No. 99-1792 

In the Supreme Court of the United States 

DIRECTOR OF REVENUE OF MISSOURI, PETITIONER 

v. 

COBANK ACB, AS SUCCESSOR TO THE 

NATIONAL BANK FOR COOPERATIVES 

ON WRIT OF CERTIORARI 
TO THE SUPREME COURT OF MISSOURI 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE SUPPORTING PETITIONER 

SETH P. WAXMAN 

Solicitor General 

Counsel of Record 

PAULA M. JUNGHANS 

Acting Assistant Attorney 

General 

LAWRENCE G. WALLACE 

Deputy Solicitor General 

DAVID C. FREDERICK 

Assistant to the Solicitor 

General 

DAVID ENGLISH CARMACK 
DONALD B. TOBIN 

Attorneys 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

QUESTION PRESENTED 

Whether the State of Missouri, consistently with 12 
U.S.C. 2134, may tax the income of the National Bank 
for Cooperatives, a federally chartered instrumentality. 

(I) 

TABLE OF CONTENTS 

Page 

Interest of the United States ...................................................... 
1 

Statement ........................................................................................ 2 

Summary of argument .................................................................. 
11 

Argument: 

State taxation of the income of banks for coopera- 
tives is permissible under the Farm Credit Act ............. 

12 

A. By its plain terms, Section 2134 confers only a 

narrowly defined tax exemption inapplicable 

here rather than a broad exemption from state 

income taxes for banks for cooperatives .................... 

12 

B. The overall context and history of the Farm 

Credit Act also negate the claim of immunity in 

this case ............................................................................ 

16 

C. The court need not decide in this case the scope 

of a federal instrumentality’s exemption from 

state taxes in other contexts ........................................ 

20 

Conclusion ....................................................................................... 22 

TABLE OF AUTHORITIES 

Cases: 

Cotton Petroleum Corp. v. New Mexico, 490 U.S. 

163 (1989) ................................................................................. 

12 

Department of Employment v. United States, 385 

U.S. 355 (1966) .............................................................. 

12, 20, 21 

Dunn v. Commodity Futures Trading Comm’n, 519 

U.S. 465 (1997) ........................................................................ 

14 

Edmonds v. Compagnie Generale Transatlantique, 

443 U.S. 256 (1979) ................................................................ 

15 

Farm Credit Servs. of Cent. Ark. v. Arkansas, 

76 F.3d 961 (8th Cir. 1996), rev’d on other grounds, 

520 U.S. 821 (1997) ............................................................ 10, 19 

(III) 

IV 

Cases—Continued: Page 

Farm Credit Servs. of Mid-Am. v. Department 

of State Revenue, 705 N.E.2d 1089 (Ind. Tax Ct. 

1999) ......................................................................................... 10 

First Agric. Nat’l Bank v. State Tax Comm’n, 392 

U.S. 339 (1968) .................................................................... 

21, 22 

Gustafson v. Alloyd Co., 513 U.S. 561 (1995) ................... 

14 

M’Culloch v. Maryland, 17 U.S. (4 Wheat.) 316 

(1819) .................................................................................... 

12, 20 

Northwest La. Product Credit Ass’n v. State, 746 

So. 2d 280 (La. Ct. App. 1999) ............................................. 

10 

Production Credit Ass’n of Eastern N.M. v. Taxa- 
tion & Revenue Dep’t, 999 P.2d 1031 (N.M. Ct. 

App.), cert. denied, 997 P.2d 820 (2000) ............................. 

10 

Russello v. United States, 464 U.S. 16 (1983) .................. 

18 

South Dakota v. Yankton Sioux Tribe, 522 U.S. 329 

(1998) ........................................................................................ 14 

State v. Farm Credit Servs. of Cent. Ark., 994 

S.W.2d 453 (Ark. 1999), cert. denied, 120 S. Ct. 

1530 (2000) ............................................................................... 

10 

United States v. Naftalin, 441 U.S. 768 (1979) ................ 

19 

United States v. New Mexico, 455 U.S. 720 (1982) .......... 

12 

United States v. Wong Kim Bo, 472 F.2d 720 

(5th Cir. 1972) ......................................................................... 

18 

Constitution and statutes: 

U.S. Const. Art. VI, Cl. 2 (Supremacy Clause) ................... 

9 

Agricultural Credit Act of 1987, Pub. L. No. 100-233, 

101 Stat. 1568: 

§ 201, 101 Stat. 1585-1605 ................................................ 

8 

§ 401: 

101 Stat. 1629 ................................................................. 

17 

101 Stat. 1637 ................................................................. 

17 

§ 410, 101 Stat. 1637........................................................... 

17 

§ 413(b)(4), 101 Stat. 1639 ................................................ 

4 

§ 805(p), 101 Stat. 1716 ..................................................... 8 

V 

Statutes—Continued: Page 

Farm Credit Act of 1933, ch. 98, 48 Stat. 257 ...................... 

2 

§ 2, 48 Stat. 257 .................................................................. 

3 

§ 30, 48 Stat. 261 ................................................................ 

3 

§ 33, 48 Stat. 262 ................................................................ 

3, 4 

§ 34, 48 Stat. 262-263 ........................................................ 
3 

§ 40, 48 Stat. 264 ................................................................ 

3, 4 

§ 63, 48 Stat. 267 ........................................................ 
5, 13, 15 

Farm Credit Act of 1955, ch. 785, 69 Stat. 655 .................... 
4 

Farm Credit Act of 1971, Pub. L. No. 92-181, 85 Stat. 
583: 
§ 1.15, 85 Stat. 587 ............................................................. 
17 

§ 1.21, 85 Stat. 590 ............................................................. 
17 

§ 2.8, 85 Stat. 597 ............................................................... 
17 

§ 2.17, 85 Stat. 602 ............................................................. 
18 

§ 3.13, 85 Stat. 608-609 (former 12 U.S.C. 2134 
(1976)) ......................................................... 

