Immunity of Lessees of Indian Lands
The Doctrine of Federal Exemption From State Taxation
McCulloch v. Maryland.—Five years after the decision in McCulloch v. Maryland that a State may not tax an instrumentality of the Federal Government, the Court was asked to and did reexamine the entire question in Osborn v. United States Bank.97 In that case counsel for the State of Ohio, whose attempt to tax the Bank was challenged, put forward two arguments of great importance. In the first place it was "contended, that, admitting Congress to possess the power, this exemption ought to have been expressly asserted in the act of incorporation; and not being expressed, ought not to be implied by the Court."98 To which Marshall replied: "It is no unusual thing for an act of Congress to imply, without expressing, this very exemption from state control, which is said to be so objectionable in this instance."99 Secondly, the appellants relied "greatly on the distinction between the bank and the public institutions, such as the mint or the post office. The agents in those offices are, it is said, officers of government.... Not so the directors of the bank. The connection of the government with the bank, is likened to that with contractors."100 Marshall accepted this analogy but not to the advantage of the appellants. He simply indicated that all contractors who dealt with the Government were entitled to immunity from taxation upon such transactions.101 Thus, not only was the decision of McCulloch v. Maryland re-affirmed but the foundation was laid for the vast expansion of the principle of immunity that was to follow in the succeeding decades.
97 22 U.S. (9 Wheat.) 738 (1824).
98 Id. at 865.
Applicability of Doctrine to Federal Securities.—The first significant extension of the doctrine of the immunity of federal instrumentalities from state taxation came in Weston v. Charleston,102 where Chief Justice Marshall also found in the Supremacy Clause a bar to state taxation of obligations of the United States. During the Civil War, when Congress authorized the issuance of legal tender notes, it explicitly declared that such notes, as well as United States bonds and other securities, should be exempt from state taxation.103 A modified version of this section remains on the statute books today.104 The right of Congress to exempt legal tender notes to the same extent as bonds was sustained in Bank v. Supervisors,105 over the objection that such notes circulate as money and should be taxable in the same way as coin. But a state tax on checks issued by the Treasurer of the United States for interest accrued upon government bonds was sustained since it did not in any way affect the credit of the National Government.106 Similarly, the assessment for an ad valorem property tax of an open account for money due under a federal contract,107 and the inclusion of the value of United States bonds owed by a decedent, in measuring an inheritance tax,108 were held valid, since neither tax would substantially embarrass the power of the United States to secure credit.109 A state property tax levied on mutual savings banks and federal savings and loan associations and measured by the amount of their capital, surplus, or reserve and undivided profits, but without deduction of the value of their United States securities, was voided as a tax on obligations of the Federal Government. Apart from the fact that the ownership interest of depositors in such institutions was different from that of corporate stockholders, the tax was imposed on the banks which were solely liable for payment thereof.110
100 Id. at 866.
101 Id. at 867.
103 12 Stat. 709, 710, 1 (1863).
104 31 U.S.C. § 3124. The exemption under the statute is no broader than that which the Constitution requires. First Nat'l Bank v. Bartow County Bd. of Tax Assessors, 470 U.S. 583 (1985). The relationship of this statute to another, 12 U.S.C. § 548, governing taxation of shares of national banking associations, has occasioned no little difficulty. American Bank & Trust Co. v. Dallas County, 463 U.S. 855 (1983); Memphis Bank & Trust Co. v. Garner, 459 U.S. 392 (1983).
105 74 U.S. (7 Wall.) 26 (1868).
107 Smith v. Davis, 323 U.S. 111 (1944).
109 Accord: Rockford Life Ins. Co. v. Illinois Dep't of Revenue, 482 U.S. 182 (1987) (Tax including in an investor's net assets the value of federally-backed securities ("Ginnie Maes") upheld, since it would have no adverse effect on Federal Government's borrowing ability).
