Reconstruction Finance Corporation v. Beaver County, Pa

• Decision Date: 13 May 1946
• Docket Number: No. 40,40
• Citation: 90 L.Ed. 1172,66 S.Ct. 992,328 U.S. 204
• Parties: RECONSTRUCTION FINANCE CORPORATION v. BEAVER COUNTY, PA
• Court: U.S. Supreme Court

328 U.S. 204

66 S.Ct. 992

90 L.Ed. 1172

RECONSTRUCTION FINANCE CORPORATION

v BEAVER COUNTY, PA.

No. 40.

Argued April 30, 1946.

Decided May 13, 1946.

Appeal from the Supreme Court of the Commonwealth of pennsylvania.

Mr. Robert L. Stern, of Washington, D.C., for appellant.

[Argument of Counsel from page 205 intentionally omitted] Messrs. John G. Marshall, of Beaver, Pa., andEdward G. Bothwell, of Pittsburgh, Pa., for appellee.

Mr. John L. Nourse, of Los Angeles, Cal., for State of California, as amicus curiae, by special leave of Court.

Mr. Sherrill Halbert, of Modesto, Cal., for the County of Stanislaus, California, as amicus curiae, by special leave of Court.

Mr. Justice BLACK delivered the opinion of the Court.

By Section 10 of the Reconstruction Finance Corporation Act, as amended, 47 Stat. 5, 9, 55 Stat. 248, 15 U.S.C.A. § 610, Congress made it clear that it did not permit states and local governments to impose taxes of any kind on the franchise, capital, reserves, surplus, income, loans, and personal property of the Reconstruction Finance Corporation or any of its subsidiary corporations. ¹ Congress provided in the same section that 'any real property' of these governmental agencies 'shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.' The Supreme Court of Pennsylvania sustained the imposition of a tax on certain machinery owned and used in Beaver County, Pennsylvania, by the Defense Plant Corporation, an RFC subsidiary.² The question presented on this appeal from the Supreme Court judgment is whether the Supreme Court's holding that this machinery is 'subject to' a local 'real property' tax means that the Pennsylvania tax statute, 72 Purdon's Pennsylvania Stat. § 5020—201, as applied conflicts with Section 10 of the Reconstruction Finance Corporation Act. This appeal, thus, challenges the validity of a state statute sustained by the highest court of the state and raises a substantial federal question. We have jurisdiction under 28 U.S.C. § 344(a), 28 U.S.C.A. § 344(a), and appellee's motion to dismiss is denied.

In 1941 Defense Plant Corporation³ acquired certain land in Beaver County. It erected buildings on the property and equipped them with machinery and attachments necessary and essential to the existence and operation of a manufacturing plant for aircraft propellers. The plant, thus fully equipped, was leased to Curtiss-Wright Corporation, to carry out its war contracts with the government for the manufacture of propellers. Most of the machinery was heavy, not attached to the buildings and was held in place by its own weight. Other portions of the machinery were attached by easily removable screws and bolts, and some of the equipment and fixtures could be moved from place to place within the plant. The lease contract with Curtiss-Wright authorized the government to receive and to replace existing equipment, and parts of the machinery appear to have been frequently interchanged and replaced as the convenience of the government required. The lease contract also provided that the machinery should 'remain personalty notwithstanding the fact it may be affixed or attached to realty.'

The government contends that under these circumstances the machinery was not 'real' but was 'personal' property, and that therefore its taxation was forbidden by Congress. The 'real property' which Congress made 'subject' to state taxation, should in the Government's view be limited to 'land and buildings and those fixtures which are so integrated with the buildings as to be uniformly, or, at most, generally, regarded as real property.' 'Real property', within this definition would include buildings and 'fixtures essential to a building's operations' but would not include fixtures, movable machinery, or equipment, which though essential to applicant's operations as a plant, are not essential to a building's operation as a building.

The county would, for tax purposes, define real property so as to treat machinery, equipment, fixtures, and the land on which a manufacturing establishment is located as an integral real property unit. This is in accord with the view of the state's supreme court which made the following statement in sustaining the tax here involved (350 Pa. 520, 39 A.2d 714): 'It has long been the rule in Pennsylvania that 'Whether fast or loose, therefore, all the machinery of a manufactory which is necessary to constitute it, and without which it would not be a manufactory at all, must pass for a part of the freehold.' * * * Appellant's machinery, being an integrated part of the manufactory, and so, of the freehold, was therefore taxable' under Pennsylvania's definition of real property. This interpretation of Pennsylvania's tax law is of course binding on us. But Pennsylvania's definition of 'real property' cannot govern if it conflicts with the scope of that term as used in the federal statute. What meaning Congress intended is a federal question which we must determine.

The 1941 Act does not itself define real property. Nor do the legislative reports or other relevant data provide any single decisive piece of evidence as to Congressional intent.⁴ Obviously, it could have intended either, as the government argues, that content be given to the term 'real property' as a matter of federal law, under authoritative decisions of this Court, or, as the county contends, that the meaning of the term should be its meaning under local tax laws so long as those tax laws were not designed to discriminate against the government.

In support of its contention that a federal definition of real property should be applied, the government relies on the generally accepted principle that Congress normally...