6, 8, 10, 13, 14 

§ 4.0, 85 Stat. 609 ............................................................... 
5, 6 

Farm Credit Amendments Act of 1985, Pub. L. 

No. 99-205, 99 Stat. 1678: 
§ 101, 99 Stat. 1678 .................................................... 

7, 8, 13 
§ 103, 99 Stat. 1680-1687 ................................................ 
8, 13 

§ 201(1), 99 Stat. 1688 ....................................................... 
7 

§ 201(7), 99 Stat. 1691-1693 ............................................. 
7 

§ 205, 99 Stat. 1703-1707 .................................................. 
8 

§ 205(e): 
99 Stat. 1704 ................................................................. 
8 

99 Stat. 1705 ................................................................. 
8 

§ 205(e)(10), 99 Stat. 1705 ................................................ 
8 

§ 205(e)(16), 99 Stat. 1705 ................................................ 
18 

Federal Credit Union Act, Pub. L. No. 86-354, 73 Stat. 
628, 12 U.S.C. 1751 et seq. .................................................... 
19 

12 U.S.C. 1768 .................................................................... 
19 

12 U.S.C. 531 .............................................................................. 
19 

12 U.S.C. 1430 ............................................................................ 
21 

12 U.S.C. 1433 ............................................................................ 
21 

12 U.S.C. 1451 ............................................................................ 
21 

12 U.S.C. 1452 ............................................................................ 
21 

12 U.S.C. 1717 (1994 & Supp. IV 1998) ................................. 21 

VI 

12 U.S.C. 1723 ............................................................................ 
21 

Statutes—Continued: Page 

12 U.S.C. 2002(a) ....................................................................... 
16 

12 U.S.C. 2011(a) ....................................................................... 
3 

12 U.S.C. 2023 ........................................................................ 
16, 17 

12 U.S.C. 2071(a) ....................................................................... 
3 

12 U.S.C. 2071(b)(7) .................................................................. 
3 

12 U.S.C. 2077 .................................................................. 
10, 16, 18 

12 U.S.C. 2077 (1982) ................................................................ 
11 

12 U.S.C. 2091(a) ....................................................................... 
3 

12 U.S.C. 2091(b)(4) .................................................................. 
3 

12 U.S.C. 2098 ........................................................................ 
15, 17 

12 U.S.C. 2121............................................................................. 
3 

12 U.S.C. 2121 note ................................................................... 
3, 4 

12 U.S.C. 2122 ............................................................................ 
3 

12 U.S.C. 2124 ............................................................................ 
3 

12 U.S.C. 2128 ............................................................................ 
3 

12 U.S.C. 2129 ............................................................................ 
3 

12 U.S.C. 2134 .................................................................... 
passim 

12 U.S.C. 2278a-11 .................................................................... 
15 

12 U.S.C. 2278b-10 .................................................................... 
15 

12 U.S.C. 2283 ............................................................................ 
15 

12 U.S.C. 2290 ............................................................................ 
21 

12 U.S.C. 3012 ............................................................................ 
21 

12 U.S.C. 3019 ............................................................................ 
21 

15 U.S.C. 713a-5 ........................................................................ 
21 

15 U.S.C. 714 .............................................................................. 
21 

42 U.S.C. 2297h-3 (Supp. III 1997) ........................................ 
21 

Miscellaneous: 

Farm Credit Admin., 1994 Annual Report ......................... 

4 

H.R. Rep. No. 171, 73d Cong., 1st Sess. (1933) ................... 
2 

H.R. Rep. No. 593, 92d Cong., 1st Sess. (1971) ............... 
3, 4, 5 

H.R. Rep. No. 425, 99th Cong., 1st Sess. (1985) .................. 
7, 8, 

13, 15, 16 

In the Supreme Court of the United States 

No. 99-1792 

DIRECTOR OF REVENUE OF MISSOURI, PETITIONER 

v. 

COBANK ACB, AS SUCCESSOR TO THE 

NATIONAL BANK FOR COOPERATIVES 

ON WRIT OF CERTIORARI 
TO THE SUPREME COURT OF MISSOURI 

BRIEF FOR THE UNITED STATES 
AS AMICUS CURIAE SUPPORTING PETITIONER 

INTEREST OF THE UNITED STATES 

This case concerns whether Congress has exempted 
from state taxation the income of a privately-owned, 
for-profit agricultural lending bank chartered as a 
federal instrumentality under the Farm Credit Act of 
1971, 12 U.S.C. 2001 et seq., as amended by the Farm 
Credit Amendments Act of 1985, Pub. L. No. 99-205, 99 
Stat. 1678. The United States has a substantial interest 
in ensuring that statutorily defined federal instrumen- 
talities are taxed by States solely in accordance with 
federal law. In response to this Court’s invitation, the 
United States filed an amicus curiae brief at the peti- 
tion stage (and subsequently on the merits as well) in 

(1) 

2 

Arkansas v. Farm Credit Services of Central Arkan- 
sas, 520 U.S. 821 (1997), which presented an issue simi- 
lar to the one here. The Court decided that case on 
procedural grounds, however, without reaching the 
merits. 

STATEMENT 

Respondent CoBank ACB is successor to all rights 
and obligations of the National Bank for Cooperatives. 
It seeks a refund of state income taxes paid to Missouri 
by the National Bank for Cooperatives for the years 
1991 through 1994. Pet. App. A8-A9. 

1. In the Farm Credit Act of 1933, ch. 98, 48 Stat. 
257, Congress reformed the system of lending for 
farmers in a manner intended “to provide stimulus in 
the form of Government capital and supervision to the 
establishment of local institutions in which farmers are 
participants and owners and through which necessary 
credit may be provided on a safe business basis and at 
reasonable cost.” H.R. Rep. No. 171, 73d Cong., 1st 
Sess. 2 (1933). The Act sought to accomplish that goal 
through the organization and chartering of different 
types of institutions that would meet the specific credit 
needs of farmers. 

