Section 7. Limitations on payments in lieu of taxes

(a) For any particular tax authority, the total amount of payments in lieu of taxes in any one fiscal year would be subject to comparison with a standard established by this subsection. If the aggregate of such payments under section 5 to be made for any fiscal year to a single tax authority by one or more Federal agencies exceeds the aggregate amount which the authority levies on all nonFederal taxable property in its territorial jurisdiction, any such Federal agency may apply to the Board for an order reducing its payment.

When it received such an application, the Board would notify the tax authority and each Federal agency. After a hearing, it would determine whether payment of the aggregate amount payable under section 5 would confer on the tax authority unwarranted benefit contrary to the interest of taxpayers of the United States. If the Board determined that the payment would confer unwarranted benefit, it would prescribe (1) a lower aggregate which it determined to be fair and equitable and (2) the portion thereof to be paid by each Federal agency. The revised amount could not be less than the aggregate amount of taxes levied by the tax authority for the applicable tax year on all non-Federal taxable property in its territorial jurisdiction. The portion to be paid by each Federal agency is to be proportionate to its share of the assessed valuation of Federal property involved in the payments.

(b) No payment in lieu of taxes is to be made under section 5 (or section 8) to a tax authority which fails to furnish services to any Federal property or to the Federal personnel or their families on the same terms on which the service is furnished to any other property or resident. This restriction does not apply where the Federal agency has expressly waived the furnishing of the service as unnecessary or undesirable.

Section 8. Transitional payments in lieu of taxes

(a) Provision is made for payments in lieu of taxes during the first 10 fiscal years after enactment of the act with respect to all Federal property which (1) is of any of the excluded classes listed in section 6 (c) and not within any class described in section 6 (b); (2) was acquired by the United States or any Federal agency within the 10 years just preceding enactment of the bill; and (3) is not subject to tax under section 4 [the reference in the printed bill is, erroneously, to section 2].

(b) The payments under subsection (a) would decline year-by-year, starting in the first fiscal year after enactment with an amount equal to the full payment in lieu of taxes that would be made under section 5. Each successive annual payment would be reduced by 10 percent of the original amount, and in the 11th year there would be no payment.

(c) The limitations in subsections (c), (d), (e), and (f) of section 5 would apply to payments under section 8. The prohibition in section 7 (b) would also apply.

Section 9. Consent to levy of special assessments

(a) Except as otherwise provided in the bill, all Federal property would be subject to the levy and collection of any special assessment upon real property to the same extent and under the same conditions as other similar property, whenever the assessment is levied upon non-Federal as well as Federal property. The tax authority is required to treat the Federal property at least as favorably as like property owned by taxable persons.

(b) Any portion of a special assessment is to be paid by the Federal agency which is the controlling agency for the property at the time that portion of the special assessment becomes due. If the agency ceases to exist before payment is made, payment shall be made by the successor Federal agency, as determined by the Director of the Bureau of the Budget.

Section 10. Federal Tax Payments Board

(a) The bill establishes a bipartisan Federal Tax Payments Board of three members appointed by the President by and with the advice and consent of the Senate. Excepting for two of the original members, the appointments are to run for 3-year overlapping terms. The President is to designate the chairman. Any member may be removed by the President, after notice and hearing, for malfeasance in office, neglect of duty, or incompetence, but for no other cause.

(b) Two members shall constitute a quorum, and a vacancy will not impair the right of the remaining members to exercise the Board's powers. The Board is to have an official seal, to be judicially noticed.

(c) Each Board members is to receive a salary of $14,000 a year, is to be eligible for reappointment, and shall not engage in any other business, vocation, or employment.

(d) Subject to the civil-service laws and the Classification Act of 1949, the Board may appoint and fix the compensation of a chief clerk, examiners, and other necessary personnel.

(e) The Board would be empowered to make necessary rules and regulations, not inconsistent with the provisions of the act.