110 Society for Savings v. Bowers, 349 U.S. 143 (1955).
Income from federal securities is also beyond the reach of the state taxing power as the cases now stand.111 Nor can such a tax be imposed indirectly upon the stockholders on such part of the corporate dividends as corresponds to the part of the corporation's income which is not assessed, i.e., income from tax exempt bonds.112 A State may constitutionally levy an excise tax on corporations for the privilege of doing business, and measure the tax by the property of net income of the corporation, including tax exempt United States securities or the income derived therefrom.113 The designation of a tax is not controlling.114 Where a so-called "license tax" upon insurance companies, measured by gross income, including interest on government bonds, was, in effect, a commutation tax levied in lieu of other taxation upon the personal property of the taxpayer, it was still held to amount to an unconstitutional tax on the bonds themselves.115
Taxation of Government Contractors.—In the course of his opinion in Osborn v. United States Bank,116 Chief Justice Marshall posed the question: "Can a contractor for supplying a military post with provisions, be restrained from making purchases within any state, or from transporting the provisions to the place at which the troops were stationed? Or could he be fined or taxed for doing so? We have not yet heard these questions answered in the affirmative."117 Today, the question insofar as taxation is concerned is answered in the affirmative. While the early cases looked toward immunity,118 in James v. Dravo Contracting Co.,119 by a 5-to-4 vote, the Court established the modern doctrine. Upholding a state tax on the gross receipts of a contractor providing services to the Federal Government, the Court said that "'[I]t is not necessary to cripple [the State's power to tax] by extending the constitutional exemption from taxation to those subjects which fall within the general application of non-discriminatory laws, and where no direct burden is laid upon the governmental instrumentality, and there is only a remote, if any, influence upon the exercise of the functions of government."'120 A state-imposed sales tax upon the purchase of goods by a private firm having a cost-plus contract with the Federal Government was sustained, it not being critical to the tax's validity that it would be passed on to the Government.121 Previously, it had sustained a gross receipts tax levied in lieu of a property tax upon the operator of an automobile stage line, who was engaged in carrying the mails as an independent contractor122 and an excise tax on gasoline sold to a contractor with the Government and used to operate machinery in the construction of levees on the Mississippi River.123 While the decisions have not set an unwavering line,124 the Court has in recent years hewed to a very restrictive doctrine of immunity. "[T]ax immunity is appropriate in only one circumstance: when the levy falls on the United States itself, or on an agency or 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 is concerned."125 Thus, New Mexico sustained a state gross receipts tax and a use tax imposed upon contractors with the Federal Government which operated on "advanced funding," drawing on federal deposits so that only federal funds were expended by the contractors to meet their obligations.126 Of course, Congress may statutorily provide for immunity from taxation of federal contractors generally or in particular programs.127
112 Miller v. Milwaukee, 272 U.S. 713 (1927).
113 Provident Inst. v. Massachusetts, 73 U.S. (6 Wall.) 611 (1868); Society for Savings v. Coite, 73 U.S. (6 Wall.) 594 (1868); Hamilton Company v. Massachusetts, 73 U.S. (6 Wall.) 632 (1868); Home Ins. Co. v. New York, 134 U.S. 594 (1890); Werner Machine Co. v. Director of Taxation, 350 U.S. 492 (1956).
115 Northwestern Mutual Life Ins. Co. v. Wisconsin, 275 U.S. 136 (1927).
116 22 U.S. (9 Wheat.) 738 (1824).
117 Id. at 867.
118 The dissent in James v. Dravo Contracting Co., 302 U.S. 134, 161 (1937), observed that the Court was overruling "a century of precedents." See, e.g., Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218 (1928) (voiding a state privilege tax on dealers in gasoline as applied to sales by a dealer to the Federal Government for use by Coast Guard). It was in Panhandle that Justice Holmes uttered his riposte to Chief Justice Marshall: "The power to tax is not the power to destroy while this Court sits." Id. at 223 (dissenting).
119 302 U.S. 134 (1937).
121 Alabama v. King & Boozer, 314 U.S. 1 (1941), overruling Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218 (1928), and Graves v. Texas Co., 298 U.S. 393 (1936). See also Curry v. United States, 314 U.S. 14 (1941). "The Constitution ... does not forbid a tax whose legal incidence is upon a contractor doing business with the United States, even though the economic burden of the tax, by contract or otherwise, is ultimately borne by the United States." United States v. Boyd, 378 U.S. 39, 44 (1964) (sustaining sales and use taxes on contractors using tangible personal property to carry out government cost-plus contract).
122 Alward v. Johnson, 282 U.S. 509 (1931).
123 Trinityfarm Const. Co. v. Grosjean, 291 U.S. 466 (1934).
124 United States v. Allegheny County, 322 U.S. 174 (1944) (voiding property tax that included in assessment the value of federal machinery held by private party); Kern-Limerick v. Scurlock, 347 U.S. 110 (1954) (voiding gross receipts sales tax applied to contractor purchasing article under agreement whereby he was to act as agent for Government and title to articles purchased passed directly from vendor to United States).