Under the overall supervision of the Farm Credit 
Administration, the system as enacted by Congress in 
1933 organized the country geographically into 12 farm 
credit districts, with each district having a federal land 
bank, a number of federal land bank associations, a 
federal intermediate credit bank, a number of produc- 
tion credit associations, and a bank for cooperatives. 
Within the district, each institution had a discrete 
lending purpose: the federal land bank to make long- 
term first loans secured by mortgages on farm land to 
farmers through land bank associations; production 

3 

credit associations to make short- and intermediate- 
term loans to farmers and ranchers with capital ob- 
tained by discounting loans with the federal intermedi- 
ate credit bank; and the bank for cooperatives to make 
loans to cooperative associations that are engaged in 
marketing farm products, purchasing farm supplies, or 
furnishing farm-business services. See generally H.R. 
Rep. No. 593, 92d Sess., 1st Sess. 6-9 (1971) (describing 
institutions in the Farm Credit System). By statute, 
each of those institutions is defined as an “instrumental- 
ity of the United States.” See 12 U.S.C. 2121 note 
(national bank for cooperatives); 12 U.S.C. 2121 (banks 
for cooperatives); 12 U.S.C. 2071(a) and (b)(7) (produc- 
tion credit associations); 12 U.S.C. 2011(a) (farm credit 
banks); 12 U.S.C. 2091(a) and (b)(4) (federal land bank 
associations). 

The Farm Credit Act of 1933 also established a Cen- 
tral Bank for Cooperatives in addition to the bank for 
cooperatives in each of the 12 farm credit districts. Ch. 
98, §§ 2, 30, 40, 48 Stat. 257, 261, 264. Congress in- 
tended for the Central Bank for Cooperatives to make 
loans to cooperative associations. See § 34, 48 Stat. 262- 
263; 12 U.S.C. 2122, 2124, 2128, 2129. The debentures 
issued by the Central Bank, however, “are not guaran- 
teed in any way by the United States.” H.R. Rep. No. 
593, supra, at 9. Rather, Congress intended the loan 
funds of the banks to be obtained from the capital and 
surplus of the banks, as well as from the sale of 
debentures to the investing public. Ibid. 

Although Congress initially capitalized the banks for 
cooperatives (and other institutions in the Farm Credit 
System), see Farm Credit Act of 1933, ch. 98, §§ 33, 40, 
48 Stat. 262, 264, it provided for the governmental stake 
in those institutions to be retired “by the creation of 
permanent capital provided by the users of the bank.” 

4 

H.R. Rep. No. 593, supra, at 9. See Farm Credit Act of 
1955, ch. 785, 69 Stat. 655 (providing mechanisms to 
facilitate retirement of government stock ownership in 
banks for cooperatives). “The first of the banks for 
cooperatives to retire all of its Government capital did 
so in 1965 and the last in 1968. Therefore all Govern- 
ment capital has now been retired, and the banks are 
completely owned by borrowing cooperatives.” H.R. 
Rep. No. 593, supra, at 9. 

In 1987, Congress authorized the merger of the Cen- 
tral Bank and the district banks for cooperatives. 
Agricultural Credit Act of 1987, Pub. L. No. 100-233, 
§ 413(b)(4), 101 Stat. 1639 (12 U.S.C. 2121 note). Pur- 
suant to that legislation, ten district banks and the 
Central Bank for Cooperatives merged and formed the 
National Bank for Cooperatives. J.A. A22-A23; Pet. 
App. A8-A9.1 The taxation provisions relevant to this 
case, however, concern banks for cooperatives, for the 
1987 Act authorizing consolidation of such banks with 
the Central Bank for Cooperatives did not affect the 
taxation of those institutions. See Farm Credit Act of 
1933, ch. 98, §§ 33, 40, 48 Stat. 262, 264; 12 U.S.C. 2134. 

2. In the Farm Credit Act of 1933, Congress specifi- 
cally provided that the Central Bank for Cooperatives 
and banks for cooperatives “shall be deemed to be 
instrumentalities of the United States” and that “all 

1 Respondent CoBank ACB is an agricultural credit bank that 
was created when the National Bank for Cooperatives merged 
with two other entities, the Farm Credit Bank of Springfield and 
the Springfield Bank for Cooperatives. J.A. A21-A22. Although 
an “agricultural credit bank” is not defined by federal statute, the 
Farm Credit Administration has recognized such institutions as 
having the combined authority of a bank for cooperatives and a 
farm credit bank. See Farm Credit Admin., 1994 Annual Report 

2. 

5 

notes, debentures, bonds and other such obligations 
issued by such banks * * * shall be exempt both as to 
principal and interest from all taxation (except 
surtaxes, estate, inheritance, and gift taxes) now or 
hereafter imposed by the United States or by any 
State, Territorial, or local taxing authority.” Ch. 98, 
§ 63, 48 Stat. 267. That Section further provided that 
the income of those banks “shall be exempt from all 
taxation” by taxing authorities “except that any real 
property and any tangible personal property of such 
banks * * * shall be subject to Federal, State, 
Territorial, and local taxation to the same extent as 
other similar property is taxed.” Ibid. Notwithstand- 
ing that broad exemption, the 1933 Act provided a 
limitation: “The exemption provided herein shall not 
apply with respect to * * * the Central Bank for 
Cooperatives, or any Production Credit Corporation or 
Bank for Cooperatives, or its property or income after 
the stock held in it by the United States has been 
retired.” Ibid. 

