This suit in equity was instituted by Howard Kiker, a resident of the State of New Jersey, to restrain the enforcement of the provisions of an ordinance of the City of Philadelphia, approved December 13, 1939, which imposes a tax of one and one-half per centum annually on, inter alia, salaries, wages, commissions and other compensation for work done or services performed in that City, as against any such income received by him after December 31, 1940, from employment by the United States government at the Philadelphia Navy Yard, a Federal area on League Island. Defendants, the City of Philadelphia and its officials, filed preliminary objections to the bill, assigning as one of the reasons therefor that no cause of action was stated, and, after argument and stipulation of counsel that the case be disposed of finally on the undisputed facts and upon questions of law, the learned court below entered a final decree sustaining the objections raised and dismissing the bill. The plaintiff then appealed to this Court.1
In his bill, plaintiff alleged that he is a resident of Mt. Ephraim of the State of New Jersey and that he has been employed for the past sixteen years at the League Island Navy Yard as a supervisor, planner and estimater in its industrial department. The bill prays that the City and its officials be prevented from enforcing the ordinance for the following reasons; that it is an attempt to impose a tax upon compensation for services of nonresidents rendered outside of the City, that it is an attempt to impose a tax on persons who receive no
protection or benefit from the City, and that it is an attempt to impose a tax on plaintiff's employment by the Federal government.
League Island lies on the westerly bank of the Delaware River, just above the mouth of the Schuylkill, and originally was a part of the City of Philadelphia. The Commonwealth of Pennsylvania, by the Acts of March 29, 1827, P. L. 153; February 10, 1863, P. L. 24; and April 4, 1866, P. L. 96, granted consent to the United States government, inter alia, to purchase and acquire, for naval and other purposes, a tract of land in the City and County of Philadelphia, known as League Island; and also ceded to the Federal government the right to exclusive jurisdiction thereover, providing, however, "That the cession . . . made shall continue in force so long as the . . . territory shall be used by the government of the United States for the purposes of a navy yard, and no longer: Andprovided, also, That all process, civil and criminal, of the commonwealth of Pennsylvania, shall extend into, and be effectual, within the territory hereby ceded, as if this law had not passed." Pursuant to appropriate federal legislation, approved February 18, 1867, 14 U.S. St. at L., c. 46, p. 396, a Certificate of Acceptance of this tract in the City and County of Philadelphia, dated December 23, 1868, was recorded in the office of the Recorder of Deeds in Philadelphia County in Volume 19 (J. T. O. 2) Miscellaneous Land Records p. 208. SeeManlove v. McDermott, 104 Pa. Super. 560. On October 9, 1940, Congress passed Public Act No. 819 (54 Stat. 1059, 4 U.S.C.A. Section 14), providing by section 2,2 that persons living or
receiving income in a Federal area should not be relieved from liability to pay any income tax levied by any State or any duly constituted State taxing authority having jurisdiction to levy such a tax by reason of residence or employment in the Federal area.
Three questions are presented for our determination: first, whether Congress was acting within its constitutional limits in attempting by Public Act No. 819 to confer upon the Commonwealth of Pennsylvania and its political subdivisions the power to tax incomes earned within a Federal area; second, whether by the terms of that statute Congress did permit the City of Philadelphia to levy the tax in question; and, third, whether the Philadelphia ordinance imposing the tax may be so construed as to embrace the Federal area of League Island. These questions have never been passed upon by us, nor, so far as our research reveals, by any other appellate court. We shall consider them in the order stated.
