dissenting: I agree of course that the Port of New York Authority is discharging very important.and useful functions for the people of the States of New York and New Jersey and, as for that matter, for the entire nation. However, before the interest on its bonds can be excluded, under the provisions of section 22 (b) (4), from the income of a taxpayer who holds such bonds, it must first be found that the Port of New York Authority is a “political subdivision” of the state. Section 22 (b) (4) exempts from taxation “Interest upon (A) the obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia; * *
However important the functions discharged by the Port of New York Authority may be, I do not think it is a “political subdivision” of a state, either of New York or New Jersey or both, as that term is used in section 22 (b) (4). I think the Supreme Court decided that question, or at least indicated what the decision should be, in Helvering v. Gerhardt, 304 U. S. 405, when it said, in discussing article 643, of Treasury Regulations 77: “If the regulation be deemed to embrace the employees of a state-owned corporation such as the Port Authority, it was unauthorized by the statute. But we think it plain that the employees of the Port Authority are not employees of the state or a political subdivision of it within the meaning of the regulation as originally promulgated — an additional reason why the regulation, even before the 1938 amendment, was ineffectual to exempt the salaries here involved.”
The majority opinion, by a process ot reasoning with which I do not agree, reaches the conclusion that the Supreme Court in the language to which I have referred did not mean to rule that the Port of New York Authority was not a political subdivision of a state. Therefore, says the majority opinion: “In our view the term “political subdivision’ as used in the statute before us must be construed without the benefit of any light from the Gerhardt case and only by reference to such conventional aids to statutory construction as are at hand.”
As already stated, I do not agree with this view. While the Supreme Court spoke only briefly on the question of “political subdivision,” I do not agree that it shed no light on the subject. I not only think the Court did shed light on the subject, I think it spoke directly on the question. Of course what the Court said was with reference to the taxation of salaries of employees of the Port of New York Authority and not with reference to the taxation of interest on its bonds. However, the Court having said, as I view it, that the employees involved in the Gerhardt case were not employees of a “political subdivision” of a state, the same line of reasoning, I think, must hold that the bonds issued by the Port of New York Authority were not bonds issued by a “political subdivision” of a state. That seems inevitable to me. For that reason, I dissent from the majority opinion.
Smith and Van Fossan, agree with this dissent.