease provides that as the buildings were completed they became the property of the United States in that provision I’ve read to you, I’ve showed you —

    Where — where is that?

    Robert L. Stern:

    That’s — well that’s on pages 7 and 8 of our brief or page —

    On page 33, I’m looking at this record.

    Robert L. Stern:

    Oh, it’s in 138 of the record.

    It’s the same — it’s the clause 11 of the lease.

    (Voice Overlap) what you’ve talked before.

    Robert L. Stern:

    Yes, clause 11 of the lease.

    So that — since the buildings became the property of the United States as they became completed, they became subject to the lease just to the land.

    They became a part of the real estate, as buildings normally do, buildings and apartment house of this sort.

    So, they were leased too, the buildings —

    Hugo L. Black:

    How much is all of it worth?

    Robert L. Stern:

    The buildings cost about $5 million.

    Hugo L. Black:

    And the land (Inaudible)

    Robert L. Stern:

    The land was land on an airbase.

    Hugo L. Black:

    Does it show?

    Robert L. Stern:

    It doesn’t show in the record what it was — what it was worth.

    Hugo L. Black:

    How much rent the Government gets a year?

    Robert L. Stern:

    The Government doesn’t received the rent, Your Honor.

    The petitioner receives the rent but the Government fixes — Government fixes the rent.

    Hugo L. Black:

    Well, I mean that, what does the Government — you said the Government lease as to him.

    What — what does it get to its least?

    Robert L. Stern:

    The Government gets a hundred dollars a year.

    Hugo L. Black:

    For 75 years?

    Robert L. Stern:

    Yes, Your Honor.

    And the reason for that was —

    Hugo L. Black:

    $100 a year for — but there’s $5 million of property.

    Robert L. Stern:

    $100 a year for the land and for the and for the —

    Hugo L. Black:

    The property?

    Robert L. Stern:

    Yes, Your Honor.

    But — that shows that there’s governmental interest in this thing.

    The Government wasn’t trying to make money out of this.

    The Government was trying to have a project built to serve the governmental function in providing housing for the military personnel as cheaply as possible and if the Government in charge, since there’s rent is sort of, not quite but it’s sort of cost-plus basis that is they’ve got to fix rent which —

    Hugo L. Black:

    Cost-plus $100 a year?

    Robert L. Stern:


    No, no.

    The Government allows the mortgage — allows the — the petitioner to charge rents which it hopes unfortunately for our client hasn’t worked that way but it hopes to allow at a reasonable profit over and above the cost of the project including the amortization.

    In order to keep the rent down to the housing, to the tenants, they don’t charge more than the nominal rent because if they charge much more than a $100 a year it would be passed on to the tenants.

    This land is — this land is there for military purposes.

    It’s being used for military purposes to provide housing in a way which would avoid Congress having to put up a few billion dollars all at once.

    Earl Warren:

    Does the Government put a limit on the rents to be charged?

    Robert L. Stern:

    Oh, yes.

    That’s — that — the Government right from the beginning established —

    Earl Warren:

    — the Government.

    I say suppose there’s some consideration —

    Robert L. Stern:

    Oh, yes.

    That’s why the Government — that is part of the whole picture.

    The Government fixes the rents for the tenants.

    It —

    Felix Frankfurter:

    The Government helps to finance the buildings.

    Robert L. Stern:

    Yes, it’s — they built — they wouldn’t have been built if it hadn’t been for Government financing.

    There’s no private people will put up a housing on these military reservations without Government leased insurance because they don’t know for sure that the project, that the — that the Government —

    Felix Frankfurter:

    So the return for the — for the lessee is not on the basis of $5 million.

    Robert L. Stern:

    Oh, no.

    The — the proposed return for the lessee as shown by the project analysis is about $30,000 a year, maybe $50,000.

    Felix Frankfurter:


    But did you found the basis of an (Inaudible)

    Robert L. Stern:


    Robert L. Stern:

    It’s not 6% of $5 million.

