Arkansas v. Farm Credit Svcs. Of Central Arkansas, 520 U.S. 821 (1997)

Arkansas v. Farm Credit Services of Central Arkansas

No. 95-1918

Argued April 21, 1997
Decided June 2, 1997
520 U.S. 821

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Syllabus

The Tax Injunction Act (Act) restricts the federal district courts’ power to prevent collection or enforcement of state taxes, but makes an exception to that jurisdictional bar where no plain, speedy, or efficient state court remedy may be had. This Court has established another exception where the United States sues to protect itself or its instrumentalities from state taxation. Department of Employment v. United States, 385 U.S. 355, 358. Production Credit Associations (PCA’s) are federally chartered corporate financial institutions organized by farmers primarily to make loans to farmers. During the relevant time period, federal law has exempted PCA’s from state taxes on their notes, debentures, and other obligations. Respondent PCA’s, claiming that they are also immune from Arkansas sales and income taxes, sought a declaratory judgment and an injunction prohibiting the State from levying such taxes on them. Seeking to overcome the Act’s jurisdictional bar, they contended that, as instrumentalities of the United States, they are not subject to the Act’s provisions any more than the United States itself. The District Court granted them summary judgment, and the Court of Appeals affirmed.

Held: PCA’s are not included within the judicial exception to the Act by virtue of their designation as instrumentalities of the United States, and so may not sue in federal court for an injunction against state taxation without the United States as co-plaintiff. Pp. 825-832.

(a) The Act, which has been interpreted and applied as a "jurisdictional rule" and a "broad jurisdictional barrier," Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463, 470, was enacted to confine federal court intervention in state government. The federal balance is well served when the several States define and elaborate their own laws through their own courts and administrative processes and without undue interference from the federal judiciary. A State’s power to tax is basic to its power to exist. Given the federal balance and the basic principle that statutory language is to be enforced according to its terms, federal courts must guard against interpretations of the Act which might defeat its purpose and text. Where the United States Government is a party, the other side of the federal balance must be considered. The necessity to respect the National Government’s authority underlies the rule that the Act does not constrain federal judicial power when the United States sues to protect itself and its instrumentalities from state taxation. Pp. 825-828.

(b) When the United States is not a party, the mere fact that a party challenging a tax has interests closely related to those of the Federal Government is not enough, in and of itself, to overcome the Act’s bar. Moe, supra, at 471-472. An instrumentality of the United States can enjoy the benefits and immunities conferred by explicit statutes without the further inference that it has all of the rights and privileges of the National Government. The courts of appeals have adopted different standards for deciding whether a federal instrumentality may sue in federal court to enjoin state taxation where the United States is not a co-plaintiff. Under any of those tests, PCA’s would not be exempt from the Act’s restrictions. The United States is not joined as a co-plaintiff, and opposes the exercise of jurisdiction. Regardless of whether a federal agency or body with substantial regulatory authority is exempt from the Act when it brings suit in its own name, cf. NLRB v. Nash-Finch Co., 404 U.S. 138, PCA’s are not entities of that description. Despite their formal and undoubted designation as instrumentalities of the United States, and despite their entitlement to those tax immunities accorded by the explicit statutory mandate, they do not have or exercise power analogous to that of the National Labor Relations Board or other United States departments or regulatory agencies. Their business is making commercial loans, and their stock is owned by private entities. Their interests are not coterminous with those of the Government any more than most commercial interests. A holding that they are subject to the Act’s restriction on federal court jurisdiction furthers the State’s interests without sacrificing those of the Federal Government. Pp. 828-832.

76 F.3d 961, reversed.

KENNEDY, J., delivered the opinion for a unanimous Court.