Com'rs of Sinking Fund of City of Louisville v. Howard

• Decision Date: 28 March 1952
• Citation: 248 S.W.2d 340
• Parties: COMMISSIONERS OF SINKING FUND OF CITY OF LOUISVILLE et al. v. HOWARD et al.
• Court: United States State Supreme Court — District of Kentucky

Page 340

248 S.W.2d 340

COMMISSIONERS OF SINKING FUND OF CITY OF LOUISVILLE et al. v. HOWARD et al.

Court of Appeals of Kentucky.

March 28, 1952.

Rehearing Denied May 16, 1952.

Gilbert Burnett, Robert Meagher, and Alex P. Humphrey, all of Louisville, for appellants.

William A. Armstrong, Donald E. Armstrong, Louisville, for appellees.

CULLEN, Commissioner.

In a declaratory judgment action, the Jefferson Circuit Court held that the City of Louisville was not entitled to collect the city's occupational license tax from persons employed at the Naval Ordnance Plant, located upon property owned by the United States Government. The city appeals.

The controlling question is whether the city had power to annex the Federal area and make it a part of the city, so that persons working in the area would come within the terms of the license tax ordinance, providing that the tax shall be computed on the gross receipts from work done, business conducted or services performed 'in the City.'

The area embracing the Naval Ordance Plant was acquired by the Federal Government, by condemnation, in 1940. Thereafter, in 1941, the Secretary of the Navy accepted 'exclusive jurisdiction' over the land, and the acceptance was acknowledged by the Governor of Kentucky. In 1947, the City of Louisville enacted an ordinance proposing the annexation of certain territory adjoining the city, including the Federal area, and in 1950 a final annexation ordinance was enacted, declaring the territory to be annexed to the city. The occupational license tax ordinance was originally enacted in 1948, and was reenacted in 1950.

By an Act of 1940, Section 106, Title 4, U.S.C.A., Congress provided that any state or 'any duly constituted taxing authority therein, having jurisdiction to levy such a tax,' may levy and collect income taxes in any Federal area within the state 'to the same extent and with the same effect as though such area was not a Federal area.' By Title 4 U.S.C.A. § 110(c), 'income tax' is defined as 'any tax levied on, with respect to, or measured by, net income, gross income, or gross receipts.'

It is agreed by all parties that the area embracing the Naval Ordnance Plant came under the 'exclusive jurisdiction' of Congress by virtue of Art. I, Section 8, Clause 17 of the Federal Constitution, KRS 3.010, the acceptance of jurisdiction by the Secretary of the Navy, and the recognition of that acceptance by the Governor of Kentucky. The difference of opinion is as to the effect of such exclusive jurisdiction.

It is the position of the appellees that, with respect to areas under the exclusive jurisdiction of Congress, the jurisdiction of the state and its political subdivisions is completely ousted, and to all intents and purposes the land ceases to be a part of the state within whose borders it lies; that such areas occupy the same status as if they were separate provinces or countries. In support of this position, appellees cite such cases as Ft. Leavenworth R. R. Co. v. Lowe, 114 U.S. 525, 5 S.Ct. 995, 29 L.Ed. 264; Arlington Hotel Co. v. Fant, 278 U.S. 439, 49 S.Ct. 227, 73 L.Ed. 447; United States v. Unzeuta, 281 U.S. 138, 50 S.Ct. 284, 74 L.Ed. 761; Surplus Trading Company v. Cook, 281 U.S. 647, 50 S.Ct. 455, 74 L.Ed. 1091; Standard Oil Co. v. California, 291 U.S. 242, 54 S.Ct. 381, 78 L.Ed. 775; Silas Mason Co. v. Tax Commission, 302 U.S. 186, 58 S.Ct. 233, 82 L.Ed. 187; and Pacific Const Dairy v Department of Agriculture of California, 318 U.S. 285, 63 S.Ct. 628, 87 L.Ed. 761. We do not question the soundness of those cases, but we think they are not controlling of the issue before us.

The cited cases are authority for the proposition that the state is ousted of any jurisdiction to exercise sovereignty within an area under the exclusive jurisdiction of Congress. But in the case before us, the act of annexation by the city did not, of itself, represent any effort or attempt by the city to exercise jurisdiction within the area of the ordnance plant. The city merely elected that the area be included within its geographic boundaries as a political subdivision of the state.

We are impressed with the argument on behalf of the city that the annexation involved only a question of political geography, and not a clash of political sovereignties. Certainly, it could be of no concern to Congress, in which of its political subdivisions a...