It is clear that since this Commonwealth granted to the United States government exclusive jurisdiction, without qualification or restriction, save as to the service of criminal and civil process and as to limitation upon the duration of the cession, the City of Philadelphia could not lawfully impose a tax upon income received by a non-resident from transactions occurring or services performed in the Federal area of League Island (Standard Oil Co. v. California,291 U.S. 242), unless, of course, Congress can grant such consent. See United States v. City of Buffalo, 54 F.2d 471. It was originally supposed that a State, in granting consent to the Federal government to purchase territory upon which to erect forts, magazines, arsenals, dock-yards and other needful buildings, could not constitutionally qualify its consent, and that jurisdiction, under such circumstances, had to be exclusively in the United States government, on account
of the provisions of Article I, Section 8, Clause 17 of the Constitution of the United States:3 United States v. Cornell, 2 Mason's Reports (U.S.C.C.) 60; Fort Leavenworth R.R. Co. v.Lowe, 114 U.S. 525. However, it is now well settled that in granting consent to the Federal government a State can reserve to itself such jurisdiction (e.g. the right to impose taxes in the area in question) as will not interfere with the enjoyment by the government of the United States of the property for the uses and purposes for which it was obtained: James v. DravoContracting Co., 302 U.S. 134. In the latter case, a suit was brought by a contracting company to restrain the collection of a tax imposed by the State of West Virginia on gross receipts obtained by it under contracts with the National government. It was held that the tax was applicable to receipts obtained under contracts performed by a Pennsylvania corporation upon lands purchased by the government of the United States for use in connection with the erection of needful buildings (dams), for the reason that the consent of the State to purchase contained a reservation of its right to tax in such areas. There, the Supreme Court of the United States, speaking through its then Chief Justice, said (p. 146): ". . . it is urged that if the paragraph be construed as seeking to qualify the consent of the State, it must be treated as inoperative. That is, that the State cannot qualify its consent, which must be taken as carrying with it exclusive jurisdiction by virtue of Clause 17 [of Article I, Section 8 of the Federal Constitution] . . . [p. 148]. Normally, where governmental
consent is essential, the consent may be granted upon terms appropriate to the subject and transgressing no constitutional limitation . . . Clause 17 contains no express stipulation that the consent of the State must be without reservations. We think that such a stipulation should not be implied. We are unable to reconcile such an implication with the freedom of the State and its admitted authority to refuse or qualify cessions of jurisdiction when purchases have been made without consent or property has been acquired by condemnation. In the present case the reservation by West Virginia of concurrent jurisdiction did not operate to deprive the United States of the enjoyment of the property for the purposes for which it was acquired, and we are of the opinion that the reservation was applicable and effective." On the same day it was also said by that tribunal, in this connection, in Mason Co. v. Tax Comm'n, 302 U.S. 186,207-8: "The mere fact that the Government needs title to property within the boundaries of a State, which may be acquired irrespective of the consent of the State (Kohl v.United States, 91 U.S. 367, 371, 372), does not necessitate the assumption by the Government of the burdens incident to an exclusive jursidiction. We have frequently said that our system of government is a practical adjustment by which the national authority may be maintained in its full scope without unnecessary loss of local efficiency. In acquiring property, the federal function in view may be performed without disturbing the local administration in matters which may still appropriately pertain to state authority."
It follows, therefore, that the Commonwealth of Pennsylvania, when it consented to the purchase of League Island by the National government and ceded jurisdiction over it, could have reserved to itself the right to tax in such area, even though the territory was acquired for use as a dock-yard, just as a number of States have done under similar circumstances with
respect to land within their respective geographical limits.4 There can be no logical objection on constitutional grounds if the same result is accomplished by a recession to the State of the right to tax, should Congress see fit by this means to promote local efficiency, as it appears to us to have done in passing Public Act No. 819. Similar retrocessions to the States of the Union are not unusual.5 While any cession, or recession, of jurisdiction by one sovereignty to another requires an acceptance in order to render it effective (Yellowstone Park Transp. Co. v. Gallatin County,31 F.2d 644); such acceptance will be presumed in the absence of a contrary intent (Mason Co. v. Tax Comm'n, supra). No such contrary intent appears anywhere in the record in the instant case. "The States of the Union and the National Government may make mutually satisfactory arrangements as to jurisdiction of territory within their borders and thus in a most effective way, cooperatively adjust problems flowing from our dual system of government": Collins v. Yosemite Park Co.,304 U.S. 518, 528.
