members of the Board. This is an indication of the unusual relationship the USCHS has with the federal government.
Perhaps the most important factor in this Court's determination that the USCHS is a federal instrumentality is that all profits of the Society are dedicated to achieving its purposes: "to preserve and improve the Capitol, research, publish, create items, medals and materials of historical interest and to cooperate with congressional committees and federal agencies in the work of the Society and the distribution of its products." Congressional Charter for USCHS, Pub. L. No. 95-493 (October 20, 1978). None of the Society's profits inure to the benefit of its members. Instead, the moneys are used to advance a national cause.
The Supreme Court highlighted the importance of this factor in Johnson where it pointed out that none of the profits from the post exchange went to individuals, rather, all earnings were used to add to the pleasure and comfort of the troops. 316 U.S. at 485. The Court further noted the importance of this factor in United States v. Livingston, 179 F. Supp. 9 (E.D.S.C. 1959), aff'd 364 U.S. 281, 80 S. Ct. 1611, 4 L. Ed. 2d 1719 (1960), when it affirmed a district court's ruling that a private corporation that contracted with the government to perform services for one dollar was the alter ego of the government and thus tax immune. In that case the Court stressed the fact that the corporation was acting "out of a high sense of public responsibility." Id. at 23. Cf. United States v. Boyd, 378 U.S. 39, 12 L. Ed. 2d 713, 84 S. Ct. 1518 (1964) (contractors for profit held not federal instrumentalities -- key element is use of property in connection with own commercial activities). Like the contractor in Livingston, the USCHS conducts all of the activities in which it engages as a patriotic service, with no prospect of monetary gain for any of the individuals involved. This factor weighs heavily in favor of finding that the USCHS is a federal instrumentality.
In considering cases in which an organization claimed to be a federal instrumentality, the Supreme Court has also focused on the financial relationship between the entity and the government. In Department of Employment, the Court cited as a factor in its decision the fact that the Red Cross receives substantial government contributions. Yet, in Johnson, the Court concluded that post exchanges were federal instrumentalities despite the fact that the government assumed none of the risk of their operation. Similarly, the USCHS bears all financial risk and burden of its activities. Yet, on the other hand, it is given substantial government assistance in the form of rent free space in the Nation's Capitol in which it operates the Visitor's Center. Thus, the USCHS' financial relationship with the government demonstrates both the independence found in Johnson and the interdependence evident in the Department of Employment.
Another of the most significant factors in a determination that an entity is a federal instrumentality is that the entity performs an essential function for the government. The USCHS does perform such a function. It provides valuable services as the principal historian for the United States Capitol. The USCHS also provides services to Congress. A majority of the sales made by the USCHS are of the "We the People" calendar and 93% of these calendars are sold to members of Congress who give them to their constituents. Additionally, by operating the Visitor's Center the USCHS provides education, information and convenience to Congress and visitors to the Capitol. The Court finds that the USCHS is an "instrumentality so closely connected to the government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed [-- here the operation of the Capitol Visitor's Center --] is concerned." United States v. New Mexico, 455 U.S. 720, 102 S. Ct. 1373, 1382, 71 L. Ed. 2d 580 (1982).
In arguing that USCHS is not a federal instrumentality the District of Columbia points to two provisions in the contract providing for operation of the Visitor's Center. These provisions state that the USCHS is not an agent of the United States and that the USCHS agrees to hold the United States harmless for any claims against the Society. But this argument confuses agency with federal instrumentality status. The federal government may not be liable for torts of employees of its instrumentalities but it is liable for acts committed by agents of the government. Thus, an entity need not be in an agency relationship with the United States to be a federal instrumentality. For example, the Red Cross is not an agency of the United States but it is an instrumentality. Department of Employment v. United States, 385 U.S. 355, 17 L. Ed. 2d 414, 87 S. Ct. 464 (1966). See also United States v. New Mexico, 455 U.S. 720, 102 S. Ct. 1373, 1383, 71 L. Ed. 2d 580 (1982) ("a finding of constitutional tax immunity requires more than the invocation of traditional agency notions"). Thus, although these contract provisions establish that USCHS is not an agent of the government they do not effect a finding that the USCHS is a federal instrumentality.
Having held that the USCHS is a federal instrumentality the Court necessarily must conclude that the USCHS is exempt from taxation.
"Under the Supremacy Clause, as interpreted in a line of cases dating to McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 436-37, 4 L. Ed. 579 (1819), federal instrumentalities are immune from taxation by a State, unless such taxation is specifically authorized by Congress. See e.g., First National Bank v. State Tax Commission, 392 U.S. 339, 88 S. Ct. 2173, 20 L. Ed. 2d 1138 (1968); Smith v. Kansas City Title Trust Co., 255 U.S. 180, 212-13, 65 L. Ed. 577, 41 S. Ct. 243 (1921); United States v. States Tax Commission, 481 F.2d 963, 969 (1st Cir. 1973)." United States v. Maine, 524 F. Supp. 1056, 1058 (D. Me. 1981). The Court finds that Congress did not specifically authorize the District of Columbia to tax the USCHS. Although the District is regulated by Congress, Section 47-2605(m) of the D.C. Code limits the District of Columbia's taxing power to the same extent that the states are limited by the federal constitution. United States v. District of Columbia, 215 U.S. App. D.C. 352, 669 F.2d 738, 747 (D.C. Cir. 1981). Thus, because states would be barred from taxing a federal instrumentality -- here the USCHS -- the District of Columbia too is precluded from exacting such a tax.
An Order in accordance with the foregoing shall be issued of even date with this Opinion.
Upon consideration of Plaintiff's Motion to Stay, Defendant's Motion to Dismiss and Plaintiff's Motion for Summary Judgment and the oppositions to these motions and the entire record in this case, it is, by the Court, this 2nd day of September, 1982, hereby,
ORDERED that Plaintiff's Motion to Stay is dismissed as moot; and it is further,
ORDERED that Defendant's Motion to Dismiss is denied; and it is further,
ORDERED that Plaintiff's Motion for Summary Judgment is granted.