The pioneer express., 1911-03-17
| Decide BONDS TAXABLE
FAR-REAcHiNo DECISION GIVEN
n IN MiNMEaorA.

Against Bonds Issued BY Munlelpall
Ties Located Ii fsrri- q =
Il tories.
Il st. Paul, MINI. - Millions oe dol
lars worth Of bonds issued BY munic
tpalities iii territories d the United
States. purchased BY thrifty investors
in the belief based upon eminent legal
advice that they were on the basis Of
government bonds and untaxable by
states. are now taxable, at least IL to
banks, trust companies and savings
banks. according 70 . decision rem.
dered by the supreme court Of Min.
nesota. '*-
The case was the State. respondent,
vs. the Farmers and Mechanics Sav.
ings Bank Of Minneapolis, appellant,
The decision affirms that Of Judge
John Day Smith in the Hennepin dis.
trict court when the State sued tho
bank to recover certain taxes which
the bank refused to pay in 1908. It
is estimated that $50O,000 worth Of
the securities affected are held in Min.
neapolis.
In syllabus the court holds that q
tax upon the surplus on which saw.
ings banks are taxed IL q tax upon
the property and not upon the fran.
chise to exist as a corporation, which
10 a contrary view to that taken BY
the states lawyers. In the case. It
further rules that bonds issued by
the municipalities Of the territories Of
the United States are taxable and
must be taken into account an q part
Of the assets for the purpose of de.
termining whether there is surplus.
Double Taxation Charged.
The second point In the test case in
which the banks counsel, CIaud B.
Leonard, contended that tax on
mortgages under the savings bank tax
law Of 1907 In addition to the registry
mortgage tax was double taxation and
also class legislation, in, conflict with
the federal constitutions. in that pri.
vate holders of mortgages were i'm.
mune from the second tax on them,
wrought decision i'm direct opposi.
ton to Mr.. Leonard's opinion.
1--WE contended that inasmuch as the
municipalities of territories and the
bonds they issued were instrumental.
ties Of the federal government, the
bonds: could not be taxed commented
Mr.. Leonard. Mutual savings, banks
are taxed on their surplus and we con
tended that bonds of the. e.abeNe nature
should not be added to our surplus.
Under the Minnesota law all mort.
cages pay a specific registration tax
of one.half of ! per cent and are there.
after exempt as personal property.
We contended that such mortgages on
which the registration tax had been
paid should also be deducted from our
surplus Of personal property on. which
we were subject to taxation. on the
ground that to require ussto pay taxes
on such mortgages was double taxa
tion and that the provision in the law
making the same applicable only to
savings banks and trust companies
was unconstitutional
w. Az. Lancaster assisted in prepar.
ing the case for the bank. II was .
test suit peculiarly devoid Of prece
dents. Investigation will now be
made to- learn whether the case may
be- appealed to the federal courts,
Following is the syllabus in the
case:
"Sec. $50. r. L. 1906. provides for
the taxation of savings: banks by de.
Quoting the sum total of. the, deposits
and; accounts payable from the sum
total; Of the assets including. personal
property appertaining to the business,
and tho surplus, if any, is listed and
assessed as credits according to- the
provisions Of sec. 1885,. r.. l. 1906.
Held, the tax upon the, surplus is q
property tax and not a. tax upon the
franchise to exist as a. corporation.
Municipal bonds issued, by the
municipalities of the territories of the
United States are not exempt from
taxation In the hands, of savings banks
in' this state and all such bonds must
be- listed and taken into account as a
part Of the assets for the purpose of
determining whether thare is a sur.
plus.
Chapter 1876. laws 1907. which re-.
quires savings banks to pay registry
mortgage tax upon marriages owned
By them, without exempting such
mortgages from taxation otherwise, is
not class legislation nor in conflict
with sec. I. art. n. ef the federal con.
stitution."
Affirmed. Lewis, ].
HARVARD PAPER SUPPRESSED