US Supreme Court Briefs

99-1792

In the Supreme Court of the United States

DIRECTOR OF REVENUE OF MISSOURI, PETITIONER

v.

COBANK ACB, AS SUCCESSOR TO THE
NATIONAL BANK FOR COOPERATIVES

ON WRIT OF CERTIORARI
TO THE SUPREME COURT OF MISSOURI

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER

 

SETH P. WAXMAN
Solicitor General
Counsel of Record

PAULA M. JUNGHANS
Acting Assistant Attorney General

LAWRENCE G. WALLACE
Deputy Solicitor General

DAVID C. FREDERICK
Assistant to the Solicitor
General

DAVID ENGLISH CARMACK
DONALD B. TOBIN
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

 

QUESTION PRESENTED

Whether the State of Missouri, consistently with 12 U.S.C. 2134, maytax the income of the National Bank for Cooperatives, a federally charteredinstrumentality.

 

In the Supreme Court of the United States

No. 99-1792

DIRECTOR OF REVENUE OF MISSOURI, PETITIONER

v.

COBANK ACB, AS SUCCESSOR TO THE
NATIONAL BANK FOR COOPERATIVES

 

ON WRIT OF CERTIORARI
TO THE SUPREME COURT OF MISSOURI

 

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER

 

INTEREST OF THE UNITED STATES

This case concerns whether Congress has exempted from state taxationthe income of a privately-owned, for-profit agricultural lending bank charteredas a federal instrumentality under the Farm Credit Act of 1971, 12 U.S.C.2001 et seq., as amended by the Farm Credit Amendments Act of 1985, Pub.L. No. 99-205, 99 Stat. 1678. The United States has a substantial interestin ensuring that statutorily defined federal instrumentalities are taxedby States solely in accordance with federal law. In response to this Court'sinvitation, the United States filed an amicus curiae brief at the petitionstage (and subsequently on the merits as well) in Arkansas v. Farm CreditServices of Central Arkansas, 520 U.S. 821 (1997), which presented an issuesimilar to the one here. The Court decided that case on procedural grounds,however, without reaching the merits.

STATEMENT

Respondent CoBank ACB is successor to all rights and obligations of theNational Bank for Cooperatives. It seeks a refund of state income taxespaid to Missouri by the National Bank for Cooperatives for the years 1991through 1994. Pet. App. A8-A9.

1. In the Farm Credit Act of 1933, ch. 98, 48 Stat. 257, Congress reformedthe system of lending for farmers in a manner intended "to providestimulus in the form of Government capital and supervision to the establishmentof local institutions in which farmers are participants and owners and throughwhich necessary credit may be provided on a safe business basis and at reasonablecost." H.R. Rep. No. 171, 73d Cong., 1st Sess. 2 (1933). The Act soughtto accomplish that goal through the organization and chartering of differenttypes of institutions that would meet the specific credit needs of farmers.

Under the overall supervision of the Farm Credit Administration, thesystem as enacted by Congress in 1933 organized the country geographicallyinto 12 farm credit districts, with each district having a federal landbank, a number of federal land bank associations, a federal intermediatecredit bank, a number of production credit associations, and a bank forcooperatives. Within the district, each institution had a discrete lendingpurpose: the federal land bank to make long-term first loans secured bymortgages on farm land to farmers through land bank associations; productioncredit associations to make short- and intermediate-term loans to farmersand ranchers with capital obtained by discounting loans with the federalintermediate credit bank; and the bank for cooperatives to make loans tocooperative associations that are engaged in marketing farm products, purchasingfarm supplies, or furnishing farm-business services. See generally H.R.Rep. No. 593, 92d Sess., 1st Sess. 6-9 (1971) (describing institutions inthe Farm Credit System). By statute, each of those institutions is definedas an "instrumentality of the United States." See 12 U.S.C. 2121note (national bank for cooperatives); 12 U.S.C. 2121 (banks for cooperatives);12 U.S.C. 2071(a) and (b)(7) (production credit associations); 12 U.S.C.2011(a) (farm credit banks); 12 U.S.C. 2091(a) and (b)(4) (federal landbank associations).

