Federal Land Bank v. Kiowa County, 368 U.S. 146 (1961)

Federal Land Bank of Wichita v. Board of County


Commissioners of Kiowa County, Kansas
No. 25


Argued October 16, 1961
Decided December 11, 1961
368 U.S. 146

CERTIORARI TO THE SUPREME COURT OF KANSAS

Syllabus

Petitioner is a federal land bank organized as a federal instrumentality under the Federal Farm Loan Act, which exempts such banks from all taxation "except taxes upon real estate"; authorizes them to acquire land in satisfaction of debts; but forbids them to hold any such real estate for longer than 5 years, "except with the special approval of the Farm Credit Administration." Petitioner acquired certain farm land in Kansas in satisfaction of a debt, sold it for more than the amount of the debt, retained a half interest in the mineral estate, leased its oil and gas rights, and began receiving royalties therefrom. It paid taxes on its interest in the mineral estate, which was "real estate" under Kansas law; but it challenged the right of a county to levy personal property taxes on its oil and gas lease and the royalties derived therefrom under a Kansas statute which declared them to be "personal property." The State Supreme Court held that Congress did not intend to exempt this personal property from taxation, because the mineral estate had been held longer than 5 years and because holding it after the loss had been recouped did not serve the bank’s governmental function.

Held: there is no basis for concluding that Congress did not intend the immunity to apply in this case, and the state personal property tax on petitioner’s oil and gas lease and the royalties derived therefrom are unconstitutional by virtue of the Supremacy Clause of the Constitution. Pp. 147-156.

(a) The holding of the mineral estate involved here was in furtherance of the bank’s governmental function. Pp. 150-152.

(b) A regulation of the Farm Credit Administration supplied the requisite permission to hold the mineral estate longer than 5 years. Pp. 152-155.

187 Kan. 148, 354 P.2d 679, reversed.