been called upon to consider. It believes that, however alluring the thought may be, the search for a theoretically perfect and universal single solution for all Federal real estate is futile. Supplementary materials are presented in the appendix, part II, of this report. THE PROBLEM ASSIGNED The Federal Real Estate Board was established by Executive Order No. 8034 issued by the President on January 14, 1939. This order listed the agencies to be represented on the Board and specifically prescribed its activities. (See appendix 1.) One of its more comprehensive assignments is that given in paragraph 5 of the Executive order, which reads: "The Federal Real Estate Board shall study, and make appropriate recommendations regarding, the situation in different communities adversely affected by the loss of tax revenues on land purchased or acquired by the Federal Government." The present statement represents the progress made to date in carrying out this assignment. Existing Federal practices with respect to this problem are not well coordinated. How they appear to one of the State research agencies may be seen from the following extract from a recent report: 1 Each law concerning payments in lieu of taxes was enacted to meet a particular problem with little consideration as to how that particular addition fitted into the general structure, so no settled policy exists. Sometimes Federal property is assessed in the same manner as other property; at other times it is not, but full tax equivalents are paid. Sometimes Federal payments are sent without warning; in other cases local taxing units must take the initiative in formulating an agreement for payments. Sometimes Federal agencies are authorized to make payments; again they may be directed to do so. Sometimes Congress insists that money paid shall be spent for certain specific purposes; in other connections no such restrictions are made. Sometimes payments are made to the various State treasuries with instructions to pay part or all to local governments; in other statutes no such instructions are given. As a first step, the Board reviewed the tabulation of Federal property prepared by the special committee of the President and presented in House Document No. 111 of the Seventy-sixth Congress. (See table, appendix 2.) The Board, as a result of its investigations, finds that the Federal Government now owns a strikingly wide variety of lands. Ranging from small post-office sites, through large war-industry plants, to the great national parks and forests of the West, these holdings are used for many purposes and in countless different ways. Some produce revenues to the Federal Government; others are maintained in the public interest wholly at Government expense. Some are being held by the Government pending liquidation only, while title to others will probably remain with the United States in perpetuity. The whole picture is one of contrast and complexity. It is not surprising, therefore, that the Board in its studies finds a corresponding variation in the arrangements under which Federal agencies, pursuant to various acts of the Congress, are now making payments to the State and local governments in connection with federally owned real estate. 1 Illinois Legislative Council, Research Department, Payments in Lieu of Taxes Under Housing and Federal Land Purchase Programs: Publication No. 51, Springfield, Ill., September 1942, pp. 3-4. Revision of all these arrangements to fit an ideal and uniform pattern is regarded as impracticable and unnecessary at this time. The effort of the Board has been rather to deal with the situations which now most urgently call for legislative remedies. PRESENT FEDERAL POLICY It is well settled in law that property owned by the United States is not subject to State or local taxation without the approval of Congress (McCulloch v. Maryland (4 Wheat. 316) 1819). Nevertheless, the Congress has provided three general types of procedures authorizing payments to State and local governments with respect to Federal properties, namely: 1. Subjecting real properties held by certain Government corporations and affiliated agencies to taxation on the same basis as privately owned property. With the sole exception of the Inland Waterways Corporation, all agencies in this class are credit agencies, and the properties involved are practically all acquired as a consequence of lending operations (appendix 3). 2. Authorizing and directing payment of a specified percentage of revenue received from properties to State or local governmental units, with or without stipulating the uses to which the payment may be put (appendix 4). The principal agencies affected by this group of laws are the Department of Agriculture, the Department of the Interior, the War Department (flood control projects) and the Tennessee Valley Authority. 3. Authorizing particular administrative agencies to enter into agreements or other arrangements for payment of certain sums as contributions out of revenue received from properties (appendix 5). Agencies in this class are the Farm Security Administration of the Department of Agriculture, and the Federal Public Housing Authority of the National Housing Agency. In the case of the Farm Security Administration, the payment is determined pursuant to an agreement, but the amount cannot exceed a tax equivalent. In the case of the Federal Public Housing Authority, the law requires that a tax equivalent determined by the Authority itself be paid. It is clear that in general the Federal Government has scrupulously preserved its exemption from State and local taxing jurisdictions, but at the same time has recognized some degree of responsibility to such jurisdictions with respect to certain classes of real property. Such recognition has taken the form of contributions. The extent of these for the years 1937 to 1942 inclusive is summarized in table 1. The term "contributions" is used throughout this report to designate voluntary payments by the Federal Government to State or local governments in view of the nontaxable status of Federal real estate. A similar authority to enter into individual agreements with State and local governments would granted to the proposed Arkansas Valley Authority under sec. 16 (d) (2) of H. R. 6464, 77th Cong. TABLE 1.