Federal Payments in Lieu of Taxes

Report Outline
Tax Immunity of Federal Holdings
Scope and Value of Federal Holdings
Ways to Assess Payments in Lieu of Taxes

Tax Immunity of Federal Holdings

The doctrine that the federal government may not be taxed by lesser jurisdictions without its consent has become a source of growing discomfiture to state and local governments which find themselves squeezed between rising costs and inadequate revenues. The federal government is the country's largest landowner; its holdings in towns and cities across the continent, on mountains and plains, in forests and parks amount to more than one acre in every five.

The total value of federal real estate and improvements has been estimated at as much as $56 billion. Yet the government holdings are almost entirely exempt from payment of local or state property taxes. If they were liable to such levies, local and state governments would benefit to the tune of several hundred million dollars of revenue a year.

Introduction of a “broad system of payments in lieu of property taxes,” with particular emphasis on commercial and industrial properties of the federal government, was urged in 1955 by the Commission on Intergovernmental Relations, a body created by Congress at President Eisenhower's request to survey federal-state relations. Senate and House committees considered several proposals to carry out the recommendation, but no final action was taken in the 84th Congress. The President asked the new Congress, in his budget message on Jan. 16, 1957, to approve a limited program of federal payments.