The Farm Credit Act of 1933 also established a Central Bank for Cooperativesin addition to the bank for cooperatives in each of the 12 farm credit districts.Ch. 98, §§ 2, 30, 40, 48 Stat. 257, 261, 264. Congress intendedfor the Central Bank for Cooperatives to make loans to cooperative associations.See § 34, 48 Stat. 262-263; 12 U.S.C. 2122, 2124, 2128, 2129. The debenturesissued by the Central Bank, however, "are not guaranteed in any wayby the United States." H.R. Rep. No. 593, supra, at 9. Rather, Congressintended the loan funds of the banks to be obtained from the capital andsurplus of the banks, as well as from the sale of debentures to the investingpublic. Ibid.

Although Congress initially capitalized the banks for cooperatives (andother institutions in the Farm Credit System), see Farm Credit Act of 1933,ch. 98, §§ 33, 40, 48 Stat. 262, 264, it provided for the governmentalstake in those institutions to be retired "by the creation of permanentcapital provided by the users of the bank." H.R. Rep. No. 593, supra,at 9. See Farm Credit Act of 1955, ch. 785, 69 Stat. 655 (providing mechanismsto facilitate retirement of government stock ownership in banks for cooperatives)."The first of the banks for cooperatives to retire all of its Governmentcapital did so in 1965 and the last in 1968. Therefore all Government capitalhas now been retired, and the banks are completely owned by borrowing cooperatives."H.R. Rep. No. 593, supra, at 9.

In 1987, Congress authorized the merger of the Central Bank and the districtbanks for cooperatives. Agricultural Credit Act of 1987, Pub. L. No. 100-233,

§ 413(b)(4), 101 Stat. 1639 (12 U.S.C. 2121 note). Pursuant to thatlegislation, ten district banks and the Central Bank for Cooperatives mergedand formed the National Bank for Cooperatives. J.A. A22-A23; Pet. App. A8-A9.1The taxation provisions relevant to this case, however, concern banks forcooperatives, for the 1987 Act authorizing consolidation of such banks withthe Central Bank for Cooperatives did not affect the taxation of those institutions.See Farm Credit Act of 1933, ch. 98, §§ 33, 40, 48 Stat. 262,264; 12 U.S.C. 2134.

2. In the Farm Credit Act of 1933, Congress specifically provided thatthe Central Bank for Cooperatives and banks for cooperatives "shallbe deemed to be instrumentalities of the United States" and that "allnotes, debentures, bonds and other such obligations issued by such banks* * * shall be exempt both as to principal and interest from all taxation(except surtaxes, estate, inheritance, and gift taxes) now or hereafterimposed by the United States or by any State, Territorial, or local taxingauthority." Ch. 98,

§ 63, 48 Stat. 267. That Section further provided that the incomeof those banks "shall be exempt from all taxation" by taxing authorities"except that any real property and any tangible personal property ofsuch banks * * * shall be subject to Federal, State, Territorial, and localtaxation to the same extent as other similar property is taxed." Ibid.Notwithstanding that broad exemption, the 1933 Act provided a limitation:"The exemption provided herein shall not apply with respect to * ** the Central Bank for Cooperatives, or any Production Credit Corporationor Bank for Cooperatives, or its property or income after the stock heldin it by the United States has been retired." Ibid.

By 1971, when Congress amended the Farm Credit Act, all previously-organizedbanks for cooperatives had become privately owned, because the stock onceheld in them by the United States had been retired. See H.R. Rep. No. 593,supra, at 9. Congress provided, however, that the Governor of the Farm CreditAdministration had the authority on behalf of the United States to purchasestock in banks for cooperatives "as a temporary investment in the stockof the institution to help one or several of the banks or associations tomeet emergency credit needs of borrowers." Pub. L. No. 92-181, §4.0, 85 Stat. 609. To assist in aiding agricultural lending entities duringfinancial emergencies, Congress empowered the Governor of the Farm CreditAdministration to purchase stock in the various institutions establishedwithin the Farm Credit System, including banks for cooperatives. §4.0, 85 Stat. 609. Furthermore, Congress retained the exemption from taxationfor each bank for cooperatives that had existed prior to 1971-an exemptioncontingent on ownership of stock in the bank by the United States (throughthe Farm Credit Administration). § 3.13, 85 Stat. 608-609 (codifiedat 12 U.S.C. 2134). The amended statute provided:

Each bank for cooperatives and its obligations are instrumentalitiesof the United States and as such any and all notes, debentures, and otherobligations issued by such bank shall be exempt, both as to principal andinterest from all taxation (except surtaxes, estate, inheritance, and gifttaxes) now or hereafter imposed by the United States or any State, territorial,or local taxing authority. Such banks, their property, their franchises,capital, reserves, surplus, and other funds, and their income shall be exemptfrom all taxation now or hereafter imposed by the United States or by anyState, territorial, or local taxing authority; except that interest on theobligations of such banks shall be subject only to Federal income taxationin the hands of the holder thereof pursuant to the Public Debt Act of 1941(31 U.S.C. 742(a)) and except that any real and tangible personal propertyof such banks shall be subject to Federal, State, territorial, and localtaxation to the same extent as similar property is taxed. The exemptionprovided in the preceding sentence shall apply only for any year or partthereof in which stock in the bank for cooperatives is held by the Governorof the Farm Credit Administration.

