United States v. District of Columbia, Civ. A. No. 82-0923.

• Citation: 558 F. Supp. 213
• Decision Date: 14 April 1983
• Docket Number: Civ. A. No. 82-0923.
• Parties: UNITED STATES of America, Plaintiff, v. DISTRICT OF COLUMBIA, Defendant.
• Court: U.S. District Court — District of Columbia

558 F. Supp. 213

UNITED STATES of America, Plaintiff, v. DISTRICT OF COLUMBIA, Defendant.

Civ. A. No. 82-0923.

United States District Court, District of Columbia.

September 3, 1982.

Opinion Vacated as Moot April 14, 1983.

Charles E. Stratton, Dept. of Justice, Tax Div., John C. Martin, Asst. U.S. Atty., and John C. Salyer, Deputy Gen. Counsel to the Architect of the Capitol, Washington, D.C., for the U.S.

Richard L. Aguglia, District of Columbia Corp. Counsel, Washington, D.C., for the District of Columbia.

MEMORANDUM OPINION

CHARLES R. RICHEY, District Judge.

The Court has before it two motions:¹ (1) Defendant's Motion to Dismiss; and, (2) Plaintiff's Motion for Summary Judgment.² For the reasons stated herein, the Court denies Defendant's Motion to Dismiss and grants Plaintiff's Motion for Summary Judgment. These motions are decided without oral argument.

I. BACKGROUND

This is an action brought by the United States, seeking a declaratory judgment that the United States Capitol Historical Society ("USCHS") is a federal instrumentality and that the defendant, District of Columbia, has no power to tax sales by the USCHS. Alternatively, the United States seeks a declaration that USCHS is exempt from taxation because it operates in a federal enclave.

The USCHS is a nonprofit corporation organized under District of Columbia law and granted a federal charter in 1978. USCHS operates the Capitol Visitors Center on the United States' Capitol grounds as authorized by Title III of the National Visitors Center Facilities Act of 1968. Pub.L. No. 90-624 (40 U.S.C. § 831). The Society produces a variety of books, pamphlets, brochures and general merchandise which are sold at the Visitors Center.³

In November 1981, defendant filed suit against USCHS in the District of Columbia Superior Court to collect $743,029.30 in sales taxes, penalties and interest. Defendant also sought a declaratory judgment to require the Society to collect sales taxes and file sales and use tax returns.⁴ District of Columbia v. United States Capitol Historical Society, CA No. 81-3119 (hereinafter "DC v. USCHS"). A third party complaint was filed against the United States and the case was removed to federal district court. This Court dismissed the third party complaint and remanded to the Superior Court. Thereafter, the United States brought this action in federal district court and the motions pending before the Court were filed.

II DEFENDANT'S MOTION TO DISMISS IS DENIED BECAUSE THE UNITED STATES HAS STANDING AND THE SUIT IS NOT BARRED BY RES JUDICATA OR COLLATERAL ESTOPPEL

Defendant moves to dismiss Plaintiff's Complaint for Declaratory Judgment on three grounds: (a) res judicata; (b) standing; and, (c) collateral estoppel.

(a) Defendant contends that because the instant case is virtually identical to the case of DC v. USCHS, this Court's remand of the latter case bars this action under the doctrine of res judicata. The Court disagrees. This Court's Order of March 22, 1982 struck the third party complaint filed by the USCHS against the United States and then remanded the case to the Superior Court because the grounds for removal were eliminated once the United States was no longer a party. The Order merely determined that USCHS had not filed a proper third party complaint against the United States under Rule 14(a) Fed.R.Civ.Pro., as the District of Columbia argued at that time.⁵ At most, this Order could bar USCHS from refiling the third party complaint against the United States in the case of DC v. USCHS and again seeking removal. But it does not preclude the filing of the instant case which is a separate action brought by the United States to protect its sovereign rights.

In this action, jurisdiction is clearly conferred upon this Court by 28 U.S.C. § 1345. See United States v. District of Columbia, 669 F.2d 738, 741-42 (D.C.Cir.1981) (hereinafter "US v. DC").

(b) The defendant alleges that the United States does not have standing to bring this complaint because, first, it has suffered no injury and second, the USCHS is not a federal agency. The Court rejects these arguments.

