150 Iowa 95 | Iowa | 1911
Lead Opinion
The bank and its coplaintiffs, who are the stockholders therein, appealed to the district court from the action of the city council, sitting as a board of equalization, in raising the assessment on the shares of its capital stock from $110 per share to $130 per share, exclusive of real estate, and in ordering the same assessed and taxed for the year 1907 upon the latter valuation.
In the district court the appellants pleaded that the assessment in question was excessive and inequitable and a discrimination against the stockholders of the bank, and, further, “that the statutes of Iowa do not authorize, require, or permit taxation upon the shares of stock of state, savings or private banks, or loan or trust companies, and that the taxation of shares of stock of national banks, is special, unequal, and discriminates against shares of stock of national banks only, and imposes taxes upon such shares which are wholly void and, as to the entire amount thereof, at a greater rate than is assessed upon the moneyed capital in the hands of individual citizens of said state in the form of shares of stock of such state, savings, and private banks, and loan, and trust companies, and such taxes on shares of stock are wholly void .under section 5219 of the Revised Statutes of the United States (U. S. Comp. St. 1901, p. 3502).”
The appellants urge that the assessment of their bank stock is wholly void under section 5219 of the United States statutes, for the reason that by the ^statutes of this state shares of stock of national banks are assessed to the owners thereof, while no taxation is levied upon shares of stock in state banks, savings- banks, or loan and trust companies.
If the appellants’ contention that the shares of stock
The vital question in this ease, then, is whether under our statutes, Code, sections 1321-1325, the shares of stock in state and savings banks are taxable. The appellee practically concedes that they are not, and in Home Savings Bank v. Des Moines, 205 U. S. 503 (27 Sup. Ct. 571, 51 L. Ed. 901), the Supreme Court of the United States, speaking through Mr. Justice Moody, so held.
In that case the question now under consideration was directly involved, and it was held that under the state statutes a tax is imposed upon the property of the corporation, and not upon the shares of stock therein, as the property of the owners of such stock. It was urged that, where a tax is levied upon a corporation, measured by the value of the shares of stock in it, it is equivalent in its effect to a tax upon the stockholders in respect of their shares, because, being paid by the bank, the burden thereof eventually falls upon the shareholders, and in answer to such contention the court said: “But the two kinds of taxes are not equivalent in law, because the state has the power to levy one, and has not the power to levy the other. The question here is one of power, and not of economics. If the state has not /the power to levy this tax, we will not inquire whether another tax, which it might lawfully impose, would have the same ultimate incidence.” So far as the language quoted was meant to apply to the state’s taxation of its own corporations, or the shareholders therein, it is evidently not sound, because the state may determine whether it will tax in one form or another. But, if the language used by the learned justice referred to the taxation of national banks by the states, the conclusion • an
We are brought, then, to the question whether a state revenue law which authorizes and requires the taxation of national banlc shares as such, but does not provide for or permit the taxation of shares of stock in state banks, is in contravention of section 5219 of the statutes of the United States, and-therefore invalid. And to this question •we think there can be but one answer. When it must be conceded, as it must be here, under the decision in the Home Savings Bank case, that shares of stock in state banks are not taxable under our statute, the conclusion is inevitable that the taxation of shares of stock in national banks is a discrimination against such stock, which is prohibited by section 5219. Under said section any discrimination against national bank shares of stock, in the matter of taxation, in favor of other moneyed capital in the hands of individual citizens of the state which comes into competition with the business of national banks is forbidden. Mercantile Bank of New York, 121 U. S. 152 (7 Sup. Ct. 826, 30 L. Ed. 895) ; People v. Commissioners, 94 U. S. 418 (24 L. Ed. 164) ; People v. Weaver, 100 U. S. 539 (25 L. Ed. 705) ; Bradley v. People, 4 Wall. 462 (18 L. Ed. 433); Van Allen v. Assessor, 3 Wall. 581 (18 L. Ed. 229) ; Bank of Commerce v. Seattle, 166 U. S. 463 (17 Sup. Ct. 996, 41 L. Ed. 1079) ; Aberdeen Bank v. Chehalis County, 166 U. S. 440 (17 Sup. Ct. 629, 41
In the Mercantile Bank case, in 121 U. S., 7 Sup. Ct. (30 L. (Ed.), Mr. Justice Mathews said: “In the valuation of the capital of state banks for this taxation, nontaxable securities of the United States were necessarily excluded, while in the valuation of shares of national banks no deduction was permitted on account of the fact that the capital of the national bardes was invested in whole or in part in government bonds. The effect of this was, of course, to discriminate to a very important extent in favor of investments in state banks, the shares in which, eo nomine, were not taxed at all, while their taxable capital was diminished by the subtraction of the government securities in which it was invested, and against national bank shares taxed without such deduction at a value necessarily and largely based on the value of the government securities in which by law a large part of the capital of the bank was required to be invested. It was deemed consistent, however, with these national uses, and otherwise expedient, to grant to the states the authority to tax them, within the limits of a rule prescribed by the law. In fixing those limits, it became necessary to prohibit the states from imposing such a burden as would prevent the' capital of individuals from freely seeking investment in institutions which it was the express object of the law to establish and promote. The business of banking, including all the operations which distinguish it, might be carried on under state law, either by corporations or private persons, and
It seems -to us that it can hardly be questioned that the exemption from taxation of the shares of stock in state and savings banks, and the taxation of the shares of stock in national banks, cannot fail to discourage investments in the stock of national banks and to create and foster an unequal and unfriendly competition between such banks. Under the decision in the Home Savings Bank case, if state and savings banks have their entire capital invested in government securities, there can be no taxation thereof; and hence, under any view of the matter that may be taken, the shareholders escape taxation. Eor, while a national
The appellee contends, however, that a different rule has been announced in Davenport Bank v. Davenport, 123 U. S. 85 (8 Sup. Ct. 73, 31 L. Ed. 94), and that under the holding in that case the present assessment should be held valid. But the Davenport case followed the rule announced in the Mercantile Bank ease as to deposits in savings banks, and the court did not therein discuss or determine the question before us.
