Silas Mason Co v. Tax Commission of State of Washington Ryan v. State of Washington

• Decision Date: 06 December 1937
• Docket Number: Nos. 7,8,s. 7
• Citation: 302 U.S. 186,82 L.Ed. 187,58 S.Ct. 233
• Parties: SILAS MASON CO., Inc., et al. v. TAX COMMISSION OF STATE OF WASHINGTON et al. RYAN v. STATE OF WASHINGTON et al. Re
• Court: U.S. Supreme Court

302 U.S. 186

58 S.Ct. 233

82 L.Ed. 187

SILAS MASON CO., Inc., et al.

v TAX COMMISSION OF STATE OF WASHINGTON et al.

RYAN

v. STATE OF WASHINGTON et al.

Nos. 7, 8.

Reargued Oct. 12, 13, 1937.

Decided Dec. 6, 1937.

[Syllabus from pages 186-188 intentionally omitted] Mr. B. H. Kizer, of Spokane, Wash., for appellants Silas Mason Co. and others.

Mr. E. P. Donnelly, of Seattle, Wash., for appellees Tax Commission of Washington and others.

Messrs. John W. Davis, of New York City, and B. H. Kizer, of Spokane, Wash., for appellant Ryan.

Messrs. E. P. Donnelly, of Seattle, Wash., and E. W. Schwellenbach, of Ephrata, Wash., for appellees State of Washington and others.

Mr. Stanley Reed, Sol. Gen., of Washington, D.C., for the United States, as amicus curiae, by special leave of Court.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

These suits were brought to restrain the enforcement of the Occupation Tax Act of the State of Washington (Laws 1933, c. 191, p. 869; Ex.Sess., 1933, c. 57, p. 157¹) as applied to the gross income received by appellants under contracts with the United States for work performed in connection with the building of the Grand Coulee Dam on the Columbia River.² The Supreme Court of the State sustained the tax and affirmed judgments dismissing the suits. Silas Mason, Inc. v. State Tax Commission, 188 Wash. 98, 61 P.2d 1269; Ryan v. State, 188 Wash. 115, 61 P.2d 1276. The cases come here on appeal.

The questions are (1) whether the tax imposes an unconstitutional burden upon the Federal Government, and (2) whether the areas in which appellants' work is performed are within the exclusive jurisdiction of the United States. On reargument, and at the request of the Court, the views of the Government upon these questions were presented. With respect to the first question, our ruling upholding the validity of a similar tax of West Virginia as laid upon the gross receipts of a contractor engaged in building locks and dams for the United States is controlling. James v. Dravo Contracting Company, 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155. We pass to the question of territorial jurisdiction.

1. The following facts as to the nature and history of the enterprise, as set forth in appellants' complaints and shown by evidence and stipulations, are uncontroverted: The Columbia River, above its lower reaches, partakes of the character of a mountain stream, its fall being great, its current swift, and its course marked at intervals of a few miles by rapids flowing over and through rocky masses of such magnitude as to render navigation difficult and in many instances impossible save by the construction of canals and locks. There are great alternations in its flow, its period of high water depending upon the melting of snow in the mountains where its sources are found. Its principal tributary is the Snake River, which has the same characteristics. Through improvements that have been made and are contemplated the Columbia River is commercially navigable from its mouth to the mouth of the Snake, and above that point the Columbia is navigable locally, from pool to pool, to the mouth of the Okanogan River, but all such navigation is difficult and not commercially feasible because of the physical conditions above described. These characteristics, however, 'render it an ideal stream for the development of hydroelectric power.' For the most part the Columbia River within the United States flows through an arid country, 'the land being immensely productive and rich when placed under irrigation but of no value without irrigation.' The course of the river for the greater part of its length in the United States lies wholly within the State of Washington. From a short distance below the mouth of the Snake, the Columbia is the boundary between the States of Washington and Oregon.

Following sporadic improvements extending over a number of years, the Corps of Engineers of the War Department finally made an exhaustive survey, and in 1932 the Chief of Engineers of the United States Army recommended a comprehensive plan for the development of the Columbia River, which took into consideration the use of its waters for the purposes of navigation, flood control, power development, and irrigation. The plan contemplated the construction of ten dams across the river at various points in Washington and where the river is the boundary between Washington and Oregon. The uppermost of these dams is at the head of Grand Coulee in Washington about 150 miles below the international boundary and 274 miles above the mouth of the Snake River. The plan was commonly described as the Columbia Basin Project.

