Clallam County v. United States

Background

A federal corporation created under a 1918 law and organized in Washington State was formed to buy land, build a sawmill and railroad, and supply lumber for aircraft production. The United States owned nearly all the stock, provided money and property, and took the corporation’s bonds. After the armistice the corporation began winding up its affairs under War Department supervision, with remaining assets destined for the United States. The corporation sued to cancel county and state taxes levied for 1919–1921 on the land and other property held in its name.

Reasoning

The Court addressed whether a federal court could hear the constitutional claim and whether a county could tax the corporation’s property. The opinion explained that the corporation was an instrument set up by the United States to carry out wartime production, that all its property was acquired or furnished by the United States, and that it was used solely to further the government’s program. Applying the principle that states may not tax instrumentalities or means of the national government when the tax would be repugnant to federal power, the Court concluded that taxing this property would be improper. The Court therefore found federal jurisdiction and held the property immune from the state tax.

Real world impact

The decision prevents the county from collecting those taxes on property used exclusively for the federal war effort and confirms that federal courts can resolve such constitutional claims. The Court distinguished this case from ordinary private corporations that pursue independent profits, emphasizing that immunity turned on the corporation’s federal creation, ownership, and single-purpose wartime use.