STATEMENT OF SENATOR LEHMAN ON THE SUBJECT OF PAYMENTS IN LIEU OF TAXES TO STATES, COUNTIES, MUNICIPALITIES, ETC., ON GOVERNMENT-(OWNED FACILITIES At present, there are seven bills before the Committee on Government Operation, all of which deal with Federal payments in lieu of taxes. These bills, together with a task-force report of the Kestnbaum Commission on Intergovernmental Relations, will, I understand, be the subject of an exhaustive study and full field investigation by this committee. I am sure that the investigation will prove of value in helping to draft adequate legislation in this complex field. I agree with the fundamental principle requiring governmental entities engaged in commercial operations although there is a question of definition here to make payments in lieu of taxes to municipalities and local units of government. I have long held this view, and I would apply this principle to Governmentowned facilities whether they are owned by the Federal Government or by State governments. Indeed, in recent testimony I gave before the Senate Public Works Committee (on July 13 of this year) in regard to a bill of mine authorizing a New York State hydroelectric development at Niagara Falls, I stated as follows: "Of course, I am not opposed to the practice followed by TVA and other public-power developments, of making payments in lieu of taxes to the municipalities where the project works are located, to compensate them for the loss they suffer in property and other local taxes by virtue of the use of this property by a Government entity." My point is that municipalities and local units of government have very limited sources of revenue. The major source is property tax. Hence, I would believe it fair and proper for a Government facility to make payments in lieu of taxes to the local government units to compensate them for the loss they suffer when these Government units occupy property which might otherwise yield a revenue to the local government. This is necessary, as I said, because the local governments have such limited tax resources and do not have the wide taxing powers that a State government, for instance, enjoys. As far as Federal facilities making payments to State governments is concerned, much more study needs to be given this aspect of the matter than has been given in the past. I see some merit in it, and yet I see some persuasive arguments against such a practice. I think your committee can serve a valuable function in sponsoring some intensive studies of this aspect of the matter. I would certainly agree, however, that for a Federal facility to pay Federal taxes-or a State facility to pay State taxes-makes very little sense. It would be equivalent to a man paying for lodgings in his own house. It would be, moreover, a thinly disguised sales tax. It would destroy one of the major purposes of a governmental operation, and would violate, in my judgment, a fundamental principle of sound government. I submit these views to you for such use as they may be in the continuing study which I understand your committee is making of this subject. I am sure that the findings and observations of your committee, and the record of expert opinion that you will gather, will be most useful to all of us who are interested in this matter. APPENDIXES APPENDIX I [Public Law 388-84th Congress] [Chapter 874-1st Session] [H. R. 6182] AN ACT To amend the Federal Property and Administrative Services Act of 1949 to make temporary provision for making payments in lieu of taxes with respect to certain real property transferred by the Reconstruction Finance Corporation and its subsidiaries to other Government departments Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the table of contents contained in the first section of the Federal Property and Administrative Services Act of 1949 is hereby amended by inserting immediately below "Sec. 605. Effective date." the following: "TITLE VII-PROPERTY TRANSFERRED FROM THE RECONSTRUCTION FINANCE CORPORATION "Sec. 701. Declaration of Policy. "Sec. 702. Definitions. "Sec. 703. Property transferred by the Reconstruction Finance Corporation. "Sec. 704. Limitations. "Sec. 705. Effective date." SEC. 2. Section 3 of such Act is hereby amended by inserting immediately after "As used in" the following: "titles I through VI of". SEC. 3. Such Act is hereby further amended by adding at the end thereof the following: "TITLE VII-PROPERTY TRANSFERRED FROM THE RECONSTRUCTION FINANCE CORPORATION "DECLARATION OF POLICY "SEC. 701. The Congress recognizes that the transfer of real property having a taxable status from the Reconstruction Finance Corporation or any of its subsidiaries to another Government department has often operated to remove such property from the tax rolls of States and local taxing authorities, thereby creating an undue and unexpected burden upon such States and local taxing authorities, and causing disruption of their operations. It is the purpose of this title to furnish temporary measures of relief for such States and local taxing authorities by providing that payments in lieu of taxes shall be made with respect to real property so transferred on or after January 1, 1946. "SEC. 702. As used in this title "DEFINITIONS "(a) The term 'State' means each of the several States of the United States and the Territories of Alaska and Hawaii. "(b) The term 'real property' means (1) any interest in land, and (2) any improvement made thereon prior to any transfer thereof occurring on or after January 1, 1946, from the Reconstruction Finance Corporation to any other Government department, if for the purpose of taxation such interest or improve 144 ment is characterized as real property under the applicable law of the State in which such land is located. "(c) The term 'local taxing authority' means any county or municipality, and any subdivision of any State, county, or municipality, which is authorized by law to levy and collect taxes upon real property. "(d) The terms 'real property tax' and 'real property taxes' do not include any special assessment levied upon real property after the date of a transfer of such real property occurring on or after January 1, 1946, from the Reconstruction Finance Corporation to any other Government department. "(e) The term 'Government department' means any department, agency, or instrumentality of the United States, except the Reconstruction Finance Corporation. "(f) The term 'transfer' means "(1) a transfer of custody and control of, or accountability for the care and handling of, any real property, or "(2) a transfer of legal title to any real property. "(g) The term 'Reconstruction Finance Corporation' includes all subsidiaries of the Reconstruction Finance Corporation. "PROPERTY TRANSFERRED BY THE RECONSTRUCTION FINANCE CORPORATION "SEC. 703. WWhere real property has been transferred on or after January 1, 1946, from the Reconstruction Finance Corporation to any Government department, and the title to such real property has been held by the United States continuously since such transfer, then on each date occurring on or after January 1, 1955, and prior to January 1, 1959, on which real property taxes levied by any State or local taxing authority with respect to any period become due, the Government department which has custody and control of such real property shall pay to the appropriate State and local taxing authorities an amount equal to the amount of the real property tax which would be payable to each such State or local taxing authority on such date if legal title to such real property had been held by a private citizen on such date and during all periods to which such date relates. "LIMITATIONS "SEC. 704. (a) The failure of any Government department to make, or to make timely payment of, any payment authorized by section 703 shall not subject"(1) any Government department, or any person who is a subsequent purchaser of any real property from any Government department, to the payment of any penalty or penalty interest, or to any payment in lieu of any penalty or penalty interest; or "(2) any real estate or other property or property right to any lien, attachment, foreclosure, garnishment, or other legal proceeding. "(b) No payment shall be made under section 703 with respect to any real property of any of the following categories: "(1) Real property taxable by any State or local taxing authority under any provision of law, or with respect to which any payment in lieu of taxes is payable under any other provision of law. "(2) Real property used or held primarily for any purpose for which real property owned by any private citizen would be exempt from real property tax under the constitution or laws of the State in which the property is situated.. "(3) Real property used or held primarily for the rendition of service to or on behalf of the local public, including (but not limited to) the following categories of real property: courthouses; post offices and other property used for purposes incidental to postal operations; and federally owned airports maintained and operated by the Civil Aeronautics Administration. "(4) Office buildings and facilities which are an integral part of, or are used for purposes incidental to the use made of, any properties described in paragraph (1), (2), or (3) of this subsection. "(c) Nothing contained in this title shall establish any liability of any Government department for the payment of any payment in lieu of taxes with respect to any real property for any period before January 1, 1955, or after December 31, 1958. "EFFECTIVE DATE "SEC. 705. This title shall take effect as of January 1, 1955." Approved August 12, 1955. |