US v. Nye County, Nevada, 97-15309
| Decision Date | 02 June 1999 |
| Docket Number | 97-15954,97-16345,97-15953,97-16376 and 97-16377.,No. 97-15309,97-15309 |
| Citation | 178 F.3d 1080 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. NYE COUNTY, NEVADA; Bernie C. Merlino, Nye County Assessor, Defendants-Appellants, and Arcata Associates, Defendant, v. Arcata Associates, Third-Party-Plaintiff, v. United States of America, Third-Party-Defendant. United States of America, Plaintiff-Appellee, v. Nye County; Bernie C. Merlino, Nye County Assessor, Defendants, and Clark County, Nevada; J.E. Dutton, Clark County Assessor, Defendants-Appellants. United States of America; State of Nevada, ex rel.; Arthur F. Wehrmeister, District Attorney of Nye County, Nevada, Plaintiffs, v. Nye County; Bernie C. Merlino, Nye County Assessor, Defendants, and Clark County, Nevada; J.E. Dutton, Clark County Assessor, Defendants-Appellees, v. Raytheon Services Nevada, Inc., a Delaware corporation; EG & G Energy Measurements, a Nevada corporation; Wackenhut Services Inc., a Florida corporation; Reynolds Electrical and Engineering Co., Inc., Defendants-Third-Party-Plaintiffs-Appellants. United States of America, Plaintiffs-Third Party Appellant, and U.S. Department of Energy, Third-Party-Defendant Appellant. v. State of Nevada, Plaintiff-Appellee, v. Nye County; Bernie C. Merlino, Nye County Assessor; Clark County, Nevada; J.E. Dutton, Clark County Assessor, Defendants-Appellees, and Arthur F. Wehrmeister, District Attorney, Nye County, Nevada; Raytheon Services Nevada, Inc., a Delaware corporation; Wackenhut Service, Inc.; Reynolds Electrical & Engineering, Inc., Defendants, v. Wackenhut Service, Inc; Reynolds Electrical & Engineering, Inc., Third-Party-Plaintiffs, and EG & G Energy Measurements, Inc., Defendant-Third-Party-Plaintiff. State of Nevada, ex rel; Arthur F. Wehrmeister, District Attorney of Nye County, Nevada; Rachel H. Nicholson, Deputy District Attorney of Nye County, Nevada, Plaintiffs-Appellees, v. Nye County; Bernie C. Merlino, Defendants, v. United States of America, Plaintiff-Third-Party-Defendant-Appellee, Loral Aerospace Corp, and All Consolidated Cases, Defendant-Third-Party-Plaintiff-Appellant. State of Nevada, ex rel; Arthur F. Wehrmeister, District Attorney of Nye County, Nevada; Rachel H. Nicholson, Deputy District Attorney of Nye County, Nevada, Plaintiffs, v. Loral Aerospace Corp., and All Consolidated Cases, Defendants-Third-Party-Plaintiffs-Appellees, v. United States of America, Third-Party Defendant-Appellant. United States of America, Plaintiff-Appellant, v. Nye County, Nevada; Bernie C. Merlino, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
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Sara S. Holderness, Tax Division, United States Department of Justice, Washington, DC, for the United States.
Jerald L. Wilkerson, Jerald Wilkerson, Ltd., Las Vegas, Nevada, for Nye County, Nevada.
Kathleen Janssen, Deputy District Attorney, Las Vegas, Nevada, for Clark County, Nevada.
Philip M. Ballif, Jones Vargas, Las Vegas, Nevada, for Loral Aerospace Corporation.
Before: LAY,* KOZINSKI and T.G. NELSON, Circuit Judges.
After getting off to a memorable start in M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819)1 the doctrine of intergovernmental tax immunity has deteriorated into a morass of "inconsistent decisions and excessively delicate distinctions," United States v. New Mexico, 455 U.S. 720, 730, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982).2 We venture into the bog yet again to evaluate Nevada's latest effort to squeeze some tax revenue from the activities of its largest landowner, the United States Government.
When these parties last came to visit, we held that Nevada's tax on federal property used by government contractors violated the Supremacy Clause. See United States v. Nye County Nev., 938 F.2d 1040, 1041 (9th Cir.1991). Learning from its mistakes, the Nevada legislature modified its law to tax federal contractors' beneficial use of federal property, rather than the property itself. See Nev. Rev. Stat § 361.157 (1997) (real property); id. § 361.159 (personal property). The United States and various of its contractors returned to district court, claiming that such linguistic acrobatics cannot save the Nevada statutes from constitutional infirmity.
