OCTOBER TERM, 1996
Syllabus
certiorari to the united states court of appeals for the eighth circuit
No. 95-1918. Argued April 21, 1997—Decided June 2, 1997
The Tax Injunction Act (Act) restricts the federal district courts' power to prevent collection or enforcement of state taxes, but makes an exception to that jurisdictional bar where no plain, speedy, or efficient state-court remedy may be had. This Court has established another exception where the United States sues to protect itself or its instrumentalities from state taxation. Department of Employment v. United States, 385 U. S. 355, 358. Production Credit Associations (PCA's) are federally chartered corporate financial institutions organized by farmers primarily to make loans to farmers. During the relevant time period, federal law has exempted PCA's from state taxes on their notes, debentures, and other obligations. Respondent PCA's, claiming that they are also immune from Arkansas sales and income taxes, sought a declaratory judgment and an injunction prohibiting the State from levying such taxes on them. Seeking to overcome the Act's jurisdictional bar, they contended that, as instrumentalities of the United States, they are not subject to the Act's provisions any more than the United States itself. The District Court granted them summary judgment, and the Court of Appeals affirmed.
Held: PCA's are not included within the judicial exception to the Act by virtue of their designation as instrumentalities of the United States and so may not sue in federal court for an injunction against state taxation without the United States as co-plaintiff. Pp. 825-832. (a) The Act, which has been interpreted and applied as a "jurisdictional rule" and a "broad jurisdictional barrier," Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U. S. 463, 470, was enacted to confine federal-court intervention in state government. The federal balance is well served when the several States define and elaborate their own laws through their own courts and administrative processes and without undue interference from the Federal Judiciary. A State's power to tax is basic to its power to exist. Given the federal balance and the basic principle that statutory language is to be enforced according to its terms, federal courts must guard against interpretations of the Act which might defeat its purpose and text. Where the United States Government is a party, the other side of the federal balance must
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