U.S. v. Hynes
| Citation | 20 F.3d 1437 |
| Decision Date | 05 April 1994 |
| Docket Number | 91-3478,Nos. 91-3400,s. 91-3400 |
| Parties | -1721, 62 USLW 2635 UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Thomas C. HYNES, Assessor of Cook County, Illinois, Edward J. Rosewell, County Treasurer and Ex Officio County Collector of Cook County, and the County of Cook, Illinois, Defendants-Appellants, Cross-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Eileen M. Marutzky, Asst. U.S. Atty., James B. Burns, Office of U.S. Atty., Crim. Div., Chicago, IL, Gary R. Allen, David E. Carmack, Dept. of Justice, Tax Div., Appellate Section, David M. Katinsky, Shirley D. Peterson, Dept. of Justice, Antitrust Div., John J. McCarthy (argued), David M. Katinsky, Edward J. Snyder, Dept. of Justice, Tax Div., Richard A. Correa, Dept. of Justice, Tax Div., Appellate Section, Washington, DC, for plaintiff-appellee.
Karen Dimond, Office of State's Atty. of Cook County, Mark R. Davis (argued), O'Keefe, Ashenden, Lyons & Ward, Chicago, IL, for defendants-appellants.
Before POSNER, Chief Judge, and FAIRCHILD, CUMMINGS, BAUER, CUDAHY, COFFEY, FLAUM, EASTERBROOK, RIPPLE, MANION, KANNE, and ROVNER, Circuit Judges.
The Harold Washington Social Security Center and the Federal Archives and Records Center, both located in Chicago (which is in Cook County, Illinois), were constructed on land to which the federal government has title. The government does not yet have title to the buildings, which were constructed pursuant to installment contracts authorized by 40 U.S.C. Sec. 602a. Legal title is held by a third party while the installment payments are made to complete the purchase. The federal government is entitled to possession and use of the properties during the installment payment period, and legal title vests in the United States when all installment payments have been completed. 1
Defendant Hynes assessed the Social Security Center and the Archives and Records Center pursuant to the Illinois Revenue Act for tax years 1985 through 1989. Defendant Rosewell sought to collect general property taxes for those tax years. The taxes have not been paid. In 1988, the United States brought this action for declaratory and injunctive relief, requesting that the district court declare that taxation of the properties discriminates against the United States and is therefore unconstitutional. The district court granted summary judgment for the United States as to tax year 1985, and granted summary judgment for defendants-appellants (which we will refer to collectively as "Cook County") as to tax years 1986 through 1989. Each party appeals from the judgment insofar as adverse to it.
In 1972, Congress enacted the Public Buildings Amendments, Pub.L. No. 92-313, 86 Stat. 216 (1972) (codified at 40 U.S.C. Sec. 602a), authorizing the Administrator of General Services to enter into installment purchase contracts of no longer than thirty years for the purchase of federal buildings. Congress made such property subject to local taxation, until title passes to the United States:
With respect to any interest in real property acquired under the provisions of this section [Sec. 602a], the same shall be subject to State and local taxes until title to the same shall pass to the Government of the United States.
40 U.S.C. Sec. 602a(d) (1992).
Prior to 1985, Illinois provided an exemption from general property taxation to "[a]ll property that is being purchased by a governmental body under an installment contract pursuant to statutory authority and used exclusively for the public purposes of the governmental body." Ill.Rev.Stat. ch. 120, p 500.9a (1983). If the term "governmental body" included the United States, then the Sec. 602a properties in Illinois were exempted by state law. The Cook County Assessor, however, assessed ad valorem taxes on the Social Security Center for 1975 through 1978 and on the Archives and Records Center for 1972 through 1978. The United States refused to pay the taxes, arguing that p 500.9a exempted the federal properties from state and local taxation. The United States challenged Cook County's position in a declaratory judgment action; the district court granted summary judgment for the United States. Cook County appealed to this court.
That appeal presented a question of statutory construction. Cook County argued that the term "governmental body" in p 500.9a could not be construed to include the federal government because the state legislature was not empowered by the Illinois Constitution to create such an exemption. 2 A panel of this court concluded that the Illinois Constitution should be construed as implicitly recognizing the state legislature's power to enact exemptions which conform to the mandates of the federal Constitution, and held that the term "governmental body" did include the United States and accordingly, p 500.9a did exempt property being acquired by the federal government. United States v. County of Cook, Ill., 725 F.2d 1128, 1131 (7th Cir.1984) ("County of Cook ").