Ibid. (emphasis added).

By 1985, a poor agricultural economy had driven the Farm Credit Systeminto a financial crisis. See H.R. Rep. No. 425, 99th Cong., 1st Sess. 6-11(1985). Congress considered various options, including an infusion of federalfunds into the Farm Credit System, but rejected that idea in part becauseof its conclusion that "if the System uses its own resources effectively,outside assistance is not now needed and not likely to be needed through1987." Id. at 14. Instead, Congress enacted the Farm Credit AmendmentsAct of 1985, Pub. L. No. 99-205, 99 Stat. 1678, to permit the Farm CreditSystem to use its own resources in addressing the financial needs of members.See H.R. Rep. No. 425, supra, at 11, 14. Among other things, the 1985 Actrestructured the Farm Credit Administration so that it would be controlledby a three-member board instead of by a Governor, § 201(1), 99 Stat.1688, and modified the role of the Farm Credit Administration within theFarm Credit System, § 201(7), 99 Stat. 1691. Congress discontinuedthe Farm Credit Administration's authority to own stock in a bank for cooperativesas part of an effort to "establish the Farm Credit Administration asan arms length regulator of the System institutions and to take it out ofcertain activities of the System which would involve it in management discretionof such institutions." H.R. Rep. No. 425, supra, at 28. See Pub. L.No. 99-205, §§ 101, 201(7), 99 Stat. 1678, 1691-1693; see alsoH.R. Rep. No. 425, supra, at 15 (explaining that Section 101 of the Act"would repeal and replace sections 4.0 and 4.1 of the Act, which establishtwo revolving funds that are available to the Governor of the Farm CreditAdministration to make investments in production credit associations, Federalintermediate credit banks, and banks for cooperatives").2

In addition to changes in "the basic powers, duties and authoritiesof the Farm Credit Administration,"

the Act also contained "numerous technical and conforming amendments."H.R. Rep. No. 425, supra, at 28; see § 205, 99 Stat. 1703-1707. Amongthose technical amendments was the deletion of the two sentences withinSection 3.13 of the 1971 Act italicized above, which exempted a bank forcooperatives from state taxation contingent upon stock ownership by the"Governor of the Farm Credit Administration." § 205(e)(10),99 Stat. 1705.3 The 1985 Act left Section 3.13, now codified at 12 U.S.C.2134, much as it currently exists (set forth at Pet. 2).4

3. Respondent's predecessor, the National Bank for Cooperatives, filedMissouri corporate income tax returns and paid Missouri income tax for taxyears 1991 through 1994. In March 1996, respondent filed amended returnson behalf of the National Bank for Cooperatives, seeking refunds of incometax paid for 1991 through 1994 on the ground, inter alia, that the NationalBank for Cooperatives was exempt from state income taxation because it wasa federal instrumentality and Congress had not expressly consented to itsbeing subject to state taxation in the amended version of the Farm CreditAct (12 U.S.C. 2134). The Missouri Director of Revenue denied respondent'sclaims in pertinent part. J.A. A14-A20, A29-A34. Respondent challenged thatdecision before Missouri's Administrative Hearing Commission, which upheldthe director's denial. Pet. App. A6-A16. The commission held that the NationalBank for Cooperatives had not established that it was a federal instrumentalitystatutorily exempt from state taxation of its income. The commission determinedthat, in contrast to farm credit banks and federal land bank associations,Congress did not expressly provide that banks for cooperatives would haveimmunity from state income taxation. Id. at A14. The commission found thathad Congress intended to confer upon banks for cooperatives the same immunitythat was provided to farm credit banks and federal land bank associations,it would have done so expressly. Ibid. For jurisdictional reasons, the commissiondid not reach respondent's constitutional claim. Id. at A2, A11.