By 1971, when Congress amended the Farm Credit 
Act, all previously-organized banks for cooperatives 
had become privately owned, because the stock once 
held in them by the United States had been retired. 
See H.R. Rep. No. 593, supra, at 9. Congress provided, 
however, that the Governor of the Farm Credit Ad- 
ministration had the authority on behalf of the United 
States to purchase stock in banks for cooperatives “as a 
temporary investment in the stock of the institution to 
help one or several of the banks or associations to meet 
emergency credit needs of borrowers.” Pub. L. No. 92- 
181, § 4.0, 85 Stat. 609. To assist in aiding agricultural 
lending entities during financial emergencies, Congress 
empowered the Governor of the Farm Credit Admini- 
stration to purchase stock in the various institutions es- 

6 

tablished within the Farm Credit System, including 
banks for cooperatives. § 4.0, 85 Stat. 609. Further- 
more, Congress retained the exemption from taxation 
for each bank for cooperatives that had existed prior to 
1971—an exemption contingent on ownership of stock 
in the bank by the United States (through the Farm 
Credit Administration). § 3.13, 85 Stat. 608-609 (codi- 
fied at 12 U.S.C. 2134). The amended statute provided: 

Each bank for cooperatives and its obligations are 
instrumentalities of the United States and as such 
any and all notes, debentures, and other obligations 
issued by such bank shall be exempt, both as to 
principal and interest from all taxation (except sur- 
taxes, estate, inheritance, and gift taxes) now or 
hereafter imposed by the United States or any 
State, territorial, or local taxing authority. Such 
banks, their property, their franchises, capital, re- 
serves, surplus, and other funds, and their income 
shall be exempt from all taxation now or hereafter 
imposed by the United States or by any State, terri- 
torial, or local taxing authority; except that interest 
on the obligations of such banks shall be subject 
only to Federal income taxation in the hands of the 
holder thereof pursuant to the Public Debt Act of 
1941 (31 U.S.C. 742(a)) and except that any real and 
tangible personal property of such banks shall be 
subject to Federal, State, territorial, and local taxa- 
tion to the same extent as similar property is taxed. 
The exemption provided in the preceding sentence 
shall apply only for any year or part thereof in 
which stock in the bank for cooperatives is held by 
the Governor of the Farm Credit Administration. 

Ibid. (emphasis added). 

7 

By 1985, a poor agricultural economy had driven the 
Farm Credit System into a financial crisis. See H.R. 
Rep. No. 425, 99th Cong., 1st Sess. 6-11 (1985). Con- 
gress considered various options, including an infusion 
of federal funds into the Farm Credit System, but 
rejected that idea in part because of its conclusion that 
“if the System uses its own resources effectively, 
outside assistance is not now needed and not likely to 
be needed through 1987.” Id. at 14. Instead, Congress 
enacted the Farm Credit Amendments Act of 1985, 
Pub. L. No. 99-205, 99 Stat. 1678, to permit the Farm 
Credit System to use its own resources in addressing 
the financial needs of members. See H.R. Rep. No. 425, 
supra, at 11, 14. Among other things, the 1985 Act 
restructured the Farm Credit Administration so that it 
would be controlled by a three-member board instead of 
by a Governor, § 201(1), 99 Stat. 1688, and modified the 
role of the Farm Credit Administration within the 
Farm Credit System, § 201(7), 99 Stat. 1691. Congress 
discontinued the Farm Credit Administration’s author- 
ity to own stock in a bank for cooperatives as part of an 
effort to “establish the Farm Credit Administration as 
an arms length regulator of the System institutions and 
to take it out of certain activities of the System which 
would involve it in management discretion of such 
institutions.” H.R. Rep. No. 425, supra, at 28. See Pub. 
L. No. 99-205, §§ 101, 201(7), 99 Stat. 1678, 1691-1693; 
see also H.R. Rep. No. 425, supra, at 15 (explaining that 
Section 101 of the Act “would repeal and replace sec- 
tions 4.0 and 4.1 of the Act, which establish two revolv- 
ing funds that are available to the Governor of the 
Farm Credit Administration to make investments in 

8 

production credit associations, Federal intermediate 
credit banks, and banks for cooperatives”).2 

In addition to changes in “the basic powers, duties 
and authorities of the Farm Credit Administration,” 
the Act also contained “numerous technical and con- 
forming amendments.” H.R. Rep. No. 425, supra, at 28; 
see § 205, 99 Stat. 1703-1707. Among those technical 
amendments was the deletion of the two sentences 
within Section 3.13 of the 1971 Act italicized above, 
which exempted a bank for cooperatives from state 
taxation contingent upon stock ownership by the “Gov- 
ernor of the Farm Credit Administration.” § 205(e)(10), 
99 Stat. 1705.3 

The 1985 Act left Section 3.13, now codi- 
fied at 12 U.S.C. 2134, much as it currently exists (set 
forth at Pet. 2).4 
2 Although the Farm Credit Administration was no longer 
authorized to provide any separate capital assistance directly to 
institutions such as banks for cooperatives, it could make invest- 
ments from the United States’ “revolving fund” in the newly 
created Farm Credit System Capital Corporation. § 101, 99 Stat. 
1678; H.R. Rep. No. 425, supra, at 28-29. The Capital Corporation 
became solely responsible for providing financial and technical 
assistance to institutions experiencing difficulties, with its funds 
being raised mostly internally from other institutions in the Farm 
Credit System. § 103, 99 Stat. 1680-1687; H.R. Rep. No. 425, 
supra, at 13-15. The Farm Credit System Assistance Board and 
the Farm Credit System Financial Assistance Corporation have 
since replaced the Farm Credit System Capital Corporation. Agri- 
cultural Credit Act of 1987, Pub. L. No. 100-233, § 201, 101 Stat. 

1585-1605. 

3 Pub. L. No. 99-205 contains two separate sections designated 
as 205(e). The first Section 205(e) deals with production credit 
associations and the second deals with banks for cooperatives. 

