The New York herald., 1869-04-20
UNITED STATES SUPREME COURT.


@. JactSoh-In error to the Circuit Court of the
District OF Maryland. Mr.. Justice Nelson delivered
the opinion OF the court THIS is a writ OF error t6
The Circuit Court of the United States OF the District
OF Maryland The suit was brought by Jackson,
- nonresident ahen, against the Northern Central
Railroad Company Incorporated by the State Of
Maryland, 10 recover 81, $50, coupons attached tC
bonds issued By the company. A copy OF one Is as
foliows:-
The Northern Central Railroad Company wiz pay
10 the bearer January l. 1885, thirty dollars. being
hail years interest on bond No. 1891 tor u l,o00
j. 5. LIEB Treasurer
The signature OF the treasurer was admitted; the
plalnlh then proved demand OF payment, at
which time and place the company offered to pay the
amount, deductng tax OF five per centum per
annum to the United States. under an act OF Con-
gress, and further tax OF three mills per dollar OF
the principal OF each bond claimed to be due TO the
State OF Pennsylvania, which offer OF payment was
refused The plaintiff also gave In evidence
charters Incorporating the Northern Central Rail-
road Company by the State of Maryland and OF
Pennsylvania, ana rested. The defendant then gave
In evidence the articles OF consolidation OF four rail-
road companies one OF which had been Incorporated
by the state OF Maryland, and the three others by
the state OF pennsylvania, embracing line of road
extending from Baltimore SO Sudbury. Pa. Tnls
consolidation was entered into by the respective
companies IN pursuance OF acts OF tho legislatures Of
tie two States; and by means Of which the our COM
palles were merged into one, called the Northern
CeAiral hal!roaa Company, ana was Incorporated by
the same name by the legislature OF each STATE The
stockholders of the oid Companies received from the
Bew twice tile number Of shares held by them IN the
Old and upon the receipt or which the old shares
we cancelled. After this company was thus organ
lzed and The directors elected; and, on the 20th
December, 1855, IT executed mortgage 10
board OF trustees upon the entire line
ci its road from Baltimore to Sunbury including all
ITS property and estate situate within both the
States which mnrtgage was gwen TO secure Tie pay
ment oil y 5u0Og1 II tonds TO be issued in amounts
therein specified. The bonds were issued by the
company accordingly. portion OF them are IN the
hands OF the plainu, the coupons attached TO which
are The subjects OF this sui Upon this state OF the
case IT a insisted on the part OF the defence that the
Northern Central Railroad Company is entitled to
have a deduction from the coupons of three nills
per dollar OF the principal OF each bond as tax in
posed on the same ty The state OF PENNSYLVANIA
Ills Is denied by the plaiDtln 1t has been argued
for the plaintln that the acs OF the Legislature Of
Pennsy When properly Interpreted do not en-
brace the bonds or coupons Ia question; but il is not
important to examine the sub for 1t moi to be de-
ned that as the courts Of the state have exrounded
these laws they authorize the deduction and If no
other objection existed against the tax the defence
would ail. II this was an open question should
have conCurred with the Interpretation OF the court
below, which cOncufred with the views of the p,an-
tln's counsel. These acts, as expounded, tax
''money owing bg insolyent debtors whether
by promissory note penal or single bill
bond or Judgment and impose three mills
on the dollar OF the principal PAYABLE out Of
the interest and Is made the duty OF The president
or other officer Of The company who pays the cou.
pons or interest to the holder to retain the amount
tency OF The Legislature OF Pennsylvania TO irnpose
this tax upon general principles as we snail Mace
the objection upon other and distinct grounds
though we must say that the tax upon the pron,is-
sorry note or bond given 10y the resident debtor and
the withholding OF the amount nom the interest due
10 the nonresident holder, would seem to be n tax
upon each nonresldeut. IL Is not tax of the
money loaned because that belongs to the resident
debtor, Tor which he is taxable; it Is tax on the
security-the bond, which In the hands OF The nom
resident holder The ground upon which we nlace
the objection In this case TO the tax is IN brief thai
M nf ,,.h
In question are part, were Issued by this COMPANY
upon the credit OF the line OF road Its franchises and
1Xtures, extending from Baltimore to Sunbury
gwen portion OF which line lies within tie iuris.
