Document: 338 U.S. 665 70 S.Ct. 413 94 L.Ed. 439 NEW JERSEY REALTY TITLE INS. CO.v.DIVISION OF TAX APPEALS IN DEPARTMENT TAXATION AND FINANCE etal. No. 147. Argued Dec. 13, 1949. Decided Feb. 6, 1950. Mr. Walter Gordon Merritt, New York City, for appellant. Vincent J. Casale, Newark, N.J., appellees. Justice CLARK delivered the opinion of Court. 1 A taxing district Jersey has levied against intangible personal property a domestic corporation an assessment taxable year 1945 in amount 15 per cent taxpayer's paid-up capital and surplus, computed without deducting principal certain United States bonds accrued interest thereon. This appeal challenges validity tax statute under which it was levied, on ground conflict with Art. I, § 8 Federal Constitution, by Congress is authorized 'To borrow Money credit States,' 3701 Revised Statutes (1875), 31 U.S.C. 742, U.S.C.A. generally exempts interest-bearing obligations from state local taxation. 2 The question 54:4—22 (1937), as amended Laws 1938, c. 245, N.J.S.A.1 N.J.Rev.Stat.Cum.Supp., 1939, 1940, 54:4—22. That section provided follows: 3 'Every stock insurance company organized laws this State, other than life company, shall be assessed taxed where its office situated, upon full or value (exclusive real estate tangible property, separately same located, exclusive all shares owned such nontaxable exempt taxation), debts liabilities definite to obligation amount, reserves taxes, proportion unearned premiums, losses bears property; provided, however, any subject provisions no event less fifteen centum sum surplus excess total are stated annual statement calendar next proceding date filed Department Banking Insurance State Jersey, after assessments estate, title stands name company. 4 'The not regarded purposes act (section) liability part thereof deducted, person persons corporations holding therefor. No franchise imposed included section.' (Italics added.)2 5 at rate district. 6 Appellant Realty Title Company, City County Essex, Jersey. For Newark $75,700 appellant's collected $3,906.12 7 had return3 based balance sheet close business September 30, 1944, showing assets $774,972.98, entirety declared intangibles. In calculating 'total intangibles' appellant deducted following assets: Treasury Bonds face $450,000; thereon $1,682.25; valued $318,771.95. aggregate thus excluded $770,454.20. remainder, $4,518.78, entered return From deducted: $25,756.63 'debts certain'; $28,175.46 'reserves taxes'; $758.13 'proportion loss premium.' There disagreement these computations. As observed highest court below, deductions 'left assessable tax.' therefore proviso directed 'the liabilities' shown preceding department banking insurance. manner computation explicit record. Moreover, several interpretations proper method computing assessment. that 'may percent defined statute.' (64 A.2d 341, 344). added.) If phrase 'as statute,' referred language 54:4—22, 'paid-up (italics added), would seem necessary deduct determining basis computation. then $496,999.70,4 sum, $74,549.95. subsequently may equal exceed does necessarily have precisely same, but * can surplus.' Such references surplus,' together court's characterization laid net worth, suggest worth $547,462.93. On basis, been $82,119.43, present satisfy interpretation requiring levy cent. our disposition case, unnecessary choose between conflicting below. 9 Clearly negatived purpose authorize bonds. below conceded securities involved were, time assessment, state, municipal It equally clear, government bonds, thereon, fact included.5 10 Contending applied contravenes paramount federal provisions, sought cancellation Division Tax Appeals Taxation Finance Division's recommending dismissal proceeding 'a appeal.' Its order reversed former Supreme Court writ certiorari. 137 N.J.L. 444, 60 265. viewed ad valorem personalty; concluding valid only if were computation, construed exclusion. ruling established Constitution State. N.J. 496, 64 341. 'against property' 'concluded rather company.' held tax, having discrimination, constitutionally permissible. decision taken. We noted probable jurisdiction, 28 1257(2), 1257(2). 11 must fall Statutes, providing 'All stocks, notes, States, taxation authority.' we consider either entire take guides application decisions related constitutional immunity Bank Commerce v. 1863, Black 620, 17 451, Case, 1865, Wall. 200, 793, considered substantially distinguishable Jersey's applied. case actual stock, corporate taxpayer invested realty. invalid interference borrowing power, rejected contention should sustained represented securities. Case paid secured in, earnings' large their regard conclusive one unconstitutional. 'when made institutions, there great difficulty saying constituting corpus body taxed. easy separate itself. legislature when valuation could intended invested. practical effect *.' pages 208—209. 