4 In the Agricultural Credit Act of 1987, Congress amended 12 
U.S.C. 2134 to add a second exception to the tax exemption, insert- 
ing after the word “authority,” the clause “except that interest on 

9 

3. Respondent’s predecessor, the National Bank for 
Cooperatives, filed Missouri corporate income tax 
returns and paid Missouri income tax for tax years 1991 
through 1994. In March 1996, respondent filed 
amended returns on behalf of the National Bank for 
Cooperatives, seeking refunds of income tax paid for 
1991 through 1994 on the ground, inter alia, that the 
National Bank for Cooperatives was exempt from state 
income taxation because it was a federal instrumental- 
ity and Congress had not expressly consented to its 
being subject to state taxation in the amended version 
of the Farm Credit Act (12 U.S.C. 2134). The Missouri 
Director of Revenue denied respondent’s claims in 
pertinent part. J.A. A14-A20, A29-A34. Respondent 
challenged that decision before Missouri’s Administra- 
tive Hearing Commission, which upheld the director’s 
denial. Pet. App. A6-A16. The commission held that 
the National Bank for Cooperatives had not established 
that it was a federal instrumentality statutorily exempt 
from state taxation of its income. The commission 
determined that, in contrast to farm credit banks and 
federal land bank associations, Congress did not 
expressly provide that banks for cooperatives would 
have immunity from state income taxation. Id. at A14. 
The commission found that had Congress intended to 
confer upon banks for cooperatives the same immunity 
that was provided to farm credit banks and federal land 
bank associations, it would have done so expressly. 
Ibid. For jurisdictional reasons, the commission did not 
reach respondent’s constitutional claim. Id. at A2, A11. 

4. The Missouri Supreme Court upheld respondent’s 
constitutional challenge to the tax. That court inter- 

such obligations shall be subject to Federal income taxation in the 
hands of the holder.” Pub. L. No. 100-233, § 805(p), 101 Stat. 1716. 

10 

preted this Court’s Supremacy Clause jurisprudence to 
accord federal instrumentalities immunity from state 
income taxation and to require that such immunity 
could be waived only by express statutory consent. 
Pet. App. A2-A3. The court reasoned that Congress 
had consented to state income taxation of banks for 
cooperatives under Section 3.13 of the Farm Credit Act 
of 1971 (former 12 U.S.C. 2134 (1976)) after the United 
States no longer owned stock in those banks, but that 
the 1985 amendments to the 1978 Act deleted that 
consent. Pet. App. A3. The court further opined that 
Congress’s consent to taxation is at most implied and 
thus is insufficient to constitute a waiver. Ibid. The 
Missouri Supreme Court noted that other courts that 
have addressed the question under the Farm Credit 
Act, which has virtually identical language for produc- 
tion credit associations, had reached the same conclu- 
sion that States could not tax the income of those Farm 
Credit System institutions. Ibid. (citing Farm Credit 
Servs. of Cent. Ark. v. Arkansas, 76 F.3d 961, 964 (8th 
Cir. 1996), rev’d on other grounds, 520 U.S. 821 (1997); 
State v. Farm Credit Servs. of Cent. Ark., 994 S.W.2d 
453, 456 (Ark. 1999), cert. denied, 120 S. Ct. 1530 (2000); 
Farm Credit Servs. of Mid-Am. v. Department of State 
Revenue, 705 N.E.2d 1089, 1092 (Ind. Tax Ct. 1999); 
Northwest La. Prod. Credit Ass’n v. State, 746 So. 2d 
280 (La. Ct. App. 1999)). 

The New Mexico Court of Appeals reached the oppo- 
site conclusion with respect to income taxation of pro- 
duction credit associations under 12 U.S.C. 2077. See 
Production Credit Ass’n of Eastern N.M. v. Taxation 
& Revenue Dep’t, 999 P.2d 1031 (Ct. App.), cert. denied, 
997 P.2d 820 (N.M. 2000), reprinted in Pet. App. A17- 
A32. That court held that, under the language and 
history of 12 U.S.C. 2077, Congress had consented to 

11 

state taxation of the income of production credit asso- 
ciations. Pet. App. A30-A32. The court reasoned that, 
under the 1933 and 1971 Acts, production credit asso- 
ciations were exempt from state income tax only for so 
long as the United States owned stock in those asso- 
ciations. The court further concluded that the repeal in 
1985 of the two sentences in 12 U.S.C. 2077 (1982) con- 
ditionally exempting the production credit associations 
from state income tax so long as the United States 
owned an equity interest in the associations did not 
change the law, but merely reflected the fact that the 
sentences had become redundant because the United 
States no longer held or would hold shares of stock in 
those associations. Pet. App. A28. 

SUMMARY OF ARGUMENT 

The decision below erroneously construed the Farm 
Credit Act of 1971, 12 U.S.C. 2134, to exempt banks for 
cooperatives from state income taxes. The Farm Cre- 
dit Act of 1933 conferred on banks for cooperatives a 
broad exemption from such state taxation, but only for 
so long as the federal government maintained stock 
holdings in them. Since 1968, the federal government 
has not held any stock in a bank for cooperatives. Since 
that time, therefore, such banks have enjoyed a limited 
express exemption from state taxation with respect to 
their obligations, but the banks themselves have been 
liable for income taxation such as the State seeks to 
impose here. 

In 1985, Congress enacted technical amendments 
that deleted the broader exemption from tax that had 
applied when the United States owned stock in banks 
for cooperatives. In ruling that Congress evinced no 
intent to continue to subject banks for cooperatives to 
state income taxation, the state supreme court in effect 

12 

interpreted the 1985 technical amendments as if Con- 
gress had deleted the condition precedent to the broad 
exemption—the federal government’s stock owner- 
ship—but had not deleted the exemption itself. Neither 
the language of the amendment nor the history of 
Section 2134 supports that result. 

ARGUMENT 

STATE TAXATION OF THE INCOME OF BANKS 
FOR COOPERATIVES IS PERMISSIBLE UNDER 
THE FARM CREDIT ACT 

As this Court has made clear, while “absent express 
congressional authorization[ ] a State cannot tax the 
United States directly,” Cotton Petroleum Corp. v. 
New Mexico, 490 U.S. 163, 175 (1989) (citing M’Culloch 

v. Maryland, 17 U.S. (4 Wheat.) 316 (1819)), Congress 
determines whether, and to what extent, instrumentali- 
ties performing federal functions are exempt from state 
and local taxation. United States v. New Mexico, 455 
U.S. 720, 733-735, 737-738, 743-744 (1982); Department 
of Employment v. United States, 385 U.S. 355, 358 
(1966). The language, structure, and history of the 
Farm Credit Act make clear that Congress intended for 
privately-owned, for-profit banks for cooperatives to be 
subject to the income tax Missouri seeks to impose. 