diction OF the State Of Maryland. The old eomnany
consolidation, transferred 1t, with It's IXtures
and all other interests connected therew;th incl,l
ing their stock, TO the new organization which has
issued these bonds The security therefore pledr red
and bound for the payment Of them ana OF the nteTe
embraces TINS Maryland portion OF the road: and in
case of failure TO pay the principal interest thus
portion, with It's franchises and fixtures would he
liable TO sale in satisfaction OF the bonds ana IN.
terest. Now it Is apparent II the state OF Pennsv
vana Is at liberty TO tax these bonds that To- the
extent OF this Maryland porsion OF the road She is
taxing properly and interests beyond her jnrsIic-
ton. Vhi portion ayails her tdX roll as efectualy
as II Il was situated within her own limits Tie Nj
ryland portion Is not liable for the rayment OF apy
specified part or quantity OF these bonds thus taxed
bur IL liable with all It's Interests for The whole
amount the same as that portion OF the road within
the state OF Pennsylvania. The bonds were an issue
In the usua way, by the Northern Central Railroad
Company, ana tie security given by mortoage an
tbe eDtIe me ui Ihe rOad NO portion Of the bond;
belong 10 one part more than To another. No sever
ance made Of the bonds aru therefore none
can be made IN the taxation with reference TO the
lue within the respective Jurisdictions of tie
States II The TAX Is permitted as It resnects one
bond, IL must be as II respects all. Again IL Penn.
sylvania can tax these bonds upon me sarna
principle Maryland can tax them. THIS -
too apparent 70 require argument. The only
difference IN the two cases l., that the line Of the
road Is longer within the limits OF the former than
within tue latter. The tax would be more marked
one beyond the jurisdiction Of the STATE "a the pro.
narfV "a n IN 10 Hft -
larger. The consequence OF TINS tax OF three mills
on the dollar II permitted, would be double taxa.
ton OF the bondhol1er. Each state could tax the
entire issue OF bonds, amounting as we have sean t
$4,000 The effect OF this taxation upon me
bondholder is readily SEEN A tax OF three mills
per dollar OF the principal at interest Of ak per
centum. payable semiannually Is ten per cenum per
annum OF the interest. A tax, therefore, by each
state at this rate amounts TO an annual deduction
from the coupons OF twenty per centum: and n mi,
consolidation OF the line Of road had extended into
New YORK or ONO or into both. the deducton would
have been thirty or forty II pennsylvania must tax
bonds OF this description, she must cOnfne It 10
bonds issued exclusively by her own corporeti tions
Our conclusion this branch OF the case is mat To-
permit he deduction OF the tax from the coupons In
question, would be giving effect 10 the acts OF the
Legislature or iennsylvGnla upon properly and In
teresta lying beyond her jurisdciion The next qucs
ton Is whether or not the coupons we're sub Get
20 the United States on The list Of Jn,v SM' ,sss
when they became dueY The first income tax was
imposed by the act OF Congress passed August q
1881. az u = stat, y. 309 The forty-ninth section
OF that act directed to be levied ana collected upon
the auhual lncoluc Ol every person residing In
United States from whatever source derit ed INV or
three per centum on the amount OF the excess of such
income over ssoJ; ana upon the income, rents or
dividends accruins upon properly, SC. owned In
the United states by any citizen residing abroad a
tax OF Eve per cent. The next act was passed July
l. 1852 Qb. p 473 ana section ninety directed 20 he
levied and collected a tax OF three per centtln, on
the annual income OF every person residing In tae
United states over 5000 and under $1,000 an cx-
ccedlng $4,000 a tax OF i've per centun: and upon
tne income Of citizens residing abroad tax OF nye
per centum. The next section provides that the
portion OF income derived, among other things from
interest on bonds or other evidences OF indebted.
ness of any railroad company or other corDo alton
winch siiaii nave been assessed and paid by said
companies, shall be deducted irln that rfe
fcrbed In tEe previous section: ana secilon
eighy-one directs that this tax on tho bonds
aud evidences OF indebtedness shall be maid
by the companies. which may deduct the same on
the payment OF interest to the bondhOdcrs The
- - no lot M "a al,