, 1865-11-28
Foreign Holders Of American Bonds
Exempt from Taxation.
Delivered by Chief Jnstfce Chase at
Baltimore, November 22d.

1 duct ma Wltn4olQ 1fom Mn cefI1lu percent
ages TO be paid into the treasures Of the Unit
ed States and Pennsylvania respectively. ani
that he can recover, therefore. Only th1
amount Of the coupons less these deductions
The counsel for the Company prays the Cour
20 10 instruct the Jury. The plaintiff denie
the right Of the defendant to hare these de
l.duclieus made.
The DEDUCTIONS c1almed are two: Eve DC
centu1n on The uuoount Of the COUPONS for III
UuiteI States. and three mills on each Io,In,
Of tbe nrincfnsl. nr Of the smomt nf m
bonds, 4r Pennsylvania.
They would consider each in turn. The In
teTnai Revenue Act Of Cone7ess. approved
every person residing in the Unlted States
and OF eyerY citizen Of the United States r.:
sidinr nbroat1. whefher i1erirrd frnm fntereeta
s:vIdends or other sources. a duty OF i've ner
~, ~, - excess over siv 1,rnflred 4n1
3 ~ ~ fia,, ~ o.a,ai,r, ~ H. .,n.., s.,n.
| iars, san o. te9 PIT eeatun On Inc excess over
I'VE Iantsana tn saM uoiaaIs. asls. ,..,..,n..,. !. :.
N me same sectlon u ls PROVIDED tnat N
aeccttafhtng tue income o. any person. naolc
70 an hcomc,ta1 1ne anonnl oI income re-
ceaFea as aarldenas rom mstitqtions, whose
olEtefs, as Te4uiSca ny a", "Nhheld per
centam or their DIVIDENDS and paid tue same
over to IN authorized officer Of the Govern
ment, shall be- Included and the amonnt so
withheld shall be deducted. Hon the tax
which would be otherwise ossesssd. This
set, however imposes no tax On Citizens OF
The United States. aud therefore none on
plaintiff, rho Is neither such citizen nor resi-
dent. -
It is clear, also, that Congress regnrded the
duty On dividends directed TO be Withheld By
the officers Of. the companies paying them,
and to he paid ever BY them to The proper
officers Of the Gov yernment as an income tux
to be paid only by citizens, or residents Of
the United Stales.
The fact that Congress regarded the duty
Of dividends In this light aids materially In
the construction Of the I'D sect!on ot the
internal Revenue Act, which is mainly relied
upon By the defendant. This section subjects
afl railroad, canal. turnpike, caual nayieatiou
or sluck-watcr companies 10 duty Of i've
per centUm on all interests and dividends
derived from their bonds or shares, md au-
thorizes them to withhold that amount from
bond1oIders and shareholders, and make pay
meut to TIC Goycrutucnt tlischarae to that
Is general, and II the scction stood alone, an
argument of some force might be drawn from
It that Congress intended to impose an income
on interests and dividends from such bonds
and shares. without reference to the citizen
ship OF residence Of the holder.
must be considered In connection with other
parts Of the act, and the 11th section, Us We
have already observed, regards dividends,
subject to deduction by The officers Of tho
companies paying them, as iueonac, not ta=:n-
BILE except when payable to citizens or resi-
dents. i is inpfacticable to aseribe to Con-
g7ess q dihcrcutt intention In regard to inter
ests- Sound principles OF construction re-
qufrcd the Court to regard this section M
simply providing for tho c1eap md efficient
collection ot the tag On Incomes derived from
the bonds ind shares OF the companies d.
scribcd, and not at all rs touching, the nun-
ber or classes Of income tax payers, The in
tcrests and dividends on which The duty is
thus collected must be regarded. as the sa1ae
interests and dividends On which duty Is
to duty only when held By citizens or resi-
dents Of the United States.
The defendants PRAYER for instruction.
therefore, must be denied 80 far IS It asserts
right on the part OF the railroad company
to deduct i've per cent from the amount Of
The de.endant also elalms by Ils PRAYER a
right TO deduct from the eNoVnt of ne cou-
non suea an. three mills ner t3oltar m each
tond to which the COUPONS were annexed.
