These cases are now before us on remand from the United States Supreme Court. When these cases originally appeared before this court, we held that the Georgia bank share tax act, then Code Ann. § 91A-3301, later OCGA § 48-6-90 (repealed by Ga. L. 1983, p. 1350), was not rendered unconstitutional by the fact that it provided for taxation of bank shares based on the net worth of the bank without subtracting the value of federal securities owned by the bank.
Bartow County Bank v. Bartow County Board of Tax Assessors,
Subsequently, the United States Supreme Court rendered its decision in American Bank &c. Co. v. Dallas County, 463 U. S. --- *832 (103 SC 3369, 77 LE2d 1072) (1983). The Court held that the Texas bank share tax, which was calculated by use of an equity capital formula, 1 violated Rev. Stat. § 3701, 31 USC § 742, as amended in 1959 (Pub. L. 86-346), 2 because the tax considered the value of United States obligations held by the banks. Since Rev. Stat. § 3701, 31 USC § 742, as amended, prohibits such consideration, directly or indirectly, in the computation of the tax, the state tax violated the supremacy clause. U. S. Const., Art. VI, Cl. 2. The U. S. Supreme Court then vacated the judgment in Bartow County Bank, supra, and remanded the case to this court for reconsideration in light of its opinion in American Bank &c. Co., supra. Bartow County Bank, supra, --- U. S. --- (103 SC 3563, 77 LE2d 1402) (1983).
1. As we explained in
Bartow County Bank,
supra,
While our statute admittedly does not provide by its terms for the exemption of federal obligations, neither does it expressly provide that federal obligations shall not be exempted. Prior to the United States Supreme Court decision in American Bank &c. Co., supra, we construed the statute so as not to allow such exemption on the premise, based upon U. S. Supreme Court decisions rendered prior to 1959, that such a statute would be constitutional. On remand, *833 we must reconsider that construction in light of the decision in American Bank &c. Co., supra, that such a statute, as so construed, is now unconstitutional.
It has long been the law in Georgia “that Acts of the Legislature are not only presumed to be constitutional, but that the authority of the Courts to declare them void, will never be resorted to, except in a clear and urgent case....”
Boston & Gunby v. Cummins,
2. Having concluded that the banks’ federal obligations cannot “be considered, directly or indirectly, in the computation of the tax,” 31 USC § 742, we confront the problem of how the share tax is to be calculated. The Attorney General argues for a proportionate method of deduction; e.g., determine the extent to which federal obligations are represented in the bank’s assets, and then deduct the exempt federal obligations to the extent that they are represented in net worth (and by which the share tax is measured). The banks, on the other hand, argue for an absolute deduction. Alternatively put, they argue that the statutory command that federal obligations not “be considered, directly or indirectly, in the computation of the tax,” means that for state tax purposes those of the bank’s assets which are represented by federal obligations should be deducted in full, notwithstanding the fact that only a portion of the federal obligations are attributable to net worth. We disagree because we deal here with a value tax measured by net worth, rather than by total assets. The law commands that we exclude federal obligations from the tax base, which is to say, that we exclude federal obligations from net worth to the extent that they are represented therein.
The nature of a balance sheet is such that so much of a bank’s assets as consist of federal obligations are represented by an equivalent amount of liabilities (resulting in those assets not being taxed) and net worth (resulting in those assets being taxed). Thus the *834 proportionate deduction method, which we adopt, affords deduction of federal obligations to the full extent they are represented in net worth. 3
The statute commands that federal obligations not be taxed directly (as in a tax assessed on a federal obligation), or indirectly (as in a tax assessed on a share in a bank the value of which includes federal obligations). But we agree with the Attorney General that it does not mean that the value of the federal obligations need be or should be deducted in full from the bank’s net worth. Rather, allowing a deduction from the bank’s net worth of the percentage of assets attributable to federal obligations fully insulates the federal obligations from the tax.