The appeals before us involve a host of federal contractors: Arcata Associates, Loral Aerospace (now Lockheed Martin Aerospace), Raytheon Services Nevada, EG & G Energy Measurements, Wackenhut Services and Reynolds Electrical & Engineering. Each contractor manages and maintains federal property in Nevada or provides vital services on that property. The United States ultimately bears the full burden of these taxes because it compensates each of its contractors under standard cost-plus-fee agreements. At year's end, Nevada requires every contractor to list government property it has used in the course of performing its contract(s) and, at the contractor's option, estimate the percentage of that property it has used.3 The relevant county—in our case, Nye4—then assesses a tax based on the value of that federal property.
The way in which Nye County administers the tax has not changed since our 1991 decision. The question before us, then, is whether the mere change in the wording of the Nevada statutes removes their constitutional infirmity.
Statute of limitations
As a preliminary matter, the counties argue that some of the federal government's claims are time-barred or otherwise procedurally barred under Nevada law. According to the counties, the federal government is acting as a subrogee of the contractors, and hence its rights are limited by the same procedural rules that would limit the contractors were they to seek relief from the tax in state court. See United States v. California, 507 U.S. 746, 758-59, 113 S.Ct. 1784, 123 L.Ed.2d 528 (1993). However, California considered state law substantive claims. Here, the United States asserts a federal constitutional claim on its own behalf, claiming that the counties have taxed federal property. State procedural rules do not govern such a claim. See United States v. Thornburg, 82 F.3d 886, 893 (9th Cir.1996).
A tax on federal property?
Although states may not tax the federal government or its property directly, see M'Culloch, 17 U.S. (4 Wheat.) at 435, they may tax private parties who use federal property, even when these private parties are providing goods and services to the United States, see New Mexico, 455 U.S. at 734, 102 S.Ct. 1373. Which side of this nebulous line do Nevada's revised statutes fall on?
We start with Nye County. The statute we struck down there provided:
Personal property exempt from taxation which is leased, loaned or otherwise made available to and used by a natural person, association or corporation in connection with a business conducted for profit is subject to taxation in the same amount and to the same extent as though the lessee or user were the owner of the property. ...
938 F.2d at 1042 (emphasis added) (citing Nev.Rev.Stat. 361.159 (1991)). We held that Id. Since the Nevada statute said it taxed property, we accepted that characterization. Although we also criticized the county for making no attempt to segregate and tax the contractor's beneficial use of the property, see id. at 1043, it was the language of the Nevada statute, not the county's practice, that was critical to the result, see id.
Taking to heart Nye County's friendly advice that a tax on "a user's beneficial use of property owned by the United States" would be constitutional, id., Nevada amended its tax statutes to do just that. The personal property tax statute now reads:
Nev.Rev.Stat. § 361.159. In the same vein, the new real property tax statute taxes "the leasehold interest, possessory interest, beneficial interest or beneficial use of the lessee or user of the tax-exempt real estate" subject to the same apportionment and time conditions. Id. § 361.157. Thus, Nevada has shifted the subject of the taxes from the property itself to the beneficial use of that property. Taking the statutes at face value, as Nye County says we should, they appear to be constitutional.
The Supreme Court reached a similar conclusion in United States v. Township of Muskegon, 355 U.S. 484, 78 S.Ct. 483, 2 L.Ed.2d 436 (1958), where it approved a tax on a government-owned manufacturing plant used rent-free by a private motor company to perform supply contracts with the federal government. "Vital" to the result was that the contractor "used the property in connection with its own commercial activities" and retained autonomy "to use the property as it thought advantageous and convenient in performing its contracts and maximizing its profits." Id. at 486, 78 S.Ct. 483. Because this also describes the situation of the contractors here, Muskegon supports the constitutionality of Nevada's tax statutes.
We recognize that the Tenth Circuit has read Muskegon narrowly as applying only to contractors who produce goods on government property, as opposed to those who "merely perform their contractual obligations on government owned property." United States v. Colorado, 627 F.2d 217, 220 (10th Cir.1980), aff'd mem....
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