4. The Missouri Supreme Court upheld respondent's constitutional challengeto the tax. That court interpreted this Court's Supremacy Clause jurisprudenceto accord federal instrumentalities immunity from state income taxationand to require that such immunity could be waived only by express statutoryconsent. Pet. App. A2-A3. The court reasoned that Congress had consentedto state income taxation of banks for cooperatives under Section 3.13 ofthe Farm Credit Act of 1971 (former 12 U.S.C. 2134 (1976)) after the UnitedStates no longer owned stock in those banks, but that the 1985 amendmentsto the 1978 Act deleted that consent. Pet. App. A3. The court further opinedthat Congress's consent to taxation is at most implied and thus is insufficientto constitute a waiver. Ibid. The Missouri Supreme Court noted that othercourts that have addressed the question under the Farm Credit Act, whichhas virtually identical language for production credit associations, hadreached the same conclusion that States could not tax the income of thoseFarm Credit System institutions. Ibid. (citing Farm Credit Servs. of Cent.Ark. v. Arkansas, 76 F.3d 961, 964 (8th Cir. 1996), rev'd on other grounds,520 U.S. 821 (1997); State v. Farm Credit Servs. of Cent. Ark., 994 S.W.2d453, 456 (Ark. 1999), cert. denied, 120 S. Ct. 1530 (2000); Farm CreditServs. of Mid-Am. v. Department of State Revenue, 705 N.E.2d 1089, 1092(Ind. Tax Ct. 1999); Northwest La. Prod. Credit Ass'n v. State, 746 So.2d 280 (La. Ct. App. 1999)).

The New Mexico Court of Appeals reached the opposite conclusion withrespect to income taxation of production credit associations under 12 U.S.C.2077. See Production Credit Ass'n of Eastern N.M. v. Taxation & RevenueDep't, 999 P.2d 1031 (Ct. App.), cert. denied, 997 P.2d 820 (N.M. 2000),reprinted in Pet. App. A17-A32. That court held that, under the languageand history of 12 U.S.C. 2077, Congress had consented to state taxationof the income of production credit associations. Pet. App. A30-A32. Thecourt reasoned that, under the 1933 and 1971 Acts, production credit associationswere exempt from state income tax only for so long as the United Statesowned stock in those associations. The court further concluded that therepeal in 1985 of the two sentences in 12 U.S.C. 2077 (1982) conditionallyexempting the production credit associations from state income tax so longas the United States owned an equity interest in the associations did notchange the law, but merely reflected the fact that the sentences had becomeredundant because the United States no longer held or would hold sharesof stock in those associations. Pet. App. A28.

SUMMARY OF ARGUMENT

The decision below erroneously construed the Farm Credit Act of 1971,12 U.S.C. 2134, to exempt banks for cooperatives from state income taxes.The Farm Credit Act of 1933 conferred on banks for cooperatives a broadexemption from such state taxation, but only for so long as the federalgovernment maintained stock holdings in them. Since 1968, the federal governmenthas not held any stock in a bank for cooperatives. Since that time, therefore,such banks have enjoyed a limited express exemption from state taxationwith respect to their obligations, but the banks themselves have been liablefor income taxation such as the State seeks to impose here.

In 1985, Congress enacted technical amendments that deleted the broaderexemption from tax that had applied when the United States owned stock inbanks for cooperatives. In ruling that Congress evinced no intent to continueto subject banks for cooperatives to state income taxation, the state supremecourt in effect interpreted the 1985 technical amendments as if Congresshad deleted the condition precedent to the broad exemption-the federal government'sstock ownership-but had not deleted the exemption itself. Neither the languageof the amendment nor the history of Section 2134 supports that result.

ARGUMENT

STATE TAXATION OF THE INCOME OF BANKS FOR COOPERATIVES IS PERMISSIBLEUNDER THE FARM CREDIT ACT

As this Court has made clear, while "absent express congressionalauthorization[ ] a State cannot tax the United States directly," CottonPetroleum Corp. v. New Mexico, 490 U.S. 163, 175 (1989) (citing M'Cullochv. Maryland, 17 U.S. (4 Wheat.) 316 (1819)), Congress determines whether,and to what extent, instrumentalities performing federal functions are exemptfrom state and local taxation. United States v. New Mexico, 455 U.S. 720,733-735, 737-738, 743-744 (1982); Department of Employment v. United States,385 U.S. 355, 358 (1966). The language, structure, and history of the FarmCredit Act make clear that Congress intended for privately-owned, for-profitbanks for cooperatives to be subject to the income tax Missouri seeks toimpose.

