Director of Revenue of Mo. v. CoBank ACB
Encyclopedia
Director of Revenue of Mo. v. CoBank ACB, , was a United States Supreme Court
case decided in 2001. The case concerned whether the National Cooperative Bank
is exempt from state income tax
requirements. A unanimous Court held that they are not exempt.
ACB is the successor to all rights and obligations of the National Bank for Cooperatives. In 1996, CoBank filed amended returns on behalf of that bank, requesting an exemption from all Missouri
corporate income taxes and refunds on the taxes it paid for 1991 through 1994. CoBank asserted that the Supremacy Clause accords federal instrumentalities immunity from state taxation unless Congress has expressly waived this immunity, which the Act did not expressly do. The state of Missouri denied the request, but the Missouri State Supreme Court reversed, stating that because the Act's current version is silent as to the banks' tax immunity, Congress cannot be said to have expressly consented
to state income taxation and, thus, the banks are exempt.
Justice Clarence Thomas
wrote the decision of the Court, which unanimously
reversed the Missouri Supreme Court. The Court held that banks for cooperatives are subject to taxation. Thomas wrote for the Court that nothing in the 1985 amendments to the Farm Credit Act indicated a repeal of the previous express approval of state taxation and that the structure of the Act indicated by negative implication that banks for cooperatives were not entitled to immunity. The Court rejected further claims by CoBank that they were entitled to immunity under McCulloch v. Maryland
, stating that that doctrine was expressly not invoked by Congress in this instance.
There was also discussion of the specific wording of the statute. Thomas wrote, "Had Congress simply deleted the final sentence of §2134 that limited the exemption while retaining the sentence granting the exemption, we would have no trouble concluding that Congress had eliminated the States’ ability to tax banks for cooperatives. Short of this act, however, we find Congress’ silence insufficient to disrupt the 50-year history of state taxation of banks for cooperatives."
With this decision, the Missouri Supreme Court had erred in finding an exemption, and the case was remanded to them to alter their previous determination.
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
case decided in 2001. The case concerned whether the National Cooperative Bank
National Cooperative Bank
National Cooperative Bank is a cooperative financial institution chartered by the United States Congress in 1978, primarily to serve the financial needs of cooperatives...
is exempt from state income tax
Seventeenth Amendment to the United States Constitution
The Seventeenth Amendment to the United States Constitution established direct election of United States Senators by popular vote. The amendment supersedes Article I, § 3, Clauses 1 and 2 of the Constitution, under which senators were elected by state legislatures...
requirements. A unanimous Court held that they are not exempt.
Background
The Farm Credit Act of 1933 created various lending institutions, including banks for cooperatives, which are designated as federally chartered instrumentalities of the United States. CoBankCoBank
CoBank, ACB, a part of the United States Farm Credit System, is an agricultural credit bank serving cooperatives in the agricultural sector. It lends money to farm credit associations, agricultural businesses, and rural utilities, who collectively own CoBank. It also owns 100% of Farm Credit...
ACB is the successor to all rights and obligations of the National Bank for Cooperatives. In 1996, CoBank filed amended returns on behalf of that bank, requesting an exemption from all Missouri
Missouri
Missouri is a US state located in the Midwestern United States, bordered by Iowa, Illinois, Kentucky, Tennessee, Arkansas, Oklahoma, Kansas and Nebraska. With a 2010 population of 5,988,927, Missouri is the 18th most populous state in the nation and the fifth most populous in the Midwest. It...
corporate income taxes and refunds on the taxes it paid for 1991 through 1994. CoBank asserted that the Supremacy Clause accords federal instrumentalities immunity from state taxation unless Congress has expressly waived this immunity, which the Act did not expressly do. The state of Missouri denied the request, but the Missouri State Supreme Court reversed, stating that because the Act's current version is silent as to the banks' tax immunity, Congress cannot be said to have expressly consented
Eleventh Amendment to the United States Constitution
The Eleventh Amendment to the United States Constitution, which was passed by the Congress on March 4, 1794, and was ratified on February 7, 1795, deals with each state's sovereign immunity. This amendment was adopted in order to overrule the U.S. Supreme Court's decision in Chisholm v...
to state income taxation and, thus, the banks are exempt.
Opinion of the Court
Clarence Thomas
Clarence Thomas is an Associate Justice of the Supreme Court of the United States. Succeeding Thurgood Marshall, Thomas is the second African American to serve on the Court....
wrote the decision of the Court, which unanimously
Majority opinion
In law, a majority opinion is a judicial opinion agreed to by more than half of the members of a court. A majority opinion sets forth the decision of the court and an explanation of the rationale behind the court's decision....
reversed the Missouri Supreme Court. The Court held that banks for cooperatives are subject to taxation. Thomas wrote for the Court that nothing in the 1985 amendments to the Farm Credit Act indicated a repeal of the previous express approval of state taxation and that the structure of the Act indicated by negative implication that banks for cooperatives were not entitled to immunity. The Court rejected further claims by CoBank that they were entitled to immunity under McCulloch v. Maryland
McCulloch v. Maryland
McCulloch v. Maryland, , was a landmark decision by the Supreme Court of the United States. The state of Maryland had attempted to impede operation of a branch of the Second Bank of the United States by imposing a tax on all notes of banks not chartered in Maryland...
, stating that that doctrine was expressly not invoked by Congress in this instance.
There was also discussion of the specific wording of the statute. Thomas wrote, "Had Congress simply deleted the final sentence of §2134 that limited the exemption while retaining the sentence granting the exemption, we would have no trouble concluding that Congress had eliminated the States’ ability to tax banks for cooperatives. Short of this act, however, we find Congress’ silence insufficient to disrupt the 50-year history of state taxation of banks for cooperatives."
With this decision, the Missouri Supreme Court had erred in finding an exemption, and the case was remanded to them to alter their previous determination.