August 6, 1940

thereof," places in the council of the tribe the tribal powers, among others, of managing the tribal land, safeguarding the peace and safety of residents of the reservation, establishing a judicial system, regulating property, requisitioning community labor for public purposes, and levying assessments for public purposes.

While an Indian tribe is a governmental entity so long as it retains its character as a tribe, even though it may not be organized in the manner provided by the Indian Reorganization Act, its character as a governmental entity is conclusively established and takes practical form when the tribe is organized under a constitution under section 16 of that act and incorporated as a Federal corporation under section 17.

Since an Indian tribe is a governmental entity, it may likewise be described as a "public body." That term may refer to a public agency with less governmental power than that of a governmental entity. It undoubtedly contemplates such public corporations as are established for the purpose of carrying on particular public enterprises and which are endowed with limited governmental powers. An Indian tribe fulfills the concept of a public body as a local government similar to a municipality or, when the tribe is incorporated, as a public corporation carrying on public enterprises. The charter of every tribe incorporates such tribe as a "body politic and corporate of the United States of America."

The remaining question is whether an Indian tribe is a governmental entity or public body "authorized to engage in the development or administration of low-rent housing or slum clearance." The management of tribal property and the carrying on of tribal business enterprises are governmental powers which have been recognized by Congress and by this Department as within the authority of an Indian tribe. This recognition has already included the undertaking by the tribes of housing enterprises under the supervision of this Department. Since 1935 Indian tribes have been recognized agencies for the carrying out of rehabilitation projects upon the Indian reservations, and, under grants from rehabilitation funds appropriated to the Indian Office, they have undertaken housing projects for the benefits of their members.

However, only those tribes which are incorporated under the Indian Reorganization Act may be said with assurance to have express authority, both from their membership and from Congress, to engage in the low-rent and slum clearance projects contemplated by the National Housing Act. Incorporated tribes have specific authority in their charters to engage in any business that will further the economic wellbeing of the members of the tribe, to make and perform contracts with

any person, association, or corporation, to sue and be sued, to borrow funds from any governmental agency, and to pledge tribal assets (excluding tribal lands) for the purpose of obtaining such a loan, certain of such powers being subject, according to the extent of their exercise, to the approval of the Secretary of the Interior. A tribe which has not been incorporated cannot be said to have authority, without Congressional sanction, to enter into the undertakings probably required for engaging in low-rent and slum clearance projects, particularly the authority to sue and be sued and to make contracts involving interests in tribal lands and the proceeds therefrom. It would, therefore, be a serious question whether the United States Housing Authority would find, as an administrative matter, that such a tribe was an agency to which it could properly loan housing funds.

In summary, therefore, it is my opinion that an Indian tribe is a governmental entity or public body capable of undertaking tribal housing projects, and that where a tribe is incorporated under the Indian Reorganization Act it is clearly authorized to engage in the low-rent housing and slum clearance projects contemplated by the National Housing Act, and, therefore, such a tribe comes within the terms of that act as a public housing agency eligible to obtain the assistance and benefits of that act.

Approved:

OSCAR L. CHAPMAN,

Assistant Secretary.

LEGALITY OF PROPOSED BOND ISSUE OF PUERTO RICO

Opinion, August 27, 1940

PUERTO RICO-BONDS-TAXATION-UNIFORMITY-EQUAL PROTECTION.

The proposed issuance of certain bonds under Act No. 22 of the Second Special Session of the Fourteenth Legislature of Puerto Rico, approved June 18, 1939, probably violates the equal protection and uniformity of taxation requirements of the Organic Act of Puerto Rico, since it remits all delinquent property taxes, up to $400, for the fiscal years preceding 1938-39, but makes no provision for refunding the taxes collected for those years. PUERTO RICO-BONDS-STATUTES-SEPARABILITY.

