No. 83-551 INTHE SUPREME COURT OF THE STATE OFMONTALJA

TED SCHWINDEN, In hisOfficialCapacity as Governorof the Stateof Montana; ELLEN FEAVER, Inher OfficialCapacity as Directorof Revenueof the Stateof Montana; DEPARTMENT OF REVENUE of the Stateof Montana; MONTANA ASSOCIATION OF COUNTIES; MONTANA LEAGUE OF CITIES AND TOWNS; URBAN COALITION; and MONTANA SCHOOL BOARDS ASSOCIATION, Plaintiffs,-vsBURLINGTOL.? NORTHERN, INC.

### , Defendant.

ORIGINAL PROCEEDING: COUNSEL OF RECORD: For Plaintiff: DavidW. Woodgerd argued, Dept. of Revenue, Helena, Montana G. Steven Brown, Mont. Assoc. of Counties, Helena, Montana RobertM. McCarthy, Silver Bow CountyAtty. forLeague of Cities & Towns, Butte, Montana MikeMcGrath, L & C CountyAttorneyforUrban Coalition, Helena, Montana ChipErdmann, Montana School BoardsAssoc., Helena For Defendant: StanleyT. Kaleczycargued, Helena, Montana ForAmicus Curiae: GeorgeBennettargued for MontanaBankers, Helena, Montana WilliamDavid Dexter forMulti-Tax C~mmission,Seattle, Washington

Submitted: October 9, 1984 Decided: November 23, 1984 Filed: fdijv

### 2

### 5

## 1984

ClerkMr. Justice John C. Sheehy delivered the Opinion of the Court.

This is an originalproceedings in this Court broughtby Governor Ted Schwinden,Ellen Feaver, Director of the State Department of Revenue, and interested associations for a declaratory judgment determining the validity of section 15-31-116, MCA. The defendant taxpayer is Burlington Northern, Inc. We deemed important the issue raised by the complaint for declaratory judgment because it implicated the validjty of state corporation license tax statutes which allocate

revenue between the state and counties. We therefore accepted jurisdiction of the cause and remanded the case to the District Court, First JudicialDistrict,Lewis and Clark County, to determine any factual controversies involved. The District Court scheduled hearings,determined facts under our remand, and returned its written findings of fact to this Court on May 25, 1984. Thereafter we provided time for the filing of objections by the parties, submission of briefs by the parties and amici on the issues and find-ings, and heard oral arguments on the cause. At the conclusion of oral argument, we asked for additional briefs from the parties on an issue raised by an amicus curiae. The cause

now deemed submitted for decision, we proceed to our determination. I. HISTORY Prior to 1978,Montana countieswere empowered by state law to impose a property tax on bank stock shares. Because federal obligations were included in the calculation of hankassets subject to that tax, the Montana hank shares tax was held unconstitutional and a ~~iolation of 31 U.S.C. S 742 11976), (now 31 U.S.C. S 3124), in Montana Bankers Association v. Department of Revenue (1978),177 Mont. 1.1.2, 580 P.2d 909. The United States Supreme Court made a similar holding with regard to a Texas bank shares tax law in American Bank and Trust Company v. Dallas County (1983),No. 81-1717, Slip OP- I -U.S. - 

## , 103 S.Ct. 3369, 77 L.Ed.2d 1072. The bank shares tax which was held unconstitutional in Montana Bankers was clearlv a property tax. The governing statutes were section 15-24-501 through -508, MCA 11978), which were codified in the special property tax applications chapter of the cocte. The property tax was measured as a percentage of the property owned and the revenue generatedby the taxwas collected and kepthy the counties. Until the Montana Bankers decision, Montana banking institutions paid a bank shares tax but no corporation license tax to the State. Although banks have been subject to the corporation license or income tax statutes since 1971-,

(section 15-31-101(4)

