Van Cott v. State Tax Commission

96 P.2d 740, 98 Utah 264, 1939 Utah LEXIS 15

• Court: Utah Supreme Court
• Decided: December 28, 1939
• Docket: No. 5902.
• Status: Published

Opinions

WOLFE, Justice.

This case was appealed from this court by the Tax Commission to the Supreme Court of the United States which stated in its decision 806 U. S. 511, 59 S. Ct. 605, 607, 83 L. Ed. 950, as follows:

“We have now re-examined and overruled the doctrine of New York ex rel Rogers v. Graves in Graves v. New York ex rel O’Keefe, 306 U. S. 466, 59 S. Ct. 595, 83 L. Ed. [927, 120 A. L. R. 1466], this day decided. Salaries of employees or officials of the Federal Government or its instrumentalities are no longer immune, under the Federal Constitution, from taxation by the States. Whether the Utah income tax, by its terms, exempts respondent, can now be decided by the State’s highest court apart from any question of Constitutional immunity, and without the necessity, so far os the Federal Constitution is .concerned, of attempting to divide functions of government into those which are essential and those which are non-essential.” (Italics added.)

The case on remittitur from the United States Supreme Court is here for the purpose of deciding whether, in view of the holding that all federal salaries may be subjected to a non-discriminating state income tax, it would change our opinion that Van Cott’s salary was earned in an essential governmental function and, therefore, exempt under Sec. 80-14-4, R. S. U. 1933. The facts are stated in this court’s opinion contained in 95 Utah 43, 79 P. 2d 6, 7, to which reference is made for them. That case interpreted the words “essential governmental function” as meant by the Legislature. It held that “the statute excluding governmental salaries, wages, and commissions for services rendered in connection with the exercise of an essential governmental function is a recognition of the rule of immunity announced by the Supreme Court of the United States,” etc. And again:

“From these cases, the rule may be deduced that each government is denied the power to tax the essential governmental functions of the other, and this limitation of power has extended to salaries, wages, or compensation paid to officers or employees of the government itself or an instrumentality which it supports in the exercise of essential governmental functions” (Italics added.)

It was then decided that the work of the Reconstruction Finance Corporation and of the Regional Agricultural Credit Corporation of Salt Lake City, because of the nature of the functions of these two instrumentalities in the severe years of . 1932 and following, should be held as essential within the meaning of Sec. 80-14-4 (g), R. S. U. 1933. Thus, this court has already determined that the Legislature intended to exclude Van Cott’s salary as being earned for services rendered in connection with the exércise of essential governmental functions. The fact that the Supreme Court has since held that there is no immunity of Federal salaries from a state’s non-discriminatory income tax, whether earned in an essential or non-essential function, cannot affect the distinction which our Legislature sought to draw by the use of the words “essential governmental function” in 80-14-4 (g), even though the Legislature may have acted on an erroneous assumption that federal salaries earned in connection with such functions were immune from state taxation and, for this reason, exempted them. The Legislature did not make the classification a contingent one, depending on whether or not the United States Supreme Court adhered to its formerly announced rule that such salaries were immune. It drew a definite exemption based on what now appears afterward to have been a wrong theory of immunity, but, for better or worse, it definitely drew that line regardless of whether or not its reasons were erroneous. Consequently, we hold that this court has already decided the question presented at this last hearing, in the case of Van Cott v. State Tax Commission of Utah, 95 Utah 48, 79 P. 2d 6. That decision held that Van Cott’s salary as agency counsel for the Salt Lake Agency of the Reconstruction Finance Corporation, and as counsel for the Regional Agricultural Credit Corporation of Salt Lake City, was earned “for services rendered in connection with the exercise of an essential governmental function,” because the functions exercised by both those corporations were, at least in our present period of economic stress, essential governmental functions. We adhere to that conclusion because if the decision correctly interpreted the intent of the Legislature in using the phrase “essential government functions,” such interpretation is still correct regardless of any change in decision of the United States Supreme Court. We therefore repeat the order remanding the case to the Tax Commission with instructions to redetermine the tax in accordance with the views expressed in our former decision in this case.

McDONOUGH and PRATT, JJ., concur.