                 Liability of the United States for State
            and Local Taxes on Seized and Forfeited Property


Pro p erty seized by, and ultim ately forfeited to, the federal governm ent is not subject to state and
    local taxes th at arise after the date o f the offense that leads to the o rd er o f forfeiture.*


                                                                                         July 9, 1991

 M e m o r a n d u m O p in io n f o r t h e A s s o c i a t e D e p u ty a tto r n ey G e n e r a l


   This memorandum responds to your request for our opinion whether prop­
erty seized by, and ultimately forfeited to, the federal government is subject
to taxation by state and local authorities. We conclude that principles of
intergovernmental tax immunity, combined with longstanding rules govern­
ing forfeiture and the express language of modem forfeiture statutes, establish
that property ultimately forfeited to the federal government is not subject to
state and local taxes arising after the date of an offense that leads to the
order of forfeiture.1
   Property actually forfeited to the United States is immune from taxation by
state and local authorities in the absence of express congressional authorization.

   * E ditor's Note: T he views of the Office were later revised in light of United States v. 92 Buena Vista
Ave., 507 U.S. I l l (1993) (plurality and concurring opinions established that the interests o f innocent
owners who acquire property after commission o f an act leading to forfeiture are not defeated by the
forfeiture action). See Memorandum for Cary H. Copeland, Director and C hief Counsel, Executive O f­
fice for Asset Forfeiture, Re: Liability o f the United States fo r State and Local Taxes on Seized and
Forfeited Property (Oct. 18 1993) ( to be published) ( in civil forfeiture proceedings, the U nited States is
obligated to pay liens for state and local taxes accruing after the commission o f the offense leading to
forfeiture and before the entry of a judicial order of forfeiture, if the lien-holder establishes innocent
ownership o f its interests, but the United States may not pay such liens in criminal forfeiture proceedings
because state and local tax lien-holders are not bona fide purchasers for value of the interests they would
assert). See also Memorandum for Cary H. Copeland, Director and Chief Counsel, Executive Office for
Asset Forfeiture and James Knapp, Deputy Director, Asset Forfeiture Office, Criminal Division. Re:
Authority to Pay State and Local Taxes on Property After Entry o f an Order o f Forfeiture (Dec. 9 1993)
(to be published) (the Attorney General has discretionary authority under the civil and criminal forfeiture
statutes to com pensate state and local governments for tax revenues lost as a result of a forfeiture).
  ' Currently, “[t]he [Justice] Departm ent's position is that the doctrine of sovereign immunity precludes
the payment o f State and local taxes on property which has been seized for federal forfeiture.” M emoran­
dum for United States Attorneys Offices from Cary H. Copeland, Director, Executive Office for Asset
Forfeiture, Re: Forfeiture Policies at 1 (July 3, 1990). Under this policy, the "date o f the seizure marks
the imposition of sovereign immunity.” Id. at 2. The Department, therefore, “will not pay State or local
taxes incurred after the property is seized for forfeiture.” Id.


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This doctrine finds its classic expression in M ’Culloch v. M aryland, 17 U.S.
(4 W heat.) 316 (1819). As the Court has subsequently explained, under
M ’Culloch “a State cannot constitutionally levy a tax directly against the
Government of the United States or its property without the consent of Con­
gress.” U nited States v. City o f Detroit, 355 U.S. 466, 469 (1958). See also
C otton Petroleum Corp. v. N ew Mexico, 490 U.S. 163, 175 (1989) (“[A]bsent
express congressional authorization, a state cannot tax the United States
directly.”); U nited States v. Allegheny County, 322 U.S. 174, 177 (1944) (the
“possessions, institutions, and activities of the Federal Government itself in
the absence of express congressional consent are not subject to any form of
state taxation”).2 Once property is forfeited to the United States, an attempt
by a state or local government to tax that property in the absence of consent
by the Congress is plainly invalid under the longstanding doctrine of inter­
governmental tax immunity.3
    The process of forfeiture presents the question whether that immunity
might attach before the date on which the forfeiture is perfected by entry of
an order of forfeiture. We conclude that it does, by operation of the relation
back doctrine, which is codified in the major federal forfeiture statutes. For
example, the provisions of federal law relating to civil forfeiture of certain
drug-related property were amended by the Comprehensive Crime Control
Act o f 1984, Pub. L. No. 98-473, 98 Stat. 1837, 2051 (1984), to provide that
“ [a]ll right, title, and interest in property [subject to forfeiture] shall vest in
the United States upon commission of the act giving rise to forfeiture under
this section.” 21 U.S.C. § 881(h). See also 18 U.S.C. § 1963(c) (same); 21
U.S.C. § 853(c) (same).4
  Under this principle, which by 1890 was the “settled doctrine” o f the
Supreme Court with respect to forfeitures,

          whenever a statute enacts that upon the commission of a cer­
          tain act specific property used in or connected with that act
          shall be forfeited, the forfeiture takes effect immediately upon