A. By Its Plain Terms, Section 2134 Confers Only A 

Narrowly Defined Tax Exemption Inapplicable Here 

Rather Than A Broad Exemption From State Income 

Taxes For Banks For Cooperatives 

1. Since the original enactment of the Farm Credit 
Act in 1933, Congress has declared that all banks for 
cooperatives are federal instrumentalities—regardless 
of whether the federal government owns any stock in 
them—and that, as such, their “notes, debentures, 

13 

bonds, and other such obligations * * * shall be 
exempt both as to principal and interest from all taxa- 
tion” except for “surtaxes, estate, inheritance, and gift 
taxes.” Ch. 98, § 63, 48 Stat. 267. If the federal gov- 
ernment held an ownership interest in a bank for coop- 
eratives, a broader exemption from state and federal 
taxes applied. Ibid.; see § 3.13, 85 Stat. 608-609. By 
1968, however, the provision conferring the broader 
exemption from state taxation no longer had any practi- 
cal effect, because the federal government no longer 
held any stock interest in any bank for cooperatives. 
See H.R. Rep. No. 425, supra, at 117 (noting that “the 
Banks for Cooperatives [were] farmer-owned by 1968”). 
The condition for exempting banks for cooperatives 
from state income tax had therefore ceased to exist. 

In 1985, Congress restructured the Farm Credit Sys- 
tem and withdrew the federal government’s authority 
to own stock directly in banks for cooperatives. Pub. L. 
No. 99-205, § 101, 99 Stat. 1678; H.R. Rep. No. 425, 
supra, at 28-29. As part of that effort to make the Sys- 
tem more self-sufficient, Congress created the Farm 
Credit System Capital Corporation to provide emer- 
gency investments in System entities with capital 
raised from within the System. Pub. L. No. 99-205, 
§ 103, 99 Stat. 1680-1687; H.R. Rep. No. 425, supra, at 
13-15. For the future, any federal government financial 
support was limited to investments in the Capital Cor- 
poration. Pub. L. No. 99-205, § 101, 99 Stat. 1678; H.R. 
Rep. No. 425, supra, at 28-29. In accordance with that 
restructuring, Congress also passed various technical 
amendments to 12 U.S.C. 2134. Those amendments 
deleted the reference to the federal government’s stock 
ownership in a bank for cooperatives and the part of 
Section 2134 that authorized the broader exemption 
from federal and state taxation when the federal gov- 

14 

ernment owned stock in a bank for cooperatives. As 
amended, Section 2134 thus provides that notes, deben- 
tures, and other obligations issued by a bank for 
cooperatives are tax exempt while providing that 
interest on such obligations is subject to federal income 
tax. 12 U.S.C. 2134. As to any other tax obligations, 
the statute is now silent. 

Respondent argues that the 1985 technical amend- 
ments rendered them exempt from state income taxes 
because the absence of any statement about tax liability 
is tantamount to a congressional intent that banks for 
cooperatives be completely exempt from such taxes. 
Such an interpretation, however, would render mean- 
ingless the provisions in Section 2134 specifically set- 
ting out tax exemptions for obligations of banks for 
cooperatives. Congress would not have needed to enact 
specific exemptions from state taxation if it had 
intended a rule of general exemption to apply. Rather 
than read the specific tax exemptions for banks for 
cooperatives as surplusage, the language in the statute 
should be given its full effect. See South Dakota v. 
Yankton Sioux Tribe, 522 U.S. 329, 347 (1998) (“[T]he 
Court avoids interpreting statutes in a way that ‘ren- 
ders some words altogether redundant.’ ”) (quoting 
Gustafson v. Alloyd Co., 513 U.S. 561, 574 (1995)); 
Dunn v. Commodity Futures Trading Comm’n, 519 
U.S. 465, 472 (1997) (“legislative enactments should not 
be construed to render their provisions mere surplu- 
sage”).5 From its inception in 1933 to the present, 

5 Indeed, under respondent’s theory, it would be free from all 
state taxation, including property taxes. Such a result, however, 
would provide banks for cooperatives with an even broader ex- 
emption than originally enacted in 1933 by Congress, when the 
United States held stock in such banks, for even in that circum- 
stance the banks were subject to property taxes. See Farm Credit 

15 

therefore, nothing in the language of Section 2134 or its 
precursors supports the contention that Congress in- 
tended to create an exemption from income taxes for 
privately-owned banks for cooperatives. 

2. Nor does anything in the legislative history of 
Section 2134 suggest such an intent. Because the statu- 
tory language prior to 1985 was unequivocal on this 
point, the state supreme court’s conclusion must rest on 
Congress’s intent in enacting the 1985 amendments. 
Yet nothing in the legislative history of those amend- 
ments suggests that Congress intended to grant to 
banks for cooperatives any expanded or new immuni- 
ties from taxation. Indeed, in removing prior provi- 
sions authorizing the federal government to maintain 
direct stock holdings in the banks for cooperatives, as 
well as the original provisions conferring the broader 
exemption from state tax when the United States holds 
an ownership interest in the banks for cooperatives, the 
legislative history specifies that Congress intended to 
make only “technical and conforming amendments.” 
H.R. Rep. No. 425, supra, at 28. If Congress had 
intended to alter the status quo in the 1985 amend- 
ments and to create a broad immunity from taxation for 
privately-owned banks for cooperatives, it is unlikely to 
have done so by a “technical amendment.” See 
Edmonds v. Compagnie Generale Transatlantique, 443 
U.S. 256, 266-267 (1979) (“[S]ilence [in legislative 

Act of 1933, ch. 98, § 63, 48 Stat. 267; Pub. L. No. 92-181, § 3.13, 85 
Stat. 608-609. Moreover, exempting banks for cooperatives from 
property tax would be inconsistent with Congress’s treatment of 
property taxes for other institutions within the Farm Credit Sys- 
tem. See 12 U.S.C. 2278a-11 (making Assistance Board subject to 
real estate taxes); 12 U.S.C. 2278b-10 (same for Financial Assis- 
tance Corporation); 12 U.S.C. 2098 (same for land bank associa- 
tions). 