Three mills per dollar on each bond Is fhree
dollars On each THOUSAND dollar boni, The
interest on each Thousand dollar hond il tf,ir-
II fiol!ara- The cfaim tberrfnre ia ~ dednct
three dollars from each thirtv dollars or in
tcrcst. or. in other worda. tel, ner cenfnm nj
he who'd n1nonnt of the fnteresf cnnnnns n
he mid INTO the Trrasnrv of PenrsviyanIH'
For support Of this CHM the conrt had
YPt&ffNH faFt5nnA nj
the General Tax INV oT Pennsrivania ea A.,
Drfntsi, IN Rr{ehtjevss n7erst eI;finn ~ In:
and 10 The I'd sectI1n Of 4 stntnte ,Y ffe serne
Stnte i1npcsipr additiunai tares. approved
April 60, iSGI. The Court had time ier veTv
liitIe further search, and were moi nwnre of
any other statutes which could be regarded Is
supporting the claim. They ssl0uld consider
1t, therefore, a1naost excluslyely. with refer
|. ence to the provisions to which ff'ey had baen
referred.
The first or these, In section oS, page 78, Of
Bright!ey. Is mere enumeration Of the sub
jeck Of taxation In Peunsylvan1a, and Il Is not
easy to imagine that interest coupons are
intended by either Of the descriptfons And
this inference Ia strengthened By the Ian
gnnge Of the second provision citod from the
10lst section of the same law, which
specifics certain property. to be assessed
At eeftatn rates for State purposes. and
then adds, the cause cited for the Defendants,
namely: And on all other property taHlble
cn state purposes, three mills On every dollar
or the value thereof" The Court were Of the
opinion that there wasn reference here to the
ta1ation Of interest. Interest taxed as income
= = not a aptly described d. Is properly ta1sd on
tlis:a the valus tAereot nor ls It nkey t5at 50
thlee-tenias OF one per centum, less than
elsht aolmfa on LEG amount o. the interest
coupons sueQ on, would DC amposed as tax
oa ,s nsEIese c9nsaaetea eh. as meome. anu 1AWas
qnlte imposslnle Iaat my saea Ia1 snonlo
9ase 3as oeen imposed ca me pr1nciPai o. ne
4eut u "aiSn =" "sutys.1 s4 nnaassu ano y uity
ootafs m 5,i y na4 IeaIs Inteleste aaa airectea
~ oe Go4sctea " ue19ct1on nun tne 4uter-
eat. s ouc4 = ~ "oaiu W ~ ENORMOUS u tae
t1a,,,9 ~ y m.eiest Moua 9a ung ano
Mqnao stpa DC unprecedented IN Inc history o1 lax
sI9n. M n.,-,
tne .a1Ta pinVlson G!tea tor Tue aeleuaant !t!a!
= ao .ae .tt tuu seeetgn ~ ~ ~ " aooa.
p.; p,o.!;Hse .aas .Io uis y. hs ~ ts
, umpaff!B6s Ps.5iS 'esGs.. ~ nnNu, ot tlg
tatose " tha ~ ~ ~ - = @ suau
- ~ Ste+a Tsan ~ 1o0 I>A aAo p1S 11oSe1
- A. ~ tha ronrt IA ~ -oo,-d +ha s-et W.
.tsis,... s .sto.a 49, w ~ ~ tSsu .s p'
;uIn.;,n- ar4, ~ - - ~ ~ t.ssat ~ ~ ~
iss1od ~ 49, 40 ~ a9 thaa sas " tisL "a
rererd IL IL ~! 49,, ~ IL - 1es T., ~
onn1fcnhie II NJ tn11s in,,ossS h.; r. r. i, ~ ~
II Pa,,nsr1ron;a ~ tbs ;nie-as4 ia ~ fs~,.,
comnanT nnnc can IN hc 49, rrtafneI sS 1a@ LULU =
There Was fnired a stat1,tnr., ,,r,v,s,or y.
WHICH the III of Ida ia annnysa,'e md ~ ~
wiich 5nnbt,cse n was 1sp1ea aRps, - alm nnn1@ ~
me lo5th eection Of the General Ta1 Law,
louaa on pags !o9 o. 6nsntley, imposes taE
On the interest accr9ng on the loans ol stock
l5suea oy eorpolatlons, ano gn4fan!lea oT
1ne ata!s, ano Ihis = ta3 Nmcn m@nt oe
propelV enough eouectea bY dedncncn and
menaicn pta !. oy ne olnsets o. me corporation
eua ~ ,oes nut Apply 70 tae 9onas o. tne 0e"
lenuant, 1oF II y aok clancu Lnat lney are
Hualantlea " 1e otale. II 1olloWEa thM
tAey u4s4 ose1iA1e tae prayer o. Lae oe-
ienoant. IL vas proper 70 add that they had
eesn potnlng ~ t9e SLatules OF tennsylEania
Tn1s9 Na11antea me aupPosltion that It's
iLegElaItute aver mtenaeo 10 ta1 Donds or the