Mr. FITTS. That is correct; but the difference in the rate is not accounted for by the difference of taxes.

Mr. CLASON. No; this is a subsidized Federal proposition, otherwise it would not stand on its own merits; is not that true?

Mr. FITTS. I do not agree with that. That is an age-old charge. I do not think you would expect me to agree to that, and the record does not support it.

Mr. CLASON. How many years have you set up as the time during which the cost of this power development should be paid for; is it a 40-year proposition, or 50 years?

Mr. FITTS. The period of amortization?

Mr. CLASON. Yes.

Mr. FITTS. I would have to ask Mr. Krug; he knows more about that than I do. I will ask him to supply that figure.

Mr. CLASON. Mr. Chairman, I see Governor Cooper is here, and we have only started, and there are only 24 minutes left this morning. Mr. SPARKMAN. Mr. Chairman, a great many of us want to ask question, and I would like to suggest that we let Mr. Fitts make his general statement, and then call him back for questions later.

The CHAIRMAN. Yes; that is all right. And we are going to have to work pretty fast.

Mr. FITTS. There is just one other point. I understand I will have an opportunity, at another time, to take up some of the detailed questions concerning the results that will be reached under this law, and why we think they are fair results; but there is one other point I would like to cover generally.

I think the chairman mentioned there was a new question of policy as to what had been done by the Federal Government.

The CHAIRMAN. No; it is an old question.

Mr. FITTS. On the subject of in-lieu payments to States. I myself was surprised when I went through the statutes, just 2 weeks ago for the first time, to find out what other similar examples there were of payments of this character, when I found there are quite a few. In the forestry statutes, for instance, the statute provides that out of the proceeds of the sale of any products from the forests 25 percent of the revenues derived from those proceeds are to be paid back to the State in which the forests are located.

The same sort of provision occurs in the Oil and Mineral Leasing Act, where it is provided that 371⁄2 percent

The CHAIRMAN. That is Government land, is it not?

Mr. FITTS. On the lands where they get royalties?

The CHAIRMAN. Yes.

Mr. FITTS. Yes, sir; 372 percent is to be paid back to the States and counties.

Mr. SMITH. In none of those statutes, however, does the Federal Government admit that property held by it for Federal purposes is taxable by the State?

Mr. FITTS. Oh, no.

Mr. SMITH. Does not this language on page 2, in which you say "to be made upon condition that no State, county, or local taxes shall be assessed or levied against the property, operations, or business of the corporation” make an admission that there may be a right in the State, county, or locality to tax this property which is held, as we claim, for a Federal purpose?

Mr. FITTS. Of course, I do not think so, and, if it does, I should like to see it changed.

Mr. SMITH. Should not that language be stricken out and any such apparent admission definitely denied in any legislation we enact granting payment in lieu of taxes?"

Mr. FITTS. I think it should. What that language is intended to do, and I think it does, but we can make it much more explicit, and the more explicit the better pleased I am, certainly-but what that language is intended to do is to make clear that Congress is asserting this property is immune and exempt from State and local taxation. Mr. SMITH. It should so state.

Mr. FITTS. And that this is a voluntary in-lieu payment, and recognizing that.

The CHAIRMAN. In other words, what you are saying is that Congress should put itself in the ridiculous attitude of saying that it is, and that it is not?

Mr. FITTS. That is exactly what is done in these other statutes, Mr. Chairman.

The CHAIRMAN. But there is a difference in these other statutes you just referred to, in which a situation arose out there where the Government holds property for conservation and reforestation purposes, and only markets the waste; whereas, you are representing a business concern that is in the public business of producing and selling electricity, just like any other business enterprise.

Mr. FITTS. I do not quite understand the difference on this issue, because the reason, as stated in the Weeks Forestry Act, the reason for providing for payment to the States, is that by taking forest lands out of taxation, when they purchased new land under that act, they deprived the States of certain revenues. It seems to me the principle is the same here.

The same thing appears in the Tayolr Grazing Act, where the provision is that 50 percent of the income from grazing districts within. the States shall be paid back to the State in which the districts are located.

And under the Federal Water Power Act-I am just trying to show that this is not a novel departure from congressional precedent-under the Federal Water Power Act of 1920, 37.5 percent of the amounts received for the use of Federal land for power development are paid back to the States.