### 1

## , interest earned on federal obligations was excluded from t~xableincome under those statutes. This applied to all corporations. No corporation paid a corporation license or income tax if its expenses were greater than its income after deducting excludable federal interest income. This was true even though the corporation

was profitable when federal interest income was considered. Because financial institutionsheld a substantial portion of their assets in federal obligations, it was inevitable that, after deducting federal interest income, they owed no corporation license tax. After Montana Bankers the bankspaid neither the bank shares tax nor a corporation license tax and the counties ,-ostan important source of revenue. The legislature responded to the tax revenue loss growing out of our decision inMontana Bankersby passing Ch. 634, Laws of Montana (1979). The passage of that act made savings and loans i.nstitutions subject to the corporation license tax, made interest income from Montana obliqations includable in corporate taxable income hy repealing the exemption for Montana interest,and allocated to the counties

aportion of the corporation license tax revenue. Subjecting savings and loan associ-ations to the corporation 1-icensetax brought about First Federal Savings and Loan Association v. Department of Revenue (Mont. 19821, 654 P.2d 496, 39 St.Rep. 1802, cert. den. 103 S.Ct. 312.8 (1983). InFirst Federal,the savings and loan associations, in computing their corporation license tax, deducted from yross income the interest income earned from federal obligations. The Department of Revenue, in examining their tax returns for the year involved, disallowed the deduction for interest income earned from federal obligations. One of the issues comingbefore this Court in that casewas whether the inclusion of interest from federal obligations in income subject to the corporation 3icense tax violated 31 [J.S.C. S 742 (1976)

## ,which stated that "Except as otherwise provided by law, all

# . .. obligations of the United States, shallbe exempt from taxation by or under State or municipal or local authority 

# ..." In First Federal, this Court determined that federal obligation interest income received by the taxpayers was not includable in income for the purpose of calculating the Montana corporation license tax.After the decision in First Federal, Montana banks and savings and 1-oanassociations paid no corporation license tax, no corporation income tax, and no property taxes on their Sa.nk shares. The legislature responded in 1983 by passing section 3-5-31-11.6,MCA, which is the center 

### of controversyhere. Burlington Northern, Inc. is a corporation which operates a railroad and other business interests in and out of Montana. Montana imposes either a license tax or an income tax on corporations. The license tax, section ?-5-31-101,MCA, is imposed on every corporation for the privilege of doing business in Montana. The income tax, section 1.5-31.-403,MCA, is a "back-up" statute to impose a tax on mu1tj.-state corporations that derive income from Montana but are not doing business here. Eecause of the broad definition given to "doing business" in Montana., rost corporations with business connections in the state are subject to the corpora.tion,icense tax. Both the corporation income and the corporation license taxes are calculated in the same manner, using the same statutes to determine the amount of the tax. We remind.the reader, though it is not an issue in this case, that Montana follows the unitary principles of state taxatior,where multistate corporations are involved. This method of a. taxation has been approved by this Court, Ward Paper Box Co. v. Dept. of Rev. Etc. (1981), 1.96Mont. 87, 638 P.2d 1053; and the United States Supreme Court in Mobi3.eOil Corporation 

### v. Commissioner of Taxes of Vermont (1980)

### , 445 U.S. 425, 436, 100 S.Ct. 1223, 1231, 63 L.Ed.2d 510, 520.IS SECTION 15-31-116,MCA VALIJD? As we have said, after cur decision in First Federal interest income from federal.obligations was not includable in the taxable income of corporations subject to the state corporation license tax. Section 15-31-116, MCA, provides, however, that when a corporate taxpayer computes allowable deductions from gross income, those deductions a.redecreased by i! ratio of the fed-era1interest income to al-1interest income earned by the corporation. This section provides as follows: 

### "(1) A corporation, taxable under this part, that excludes interest from grcss income which would be taxable except for federal law must adjust its allowable deductions for all taxable periods for which interest js excluded in the followingmanner: 

### "(a) the total amount of interest excluded from gross income by federal law must be determined; 

### "(b) the tota

### J amount of all.interest i-ncomefrom all sourcesmustbe determined; 

### "(c) the ratio of excluded interest income to all interest incomemustbe determined;and 

### "(d) the total deductions allowable under 15-31-11.4 must be reduced by an amount determined by multiplying the amount of deduction otherwise allowehle by the ratio of excluded interest to all interest income; however, the product of this calculation may not exceed the amount of excluded interest income. 