    That would be a very large amount.

    Earl Warren:

    It’s — it’s just a management case.

    Robert L. Stern:

    It — that’s just about what I was going to say, Your Honor.

    In substance, the petitioner here is any more than a manager, even though there is — technically there is leeway, the Government fixes the rent.

    They have obligations to do things and in substance the same as a management fee.

    Tom C. Clark:

    What was the amount of the assessment?

    Earl Warren:

    The amount of the assessment the first year was about $750,000, the second year, when it was all finished about two and half million dollars.

    Felix Frankfurter:

    What was the tax?

    Robert L. Stern:

    The tax, the first year with $10,000, the second year was $15,000 and there hasn’t been any since because under the injunction granted below.

    There hasn’t — there haven’t been allowed to grant one under temporary injunction.

    What I was about to say is that the — most important rights of a lessee here are controlled by the Government.

    He can’t rent to whom he wants.

    He can’t charge what he wants.

    He can’t use the property for what he wants and he can’t even make the length of a sublease of what he wants without Government approval.

    And that to my mind shows that the Government has greater control over this project than an ordinary lessor has over property on his project operated by an ordinary lessee.

    Felix Frankfurter:


    Robert L. Stern:


    Felix Frankfurter:

    If the tax would be paid by a lessee would have come out of what you called (Inaudible)

    Robert L. Stern:


    Only for the first two years before an arrangement was made as the — the record shows it was contemplated.

    From then on, it would be passed on to the — to the tenants.

    And as a matter of fact, on this project after this record was closed, I think the money is being put in (Voice Overlap) —

    Felix Frankfurter:

    — probably with the consent of the Government?

    Robert L. Stern:

    Oh, yes, because — and the records shows in the project —

    Felix Frankfurter:

    What pass on to the Government, is a matter of the management —

    Robert L. Stern:

    That’s —

    Felix Frankfurter:


    Robert L. Stern:

    That’s right.

    That’s why the Government is really interested in this case in a long run, in this whole series of cases more than the property on this, because —

    The rent.

    Robert L. Stern:


    That is just as liable to increase of the rent.

    Robert L. Stern:

    To the — to the Air Force personnel.

    That’s what the Government wants to avoid but the whole purpose of the statute is to provide housing for these people that is low cost as possible.

    When the first assessment was made the entire construction 611 units have been completed?

    Robert L. Stern:

    Not, 78% completed, Your Honor, according to the record and the rest was completed within a couple of months.

    Well, I — I looked at it on the count of 138 says that the building improvements only become a part of the lease (Inaudible)

    Robert L. Stern:

    Well, for the — there haven’t been any attempt.

    They make something —

    On a completion —

    Robert L. Stern:

    To each building — yes, but that means each building has completed of 78% of the buildings were fully completed according to the record.

    That’s set forth in our reply brief and I wont bother with the record references but 78% of the building were occupied and completed by that time and for future years, of course, a 100% of them were in connection — may I refer, Your Honor, to record 164 the very last couple of lines in the project analysis which says, “If such taxes are assessed, rents will have to be adjusted accordingly.”

    Felix Frankfurter:

    Is there any suggestion that the Government have another interest or another aspect of Government interest that if they have to pay more rent, they have to increase the salary of the officers of the (Inaudible) —

    Robert L. Stern:

    Well, I —

    Felix Frankfurter:

    — that sort?

    Robert L. Stern:

    I don’t suppose indirectly but not directly.

    It wouldn’t work that way directly.

    I won’t say it would be terrible, Your Honor, I supposed the — the salaries of people in the Air Force probably ought to be increase anyhow to keep people in the Air Force.

    But the — but the record indicates and what we all know that rents are — are among other things which call into the fact that rents are high and pay is low are among the various factors which cause people to leave the military services and the more you raise the rents or the more you don’t raise the salary, the effect is going to drive people out and this is — this is one of the factors.