16 

history] * * * while contemplating an important and 
controversial change in existing law is unlikely.”). Yet 
the decision below in effect assumes the exact opposite: 
even though Congress had explicitly created an exemp- 
tion from taxation only in certain specifically defined 
contexts, the court nonetheless held that Congress 
impliedly intended to establish a much broader exemp- 
tion. See Pet. App. A3. 

The court’s assumption is particularly implausible in 
view of the history of Section 2134. Congress was well 
aware that banks for cooperatives are for-profit entities 
chartered by the federal government. Consequently, 
Congress intended in the 1985 amendments for the 
federal government not to subsidize the banks for coop- 
eratives, but rather to give the Farm Credit System 
the tools with which to use existing capital in the Sys- 
tem to aid those with special financial needs. See H.R. 
Rep. No. 425, supra, at 7-8, 11-12. The history behind 
Section 2134, therefore, does not support the state su- 
preme court’s holding that Congress implicitly con- 
ferred upon banks for cooperatives a new, broad-based 
exemption from federal, state, and local taxes. 

B. The Overall Context And History Of The Farm Credit 

Act Also Negate The Claim Of Immunity In This Case 

From the original enactment of the Farm Credit Act, 
Congress explicitly determined which federally char- 
tered lending institutions within the Farm Credit 
System would be entitled to comprehensive immunity 
from taxation and which would not. In addition to 
banks for cooperatives, the Farm Credit System in- 
cludes farm credit banks, federal land bank associa- 
tions, and production credit associations. 12 U.S.C. 
2002(a). With respect to each entity, the Farm Credit 
Act contains a “taxation” provision that delineates spe- 

17 

cifically the immunity from taxes enjoyed by that 
entity. See 12 U.S.C. 2023 (farm credit banks), 2077 
(production credit associations), 2098 (federal land bank 
associations), 2134 (banks for cooperatives). 

For farm credit banks and federal land bank associa- 
tions, Congress explicitly provided the type of compre- 
hensive immunity that the state supreme court held to 
be implied here for banks for cooperatives. For exam- 
ple, Congress explicitly granted comprehensive immu- 
nity to farm credit banks under 12 U.S.C. 2023, which 
provides: 

The Farm Credit Banks and the capital, reserves, 
and surplus thereof, and the income derived there- 
from, shall be exempt from Federal, State, munici- 
pal, 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. 

The substantive language of that exemption is identical 
to the language for federal land bank associations in 12 
U.S.C. 2098. As to both entities, the exemption lan- 
guage has been largely unchanged since the Farm 
Credit Act of 1971. See Pub. L. No. 92-181, §§ 1.21, 2.8, 
85 Stat. 590, 597.6 

6 Section 1.21 of the Farm Credit Act of 1971 addressed the 
taxation of both federal land banks and federal land bank associa- 
tions. Section 2.8 referred to the taxation of federal intermediate 
credit banks. Federal land banks and federal intermediate credit 
banks were merged and became “ farm credit banks” under the 
Agricultural Credit Act of 1987, Pub. L. No. 100-233, § 410, 101 
Stat. 1637. As part of the 1987 Act, the taxation statutes were 
redesignated as Sections 1.15 and 2.17 for farm credit banks and 
federal land bank associations, respectively. Pub. L. No. 100-233, 
§ 401, 101 Stat. 1629, 1637. 

18 

By contrast, production credit associations and banks 
for cooperatives have been granted only the limited 
exemption from taxation with respect to their obliga- 
tions. See 12 U.S.C. 2077, 2134. Prior to the 1985 
amendments to the Farm Credit Act, production credit 
associations (like banks for cooperatives) also possessed 
a broad-based exemption from taxation that was con- 
tingent upon the United States’ stock ownership. See 
Pub. L. No. 92-181, § 2.17, 85 Stat. 602. That contingent 
exemption was repealed in 1985 by the same technical 
amendments that applied to the banks for cooperatives. 
See Pub. L. No. 99-205, § 205(e)(16), 99 Stat. 1705. Con- 
gress thus “intentionally and purposely” chose to grant 
an expansive immunity from taxation to farm credit 
banks and federal land bank associations, while at the 
same time conferring a more limited exemption (con- 
cerning only their notes, debentures, and other obliga- 
tions) with respect to production credit associations and 
banks for cooperatives. Had Congress wished to confer 
upon banks for cooperatives and production credit 
associations the more comprehensive exemption from 
taxation that it had provided to federal credit banks 
and federal land bank associations, it presumably would 
have done so expressly as it had elsewhere in the Farm 
Credit Act. See, e.g., Russello v. United States, 464 
U.S. 16, 23 (1983) (“[W]here Congress includes particu- 
lar language in one section of a statute but omits it in 
another section of the same Act, it is generally pre- 
sumed that Congress acts intentionally and purposely 
in the disparate inclusion or exclusion.”) (quoting 
United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th 
Cir. 1972)). Congress, however, did not “write the 

19 

statute that way.” Id. at 23 (quoting United States v. 
Naftalin, 441 U.S. 768, 773 (1979)).7 