### "(2) Allowable deductions must he reduced with respect to all corporations that exclude interest income otherwise taxableupon returns filed for all taxableperiods forwhich such exclusion is claimed and for all taxable periods for which a claim for refund ismade." In its findings of fact, the District Court found th.a.t

an algebraic formula adopted by the state department of revenue in 42.23.417 A.R.M. demonstrates how to compute the deductions disallowed on the basis of federal interest income. That formula follows:Exempt Interest Jncome x Total Deductions = DeductionsDisall-owed Total Interest Income For the year 1982 (th.eonly year which we are concerned with) RN's total interest income from all sources constituted 1.74% of its gross income; the percentage of BN's total interest income made up of federally exempt incomewas 20.4%. Application of the section 15-31-116, MCA formula to EN'S 1982 interest and expense data produces the following result: $18,328,000 x $4,677,639,000 = $952,765,750 $89,982,000 Because, however, section 15-31-11-6,MCA, limits the amount of disallowed deductions to the amount of the federal interest income received, the amount of deductions actual1y disallowed BN in tax year 1982 $18,328,000. The District Court found that the effect of the statutory formula, combined with the statutory limit, is to add back to RN's taxable income 100% of BN's federal interest in tax year 1982.The Department of Revenue argues that (1) deductions allowable to compute state taxab1.eincome are a matter of legislative grace; (2) there is precedent for section 1-5-31-116,MCA, in the Internal Revenue Code, 26 U.S.C. 291; and, (3) the except-ionenacted in 31 U.S.C. S 742 (1976),

(now 31 U.S.C. S 3124), shows that federal interest can be taxed in some instances. BN responds that 31U.S.C. 5 31.24forbids circuitous as well as direct attempts to tax federal interest income, citing American Bank and Trust Company 

### v. Dallas County

(1983),No. 81-1717 Slip Op., US 

### - 

## , 103 S.Ct. 3369, 77 L.Ed.2dI 1072 to the effect that "Congress intended to sweep away formaldistinctionsand to invalidateall taxesmeasureddirectly or indirect-lyby the value of federal obligations, except those specified in the amendment." 103 S.Ct. at 3377, 77L.Ed.2d at 1082. We determine that the net effect of section 15-31-116, MCA, is to add back to taxable income interest income fro^ federal obligations for the purpose of determining state corporation license tax. This, states are not permitted to do. Under 31 U.S.C. S 3124 both federal obligations and interest therefrom are exempt from taxation by states directly or indirectly in the computation of tax,unless the tax is specifically excepted in 3124(1) or (2). Because our holding in First Federal was that the corporation license tax was not a franchise tax, section 15-31-116, MCA, standing alone, is invalid. It directly contravenes a federal law and as such violates the supremacy clauseof the federalConstitution (Art.VI, C1. 2). 111. OUR DECISION INFIRSTFEDERAL The issuance of ourdecision in FirstFederal created an emergency of sorts for the counties because of the material reduction in their tax revenue because of the decision. One consequencewas that theDepartmentof Revenuepetitioned the United States SupremeCourt fora writ of certiorari relative to our decision,a petition which was joined 

### in by 25 other states. Certiorari was denied by the United States Supreme Court (cert.den. 103 S.Ct. 3128 (1983)). The legislature disagreed with our decision in First Federal and said so in its preface to the adoption of Ch. 673,Laws of Montana (1983)

## ,which became section 15-31-116, MCA. The legislature was also careful to state that the passage of the new enactment was for the purpose ofmaintaining current levels of revenue to the state and local governments. Thus,our decision today that section 15-31-11-6, MCA, is invalid returns the State to the position it was in prior to the enactment after First Federal. Banking institutionswill

owe no corporation license tax. The question naturally arises, were we correct in First Federal, the centerpiece of theproblem? We have determined to reexamine First Federal, though

over the objection of BN thatwe should not consider an issue raised by an amicus curiae, the Montana RankersAssociation. A. FirstFederalwas incorrect In First Federal we held that under 31 U.S.C. 5 742 (1976) corporate taxpayers filing tax returns under the Montana corporation license tax law could not be required to inc1ud.e in their reported income, interest earned on federal obligations during the taxableyear. The operating paragraph of FirstFederal follows: "The Department argued that the Montana Corporation License Tax is a franchise tax on theprivilege of doing business in Montana with the tax based upon or measured by the net income of the taxpayer. Hence, it was argued, that the tax is not on the property (interest income), but is on the privilege. This Court finds the argument to be unpersuasive. It is a distinction without a difference in our opinion. If the franchise tax 

