In 2008, the Michigan Supreme Court unanimously held that the Detroit International Bridge Company (DIBC) was immune from the City of Detroit's zoning ordinances because it was a federal instrumentality for the limited purpose of facilitating commerce over the Ambassador Bridge, which connects Detroit, Michigan to Ontario, Canada.
This week, the Sixth Circuit Court of Appeals held that the Michigan Supreme Court was wrong.
Usually, a federal instrumentality case assesses whether a company either chartered by, or intimately involved with, the federal government is exempt from state taxation. In the original case examining that issue, McCulloch v. Maryland, the Supreme Court held that the Second Bank of the United States was exempt from a Maryland tax.
Two hundred years later, however, there is no simple test to determine whether an entity is a federal instrumentality.
The U.S. Supreme Court looks to several factors, including whether:
- The entity was created by the government;
- It was established to pursue governmental objectives;
- Government officials handle and control its operations; and
- The officers of the entity are appointed by the government.
The Sixth Circuit summarizes those factors as the purpose for which the alleged instrumentality was created, whether it continues to perform that function, and the federal government's control over and involvement with the organization.
Here, the appellate court concluded that the DBIC bears none of the hallmarks of a federal instrumentality.
In 1921, Congress gave the DIBC's predecessor, the American Transit Company, permission to build and operate what would become the Ambassador Bridge. That, alone, does not make DIBC a federal instrumentality.
DIBC is a private, for-profit corporation, incorporated under Michigan law. While the bridge may be "the busiest commercial border crossing in North America," the federal government's involvement with the DIBC is limited to conducting border inspections.
Aside from operating the inspection compound, the federal government has no day-to-day involvement in the DIBC's operations. Congress did not create the company, and the federal government has no right to appoint members to the DIBC's board or otherwise control the company's day-to-day actions.
Now that the Sixth Circuit has decided that the Ambassador Bridge is not a federal instrumentality, will Detroit renew the 2008 zoning objections that prompted the Michigan Supreme Court's instrumentality determination?
- Commodities Export Company v. Detroit International Bridge Company (Sixth Circuit Court of Appeals)
- Federal Instrumentalities and Personnel and State Police Power (FindLaw)
- Appeals Court Rules Against Bridge Company on Private vs. Public Issue (Detroit Free Press)