Reconstruction Finance Corp. v. Beaver County

Under § 10 of the Reconstruction Finance Corporation Act (the federal statute), Congress indicated that state and local governments could not impose taxes on the “franchise, capital, reserves, surplus, income, loans, or personal property” of the Reconstruction Finance Corporation (RFC) (plaintiff) or any of its subsidiaries. The statute also provided that “any real property” of RFC would be subject to the same taxation, based on its value, as other real property. An RFC subsidiary, Defense Plant Corporation, housed machinery in a plant built on land owned by Beaver County (the county) (defendant). Some of the machinery was not attached to the building, and other parts were attached by removable screws and bolts and could be moved to other locations in the plant. Parts of the machinery were frequently interchanged. The lease contract required the machinery to remain movable, whether or not it was attached to fixed property. RFC alleged that the machinery was not real property, but personal property, which was exempt from taxation, and argued that real property was limited to land, buildings, and integrated fixtures. The county argued that real property included machinery. The Pennsylvania Supreme Court upheld the tax based on the supposition that the machinery was real property under § 10. The state supreme court’s definition conflicted with the scope of the definition used in the federal statute and, therefore, presented a federal question. RFC appealed to the United States Supreme Court.