Are Privatized Government Projects Taxable?

Nothing like a strong lead to really reach out and suck you into reading the post, huh? Today’s St. Louis Post-Dispatch has a very interesting article on a lawsuit just across the river involving attempts by St. Clair County, IL, to tax military housing now operated by a private company. As the article states, the lawsuit could have national implications, and the issue could certainly affect Missouri’s two large military bases.

In short, now that the federal government is contracting with a private company to operate the base’s military housing, St. Clair County says the housing is taxable:

  "The structure of this arrangement permits taxation as any other leasehold," Haida said.

The company disagrees, and has filed suit:

"Federal property is exempt from real estate tax, period," said Joseph McDonnell, an attorney representing Scott Air Force Base Properties.

The important thing to remember here is that the property is still owned by the government, rather than the company. So I think it is pretty clear that the housing is not taxable, and the company should win its suit. As this excellent housing privatization program expands, it should be clear to state and local governments that they don’t get to tax the houses now just because a private company manages the federal property. However, some type of payment in lieu of taxes must be made by the federal government (and I think they already do this, in many cases) to the school districts that are educating the children of the servicemembers. With that important caveat, I rest my case.