Section 11. Powers and duties of the Board

(a) The Board is given the following duties:

(1) It is to prescribe such uniform rules, regulations, and forms as may be required for the submission by State tax authorities of claims for payments authorized by the act.

(2) It is to promulgate such uniform rules and regulations as may be necessary to provide for the making by Federal agencies of the authorized payments and for the determination of the amounts.

(3) It is to consult, at least once in each calendar year, with the advisory committee established under section 12.

(4) Upon application by any State tax authority or Federal agency, the Board is to hear and determine any question of fact or law concerning the liability of any Federal agency to make any payment under the act, the identity of Federal property subject to any payment under the act, or the amount of any such liability. However, the Board is not to hear or determine any such question until the parties to a controversy have exhausted administrative and judicial remedies available under law in effect within the jurisdiction of the State tax authority concerned for the determination of any question concerning the nominal Federal tax liability with respect to property involved in the application.

(5) To transmit to the President and the Congress annually a report containing a full statement of its activities during the calendar year, including the names, salaries, and duties of Board employees; an account of moneys disbursed by the Board; a description of proceedings heard or determined by, or pending before, the Board; and any recommendations the Board considers advisable for legislation respecting administration of the act.

(b) When an application is filed with it for any determination under the act, the Board (or any of its members, or any examiner designated by it) may summon and join in the proceeding Federal agency or State tax authority found to be a necessary party, hold hearings, administer oaths, examine witnesses and receive evidence, and require by subpena the attendance and testimony of witnesses and production of relevant documentary evidence. Subpenas are to be issued on behalf of any Federal agency or State tax authority which is a party to the proceeding, on request and upon a statement of general relevance and reasonable scope of the evidence sought. Witness fees and mileage are to be the same as in United States district courts. The aid of any district court may be invoked in case of disobedience to a subpena, and failure to obey an order of the court may be punished as contempt.

(c) All hearings under section 11 are to be public. Each party would have the right to assistance of counsel, to offer evidence and submit rebuttal evidence, and conduct cross-examination. A transcript of the stenographic record of the testimony is to be filed in the Board's office.

(d) Each determination by the Board under this section is to be final and conclusive upon all State tax authorities and Federal agencies who are parties to the particular proceeding, and the determination is not to be questioned by any court or any accounting officer of the Government.

Section 12. Advisory committee

(a) The President is to appoint a 12-member advisory committee on Federal tax payments. Six of the members are to be officers or employees of Federal agencies, three are to be officers or employees of State governments, and three are to be officers or employees of other State tax authorities (i. e., local governments). The President is to designate the chairman.

(b) The duties of the Committee are

(1) to study the administration of the act and problems arising in connection therewith;

(2) to consult with the Board, upon its request, in an advisory capacity in the solution of such problems; and

(3) to transmit to the President from time to time a report containing a summary of the results of its studies, together with its recommendations for administrative or legislative changes to promote the efficient, economical, and equitable administration of the act.

(c) Members who are officers or employees of any Federal agency would receive no additional compensation for advisory committee service. Others may be paid not in excess of $50 for each day of service, as the President shall prescribe. All would be reimbursed for necessary travel and other expenses. These payments would be made from appropriations to the Board.

Section 13. Miscellaneous administrative provisions

(a) Upon proper written request from any State tax authority, each Federal agency which is controlling agency for any Federal property within the territorial jurisdiction of the tax authority is to furnish to the tax authority information concerning the Federal property similar to that which may be lawfully required with regard to like property owned by taxable persons.

(b) Failure of a Federal agency to make any payment authorized by the act, or to make timely payment, is not to subject any Federal agency, or any purchaser of property from a Federal agency, to the payment of any penalty or penalty interest or any payment in lieu of these. Likewise, it is not to subject any Federal property to any lien, attachment, foreclosure, or other legal proceeding not specifically authorized by the act.

Section 14. Appropriations

This section authorizes appropriation to each Federal agency of such sums as may be required for the discharge of its duties and obligations under the act Section 15. Separabilitu

If any provision of the act, or its application to any Federal agency or any State tax authority, is held to be invalid, this is not to affect the remainder of the act and the application of the provision to other Federal agencies and State tax authorities.