  2 T he federal governm ent’s tan im m unity has been described as a function o f the supremacy o f federal
law under A rticle VI o f the Constitution, United States v. New M exico, 455 U.S. 720, 733 (1982);
M ’Culloch, 17 U.S. at 436 (describing tax immunity as "the unavoidable consequence of that supremacy
w hich the constitution has declared” ); and as a function o f sovereign immunity, Kern-Limerick, Inc. v.
Scurlock, 347 U.S. 110, 122 (1954).
  5 If seized property is not ultimately forfeited to the federal government, the owner o f the property
w ould rem ain liable for state and local taxes.
  4 Som e courts have held that the relation back doctrine, if not expressly set forth in the statute, is
sim ply a rule o f statutory construction that applies only to those statutes making forfeiture automatic
rather than perm issive. See, e.g.. U nited States v. Thirteen Thousand Dollars in United States Cur­
rency, 733 F.2d 581, 584 (8th Cir. 1984); United States v. Currency Totalling $48,318.08, 609 F.2d 210
(5th Cir. 1980). See generally Mark A. Jankowski, Note, Tempering the Relation-Back Doctrine: A
M ore Reasonable Approach to Civil Forfeiture in D rug Cases, 76 Va. L. Rev. 165, 181-83 (1990).
A fter the adoption o f express relation back provisions in the m ajor forfeiture statutes, these holdings
w ould appear to be o f limited practical significance.

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           the commission o f the act', the right to the property then vests
          in the United States, although [its] title is not perfected until
          judicial condemnation; the forfeiture constitutes a statutory
           transfer o f the right to the United States at the time the of­
          fen ce is committed; and the condemnation, when obtained,
          relates back to that time, and avoids all intermediate sales and
          alienations, even to purchasers in good faith.

United States v. Stowell, 133 U.S. 1, 16-17 (1890) (emphases added). See
also United States v. Grundy & Thornburgh, 1 U.S. (3 Cranch) 337, 348-54
(1806); Florida Dealers and Growers Bank v. United States, 279 F.2d 673,
677 (5th Cir. 1960).
    Under the relation back doctrine, the United States’ title to forfeited prop­
erty, although not perfected until an order of forfeiture is entered, arises on
the date of the offense giving rise to forfeiture. Florida Dealers and G row ­
ers Bank, 279 F.2d at 676 (“At th[e] moment [of the illegal act] the right to
the property vests in the United States, and when forfeiture is sought, the
condemnation when obtained relates back to that time . . . .”); United States
v. 6960 M iraflores Ave., 731 F. Supp. 1563, 1567 (S.D. Fla. 1990) (“A final
judgment of forfeiture merely confirms the government’s interest . . . .”).*
Because the interest of the United States arises on the date of the offense,
the federal government’s tax immunity mandates that no state and local tax
obligations may attach to the property after that date absent congressional
authorization.
   We have identified no congressional authorization sufficient to permit
payment of state and local tax obligations arising after title to the property
vests in the United States. Authority to pay state and local taxes on feder­
ally-owned property requires “express congressional authorization” to waive
tax immunity. Cotton Petroleum Corp. v. New Mexico, 460 U.S. at 175. See
also Kern-Limerick, Inc. v. Scurlock, 347 U.S. at 122 (court will not “subject
the Government or its official agencies to state taxation without a clear
congressional mandate”).5 None of the relevant statutory provisions con­
tains such authorization.
   Although the statutory forfeiture provisions do contain some exceptions,
none of those exceptions contemplates payment of state and local taxes.
The exceptions to the criminal forfeiture statutes for a “bona fide purchaser
for value of such property who at the time of purchase was reasonably
without cause to believe that the property was subject to forfeiture,” 18



  3 An example o f such an explicit authorization is 42 U.S C § I490h (“All property . . . the title to
which is acquired or held by the Secretary under this subchapter other than property used for adm inis­
trative purposes shall be subject to taxation by a State, Commonwealth, territory, possession, district,
and local political subdivisions in the same manner and to the same extent as other property is taxed . . . .”).
  * Editor’s Note: A fter this opinion was issued, Miraflores was overruled on other grounds, Republic
N a t'l Bank o f M iami v, United States, 506 U.S. 80 (1992).