126 "[I]mmunity may not be conferred simply because the tax has an effect on the United States, or even because the Federal Government shoulders the entire economic burden of the levy." United States v. New Mexico, 455 U.S. 720, 734 (1982). Arizona Dep't of Revenue v. Blaze Constr. Co., 119 S. Ct. 957 (1999) (the same rule applies when the contractual services are rendered on an Indian reservation).
127 James v. Dravo Contracting Co., 302 U.S. 134, 161 (1937); Carson v. Roane-Anderson Co., 342 U.S. 232, 234 (1952); United States v. New Mexico, 455 U.S. 720, 737 (1982). Roane-Anderson held that a section of the Atomic Energy Act barred the collection of state sales and use taxes in connection with sales to private companies of personal property used by them in fulfilling their contracts with the AEC. Thereafter, Congress repealed the section for the express purpose of placing AEC contractors on the same footing as other federal contractors, and the Court upheld imposition of the taxes. United States v. Boyd, 378 U.S. 39 (1964).
Taxation of Salaries of Employees of Federal Agencies.— Of a piece with James v. Dravo Contracting Co. was the decision in Graves v. New York ex rel. O'Keefe,128 handed down two years later. Repudiating the theory "that a tax on income is legally or economically a tax on its source," the Court held that a State could levy a nondiscriminatory income tax upon the salary of an employee of a government corporation. In the opinion of the Court, Justice Stone intimated that Congress could not validly confer such an immunity upon federal employees. "The burden, so far as it can be said to exist or to affect the government in any indirect or incidental way, is one which the Constitution presupposes; and hence it cannot rightly be deemed to be within an implied restriction upon the taxing power of the national and state governments which the Constitution has expressly granted to one and has confirmed to the other. The immunity is not one to be implied from the Constitution, because if allowed it would impose to an inadmissible extent a restriction on the taxing power which the Constitution has reserved to the state governments."129 Chief Justice Hughes concurred in the result without opinion. Justices Butler and McReynolds dissented and Justice Frankfurter wrote a concurring opinion in which he reserved judgment as to "whether Congress may, by express legislation, relieve its functionaries from their civic obligations to pay for the benefits of the State governments under which they live."130
128 306 U.S. 466 (1939), followed in State Comm'n v. Van Cott, 306 U.S. 511 (1939). This case overruled by implication Dobbins v. Erie County, 41 U.S. (16 Pet.) 435 (1842), and New York ex rel. Rogers v. Graves, 299 U.S. 401 (1937), which held the income of federal employees to be immune from State taxation.
129 Id. at 487.
130 Id. at 492.
That question is academic, Congress having consented to state taxation of its employees' compensation as long as the taxation "does not discriminate against the . . . employee, because of the source of the . . . compensation."131 This statute, the Court has held, "is coextensive with the prohibition against discriminatory taxes embodied in the modern constitutional doctrine of intergovernmental tax immunity."132
Ad Valorem Taxes Under the Doctrine.—Property owned by a federally chartered corporation engaged in private business is subject to state and local ad valorem taxes. This was conceded in McCulloch v. Maryland,133 and confirmed a half century later with respect to railroads incorporated by Congress.134 Similarly, a property tax may be levied against the lands under water which are owned by a person holding a license under the Federal Water Power Act.135 However, when privately owned property erected by lessees on tax exempt state lands is taxed by a county at less than full value, and houses erected by contractors on land leased from a federal Air Force base are taxed at full value, the latter tax, solely by reason of the discrimination against the United States and its lessees, is rendered void.136 Likewise, when under state laws, a school district does not tax private lessees of state and municipal realty, whose leases are subject to termination at the lessor's option in the event of sale, but does levy a tax, measured by the entire value of the realty, on lessees of United States property utilized for private purposes and whose leases are terminable at the option of the United States in an emergency or upon sale, the discrimination voided the tax collected from the latter. "A state tax may not discriminate against the Government or those with whom it deals" in the absence of significant differences justifying levy of higher taxes on lessees of federal property.137 Land conveyed by the United States to a corporation for dry dock