-Contributions made by Federal agencies to non-Federal taxing bodies, based on real estate owned by the United States 1 [Not including District of Columbia or credit agencies] 1 All based on fiscal year ending June 30 except Soil Conservation Service which pays on a calendar-year basis. 2 Lands acquired under title III of the Bankhead-Jones Farm Tenant Act (appendix 4). 3 Covers wildlife refuges formerly under Biological Survey. * Estimated. Including amounts paid in lieu of taxes by public bodies to whom projects have been leased and deductions made in paymets to the United States. The large increase in 1912 is accounted for by the amendment to the Lanham Act referred to in the text. In recent years, Government policy with respect to contributions based on real estate ownership has come in for increased attention. As evidence of renewed interest in the subject, the following facts may be noted: 1. No less than 30 bills for modifying existing legislation on these contributions were introduced in the Seventy-sixth Congress, and at least 37 such bills were introduced in the Seventy-seventh Congress (appendix 6). 2. Connecticut, Massachusetts, Michigan, New Hampshire, New York, Pennsylvania, and a number of other States have enacted legislation providing for State payments to aid local taxing units on account of property held by the State. Three States, New Hampshire, Pennsylvania, and Texas, recognize the responsibility for directly aiding local governments, the revenues of which are affected by the presence of Federal conservation lands. In these States direct contributions are made. Washington gives special grants-in-aid to school districts containing Federal lands and at least nine States have made legal provisions for the free education of children residing on Federal reservations within their boundaries.* 3. In several States associations have been, or are in the process of being, formed for the purpose of obtaining more favorable legislation on the subject." 4. Executive departments have received, over the past few years, numerous letters, inquiries, petitions, calls, and requests from Members of Congress, local groups of citizens, and others concerning modification of the statutes relating to payments by the Federal 4 Blauch, Loyd E., and Iverson, Wm. L., Education of Children on Federal Reservations. Staff study No. 17, prepared for the Advisory Committee on Education. Government Printing Office, Washington, D. C., 1939. For example, the Interstate Association of Public Land Counties, composed of representatives of counties in 11 Western States, recently was formed to seek from Congress a more liberal contribution with respect to Federal lands. It might be noted also that a resolution was adopted by the Municipal Finance Officers' Association at Louisville in May 1941, asking that greater contributions be made by the Federal Government by virtue of its "huge building projects." Government to State or local governments on account of Federal real estate. It is the belief of the Board that past experience, together with a realistic view of future needs, throws light upon what action should be taken to improve the existing situation. Federal holdings of real estate are so complex and varied, and their location, character, and use so diverse as to preclude any single or simple solution to the general problem of contributions. The Board has undertaken, however, (a) to segregate Federal real estate into several broad categories to facilitate analysis; (b) to establish certain principles which should, in general, apply to all categories; and (c) to formulate proposals for specific categories or subcategories in the light of these principles. CLASSIFICATION OF FEDERAL REAL ESTATE In establishing these broad categories the Board has considered that the problem presented by Federal properties located in the District of Columbia is not a part of its assignment. This conclusion follows from these facts: (a) The District, as the seat of the Federal Government, presents a highly specialized problem in that the Federal and District Governments bear a unique relation to each other; and (b) the manner of handling the problem within the District has been of a very special character, inasmuch as the District Government and the Congress have annually given the matter explicit attention as part of the appropriation procedure. Another class of real estate in a special category consists of properties held by credit agencies of the Government as a byproduct of lending operations. Practically all such agencies engaged in activities likely to lead to acquisition of real estate are authorized to pay taxes upon real estate so acquired pending its disposition. The operations of such lending agencies are in general similar to those of other credit agencies with which they are more or less in competition and which are subject to taxation; moreover, the ownership is of temporary character, and is therefore distinct from the general problem. So far as known to the Board, the policy has occasioned no dissatisfaction on the part of either local governments or lending agencies. The practice is well established, and a change now would serve no useful purpose. Therefore, the Board sees no reason for reconsidering the general policy on this class of real estate. Only one exception to this general situation has come to the attention of the Federal Real Estate Board, namely, the revolving fund section of the Farm Credit Administration. In this case there is no authority for the payment of taxes upon real estate owned, although some real estate has been acquired through its lending operations under the Agricultural Marketing Act. These properties (as of January 1, 1943), consist of 11 terminal elevators located in 10 cities in 9 States, and 106 country elevators in 11 States. There appears to be no good reason why the general policy followed by Government lending institutions should not be followed in this case, and the Board recommends that legislation appropriate to this end be enacted. Excluding then, Federal real estate in the District of Columbia, and real estate owned by Federal credit agencies, the Board has classified the remaining Federal holdings of real estate into eight major groups as indicated in table 2, and some of these groups are further divided into subgroups. |