### is on the privilege and the tax is based on the net. income,this Court concludes that the tax is on the privilege 

### - and the net income. If the net income includes tax-exempt interest, the tax is on exempt incomewhich is prohibited by the specific federal statutes creating the federal obligations and granting the tax exemption

# . . . Jt also appears to this Court that by the Department's including the tax-exempt interest in net income, the Department is seeking to tax indirectly what it cannot tax directly, in violation of the general rule set forth in 31 U.S.C. ?42 (1976)

# . . ." 654 P.2d at 498.It is apparent that this Court concluded that, because the corporation license tax laws of this stateprovided a tax that was measured by net income, the corporation license tax violated.federal law in that regard. We now d-eterminethat

we were erroneous in that conclusion and that the holding in FirstFederal shouldbe reversed. We base our determination on these factors: (a) the Montana corporation license tax was fashioned after the federal corporation franchise tax statutes; (b) several of

our cases preceding First Federal had held the Montana corporation license tax to be a franchise tax; (c)Congress has amended 31U.S.C. § 742 (1976)to clarifywhen statesmay tax federal obligations and interest income; (d)the United States Supreme Court has enunciated the clarifying effect of the present federal statute, 31 U.S.C. S 3124; and (e) one other court has held other acts similar to the Montana corpora.tionlicense tax valid. We want it understood that we do not reach our determination reversing First Federal because of the tax I-ossto the state and counties if we were to continue First Federal in effect. Ifwe were not convinced.of the error in First Federal, we would reluctantly hut candid.1~ ad.visethe 1-egislatureto look to other sources of tax revenues. By its terms, section 15-31-101, MCA, the corporation license tax sta.tute, is a franchise tax. It provides in pertinentpart: 

### "(3) Every corporation 

# .

# . . engaged in business in the state of Montana shall annually pay to the state treasurer as a license fee for the privilege of carrying on business in this state such percentage or percentages of its total net income +or the preceding taxable year at the rate hereinafter set forth

# ..

# ."Theprecursor of section 15-31-101,MCA, came before the Montana Supreme Court in Equitable Life Insurance Company v. Hart, et al. (1918), 55 Mont. 76, 173 P. 1062. Equitable mainta.ined,among other arguments, that because it alsopaid

a special tax for the privilege of conducti.ngan insurance business in the state, it should not be subjected to a further corporation license tax. This Court determined that Equitablewas required topay the Montana corporation license tax even though it paid other insurance license taxes. The Court reviewed the history leading to this statute and pointed out that theMontana corporation license tax followed verbatim the corporate franchise tax in the fed.era1Tariff Act of 1909. This Court then referred to the United States Supreme Court case of Flint v. Stone Tracy Company (19101, 220 U.S. 107, 31 S.Ct. 342, 55 L.Ed 389. 

# ".

.

# . In the present case the tax is not payable unless there be a carrying on or doing of business in the designated capacity, and this is made the occasion for the tax, measured by the standard prescribed 

# . . . the tax is laid upon the privilegeswhich exist in conductinq business with the advantages which inhere in the corporate capacity of those taxed, and which are not enjoyed by private firms or individuals

# ... Jt is this distinctive privilege which is the subject of taxation 

# . 

# . ." 55 Mont. 76, 83, 173 P. 1062, quoting Flint inpart. In State v. J. C. McGuire Construction Company (1942), 113Mont. 324, 328, 125 P.2d 433, 434,this Court said: "In all Later decisions of this courtwherein this tax has been under consideration or has been referred to in any way it has been spoken of as a Eranchise tax, or license tax, an excise upon the privilege of doing business in the state in a corporate capacity. Cottonwood Coal Company v. Junod, 73Mont. 392,atpage 398,236 P. 1080;East Helena State Bank v. Rogers, 73 Mont. 210, at page 213, 236 P. 1090; OIConnell v. State Board of Equalization, 95Mont. 91 atpage 118, 25 P.2d 114. Ithas been clearly distinguished from the license fees exacted upon the grant of privilege and from taxes imposed upon income or property. With the history of jud.icia1interpreFationof the act aswehave it thus harmorlized with other tax measures, and the administration of the law in accord.a.nce therewith, the question of the character of the tax is sowell settled as to leaveno room fordoubt or speculation.

