Atkinson v. State Tax Comm'n of Ore.

Background

A group of contractors who built the Bonneville Dam under a 1934 contract challenged Oregon’s personal income tax on their net earnings. They argued the tax unlawfully burdened federal operations and that the work area was under exclusive federal control, so the State could not tax them. The Oregon Supreme Court sustained the tax, and the contractors appealed to the United States Supreme Court.

Reasoning

The Court relied on earlier decisions holding that certain state taxes do not unconstitutionally burden the Federal Government. It examined where the work took place: the riverbed remained titled to the State, and lands bought by the United States for the project did not show that the federal government had accepted exclusive control. Federal officials had required compliance with Oregon’s workers’ compensation law, which indicated the Government did not assume exclusive legislative authority. Because the State kept territorial authority so long as it did not interfere with federal functions, imposing the tax did not block the federal project.

Real world impact

The Court affirmed the Oregon judgment and let the tax stand. Contractors working on federal projects inside a state can be taxed on income earned there unless the federal government has clearly accepted exclusive control. The opinion notes the purchases and contract predated a 1936 federal law and does not decide how that later law affects lands where exclusive jurisdiction had been granted and accepted.