Now, there was a total payment distributed to 44 of the 48 States, all of them receiving some benefits under these various provisionsfor instance, under the Oil and Mineral Leasing Act they paid out almost $3,000,000; under the National Forestry Act they paid out over $1,000,000.

Then, also, the Boulder Canyon Project Act, authorizing the construction of Boulder Dam, provides that after the amortization payments required by the act are made, out of any excess revenues 18.75 percent shall be paid to the State of Nevada and 18.75 percent to the State of Arizona.

So that we do have a fairly consistent and a fairly long legislative background on this general principle of whether or not the Federal Government should make in-lieu payments voluntarily, while asserting that it is not subject to State taxation as a matter of law.

Mr. SMITH. In each of those cases, there is an income to the Federal Government from the use of some properties, the same as there is in this case?

Mr. FITTS. That is correct.

Mr. SMITH. And it is a payment as a matter of equity, as a grant by the Federal Government from these incomes, to the State or locality?

Mr. FITTS. That is right.

Mr. SMITH. But in none of those cases is there an admissionMr. FITTS. No.

Mr. SMITH. That there is any right in the locality or the State to tax its properties?

Mr. FITTS. That is right. There is an assertion to the contrary, and I think there ought to be.

Mr. SMITH. This language, then, that such payments shall be made upon condition that no State taxes shall be levied does not occur in those acts, does it?

Mr. FITTS. I do not think so.

Mr. SMITH. Do you recall any others?

Mr. FITTS. I do not think so. I think that language can probably be omitted by saying this property shall remain exempt from State taxes.

The CHAIRMAN. Will the gentleman from Connecticut yield?
Mr. SMITH. Yes.

The CHAIRMAN. May I make this request of the committee: In view of this gentleman's statement and the fact we want to hear Governor Cooper as soon as possible, would it be agreeable to the committee to allow him to stand aside at this place and cross-examine him later? Is there any objection to that? If there is no objection, I will ask you, Mr. Fitts, to stand aside and I will ask Governor Cooper to come around and take the stand, please.

The CHAIRMAN. Governor Cooper, I assume that you are rather a busy man down in Tennessee at this time, and we desire to accommodate you as much as we can, and if you have a statement that you wish to make with respect to this matter, will you please make it just as brief as you can and right to the point, and we will be glad to hear it.

STATEMENT OF HON. PRENTICE COOPER, GOVERNOR OF

TENNESSEE

Governor COOPER. Thank you very much, Mr. Chairman and gentlemen of the House Military Affairs Committee. I appreciate the courtesy that you have shown me this morning very much indeed. I appreciate the invitation of your chairman to appear before you today to present our views on S. 2925, which is commonly referred to as the Norris-Sparkman bill.

My name is Prentice Cooper, and I am the Governor of Tennessee, and as such officially represent the State government. I believe that I also speak for the county judges of Tennessee-at least most of them have written me authorizing me to speak for them today, and I also have been authorized by the Tennessee Taxpayers Association, by resolution which I have here and will be pleased to include that

resolution and these letters from the county judges in the record. The CHAIRMAN. Very well.

(The papers referred to follow :)

Hon. PRENTICE COOPER,
Governor of Tennessee,

TENNESSEE TAXPAYERS ASSOCIATION, INC.,
Nashville, Tenn., January 20, 1940.

The Capitol, Nashville, Tenn.

DEAR GOVERNOR COOPER: A copy of the resolution, properly certified, setting forth the position of Tennessee Taxpayers Association in endorsing the NorrisSparkman bill, now pending in Congress, for enactment, is presented herewith. This resolution was approved today by the executive committee of the association. It is sent to you in accordance with the conversation had with you on Wednesday, January 17, by representatives of Tennessee Taxpayers Association. It is understood that you desire to include this in a file or brief which it is your purpose to present to the House Committee on Military Affairs when you testify before the committee in support of the enactment of the NorrisSparkman bill on January 23.

Yours truly,

Whereas the Tennessee Taxpayers Association has for more than a year been vitally interested in the problem of utility-tax replacements growing out of the present public ownership of formerly privately operated utilities; and

Whereas there is now pending before Congress the Norris-Sparkman bill designed to provide payments of certain annual amounts to State and local government in Tennessee, and in other States similarly affected, in replacement of ad valorem taxes on generating and transmitting properties now lost by reason of their Federal ownership: Therefore be it

Resolved by the executive committee of Tennessee Taxpayers Association on this the 20th day of January 1940, That Tennessee Taxpayers Association favors the enactment of the Norris-Sparkman bill and joins all others interested in this problem in requesting Congress to enact said bill.

