The Brattleboro daily reformer. (Brattleboro, Vt.) 1913-1955, 1917-02-13
UPHOLDS LOAN ACTS
TAX EXEMPTIONS
Important Decision Made by the At
torney General Is Announced by
Secretary KfcAdoo.

WASHINGTON, Feb. l5-Secretary
McAdoo has announced that ATTORNEY
General H. w Gregory had rendered an
opinion upholding the constitutionalitv
Of Section % OF the federal farm loan
act exempting first mortgages executed
to federal land banks, or to Joint stock
land banks, and the farm loan bonds
to be issued by these banks from state,
from municipal, and from local taxa
ton. The secretary asked the attorney
general for the opinion in response to
n number of inquiries submitted to the
federal farm loan board with a view
to settling any possible doubt that
might arise The section of the farm
| loan act III question says:
First mortgages executed to federal
| land banks, or to joint stock land
| banks, and farm loan bonds issued I'M
der the provisions of this act, shall be
deemed and held to be Instrumental
tiles Of the government Of the United
States, and as such they and the in
come derived therefTom shall be exempt
from federal state, municipal, and To-
cal taxation.
In his opinion Mr.. Gregory says:
/ II assume that It ~ the constitu-
tionalit; of that portion if the section
which cxemptS first mortgages and
farm loan bonds from state, municipal,
and local taxation which is in question.
and | contine myself to that matter
"While there are many eases deal
ing with the taxation of the federal
/, government, il is sufficient in the
; present ease to refer TO ATcCulloch \.
the State Of Maryland, and certain
eases following. and similar to that
ease. In McCullOch Y. the state Of
, Maryland, after holding that the act
Incorporating the Bank of the United
states was constitutional, it was held
, that the state had no power to require
> a stamp tax on the circulating notes OF
: said bank 1t should be noted that
these notes were not obligations Of the
Cnited States non legal tender. They
were merely issued by the bank to Dor
{ rowers in exchange for notes OF the Dor
| rowers discounted by the bank.
g 1.-The supeme court did not deny tn,
J power Of the state Of MARYLAND to ta9
I the property of the bank within tn
state. but held that it could not tax III,
n operations of the bank as such Thi
! ease was followed in Osborne Y. tn,
4 bank, 9 Wheat, 73S, where il was hel,
: that the state could not levy a Hcens
}. tax upon the United States bank 70
@ doing business in the state.
Mr.. Gregory cites several Simila
j. cases and then SAYS
The question is whether q state ta.
4 upon the bonds and first mortgages con
Iemplated by the Federal Farm Loa1
: act Is u tax upon the operations Of tn
E system created by the act, so that SUE
!. 4 tax may hamper ii in its efiicien
: and successful operation: or. Iookin
g at IL more narrowlv. whether the abov
q question is OF sufficient doubt to max
:. the declaration of congress that sue
o tax would hamper the operations 0
n the system conclusive upon the court}
s Il do not deem il necessary to III
alyze the act i'll detail. 1t IS sufficien
d to say that the mortgages and farl
q loan bonds are of the very essence q
r the system created hy it.
e THE original capital of the FEEDER;
r land banks is to be loaned. through tn
n agency of national farm loan associ;
W tionS. to bona idc cultivators of ii
e soil on first mortgages on farm land
G When a sufficient amount in such NOR
70 cages has accumulated they are to /
Is turned over 10 a Registrar appointe
by the Farm Loan board. and, with Il
approval Of that board, farm loa
bonds are issued by the land bank an
sold. With the proceeds further loai
are made on mortgages, which NOR
n cages in their turn become the has
for an additional issue Of bonds. Tn
continuous flow and refow Of nor
e. Cages aud bonds constitutes the prin
5, function Of the whole. system.
IL = \ tax upon these bonds and NOR
e, cages would therefore, be tax upt
j. the most important operations Of Il
n system and might hamper it to so gre
Is an extent as to render it unsuccessful
e In oher words, it might be found il
It possible to raise capital by means