A. By Its Plain Terms, Section 2134 Confers Only A Narrowly Defined TaxExemption Inapplicable Here Rather Than A Broad Exemption From State IncomeTaxes For Banks For Cooperatives

1. Since the original enactment of the Farm Credit Act in 1933, Congresshas declared that all banks for cooperatives are federal instrumentalities-regardlessof whether the federal government owns any stock in them-and that, as such,their "notes, debentures, bonds, and other such obligations * * * shallbe exempt both as to principal and interest from all taxation" exceptfor "surtaxes, estate, inheritance, and gift taxes." Ch. 98, §63, 48 Stat. 267. If the federal government held an ownership interest ina bank for cooperatives, a broader exemption from state and federal taxesapplied. Ibid.; see § 3.13, 85 Stat. 608-609. By 1968, however, theprovision conferring the broader exemption from state taxation no longerhad any practical effect, because the federal government no longer heldany stock interest in any bank for cooperatives. See H.R. Rep. No. 425,supra, at 117 (noting that "the Banks for Cooperatives [were] farmer-ownedby 1968"). The condition for exempting banks for cooperatives fromstate income tax had therefore ceased to exist.

In 1985, Congress restructured the Farm Credit System and withdrew thefederal government's authority to own stock directly in banks for cooperatives.Pub. L. No. 99-205, § 101, 99 Stat. 1678; H.R. Rep. No. 425, supra,at 28-29. As part of that effort to make the System more self-sufficient,Congress created the Farm Credit System Capital Corporation to provide emergencyinvestments in System entities with capital raised from within the System.Pub. L. No. 99-205,

§ 103, 99 Stat. 1680-1687; H.R. Rep. No. 425, supra, at 13-15. Forthe future, any federal government financial support was limited to investmentsin the Capital Corporation. Pub. L. No. 99-205, § 101, 99 Stat. 1678;H.R. Rep. No. 425, supra, at 28-29. In accordance with that restructuring,Congress also passed various technical amendments to 12 U.S.C. 2134. Thoseamendments deleted the reference to the federal government's stock ownershipin a bank for cooperatives and the part of Section 2134 that authorizedthe broader exemption from federal and state taxation when the federal governmentowned stock in a bank for cooperatives. As amended, Section 2134 thus providesthat notes, debentures, and other obligations issued by a bank for cooperativesare tax exempt while providing that interest on such obligations is subjectto federal income tax. 12 U.S.C. 2134. As to any other tax obligations,the statute is now silent.

Respondent argues that the 1985 technical amendments rendered them exemptfrom state income taxes because the absence of any statement about tax liabilityis tantamount to a congressional intent that banks for cooperatives be completelyexempt from such taxes. Such an interpretation, however, would render meaninglessthe provisions in Section 2134 specifically setting out tax exemptions forobligations of banks for cooperatives. Congress would not have needed toenact specific exemptions from state taxation if it had intended a ruleof general exemption to apply. Rather than read the specific tax exemptionsfor banks for cooperatives as surplusage, the language in the statute shouldbe given its full effect. See South Dakota v. Yankton Sioux Tribe, 522 U.S.329, 347 (1998) ("[T]he Court avoids interpreting statutes in a waythat 'renders some words altogether redundant.'") (quoting Gustafsonv. Alloyd Co., 513 U.S. 561, 574 (1995)); Dunn v. Commodity Futures TradingComm'n, 519 U.S. 465, 472 (1997) ("legislative enactments should notbe construed to render their provisions mere surplusage").5 From itsinception in 1933 to the present, therefore, nothing in the language ofSection 2134 or its precursors supports the contention that Congress intendedto create an exemption from income taxes for privately-owned banks for cooperatives.

2. Nor does anything in the legislative history of Section 2134 suggestsuch an intent. Because the statutory language prior to 1985 was unequivocalon this point, the state supreme court's conclusion must rest on Congress'sintent in enacting the 1985 amendments. Yet nothing in the legislative historyof those amendments suggests that Congress intended to grant to banks forcooperatives any expanded or new immunities from taxation. Indeed, in removingprior provisions authorizing the federal government to maintain direct stockholdings in the banks for cooperatives, as well as the original provisionsconferring the broader exemption from state tax when the United States holdsan ownership interest in the banks for cooperatives, the legislative historyspecifies that Congress intended to make only "technical and conformingamendments." H.R. Rep. No. 425, supra, at 28. If Congress had intendedto alter the status quo in the 1985 amendments and to create a broad immunityfrom taxation for privately-owned banks for cooperatives, it is unlikelyto have done so by a "technical amendment." See Edmonds v. CompagnieGenerale Transatlantique, 443 U.S. 256, 266-267 (1979) ("[S]ilence[in legislative history] * * * while contemplating an important and controversialchange in existing law is unlikely."). Yet the decision below in effectassumes the exact opposite: even though Congress had explicitly createdan exemption from taxation only in certain specifically defined contexts,the court nonetheless held that Congress impliedly intended to establisha much broader exemption. See Pet. App. A3.