### " (Em.phasisadded..) InMontana Bankers Association v. Department of Revenue (1978),177Mont. 11.2,580 P.2d 909,this Court construed the Montana bank sharestax act,a property tax,asvalid only if it be interpreted to authorize a deduction for the value of federal.obligations in computing the hank shares tax basis. This Court relied on the 1959 amendmen.tto 31 U.S.C. S 742

(1976),ofwhich more later. Thisholding is stilleffective in Montana. The Montana corporation license tax is not to be considered. a property tax. OIConnellv. State Board of Equalization (1933), 95Mont. 91, 25 ~.2d 114. It 

### is quite clear from our holdings prior to First Federa.1 that the Montana corporation license tax was determined by this Court to be a franchise tax and a nonproperty tax. Therefore, our decision in First Federal needs to be reexamined in the light of the language of 31 U.S.C. S 3124 (the successor to 31 U.S.C. S 742 (1976)): "(a) Stocks and obligations of the United States Government are exempt from taxation by 

### a State or political subdivision of a State. The exemption applies to each formof taxation thatwould require the obligation, the interest on the obligation, or both, tobe considered in computing a tax,except--

"(1) a nondiscriminatory franchise tax or another nonproperty tax instead of a franchisetax, imposed on a corporation;and "(2) an estateor inheritancetax." (The language found in subdivision (1) and (2) of 31 U.S.C. 5 3124 (a) is i.n essence the language found.in.a 1959 amendmentby the Congress to 31U.S.C. S 742 (1976).)It was the intention of Congress in S 3124 t.o clarify the states' right to tax federal obligations or interest income in the narrow circumstances described i.n 5 3124. We determine that a nondiscriminatory franchise tax or other nonproperty tax instead of a franchise tax is permissible; and we determine that the Montana corporation license tax is valid as a nondiscriminatory franchisetax. In American Bank and Trust Company v. Dallas County (1983),No. 81-1717, Slip Op., -U.S. 

### - 

## , 103 S.Ct. 3369, 77 L.Rd.2d 1072, the United States Supreme Court had before it the validity of the Texas tax on bank shares, a property tax. The court considered the Texas tax in the lightof the 1959 federal amendment which is now a part of 3124. Because the 1959 amendment provided for specific exemptions for franchise and estate and. inheritance taxes, and conspicuouslyomitted shares taxes from that group, the Court concluded thatCongress meant tobar bank sharestaxes to the extent that they consider federal obligations in the computation of aproperty tax. 103 S.Ct. at 3375. The first part of 5 3124(a) bars any form of taxation that would require federal obligations or the interest therefrom to be considered in computing the tax. The language of 3124(a)

## , however, does not preclud-e the considerationof federal obligationsor their interest income in computing a nondiscriminatory franchise tax. InAmerican Bank and Trust Company, supra, the Supreme Court said j.n 

### -- looking at the 1959 amendment: "Prior to the 1959 amendment, franchise and estate and inheritance taxes measured by the value of federal obligations, like bank shares taxes, were upheld on the theory that the taxwas levied on the franchise or the transfer of the property rather than on the ownership interest in the federal securities themselves. By expressly exemptingfranchiseand estate and inheritance taxes from the amended S 3701, Congress manifested its awareness that the new languase would broaden significantly the prohibition as it had been construed by the courts. Congressmust have believed that franchise 