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U.S.C. § 1963(c), 21 U.S.C. § 853(c), provide no authority for payment of
state and local taxes. These exceptions not only fail to contain an express
waiver o f tax immunity, but also do not, in their general language, reach the
asserted interest of taxing authorities in the property, for those authorities do
not qualify as bona fide purchasers for value.
    The civil forfeiture statute’s somewhat broader exception for “innocent
owners,” 21 U.S.C. § 881(a)(6), as the Department has traditionally inter­
preted it, does not waive the government’s tax immunity. It consistently has
been the position of the United States that one cannot qualify as an innocent
owner if the asserted ownership interest (broadly construed to include liens)
arose after the date of the offense at issue.6 Given this reading, which we
have no occasion to question here, there is no statutory basis for permitting
state and local tax liens arising after the date of the offense to qualify for
payment under the exception.
    We also find no authorization for the payment of state or local taxes in
either the Attorney General’s authority under 28 U.S.C. § 524(c)(1)(D) to
pay “valid liens” against forfeited property or his authority under 28 U.S.C.
§ 524(c)(1)(E) to grant remission or mitigation of forfeiture. Neither of
these provisions contains the express congressional authorization necessary
to pay state and local taxes on federal property. Nor do they describe a
category of permissible actions that might arguably include payment of state
and local tax claims. Although the lien provision may permit the Attorney
General to recognize property interests — including tax liens -- in forfeited
property that existed prior to the date of the offense, it does not make valid
otherw ise invalid attempts by state and local taxing authorities to attach
liens to property after title has vested in the federal government. In like
fashion, the Attorney General’s authority to grant remission of forfeiture is
insufficient to permit payment of tax liens attaching after the relevant of­
fense, for such relief can be granted only if the petitioner “has a valid, good
faith interest in the seized property as owner or otherwise.” 28 C.F.R. § 9.5(b)(1).7
    O ur conclusion is consistent with that of courts that have considered re­
lated questions. Most directly relevant is the Tenth Circuit’s decision in
E ggleston v. Colorado, 873 F.2d 242 (10th Cir. 1989), cert, denied, 493 U.S.
1070 (1990). There, the court held that the state’s tax claims were invalid


   6 See, e.g .. In Re One 1985 N issan, 889 F.2d 1317, 1320 (4th Cir. 1989); United States v. 6960
M iraflores A ve., 731 F. Supp. at 1568 ("The Governm ent contends . . . that the innocent owner provi­
sion only applies to claimants who ow ned the property at the tim e o f the offense, and not to those who
acquired the property afterward . . . .” ). Most courts that have considered this position have agreed that
“[t]he innocent ow ner exception applies only to owners whose interest vests prior to the date of the
illegal act that form s the basis for forfeiture.” Eggleston v. Colorado, 873 F.2d 242, 248 (10th Cir.
1989), cert, denied, 493 U.S. 1070(1990). See, e.g.. In Re One 1985 Nissan, 889 F.2d at 1320; United
States v. One 1965 Cessna 320C Twin Engine Airplane, 715 F. Supp. 808, 811 (E.D. Ky. 1989); United
S tates v. J 314 W hiterock, 571 F. Supp. 723, 725 (W.D. Tex. 1983) Cf. 6960 Miraflores Ave., 731 F.
Supp. at 1567-69.
   7 A lthough the criteria governing mitigation are somewhat more general (.e.g., “to avoid extreme
hardship” ), 28 C.F.R. § 9.5(c), nothing in any relevant statute or in the regulations expressly refers to
state and local tax claim s.

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because the asserted state tax liens did not exist until after the event giving
rise to federal forfeiture. Similarly, the court in United States v. $5,644,540
in United States Currency, 799 F.2d 1357, 1364 (9th Cir. 1986), upheld
forfeiture of property against the claims of California tax authorities who
were unaware of the property’s existence until after the date of the offense
leading to forfeiture.8
   We conclude that the federal government’s immunity from state and local
taxes precludes payment of such taxes that arise after the date of an offense
that gives rise to forfeiture. We have identified no authority that permits the
Department to pay tax claims arising after that date.

                                                              JOHN C. HARRISON
                                                     Deputy Assistant Attorney General
                                                         Office o f Legal Counsel




  * See also United Slates v. Trotter, 912 F.2d 964, 966 n.2 (8th Cir. 1990) (“Since title vests ‘in the
United States,’ other creditors, including state agencies, may not claim any part of the funds if the gov­
ernment successfully obtains forfeiture."). It should also be noted that, because tax immunity runs to the
benefit of the states as against the U nited States, some federal courts have invalidated federal tax liens
arising after the date o f an offense leading to forfeiture to a state following the relation back doctrine.
Metropolitan Dade County v. United States, 635 F.2d 512 (5th Cir. Unit B. Jan. 1981). But see United
Statesv. Wingfield, 822 F.2d 1466,1475 (10th Cir. 1987) (“[T]he doctrine of relation back under state law
cannot be held to subvert the constitutional power to lay and collect taxes.").

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