Section 16. Effective date

Sections 4, 5, 8, and 9 (the sections providing for consent to taxation of certain property, for continuing or transitional payments in lieu of taxes on certain other property, and for consent to special assessments) would become effective on July 1, 1955. All other provisions would become effective on the date of enactment.

APPENDIX D TO STAFF MEMORANDUM NO. 84-1-36

PROVISIONS OF S. 2390 (84TH CONG.)

A bill to consent to the taxation of certain Federal property by State and local tax authorities, to provide for the payment by Federal agencies of sums in lieu of taxes with respect to certain other Federal property, and for other purposes

OUTLINE OF THE BILL

The bill (S. 2390) consists of introductory sections specifying a short title, declaring the general policy and giving special definitions, followed by sections which may be outlined as follows:

Section 4: Consent to taxation of certain Federal property

Sections 5, 7, and 8: Payments in lieu of taxes with respect to certain Federal property

Section 6: Excluded properties

Section 9: Consent to levy of special assessments

Sections 10–13: Administrative provisions

Section 14: Action for collection of payments

Sections 15-17: General provisions

Sections 4 through 8, taken together, would establish a classification of Federal properties as a basis for annual payments to State and local governments,. related more or less closely to the property-tax payments which might be made on privately owned properties. The categories and their treatment may be summarized as follows:

1. Exclusions. Certain groups of properties would be exempted (by sec. 6) from either taxation under section 4 or payments in lieu of taxes under section 5. These exclusions cover

(a) Any Federal property (1) acquired by any Federal agency before September 8, 1939, or (2) subject under any other law to such payments to the same tax authority.

(b) Any Federal property which (1) if privately owned would be exempt from tax because of its use, (2) is the subject of revenue sharing under Federal law, or (3) is devoted primarily to any local governmental use, e. g. a courthouse or post office.

(c) Properties in certain uses specifically listed.

(d) Any stock of strategic or critical material or any agricultural commodity in the custody of a Federal agency, or other personal property not devoted to an industrial or commercial use.

2. Transitional payments. The properties excluded by subsection 6 (c) would generally be subject under section 8 to a system of transitional payments in lieu of taxes during a period of 10 years after acquisition.

3. Taxation.-Federal property of the following classes would be subject under section 4 to State and local taxation, the same as other like property in the same jurisdiction :

(a) Property held to secure a Federal agency against loss in connection with a loan, contract of insurance, or guaranty.

(b) Property leased or sold under a conditional sale contract to any taxable person.

4. Payments in lieu of taxes.-Federal property of the following classes would be subject under section 5 to payments in lieu of taxes unless it is excluded by various limiting provisions:

(a) Property devoted to commercial or industrial use by or on behalf of a Federal agency.

(b) Property devoted to housing of individuals for which rent is received. (c) Property devoted primarily to any other use except a local governmental use.

Section 9 would consent to the levying against any Federal property of special assessments for local improvements, subject to requirements that any assessment be levied upon non-Federal as well as upon Federal property, and that at least as favorable treatment be accorded the Federal property as to like property owned by taxable persons.

Sections 11 and 12 would establish a Federal Tax Payments Board and prescribe its powers and duties, which are the general supervision of the payments authorized by the bill. The bill generally assigns initial responsibility for payments to the property using or owning agencies, subject to appeals to the Board. Section 13 provides for an advisory committee representing Federal, State, and local interests. Section 14 allows claimant State and local tax authorities to appeal to the United States district courts in cases where any part of a claim has not been paid by a Federal agency.

A summary description of each section follows:

Section 1. Short title

The act may be cited as the "Federal Property Tax Payment Act of 1955." Section 2. Declaration of policy

Subsection (a) of the declaration of policy states that, although the United States is under no constitutional obligation to pay taxes or to make financial contributions in lieu of taxes on account of Federal property, it is the policy of the United States to make hereafter such tax payments and contributions in lieu of taxes as may be fair and equitable to compensate States and their political subdivisions and instrumentalities for tax revenue of which they are deprived by reason of the ownership or control by the Federal Government of property within the States.