## -- and estate and inheritance taxes required federal obligations 

### - to 'be considered, direct1 or 

### - indirectly, in tE computation of 

## - the 'tax': 

### - otherwise, thespecific exemptions frr these taxes would have been superfluous 

# . . ." (Emphasis added.) 103 S.Ct. at 3375, 77 L.Ed.2d at 1079. Thus, a nondiscriminatory franchise tax levied by a stateon a corporation for the privilege of doingbusiness in the state is valid even though, in computing the tax, interest income from federal obligations is included. The rea-soningof the United States Supreme Court in American Rank makes it clear that a statemay use, directly or indirectly, the interest income on federal.ohl-igationsto determine corporate nondiscrimina-toryfranchise taxes levied by the state. In Garfield Trust Company v. Director, Division of Ta.xation, a. cause in the New Jersey tax court (NO. CB 143A-80, decided June 19, 1984), theNew Jersey court upheld the validity of a New Jersey franchise tax in light of 31 U.S.C. S 3124 and the decision in American Bank. New Jersey's corporate franchise tax is determined by the addition of prescribed percentages of net worth and net income allocable to the State of ?JewJersey. The plaintiff included its holdings of federal obligations and its income from those sources in computing its corporate income tax, paid the tax, and then. sued for refund. The refund was denied by the New Jersey taxing auth0riti.e~and the New Jersey tax courtupheld thedenial. The legal theory adopted by theNew Jersey tax court in reaching its decision is the same 3-swe have expounded here. The decision was based onAmerican Bank which makes it clearthat Congress, in 31 U.S.C. S 3124, provided a distinction between ncndiscriminatory franchise taxes measured by tax exempt obligations on the one hand, a.nd property taxes otherwise levied directly or indirectly by states on such federal itemson the other. We also determine that the Montana corporation license -tax is a nondiscriminatory franch.ise tax. The term "nondiscriminatory" was made c1ea.r by the United States Supreme Court in Memphis Bank and Trust Company v. Garner (I-g83),459 U.S. 392, 103 S.Ct. 692, 74 Il.Ed.2d 562. The Court said: "A state tax that imposes a greater burden on holders of federal property than on holders of similar state property impermissibly discriminates against federal obligations. See, e.g., United States v. County of Fresno, supra, at 462, 50 L.Ed.2d 683, 97 S.Ct. 699 ('a state tax on those who deal with the Federal Government' is unconstitutional if the tax 'isimposed [unlequally on 

# . . 

# . similarly situated constitutents of the State'). Our cases establish,however,that if the

'taxremains the same whatever the character of the [property] may be, no claim can be sustained that this taxing statute discriminates against the federal obligations.' Werner Machine Company v. Directorof DivisionofTaxation, supra, at 493-94, 76 S.Ct. 534, 100 L.Ed. 634." 459 U.S. at 397, 74 L.Ed.2d at 567. Montana's corporation license tax does not discriminate against holders of federal obligations. It taxes the interest earned by corporate holders of state obligations. Section 15-31-115,MCA,provides: "Notwithstanding the provisions of any other law, the income from bonds or other obligations issued by any state or pol.itica1subdivision of a. state are included in gross and net income for purposes of the corporation license tax

# . .."

B. May the Court reverse First Federal, as the issue was raised by amicus curiae? Reversal of our First Federal decision was first suggested in this cause by Montana Ba-nkersAssociation,appearing amicus curiae. It is contended therefore that the rectitude of our holding in First Federal cannotbe examined in this case, as the issue was first raised by one not a party to the action. We determine here not to fol-lowthe usual rule that issues raised by amici that are not part of the underlying action will not be considered by this Court. Compell-ing

reasons not to follow that rule include (a) the binding effect of First Federal on state officials, (b)the validity of section 15-31-116,MCA, inherently involves the operation of the Montana corporation license tax, and (c)in oriqinal proceedi~gs ourpowers are at least those of a district court under Rule 54(c),M.R.Civ.P. First Federal,when decided by this Court, was binding

on the state officials who were charged by law with the collection of theMontana corporation license tax. The state officials thereforewere not in a position to relitigate the validity of theholding in FirstFederal. Theirduty instead required them to uphold the provisions of section 15-31-116, MCA, if possible. The state officials were not in the position of the usual party who, though he is able to do so, does not raise in the district court an issue for that court's decision. When outside issues are raised in this Court by amici, 

