Cite as: 507 U. S. 746 (1993)
Opinion of the Court
of Kenneth Meeks in Support of United States' Motion for Summary Judgment, describing similar funding operations with WBEC).
In New Mexico, the Government brought an action arguing that the contractors' expenditures, other than those made out of the fixed fees, were constitutionally immune from taxation. We noted that the doctrine of federal immunity from state taxation is "one that has been marked from the beginning by inconsistent decisions and excessively delicate distinctions." 455 U. S., at 730. After surveying our "confusing" precedents, we concluded it was time to return to the underlying constitutional principle of tax immunity: A State may not lay a tax " 'directly upon the United States.' " Id., at 733 (quoting Mayo v. United States, 319 U. S. 441, 447 (1943)). But whereas the Government is absolutely immune from direct taxes, it is not immune from taxes merely because they have an "effect" on it, or "even because the Federal Government shoulders the entire economic burden of the levy." 455 U. S., at 734. In fact, it is "constitutionally irrelevant that the United States reimburse[s] all the contractor's expenditures, including those going to meet the tax." Ibid. (citing Alabama v. King & Boozer, 314 U. S. 1 (1941)). Tax 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." 455 U. S., at 735.
It is beyond peradventure that California did not tax— indeed, could not have taxed—the Federal Government in this case. California taxed WBEC. And the Government's voluntary agreement to reimburse (or even fund in advance) WBEC for those taxes does not make the Government's payments direct disbursements of federal funds to the State. We addressed an analogous indemnification relationship in Brady v. Roosevelt S. S. Co., 317 U. S. 575 (1943). The United States had contracted with a private corporation to
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