Small Business Admin. for Exemption from Ad Valorem Taxation in Meade County, Kan., Application of
Decision Date | 10 August 1990 |
Docket Number | No. 64447,64447 |
Parties | In the Matter of the Application of the SMALL BUSINESS ADMINISTRATION FOR EXEMPTION FROM AD VALOREM TAXATION IN MEADE COUNTY, KANSAS. |
Court | Kansas Court of Appeals |
Syllabus by the Court
1. Absent a waiver of immunity, all property owned by the United States or any agency or instrumentality thereof is exempt from all property or ad valorem taxes levied under the laws of this state.
2. Under Kansas law, a mortgage does not create an interest in land because the mortgage is merely a lien and not a form of title.
3. A mortgage foreclosure sale terminates the relationship between mortgagor and mortgagee. The mortgage lien merges into the foreclosure decree.
4. The purchaser at a foreclosure sale receives an equitable title to the property, which is more akin to a lien interest than an ownership interest. While the interest acquired is one recognized and protected by courts of equity, the purchaser only has a judgment lien along with the possibility of future ownership.
5. Incidents of "ownership" in property generally include the rights to its possession and use and the enjoyment of its products, in addition to legal title and the right to sell or otherwise dispose of it. The mere possibility of receipt of a sheriff's deed in the future will not rise to the status of "ownership" under either legal or practical principles.
6. The doctrine of relation back is only applied for the purposes of doing right and justice and is generally used to protect the title to property from the time of contract for sale to the time of conveyance. The doctrine will not be applied for the sole purpose of permitting a purchaser at a mortgage foreclosure sale to escape payment of ad valorem taxes accruing during the redemption period.
Joe Shepack, County Atty., for appellant Bd. of Meade County Com'rs.
Lee Thompson, U.S. Atty., and Stephen K. Lester, Asst. U.S. Atty., for appellee Small Business Admin.
Steven R. Wiechman, Topeka, for amicus curiae Kansas Ass'n of Counties.
Before ELLIOTT, P.J., DAVIS, J., and WILLIAM M. COOK, District Judge, assigned.
The Board of County Commissioners of Meade County (County) appeals from the order of the Shawnee County District Court granting the Small Business Administration (SBA) relief from real estate taxes.
The County does not challenge the facts found by the trial court. In a journal entry filed September 29, 1989, the court stated the facts as follows:
The district court held SBA to be immune from payment of the taxes which accrued during the redemption period.
The issue presented in this case is whether an agency of the United States, which bids in and acquires a certificate of purchase from the sheriff in a mortgage foreclosure action, is liable for taxes accruing on the real estate during the redemption period and before the agency receives the sheriff's deed.
There is no dispute in this case as to the County's authority to impose a tax directly on the United States or any agency or instrumentality thereof. A state may not, consistent with the Supremacy Clause, United States Const., art. VI, cl. 2, lay a tax "directly upon the United States." Mayo v. United States, 319 U.S. 441, 447, 63 S.Ct. 1137, 1140, 87 L.Ed. 1504 (1943). This prohibition applies to ad valorem taxes imposed by a state or county on real estate owned by the United States. Clallam County v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328 (1923). Kansas law also recognizes the prohibition. K.S.A. 79-201a exempts "[a]ll property belonging exclusively to the United States, except property which congress has expressly declared to be subject to state and local taxation," from all property or ad valorem taxes.
SBA is an agency of the United States and operates under the general direction and control of the President. 15 U.S.C. 633 (1988). It is an integral part of the government mechanism, not merely a separate legal entity. Small Business Adm'n v. McClellan, 364 U.S. 446, 450, 81 S.Ct. 191, 195, 5 L.Ed.2d 200 (1960). Absent a waiver, SBA stands in the shoes of the United States and is entitled to the same exemption from state and local taxation as is the United States. United States v. City of Roanoke, 258 F.Supp. 415 (W.D.Va.1966).
In United States v. New Mexico, 455 U.S. 720, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982), the Court recognized the difficulty that the immunity issue has given the courts through the years. The Court said:
455 U.S. at 730, 102 S.Ct. at 1380-81.
In determining whether a federal agency is immune from state or local taxes, the deciding factor is not whether the tax has an effect on the United States but whether the tax is imposed directly on property owned by the United States. The Court in United States v. New Mexico expressed that view as follows:
...
455 U.S. at 733-34, 102 S.Ct. at 1382.
Unquestionably, property owned absolutely in fee simple by the SBA is immune from state or local taxation. United States v. Roanoke, 258 F.Supp. 415. For the purpose of immunity, it is not necessary that the federal agency be in possession of the property. Thus, it has been held that both the federal government and its bailee were immune from taxation of machinery owned by the government. United States v. Allegheny County, 322 U.S. 174, 189, 64 S.Ct. 908, 916-17, 88 L.Ed. 1209 (1944). Although it is not necessary for the federal agency to have legal title to the property, immunity must rest on sufficient ownership that it can be said the property was "owned" by the United States. Rohr Corp. v. San Diego County, 362 U.S. 628, 80 S.Ct. 1050, 4 L.Ed.2d 1002 (1960). There, property owned by the Reconstruction Finance Corporation was declared to be surplus property and the War Assets Administration took possession of the property for purposes of management and disposition. Even though the property was still titled in the Reconstruction Finance Corporation, the Court held:
"... We believe that the appropriate test would turn on practical ownership of the property rather than the naked legal title." 362 U.S. at 634, 80 S.Ct. at...
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