The panel went on to address an argument offered by Cook County that even if p 500.9a is construed to exempt property being acquired by the federal government, Sec. 602a(d) nullifies the exemption. This contention was rejected, the panel reasoning that Sec. 602a(d) does not require states to tax property being acquired by the federal government, and the United States is entitled to take advantage of a state statutory exemption. Additionally, the panel was "unconvinced that section 602a[ (d) ] in fact constitutes such a waiver," reasoning that permitting property being acquired by state or local government to incur a lighter tax burden than property being acquired by the federal government would result in discriminatory taxes on the United States or on those with whom it deals. Id. at 1131. The panel concluded that "[t]he consent found in section 602a[ (d) ] lacks the specificity we would expect to find if Congress intended to subject the United States to discriminatory taxation." Id. at 1132.
Following this court's decision in County of Cook, the Illinois legislature amended p 500.9a in 1984 (effective on January 1, 1985) to exempt from taxation
[a]ll property that is being purchased by a governmental body under an installment contract pursuant to statutory authority and used exclusively for the public purposes of the governmental body, except such property as the governmental body has permitted or may permit to be taxed.
Ill.Rev.Stat. ch. 120, p 500.9a (1992) 3 (our italics indicate language added by the amendment).
Cook County argues in this appeal that the added language avoids discrimination against the United States. It denies an exemption where the property is being acquired by a governmental body which permits the property to be taxed, and does not base a difference in treatment on the identity of the governmental body. There would be taxation, not exemption, of Sec. 602a property because the United States permits it to be taxed. In like manner, property being similarly purchased by a state or local body would be taxed, and not exempt, if the state or local body likewise permitted it to be taxed.
The district court found that the Illinois legislature was aware of the federal consent to taxation in Sec. 602a(d) and was also aware that the state and local governments had not similarly consented to taxation when it amended p 500.9a. The district court concluded that in intentionally taking advantage of this situation, Illinois imposed a discriminatory tax upon property being acquired by the federal government under an installment purchase contract. United States v. Hynes, 759 F.Supp. 1303, 1307 (N.D.Ill.1991). Relying upon County of Cook, the district court held that Sec. 602a(d) lacked the specificity necessary to consent to such discriminatory taxation, and granted summary judgment for the United States. Id. at 1308.
Cook County filed a motion to reconsider, arguing that even if the United States was entitled to an exemption from tax, it had not complied with the procedural requirements for obtaining the exemption. The district court held that the 1984 amendment was severable so that the exemption was based upon pre-amendment p 500.9a, rather than the federal Constitution, and that the federal government was required to comply with the Illinois procedural requirements for perfecting that state claim. Since the federal government had not complied with the procedural requirements and those requirements were applicable to tax years 1986 and later, Cook County was enjoined only from collecting taxes for tax year 1985. United States v. Hynes, 771 F.Supp. 928 (N.D.Ill.1991). These appeals followed.
"[A] State cannot constitutionally levy a tax directly against the Government of the United States or its property without the consent of Congress." United States v. City of Detroit, 355 U.S. 466, 469, 78 S.Ct. 474, 476, 2 L.Ed.2d 424 (1958); United States v. New Mexico, 455 U.S. 720, 733, 102 S.Ct. 1373, 1382, 71 L.Ed.2d 580 (1982). Additionally, a state may not impose taxes which discriminate against the federal government (or those with whom it deals). North Dakota v. United States, 495 U.S. 423, 434-435, 110 S.Ct. 1986, 1994-1995, 109 L.Ed.2d 420 (1990); Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 812-813, 109 S.Ct. 1500, 1506-1507, 103 L.Ed.2d 891 (1989). Here Congress has given consent.
In County of Cook, this court was addressing the pre-amendment p 500.9a, and was asked to construe "governmental body" to include the United States; this construction would avoid the question whether the statute would be unconstitutional if it failed to exempt property being acquired by the United States. See Frisby v. Schultz, 487 U.S. 474, 483, 108 S.Ct. 2495, 2501-02, 101 L.Ed.2d 420 (1988); Cohen v. City of Des Plaines, 8 F.3d 484, 493 (7th Cir.1993) (...
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