Montana Attorney General Opinion 15-607

Opinion No. 607 Income Tax-R. F. C.-R. A. C. C. -Spokane Bank fOI' Coopemtives. HELD: Officers nnd employees of the ileconstruction 1i'inance Corpora· tion. the Spokane Bank for Coopera- th'es and similar institutions, who re- side in the State of ~lontana or whose services are rendered in the State of ~lolltana may be subject to pnyment. of an income tax on thtil' snlnries or wages under our law since such institu- tions, while instrumentalities of the government, are entities separate and distinct from the United States ami their agents and employees are not agents nnd employees of the United States. Septemher 10, 1034. Your letter to us of r('('Cnt date is ns follows: "An officer of the Spokane Bank for Co-operath'es has raised tbe ques- 416 OPINIO~S OF THE A'l'TORNEY GENERAL tion as to whether his compensation is subject to the Personal Income Tax Law, Chapter 181 of the Laws of 1933. "Therefore, we request that you kindly advise this Department as to whether compensation paid to offi- cers and employees of the Reconstruc- tion Finance Corporation, Regional Agricultural Credit Corporation and the Spokane 'Bank fat· Co-operath'es and similar organizations is subject to the Personal Income 'l'ax Lnw of this state." Under section 2 of Chapter 181, Laws of 1!l33, the net income of a resident of Montana of the requi~ite amount. and under section 3 thereof the net income of a non-resident of ~Montana of the requisite amoun t derived "from all property owner] and from e\-ery business, trade, profession or occupa- tion carried on in this state by such person" are subject to the payment of an income tax. Section 7 of the same Act. pro\'ides: "The term 'Gross Income' includes g-ains, profits a nd income derived from salaries, wages or compensation for personal service, of whatever kind. and in whatever form paid, $ • .. but does not include the following items whiCh are exempt from taxation under this Act: .. .. • "( f) Salaries, wages and other com- pensations received from the United States or (h~') officials or employees thereof, including persons in thl' mili- tary or naval forces of the United States" .. *." The Reconstruction }1'inance Corpora- tion Act of 1932, created a body cor- )lOl'ate with the name "l{econstruction Finance Corporation." The prinCipal office of the corporation is located in the District of Columbia. but it is au- thorized to establish "agencies or branch offices in any city or cities of the United States under rules and regula- tions to be prescribed by its board of directors." The entire capital stock of the corporation, amounting to $500,- 000,000 is owned by the United States. The management of the corporation is vested in its board uf directors. The corporation is empowered to sue and be sued; "to select, employ and fix the compensation of such officers, em- ployees, attorneys and agents as shall be necessary for the transaction of its business, without regard to the pro\'i- sions of other laws applicable to the employment and compensation of of- ficers or employees of the United States and to define their authoJity and du- ties, require bonds of them and fix the penalties thereof, and to dismiss at pleasure such officers, employees, at- torneys and agents." The board of directors of the corporation shall de- termine and preSC1'ihe the manner in which its obligations shall be incurred and its expenses allowed and paid. The Act as subsequently amended authorized the corporation "to create in an~' of the twelve Federal Land Bank Districts, where it may deem the same to be desirable. '! regional agri- cultural credit corpora tion with a paid- up capital of not less than $3.000,000. to be subscribed for by the former." The regional agricultural credit corpor- ations so created "shall be managed by officers and agents to be appointed by the Reconstruction Finance Corpor- ation." The Farm Credit Act of 1933 directed the Governor of tile Farm Credit Ad- ministration to organize and charter twelve banks to be known as "Banks for Cooperatives," one of which shall be established in each city in which there is located a Federal Land Bank. "The directors of the several Federal land banks shall be ex-officio the direc- tors of the respective Banks for Co- operatives. Such directors shall have power, subject to the approval of the governor, to employ and fix the com- pensation of such officers and em- ployees of such banks as may be nec- essary to carry out the powers and duties conferred upon sueh banks under the Act." The Banks for Cooperath'es shall have power to sue and be sued in and court. The capital stock of each bank shall be in such amount as the governor determines is required for the purpose of meeting the credit needs of eligible borrowers therefrom. "The governor, on behalf of the United States, shall make pa.\·ments for stock in the banks and such payments shall he subject to call in whole or in part by the board of directors of the bank \Yith the approval of the governor." 'l'he banks are authorized to make luans to cooperati\'e a~sociations for any of the purposes set forth in the Agricultural Marketing Act as amend- ed. Cooperative associations borrow- ing from any Bank for Cooperatives OPINIO;';S OF THE ATTOR~EY GENERAL 417 shall be required to own, at the time the loan is made. an amount of stock of the bank equal in fair book yalue to fh'e pel' cent of the amonnt of the loan. Upon default of any obligation of any Bank for Cooperath'es such bank may be declared insolvent and placed in the hands of a receiver by the gover- nor. The institutions under consideration are instrumentalities of the govern· ment. (Skinner & Eddy Corp. ,'. ~ic­ Carl, 275 U. S. I, 72 L. Ed. 131; Russell Wheel & Foundry Co. v. United States. :'11 }j'ed. (2d) R2H; North Dakota-;\ion- tana W. G. Ass'n. v. United States, 66 Fed. (2d) 573.) Indeed the Banks for CooperntiYes are made such hv the }j'arm Credit Act of 1933. They are, however, entities separate and distinct from the United States and their agents and employees are not agents or em- ployees of the United States. (United States y. Strang, 254 U. S. 491, 65 L. Ed. 368; Krichman v. United States. 256 U. S. 363, 65 L. Ed. 992; Sloan Shipyards Corp. y. U. S. Fleet Corp .. 258 U. S. 549. 66 L. Ed. 762; Skinner & Eddy Corp. v. McCarl, abo,:e; Proyi- dence Engineering Corp. v. Downe)' Shipbuilding Corp., 294 Fed. 641; Rus- sell Wheel & Foundry Co., v. United States, above; North Dakota·Montana 'V. G. Ass'n. ,'. United States, I1bO\·e.) That congress recognized a distinc- tion between officers and employees of the United States and employees of the Reconstruction Finance Corpora tion is apparent from the following sentence found in section 3 of the Reconstruc· tion Finance Corporation Act as :tmellll- ed by section 208 (a) of the Emergency Relief an<l Construction Act of 1932: "Nothing contained in this chapter or in any Act shall be construe<l to pre- vent the appointment and compensa- tion as an employee of the corporation of any officer or employee of the United States in an)' board, commission, inde- pendent establishment or executive de- partment thereof." That a Bank for Cooperath'es is an entity distinct from the United States, its departments and boards cannot be gainsaid, in view of the provision which confers on the Governor of the Farm Credit Administration authorit,' to de- clal'e such bank insolvent upon' default of any of its obligations. Our conclusion is, therefore, that of- ficers and employees of the Reconstruc- tion Finance Corporation, (he Regional Agriculturnl Credit Corporation, the Spokane Bank for Cooperatives and similar institutions, who reside in the State of Montana or whose services are rendered in the State of ~Iontana may be subject to payment of an in- come tax on their salaries or wages under our law. Note; See Pomeroy". State Board of Equalization, et ai., 99 Mont. 534, 45 Pac. (2d) 316.