purposes was subject to a general property tax, despite a reservation in the conveyance of a right to free use of the dry dock and a provision for forfeiture in case of the continued unfitness of the dry dock for use or the use of land for other purposes.138 Also, where equitable title has passed to the purchaser of land from the Government, a State may tax the equitable owner on the full value thereof, despite retention of legal title;139 but, in the case of reclamation entries, the tax may not be collected until the equitable title passes.140 In the pioneer case of Van Brocklin v. Tennessee,141 the State was denied the right to sell for taxes lands which the United States owned at the time the taxes were levied, but in which it had ceased to have any interest at the time of sale. Similarly, a State cannot assess land in the hands of private owners for benefits from a road improvement completed while it was owned by the United States.142
131 4 U.S.C. § 111. The statute, part of the Public Salary Tax Act of 1939, was considered and enacted contemporaneously with the alteration occurring in constitutional law, exemplified by Graves. That is, in Helvering v. Gerhardt, 304 U.S. 405 (1938), the Court had overruled precedents and held that Congress could impose nondiscriminatory taxes on the incomes of most state employees, and the 1939 Act had as its primary purpose the imposition of federal income taxes on the salaries of all state and local government employees. Feeling equity required it, Congress included a provision authorizing nondiscriminatory state taxation of federal employees. Graves came down while the provision was pending in Congress. See Davis v. Michigan Dept. of the Treasury, 489 U.S. 803, 810-814 (1989). For application of the Act to salaries of federal judges, see Jefferson County v. Acker, 527 U.S. 423 (1999) (upholding imposition of a local occupational tax).
132 Id. at 813. This case struck down, as violative of the provision, a state tax imposed on federal retirement benefits but exempting state retirement benefits. See also Barker v. Kansas, 503 U.S. 594 (1992) (similarly voiding a state tax on federal military retirement benefits but not reaching state and local government retirees).
135 Susquehanna Power Co. v. Tax Comm'n (No. 1), 283 U.S. 291 (1931).
136 Moses Lake Homes v. Grant County, 365 U.S. 744 (1961).
137 Phillips Chemical Co. v. Dumas School Dist., 361 U.S. 376, 383, 387 (1960). In Offutt Housing Co. v. Sarpy County, 351 U.S. 253 (1956), a housing company was held liable for county personal property taxes on the ground that the Government had consented to state taxation of the company's interest as lessee. Upon its completion of housing accommodations at an Air Force Base, the company had leased the houses and the furniture therein from the Federal Government.
138 Baltimore Shipbuilding Co. v. Baltimore, 195 U.S. 375 (1904).
140 Irwin v. Wright, 258 U.S. 219 (1922).
141 117 U.S. 151 (1886).
142 Lee v. Osceola Imp. Dist., 268 U.S. 643 (1925).
In 1944, with two dissents, the Court held that where the Government purchased movable machinery and leased it to a private contractor the lessee could not be taxed on the full value of the equipment.143 Twelve years later, and with a like number of Justices dissenting, the Court upheld the following taxes imposed on federal contractors: (1) a municipal tax levied pursuant to a state law which stipulated that when tax exempt real property is used by a private firm for profit, the latter is subject to taxation to the same extent as if it owned the property, and based upon the value of real property, a factory, owned by the United States and made available under a lease permitting the contracting corporation to deduct such taxes from rentals paid by it; the tax was collectible only by direct action against the contractor for a debt owed, and was not applicable to federal properties on which payments in lieu of taxes are made; (2) a municipal tax, levied under the authority of the same state law, based on the value of the realty owned by the United States, and collected from a cost-plus-fixed-fee contractor, who paid no rent but agreed not to include any part of the cost of the facilities furnished by the Government in the price of goods supplied under the contract; (3) another municipal tax levied in the same State against a federal subcontractor, and computed on the value of materials and work in process in his possession, notwithstanding that title thereto had passed to the United States following his receipt of installment payments.144
143 United States v. Allegheny County, 322 U.S. 174 (1944).
144 United States v. City of Detroit, 355 U.S. 466 (1958). The Court more recently has stated that Allegheny County "in large part was overruled" by Detroit. United States v. New Mexico, 455 U.S. 720, 732 (1982).
