103 Neb. 280 | Neb. | 1919
Lead Opinion
In its statement to the assessor of Hamilton county made for the year 1918, the First National Bank of Aurora showed that its capital stock was $50,000, surplus $50,000, and undivided profits of $2,887.51, making a total hook value of its shares of $102,887.51. The hank claimed that it was entitled to deduct from this aggregate amount certificates of indebtedness, war stamps and liberty bonds of the United States held by it to the amount of $75,473.77, and real estate belonging to the bank of the value of $6,000.
The assessor refused to allow any deduction from the statement on account of the tax exempt obligations of the United States mentioned. On appeal being taken, the county board of equalization also refused to do so. An appeal was taken from this decision to the district court for Hamilton county. The facts were set forth in the petition. The state of Nebraska was allowed to intervene, claiming that the securities involved were subject to taxation for state purposes. A demurrer was filed to the petition on behalf of the state and the county. The United States appearing also intervened by Plonorable Thomas S. Allen, district attorney for the district of Nebraska, claiming that the federal securities mentioned are not either directly or indirectly subject to state or local taxation. The district court overruled the several demurrers. The demurrants electing to stand on the demurrer, the court found upon the allegations of the petition that the federal securities involved are wholly exempt from taxation by either state, county or municipal authorities, and ordered that the amount of the same be deducted from the gross amount of the statement made by the bank. From this judgment the state and the county of Hamilton have appealed.
The issues involved in the case are narrow. , The first essential inquiry is: What is the res, or thing, which is the subject of taxation under the provisions of the statute. If it is the property of the bank which is taxed, it is admitted by the state and county under the decisions in M’Culloch v. State of Maryland, 4 Wheat. (U. S.) *316, and Weston v. City Council of Charleston, 2 Pet. (U. S.) *449, that the value of the securities
Prior to the enactment of the present revenue law in 1903, the stockholders of every bank within the state, whether state or national, were assessed and taxed on the value of their shares of stock in the county, town, precinct, village or city where the bank was located, whether the stockholders resided in such places or not. It was required that the bank keep on. file a correct list of the names and residences of stockholders, and the number of shares held by each, and it was the duty of the assessor to report to the county clerk a correct list of the names and residences of such stockholders with the number and assessed value of the shares. The county clerk was required to enter the valuation of the shares in the tax lists in the name of the owner, and to extend the tax in the same manner as against other property. It was the duty of the bank and its officers to retain so much of any dividend or dividends belonging to the stockholders as necessary to pay taxes levied on the shares of stock, and, if the tax was not paid, the collector of taxes had the right to sell the shares to pay the same “like other personal property.” Comp. St. 1899, ch. 77, art. I, secs. 33-37.
In 1903 the legislature revised the law in regard to assessment and collection of taxes, condensed it, and changed it in several minor respects. As relating to the taxation of banks, the essential element that the assessment should be on the shares of stock was left untouched. Section 6343, Rev. St. 1913, as amended in 1915 (Laws 1915, ch. 108); is the law which specifies the manner in which the shares of stock in such institutions shall be taxed. This section is as follows: “The president, cashier or other accounting officer, of every bank or banking association, loan and trust or investment company, shall, on the first day of April of each year,
This section first came up for consideration in the case of the State v. Fleming, 70 Neb. 523, 536. In this case an attack was made upon the constitutionality of the entire act, and objections were also made to the validity of certain specific provisions. It is said in
The court was evidently of the opinion that the slight changes in the former act did not affect the design of the statute to lay the tax upon the shares of stock of the individual stockholders, and not upon the property of the bank.
In First Nat. Bank v. Webster County, 77 Neb. 815, it is said: ‘ ‘ Shares of stock in a national bank are assessed to the individual stockholder at the place where the bank is located, but the bank is liable in the first instance for the payment of the tax, and is given a lien on the stock to secure repayment from the shareholder. The bank is made the agent of the shareholder, not only for the payment of the tax, but for the purpose of listing the stock for taxation.”
A consideration of the whole of section 6343, as amended, shows that in the second sentence of the section, the words “such capital stock” refer to the shares of capital stock belonging to the shareholder, and not to the entire capital stock of the bank, or banking association. A full discussion of the terms “capital stock” and “shares of stock” in a similar statute with reference to taxation may be found in First Nat. Bank v. Moon, 102 Kan. 334, L. R. A. 1918C, 986, where a like conclusion is reached. Head v. Board of Review, 170 Ia., 300.
We see no reason to depart from the construction that the tax provided for is levied upon the shares of stock in the hands of the individual stockholders, and is not levied upon the property of the hank.
Having reached this conclusion, the question remains: Was the bank, on behalf of its stockholders, authorized to deduct the value of the tax exempt securities of the United States from the statement made to the assessor. The. question must ^be considered in the light of the adjudications of the 'supreme court of the United States.
"The interest of the shareholder entitles him- to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the number of his shares; and, upon its dissolution or termination, to his proportion of the property that may remain of the corporation after the payment of its debts. This is a distinct, independent interest or property, held by the shareholder like any other property that may belong to him. Now, it is this interest which the act of congress has left subject to taxation by the states, under the limitations prescribed as will be seen on referring to it.”
This was followed in Cleveland Trust Co. v. Lander, 184 U. S. 111, in which case it was held, without dissent, that a tax on the shares of stock in an Ohio trust company, under the laws of Ohio, is not a tax on the property of the corporation, therefore no deduction was allowed for the amount of the capital stock invested in tax free bonds of the United States. See, also, Bank of Commerce v. Tennessee, 161 U. S. 134; Delaware, L. & W. R. Co. v. Commonwealth of Pennsylvania, 198 U. S. 341-354; Citizens Nat. Bank v. Commonwealth of Kentucky, 217 U. S. 443; Mechanics Nat. Bank v. Baker, 65 N. J. Law, 113.