12 And Supervisors, 1869, 26, 19 60, issues notes supra, view congressional provision, foreshadowed 3701, 'shall Stat. 346. see Farmers' & Mechanics' Savings Minneapolis, Minnesota Minnesota, 1914, 232 516, 528, 34 354, 357, 58 706; Home Des Moines, 1907, 205 503, 512—513, 27 571, 573, 51 901. 13 matters whether is, appellee contends, indirect excise measured urges, gauged surplus. Our inquiry narrowed operation conclude regardless accounting label employed describing it. 14 indirectly tax-exempt authority Tradesmens Nat'l Oklahoma Comm'n, 309 560, 688, 84 947, Educational Films Corp. America Ward, 1931, 282 379, 170, 75 500, 71 A.L.R. 1226. bear controversy. upheld adopted pursuant authorizing national banks. considered, well scrutiny income.6 here imposing privilege Legislature7 officials8 courts below.9 While limited State's cf. Wisconsin C. Penney Co., 311 435, 443, 61 246, 249, 85 267, 130 1229, likewise do think franchise. considering similar earned review 'imposed contradistinguished privileges franchises.' page 209. agree impose discriminatory burden did invoked ex rel. Missouri Ins. Co. Gehner, 1930, 281 313, 50 326, 74 870. But since understood even though discrimination obligations. 16 If, exclusively remaining deduction interest, over 79 $94,936.87 prescribed increased result solely ownership issues. Gehner offended allowed yet pared down allowable exemptions, disadvantage, because Consistently decision, hold violated automatic increase indicated also required legislative purpose, found 'to prevent taxes diminish slightest degree market investment attractiveness issued effort secure credit.' Smith Davis, 323 111, 117, 65 157, 160, 89 107. 18 exemption paid. Cf. Hibernia Loan Society San Francisco, 1906, 200 310, 26 265, 495. occasion expressly securities,10 find contrary disclosed omission 'and thereon.' N.J.S.A., provision Statutes. reversed. 20 Reversed. 21 DOUGLAS took consideration case. 22 BLACK, dissenting. 23 I cannot Congress. consistently held, need justifiable created doing within state. short ago said power legitimate subject, franchise, income including instrumentalities settled.' Nat. 564, 691, 947; cases cited. how Court's possibly reconciled principle, seems clear me falls classification. 24 law applies companies laws. first provides formula excludes reserves, tax. To avoid possibility occasionally might produce all, added setting minimum 15% worth. necessity 'no appellant, subjected question. Thus, terms practice, least replaced Certainly 'on subject,' meaning opinion. distinction unless now departing sound principle constitutionality 'by particular descriptive it.' 387, 171, Yet making determinative invalidated. See supra; supra. set dollars exceeded here, say unreasonable charge advantages accorded actually enacted varies fairly happens own require us strike certainly put heavier merely 318, 25 reasoning point, stand. property. brief 'net worth' $94,936.87.1 Thus touch acknowledges, must, 'clearly purpose' include them exclude express statute. drawn touched leaves untaxed 85% more covers intend accomplish just leaving untaxed. Under circumstances relies, bar upholding recognized apply company's discriminate owning granted exemptions statutory etc., deprived extent 'discrimination' applicability statute, way deprive owners exemption. pointed out, Indeed, lower funds non-exempt affirmed. Section 'Title 54, Subtitle 2. Real Personal Property General.' By amendment 1945, operative involved, last sentence quoted above deleted. 1946, 1947, form furnished entitled 'Personal Return Stock Company Year Statutes.' financial 1943 reflected items: $250,000; paid-in $47,462.93; $50,463.23; $452,526.06. Reserves amounted $161,047.74, approve construction suggested above, meant nonreserve only. Both assumed briefs deductible. deductible figure $496,999.70, therefrom $44,473.64. $547,462.93, remainder interest. neither nor uphold implied appellee's rate. upheld, levy, bank deposits, Coite, 1868, 594, 897; Provident Institution Massachusetts, 611, 907, shares, Hamilton 632, 904, dividends paid, York, 1890, 134 593, 33 1025. note 'whether latter before be.' 502, 344. 272, 38 742; 39 1000, 1003, 745 note; 40 288, 291, 747. suggests perhaps subtracted computed, raise know challenged being too low discovering supposed ambiguity supported doubtful premise court, absence allegation proof small, recompute itself remand construe justify what arithmetical error. instance refused either, 319, 327, Furthermore, absurd consequences. it, completely few million two days paying back afterwards: altered transaction, nand accordingly reduced) loan obtained. concedes brief, subtracting (which determined assets) 'administrative practice.' ascribe self-defeating

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