While the invalidity of a portion of a statute will not necessarily invalidate other portions thereof which are separable from the invalid part, such is not true in the case of the present statute, the invalidity of a portion of which has the result of frustrating the cardinal purposes for which the bonds are to be issued.

PUERTO RICO-TAXES-DELINQUENT-CANCELATION-LEGALITY-LIEN.

Despite the fact that under Act No. 22 the delinquent taxes are declared by the statute to be canceled prior to the time of possible flotation of the bond

August 21, 1940

issue authorized thereby, a liberal view would entail the conclusion that although such action may be illegal it could not have the effect of precluding the issuance of the bonds, but at most would have the effect of continuing the lien of the delinquent taxes until such time as the bond proceeds could be obtained. PUERTO RICO

MUNICIPAL BUDGETS

APPROPRIATIONS

TRACTS-IMPAIRMENT OF OBLIGATION.

COMMITMENTS - CON

The Legislature of Puerto Rico in enacting legislation not only providing for the remission of delinquent taxes up to $400, but also providing for the contracting of an Insular loan to compensate the municipalities for taxes lost to them because of the contemplated remission, no doubt acted so as not to imperil the payment of outstanding municipal commitments against revenues appropriated in past municipal budgets. Otherwise, the tax remission features of Act No. 22 would quite probably have violated the prohibition of the Organic Act against impairment of contractual obligations, because of the numerous outstanding and unpaid claims against the general funds of the municipalities existing at the time of the enactment of Act No. 22 and still remaining unpaid. PUERTO RICO-MUNICIPAL BUDGETS-APPROPRIATIONS-COMMITMENTS-LIQUIDA

TION.

Commitments cannot be made beyond amounts appropriated in the budgets, and delinquent taxes and penalties and interest, if collected and not necessary to liquidate commitments of prior years, can only be counted upon as cash surpluses allocable to separate new supplementary budgets to be formed for the special purpose of disposing of such surpluses.

KIRGIS, Acting Solicitor:

My opinion has been requested as to the legality of a proposed bond issue of The People of Puerto Rico. The bonds are to be in the denomination of $1,000 each; are to be in coupon form; are to be payable to bearer; are to be dated January 1, 1940; are to bear interest from January 1, 1940, at the lowest rate permitting purchasers to offer par for the bonds, but in any event not to exceed 42 percent per annum, the interest to be payable July 1, 1940, and semi-annually thereafter on January 1 and July 1 of each year; are to be designated "Puerto Rico -% Loan of 1940 (1941-45) Remittance of Property Taxes"; are to mature in five series, each totaling $300,000 and each falling due, in equal annual installments, on January 1, 1941-1945, inclusive; are to be special obligations of The People of Puerto Rico, payable, both as to principal and interest, at the Treasury of the United States, out of an internal revenue tax of 50 cents collected on each thousand cigarettes brought into or manufactured, sold or consumed in Puerto Rico, the proceeds of the said tax to constitute a special fund, applicable in whole or in part, as may be necessary, to the payment of the bonds and the interest thereon.

The authority for the issuance of the bonds is found in Act No. 22 of the Second Special Session of the Fourteenth Legislature of Puerto Rico, approved June 18, 1939, and more generally, in section 3 of

the Organic Act of Puerto Rico (39 Stat. 951, 953), as variously amended and supplemented.

The object of Act No. 22 is the remission, up to the amount of $400, of delinquent property taxes for the fiscal year 1937-38 and for earlier fiscal years. The act provides that the portion of the property taxes lost to the municipalities of Puerto Rico by virtue of the remission shall be reimbursed to them out of the proceeds of the proposed bond issue.