    I can’t — I can’t pin it down to say that salaries would go up to $2 if the tax were $2 or more than that.

    In short, my argument on this question of who owns the building is, the lease says the Government owns them.

    On the base of the record as a whole the Government has more control than the ordinary lessor, the lessee has less.

    Therefore, you can’t say that the lease is fictitious.

    The buildings performed a governmental function in providing military housing and we think it clear that the buildings are Government property and the tax consequences which flow from that must flow from that fact.

    Now, I am going to move to the — to the argument that this property cannot be taxed because it’s on land over which the Government has exclusive jurisdiction whether or not it belongs to the Government, whether or not the buildings or the appliances belong to the Government or belong to private — private individuals.

    Earl Warren:

    Mr. Stern, before you get to that, are you going to discuss the question as to whether they can tax the lessee’s interest in the land?

    Robert L. Stern:

    Well —

    Earl Warren:

    If he has some interest on —

    Robert L. Stern:

    Yes, Your Honor.

    Robert L. Stern:

    Well, that’s part of it, if — if this is — if this area subject to the exclusive jurisdiction of the United States and if the United States hasn’t permitted them to tax to what lessee’s interest, then they can’t because you can’t — State cannot tax any property unless his interest is a kind of property.

    A land on which the United States has exclusive jurisdiction without the consent of Congress.

    If the Court finds the Congess has given its consent under the lessee’s interest statue, to which I will come, then we say this tax isn’t on the lessee’s interest because it’s on the buildings and that’s not the lessees interest.

    That’s the property of the United States.

    Those are the two main problems in my argument.

    (Inaudible) furniture and fixtures.

    Robert L. Stern:

    The furniture and fixtures can’t be tax, Your Honor, for — for either one or two reasons.

    One, because it’s — if it’s on an exclusive federal enclave, it can’t be taxed unless Congress has consented.

    Two, Congress has to consent it even under that lessee’s interest statute because those — those appliances haven’t been leased from anybody.

    They’re just the same as any other private property on a reservation and the only consent which anybody refers to is a consent to tax a lessee’s interest and these — those appliances haven’t been — not being leased, not coming under any lease can’t be called a lessee’s interest.

    But the appliance is only a very small part of this case and I think I’ve summarized my argument on that and probably won’t come back to it.

    Now, the first — the first argument, Your Honor, which has to — which covers the point of lessee’s interest as well as anything else, is that this cannot — this tax cannot be sustained because Congress has not consented to taxing — to this tax on lands subject to the exclusive jurisdiction of the United States.

    It’s established that States and counties cannot tax even private property on areas over which the United States has exclusive jurisdiction.

    In the Surplus Trading case in 281 U.S. there were blankets own by a private company on a military reservation, exclusive, and this Court held that the State couldn’t impose a property tax on them.

    That case has been — and others before and since have sustained that principle and there hasn’t been any deviation from it.

    The — some of those case involved lease property, Arlington Hotel against Fant, there was a lease for 50 years of — of land on a reservation for 50 years.

    It was held the State had no authority over it.

    For the fact that the lease doesn’t make any difference.

    Now, Congress, of course, may waive the federal immunity from taxation and it is done so in a number statutes which used expressed language saying that on federal areas, certain kind of taxes or other laws may be applicable.

    Most important here is the Buck Act of 1940 which permits the States to impose sales, used, income and gasoline taxes on these areas in expressed language.

    But it doesn’t allow him to impose property taxes on this areas, just the main kind of taxes and it does so very expressly which shows that when Congress want to this, it knows how to do it expressly.

    Now, there is, of course, special reason why Congress should have to be quite expressed in waiving an immunity of this sort and that is because people and States and the Federal Government shouldn’t have to guess as to where the jurisdiction lies over — over particular territory.