In June, 1933, Harold L. Ickes was appointed Administrator of Public Works, and later the President, under authority of the National Industrial Recovery Act (sections 201—203, 48 Stat. 200—205 (40 U.S.C.A. §§ 401—403)), directed the Administrator to include in the Public Works program the Grand Coulee Dam and Power Plant. Appellants state that the project as finally recommended by the War Department and the Department of the Interior contemplated, among other features, a dam at the Grand Coulee to be 370 feet high above low water (550 feet high, as actually constructed) and 4,290 feet long on the crest, and a power plant to develop 2,100,000 horse power, at a total cost of $392,000,000. Appellants add that this is the key dam on the river and will create a lake 150 miles long, reaching the Canadian boundary; that over 5,000,000 acrefeet of storage will become available, the release of which when the flow of the river is at its lowest will double the prime power of the river downstream to the Snake River and add more than 50 per cent. to the power of the Columbia below the Snake; that the storage will have an appreciable effect in reducing floods on the whole river; and that 'there will be 905,500 acres of first class land available for irrigation.'

In 1933, the Legislature of the State of Washington created the Columbia Basin Commission to promote the Columbia Basin Project. Laws 1933, c. 81, p. 376; Ryan v. State, supra, 188 Wash. 115, 61 P.2d 1276, at page 1277. For that purpose the Commission obtained an allocation of $377,000 of the emergency relief funds of the State. On June 30, 1933, the United States, represented by the Commissioner of the Bureau of Reclamation, under the provisions of the Reclamation Act of June 17, 1902 (32 Stat. 388), and amendatory and supplementary acts (43 U.S.C.A. § 371 et seq.), made a contract with the Columbia Basin Commission by which the United States agreed to undertake topographic surveys and exploratory work and prepare certain designs and estimates for which the Columbia Basin Commission undertook to pay within the limits of its appropriation. Ryan v. State, supra, 188 Wash. 115, 61 P.2d 1276, at page 1278.

On November 1, 1933, the Secretary of the Interior signed a memorandum addressed to himself as Administrator of Public Works in which the Secretary recommended that the project 'be considered a federal project to be constructed, operated and maintained by the Bureau of Reclamation and to be paid for from net revenues derived from the sale of its electric power.' Under the same date, the United States, represented by the Secretary of the Interior, in pursuance of the Reclamation Act of 1902 and the National Industrial Recovery Act, made a further agreement with the State of Washington providing for the expenditure by the United States, through the Bureau of Reclamation, of the sum of $63,000,000 for the construction of a dam and power plant at the Grand Coulee site, together with necessary transmission lines. There was further provision that the United States should retain title to the dam and power plant until the cost of the project, including the cost of the first unit dam and power plant, had been fully repaid into the United States Treasury; that the State Commission should act as an advisory board in conference with officers of the United States concerning the various important questions which might arise in connection with the construction and use of the dam, power plant, and transmission lines; and that the State should have an option to purchase the perpetual right to the entire power output of the first unit dam and power plant upon prescribed conditions. Ryan v. State, supra, 188 Wash. 115, 61 P.2d 1276, at page 1278.

On December 12, 1933, the Secretary of the Interior and Administrator of Public Works signed an amended Declaration of Taking in the case of United States v. Continental Land Company et al., in the United States District Court for the Eastern District of Washington,^* in which it was stated that certain lands at the Grand Coulee Dam site to the extent of 840.28 acres 'are hereby taken for the use of the United States' in the construction of a dam 'for the regulation and control of the flow of the Columbia River, for a storage reservoir from the damsite to the Canadian boundary, for the improvement of navigation, for flood control, for hydro-electric power development at the Grand Coulee damsite, for the increase of power development downstream, for the reclamation of arid and semi-arid lands, for the domestic use of water, and for the relief of unemployment.' Thereupon the United States immediately acquired title and possession of the lands involved. 40 U.S.C. § 258a (40 U.S.C.A. § 258a). Shortly after, on January 4, 1934, the First Assistant Secretary of the Interior gave formal notice to the Commissioner of Public Lands of Washington of the intention of the United States to make examinations and surveys and attached to the notice a list of lands owned by the State 'over and upon which the United States requires rights of way for canals, ditches, laterals and sites for reservoirs and structures appurtenant thereto; and such additional rights of way and quantities of land as may be required for the operation and maintenance of the completed works for the...