Russet Potato Co. v. Board of Equalization

Related Cases

McQUADE, Justice

(dissenting).

The majority, today, reaches an erroneous result by a route which is not tenable as a matter of law. They, for instance, contend that, following Offutt Housing Co. v. Sarpy County, 351 U.S. 253, 76 S.Ct. 814, 100 L.Ed. 1151 (1956), congressional approval is necessary before a state may *507tax private property located on an Indian reservation. The Offutt Housing Company •case turned, in part, on the interpretation •of a federal statute in order to find a congressional purpose to allow state taxation •of privately owned leasehold improvements and fixtures on a federal military installation. That determination was necessary in that case, because under art. 1, § 8, cl. 17, of the United States Constitution, the power of Congress “to exercise exclusive legislation” over the District of Columbia and military lands has been held to prohibit a state tax on private property located on a military base unless it has been explicitly authorized by Congress. That issue is not present in this case. We are not confronted with an attempt to levy a tax on personal property on military lands. There Is no such special impediment to Idaho’s taxing appellant’s interest in the use or possession of the fixtures built on the United 'States exempt property other than the majority’s grudging interpretation of our own statutes. See also Thomas v. Gay, 169 U. S. 264, 18 S.Ct. 340, 42 L.Ed. 740 (1897); 2 Cooley, Taxation, § 648, at 1361-1362 (4th •ed. 1924).

The majority also reasons that, because .one of the statutes involved in the three Michigan cases, United States v. Detroit, 355 U.S. 466, 78 S.Ct. 474, 2 L.Ed.2d 424 (1958); United States v. Muskegon, 355 U.S. 484, 78 S.Ct. 483, 2 L.Ed.2d 436 (1958) ; City of Detroit v. Murray Corp., 355 U.S. 489, 78 S.Ct. 458, 2 L.Ed.2d 441 (1958), was extremely detailed, our statute, if it is to reach the appellant’s property, must be as prolix. This utterly misconstrues the import of these cases. The third of the three, City of Detroit v. Murray Corp., supra, did not involve the Michigan statute set out in the majority opinion. The statute involved in the Murray case authorized taxation of persons possessing personal property. The Supreme Court of the United States, per Justice Black, explicitly renounced a hair-splitting close interpretation approach to these statutes:

“However in passing on the constitutionality of a state tax ‘we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it.’ Lawrence v. State Tax Commission, 286 U.S. 276, 280, 52 S.Ct. 556, 557, 76 L.Ed. 1102. Consequently in determining whether these taxes violate the Government’s constitutional immunity we must look through form and behind labels to substance. This is at least as true to uphold a state tax as to strike one down. Cf. Wisconsin v. J. C. Penney Co., 311 U.S. 435, 443-445, 61 S.Ct. 246, 249-250, 85 L.Ed. 267; Capitol Greyhound Lines v. Brice, 339 U.S. 542, 70 S.Ct. 806, 94 L.Ed. 1053. Due regard for the State’s power to tax requires no less.” City of Detroit, supra, 492-493, 78 S.Ct. at 460.

The United States Supreme Court, in the three Michigan cases, was only interested in the power of a state to levy a tax such as the one which is the subject of this action. It was not concerned with an examination of whether the state statutes empowered the tax collector to levy a tax on each item of property by name and quantum of title.

“It is true that the particular Michigan taxing statutes involved here do not expressly state that the person in possession is taxed ‘for the privilege of using or possessing’ personal property, but to strike down a tax on the possessor because of such verbal omission would only prove a victory for empty formalisms. And empty formalisms are too shadowy a basis for invalidating state tax laws.” City of Detroit, supra, 493, 78 S.Ct. at 461.

The holdings in United States v. Detroit, supra, United States v. Muskegon, supra, and City of Detroit v. Murray Corp., supra, were simply that a state has the power to tax private interests in possession and use of government property if the state desires.

The critical question, then, is whether the building in the present case is privately “owned” by the appellant, and, therefore, taxable under I.C. § 63-1223 as it read when this tax was levied; or whether it is “own*508ed” by the federal government and exempt from taxation under I.C. § 63-105A.

The majority reasons that “title” to the building is in the United States Government and that the appellant cannot be charged with any ownership interest in it. It is my opinion that the appellant’s fifty-year leasehold interest is so substantial as to be properly characterized as one of “ownership” for the purposes of our tax statute. The case of Offutt Housing Co. v. Sarpy County, supra, is most instructive on this point. The facts of that case were quite similar to those in the case before us. The Offutt Housing Co. leased land from the federal government for the purpose of constructing a housing project upon it. The seventy-five year lease provided that title to the buildings vested in the government upon construction, but the housing company was obligated to reimburse the government for fire', and police protection and had the right to permit utility companies to extend lines to the project to provide services. The company also carried the insurance on the buildings. The Sarpy County tax assessor assessed a personal property tax against the company, which the company challenged, contending that the government was the owner of the structures. The United States Supreme Court rejected this argument and held that the housing company was taxable on the full value of the buildings. The Court pointed out that

“Labeling the Government as the ‘owner’ does not foreclose us from ascertaining the nature of the real interests created and so does not solve the problem. See Millinery Center Building Corp. v. Commissioner, 350 U.S. 456, 76 S.Ct. 493 [100 L.Ed. 545]. * * * The Government may have ‘title,’ but only a paper title, and, while it retained the controls described in the lease as a regulatory mechanism to prevent the ordinary operation of unbridled economic forcesj this does not mean that the value of the buildings and improvements should thereby be partially allocated to it.” 351 U.S. 253, 261, 76 S.Ct. at 819 (1956).

The appellant has the right to full beneficial use of this building for fifty years, including the right to encumber it, the right to sub-lease it, the right to modify its structure, and the obligation to maintain it. The appellant also carries fire and casualty insurance on the building. The Russet Potato Co. is in every sense, except as holder of the bare, legal title, the “owner” of the building. Yet the majority, admitting that “the appellant under the terms of the lease has practically all of the rights * * * normally considered as incident to ownership of the property,” decides this case on the basis of the mere transfer of legal title, without normal incidents of ownership. Neither the word nor the legal concept of “title” is mentioned in any of the pertinent statutes. The concept which is important in the interpretation of I.C. § 63-1223 is ownership. By imposing the narrow, technical definition of “title” on the statutory word “owned,” the majority is defeating the purpose and spirit of the tax law-. I conclude that the fifty years of dominion and control over the property by appellant is ownership as contemplated by the statute. The life of the building is approximately fifty years. Therefore the reversionary interest of “title” applies only to the land.

There is no constitutional barrier to levying a tax on appellant’s warehouse, and the statute is clear in authorizing the tax.

SHEPARD, J., concurs in the dissent.