In sustaining the first tax, the Court held that it was imposed, not on the Government or on its property, but upon a private lessee, that it was computed by the value of the use to the contractor of the federally leased property, and that it was nondiscriminatory; that is, it was designed to equalize the tax burden carried by private business using exempt property with that of similar businesses using taxed property. Distinguishing the Allegheny case, the Court maintained that in this older decision, the tax invalidated was imposed directly on federal property and that the question of the legality of a privilege on use and possession of such property had been expressly reserved therein. Also insofar as the economic incidents of such tax on private use curtails the net rental accruing to the Government, such burden was viewed as insufficient to vitiate the tax.145
Deeming the second and third taxes similar to the first, the Court sustained them as taxes on the privilege of using federal property in the conduct of private business for profit. With reference to the second, the Court emphasized that the Government had reserved no right of control over the contractor and, hence, the latter could not be viewed as an agent of the Government entitled to the immunity derivable from that status.146 As to the third tax, the Court asserted that there was no difference between taxing a private party for the privilege of using property he possesses, and taxing him for possessing property which he uses; for, in both instances, the use was private profit. Moreover, the economic burden thrust upon the Government was viewed as even more remote than in the administration of the first two taxes.147
146 United States v. Township of Muskegon, 355 U.S. 484 (1958).
147 City of Detroit v. Murray Corp., 355 U.S. 489 (1958). In United States v. County of Fresno, 429 U.S. 452 (1977), these cases were reaffirmed and applied to sustain a tax imposed on the possessory interests of United States Forest Service employees in housing located in national forests within the county and supplied to the employees by the Forest Service as part of their compensation. A State or local government may raise revenues on the basis of property owned by the United States as long as it is in possession or use by the private citizen that is being taxed.
Federal Property and Functions.—Property owned by the United States is, of course, wholly immune from state taxation.148 No State can regulate, by the imposition of an inspection fee, any activity carried on by the United States directly through its own agents and employees.149 An early case, the authority of which is now uncertain, held invalid a flat rate tax on telegraphic messages, as applied to messages sent by public officers on official business.150
Federally Chartered Finance Agencies: Statutory Exemptions.—Fiscal institutions chartered by Congress, their shares and their property, are taxable only with the consent of Congress and only in conformity with the restrictions it has attached to its consent.151 Immediately after the Supreme Court construed the statute authorizing the States to tax national bank shares as allowing a tax on the preferred shares of such a bank held by the Reconstruction Finance Corporation,152 Congress passed a law exempting such shares from taxation. The Court upheld this measure, saying: "When Congress authorized the states to impose such taxation, it did no more than gratuitously grant them political power which they theretofore lacked. Its sovereign power to revoke the grant remained unimpaired, the grant of the privilege being only a declaration of legislative policy changeable at will."153 In Pittman v. Home Owners' Corp.,154 the Court sustained the power of Congress under the Necessary and Proper Clause to immunize the activities of the Corporation from state taxation; and in Federal Land Bank v. Bismarck Lumber Co.,155 the like result was reached with respect to an attempt by the State to impose a retail sales tax on a sale of lumber and other building materials to the bank for use in repairing and improving property that had been acquired by foreclosure or mortgages. The State's principal argument proceeded thus: "Congress has authority to extend immunity only to the governmental functions of the federal land banks; the only governmental functions of the land banks are those performed by acting as depositories and fiscal agents for the federal government and providing a market for government bonds; all other functions of the land banks are private; petitioner here was engaged in an activity incidental to its business of lending money, an essentially private function; therefore § 26 cannot operate to strike down a sales tax upon purchases made in furtherance of petitioner's lending functions."156 The Court rejected this argument and invalidated the tax saying: "The argument that the lending functions of the federal land banks are proprietary rather than governmental misconceives the nature of the federal government with respect to every function which it performs. The federal government is one of delegated powers, and from that it necessarily follows that any constitutional exercise of its delegated powers is governmental.... It also follows that, when Congress constitutionally creates a corporation through which the federal government lawfully acts, the activities of such corporation are governmental."157
148 Clallam County v. United States, 263 U.S. 341 (1923). See also Cleveland v. United States, 323 U.S. 329, 333 (1945); United States v. Mississippi Tax Comm'n, 412 U.S. 363 (1973); United States v. Mississippi Tax Comm'n, 421 U.S. 599 (1975).
149 Mayo v. United States, 319 U.S. 441 (1943). A municipal tax on the privilege of working within the city, levied at the rate of one percent of earnings, although not deemed to be an income tax under state law, was sustained as such when collected from employees of a naval ordinance plant by reason of federal assent to that type of tax expressed in the Buck Act. 4 U.S.C. §§ 105-110. Howard v. Commissioners, 344 U.S. 624 (1953).