The court's assumption is particularly implausible in view of the historyof Section 2134. Congress was well aware that banks for cooperatives arefor-profit entities chartered by the federal government. Consequently, Congressintended in the 1985 amendments for the federal government not to subsidizethe banks for cooperatives, but rather to give the Farm Credit System thetools with which to use existing capital in the System to aid those withspecial financial needs. See H.R. Rep. No. 425, supra, at 7-8, 11-12. Thehistory behind Section 2134, therefore, does not support the state supremecourt's holding that Congress implicitly conferred upon banks for cooperativesa new, broad-based exemption from federal, state, and local taxes.

B. The Overall Context And History Of The Farm Credit Act Also NegateThe Claim Of Immunity In This Case

From the original enactment of the Farm Credit Act, Congress explicitlydetermined which federally chartered lending institutions within the FarmCredit System would be entitled to comprehensive immunity from taxationand which would not. In addition to banks for cooperatives, the Farm CreditSystem includes farm credit banks, federal land bank associations, and productioncredit associations. 12 U.S.C. 2002(a). With respect to each entity, theFarm Credit Act contains a "taxation" provision that delineatesspecifically the immunity from taxes enjoyed by that entity. See 12 U.S.C.2023 (farm credit banks), 2077 (production credit associations), 2098 (federalland bank associations), 2134 (banks for cooperatives).

For farm credit banks and federal land bank associations, Congress explicitlyprovided the type of comprehensive immunity that the state supreme courtheld to be implied here for banks for cooperatives. For example, Congressexplicitly granted comprehensive immunity to farm credit banks under 12U.S.C. 2023, which provides:

The Farm Credit Banks and the capital, reserves, and surplus thereof,and the income derived therefrom, shall be exempt from Federal, State, municipal,and local taxation, except taxes on real estate held by a Farm Credit Bankto the same extent, according to its value, as other similar property heldby other persons is taxed.

The substantive language of that exemption is identical to the languagefor federal land bank associations in 12 U.S.C. 2098. As to both entities,the exemption language has been largely unchanged since the Farm CreditAct of 1971. See Pub. L. No. 92-181, §§ 1.21, 2.8, 85 Stat. 590,597.6

By contrast, production credit associations and banks for cooperativeshave been granted only the limited exemption from taxation with respectto their obligations. See 12 U.S.C. 2077, 2134. Prior to the 1985 amendmentsto the Farm Credit Act, production credit associations (like banks for cooperatives)also possessed a broad-based exemption from taxation that was contingentupon the United States' stock ownership. See Pub. L. No. 92-181, §2.17, 85 Stat. 602. That contingent exemption was repealed in 1985 by thesame technical amendments that applied to the banks for cooperatives. SeePub. L. No. 99-205, § 205(e)(16), 99 Stat. 1705. Congress thus "intentionallyand purposely" chose to grant an expansive immunity from taxation tofarm credit banks and federal land bank associations, while at the sametime conferring a more limited exemption (concerning only their notes, debentures,and other obligations) with respect to production credit associations andbanks for cooperatives. Had Congress wished to confer upon banks for cooperativesand production credit associations the more comprehensive exemption fromtaxation that it had provided to federal credit banks and federal land bankassociations, it presumably would have done so expressly as it had elsewherein the Farm Credit Act. See, e.g., Russello v. United States, 464 U.S. 16,23 (1983) ("[W]here Congress includes particular language in one sectionof a statute but omits it in another section of the same Act, it is generallypresumed that Congress acts intentionally and purposely in the disparateinclusion or exclusion.") (quoting United States v. Wong Kim Bo, 472F.2d 720, 722 (5th Cir. 1972)). Congress, however, did not "write thestatute that way." Id. at 23 (quoting United States v. Naftalin, 441U.S. 768, 773 (1979)).7