The statute is prefaced by a "Statement of Motives" which sets forth, in substance, that agricultural collapses resulting from hurricanes, low market prices or lack of farm credits have a profoundly depressing effect upon business and life in the Island, as well as upon the development and credit of the various municipal corporations of Puerto Rico; that powerful reasons impel the Legislature to take measures to mitigate the despair and unrest prevailing among the property owners, particularly the farmers, and to lessen "the anxiety that hounds them as some horrible nightmare" that their property may be sold for delinquent taxes or foreclosed upon by the Federal Land Bank or the Hurricane Relief Commission; that the embarrassing situation of the municipalities would be relieved by a solution of the tax problem while, at the same time, the proposed sacrifice entailed to the general public, divided as it would be "pro rata" among the people, would be small in comparison with the good accomplished; that the remission of taxes owing on real and personal property would stimulate encouragement of faith, and keep alive the hope of maintaining Puerto Ricans in the ownership of their land; that the measure contemplated is unique in the history of Puerto Rico and is "sensible and decisive" for agricultural, industrial and commercial “balance"; that the means of compensating the municipalities for the ninety-one hundredths of one percent of the basic tax rate on delinquent taxes (such amount being the amount to which the municipalities are entitled by law) are simple and not productive of any special hardship.

Section 1 provides that taxes due and pending collection on real and personal property which may be owed by taxpayers whose tax indebtedness, up to June 30, 1938, exclusive of surcharges, interest and costs, does not exceed $400, are remitted, together with all surcharges, interest and costs on such overdue taxes.

Section 2 provides that if the taxes on real and personal property, up to June 30, 1938, exceed $400, such taxes are reduced by the sum of $100, and “the surcharges, interest and costs owing on said [sic] taxes up to June 30, 1938 are likewise canceled."

Section 3 directs the Treasurer of Puerto Rico to cancel such tax receipts on real and personal property for the fiscal year 1937-38

August 27, 1940

and preceding years (including receipts for taxes deferred pursuant to laws relating to the deferment of taxes) as may pertain to the obligations remitted by section 1. Section 3 also directs the Treasurer to dissolve all attachments levied and recorded in the Registry of Property which may affect the property upon which the taxes referred to in section 1 are due.

Section 4 provides that all property which, prior to the approval of the act and subsequent to January 1, 1929, may have been sold at auction and adjudicated to The People of Puerto Rico for nonpayment of any of the taxes remitted by section 1, shall, if in the possession of The People of Puerto Rico, and not in use by the Insular, municipal, or Federal governments, be reconveyed to the person who possessed the same at the time of the auction sale. Section 4 also provides that the charges arising from such sale and adjudication shall be canceled.

Section 5 conditions the remission provided for by section 1 upon payment by the taxpayer to the Insular Treasury, on or before December 1, 1939, of all taxes levied on the same property for the fiscal year 1938-39 and the first half of the fiscal year 1939-40; and also provides that payment of the total tax indebtedness due up to June 30, 1938, exclusive of the sum of $400 and surcharges, interest and costs thereon, shall constitute a condition precedent to the remission. Section 6 provides that the Treasurer shall contract a loan with a natural or artificial person in the amount of $2,250,000, or such part thereof as may be necessary, and that the loan shall be repayable in not to exceed 13 years at a rate of interest not to exceed 42 percent per annum. Section 6 also provides that the Treasurer "with the amount of said loan shall reimburse to each municipality, the ninety-hundredths of the basic tax rate belonging to it out of the taxes hereby remitted."

*

Section 7 provides that the principal of, and the interest on, the loan contracted shall be payable from the proceeds of the tax levied by section 8.

Section 8 provides that, in addition to the tax on cigarettes levied by paragraph 2, section 16 of Act No. 85, approved August 20, 1925, as amended, there shall be levied an additional revenue tax of 50 cents on each thousand cigarettes brought into or manufactured, sold or consumed, in Puerto Rico. Section 8 also provides other details as to the collection of the new tax imposed; directs the Treasurer to impound the revenue derived from the said new tax in a special fund to be applied wholly or partly, as may be necessary, to the loan to be contracted; and states that, after the payment of the loan and the interest thereon, the tax shall be used to increase the general funds of