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UNITED STATES v. CITY OF SPOKANE

August 31, 1989

UNITED STATES OF AMERICA, Plaintiff,
v.
THE CITY OF SPOKANE, Defendant


Justin L. Quackenbush, Chief United States District Judge.


The opinion of the court was delivered by: QUACKENBUSH

JUSTIN L. QUACKENBUSH, UNITED STATES DISTRICT JUDGE

 BEFORE THE COURT are the parties cross-motions for summary judgment, heard with oral argument on August 28, 1989. David Katinsky and Carroll D. Gray represented plaintiff. James C. Sloane, Michael Nelson and Laurie Flinn Connelly represented defendant.

 The United States, on behalf of itself and the Inland Northwest Chapter (INC) of the American National Red Cross, contends that the City of Spokane may not impose tax on gambling proceeds generated by the INC's bingo operation. The argument is based on the allegation that such taxation violates the Supremacy Clause of the United States Constitution.

 The City of Spokane contends that INC is not an instrumentality when acting in the role of a purveyor of gambling, in that gambling is not a vital governmental function. The City further contends that the INC is subject to the Washington State gambling laws and that such regulation includes the tax in question.

 Factual Background

 The American National Red Cross, the parent organization of the INC, was chartered by Congress in 1905. By statute, the Red Cross is required to comply with the laws of the United States and the individual states. 36 U.S.C. § 2. The purposes of the American National Red Cross are stated in 36 U.S.C. § 3, and include furnishing aid to the sick and wounded in time of war, and providing voluntary relief. The parent organization establishes, through statutory authority, local chapters such as INC. 36 U.S.C. § 4a. The principal officer of the Red Cross and seven of the 49 other governors composing the Board of Governors, the governing body of the Red Cross, are appointed by the President of the United States.

 The Red Cross has been charged by the United States Government with the responsibility of meeting the commitments of the United States under several Geneva conventions, performing services on behalf of the Armed Forces of the United States, and assisting the federal government in providing disaster relief to states when needed.

 The federal government has provided substantial assistance to the Red Cross, but has authorized the Red Cross to sustain itself primarily through independent fund raising. Every year, the Red Cross is required to provide to the Department of Defense a financial report of its activities during the previous year, which is audited by the Department of Defense and transmitted to Congress.

 The INC is a duly constituted local unit of the Red Cross, chartered in 1914. The INC is responsible for providing all Red Cross services within its territorial jurisdiction and for raising the funds necessary to make these services available.

 The services provided by the INC include the preparation for and operation of disaster relief programs -- including food, shelter, clothing, medical and nursing care, and occupational tools and equipment; providing the emergency communications link between the people of its territorial jurisdiction and family members serving in the United States Armed Forces concerning the death or critical illness of a family member; providing health promotion and training, including parenting, baby-sitting, teen pregnancy, and AIDS education, hypertension and cholesterol screening and education, and other community health promotion; and providing volunteer assistance to local hospitals, including the Veterans Administration and military hospitals.

 Since 1981, the INC has conducted regular bingo games in compliance with state law. Employees who work in the bingo operations are employees of the Red Cross, not employees of the United States, and have been recognized by the Washington State Gambling Committee. Two of the Red Cross employees have duties involving both bingo and non-bingo operations. Other employees are only involved in the bingo operations. Those who work exclusively in the bingo operations are paid by the Red Cross under the same nonprofit taxpayer identification number as those who work in other Red Cross operations. Those who work exclusively in the bingo operations participate in the same retirement program, have the same medical coverage, are covered under the same Red Cross liability insurance policy, and are subject to the same by-laws and personnel policies as employees who work in other Red Cross operations.

 The City of Spokane has been taxing the revenues of the INC's bingo games and pull tabs since 1982 at 10 percent.

 In 1985, INC filed a Request for Tax Refund with the State of Washington Department of Revenue, requesting a refund of all business and occupation taxes paid by the INC to the Department of Revenue subsequent to July 1, 1980. The basis of the petition was the constitutional immunity of the Red Cross from state and local taxation. The Department of Revenue ruled that INC, as a federal ...


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