SUPERIOR BATH HOUSE CO. v. MCCARROLL, COMMISSIONER OF REVENUES OF ARKANSAS
No. 180
Supreme Court of the United States
Submitted December 18, 1940. Decided February 3, 1941.
312 U.S. 176
For these reasons we hold the judgment of the Circuit Court of Appeals was right and should be affirmed.
Affirmed.
Mr. Terrell Marshall submitted for appellant.
Messrs. Frank Pace, Jr. and Lester M. Ponder submitted for appellee.
MR. JUSTICE BLACK delivered the opinion of the Court.
By a 1929 Act, Arkansas imposed a tax of 2% on the net income of domestic corporations “with respect to
While not controlling here, it has been the consistent conviction of the Arkansas court that the federal legislation conferred broad powers of taxation upon the state. In Ex parte Gaines, 56 Ark. 227; 19 S. W. 602, decided one year after the original 1891 Act, the court held that a leasehold interest on the reservation was subject to state taxation. In Buckstaff Bath House Co. v. McKinley, 198 Ark. 91; 127 S. W. 2d 802,5 the court upheld the state unemployment compensation tax, saying of the 1891 Act: “The Congress seemingly intended (and this construction is strengthened by the Gaines case) to permit
Appellant, however, reads the Act more narrowly than does the Arkansas court, and contends that the only taxes Arkansas can levy are ad valorem taxes imposed directly on tangible property. But the words tangible and ad valorem appear nowhere in the Act, nor do any synonymous words there appear. And in our opinion to construe the Act as though such words had been used would do violence to the intent of Congress. The language of Congress was peculiarly adapted to the broadening of the state‘s taxing power—not to its restriction. Thus, though under Arkansas law structures attached to land were considered a part of the realty, taxable or non-taxable with the land,6 Congress provided that privately owned structures on the tax exempt land of the reservation should be taxed “as personal property.” Not only was this done, but also all “other property in private ownership” was expressly made subject to state taxation. By these provisions Congress manifested its purpose that no type of privately owned property should escape the state‘s taxing power merely because it was owned or used on the reservation.
And appellant‘s insistence that these provisions permit only ad valorem taxation loses sight of the fact that the word property is by no means limited, in all its variations,
Affirmed.
MR. JUSTICE STONE, concurring:
MR. JUSTICE ROBERTS and I concur in the judgment of the Court but upon different grounds from those stated in its opinion.
The state court has held that so far as the state constitution and laws are involved it has power to lay the present tax. It is no concern of ours what reasons are assigned for that conclusion. The only question for decision here is whether there is anything in the acts of Congress establishing the reservation or in the relationship of the two sovereignties, state and national, to prevent the state from laying a tax on the net income of its own corporation.
If the consent of the national government were needful in order to sustain the present tax we should have difficulty in finding that consent in the words of the Act of Congress authorizing the state to tax “all structures and other property in private ownership on the ... reservation.” But we think that such consent is unnecessary to enable a state to tax the income of its own corporations, derived from property located on the reservation. It is enough that no Act of Congress and no agreement by the state with the Federal Government prohibits the tax.
The fact that income-producing property is physically located on the territory of another sovereignty does not foreclose the state from taxing its own residents and corporations on the income derived from the property.
For that reason if Arkansas had made an unrestricted grant of the reservation it could not be said to have renounced its authority to tax income of its corporations or citizens derived from property on the reservation, more than if it were located in the District of Columbia or in another state. It clearly has not done so by reserving the right to lay a property tax within the reservation or by agreeing that the United States shall have exclusive jurisdiction over it for any or for every purpose. The state‘s power to lay the tax, being independent of its jurisdiction over the ceded territory, subsists unless waived or prohibited by competent authority.
Whatever constitutional power the Federal Government may have to prohibit the state taxation of income derived from property located on the reservation, regarded as a federal instrumentality, it is plain that it has not assumed to exercise the power. Graves v. O‘Keefe, supra, 480. Since the state has not surrendered its constitutional power to tax the income and since Congress has not assumed in the act establishing the reservation, or otherwise, to prohibit the tax, the power of the state is unimpaired, unless restricted by its own constitution and laws.