Evening star. [volume] (Washington, D.C.) 1854-1972, 1904-05-25
THE NATIONAL BANKS
THOSE DOING BUSINESS HERE
MUST PAY PERSONAL TAX.
Legal Opinion of Corporation Counsel
is Approved by District
Commissioners.

The national banks doing business within
the District of Columbia are required to
pay a personal tax of per cent year on
moneys derived from interest on United
States bonds held by the institutions. TINS
is the substance of legal opinion submit
ted to the Commissioners by Corporation
Counsel A. B. Duvall, in the case of the APP
peal of the Second National Bank from the
decision of the board Of personal tax ap-
praisers The opinion of the corporation
counsel sustains the action Of the personal
tax appraisers.
While the opinion is submitted In connec-
ton with the case of but one national panA,
yet the decision will govern all nationai
banks In the city. The opinion in eHec.
further holds that all earnings Of national
banks, from whatever source derived are
subject to a personal tax OF per GEM. 49,,
In the specific case under conslderation
the Second National Bank protested against
paying personal tax on SLOW OF It's eross
earnings which amount, 1t was statea, nau
been derived from interest on united states
bonds.
The question to be determined in the case
in point was whether the interest on the
bonds should be included among the gross
earnings of the bank and taxable unoel me
law approved July l. 1902. In connection
with this there was the further question as
to whether the tax was to be construed as
tax on property (Which In the case IN pom, -,
would be invalid, since 1t was stipuiateo III
the bonds sold in 1900 that the interest on
them was exempt from taxatlon) VI
whether the assessment was 10 De cUu-
strued as franchise taxa tax upon nc
bank itself for the privilege OF doing Dus,.
ness, and not charge against the propei''
of the bank.
A Franchise Tax.
The hoard of personal tax appraisers took
\ ohorcY
cbtse tax. and Attorneys Mattfngly ana
Clenbane ON behalf of the bank. filed an
appeal from the decision. The attorneys
maintained that the bonds constituted
contract between the United States gov
eminent and the bank, which contrac.
would be abrogated If the government.
could levy tax upon interest coneceeu
from such bonds. In violation OF .ns s SolS
language of the document. 1t was neld
that the act of 1902 did not mean TO levy
a franchise tax. One reason for TINS view
was that the charters of the corporations
concerned could not be invalidated by rea-
SON of violation of this section. nor could
their license to do business be revoked. II
was stated that the United States Supreme
Court had held that no state could impose
In his opinion on the case Mr.. Duvall
cited cases in the Pennsylvania supreme
court the courts of Connecticut and the
United States Supreme Court to support
terest on United States bonds is legal. In
the United States Supreme Court decision
1t was held that United States bonds We're
not exempt from the inheritance tax OF the
war revenue act Mr.. DuvaH held that
banks could be enjoined from the future
exercise of their franchises until all taxes
were fully paid.
Legality of the Tax.
In concluding his comment on the matter
fha corpOratfOn counsel saws:
sIn the present case there Is no tax
imposed upon any property Of the corpor-
alton, but on the earnings of the corpor-
alton. and the tax Is not laid upon the
earnings for the year In which the tax Is
collected, but Is laid upon an estimated
amount which Is the actual amount Oh
earnings for the preceding year.
Congress- by it's act Of July l, 19Uo,
was imposing taxation for the purpose or
the municipality which 1t had created In
the territory over which 1t has exclusive
Jurisdiction: and 1t seems to me 1t was
dealing with the national banks In the
District as the Supreme Court had held
the state legislatures may deal with such
banks operating within the states.
ssI am of the opinion therefore, that tne
tax provided for in the act Is not to be
construed as a property tax, but as
franchise tax, and, such, Is a legal
tax and that consequently the interest," on
United States bonds owned by the SECOND
National Bank should be included among
IT'S gross earnings for the purpose OF taxa
ton under said act"
Commissioner West In approving the
opinion of the corporation counsel recon-
mends that the attorneys of the Second
National Bank be informed in accordance
with the opinion, and the papers trans
mitted to the District assessor Tor MS
ouidance Commissioner mcfarland mas
concurred in the Recommendation