Montana Attorney General Opinion 16-360

Opinion No. 360. Taxation-Gasoline I .. icense Tax- Motor Vebicles-Licenses-Fed- eral Land Bank-Federal In- termediate Credit Bank. HELD: The }4'ederal Land Bank of Spokane and the Federal.:Intermediate Credit Bank of Spokane are not sub- ject to the state gasoline license tax and motor vehicle license fees while operating their automobiles within this state in the conduct of their busi- nesses as agencies of the federal gov- ernment. October 2, 1936. Mr. Phil Greenan Chief Clerk, State Board of Equalization The Capitol You have asked us whether or not in our opinion the Federal Land Bank of Spokane and the Federal Inter- mediate Credit Bank of Spokane are subject to our gasoline license tax and motor vehicle license fees when oper- ating their automobiles within this state in the conduct of their busi- nesses. The Federal Land Bank of Spokane was established under the authority of Chapter 7 and the Federal Inter- mediate Credit Bank of Spokane under the authority of Chapter 8, Title 12, of the United States Code Annotated. Each of them is a regularly organized or constituted corporation (Secs. 676, 1023), and shall act as a fiscal agent of the government when so designated by the Secretary of the Treasury. (Secs. 701, 1024). A part of the cap- ital stock of the land bank and all of the capital stock of the credit bank are owned by the United States. (Secs. 692, 698, 1061). The net earnings of the latter shall be divided into equal parts, one-half to be paid to the United States and the balance into a surplus fund until it amounts to 100 per centum of the subscribed capital stock, and thereafter but 10 per centum of the earnings to be paid into the surplus. After these requirements have been met, the then net earnings shall be paid to the United States as a franchise tax. The net earnings received by the United States shall, in the discretion of the Secretary of the Treasury, be used to supplement the gold reserve or be applied to the rf.duction of the outstanding bonded indebtedness of the United States; (Sec. 1072). Section 931 of Chapter 7 provides that: "Every Federal land bank and every national farm loan association, including the capital and reserve or surplus therein and the in- C0me derived therefrom, shall be ex- empt from Federal, State, municipal, and local taxation, except taxes upon real estate held, purchased, or taken by said bank or association under the provisions of section 761 and section 781 of this chapter. First mortgages executed to Federal land banks, or to joint-stock land banks, and farm loan bonds issued under the provisions of this chapter, shall be deemed and held to be instrumentalities of the Govern- ment of the United States, and as such they and the income derived therefrom shall be exempt from Fed- eral, State, municipal, and local taxa- tion." Section 1111 of Chapter 8 pro- vides that: "The privileges of tax ex- emption accorded under section 931 shall apply also to each Federal Inter- mediate Credit Bank, including its capital, reserve, or surplus, and the income derived therefrom, and the debentures issued under this title shall be deemed and held to be instru- mentalities of the Government and shall enjoy the same tax exemptions as are accorded farm loan bonds in said section." In view of the law applicable to them, the courts have frequently de- clared that federal land banks are instrumentalities of the federal gov- ernment, engaged in the performance of an important governmental func- tion. (Smith v. Kansas City Title & Trust Co., 255 U. S. 180; Federal Land Bank v. Priddy, 295 U. S. 229; Fed- eral Land Bank v. State Highway De- partment, 173 S. E. 284; Federal Land Bank of Baltimore v. Hubard, 178 S. E. 16; Ellingson v. Iowa Joint Stock Land Bank, 264 N. W. 516; Leuthold V. Des Moines Joint Stock Land Bank, 266 N. W. 450). Though the courts have not so far determined the status of federal intermediate credit banks, the conclusion is inescapable that they, too, are instrumentalities of the United States. (Smith v. Kansas City Title & Trust Co., above; Ellingson v. Iowa OPINIONS OF THE ATTORNEY GENERAL 355 Joint Stock Land Bank, above; Leuth- old v. Des Moines Joint Stock Land Bank, above; 34 Ops. U. S. Atty. Gen. 23). It is well settled that the state may not tax the instrumentalities of the general government. It is equally well settled that the state may not impose a burden of any other kind upon such instrumentalities. (2 Cooley on Taxation, sec. 606, p. 1286; 61 C. J. 371; McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579; Johnson v. Mary- land, 254 U. S. 51; Federal Land Bank v. Crosland, 261 U. S. 374; Fort v. Great Falls, 46 Mont. 292; Mid-Nor- thern Oil Co. v. Walker, 65 Mont. 414; Federal Land Bank v. State Highway Department, supra; Federal Land Bank of Baltimore v. Hubard, supra; Dallas Joint Stock Land Bank v. Bal- lard, 74 S. w. 297). In Panhandle Oil Co. v. Mississippi, 277 U. S. 218, the court held that a state tax imposed on dealers in gaso- line for the privilege of selling, and measured at so many cents per gal- lon of gasoline sold, cannot apply Lo sales to instrumentalities of the United States, such as the Coast Guard Fleet and a Veterans' Hospital. In Graves v. Texas Co., 80 L. Ed., Adv. Sheet 824, the court held that a state excise tax upon storers of gaso- line, accruing at the time of with- drawal from storage, cannot be im- posed in respect of gasoline with- drawn for the purpose of sale to the United States for use in performing governmental functions. In Johnson v. Maryland, supra, th.~ court held that an employee of the Post Office Department could not be required to obtain a license from the State of Maryland before exercising the right of driving a government motor truck over a post-road in that state in the performance of his of- ficial duty. In Federal Land Bank v. Croslan:1. supra, the court held that a first mortgage executed to a federal land bank is an instrumentality of the gov- ernment and cannot be subjected to a state recording tax. In Federal Land Bank of Baltimore v. Hubard, supra, the supreme court of appeals of Vir- ginia held to the same effect. In Federal Land Bank v. State High- way Department, supra, the supreme court of South Carolina held that a federal land bank's automobile used in the conduct of its business is an in- strumentality of the United States and for that reason is not subject to state license fees. We think former Attorney General Foot did not give the case of Pan- handle Oil Co. v. Mississippi, supra, the force to which it was properly en- titled when he advised the state board of equalization (14 Ops. of Atty. Gen. 352) that a gasoline license tax could be imposed by this state upon gasoline sold to the Federal Land Bank of Spokane for use in its business. There is no SUbstantial difference between the Mississippi statute construed in the Panhandle case and our Gasoline License Tax Law so far as the char- acter of the tax itself is concerned. It is our conclusion, therefore, that the Federal Land Bank of Spokane and the Federal Intermediate Credit Bank of Spokane are not. subject to our gasoline license tax and motor vehicle license fees when operating their automobiles within this state in the conduct of their businesses as agencies of the government.