The effect of the state supreme court’s decision is to 
grant to respondents a tax exemption equal to or 
potentially greater than that which Congress explicitly 
provided to farm credit banks and federal land bank 
associations, since the logic of the court’s decision would 
arguably grant banks for cooperatives an exemption 
from real property taxes, an exemption not shared by 
either farm credit banks or federal land bank associa- 
tions. See Farm Credit Servs. of Cent. Ark. v. Arkan- 
sas, 76 F.3d 961, 967 (8th Cir. 1996) (Loken, J., dis- 
senting), rev’d on other grounds, 520 U.S. 821 (1997). 
That result would alter significantly the extent to 
which States and localities have been empowered to tax 
banks for cooperatives since at least 1968—an em- 
powerment that has resulted in millions of dollars in tax 
revenues. See Ohio et al. Amici Cert. Br. 8. Nothing in 
Section 2134, the Farm Credit Act as a whole, or the 
pertinent legislative history indicates that Congress 

7 Congress also has demonstrated its ability to provide federal 
instrumentalities with broad exemptions from state taxation 
outside of the Farm Credit Act. For example, in the Federal 
Credit Union Act, Pub. L. No. 86-354, 73 Stat. 628 (12 U.S.C. 1751 
et seq.), federal credit unions, their property, their funds, and their 
income are exempt from all federal, state or local taxation, except 
that, like farm credit banks, their real and personal property are 
subject to taxation “to the same extent as other similar property is 
taxed.” 12 U.S.C. 1768. Federal reserve banks have been granted 
similarly expansive tax exemptions as well. 12 U.S.C. 531. Those 
statutes further point up the contextual incongruity in the state 
supreme court’s holding here and in respondents’ arguments in 
support of it—namely, that Congress sub silentio granted banks 
for cooperatives a comprehensive exemption from all federal, state, 
and local taxation. 

20 

meant for its 1985 “technical” amendments to effect 
such a sweeping change. 

C. The Court Need Not Decide In This Case The Scope Of 

A Federal Instrumentality’s Exemption From State 

Taxes In Other Contexts 

The theory advanced by respondent, and accepted by 
the court below, is that Congress’s use of the term 
“instrumentalit[y] of the United States” in 12 U.S.C. 
2134, coupled with the deletion in 1985 of the provision 
conferring an exemption from tax when the United 
States held shares in banks for cooperatives, is suffi- 
cient to warrant application of a broad constitutional 
rule that a federal instrumentality may not be taxed 
absent express consent by Congress. See Pet. App. A2- 
A3 (citing M’Culloch v. Maryland, 17 U.S. (4 Wheat.) 
316, 436-437 (1819)). 

Respondent’s position would require this Court to 
define what qualities of a federal instrumentality are 
sufficient to warrant recognition of such a broad-based 
immunity from state taxation. Yet, as this Court has 
noted, “there is no simple test for ascertaining whether 
an institution is so closely related to governmental 
activity as to become a tax-immune instrumentality.” 
Department of Employment v. United States, 385 U.S. 
355, 358-359 (1966). Unlike the Red Cross in that case, 
for instance, the banks for cooperatives do not have 
officers “appointed by the President,” “the right and 
the obligation to meet this Nation’s commitments under 
various [statutes], [or the authority] to perform a wide 
variety of functions indispensable to the workings of 
our [government].” Id. at 359. The banks for coopera- 
tives do not “receive substantial material assistance 
from the Federal Government” nor have “the President 
and the Congress * * * recognized and acted in 

21 

reliance upon the [banks for cooperatives’] status 
virtually as an arm of the Government.” Id. at 359-360. 
While Department of Employment noted that the 
foregoing qualities were not exhaustive, the Court 
elsewhere has expressed reluctance to announce a 
constitutional rule in contexts in which Congress has 
manifested its intent through statutory law. See, e.g., 
First Agric. Nat’l Bank v. State Tax Comm’n, 392 U.S. 
339, 341 (1968) (“Because of pertinent congressional 
legislation in the banking field, we find it unnecessary 
to reach the constitutional question of whether today 
national banks should be considered nontaxable as 
federal instrumentalities.”). 

That doctrine of prudence is especially appropriate in 
this area of the law. Congress has used the term 
“instrumentality” in literally scores of enactments, 
some with express tax exemption provisions and some 
without.8 Congress also has established or chartered 
by statute “government corporations” and “govern- 
ment controlled corporations,” which perform impor- 
tant functions and for which exemptions from certain 
forms of taxation may or may not be conferred by 
statute.9 Because a ruling in favor of respondent could 

8 See, e.g., 12 U.S.C. 2283, 2290 (Federal Financing Bank an 
“instrumentality of the United States” with specified exemptions 
from tax); 15 U.S.C. 713a-5, 714 (same for Commodity Credit 
Corporation); see also 42 U.S.C. 2297h-3 (Supp. III 1997) (provi- 
sions for United States Enrichment Corporation to be “instru- 
mentality” with certain exemptions from taxation prior to its 
privatization). 

9 See, e.g., 12 U.S.C. 1430, 1433 (Federal Home Loan Banks 
with specified exemptions from taxation); 12 U.S.C. 1451, 1452 
(same for Federal Home Loan Mortgage Corporation); 12 U.S.C. 
1717 (1994 & Supp. IV 1998), 12 U.S.C. 1723 (same for Government 
National Mortgage Association and Federal National Mortgage 

22 

bear on how the taxation of those entities is treated, 
conferral of any broad exemption from taxation for 
banks for cooperatives properly should be prescribed 
by Congress, if it regards such a policy to be in the 
national interest. See, e.g., First Agric. Nat’l Bank, 392 
U.S. at 346 (“Because of [the statute] and its legislative 
history, we are convinced that if a change is to be made 
in state taxation of national banks, it must come from 
Congress, which has established the present limits.”). 

CONCLUSION 

The judgment of the Supreme Court of Missouri 
should be reversed. 

Respectfully submitted. 

SETH P. WAXMAN 

Solicitor General 

PAULA M. JUNGHANS 

Acting Assistant Attorney 

General 

LAWRENCE G. WALLACE 

Deputy Solicitor General 

DAVID C. FREDERICK 

Assistant to the Solicitor 

General 

DAVID ENGLISH CARMACK 
DONALD B. TOBIN 

Attorneys 

AUGUST 2000 

Association); 12 U.S.C. 3012, 3019 (same for National Consumer 
Cooperative Bank).