Source: https://en.m.wikisource.org/wiki/National_Bank_v._Commonwealth
Timestamp: 2019-04-24 03:24:59+00:00

Document:
'Section 40. That the president and cashier of every such association shall cause to be kept a correct list of the names and residences of all the shareholders in the association, and the unmber of shares held by each, and such list shall be open to the inspection of the officers authorized to collect taxes under State authority.
Acting in professed pursuance of the State statute, the Commonwealth of Kentucky demanded payment from the said bank of $4000, with interest, the sum which a tax of fifty cents per share on the shares of the bank gave. Payment being declined the State sued.
1. That the bank was not organized under the law of the State, but under the bank act of the United States, and was, therefore, not subject to State taxation.
2. That it had been selected and was acting as a depositary and financial agent of the government of the United States, and, therefore, was not liable to any tax whatever, either on the bank, its capital, or its shares.
4. That the shares of the stock were the property of the individual shareholders, and that the bank could not be made responsible for a tax levied on those shares, and could not be compelled to collect and pay such tax to the State.
The commonwealth demurred; and the case resulting in a judgment in its favor in the Court of Appeals, this writ of error was prosecuted by the bank.
I. We admit that under recent decisions of this court shares in National banks may be taxed in the hands of the stockholders.  But this tax is laid, not on shares in the hands of stockholders, but on the capital of the bank itself.
Under the statute of Kentucky the amount of the tax is calculated by charging fifty cents on each one hundred dollars of stock, exacted in solido from the bank itself, under penalty of twenty per cent. damages in addition against the cashier and forfeiture of the charter. This is not a tax upon the shares but on the bank. The shareholder is neither named nor known in the transaction. It is a matter between the State and the bank. The shares of one hundred dollars are used simply as a means of computing the amount of tax on the capital stock. Without this, or some similar contrivance for estimating, a tax could not be levied on capital stock. There is not a word said about requiring the bank to pay for the shareholder as a convenience, but it directly, in terms, applies to stock of the banks. What stock does the bank own except the capital stock, which is identical with itself? The law requires the cashier of a bank whose stock is taxed, on the first day in July in each year, to pay the amount due. The amount due upon what? Clearly upon the capital stock. The capital of State banks in Kentucky is not always divided into shares of one hundred dollars each; on the contrary, some of the State banks now in operation, as ex. gr., The Merchants' Bank of Kentucky, are divided into shares of only twenty-five dollars each, and one, The Western Financial Corporation, into shares of five hundred dollars each.
Now, these two banks are taxed annually under the statute, because in Kentucky there are no other laws upon the subject. The language is 'fifty cents on each share thereof equal to one hundred dollars of stock.' If that means a tax upon the share, as the Court of Appeals holds, the shares in the said banks being respectively twenty-five and five hundred dollars, and the law providing only for a tax on shares equal to one hundred dollars, nothing can be clearer than that no tax at all is levied on their shares.
II. A tax on the capital stock of the bank cannot be collected.
2. Because of its character as an agency and instrument of the powers of the Federal government.  If there be any one principle of constitutional law now universally acquiesced in, it is that the powers, agents, and means employed by Congress to carry into effect the powers vested by the Constitution in the Federal government must be free from State taxation and control. Taxation would impede, burden, and perhaps destroy the constitutional laws of Congress, and hostile legislation revolutionize our National economy. Such protection is necessary to uphold the nation's credit and preserve the nation's life. The tax imposed in this case upon the plaintiff in error is, in substance and in fact, a tax upon the operations of the bank itself.
III. Can the law be enforced as a tax on shares?
IV. A concession of the right as claimed carries with it means for its enforcement.
This right, if conceded, may, and actually does, involve the destruction of these National agencies.
'If such tax be not paid,' says the statute, 'the cashier and his securities shall be liable for the same, and twenty per cent. upon the amount; and the said bank or corporation shall thereby forfeit the privileges of its charter.' Such is the law upon which this proceeding is based.
V. The rate of taxation is higher than allowed by Congress.
^1 13 Stat. at Large, 111.
^2 Revised Statutes of Kentucky, vol. ii, pp. 239, 266.
^3 Van Allen v. The Assessors, 3 Wallace, 573; Bradley v. The People, 4 Id. 459.
^4 Weston v. City of Charleston, 2 Peters, 449; Bank of Commerce v. Commissioners, 2 Black, 620; The People v. Commissioners, 4 Wallace, 244.
^5 McCulloch v. State of Maryland, 4 Wheaton, 316; Osborn v. Bank of the United States, 9 Wheaton, 738; Bobbins v. Commissioners, 16 Peters 435.

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