City of Cleveland v. United States

Background

The dispute involved a federal housing agency, a state housing authority in Ohio, local tax collectors in Cleveland and Cuyahoga County, and tenants living in low-cost housing. The United States acquired land, built low-cost homes, and the units were leased to a state authority that sublet them to tenants. Local taxing officials tried to assess and collect property taxes on that land, and the federal agency and its local partners sought injunctions to stop the tax attempts. A separate case involved a federal application for tax exemption that Ohio courts denied.

Reasoning

The main question was whether Congress could authorize federal low-cost housing projects and exempt property used for those projects from state or local taxation. The Court pointed to the Housing Act’s declared national welfare purpose and to the statute’s explicit exemption clause covering the Authority’s property. It held that Congress has the constitutional power to enact the Housing Act and may exempt property owned by the United States or its instrumentality from state taxation. The Court also explained that a three-judge federal court was properly used because state laws at issue had statewide effect.

Real world impact

The ruling means federal housing projects built under the Housing Act can be protected from state and local property taxes, though the statute allows agreements to pay sums in lieu of taxes up to the tax amount. Local governments will have less ability to collect ordinary property taxes from such federally owned projects. The decision resolves these cases in favor of the federal housing program and reverses the state-court denial of exemption in the Cincinnati matter.

Dissents or concurrances

A dissenting judge below argued the federal government was entering a local business and should not immunize the property from normal local taxation needed to support community services.