Subsection (b) states that it is the purpose of this legislation to remove, as far as practicable, inequities existing between taxpayers of State and local governments, on the one hand, and taxpayers of the Federal Government, on the other, in the distribution of governmental costs incident to property owned or used by the Federal Government.

Subsection (c) specifies that, in consideration for the payments authorized by the act, the Congress expects that the several State and local governments, when so requested, will make all public services normally provided by them available to the Federal Government, its property, and its officers and employees, the same as to other property and individuals.

Subsection (d) reserves to the Congress the right to amend, modify, or repeal the provisions of this act.

Section 3. Definitions

Some words and phrases used in the bill are defined restrictively or used in a special sense. Some of these are as follows:

"Federal agency” means any department, agency, office, or independent establishment in the executive, legislative, or judicial branch of the Government, and any corporation now or hereafter subject to the provisions of title I of the Government Corporation Control Act (31 U. S. С. 846).

"Federal property" means any property the legal title to which is held by the United States or any Federal agency.

"State tax authority" means any State, and any county, city, municipality, tax district, or other political subdivision or public entity thereof having authority under State law to levy and collect within its territorial jurisdiction any tax or special assessment.

"Tax" means any tax of general application levied according to value by any State tax authority upon property situated within its territorial jurisdiction, but does not include (1) any tax levied on the manufacture, purchase, sale, transfer, or use of any property, or (2) any tax levied or fee imposed for the procurement of any license, permit, or other authorization to engage in any form of activity.

"Property" means any real or tangible personal property.

"Real property," used in relation to any tax or special assessment, means any interest in land, and any improvement thereon if such improvement constitutes real property under law in effect in the State tax authority imposing the tax or special assessment.

"Tangible personal property," used in relation to any tax, means any physical object, other than real property, defined as tangible personal property by law in effect within the State tax authority imposing the tax. It does not include any coin, bullion, currency, credit, security, or chose in action.

"Industrial or commercial use," used in relation to any Federal property includes any use of the property for (1) the mining fabrication, or repair of any article or commodity, (2) the generation of electrical energy, (3) the transportation of individuals or property, (4) the storage of property, and (5) the sale or leasing of commodities or services.

"Governmental use," used in relation to any Federal property, means any use other than (1) an industrial or commercial use, or (2) use for the housing of individuals for which rent is received.

"Local governmental use," used in relation to any Federal property, means any governmental use for the purpose of rendering public service to or for persons residing within the vicinity of the property.

Section 4. Consent to taxation of certain Federal property

(a) Except as otherwise provided in the bill, all Federal property of the following classes situated within the territorial jurisdiction of any State tax authority would be subject to any tax imposed by that authority to the same extent and under the same conditions as other similar property within its jurisdiction:

(1) Property legal title to which is held by a Federal agency to secure any Federal agency against loss in connection with any loan, contract of insurance, or guaranty.

(2) Property legal title to which is held by any Federal agency but which has been leased, or sold under a conditional sale contract, to any taxable person.

(b) Tax payments under subsection (a) are to be made by the Federal agency which is the controlling agency for the particular property at the beginning of the tax year for which the tax is imposed. If the agency ceases to exist before payment is made, payment shall be made by the successor Federal agency, as determined by the Director of the Bureau of the Budget.

Section 5. Payments in lieu of taxes with respect to certain Federal property

(a) Except as otherwise provided in the bill, payments in lieu of taxes are to be made to each State tax authority for each fiscal year with respect to all Federal property (other than that subject to tax under section 4 [the reference in the printed bill is, erroneously, to section 2]) of the following classes situated within the territorial jurisdiction of the authority:

(1) Any property devoted to commercial or industrial use by or on behalf of any Federal agency. (2) Any property devoted to the housing of individuals for which rent is received.