    That policy was embodied in an Act 1940, involved in a case before this court, Adams against United States in which it was pointed out the need for definiteness in accepting jurisdiction by the Federal Government over these areas and is just as much need for — need for definiteness in — in losing or waiving jurisdiction as there is in accepting it.

    Well, now this —

    Felix Frankfurter:

    That could easily avoided by (Inaudible) Congress —

    Robert L. Stern:

    That’s my point, Your Honor.

    The Congress — if Congress means to waive its jurisdiction, it does so explicitly.

    And here, as I am going to show you in most of the rest of argument it hasn’t done so explicitly and we do extend so at all.

    Felix Frankfurter:

    The trouble is, there is still left with escapable from (Inaudible)

    Robert L. Stern:

    There — there are cases which hold that —

    Felix Frankfurter:

    One of — one of many, many, many cases trouble the Court before Congress (Inaudible)

    Robert L. Stern:

    Well, they had — but — but there — well I don’t think there’s been any draftsmanship was ever was intended to reach this, Your Honor, as I will show you in the next few minutes.

    What — what about the — of the $5 million mortgage (Inaudible)

    Robert L. Stern:

    That’s the building.


    The $5 million mortgage to the (Inaudible)

    Robert L. Stern:


    Is that involved with this?

    Robert L. Stern:

    Well, it’s in the record but I don’t think there’s anything to do with it.

    The — the property was mortgage and the Government insured the mortgage.

    I don’t think its relevant one way or the other.

    I thought that was just for personal property (Inaudible)

    Robert L. Stern:


    That’s the leasehold interest.

    That’s everything the lessee has including its interest in the building, whatever that is, not the title of the building.

    Now, let’s turn to the statutes, Your Honor, and I submit — and the question here we’re considering is whether Congress has waived the immunity from exemption of property on a federal — exclusive federal area.

    And I submit that no one reading the Wherry Act, would ever suspect that it contained any such waiver.

    There isn’t any such expressed language in at all.

    The only legislative history which even refers to the question of taxability is a small colloquy in the committee hearings, set forth on page 24 of our brief, in which a Congressman said, if they were bill off the reservation, the housings would be taxed.

    Nobody contradicted him.

    The administrator was there and I think that shows that people, if — if they thought that was too narrow, they would have said, “Well, even if it’s on the reservation, it could be taxable,” but nobody said that.

    So, the only specific mention to — of it in the whole history of this bill is the statement — if it’s off the reservation, it can be taxed.

    So, let’s turn, however, to sections of the statute which maybe regarded as pertinent but first, I want to refer to which is the only Section which has anything to do with taxation at all quoted in page 25 of our brief, Your Honor.

    Section 80 — no, 25 and 24, Section 807 and that provides that nothing in this title shall be construed to exempt any real property acquired and held by the Commissioner,” that’s the FHA from local taxation.

    Now, let’s look at that again, “Nothing in this title shall be construed to exempt.”

    This mean, this title shan’t exempt and the reason for that provision, that was put in to standard provision in FH — various titles of the FHA, so as to mean that if the FHA takes over property under fault.

    That property won’t go off to tax growth.

    So, the purpose of that was to — was to make it clear that the property which was otherwise taxable wouldn’t become nontaxable because the FHA acquired it.

    The — the court below conceded that this section isn’t applicable here because the FHA haven’t acquired this property, the Commission hasn’t acquired it but even more significantly, this section is significant for what it says and for what it doesn’t say.

    It only expresses an intention, as I’ve said that property which is taxable otherwise shall stay taxable on its face.

    Robert L. Stern:

    It doesn’t mean or provide that property which never was taxable because on exclusive federal enclave will become taxable under this statute and that — if I may — that if I may say so, I think, there’s a theme underlying my — this portion of my argument.

    The intention was, as I see it that if the land next door, just like this land is taxable as it would be or off to reservation then the project should be taxable.

    If the land next door, 50 feet away isn’t taxable.

