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Susquehanna Power Co. v. State Tax Commission of Md., 283 U.S. 291, 51 S.Ct. 434, 75 L.Ed. 1042

Facts

The Susquehanna Power Company, licensed by the Federal Power Commission, constructed a dam across the Susquehanna River, creating a pool that submerged a significant area of land. The company acquired these lands through purchase and state grant for its power project. The State Tax Commission assessed the submerged lands for taxation, which the company contested, arguing that the lands were instrumentalities of the federal government and thus immune from state taxation.

Issue

Whether the submerged lands used by the Susquehanna Power Company in its federally licensed power project are subject to state taxation.

Appellant urges, as principal grounds for reversal, first, that in constructing and operating its power plant under the federal license, it, and its lands and property used in the power project, are agencies or instrumentalities of the federal government, state taxation of which is impliedly prohibited by the Constitution, and, second, that in assessing the lands for taxation appellee has assigned to them a value attributable to appellant's license, likewise immune from taxation, and to the river waters, not appellant's property, in violation of the due process clause of the Fourteenth Amendment.

Rule

Lands privately owned are subject to state taxation, even if they lie under navigable waters, unless they are considered instrumentalities of the federal government due to their use in a federally licensed project.

Lands privately owned are subject to state taxation, although lying under navigable waters, Central R. Co. v. Jersey City, 209 U. S. 473, 28 S. Ct. 592, 52 L. Ed. 896; Leary v. Jersey city, 248 U. S. 328, 39 S. Ct. 115, 63 L. Ed. 271, as is private property in which the federal government may have an interest.

Analysis

The court analyzed the relationship between the federal license and the state taxation authority, concluding that the lands in question, while used in a federal project, did not possess immunity from state taxation. The court emphasized the distinction between the federal license as an instrumentality and the property used in the business, which is subject to state tax. The assessment was deemed appropriate as it reflected the fair value of the lands used in the power business.

The exemption of an instrumentality of one government from taxation by the other must be given such a practical construction as will not unduly impair the taxing power of the one or the appropriate exercise of its functions by the other.

Conclusion

The court affirmed the decision of the Court of Appeals of Maryland, upholding the tax assessment on the submerged lands.

Affirmed.

Who won?

State Tax Commission of Maryland prevailed because the court found that the assessment of the submerged lands for taxation was lawful and did not violate constitutional protections.

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