The requirements for standing in a suit brought by the United States are not the same as for a private person. United States v. City of Jackson, Mississippi, 318 F.2d 1, 15 (5th Cir.1963). The United States need not show that it has suffered pecuniary harm. United States v. County of Arlington Virginia, 669 F.2d 925 (4th Cir.1982); United States v. Lewisburg Area School District, 539 F.2d 301 (3d Cir.1976). Rather, the United States may sue to vindicate its own policies and authority, to enforce laws of the United States, and to protect its sovereign rights. United States v. County of Arlington, Virginia, supra at 928-29; 1 Moore's Federal Practice ¶ 0.65 1-1 n. 2 at 700.81 (2d ed. 1982). In this case, the United States is doing precisely that—it is suing to protect its sovereign right to be immune from taxation. If immunity from taxes imposed by the District exists, it is on behalf of the United States either because USCHS is a federal instrumentality or because it operates in a federal enclave. The USCHS' right to be free of the taxes is solely derivative. See United States v. Bureau of Revenue, 291 F.2d 677, 679 (10th Cir.1961). Thus, the United States is the real party in interest and clearly has standing to sue to enforce its sovereign rights.

(c) Finally, defendant argues that plaintiff is collaterally estopped from claiming tax immunity because it abandoned that argument at an early stage in US v. DC, 669 F.2d 738 n. 1 (D.C.Cir.1981) and the Circuit Court rejected the argument. The Court finds, however, that collateral estoppel does not apply in this case because the issues presented here are not the same issues decided in US v. DC. Collateral estoppel only applies to issues actually raised and concluded in the prior action. Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). The issues in the instant case are different from those in US v. DC in two respects. First, the United States did not argue that the organization in US v. DC was entitled to tax immunity as a federal instrumentality. Instead, that case focused on the legal incidence of the tax and statutory sections exempting sales to the United States. Second, this case asserts federal tax immunity by virtue of USCHS being located on the grounds of the Federal Capitol—a federal enclave. This question did not arise in US v. DC.

Thus, the United States does have standing to bring the above entitled action and its claim is not barred by either res judicata or collateral estoppel. Defendant's Motion to Dismiss is, therefore, denied.

III. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT IS GRANTED BECAUSE THE USCHS IS A FEDERAL INSTRUMENTALITY IMMUNE FROM TAXATION

The plaintiff presents two questions for decision on summary judgment. The first question is whether the USCHS is a federal instrumentality entitled to federal tax immunity under the Supremacy Clause. The second question is whether the District of Columbia is barred from imposing a sales tax on persons or organizations with respect to activities conducted on the Capitol Grounds because the grounds constitute a federal enclave within the federal government's exclusive jurisdiction. The Court grants plaintiff's motion because it holds that the USCHS is a federal instrumentality. The Court therefore finds it unnecessary to consider the second question presented.

There is no simple test for determining when an entity is so closely related to the government as to be a federal instrumentality immune from taxation. As noted by the Supreme Court, it often seems that "the line between the taxable and the immune has been drawn by an unsteady hand." United States v. County of Allegheny, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209 (1944). See also United States v. New Mexico, 455 U.S. 720, 730-32, 102 S.Ct. 1373, 1380-81, 71 L.Ed.2d 580 (1982) (Courts decisions in the area of tax immunity fail to speak with one voice). Yet, by examining the cases in which the Supreme Court has found that an entity is a federal instrumentality, it is possible to discern a number of factors that aid in making such a determination. The foremost cases in this area that are of use in the matter at hand are Department of Employment v. United States, 385 U.S. 355, 87 S.Ct. 464, 17 L.Ed.2d 414 (1966) in which the Supreme Court held that the American National Red Cross is a federal instrumentality and Standard Oil Co. v. Johnson, 316 U.S. 481, 62 S.Ct. 1168, 86 L.Ed. 1611 (1942) in which the Supreme Court held that army post exchanges are federal instrumentalities.

Applying the factors that the Supreme Court has relied upon in its federal instrumentality cases to the case at hand, the Court finds that the USCHS is a federal instrumentality entitled to tax exempt status. Like the Red Cross, the USCHS operates pursuant to federal charter and is audited by the federal government. It is subject to government supervision in that the items sold at the Visitors Center (including items of general merchandise) must be approved by the Architect of the Capitol in consultation with the relevant House and Senate committees. The day to day operations of the USCHS and the Visitors Center are not under direct government control. But the Supreme Court has noted that this fact does not mean that the organization in question is not a federal instrumentality. Neither the Red Cross in Department of Employment nor the post exchanges in Johnson were directly controlled by the United States, yet the Court found both to be federal instrumentalities.

Unlike the Red Cross, USCHS is not headed by a Presidential appointee. Nor is the President of USCHS a government employee as are the officers in charge of post exchanges. Rather, the USCHS is headed by a President elected by the membership. However, the USCHS does have an Honorary Board of Trustees. The President and Vice President of...