Tax Type
Bank Franchise Tax
Description
Farm Credit Act of 1971
Topic
Exemptions
Date Issued
12-09-1988
[Opinion - Virginia Attorney General: 1988 at 504]
REQUEST BY: Honorable Stanley R. Lewis Commissioner of the Revenue for Middlesex County P.O. Box 148 Saluda, Virginia 23149
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask several questions concerning the exemption from taxation for Farm Credit Banks1 and federal land bank associations pursuant to the Farm Credit Act of 1971, 12 U.S.C.A. § 2001 note (West 1980 & Supp. 1988) (the "Act"). You ask whether the federal law granting the tax exemption overrides state tax laws and also whether the tax exemption granted by the Act includes an exemption from local personal property taxes and bank franchise taxes.2
I. Applicable Statutes
The Act provides, in part, the following tax exemption to Farm Credit Banks:
The Farm Credit Banks and the capital, reserves, and surplus thereof, and the income derived therefrom shall be exempt from Federal, State, municipal, and local taxation, except taxes on real estate held by a Farm Credit Bank to the same extent, according to its value, as other similar property held by other persons is taxed.
12 U.S.C.A. § 2023 (West Supp. 1988). The Act grants the identical tax exemption to federal land bank associations. 12 U.S.C.A. § 2098 (West Supp. 1988).
II. Federal Statutes Control When State Law Conflicts Concerning Tax Exemption
A federal law supplants a conflicting state law under the authority of the Supremacy Clause of the Constitution of the United States. United States Const. Art. VI; Gibbons v. Ogden, 9 Wheat. 1, 211, 6 L. Ed. 23, 73 (1824). The tax exemption provisions of the Act, therefore, will prevail over any conflicting state statutes which may be read to authorize the taxation of Farm Credit Banks or federal land bank associations.
III. Local Personal Property Taxes Prohibited by Act
The Act prohibits any local taxation, except taxes on real estate. This prohibition includes local personal property taxes. Fed. Land Bank v. Kiowa County, 368 U.S. 146 (1961). It is my opinion, therefore, that a locality may not impose personal property taxes upon a Farm Credit Bank or a federal land bank association.
IV. Farm Credit Banks and Federal Land Bank Associations Not Subject to Bank Franchise Taxes
The Virginia Bank Franchise Tax Act, §§ 58.1-1200 through 58.1-1217, requires every bank3 to pay an annual franchise tax measured by its net capital. The Virginia Bank Franchise Tax Act specifically excludes the assessed value of real estate from the determination of the net capital basis for the tax. See § 58.1-1205. It is my opinion, therefore, that the bank franchise tax is not a tax on real estate, which is permitted under the Act. It is further my opinion that the Act prohibits the imposition of bank franchise taxes on Farm Credit Banks and federal land bank associations.
1 In your inquiry, you refer to federal land banks rather than Farm Credit Banks. The Farm Credit Act of 1971 was revised extensively by the Agricultural Credit Act of 1987, Pub. L. No. 100-233, 101 Stat. 1568 (1988). Federal land banks no longer exist under the Farm Credit System, each such bank having been required to merge with the federal intermediate credit bank in its district to form a Farm Credit Bank. The Farm Credit Act, as amended, omits the provision attached to your inquiry, 12 U.S.C.A. § 2055 (West 1980), which granted tax exemptions to federal land banks and federal land bank associations. The exemption for federal land bank associations is retained in 12 U.S.C.A. § 2098 (West Supp. 1988), and the exemption previously given to federal land banks is now accorded Farm Credit Banks pursuant to 12 U.S.C.A. § 2023 (West Supp. 1988). In this Opinion, therefore, federal land banks will be referred to as Farm Credit Banks.
2 You also ask whether the Act grants an exception from local income taxes. § 58.1-300 of the Code of Virginia prohibits any county, city, town or other political subdivision from imposing a local income tax.
3 The term "bank" is defined in § 58.1-1201 as "any incorporated bank, banking association or trust company organized by or under the authority of the laws of the Commonwealth and any bank or banking association organized by or under the authority of the laws of the United States, doing business or having an office in the Commonwealth or having a charter which designates any place within the Commonwealth as the place of its principal office, whether such bank or banking association is authorized to transact business as a trust company or not, and any joint stock land bank or any other bank organized by or under the authority of the laws of the United States upon which the Commonwealth is authorized to impose a tax."
Attorney General's Opinion