Moses Lake Homes, Inc. v. Grant County

Background

The dispute involved the United States, acting through the Air Force, and three private companies that built and operated long-term housing for military personnel under 75-year Wherry Act leases. The county assessor valued those leaseholds at the full worth of the buildings and improvements and retrospectively assessed and attempted to collect large tax bills and sales to satisfy them. The United States filed a condemnation action, deposited an estimated value in court, and the lessees challenged the county’s tax claims as discriminatorily high compared with other similar leaseholds.

Reasoning

The core question was whether valuing and taxing these federal leaseholds at the full value of improvements discriminated against the United States and its lessees. The Court explained that a prior case (Offutt) did not require states to value Wherry Act leaseholds by improvements and that States may not treat federal lessees worse than lessees of state-owned land. The Court relied on earlier decisions holding discriminatory taxes void. It rejected the lower court’s remedy of simply reducing the tax amount and held that an invalid, discriminatory tax “may not be exacted.” The Court therefore reversed the decision that had allowed collection or enforced reduced amounts.

Real world impact

The ruling prevents Grant County from collecting the challenged taxes or selling the properties to satisfy them because the assessments were unconstitutional. It emphasizes that only local taxing officials can lawfully assess taxes and that federal courts cannot substitute a modified tax for one found to be discriminatory. Counties must assess federal leaseholds without discriminatory valuation practices.