    If the building next door wouldn’t be taxable because it’s exempt, then this project shouldn’t be taxable and I think that make sense and I think that’s what Congress really had in mind, although there isn’t very much to talk about it as — as I have indicated.

    What would the Commission have to do with this?

    He’d made to him?

    Robert L. Stern:

    The Commissioner, no — the Commissioner insures the mortgage then he exercise lots of controls over it because he takes the preferred stock.

    I know but speaking of — of any real property acquired and held by the Federal Housing Commission.

    Robert L. Stern:

    That’s in Section 807.

    Stanley Reed:


    Robert L. Stern:

    Oh, well, that’s the standard provision which — which means that if the — if the property is defaulted under FHA generally —

    Stanley Reed:

    That’s nothing to do —

    Robert L. Stern:


    Stanley Reed:

    — particularly.

    Robert L. Stern:

    Oh, no.

    He forecloses it then he gets the title.

    They didn’t want that to go off to tax rules but if it never was on the tax rules because it’s on the exclusive reservation.

    This couldn’t be applicable and that’s — that’s the only specific provision the statute relating to taxes.

    However, the court below relied on Section — Section 805 which is set forth at page 63 of our brief in the appendix and let’s look at that section.

    The first part of it at least is pretty long that’s the most relevant part.

    Whenever the secretary determines that it is desirable to lease real property within the meaning of the Act of 1947, and I’ll skip a little, the Secretary is authorized to lease such property under authority of said Act.

    That’s the Act of 1947, upon such terms and conditions and so forth.

    Now, there — there again nobody reading that which anything in it about taxation or — or any intention to waive — to waive the — the federal immunity but let’s go back then to the 1947 Act.

    Under the 1947 Act which is set forth in the next — beginning on page 65, a little further on, defines Section 1 of that statute is the section which authorizes the secretary to lease real and personal property under certain conditions which are the same conditions referred to in the 1949 Act.

    Now, that Section 1 is authorizing section of the 1947 Act.

    There’s no question that section is incorporated by reference, if you want to call that, in the 1949 Act.

    But our position is that that section which is the authorizing section is the only part of the 1947 Act which is taken over to the 1949 Act.

    That’s all Congress was thinking about when they said, under the authority of said Act.

    Now, if you look the next four sections of the 1947 Act, 2, 3, 4, and 5 in the next couple of pages, near the back of our appendix, don’t have anything to do with these subjects who obviously, they could have been incorporated.

    So, the whole case from the other sides point of view comes down to whether the first section of sentence of — first sentence of Section 6 which is at the bottom of page 68, the last page of our appendix was incorporated.

    Robert L. Stern:

    And that sentence says, that’s where the lessee’s interest comes in Your Honor, it says, “The lessee’s interest made or created pursuant to the revisions of this Act shall be made subject to State or local taxation.”

    Our first — our position on that is that that was not intended to be taken over under the very general language of the 1949 Act.

    No one in the 1949 Act said anything about immunity from taxation.

    The only language is under the authority of that Act and we don’t think that’s expressed enough and it was expressed enough indication of congressional intention to be a waiver of immunity.

    There was a good reason for not carrying — for Congress not understanding that it was carrying this provision over.

    If you look at the difference and purposes of the two statutes.

    The 1947 Act was the statute for — for leasing surplus factory facilities to private industry when they couldn’t be used by the Government.

    It has — it has to be a finding that the land is of no — that the plants are of no use to the Government at that present time.

    And if that so — of course there’s good reason why the lessee at — we should — in them should be taxed that this leased a private business for non-governmental purpose.

    Here the purpose was just the opposite.

    Congress is providing for the leasing of land only because there was a current governmental need for military housing.

    And if the property is taxable the taxes pro tanto to some extent cut into the governmental purpose providing housing at its lower price as possible for the military personnel.

    Earl Warren:

    Mr. Stern.

