114 Misc. 419 | N.Y. Sup. Ct. | 1921
This is a certiorari proceeding brought to review personal property assessment of $1,458,300 for the year 1920, made by the defendants as tax commissioners of the city of New York against the' relator herein .pursuant to section 12 of the Tax Law.
There are no disputed facts. The relator, however, claims that the assessment is erroneous and should be reduced from $1,458,300 to $849,073.95 upon the ground that the defendants erroneously disallowed the deduction of the item amounting to $609,317.30 representing a debt due and owing from the United States government to the relator on October 1, 1919.
The question, therefore, to be determined by me is as follows: Is the debt of $609,317.30 due and owing from the United States government on October 1, 1919, which is the taxable status day for the year 1920, exempt from taxation on the ground as alleged by the relator that the same comes within section 3701 of the United States Revised Statutes?
The defendants contend that the item of $609,317.30 is a taxable asset in that it represents money due from a solvent debtor which is personal property as defined by section 2, subdivision 8, of the Tax Law, which provides as follows: “ The terms 1 personal estate ’ and ‘ personal property ’ as used in this chapter, include chattels, money, things in action, debts due from solvent debtors, whether on account, contract, note, bond or mortgage; * * V’
It is not contended by the relator that this item of. $609,317.30 is not a debt due from a solvent debtor and therefore not properly included, but the claim is made that inasmuch as this indebtedness is due from the United States government as an unpaid balance on certain war contracts (which have been fully performed) it is exempt under section 3701 of the United States Revised Statutes, which provides
Likewise in the case of Hibernia Savings & Loan Society v. San Francisco, 72 Pac. Repr. 920; affd., 200 U. S. 310, the court at page 922 said: “ The statute relied on (Sec. 3701, U. S. Revised Statutes) was enacted simply in furtherance of the principle enunciated in McCulloch v. Maryland, (4 Wheat. 316, 4 L. Ed. 579), and to indicate the determination of congress that the usefulness of certain instruments as a means of carrying on the government would be enhanced by exemption from taxation. See Bank v. Supervisors, supra. The words ‘ and other obligations,’ read in connection with the context, £ stocks, bonds, Treasury notes,’ include only obligations of the government similar in character to those specifically named, and given under the general power to borrow money on the credit of the United States, and to issue in return
The government must necessarily carry out a great many of its functions through contractors or agents, and simply because they are doing government work it does not necessarily follow that the money due them from the government in payment of such services or work performed is free from local taxation. Whether or not the agencies of the federal government are exempt from taxation by the state is dependent, not upon the nature of the agents, nor upon the mode of their constitution, nor upon the fact that they are agents, but upon the effect of the tax, that is, upon the question whether the tax does in truth deprive • them of power to serve it, or hinder the efficient exercise of their power. A tax upon the property of the agents having no such necessary effect, and leaving them free to discharge the duties they have undertaken to perform may be rightfully imposed by the state, Railroad Company v. Peniston, 18 Wall. 5.
The taxing power exists in the state unrestricted by the Federal Constitution or government, except as to the means necessary to the latter to discharge its functions. There are many agencies of the federal government which do not enjoy any exemption whatever from taxation by the states, and they do not claim such exemption even in respect of property which they use when serving the government. Not a small portion of their earnings, and the dividends which they distribute among their stockholders, is derived from the government. They even pay to the state taxes upon those earnings.
In the case of Railroad Company v. Pmistan, supra, at page 30, the court said: ‘ ‘ Wliile it is true that,
And again, at page 36, the court said: “All State taxation which does not impair the agent’s efficiency in the discharge of his duties to the government has been sustained when challenged, and a tax upon his property generally has not been regarded as beyond the power of a State to impose.”
The fact that the contracts in evidence were for furnishing materials and doing work to carry on the war is of no moment, because these contracts were
Having held that the item in question is properly taxable, I deem it unnecessary to discuss the other points raised by the corporation counsel upon the trial. The certiorari proceedings herein are therefore dismissed, with costs.
Proceedings dismissed, with costs.