Director of Revenue of Missouri v. CoBank ACB

Background

The dispute involves a federally chartered bank that makes loans to farmer-owned cooperatives and its successor, CoBank, against the Missouri Director of Revenue. The National Bank for Cooperatives filed corporate income tax returns for 1991–1994 and paid those taxes, then in 1996 CoBank filed amended returns seeking refunds and claiming exemption from state income tax. CoBank argued that federal instrumentalities are immune from state taxation unless Congress expressly allows it. A Missouri administrative agency rejected the claim; the Missouri Supreme Court reversed and held the banks were exempt, creating conflicts with other state courts, so the Supreme Court agreed to review the issue.

Reasoning

The core question was whether the Farm Credit Act and related statutes leave banks for cooperatives exempt from state income taxation. The Court found Congress’s long statutory history showed states could tax these banks except when the United States owned stock. Congress later removed language tied to federal stock ownership as a technical change, but did not expressly grant the broad exemption other Farm Credit institutions received. Because Congress had not affirmatively written an exemption for banks for cooperatives and the Act’s structure contrasts these banks with explicitly exempt entities, the Court concluded the banks are not immune and reversed the Missouri decision.

Real world impact

The ruling lets states collect corporate income tax from the National Bank for Cooperatives and similar institutions unless Congress clearly provides otherwise. The Court did not decide broader constitutional immunity questions because it found the statutes resolve this case. The case is sent back to lower courts for further steps consistent with this opinion.