U.S. v. State of Colo., 79-1193
| Decision Date | 03 September 1980 |
| Docket Number | No. 79-1193,79-1193 |
| Parties | 28 Cont.Cas.Fed. (CCH) 81,366 UNITED STATES of America, Plaintiff-Appellee, v. STATE OF COLORADO; Jefferson County, Colorado; Board of County Commissioners of Jefferson County, Colorado; and David R. Braden, County Assessor, Jefferson County, Colorado, Defendants- Appellants. |
| Court | U.S. Court of Appeals — Tenth Circuit |
John J. McCarthy, Jr., Washington, D. C. (M. Carr Ferguson, Asst. Atty. Gen. and Gilbert E. Andrews and David English Carmack, Attys., Tax Division, Dept. of Justice, Washington, D. C., with him on brief), for plaintiff-appellee; Joseph F. Dolan, U. S. Atty. and Jerre W. Dixon, Asst. U. S. Atty., Denver, Colo., of counsel.
Gail E. Shields, Denver, Colo., Sp. Counsel for Jefferson County, Bd. of County Com'rs and County Assessor (Stephen H. Kaplan, First Asst. Atty. Gen. and Billy Shuman, Sp. Asst. Atty. Gen., Denver, Colo., with him on brief), for defendants-appellants.
Before McWILLIAMS, BREITENSTEIN and DOYLE, Circuit Judges.
The Rocky Flats Plant is a part of an integrated system of government-owned laboratories and plants operated to develop and produce nuclear weapons for national defense and is located in Jefferson County, State of Colorado. Rocky Flats consists of approximately 6,500 acres of land and approximately 95 buildings and structures, all of which are owned in fee simple by the United States.
The actual operation and day-to-day management of the Rocky Flats Plant has been accomplished through private companies acting under management contracts with the United States. Rockwell International Corporation is presently operating and managing the Rocky Flats Plant under a management contract referred to as Contract 3533. Rockwell is paid a fixed annual fee for its services.
In 1975 the Colorado General Assembly enacted a statute, now referred to as Colo.Rev.Stat. § 39-3-112 (Supp. 1979) (as amended), which provides in pertinent part as follows:
(1) When any real property . . . exempt from taxation is leased, loaned, or otherwise made available to and used by a . . . corporation in connection with a business conducted for profit, the lessee or user thereof shall be subject to taxation in the same amount and to the same extent as though the lessee or user were the owner of such property . . . .
In 1976 the Jefferson County Tax Assessor notified Rockwell that it was a "user" of tax-exempt property, i. e. the Rocky Flats Plant, within the meaning of the Colorado statute and was liable for the tax on such use. For the taxable year 1976 the property was given a market value of $200,787,951 and an assessed value of $61,263,380. These total values were based on the following component values:
Market Value Assessed Value
------------ --------------
Land (350 Acres at
$5,000 per acre) $ 1,750,000 $ 552,000
Improvements 125,506,215 38,651,860
Machinery &
Equipment 73,531,736 22,059,520
------------ --------------
$200,787,951 $ 61,263,380
Using the assessed values set forth above, the County Assessor for Jefferson County assessed Rockwell $4,632,246.69 for taxes payable to Jefferson County for the year 1976 with respect to the Rocky Flats Plant. To the extent that any such taxes are due from Rockwell, the United States is obligated by Contract 3533 to provide funds for payment thereof, as such a charge is defined under that contract as a cost to be borne by the United States.
It was in this general setting that the United States brought the present action against the State of Colorado, the County of Jefferson, and various county officials, seeking a declaratory judgment that the tax sought to be imposed by Jefferson County on Rockwell was in reality a tax on property owned by the United States, and, as such, barred by the Supremacy Clause of the United States Constitution. McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819).
The parties agreed to a detailed stipulation of facts, and each moved for summary judgment. The trial court granted the motion of the United States, and entered judgment in favor of the United States. Basically, the trial court concluded that the tax which Jefferson County ostensibly sought to impose on Rockwell was in reality a tax on property owned by the United States, and therefore infringed on the immunity of the United States from the imposition of local taxes on government property. Specifically, the trial court held that the Colorado statute, as it was sought to be applied, was unconstitutional. The trial court's Memorandum Opinion and Order was published and appears as United States v. State of Colorado, 460 F.Supp. 1184 (D.C.Colo.1978).
The State of Colorado initially argues that the United States does not have standing to bring the instant action, and that Rockwell is an indispensable party. We do not agree. In United States v. Bureau of Revenue of State of New Mexico, 291 F.2d 677 (10th Cir. 1961) we rejected a similar argument. In that case we held that the United States was the proper party, indeed the real party in interest, to prosecute an action to protect its sovereign rights and to assert the constitutional immunity of the United States from taxation by a state. See also United States v. Allegheny County, 322 U.S. 174, 191, 64 S.Ct. 908, 918, 88 L.Ed. 1209 (1944), where the Supreme Court held that "(t)he United States may question the taxation in order to protect its sovereignty over the property in question." It therefore follows that Rockwell is not an indispensable party.
Proceeding to the merits of the controversy, the key to the present problem is the relationship between Rockwell and the United States and the nature of the activity which the State of Colorado seeks to tax. From the stipulated facts we learn that Rockwell has a management contract with the United States. The managerial services which Rockwell is obligated to perform are to be performed at the Rocky Flats Plant. Rockwell does not have any lease, permit or license to the property in question, which is owned in fee simple by the United States. Any "use" it may make of the property is strictly delineated by the contract. In such circumstance, we agree with the trial court that the efforts of the State of Colorado to impose a tax on Rockwell under the provisions of Colo.Rev.Stat. § 39-3-112 (1973) (as amended) is in reality a tax on the property itself and, as such, barred under the doctrine of implied immunity first found in McCulloch...
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