Plaintiff contends that he receives no benefits or protection from the City of Philadelphia, and, therefore, that to enforce the provisions of the ordinance here under consideration upon him is to deprive him of his property without due process of law. With this contention we cannot agree. It is clear that in classifying persons for taxation an obligation on the part of the taxing power to make available some benefit to them
must exist. We are satisfied, under the circumstances here presented, that such obligation does exist on the part of the City of Philadelphia for the benefit of the persons and property on League Island by reason of the recession by Congress to this Commonwealth of the power to tax in the area in question. A State may reserve to itself the power to tax in an area within its geographical limits when ceding jurisdiction to the National government over such territory. When the State does make such reservation in its act of cession, the obligation of furnishing protection and benefits to the persons and property within the confines of the ceded area impliedly remains in the State: James v. Dravo Contracting Co., supra. In that case, it was said (p. 148): ". . . a transfer of legislative jurisdiction carries with it not only benefits, but obligations, and it may be highly desirable, in the interest both of the national government and of the State, that the latter should not be entirely ousted of its jurisdiction. The possible importance of reserving to the State jurisdiction for local purposes which involve no interference with the performance of governmental functions is becoming more and more clear as the activities of the Government expand and large areas within the States are acquired." Therefore, there is no constitutional objection, in our opinion, to the Federal government's receding to a State a portion of the exclusive jurisdiction previously obtained from it, together with the incident obligations which were impliedly transfered by the recession. This Congress has done by Public Act No. 819. There is no doubt that after the cession, Philadelphia was obligated to confer all the usual attributes of government — the same as those possessed by residents and citizens of Philadelphia — upon those deriving income from working on League Island; fire and police protection, the right to use all municipal facilities, etc. This obligation can be called into play at any time the national government refuses or neglects to furnish them. This is certainly
true, as in James v. Dravo Contracting Co., supra, where the State reserved the right to tax, and it must necessarily be so in the case where, as here, the right to tax has been placed in Philadelphia by the recession of the National government. Benefits are conferred upon the plaintiff, and this case is determined by the reasoning and decision in James v. DravoContracting Co., supra. The fact that the Federal government, as far as League Island is concerned, does not at this time see fit to take full advantage of the obligation of this Commonwealth, or its political subdivision, the City of Philadelphia, to make available protection and benefits to persons and property on the Island, does not justify our invalidation of the income tax in question, as far as plaintiff and those in a similar position are concerned: Union TransitCo. v. Kentucky, 199 U.S. 194. The area in which plaintiff is employed or engaged is actually no longer an island, but is now physically a part of the mainland of this Commonwealth. The reservation is immediately adjacent to Philadelphia; is geographically within its limits; and since December 31, 1940, because of the provisions of Public Act No. 819, is actually part of that City for the purposes of imposing the tax here under consideration. Plaintiff may at all times use the streets, bridges and other facilities of the City, and also has the benefit of protection of its police and fire departments when engaging in business or pleasure in that municipality, as well as many other advantages. It is common knowledge that the City of Philadelphia cuts all ice, and keeps the Delaware River navigable from the northern limits of the City to Chester, where in the winter months navigation would otherwise be closed, making possible to plaintiff the transportation he uses to go to and return from League Island to his home in New Jersey. This is decidedly a benefit to him. These facts will be judicially noticed by the Court regardless of any allegations to the contrary contained in the bill: Pearce v. Langfit,101 Pa. 507; French v. Senate, 146 Cal. 604, 80 P. 1031; Ft. L. Rld. Co. v. Lowe, 27 Kan. 749, affirmed 114 U.S. 525; 20 Am. Jur. p. 54. Therefore, we are convinced that the tax does not violate the Fourteenth Amendment of the Federal Constitution, that all the benefits of the facilities of Philadelphia are legally available to plaintiff, and he has no just reason to complain of the tax.
Plaintiff argues also that Congress is without power to waive a Federal employee's immunity or exemption from city and state taxes. With this argument we cannot agree, for it completely ignores the fact that such employee, prior to the decision inGraves v. N.Y. ex rel. O'Keefe, 306 U.S. 466, and the enactment of Public Salary Tax Act and Public Act No. 819, was merely the incidental beneficiary of an anomolous situation then supposed to exist between the State and Federal governments, which was founded on the theory that for either sovereignty to tax the employee of the other was in reality an unlawful interference with the activities of that government whose employee was taxed. Therefore, such employee obviously had no vested rights whatsoever in any immunity or exemption from taxation he may have been fortunate enough to enjoy previously; and for that reason his governmental employer can lawfully consent to remove such immunity or exemption in order effectually to correct this condition and thus make him contribute financial support to the other government whose benefits he shares. In the O'Keefe case it was said, with regard to this identical argument (pp. 483-4): "The ultimate repudiation in Helvering v. MountainProducers Corp., [303 U.S. 376], of the doctrine that a tax on the income of a lessee derived from a lease of government owned or controlled lands is a forbidden interference with the activities of the government concerned led to the reëxamination by this Court, in the Gerhardt case [Helvering v. Gerhardt, 304 U.S. 405], of the theory underlying the asserted immunity from taxation of one government of salaries of employees
of the other. It was there pointed out that the implied immunity of one government and its agencies from taxation by the other should, as a principle of constitutional construction, be narrowly restricted . . . It was further pointed out that, as applied to the taxation of salaries of the employees of one government, the purpose of the immunity was not to confer benefits on the employees by relieving them from contributing their share of the financial support of the other government, whose benefits they enjoy, or to give an advantage to a government by enabling it to engage employees at salaries lower than those paid for like services by other employers, public or private, but to prevent undue interference with the one government by imposing on it the tax burdens of the other." We accordingly conclude that Public Act No. 819 does not violate Clause 17 of Article I, Section 8, or the due process clause of the Fifth Amendment of the Federal Constitution.