The Davenport, case, and others of a similar character, were reviewed by Mr. Justice Peckham in Bank v. Chapman, 173 U. S. 214 (19 Sup. Ct. 410, 43 L. Ed. 669), and his final conclusion as to the rule therein announced was as follows: “The result seems to be that the term ‘moneyed capital’ as used in the federal statute, does not include capital which does not come- into competition with the business of national banks, and that exemptions from taxation, however large, such as deposits in savings hanks or moneys belonging to charitable institutions, which are exempted for reasons of public policy, and not as an unfriendly discrimination as against investments in national bank shares, can not be forbidden by the federal statute.”
As we have. said, the decisions of the United States Supreme Court are final upon the question of the taxation of national bank shares, and we see no escape from the conclusion that, under the two lines of authorities that we have cited, the taxation of national bank shares under our present law is invalid under section 5219 of the United States statutes. The remedy, if any there be, must come from the Legislature and not from the court.
In view' of our conclusion on the question discussed, we need not further notice other questions argued by counsel, except the appellee’s claim that the question considered herein is not properly before us. ■ We do not understand, however, that appellee relies upon the point
Bor the reasons given, the judgment of the district court must be reversed.
Dissenting Opinion
(dissenting). — Taxation of national banks and of shares of stock issued by such associations has been a prolific source of litigation, and the questions relating thereto upon which the courts have been called to pass are quite numerous. ' To avoid confusion and to keep this discussion within proper limits, it is well to restate the particular proposition brought to our attention by the appeal now before us.
Reduced to brief terms the plaintiffs allegation is that under our Iowa statute shares of stock in state, savings, and private banks are not taxable, and that because of this' fact taxation of shares of stock in national banks is an unlawful discrimination against the latter, rendering the tax now in controversy wholly void and uncollectible. The majority opinion, after conceding that if shares of stock in state and savings banks can not be taxed, then the taxation of shares of stock in national banks is a discrimination against the latter, within the prohibition of section 5219 of the Revised Statutes of the United States, adds: “The vital'question, then, is whether under our statutes shares of stock in state and savings banks are taxable.” Keeping our attention upon the issue of law thus defined, I think it quite demonstrable that shares of stock in state and savings banks are taxable under our statutes, and this proposition I desire to present as briefly as is consistent with clearness of statement.
The Iowa statute bearing upon this subject of taxation is contained in chapter 1, title f, of the Code and its amend
The foregoing provisions embody every statutory requirement and direction bearing upon the inquiry whether shares of state and savings banks are taxable in this state. Nowhere in this statute can there be found the slightest suggestion of a legislative purpose to take corporate shares of banks of any kind from the list of taxable property. On the contrary, the frequent repetitions and the varying forms adopted to express substantially the same idea evidence an anxious care on the part of the framers of the statute to leave no loophole anywhere by which this form of wealth can escape assessment and taxation. To express that thought, the resources of verbal ingenuity seem to have been exhausted. The broad declaration in section 1308 that “all other property” is subject to taxation is certainly sweeping enough to include corporate shares of any kind, but to avoid any quibble over the generality of this phrase the Legislature proceeds at once, in the same connection and same section, to declare in specific terms that ■ this is “intended to embrace corporation shares or stoclcs not 'otherwise assessed or exempted.” As we have already seen, section 1310 repeats the declaration that corporation shares or stocks not otherwise provided for
.Thus far I have, for the sake of the argument, as
This rule has been applied to the construction of a statute taxing banks and bank shares not materially unlike our own law on this subject, and a tax levied and assessed in solido against a bank given effect as a tax upon the shares of stockholders, the duty to pay which is by statute cast upon the bank. First National Bank v. Chehalis County, 166 U. S. 440 (17 Sup. Ct. 629, 41 L. Ed. 1069), See, also, First National Bank v. Commonwealth, 9 Wall. 353 (19 L. Ed. 701), where statutes 'imposing upon national banks the duty of paying, taxes levied upon the
But however this may be, I regard as impregnable the proposition that whatever meaning or effect may be given to Code, section 1322, the shares of state and savings banks are still taxable under the other provisions of the law, and if the assessor in any given case has failed to properly list them, such failure is not a discrimination against holders of national bank shares, but a mere irregularity in the exercise of his duties, which may be corrected by application to the board of equalization and by appeal therefrom, if necessary to the district court under the familiar practice which obtains in this state.
If the position of the appellant be correct that section 1322 provides for a tax upon the capital of state banks, so far from being a discrimination in their favor it is a burdensome discrimination against them, for it adds taxation of capital to taxation of shares, a thing which does not exist and can not lawfully exist with reference to national banks. That both shares and capital may be taxed, see Judy v. Beckwith, 137 Iowa, 34, and cases there cited. The precedent of Home Savings Bank v. Des Moines, supra, falls short of the case before us. The net result of that opinion is that the tax levied against the. Bes Moines Savings Bank under section 1322 was not a tax upon its shares of stock, but a tax upon its capital, and that, so far as said capital was invested in bonds of the United States, it was exempt from that burden. The question whether such tax was an unlawful discrimination against national banks and their shareholders was not
I think the judgment appealed from should be affirmed.