The Miller press. [volume] (Miller, S.D.) 190?-current, 1911-03-16
DECIDE BONDS TAXABLE
FAR-REACHING DECISION GIVEN
IN MINNESOTA.
Against Bonds Issued by Municipal
ties Located in Terri
tories.

fdTS WOTJu VI DOuuS loSucu W hAuhi>
qualities in territories Of 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 as to
banks, trust companies and savings
banks, according to a decision rem
dered by the supreme court of Min.
nesota.
The case was the State, respondent,
VS.. the Farmers and Mechanics Say
ings Bank of Minneapolis, appellant
The decision afirms that of Judge
John Day Smith in the Hennepin dis
trict court when the State sued the
bank to recover certain taxes which
the bank refused to pay in 1908. II
is estimated that $500 900 worth of
the securities affected are held in Min
neapolis.
In a syllabus the court holds that a
tax upon the surplus on which saw
ings banks are taxed is a tax upon
the property and not upon the fran
chise to exist as a corporation, which
is 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 as a part
of the assets for the purpose Of de-
termining whether there is a surplus.
Double Taxation Charged.
The second point in the test case in
which the banks counsel, Claud B.
Leonard, contended that a 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 constitution, in that pri-
vate holders of mortgages were i'm
mune from the second tax on them,
wrought a decision in direct opposi-
ton to Mr.. Leonard's opinion.
I'VE contended that inasmuch as the
municipalities of territories and the
bonds they issued were instrumentali.
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 hat bonds of the above nature
should not be added to our surplus.
Under the Minnesota law all mort
cages pay a specific registration tax
of one-half of l per cen 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 us to pay taxes
on such mortgages vas double taxa
ton and that the provision in the law
making the same applicable only to
savings banks and trust companies
was unconstitutional"
w. A. Lancaster assisted in prepar-
ing the case for the bank. Il was a
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. S39, r. l.. 1905, provides for
the taxation OF savings banks by de-
Quoting the sun total of the deposits
and accounts payable from the sum
total of the assets including personal
property appertaining to the business,
and the surplus, if any, is listed and
assessed as credits according to the
provisions of sec. S35, r. l.. 1905.
Held, the a. upon the surplus is a
property tax and o a tax upon the
franchise to exist as a corporation.
Municipal bonds issued by the
municipalities Of the territories of the
United States are o 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 there is a sur.
plus.
Chapter 326, laws 1907, which re-
quires savings banks to pay a registry
mortgage tax upon mortgages owned
by them, without exempting such
mortgages from taxation otherwise, is
not class legislation nor in conflict
with sec. 1. art. IA, of the federal con
stitution."
Affirmed. Lewis, J.
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