We next turn to the second question, involving the construction of this Federal statute. As heretofore stated, no State may by taxation impose burdens upon the United States which interfere with the exercise of its governmental functions. In the Dravo case a State tax upon gross receipts paid by the United States to a non-resident contractor was held not to interfere in any substantial way with the performance of federal functions. The fact that the work was performed upon land over which the State had ceded its jurisdiction to the United States, save for the right to tax and to serve process, had no bearing on whether the tax constituted a prohibited burden. Of this case it was said in Falls City Brewing Co. v.Reeves, 40 F. Supp. 35, 39: "The Supreme Court opened the way for the application of certain nondiscriminatory State taxes on Federal areas, except insofar as those taxes might constitute a burden upon the United States, by its decisions in December 1937 in James v. Dravo Contracting Co. . . ., and Silas MasonCo. v. Tax Commission . . ." Two
years after the decision in the Dravo case, the time-honored principle of Collector v. Day, 11 Wall. 113 and Dobbins v. ErieCounty, 16 Pet. 435, that a state tax on the salary or occupation of a Federal employee constituted a direct and therefore unconstitutional burden on the United States government, was overthrown by the highest Federal tribunal in the O'Keefe case, in which the New York State income tax was held valid as applied to an officer of a United States governmental agency residing in that State. See Marson v.Philadelphia, 342 Pa. 369. As a sequel to this decision respecting taxation of Federal officers and employees, Congress passed the Act of April 12, 1939, c. 59, Title I, Section 4 (53 Stat. 575, 5 U.S.C.A. Section 84a), called the Public Salary Tax Act, whereby employees of the United States government were rendered subject to taxation by the State within which they reside, regardless of whether or not their compensation was earned on a Federal reservation. As the result of this Statute, a State could tax its own residents for income earned on Federal property, and could tax non-residents and residents of a United States reservation for income earned within the State proper, but could not tax non-residents or residents of a Federal area for income earned within the Federal area. State taxation of persons employed on Federal territory thus lacked uniformity, the resident of the State being subjected to taxation, while the non-resident employee, such as plaintiff, and the resident of the Federal area escaped. There was likewise a lack of uniformity in State taxation of non-residents, other than Federal employees, where the particular State had not reserved in its consent the power to tax in the United States' territory, in that those who earned income on the reservation were immune or exempt from State taxation, while those working elsewhere in the State were subject to it. For the purpose of correcting these anomolous situations, it seems to us, and to enable State taxation to fall alike upon all who earned income in the
State within whose boundaries the reservation was located, and in recognition of the generosity of the States which had granted to the Federal government exclusive jurisdiction over land within their respective territorial limits without reserving the right of taxation, Congress, in the best interests of our dual form of government, enacted Public Act No. 819. That these were the reasons for the passage of this statute is substantiated by the Report of a subcommittee of the Committee on Finance of the United States Senate, wherein it was stated: "Section 2(a) of the Committee amendment removes the exemption from income taxes levied by a State, or any duly constituted taxing authority in a State, where the exemption is based solely on the ground that the taxpayer resides within a Federal area or receives his income from transactions occurring or services performed in such area. One of the reasons for removing the above exemption is because of an inequity which has arisen under the Public Salary Tax Act of 1939. Under that act a State is permitted to tax the compensation of officers and employees of the United States when such officers and employees reside or are domiciled in that State but is not permitted to tax the compensation of such officers and employees who reside within Federal areas within such State. For example, a naval officer who is ordered to the Naval Academy for duty and is fortunate enough to have quarters assigned to him within the Naval Academy grounds is exempt from the Maryland income tax because the Naval Academy grounds are a Federal area over which the United States has exclusive jurisdiction, but his less fortunate colleague, who is also ordered there for duty and rents a home outside the Academy ground because no quarters are available inside, must pay the Maryland income tax on his Federal salary. Another reason for removing the above exemption is that under the doctrine laid down in James v. Dravo Contracting Co. (302 U.S. 134, 1937), a State may tax the income or receipts from transactions
occurring or services performed in an area within the State over which the United States and the State exercise concurrent jurisdiction but may not tax such income or receipts if the transactions occurred or the services were performed in an area within the State over which the United States has exclusive jurisdiction."