### we usually have in mind the fact that the district court was not given an opportunity to resolve the issues raisedby amicinor is itusually consonant with sound justice to reverse the district court on issues not decided in that court. The validity of the Montana corporation license tax, with or without section 15-31-116, MCA, is inherently involved in this cause. Theprincipal duty of this Court inthis cause is to determine the effect that 31 U.S.C. § 3124 has on the Montana corporation license tax. Our decision in First Federal was the primal urge out of which came section 15-31-116,MCA. If section 15-31-116 is illegitimate,aswe find it is, the bastard child has a father, First Federal. The responsibility of the paternity is intertwined here. Finally, it must be remembered that this cause is ar original proceeding in this Court and the legal issues that. arise belong and pertain to this Court. We remanded this

cause to the First Judicial District Court for fact-finding procedures, hut reserved to ourselves the legal issues involved. In entering judgment, our powers in an original proceedings are not less than those giver! a district court under Rule 54(c)

## , M.R.Civ.P. Under that rule, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief inhispleadings. We are not barred in this case, therefore, from reversing First Federal by the rule that amicimay not raise issuesnot raisedby theparties. IV. APPLICATION We therefore hold and determine that section 15-31-116, MCA, is invalid for offending federal law and the supremacy clause of the federal.Constitution. This opinion shall be and constitute a declaratory judgment to that effect. We furtherhold and determine that our decision in FirstFederal Savings and Loan Association v. Departmentof Revenue (Mont. 1982), 654 P.2d 496, 39 St. Rep. 1802, cert. den. 103 S.Ct. 3128 (1983),be and the same is hereby reversed as to its holding that income from federal obligations may not beconsidered in computing corporate taxes due under the Montana corporation license tax; we further hold and determine that the Montana corporation license tax as now provided in our statutes is a nondiscriminatory franchise tax imposed upon corporations for the privilege of doing business as corporations in this state. We order that the tax obligations of Burlington Northern, Inc. for the taxable year 1982 shal-1 be determined under the Montana corporation license tax as interpreted by this Court in this Opinion, as well as the corporation's future Montana corporation license tax returns while said tax remains in effect. As to all other corporate taxpayers, filing under the Montana corporation license tax provisions, their returns shall be filed with taxes computed according to this Opinion for texable years ending after the date of this Opinion and for any amendment of tax returns for earlieryears. With respect to whether the Montana corporation license tax should be otherwise retroactive1 y or prospectively applied under this Opinion,we retain jurisdiction for application to us by the Department of Revenue, 

### or by any corporate taxpayer after proceeding before the StateTaxAppeal Board, for the purpose of obtaining such further reliefasmay be required. Eachparty shallpay its own costs. 

# qdh- G

# ,2h4+ Justice

We Concur:



### - Chief JusticeJustices

Mr. Justice Fred J. Weber does notparticipate inthiscase.Mr. Chief Justice Frank I. Haswell,dissenting: I respectfully dissent. Inmy view, section 1.5-31-116,MCA, isunconstitutional on its face as it discriminates against obligati.ons of the United.States Governmentand therefore violates the Supremacy Clause of the United States Constitution. This Court has previously held that Montana's corporation li-censetax is an income tax (Security Rank & Trust Co. 

### v. Connors et al. !1976), 170Mont. 59, 55C P.2d 1313) and not a fravchise tax (First Federal Savings and Loan Association v. Department of Revenue (Mont. 1982), 654 P.2d 496, 39 St.Rep. 1802, cert. denied 103 S.Ct. 3128)

# . Accordingly, stocks and obligations of the United States Government are exempt from taxation under 31 U.S.C. section 3124. Under section 15-31.-116,MCA, the entire federal interest exemption 

### is added back into the tax base. Furthermore, section 15-31-116, MCA, as applied. to Burlington Northern, Inc.,violates the due process clause of both the United States and Montana Constitutions because the formula used thereunder in disallowing deductions is not rational-lyrelated to its 2 percent interest income from TJnited States Government obligations. Finally, Iwould not reexamine,much less overrule,our prior decision in First Federal, supra. This issue was not raised by any party to this action. Itwas raised by amicus curiae Montana Bankers Association and under well settled rules of law, amici are not permitted to raise additional issues not raisedby the parties to the lewsuit. 

# 34&4\ 

# a,'%$,&, 4 CHief Justice'