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AGO 1975 No. 11 - May 28, 1975
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Slade Gorton | 1969-1980 | Attorney General of Washington

TAXATION ‑- REAL PROPERTY ‑- LIENS ‑- ACQUISITION OF TAXABLE REAL PROPERTY BY UNITED STATES AGENCY

Where a United States agency acquires real property by outright purchase, ad valorem property taxes levied against such property which are due and payable in the year of acquisition, together with the lien for such taxes, are to be prorated and allocated to that portion of the year prior to the date of execution of the instrument vesting title in the United States.

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                                                                   May 28, 1975

Honorable Robert F. Patrick
Prosecuting Attorney
Whitman County
P.O. Box 30
Colfax, Washington 99111

                                                                                                                 Cite as:  AGO 1975 No. 11

Dear Sir:

            By letter previously acknowledged you have requested our opinion on a question which we paraphrase as follows:

            Where a United States agency acquires real property by outright purchase, are ad valorem property taxes levied against such property which are due and payable in the year of acquisition, together with the lien for such taxes, to be prorated and allocated to that portion of the year prior to the date of execution of the instrument vesting title in the United States?

            For reasons discussed in the analysis below, we answer your question in the affirmative.

                                                                     ANALYSIS

            As we understand the factual circumstances giving rise to your question, the United States Postal Service has recently completed an outright purchase of certain real property in your county to be used for a post office.  The transaction was closed and title vested in the United States during  [[Orig. Op. Page 2]] April, 1975.  Your question deals with liability for ad valorem real property taxes assessed in 1974, to be collected in 1975.

            Real property taxes constitute a lien attaching on the first day of January in the year in which such taxes are levied.  RCW 84.60.020.  Accordingly, there is no question but that a valid tax lien was in effect for taxes levied in 1974, to be collected in 1975, at the time the United States government acquired the property.  CompareMoses Lake Homes v. Grant County, 365 U.S. 744, 6 L. ed.2d [[L.Ed. 2d]]66 81 S.Ct. 870 (1961).

            As a general rule, real property acquired by the United States remains subject to state tax liens created by property tax assessments made prior to the time the United States acquired the property.  United States v. Alabama, 313 U.S. 274, 85 L. ed. [[L.Ed.]]1327, 61 S.Ct. 1011 (1941).  However, despite the continuing validity of such a lien, the lien is unenforceable against the United States by tax sale or otherwise, since the United States has not consented to suit.  United States v. Alabama, supra.  Accord,United States v. Pierce County, 193 Fed. 529 (D.C. Wash. 1912);United States v. Alberts, 55 F.Supp. 217 (D.C. Wash. 1944).  Thus, without more, the property in question would, upon being acquired during April of 1975, be subject to the real property tax lien created by the 1974 tax assessment.  The lien would, as a practical matter, be presently unenforceable, but nevertheless it would constitute a cloud on the title and would be enforceable against a subsequent purchaser from the United States.

            However, the foregoing does not end the matter.  As a result of our system of intergovernmental immunity, it is well settled that a state may not impose its taxes in such a manner as will discriminate against the federal government and those with whom it deals.  Phillips Chemical Co. v. Dumas School Dist., 361 U.S. 376, 4 L. ed.2d [[L.Ed. 2d]]384, 80 S.Ct. 474 (1960).  In thePhillips case, a state property tax imposed upon the lessee of real property owned by the United States was struck down as an unconstitutional discrimination against the United States because lessees of property owned by the state and its political subdivisions were not taxed on their leaseholds at all.  The principle enunciated in that case is that a state may not single out those who deal with the United States for a tax burden not imposed on others  [[Orig. Op. Page 3]] similarly situated; i.e., the state must treat those who deal with the United States at least as well as it treats those with whom it deals itself.1/

             In the situation at hand, we believe that any attempt to hold a tax lien valid against either the United States or a subsequent purchaser, if any, from the United States would result in unconstitutional discrimination against the federal government and those with whom it deals, in violation of the principles set forth in the Phillips case.  We reach this conclusion because RCW 84.60.050, which deals with taxes and tax liens on property acquired by the state and its municipal corporations, requires proration of taxes due in the year in which the property was acquired and voids the prorated portion of any tax lien which is in existence on the date of acquisition.  RCW 84.60.050 provides, in pertinent part, as follows:

            "(1) When real property is acquired by purchase or condemnation by the state of Washington, any county or municipal corporation . . . such property shall continue to be subject to the tax lien for the years prior to the year in which the property is so acquired . . . of any tax levied by the state, county, municipal corporation or other tax levying public body, except as is otherwise provided in RCW 84.60.070.