It is clear, therefore, from the obvious purposes of the Act, as indicated by its language and by the decisions and legislation which preceded it, corroborated by the views expressed by the Senatorial committee which considered it, that Congress intended it to apply to just such a situation as we have here before us. Plaintiff claims, however, that the phrase "having jurisdiction to levy such a tax" renders the Statute inapplicable to him because prior to its enactment the City of Philadelphia had no jurisdiction to impose taxes on League Island. Such a construction is the equivalent of saying that Congress merely intended to authorize the States to tax persons whom they were already permitted to tax. We cannot permit such an absurd construction to nullify this legislation. Cf.Superior Bath Co. v. McCarroll, 312 U.S. 176, 178. The phrase in question is obviously descriptive of the language preceding it and refers to the power of the taxing authority to impose the type of tax mentioned; it does not refer to its jurisdiction over the territory.
Having determined that Public Act No. 819 permits this Commonwealth and its subdivisions to enact legislation taxing the incomes of persons engaged on Federal reservations lying within the State's territorial limits or boundaries, and that this statute as so construed does not violate the Constitution of the United States, we next pass to a consideration of the construction and applicability of the income tax ordinance of the City of Philadelphia. That ordinance, enacted on December 13, 1939, pursuant to permission of the legislature conferred upon that City by the Act of Assembly of August 5, 1932, P. L. 45 (Sterling Act), provided for a general non-discriminatory
tax, inter alia, on all incomes earned within that municipality. Although plaintiff's salary was at that time immune from this levy, when the immunity was removed by Public Act No. 819, which receded to Philadelphia jurisdiction to impose taxes on League Island, the ordinance became applicable there without further action by either the State legislature or city council. The language of the Superior Court inPhiladelphia v. Schaller, 148 Pa. Super. 276, is particularly apposite here. There it was said (p. 282): "When the disability of the State to tax federal incomes was removed, there was no need for a reenactment of the legislation to reach incomes formerly exempt; the powers originally granted, broad enough to include all income regardless of the source were sufficient for the purpose." Plaintiff argues that the phrase of the ordinance "in Philadelphia" excluded League Island because it is not within Philadelphia. This contention is without merit, for obviously that phrase was intended to mean within the geographical limits of that City. As is clearly shown by the Act of February 2, 18546 (incorporating the City) and the statutes granting consent to its purchase and ceding jurisdiction over League Island, as well as the Federal government's Certificate of Acceptance thereof, the reservation is within the City's territorial boundaries, and the area comprising the island is not, by the phrase "in Philadelphia" excluded from the rest of the City where the tax is clearly applicable. See Rainier Nat. Park Co. v. Martin, 18 F. Supp. 481, affirmed 302 U.S. 661; Standard Oil Co. v. California, supra, p. 243. The averments of plaintiff's bill that League Island is not a part of Philadelphia and that it is wholly outside the political jurisdiction and sovereignty of the Commonwealth of Pennsylvania are not allegations of fact, but rather conclusions of law, which need not be accepted as true by the Court in considering
the sufficiency of the bill: Commonwealth ex rel. Davis v.Blume, 307 Pa. 406.
We, conclude, after carefully considering all of the arguments advanced by plaintiff, that the Philadelphia income tax ordinance is applicable to him, and that, as so applied, it is not unconstitutional. The assignments of error are all overruled and, therefore, the decree of the court below must be affirmed.
Decree affirmed; costs to be paid by appellant.
1 Although the record here before us is silent as to the amount involved, the court below has filed a certificate, in compliance with Rule 52 of this Court, that the amount in controversy exceeds the sum of $2500.
2 This section provides: "(a) No person shall be relieved from liability for any income tax levied by any State, or by any duly constituted taxing authority therein, having jurisdiction to levy such a tax, by reason of his residing within a Federal area or receiving income from transactions occurring or services performed in such area; and such State or taxing authority shall have full jurisdiction and power to levy and collect such tax in any Federal area within such state to the same extent and with the same effect as though such area was not a Federal area. (b) The provisions of subsection (a) shall be applicable only with respect to income or receipts received after December 31, 1940."
3 "The congress shall have Power . . . To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings."
4 California: Stat. 1919, c. 51, p. 74; Kansas: Laws of 1875, c. 66, p. 95; Nebraska: Laws of 1887, c. 83, p. 628, quoted inCounty of Cherry v. Thacher, 32 Nebr. 350; Washington: Session Laws of 1901, c. 92, p. 192; West Virginia: Code of 1937, c. 1, Art. 1, Sections 3, 4.
5 26 Stat. 842, Section 5 (1891) (receding to the State of Arkansas jurisdiction to tax as personal property all structures and other property in private ownership on the Hot Springs reservation; 30 Stat. 668 (1898) (jurisdiction receded to states over places purchased for branches of soldiers' homes); 53 Stat. 575 (1939) (Public Salary Tax Act).
6 That statute shows League Island to be in the First Ward of the City of Philadelphia.