DocketNumber: No. 341
Citation Numbers: 285 U.S. 393
Judges: Brandéis, Cardozo, McReynolds, Robeets, Roberts, Stone
Filed Date: 4/11/1932
Status: Precedential
Modified Date: 9/9/2022
delivered the opinion of the Court:
By the Enabling Act Congress required as a condition precedent to the admission of Oklahoma into the Union that her constitution should make provision for common schools; and for their benefit it granted certain lands to the State with the proviso that those valuable for min
In January, 1914, some of these lands were leased tó the Coronado Oil and Gas Company; renewals followed in 1919. Under the first lease the State received fifty per cent, and under the second twelve and one-half per cent, of the gross production of oil and gas. During the years here important the lessee’s entire income came from the sale of its portion of such output.
The Commissioner of Internal Revenue assessed income and excess-profits taxes upon the corporation’s net income for 1917, 1918 and 1919. The Board of Tax Appeals approved his action; the Court of Appeals, District of Columbia, ruled otherwise. The latter held that the lease to the Coronado Company was an instrumentality of the State for the utilization of lands dedicated to the support of public schools and that to tax the fruits of the lease would burden her in the performance of the governmental function of maintaining such schools. This conclusion, it. properly thought, was necessary under Gillespie v. Oklahoma, 257 U. S. 501.
We are disposed to apply the doctrine of Gillespie v. Oklahoma strictly and only in circumstances closely analogous to those which it disclosed. In principle, however, the present claim of exemption cannot be distinguished from the one presented in the earlier cause and we adhere .to the rule there approved.
“ Just what instrumentalities of. either a state or the federal government are exempt from taxation by the other cannot be stated in terms of universal application. But this Court has repeatedly held that those agencies through which either government immediately and directly exercises its sovereign powers, are immune from the taxing power of the other.” Metcalf Eddy v. Mitchell, 269 U. S. 514, 522.
The opinion in Gillespie v. Oklahoma, supra, has often been referred to as the expression of an accepted principle.
When Oklahoma undertook to lease her public lands for the benefit of the public schools she exercised a function strictly governmental in- character. Consequently, South Carolina v. United States, 199 U. S. 437, much relied upon, is not in point.
The States are essential parts of the plan adopted by the Federal Constitution; and we accept as settled doctrine that the United States can lay no tax upon their governmental instrumentalities. Texas v. White, 7 Wall. 700, 725; Collector v. Day, 11 Wall. 113; Pollock v. Farmers Loan & Trust Co., 157 U. S. 429, 584; Farmers Bank v. Minnesota, 232 U. S. 516, 527.
“ It is an established principle of our constitfitional system of dual government that the instrumentalities; means and operations whereby the United States exercises its governmental powers are exempt from taxation by the States, and that the instrumentalities, means and operations whereby the States exert the governmental powers belonging to them are equally exempt from taxation by the United States.” Indian Motocycle Co. v. United States, supra. Each government is supreme in its sphere; and in order to preserve our dual system this fact must be given practical recognition.
Here the lease to the respondent was an instrumentality of the State for the purpose of carrying out her duty in respect of public schools. To tax the income of the lessee
The challenged judgment must be
Affirmed.