STUDY OF ECONOMIC CONCENTRATION

MARCH 16 (legislative day, FEBRUARY 21), 1949.-Ordered to be printed

Mr. JOHNSON of Colorado, from the Committee on Interstate and Foreign Commerce, submitted the following

FINAL REPORT

[Pursuant to S. Res. 241, 80th Cong.]

On June 12, 1948, the Senate adopted Senate Resolution 241 directing the Committee on Interstate and Foreign Commerce, or any duly authorized subcommittee thereof, to conduct an inquiry into (1) the activities of the Federal Trade Commission and the impact of its policies as interpreted by the Supreme Court with particular relation to the basing point and freight equalization systems of pricing, and (2) the extent and character of economic concentration.

The committee has made a thorough inquiry into the pricing policies of the Federal Trade Commission and on March 11, 1949, filed its report with respect thereto (S. Doc. No. 27, 81st Cong.).

The Committee on Interstate and Foreign Commerce has not as yet had time, due to the limited period allowed in the resolution and the vital interest in the freight absorption inquiry, to undertake the study of the extent and character of economic concentration referred to in the second portion of the foregoing resolution.

That provision was inserted in the resolution at the request of Senator O'Mahoney. Since the convening of the Eighty-first Congress, Senator O'Mahoney has become chairman of the Joint Committee on the Economic Report. The Committee on Interstate and Foreign Commerce is of the opinion that the Joint Committee on the Economic Report has concurrent authority to make inquiry into economic concentration. For the Committee on Interstate and Foreign Commerce to make such inquiry might require an extension of the life of the appropriation under Senate Resolution 241 (which expires March 15, 1949) and might involve a duplication of the activities of the Joint Committee on the Economic Report. The Committee on Interstate

S. Repts., 81-1, vol. 1-87

and Foreign Commerce therefore recommends that it be discharged from inquiring into the extent and character of economic concentration at this time.

MARCH 16 (legislative day, FEBRUARY 21), 1949.-Ordered to be printed

Mr. MCCARRAN, from the Committee on the Judiciary, submitted the following

REPORT

[To accompany S. 41]

The Committee on the Judiciary, to whom was referred the bill (S. 41) for the relief of the city of Reno, Nev., having considered the same, report favorably thereon, without amendment, and recommend that the bill do pass.

The purpose of the proposed legislation is to authorize and direct the Secretary of the Treasury to pay to the city of Reno, Nev., the sum of $1,620, representing the amount which would have been paid for street improvements by the Forest Service had the Forest Service been a private person.

STATEMENT

In 1947 the city of Reno, Nev., embarked upon a street-improvement program which included the street on which property owned by the United States Forest Service was located. A bill in the amount of $1,620 was submitted to the Forest Service on September 10, 1947, for its share of the cost of the improvement abutting on its property. On September 30, 1947, the Forest Service, under the signature of C. E. Favre, forest supervisor, declined to pay the bill and recommended that a private bill be initiated in Congress for this purpose. Accordingly, legislation identical with that presently under consideration was introduced in the Eightieth Congress. At that time a report was submitted by the Department of Agriculture in which it recommended against enactment of legislation in a cursory paragraph alleg ing that land owned by the United States is not assessable for local improvements, by a State or its political subdivisions. The Depart

ment of Justice in its report quotes the paragraph contained in the Agriculture Department letter and adds the further comment that—

The provisions of the bill do not appear to be in accord with the recommenda tions of the Federal real-estate board which made an extensive study of such problems several years ago.

Your committee, having in mind the tendency exhibited in recent legislation to expand the right of the citizen to sue the sovereign, as indicated in the Federal Tort Claims Act and other legislation, invites attention to the fact that had the Forest Service been a private person it would not, under the regulations of the Internal Revenue Bureau, have been permitted to deduct such a payment from its gross income as a tax paid, for the purpose of computing its income tax. The regulation referred to appears in Regulations 111, 29.23 (c)−3, and is as follows:

So-called taxes, more properly assessments, paid for local benefits, such as street, sidewalk, and other like improvements, imposed because of and measured by some benefit inuring directly to the property against which the assessment is levied, do not constitute an allowable deduction from gross income. A tax is considered assessed against local benefits when the property subject to the tax is limited to property benefited. Special assessments are not deductible, even though an incidental benefit may inure to the public welfare. The real-property taxes deductible are those levied for the general public welfare by the proper taxing authorities at a like rate against all property in the territory over which such authorities have jurisdiction. Assessments under the statutes of California relating to irrigation and of Iowa relating to drainage, and under certain statutes of Tennessee relating to levees, are limited to property benefited, and if the assessments are so limited, the amounts paid thereunder are not deductible as taxes. The above statements are subject to the exception that insofar as assessments against local benefits are made for the purpose of maintenance or repair or for the purpose of meeting interest charges with respect to such benefits, they are deductible. In such cases the burden is on the taxpayer to show the allocation of the amounts assessed to the different purposes. If the allocation cannot be made. none of the amounts so paid is deductible.

For the above reasons and in view of the benefit accruing to this property by virtue of the city of Reno having paved the street, your committee is of the opinion that the Federal Government has been unjustly enriched under these circumstances and that payment should be made to the city of Reno for value received.

Attached hereto and made a part of this report are letters received from the Department of Agriculture and Department of Justice in connection with an identical bill of the Eightieth Congress.

SEPTEMBER 13, 1948.

Hon. ALEXANDER WILEY,

Chairman, Committee on the Judiciary,

United States Senate, Washington, D. C.

MY DEAR SENATOR: This is in response to your request for the views of this Department relative to the bill (S. 2685) for the relief of the city of Reno, Nev. The bill would provide for payment of the sum of $1,620 to the city of Reno, Nev., which sum represents the amount which would have been assessable for street improvements against property owned by the United States, and used by the Forest Service, in such city if such property had been privately owned.

In compliance with your request a report was obtained from the Department of Agriculture concerning this legislation. That report, which is enclosed, states that the Department of Agriculture acknowledges that the street in front of the Forest Service shop and warehouse in Reno was paved. It further states that, at the same time, it is well recognized that land owned by the United States cannot

be taxed by a State or its political subdivision, and this rule applies equally to special assessments for local improvements. The report concludes with the statement that the Department of Agriculture, therefore, does not recommend enactment of the bill.

Attention is directed to the fact that existing law provides that 25 percent of receipts from national forests shall be paid to States for the benefit of counties in which national forests are situated to be used for schools and roads (16 U. S. C. 500).

The provisions of the bill do not appear to be in accord with the recommendations of the Federal real-estate board, which made an extensive study of such problems several years ago (H. Doc. No. 216, 78th Cong., 1st sess.).

The Department of Justice concurs in the recommendation of the Department of Agriculture.

The Director of the Bureau of the Budget has advised this Department that there would be no objection to the submission of this report.

Yours sincerely,

The honorable the ATTORNEY GENERAL.

DEAR MR. ATTORNEY GENERAL: This is in reply to your letter of May 24, asking for comments on S. 2685, Eightieth Congress. This bill seeks to have the Federal Government pay to the city of Reno, Nev., such amount as would have been assessable for a street improvement against Federal property used by the Forest Service, if such property had been privately owned.

The Department of Agriculture acknowledges that the street in front of the Forest Service shop and warehouse in Reno was paved. At the same time it is well recognized that land owned by the United States cannot be taxed by a State or its political subdivision, and this rule applies equally to special assessments for local improvements.

The Department of Agriculture, therefore, does not recommend enactment of S. 2685.

Sincerely,

CHARLES F. BRANNAN. Secretary.

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