151 Des Moines Bank v. Fairweather, 263 U.S. 103, 106 (1923); Owensboro Nat'l Bank v. Owensboro, 173 U.S. 664, 669 (1899); First Nat'l Bank v. Adams, 258 U.S. 362 (1922); Michigan Nat'l Bank v. Michigan, 365 U.S. 467 (1961).
152 Baltimore Nat'l Bank v. Tax Comm'n, 297 U.S. 209 (1936).
154 308 U.S. 21 (1939).
155 314 U.S. 95 (1941).
156 Id. at 101.
157 Id. at 102.
Similarly, the lease by a federal land bank of oil and gas in a mineral estate, which it had reserved in land originally acquired through foreclosure and thereafter had conveyed to a third party, was held immune from a state personal property tax levied on the lease and on the royalties accruing thereunder. The fact that at the time of the conveyance and lease, the bank had recouped its entire loss resulting from the foreclosure did not operate to convert the mineral estate and lease into a non-governmental activity no longer entitled to exemption.158 However, in the absence of federal legislation, a state law laying a percentage tax on the users of safety deposit services, measured by the bank's charges therefore, was held valid as applied to national banks. The tax, being on the user, did not, the Court held, impose an intrinsically unconstitutional burden on a federal instrumentality.159
158 Federal Land Bank v. Kiowa County, 368 U.S. 146 (1961).
159 Colorado Bank v. Bedford, 310 U.S. 41 (1940).
Royalties.—In 1928, the Court went so far as to hold that a State could not tax as income royalties for the use of a patent issued by the United States.160 This proposition was soon overruled in Fox Film Corp. v. Doyal,161 where a privilege tax based on gross income and applicable to royalties from copyrights was upheld. Likewise a State may lay a franchise tax on corporations, measured by the net income from all sources and applicable to income from copyright royalties.162
Immunity of Lessees of Indian Lands.—Another line of anomalous decisions conferring tax immunity upon lessees of restricted Indian lands was overruled in 1949. The first of these cases, Choctaw, O. & G. R.R. v. Harrison,163 held that a gross production tax on oil, gas, and other minerals was an occupational tax, and, as applied to a lessee of restricted Indian lands, was an unconstitutional burden on such lessee, who was deemed to be an instrumentality of the United States. Next, the Court held the lease itself a federal instrumentality immune from taxation.164 A modified gross production tax imposed in lieu of all ad valorem taxes was invalidated in two per curiam decisions.165 In Gillespie v. Oklahoma,166 a tax upon net income of the lessee derived from sales of his share of oil produced from restricted lands also was condemned. Finally a petroleum excise tax upon every barrel of oil produced in the State was held inapplicable to oil produced on restricted Indian lands.167 In harmony with the trend to restricting immunity implied from the Constitution to activities of the Government itself, the Court overruled all these decisions in Oklahoma Tax Comm'n v. Texas Co. and held that a lessee of mineral rights in restricted Indian lands was subject to nondiscriminatory gross production and excise taxes, so long as Congress did not affirmatively grant him immunity.168
160 Long v. Rockwood, 277 U.S. 142 (1928).
161 286 U.S. 123 (1932).
162 Educational Films Corp. v. Ward, 282 U.S. 379 (1931).
163 235 U.S. 292 (1914).
164 Indian Oil Co. v. Oklahoma, 240 U.S. 522 (1916).
166 257 U.S. 501 (1922).
167 Oklahoma v. Barnsdall Corp., 296 U.S. 521 (1936).
168 336 U.S. 342 (1949). Justice Rutledge, speaking for the Court, sketched the history of the immunity lessees of Indian lands from state taxation, which he found to stem from early rulings that tribal lands are themselves immune. The Kansas Indians, 72 U.S. (5 Wall.) 737 (1867); The New York Indians, 72 U.S. (5 Wall.) 761 (1867). One of the first steps taken to curtail the scope of the immunity was Shaw v. Oil Corp., 276 U.S. 575 (1928), which held that lands outside a reservation, though purchased with restricted Indian funds, were subject to state taxation. Congress soon upset the decision, however, and its act was sustained in Board of County Comm'rs v. Seber, 318 U.S. 705 (1943).