Evening star. [volume] (Washington, D.C.) 1854-1972, 1878-10-22


the Attorney General relative 10 the 365 bonds:
DEPARTMENT OF JUSTICE. !
WASHINGTON, OcJ. 10th, 1873.
Hon. John Sherman, Secretary Of tie Treasury:
siK;m1our letter Of the 9th ult requests an
the provisions of section 5,215 OF the revised
statutes of the United States, national bank.
in arriving at the amount of taxable capital
stock beyond the amount allowed in u. 5. bonds,
shalt be allowed to deduct the amount invested
In fifty-year 365 funding bonds of the District Of
COlumDla, issued under the act of June 20, 1874.
Section 5,2l4 of the revised statutes is as fol-
lows In lieu of all existing bonds every asso-
citation shall pay to the Treasurer OF the United
States in the months of January and July, a
duty OF one-half Of one per ceatum each half
year upon the average amount of its notes in
circulation, and duty of one-quarter Of one per
OF ITS deposits, and duty of one quar-
ter Of one per centum each half year
on the average amount of its capital stock be-
yond the amount invested in United States
bonds" The first inquiry that is presented in
examining this question is, whether the bonds
known as the "thtee.sixty.tive District OF Co
States. Upon this question, have no doubt.
The act of June 90, 1874, as stat, ch. ss7, p116)
abolished the then existing government of the
District of Columbia; but provided Din the 7th
section> that the sinking fund commissioners of
the District, who were then existing in purSll-
ance of previous legislation, should be contin.
ued and made 1t their duty to cause bonds Of
the District of Columbia to be prepared, :.to be
signed by the secretary and treasurer of said
sinking fund commissioners, and cOunterSigned
by the comptroller of said District. In addi-
tiOn, there was provision in regard to the
pledge of the United States, which, as amended
by a subsequent act Of February Goth, 1875, Us
the faith of tie United States is hereby pledged
that the United States will, by proper proper
tOnat appropriations as contemplated i'm this
act. and by causing to be levied upon the prop
erty within said District such taxes as will do
so, provide the revenues necessary to pay the
interest On said bonds as the same may become
due and payable, and create sinking fund for
the payment to the principal at maturity. The
District OF Columbia was expiring corpora
ton. and as corporate legal entity il ceased
to exist by, operation of this act. The sinking
fund commissioners derived their powers, func-
tiOns and authority from the United States and
the issuance Of these bonds was the means pro-
vided by the United states by Which certain
liabilities OF the District were to be discharged
AS that corporation thus ceased to exist, and
as TIE bonds We're prepared and issued by the
commissioners OF the sinking fund under arl-
thOr1ty from the United States, and the faith of
the United States was pledged to provide by
legislation for payment of principal and interest
upon the same, as well by proportional appro-
pliatfonS from its Treasury. and by cauS-
ing to be levied upon the property in
tie District such taxes as would provide the
revenues necessary for the payment of the in
tereSt on said bonds, create a sinking fund for
the payment of the principal at maturity, it
must be considered that these are obligations OF
the tinted states to the payment Of the inter-
est and principal of which its faith is SOlemnly
pledged. To use the expression of my predeceS-
sor, Attorney General Per1epOnt: !.rhere is no
way short OF shameless violation of the clear
est principles OF settled law and honest dealing
That The government can escape from the full
payment Of these bonds" While these are OBJ
legations Of the United States, for payment of
which its faith is plainly pledged, there remains
the inquiry whether they are 90 United states
bonds" within the meaning Of the statute be
fsTe us. 1t would seem TO be clear that the fact
that they are obligations OF the United States.
Gees not dispose OF the question whether they
are to be included within the amount exempted
under this statute. 1t would moi be contended
fer instance, that the ''gold and silver certiti-
cateS,' as they are famiarly called of the
United states. which are certificates OF ndebt-
ness, 10 the payment OF which the faith of the
United states Is pledged. would be exempt
under this statute. IL must therefore be de
termined whether or not these securities of the
District are - United States bonds" within the
meaning OF statute. When the statute OF 1864
was passed, and also when it was embodied i'm
the revision. There could have been no refer
ence to any United States bends except signed
by tie secretary of the Treasury, and issued in
pursuance OF law, as the bonds of the District of
Columbia had not at that tine been provided
Tor. They were provided for by the act Of June
~, 1874; and although the revision passed on
June 22. lS,i. 1t Gid not affect OF repeal any &C
OF Congress passed since December ], 1873, bu
all such acts were to have full effect as |
passed after the enactment Of its revision /
could not, therefore, have been within the con-
temptation or congress at the time when the
act was originally passed. nor at the time Of
the revision to include the bonds Of the District
OF Columbia within those exempt from taxa
ton under section 5,214 of tie Revised
Statutes, because they then had no existence.
or course they could have been included by
subsequent legislation. 1t is important in this
connection to observe that in all the legislation
relating to the bonds in question they are never
spoken OF as g United States bonds, but always
as 1.-THE bonds of the District of Columbia
Thus, they are SO called in the act authorizing
the siDk1dg fund commissioners to issue them
they are SO termed In the act of February 1St
1875, in regard to the payment OF interest upon
N nRf M
support OF the government OF the District of Co
lumbia;'' and the same phrase is used in the
Joint resolution OF March IA, 1876, directing the
payment Of interest upon them. The same
phrase is further found in the acts approved
July 81, 1876, aud March Sd, 1877; and In the last
statute relating to them-June II, fS,s-they
seen that this legislation, while it con
TIM tInues to recognize the responsibility OF
careful always. by the term which it affixes
to them to distinguish them from the Uriied
states states ponds, POI properly so-called, which are
stat, p. 99, sec. ~ The conclusion to which |
arrive upon this point is, that 1.-The bonds of the
District OF Columbia" are not ''United States
the Revised Statutes. | have considered the
inquiry with relation to section 5,214 of the Re-
vlscd Statutes, although your question refers to
section 5,2l5, as the expression in the latter
must be governed by its use in the former see
ton. AS the purpose OF your inquiry is to de-
termne whether these bonds are TO be treated
as United states bonds in arriving at he amount
OF taxable capital stock Of national banks, il is
proper to consider whether the fact that the
bonds OF the District of Columbia are exempt
from taxation, authorize their deduction from
the amount Of capital stock over and above that
which is invested in United States bonds, prOp-
erly so-called, in ascerta1ning the amount OF
taxable capital stock.
BY its act authorizing these bonds it was pro-
v1ded In the seventh section, part of which I
have heretofore quoted, that they "Shall be
exempt from taxation by federal, state, or mtl-
nic1pal authority; engraved and printed at the
expense OF the District OF Columbia, and in form
not inconsistent herewith" The question is
necessarily here presented as to the nature of
the tax which is imposed by section 5,214 of the
Revised Statutes. The principles by which
taxes Of this nature are to be decided are rea-
sonably well settled, although the application
OF them is always attended with difficulty. II
the tax in question is TO be treated as tax
upon property, it must be deemed that from the
property which the bank thus possesses over
and above the amount invested in United States
bonds all nOn-taXable property is to be deduct
ed, and thus the District Of Columbia bonds are
TO be deducted. II it is, however, a tax upon
the franchise OF the bank, that is, upon the
privilege given to it OF doing business as ma.
tonal bank, and is thus one OF the burdens i'm
posed upon 1t by reason OF such privilege, such
property is not to be deducted. A franchise tax
is levied in consideration of the value of the
privilege which is given to those who receive the
franchise, and although in point of fact they may
see MT to invest their funds in nOn-tayabip