In People v. The Commissioners, 4 Wall. (U. S.) 244, it appears that the capital of the National Bank of Commerce of New York consisted of 100,000 shares of $100 each, all of which was invested in United States securities exempt from state taxation. In the interim ■between the decision in Van Allen v. The Assessors and the levying of the assessment in this case, -the statute had been changed so that a like tax was imposed on the shares in both state and national banks. The commissioners of taxes valued the shares at par and made no deduction on account of the investment of the capital of the bank in tax exempt securities. The action of the commissioners in refusing the deduction was affirmed in thé courts of New York. On writ of error the supreme court of the United States affirmed the judgment on the authority of the Van Allen case. See, also, note to Re First Nat. Bank (25 N. Dak. 635), in L. R. A. 1915C, 386.
Much stress has been placed by the appellee upon the decision in Home Savings Bank v. City of Des Moines, 205 U. S. 503, and in Iowa Loan & Trust Co. v. Fairweather, 252 Fed. 605. It is insisted that under these
In the Home Savings Bank case it is said: “The only claim of violation of federal right- which need be considered here is that bonds of the United States have been taxed. It is conceded, and cannot be disputed, that these securities are beyond the taxing power of the state, and the only question, therefore, is whether, in point of fact, the state has taxed them. The first step useful in the solution of this question is to ascertain with precision the nature of the tax in controversy, and upon what property it was levied, and that step must be taken by an examination of the taxing law as interpreted by the supreme court of the state. A superficial reading of the law would lead to the conclusion that the tax authorized by it is a tax upon the shares of stock. The assessment is expressed to be upon ‘shares of stock of state and savings banks and loan and trust companies.’ ”•
The court then points out that the shares are to be “assessed to such banks, * * * and not to the individual stockholders.” And it is said: “When this is read, the doubt instantly arises whether the law intended to tax the .corporation for property which it does not own, but which on the contrary is owned by the stockholders.” It is pointed out that by other sections national bank shares are assessed to the stockholders, the corporations are made liable to pay
The court also said: “The Van Allen case has settled the law that a tax upon the owners of shares of stock in corporations, in respect of that stock, is not a. tax upon the United States securities which the corporations own. Accordingly, such taxes have been sustained by this court, whether levied upon the shares of national banks by virtue of the congressional permission or upon shares of state corporations by virtue of the power inherent in the state to tax the shares of such corporations.” The court then cites a number of its decisions to that effect, and proceeds: ' “The theory sustaining these cases is, that the tax was not upon the corporations’ holdings of bonds, but on the shareholders’ holdings of stock, and an examination of them, shows that in every case the tax was assessed upon the property of the shareholders, and not upon the property of the corporation.”
Holding that the tax was directly upon the property of the bank, it logically followed that the value of the bonds of the United States owned by the banks should have been deducted in order to ascertain the value of the taxable property of the bank. Three of the judges dissented.
After the decision a change was made in the statute of Iowa, whereby the statute was made to read that shares of stock “shall be assessed to the individual stockholders.” Judge Wade based his opinion in the Fairweather case on the proposition that this was an attempt to do that indirectly which could not be done directly, and held that in substance the tax was upon the property of the bank, and not upon the shares of stock, and therefore that the deduction of the value of
In commenting on the dissenting opinion of Chief Justice Chase in the Van Allen case, and while somewhat questioning the practical effect of the decision in that case, Mr. Justice Moody says in the Home Savings Bank case: "But the distinction between a tax upon shareholders and one on the corporate property, although established over dissent, has come to be inextricably mingled with all taxing systems, and cannot be disregarded without bringing them into confusion which would be little short of chaos.” We think this is true, and that to hold otherwise could serve no good purpose.
The recent case of the Bank of California v. Richardson, 248 U. S. 476, 39 Sup. Ct. Rep. 165, is cited by appellee as' sustaining its views, and as indicating a modification of the earlier views of the supreme court of the United States. It seems to us that in the majority opinion the reasons for the conclusion reached are not as clearly stated as in former cases in that court involving similar questions, but the court does not indicate any intention to modify or change its reasoning or its conclusions in the cases hereinbefore cited, or in those cited and quoted from in the case of Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 677, 682, where a review is made of prior decisions. Since the former cases are neither criticized nor disapproved, and since the court cited with approval Bank of Redemption v. Boston, 125 U. S. 60, 8 Sup. Ct. Rep. 772, we conclude that it intends to adhere to its former decisions.
REVERSED.
Dissenting Opinion
dissenting.
I am not sure that I understand the various decisions of the federal courts bearing upon the question herein involved. Some of these decisions would seem to require the conclusion reached by the majority. That shares of stock of National banks may, under some circumstances, be assessed as such to the. shareholders at their full value, although that value includes government bonds, is clearly held in various of those decisions. The reason is that the franchise, the right to do a public banking business, is valuable, and, when privileges of this character are accepted from the state, and the value of such privileges is so mingled with other values that it cannot be determined with certainty whether the slate has taxed the values of the exempt government securities, the shareholders cannot complain that the tax is upon exempt property. Our statute requires the assessor to “determine and settle the true value of each share of, stock,” and to “take into consideration the market value of such stock, if any, and the surplus and undivided profits.” Rev. St. 1913, sec. 6343, as amended by Laws 1915, ch. 108. This would seem to bring this ease within the federal decisions above referred to, and may be finally so held. But the purpose of the federal statute allowing taxation
In the case at bar there can be no doubt that the exact value of the exempt securities is added to the otherwise complete valuation of all property and privileges assessed. The result is as clearly a taxation of the government securities as though they were specifically named for taxation. I do not. believe that the federal court will uphold this method of obtaining revenue at the expense of the general government.