4
Yet while such deduction fully insulates the federal obligations from the tax — as the law requires — it does so without insulating the bank’s taxable assets at the same time. While not identical, the banks’ argument is similar to that of the unsuccessful insurance company in United States v. Atlas Life Ins. Co.,
The banks rely on two arguments: first, that the fact that under the statute the value of a bank’s real estate holdings is deducted from net worth mandates identical treatment for federal obligations;
6
and second, that the opinion in Schuylkill Trust Co. v. Pennsylvania,
Code Ann. § 91A-3301 does provide for the deduction of real estate which is taxed separately from net worth. But the fact that it does so does not mean that that is the only method which will insulate the real estate from taxation under Code Ann. § 91A-3301. Rather it is simply the method the General Assembly chose. Nor does it follow *835 that the General Assembly would choose the same method to exempt federal obligations. The real estate deduction is only for real estate which is taxed separately; exempt federal obligations are, of course, not taxed separately. 6
In Schuylkill Trust Co.,
Next, the Court dealt with the Schuylkill Trust Company’s ownership of shares of stock of the Philadelphia National Bank. These shares had already been taxed to the Trust Company. Id.,
The banks argue that the Schuylkill Trust decision is controlling because the National Bank shares had been afforded proportionate deduction treatment and this was disallowed by the Court. On the contrary, the National Bank shares had been afforded no deduction at all. See Commonwealth v. Schuylkill Trust Co.,
Applying the proportionate deduction method to the appellant Citizens and Southern Bank of Bartow County (which deducted its federal securities in full), its total assets of $20,463,522 for the year *836 1979 included $1,995,393 in federal securities. Thus its federal securities represented 9.75% of its assets. Hence, 9.75% of its net worth is represented by federal securities. The bank therefore is entitled to reduce its net worth ($2,082,488) by 9.75% ($203,043) so as to remove from the tax base so much of its net worth as is represented by federal securities. Its deductions would then be as follows:
Deduction of federal securities $ 203,043
Real estate taxed separately 1,284,943
Reasonable capital reserves 82,000
One-half of the principal or GHEAC loans 4,895
Total deductions $1,574,881
Subtracting its total deductions ($1,574,881) from its net worth ($2,082,484), leaves $507,607 as the taxable share value. Dividing the taxable share value by the number of outstanding shares provides the taxable value of each share.
The foregoing computation removes from the tax base (net worth) so much of the net worth (tax base) as includes federal securities, thereby excluding, as required by 31 USC § 742, supra, such securities from consideration in the computation of the tax.
Judgmen t reversed. Cases remanded for further proceedings not inconsistent with this opinion.
Notes
As described by the U. S. Supreme Court, the equity capital formula involves “determining the amount of the bank’s capital assets, subtracting from that figure the bank’s liabilities and the assessed value of the bank’s real estate, and then dividing the result by the number of shares.” Id., 103 SC at 3374 (
Rev. Stat. § 3701, 31 USC § 742, as amended, provides: “All stocks, bonds, Treasury notes, and other obligations of the United States, shall be exempt from taxation by or under State or municipal or local authority. This exemption extends to every form of taxation that would require that either the obligations or the interest thereon, or both, be considered, directly or indirectly, in the computation of the tax, except nondiscriminatory franchise or other non-property taxes in lieu thereof imposed on corporations and except estate taxes or inheritance taxes.”
We need not here decide whether those banks which can prove that federal obligations were actually purchased from capital stock or surplus are entitled to an absolute deduction from assets or net worth because the banks have not as yet made such showing (other than in hypothetical examples).
This method of ascertaining the tax is not foreclosed by American Bank &c. Co., supra. See footnote 10 of that decision.
The banks presumably rely upon the deduction for real estate rather than the deduction for investments in subsidiary banks, etc., because the banks in these cases have no such investments.
See Schuylkill Trust Co. v. Pennsylvania,