The effect of the state supreme court's decision is to grant to respondentsa tax exemption equal to or potentially greater than that which Congressexplicitly provided to farm credit banks and federal land bank associations,since the logic of the court's decision would arguably grant banks for cooperativesan exemption from real property taxes, an exemption not shared by eitherfarm credit banks or federal land bank associations. See Farm Credit Servs.of Cent. Ark. v. Arkansas, 76 F.3d 961, 967 (8th Cir. 1996) (Loken, J.,dissenting), rev'd on other grounds, 520 U.S. 821 (1997). That result wouldalter significantly the extent to which States and localities have beenempowered to tax banks for cooperatives since at least 1968-an empowermentthat has resulted in millions of dollars in tax revenues. See Ohio et al.Amici Cert. Br. 8. Nothing in Section 2134, the Farm Credit Act as a whole,or the pertinent legislative history indicates that Congress meant for its1985 "technical" amendments to effect such a sweeping change.

C. The Court Need Not Decide In This Case The Scope Of A Federal Instrumentality'sExemption From State Taxes In Other Contexts

The theory advanced by respondent, and accepted by the court below, isthat Congress's use of the term "instrumentalit[y] of the United States"in 12 U.S.C. 2134, coupled with the deletion in 1985 of the provision conferringan exemption from tax when the United States held shares in banks for cooperatives,is sufficient to warrant application of a broad constitutional rule thata federal instrumentality may not be taxed absent express consent by Congress.See Pet. App. A2-A3 (citing M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316,436-437 (1819)).

Respondent's position would require this Court to define what qualitiesof a federal instrumentality are sufficient to warrant recognition of sucha broad-based immunity from state taxation. Yet, as this Court has noted,"there is no simple test for ascertaining whether an institution isso closely related to governmental activity as to become a tax-immune instrumentality."Department of Employment v. United States, 385 U.S. 355, 358-359 (1966).Unlike the Red Cross in that case, for instance, the banks for cooperativesdo not have officers "appointed by the President," "the rightand the obligation to meet this Nation's commitments under various [statutes],[or the authority] to perform a wide variety of functions indispensableto the workings of our [government]." Id. at 359. The banks for cooperativesdo not "receive substantial material assistance from the Federal Government"nor have "the President and the Congress * * * recognized and actedin reliance upon the [banks for cooperatives'] status virtually as an armof the Government." Id. at 359-360. While Department of Employmentnoted that the foregoing qualities were not exhaustive, the Court elsewherehas expressed reluctance to announce a constitutional rule in contexts inwhich Congress has manifested its intent through statutory law. See, e.g.,First Agric. Nat'l Bank v. State Tax Comm'n, 392 U.S. 339, 341 (1968) ("Becauseof pertinent congressional legislation in the banking field, we find itunnecessary to reach the constitutional question of whether today nationalbanks should be considered nontaxable as federal instrumentalities.").

That doctrine of prudence is especially appropriate in this area of thelaw. Congress has used the term "instrumentality" in literallyscores of enactments, some with express tax exemption provisions and somewithout.8 Congress also has established or chartered by statute "governmentcorporations" and "government controlled corporations," whichperform important functions and for which exemptions from certain formsof taxation may or may not be conferred by statute.9 Because a ruling infavor of respondent could bear on how the taxation of those entities istreated, conferral of any broad exemption from taxation for banks for cooperativesproperly should be prescribed by Congress, if it regards such a policy tobe in the national interest. See, e.g., First Agric. Nat'l Bank, 392 U.S.at 346 ("Because of [the statute] and its legislative history, we areconvinced that if a change is to be made in state taxation of national banks,it must come from Congress, which has established the present limits.").

CONCLUSION

The judgment of the Supreme Court of Missouri should be reversed.

Respectfully submitted.

SETH P. WAXMAN
Solicitor General

PAULA M. JUNGHANS
Acting Assistant Attorney
General

LAWRENCE G. WALLACE
Deputy Solicitor General

DAVID C. FREDERICK
Assistant to the Solicitor
General

DAVID ENGLISH CARMACK
DONALD B. TOBIN
Attorneys

AUGUST 2000

 

1 Respondent CoBank ACB is an agricultural credit bank that was createdwhen the National Bank for Cooperatives merged with two other entities,the Farm Credit Bank of Springfield and the Springfield Bank for Cooperatives.J.A. A21-A22. Although an "agricultural credit bank" is not definedby federal statute, the Farm Credit Administration has recognized such institutionsas having the combined authority of a bank for cooperatives and a farm creditbank. See Farm Credit Admin., 1994 Annual Report 2.

