We are asked to decide whether the imposition by the State of New York of an income tax on the salary of an employee of the Home Owners' Loan Corporation places an unconstitutional burden upon the federal government.
Respondent, a resident of New York, was employed during 1934 as an examining attorney for the Home Owners' Loan Corporation at an annual salary of $2,400. In his income tax return for that year he included his salary as subject to the New York state income tax imposed by Art. 16 of the Tax Law of New York (Consol. Laws, c. 60). Subdivision 2f of § 359, since repealed, exempted from the tax 'Salaries, wages and other compensation received from the United States of officials or employees thereof, including persons in the military or naval forces of the United States. * * *' Petitioners, New York State Tax Commissioners, rejected respondent's claim for a refund of the tax based on the ground that his salary was constitutionally exempt from state taxation because the Home Owners' Loan Corporation is an instrumentality of the United States Government and that he, during the taxable year, was an employee of the federal government engaged in the performance of a governmental function.
On review by certiorari the Board's action was set aside by the Appellate Division of the Supreme Court of New York, People ex rel. O'Keefe v. Graves, 253 App.Div. 91, 1 N.Y.S.2d 195, whose order was affirmed by the Court of Appeals. 278 N.Y. 691, 16 N.E.2d 404. Both courts held respondent's salary was free from tax on the authority of New York ex rel. Rogers v. Graves, 299 U.S. 401, 57 S.Ct. 269, 81 L.Ed. 306, which sustained the claim that New York could not constitutionally tax the salary of an employee of the Penama Rail Road Company, a wholly-owned corporate instrumentality of the United States. We granted certiorari December 19, 1938, 305 U.S. 592, 59 S.Ct. 252, 83 L.Ed. --, the constitutional question presented by the record being of public importance.
The Home Owners' Loan Corporation was created pursuant to § 4(a) of the Home Owners' Loan Act of 1933, 48 Stat. 128, 12 U.S.C. § 1461 et seq., 12 U.S.C.A. § 1461 et seq., which was enacted to provide emergency relief to home owners, particularly to assist them with respect to home mortgage indebtedness. The corporation, which is authorized to lend money to home owners on mortgages and to refinance home mortgage loans within the purview of the Act, is declared by § 4(a), 12 U.S.C.A. § 1463(a), to be an instrumentality of the United States. Its shares of stock are wholly government-owned. § 4(b). Its funds are deposited in the Treasury of the United States, and the compensation of its employees is paid by drafts upon the Treasury.
For the purposes of this case we may assume that the creation of the Home Owners' Loan Corporation was a constitutional exercise of the powers of the federal government. Cf. Kay v. United States, 303 U.S. 1, 58 S.Ct. 468, 82 L.Ed. 607. As that government derives its authority wholly from powers delegated to it by the Constitution, its every action within its constitutional power is governmental action, and since Congress is made the sole judge of what powers within the constitutional grant are to be exercised, all activities of government constitutionally authorized by Congress must stand on a parity with respect to their constitutional immunity from taxation. McCulloch v. Maryland, 4 Wheat. 316, 432, 4 L.Ed. 579; Van Brocklin v. Tennessee, 117 U.S. 151, 158-159, 6 S.Ct. 670, 674, 29 L.Ed. 845; South Carolina v. United States, 199 U.S. 437, 451, 452, 26 S.Ct. 110, 112, 50 L.Ed. 261, 4 Ann.Cas. 737; Helvering v. Gerhardt, 304 U.S. 405, 412-415, 58 S.Ct. 969, 971-973, 82 L.Ed. 1427. And when the national government lawfully acts through a corporation which it owns and controls, those activities are governmental functions entitled to whatever tax immunity attaches to those functions when carried on by the government itself through its departments. See McCulloch v. Maryland, supra, pages 421, 422 of 4 Wheat.; Smith v. Kansas City Title Co., 255 U.S. 180, 208, 41 S.Ct. 243, 248, 65 L.Ed. 577; Federal Land Bank v. Crosland, 261 U.S. 374, 43 S.Ct. 385, 67 L.Ed. 703, 29 A.L.R. 1; New York ex rel. Rogers v. Graves, supra.