    Robert L. Stern:


    Earl Warren:

    If this Section 6 applies —

    Robert L. Stern:


    Earl Warren:

    — could the tax been fall upon the lessee?

    Robert L. Stern:

    If it — if Section 6 applies the lessee originally pays the — can be required to pay a tax on the lessee’s interest but not upon the whole value of the property which it doesn’t own.

    Earl Warren:

    But even then this —

    Robert L. Stern:

    Then it would be passed on —

    Earl Warren:

    This would be — it does — then have the right to have his lease renegotiated?

    Robert L. Stern:

    Yes, Your Honor.

    Earl Warren:

    So, that he would probably be (Inaudible)

    Robert L. Stern:


    Not —

    Earl Warren:

    — the tax is not — isn’t that purpose of it or is it, I don’t know?

    Robert L. Stern:

    If the — this is none of the renegotiation clause but if — if any kind of a property tax is imposed, the FHA on — will take that into account in determining the maximum rents and if the lessee has to pay taxes which it was assumed in the original or when the rents originally fix, he didn’t have to pay.

    They have agreed it’s the general understanding, it isn’t in the lease but that’s the way it works and the way it’s been done generally.

    They will raise the rents and proportion them up.

    It isn’t in the — under the renegotiation clause in Section 6 itself because that’s said the Government’s rent maybe reduced.

    Robert L. Stern:

    That’s only $100 a year and that’s really inapplicable here because that’s only a nominal rent anyhow.

    It works another way.

    Earl Warren:

    Does it say — that says the terms of such lease shall be renegotiated that — that limited to $100?

    Robert L. Stern:

    That says — that’s the lease to the Government — from the Government.

    That’s not the lease to the lessee’s.

    Any lease of property authorized under the provision of this Act.

    That’s the lease by the Government shall contain a provision that if in the extent such property is made taxable.

    Now, you note here, the contrast between such property and the lessee’s interest.

    The first sentence allows the tax and the lessee’s interest and this relates to the Government’s property.

    And here, as I shall show or maybe I have shown about the tax was imposed in the buildings and the buildings of the Government’s property.

    So even — my — my second argument, Your Honor as I’ve said it, even if this is applicable, they haven’t come — come within it because they didn’t tax the lessee — they tax the Government’s property.

    Well, one more observation on Section 6 before I try to do draw this to a conclusion.

    The history of Section 6 itself shows, in our opinion, that it wasn’t intended to apply to exclusive federal enclaves.

    Without going into detail orally because that’s a little difficult, it shows that it was thought by the framers that lessee’s interest of what was involved in the 1947 Act, the appliance, the factories could be taxed anyhow by States which permitted them to be taxed and it is common law and is common law of this Court that lessee’s interest generally can be tax if they are in the State of California.

    So, in the Committee which this provision was drafted, some people said, “Well, you don’t need something in the statute to allow taxation of this,” and others said, “Well, it won’t do any harm to put it in.

    It’ll be the substance, it’ll be declaratory anyhow.”

    So, they put it in.

    Now, that full discussion doesn’t make sense at all if they were talking about exclusive federal areas because in exclusive federal areas, States can’t tax lessee’s interest.

    They must have been talking on the — on the — basing this or writing on the assumption they’re talking about lands which could be taxed otherwise and that wouldn’t be an exclusive federal area.

    Well, now let’s look at the — theirs is — for that reason, we think that Section 6 itself doesn’t apply to such areas, that it wasn’t intended to be incorporated in the 1949 Act, anyhow but that statute isn’t specific enough.

    But let’s look at the a anomalous consequences which would result if the other conclusion is reached.

    On a military base like this, right next door, hundred yards away, in this although this isn’t in the record, this isn’t a fictitious example.

    There could be Government owned apartment houses with appliances owned by private individuals.

    There could be a Government owned building with a private contractor and owning his own machinery and that actually is the case to some extent right on this project, a hundred yards away from these apartments.

    This privately owned machinery, the privately owned appliances couldn’t be taxed.