2 Although the Farm Credit Administration was no longer authorized toprovide any separate capital assistance directly to institutions such asbanks for cooperatives, it could make investments from the United States'"revolving fund" in the newly created Farm Credit System CapitalCorporation. § 101, 99 Stat. 1678; H.R. Rep. No. 425, supra, at 28-29.The Capital Corporation became solely responsible for providing financialand technical assistance to institutions experiencing difficulties, withits funds being raised mostly internally from other institutions in theFarm Credit System. § 103, 99 Stat. 1680-1687; H.R. Rep. No. 425, supra,at 13-15. The Farm Credit System Assistance Board and the Farm Credit SystemFinancial Assistance Corporation have since replaced the Farm Credit SystemCapital Corporation. Agricultural Credit Act of 1987, Pub. L. No. 100-233,§ 201, 101 Stat. 1585-1605.

3 Pub. L. No. 99-205 contains two separate sections designated as 205(e).The first Section 205(e) deals with production credit associations and thesecond deals with banks for cooperatives.

4 In the Agricultural Credit Act of 1987, Congress amended 12 U.S.C.2134 to add a second exception to the tax exemption, inserting after theword "authority," the clause "except that interest on suchobligations shall be subject to Federal income taxation in the hands ofthe holder." Pub. L. No. 100-233, § 805(p), 101 Stat. 1716.

5 Indeed, under respondent's theory, it would be free from all statetaxation, including property taxes. Such a result, however, would providebanks for cooperatives with an even broader exemption than originally enactedin 1933 by Congress, when the United States held stock in such banks, foreven in that circumstance the banks were subject to property taxes. SeeFarm Credit Act of 1933, ch. 98, § 63, 48 Stat. 267; Pub. L. No. 92-181,§ 3.13, 85 Stat. 608-609. Moreover, exempting banks for cooperativesfrom property tax would be inconsistent with Congress's treatment of propertytaxes for other institutions within the Farm Credit System. See 12 U.S.C.2278a-11 (making Assistance Board subject to real estate taxes); 12 U.S.C.2278b-10 (same for Financial Assistance Corporation); 12 U.S.C. 2098 (samefor land bank associations).

6 Section 1.21 of the Farm Credit Act of 1971 addressed the taxationof both federal land banks and federal land bank associations. Section 2.8referred to the taxation of federal intermediate credit banks. Federal landbanks and federal intermediate credit banks were merged and became "farmcredit banks" under the Agricultural Credit Act of 1987, Pub. L. No.100-233, § 410, 101 Stat. 1637. As part of the 1987 Act, the taxationstatutes were redesignated as Sections 1.15 and 2.17 for farm credit banksand federal land bank associations, respectively. Pub. L. No. 100-233,

§ 401, 101 Stat. 1629, 1637.

7 Congress also has demonstrated its ability to provide federal instrumentalitieswith broad exemptions from state taxation outside of the Farm Credit Act.For example, in the Federal Credit Union Act, Pub. L. No. 86-354, 73 Stat.628 (12 U.S.C. 1751 et seq.), federal credit unions, their property, theirfunds, and their income are exempt from all federal, state or local taxation,except that, like farm credit banks, their real and personal property aresubject to taxation "to the same extent as other similar property istaxed." 12 U.S.C. 1768. Federal reserve banks have been granted similarlyexpansive tax exemptions as well. 12 U.S.C. 531. Those statutes furtherpoint up the contextual incongruity in the state supreme court's holdinghere and in respondents' arguments in support of it-namely, that Congresssub silentio granted banks for cooperatives a comprehensive exemption fromall federal, state, and local taxation.

8 See, e.g., 12 U.S.C. 2283, 2290 (Federal Financing Bank an "instrumentalityof the United States" with specified exemptions from tax); 15 U.S.C.713a-5, 714 (same for Commodity Credit Corporation); see also 42 U.S.C.2297h-3 (Supp. III 1997) (provisions for United States Enrichment Corporationto be "instrumentality" with certain exemptions from taxationprior to its privatization).

9 See, e.g., 12 U.S.C. 1430, 1433 (Federal Home Loan Banks with specifiedexemptions from taxation); 12 U.S.C. 1451, 1452 (same for Federal Home LoanMortgage Corporation); 12 U.S.C. 1717 (1994 & Supp. IV 1998), 12 U.S.C.1723 (same for Government National Mortgage Association and Federal NationalMortgage Association); 12 U.S.C. 3012, 3019 (same for National ConsumerCooperative Bank).

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