I certify that the foregoing is a true copy of the resolution adopted on this date.

JANUARY 20, 1940.

WM. R. POUDER, Executive Secretary.

Gov. PRENTICE COOPER,

Washington, D. C.

FRANKLIN COUNTY, Winchester, Tenn., January 20, 1940.

MY DEAR GOVERNOR: I have had information that you would be in Washington on next Tuesday to appear before the House Military Affairs Committee in the interest of the passage of the Norris bill purporting to afford relief to the State of Tennessee and the other units of government affected by the sale and transfer of the Tennessee Electric Power Co. property to the Tennessee Valley Authority and various municipalities of the State in the way of a replacement tax, and I want to express my deep gratitude for the interest exhibited by you.

As the financial agent of Franklin County, Tenn., which is sustaining a loss of approximately $14,000 by this sale and transfer, of course I am tremendously interested in seeing a replacement of this loss, especially so since I realize that no additional tax burden should be placed upon the shoulders of the people through an unholy tax against property, now assessed almost to the breaking point.

I realize the Senators and Representatives of the affected area could not possibly pass legislation taxing Government property, and I would not favor such a course were it in their power to do so, and I am fully convinced that the passage of the Norris bill will have the desired effect, if the next legislature passes an act requiring the municipal distribution plants to pay to the counties the amount they are now collecting for their use and benefit.

I had the pleasure of hearing you discuss this matter before the County Judges Association recently, and I am in thorough accord with your views and am willing to risk the destiny of Franklin County in your hands; however, I would be pleased to have payment made direct to the county rather than to the State, which would be a tremendous burden on the State and wholly unnecessary.

DEAR GOVERNOR: It is my understanding that you are going to Washington to testify in behalf of the Norris-Sparkman bill. We are glad to know this and trust you can represent Bedford County in a bill so vital to our interest. We are facing a raise in taxes at this particular time and should we fail to regain our power tax it will increase our burden all the more.

Thanking you in advance for any service you can render the taxpayers of this county by supporting this bill, I am,

Your friend,

Hon. PRENTICE COOPER,

C. CORTNER, County Judge.

MARSHALL COUNTY,

Lewisburg, Tenn., January 19, 1940.

Governor of Tennessee, Nashville, Tenn. DEAR GOVERNOR: As county judge of Marshall County I wish to express my approval of the pending amendment to the Tennessee Valley Authority Act, known as the Norris-Sparkman bill. The people of this county are very much interested in the effort which is being made to replace the loss of ad valorem taxes by increasing the contributions thereto from the Tennessee Valley Authority gross revenues. The provisions of the Norris-Sparkman plan seem to me to be equitable. The loss of taxes which is imminent in Marshall County, for the 1940 assessment, is based on a former ad valorem assessment of $488,950 against the Tennessee Electric Power Co. The 1939 tax collection was $10,121.27.

Very sincerely,

Hon. PRENTICE COOPER,

W. T. EDMONDSON, County Judge.

WILLIAMSON COUNTY, Franklin, Tenn., January 18, 1940.

Governor, State Capitol, Nashville, Tenn. DEAR GOVERNOR: I observe from the papers that you plan to go to Washington next week to testify before the subcommittee of the House Military Affairs Committee considering tax replacement of taxes lost due to the purchase of private utilities by the Tennessee Vally Authority. An equitable solution of this tax replacement problem is very important to the counties of this State. The Norris bill pending in Congress would, as I understand it, substantially replace ad valorem taxes on that part of the property purchased by the Tennessee Valley Authority. In my opinion it would be better if the part of the funds due to the counties could be paid directly to them. However, if this cannot be paid directly to the counties I feel sure that necessary legislation can be enacted to redistribute to the counties their part of these funds. I can see no reason why the Tennessee Valley Authority's payments to the States and counties should not be increased as proposed by the Norris bill, since 122 percent of the Tennessee Valley Authority's gross revenue from the sale of power was set up for tax replacement.