    Right on the land this project is on.

    The tenants owned their own property.

    The utility companies owned their own property.

    They can’t be taxed, they are not lessee’s interest of any sort, they’re just private property on a Government reservation, just like that, just as if they were located 50 yards away of course across right outside of the leased land.

    They couldn’t be taxed.

    Robert L. Stern:

    It certainly would be strange for Congress to intend that Government leased — property of the Government could be taxed or property leased from the Government could be tax when property, which is privately owned or leased from a private person right next door couldn’t be taxed.

    That just doesn’t make sense and I don’t think that statute should be construed so as to reach that result.

    That’s because it’s the Government enclave?

    Robert L. Stern:

    It’s a government enclave, yes.

    They — they’re going to argue at the 20 acres of this.

    They don’t say its 20 acres but a part of it only is 20 acres isn’t subject to exclusive jurisdiction but both courts below disagreed with that and I don’t intend to take time on that orally.

    That’s considered in our briefs.

    In conclusion on this point therefore, we believe that in order to avoid this anomaly and in order to reach the result which I think is the one which — which provides a standard which should be applied in these cases that this project should be tax just like the land next door.

    It should be tax if the fellow next door can be taxed and it shouldn’t be taxed if the fellow next door can’t taxed.

    And here the fellow the next door couldn’t be taxed, its unexclusive federal enclave.

    In order to avoid the unjust result, whereby this county collects taxes for services which it doesn’t provide where they’re provided mainly by the Federal Government, this tax cannot stand.

    And I add that the District Court for Sarpy County said they wouldn’t be any lost to Sarpy County if that result will reach because this property had never been on the tax growth of Sarpy County.

    Wherry — Wherry Housing Act, a part of the amendment to the Military Leasing Act?

    Robert L. Stern:


    The Federal Housing Act, is an amendment of the FHA, is titled — it was Title 8 of the FHA.

    The military —


    Robert L. Stern:

    FHA is the housing act, the National Housing Act or the Federal Housing Act, yes.

    Where is the amendment of that?

    Robert L. Stern:


    It’s a new title for military housing in the — in Title 12 which has to do with the — which has to do with —

    (Inaudible) to Military Leasing Act of 1947.

    Robert L. Stern:

    Only through that one little clause which I mentioned, where it said you could lease under the authority of the Act of 1947 — the only time.

    We don’t think that’s enough for tying — to bring in tax immunity.

    Now —

    So, Wherry Act says that?

    Robert L. Stern:

    The Wherry Act of Section — says — in Section 805 is that the clause I mentioned, that’s all it says in effect.

    The Wherry Act of 807, which I also referred to.

    Now, I think I’ve given the substance of our argument that this tax can’t stand in any event because it isn’t in the lessee’s interest but on the property of United States and I just want to refer to one case.

    This maybe the one case I — one other case I referred to in this course of my argument, the Allegheny County case in 322 U.S. we submit is directly in point on that proposition.

    Robert L. Stern:

    In the Allegheny County case, there was a lease by the Government of machinery to a private Company and the Allegheny County there taxed the full value of the machinery leased by the Government to the private company.

    This Court held that that was tax on the Government’s own — Government own machinery and was void, couldn’t stand.

    And in the — in the course of it’s opinion the Court pointed out that maybe the lessee there, domestic company, possessed a leasehold interest in this machinery.

    But the Court said nobody has tried to tax the leasehold interest.

    There hasn’t any effort to segregate the leasehold sold interest.

    Therefore, we aren’t concern with that, this is a tax from the Government’s property and it is void and can’t stand.

    And we think that’s precisely the situation here if you assume that Section 6 of the 1947 statute is applicable and that a tax on the lessee’s interest can be imposed.

    I think I’ll reserved the remainder —

    Earl Warren:

    Mr. Stern, well its 4:30 now, we’ll —

    Robert L. Stern:

    Yes, sir.