            "(2) The lien for taxes applicable to the real property being acquired . . . for the year in which such real property is so acquired . . . shall be for only the pro rata portion of taxes allocable to that portion of the year prior to the date of execution of the instrument vesting title, . . . No taxes levied or tax lien on such property allocable to a period subsequent to the dates identified in this subsection shall be valid and any such taxes levied shall be canceled as provided in RCW 84.56.400.  In the event the owner has paid taxes  [[Orig. Op. Page 4]] allocable to that portion of the year subsequent to the dates identified in this subsection he shall be entitled to a pro rata refund of the amount paid on the property so acquired . . ."

            We recognize that RCW 84.60.050 does not by its own express terms apply to property acquired by the United States. However, Article VII, § 3 (Amendment 19) of the Washington constitution and RCW 84.40.315, both of which authorize the taxation of property of the United States and its agencies and instrumentalities, require that the tax laws of the state be applied to the fullest extent possible to federal property, consistent with federal law.2/   In order to give the fullest possible effect to this constitutional and statutory policy, and in order not to run afoul of the principles set forth in thePhillips case, we therefore must look upon the instant transaction in the same manner as if, by reason of the status of the purchaser, it came squarely within the express terms of RCW 84.60.050 as above quoted.

             [[Orig. Op. Page 5]]

            The alternative, of course, would be to conclude that RCW 84.60.050,supra, is to be limited to its express scope (i.e., to property acquired by the state or its municipal corporations) ‑ with the result the property in question would be subject to a lien in the full amount of taxes due and payable in 1975.  However, this would result in a tax burden being imposed on those who deal with the United States (in this case, the eventual purchaser of the property from the United States) without a similar tax burden being imposed on those who deal with the state or its municipal corporations.  Since this result would clearly violate the principles set forth in Phillips Chemical Co., supra, it follows that in the absence of any statutory authority for proration of taxes and tax liens on property acquired by the federal government, theentire tax and resulting tax lien for the year of the sale would be void.  This result, in turn, would violate the policy of full taxation of federal property set out in Article VII, § 3 (Amendment 19) of the Washington constitution, and RCW 84.40.315,supra, fn. 2.

            In short, the only way to give effect to the terms of Article VII, § 3 (Amendment 19) and RCW 84.40.315, supra, is to extend RCW 84.60.050 by implication to include the federal government and its agencies and instrumentalities, so as to permit the proration of taxes and tax liens on federally acquired property in the same manner as taxes and tax liens on state acquired property.

                        CONCLUSION

            For the foregoing reasons, it is our opinion that where the United States Postal Service acquires property by outright purchase, ad valorem property taxes levied against such property which are due and payable in the year of acquisition, and the lien for such taxes, are to be prorated and allocated to that portion of the year prior to the date of execution of the instrument vesting title in the United States, in accordance with the procedures set out in  [[Orig. Op. Page 6]] RCW 84.60.050.3/

             We trust the foregoing will be of some assistance to you.

Very truly yours,

SLADE GORTON
Attorney General


MATHEW J. COYLE
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

1/Accord, Moses Lake Homes v. Grant County, supra, in which this same principle was applied by the supreme court, relying upon Phillips, supra, in a case involving leased federal property situated in our own state.

2/Article VII, § 3 (Amendment 19) provides:

            "The United States and its agencies and instrumentalities, and their property, may be taxed under any of the tax laws of this state, whenever and in such manner as such taxation may be authorized or permitted under the laws of the United States, notwithstanding anything to the contrary in the Constitution of this state."

            RCW 84.40.315 provides:

            "Notwithstanding the provisions of RCW 84.36.010 or anything to the contrary in the laws of the state of Washington, expressed or implied, the United States and its agencies and instrumentalities and their property are hereby declared to be taxable, and shall be taxed under the existing laws of this state or any such laws hereafter enacted, whenever and in such manner as such taxation may be authorized or permitted under the laws of the United States."

3/If the transaction between the seller and the United States Postal Service was in the nature of a lease‑purchase agreement, our answer to your question would undoubtedly be different.  In the event of acquisition by lease‑purchase, the property remains fully taxable until title passes to the United States.  See, U.S.C. § 2103 ‑ 2111.

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