Source: https://caselaw.findlaw.com/us-supreme-court/231/373.html
Timestamp: 2019-04-25 04:57:26+00:00

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[231 U.S. 373, 374] Messrs. Maxwell evarts and George Richards for plaintiff in error.
The contention of the plaintiff in error, made in the state tribunals and reiterated here, is that the taxes are invalid because made without allowing any deduction for relator's debts, as alleged to be allowed by the laws of New York in the case of other moneyed capital in the hands of individual citizens of that state; it being insisted that inasmuch as the debts of relator exceeded the valuation of the bank shares, the assessment should be wholly canceled.
'1. In the first column the names of all the taxable persons in the tax district.
'2. In the second column the quantity of real property taxable to each person, with a statement thereof in such form as the commissioners of taxes shall prescribe.
'3. In the third column the full value of such real property.
'1. Every foreign corporation doing a banking business in this state, except a national bank.
'2. Every unincorporated company, partnership, or association of two or more individuals, organized under or pursuant to the laws of another state or country, doing a banking business in this state.
'3. Every other incorporated company, partnership, or association, of two or more individuals, doing a banking business in this state, if the members thereof, owning more than a majority interest therein, or entitled to more than one half of the profits thereof, or who would, if it were dissolved, be entitled to more than one half of the net assets thereof, are not residents of this state.
'4. Every nonresident of this state, doing a banking business in this state, in his own name and right only.' [231 U.S. 373, 384] 5219, Rev. Stat. [U. S. Comp. Stat. 1901, p. 3502] ) that 'the assessment and taxation shall not be at a greater rate than is made or assessed upon other moneyed capital in the hands of individual citizens of this state;' that the valuation of the shares of going concerns is to be ascertained by dividing the amount of capital stock, surplus, and undivided profits by the number of shares; the valuation, in the case of banks in liquidation, to be fixed by dividing the actual assets by the number of shares; that a fixed rate of tax equal to 1 per centum upon the value thus ascertained is imposed without deduction because of the personal indebtedness of the owners, or for any other reason; that the tax is in lieu of all other state taxation upon the choses in action and personal property held by the bank whose value enters into the valuation of its shares of stock; that this section is not to be construed as an exemption of the real estate of the banks from taxation; and that no share of stock of such banks, by whomsoeven ever held, is to be exempt from the tax imposed. In construing 24, the court of appeals of New York had held ( People ex rel. Bridgeport Sav. Bank v. Feitner, 191 N. Y. 88, 96, 83 N. E. 592) that the effect of introducing into the section the limitation prescribed by 5219, Rev. Stat. (U. S. Comp. Stat. 1901, p. 3502), is such that if any bank is located in a tax district where the rate is less than 1 per centum, its stockholders are entitled to a reduction to conform to the local rate.
It is not insisted that this tax law discriminates against national banks or the stockholders thereof as compared particularly with individual bankers, trust companies, or savings banks. The ground of complaint is that 24, in providing that owners of bank stock (state or national) shall not be entitled to deduction from the taxable value of their shares because of their personal indebtedness, is contrary to the restriction contained in 5219, Rev. Stat (U. S. Comp. Stat. 1901, p. 3502), that the shares of national banks shall not be taxed 'at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state,' because, under 21 of the tax law, all persons are permitted to deduct their debts from their other taxable personal property in general, including, as is claimed, other moneyed capital.
Plaintiff in error relies chiefly upon the decision of this court in New York v. Weaver, 100 U.S. 539 , 25 L. ed. 705. That case was in effect a review of the decision of the court of appeals of New York in People ex rel. Cagger v. Dolan, 36 N. Y. 59. The question was as to the validity of an assessment and taxation of national bank shares in the city of Albany under the state law of April 23, 1866 (N. Y. Laws 1866, p. 1647), without deduction because of the indebtedness of the taxpayer, in view of the fact that under other laws the owners of other kinds of personal property were entitled to have the amount of their debts deducted from the valuation for the purposes of taxation. The state court in the Dolan [231 U.S. 373, 386] Case had justified the method adopted in taxing the bank shares, upon reasoning that assumed 'that while Congress limited the state authorities in reference to the ratio or percentage levied on the value of these shares, which could not be greater than on other moneyed capital invested in the state, it left the matter of the relative valuation of the shares and of other moneyed capital wholly to the control of state regulation.' This court held that the clause in 5219,- 'that the taxation shall not be at a greater rate than is assessed upon other moneyed capital,' etc., meant that the taxation upon shares should not be greater than on other moneyed capital, taking into consideration both the rate of assessment and the valuation. In other words, that the restriction contained in the act of Congress had to do with the actual incidence and practical burden of the tax upon the taxpayer.
This decision was followed by several others to the same effect. In Albany County v. Stanley, 105 U.S. 305 , 26 L. ed. 1044, it was pointed out that the decision in the Weaver Case had not the effect of declaring the New York act of 1866 void, but only of deciding that the tax there in question was void because the taxpayer had been refused the same deduction for his debts that was allowed to other taxpayers having moneyed capital otherwise invested. Hills v. National Albany Exch. Bank, 105 U.S. 319 , 26 L. ed. 1052, and Evansville Nat. Bank v. Britton, 105 U.S. 322 , 26 L. ed. 1053, applied the same principle.
The tax law of New York now in question is materially different. As already shown, moneyed capital is dealt with for the purposes of taxation upon lines different from those upon which the taxation of other personal property proceeds. By 13 and 24, state bank shares and national bank shares are both dealt with, and they are treated alike, being assessed not upon the basis of market values, but upon a valuation deterned by a consideration of the capital stock, surplus, and undivided profits ( yielding what is commonly known as 'book value'), and leaving out of consideration other elements, such as good will and the like, which enter into the determination of the actual market value of such shares. On the other hand, personal property in general is by 21 to be assessed at its full value, which presumably means market value. Sec. 24, instead of subjecting the owners of bank shares to taxation at the rate locally obtaining for other personal property, imposes a 'flat rate' of 1 per centum upon the valuation, with the proviso, as held in the Feitner Case, supra, that if the local rate be less than 1 per centum, the owners of shares in the bank have the benefit of it.
Enough has been said to show that the decision in the Weaver Case, which had to do with a tax assessed upon bank stock on the basis of the same method of valuation and the same rate of assessment as personal property in [231 U.S. 373, 388] general, including other moneyed capital, but without allowance for the indebtedness of the taxpayer, although such allowance was made to the owners of personal property in general, including other moneyed capital, is not to be deemed conclusive upon the present controversy, in view of the differences in the taxing laws.
The rule of construction thus laid down has been since consistently adhered to by this court. Palmer v. McMahon, 133 U.S. 660, 667 , 33 S. L. ed. 772, 775, 10 Sup. Ct. Rep. 324; First Nat. Bank v. Chehalis County, 166 U.S. 440, 454 , 41 S. L. ed. 1069, 1075, 17 Sup. Ct. Rep. 629; First Nat. Bank v. Chapman, 173 U.S. 205, 214 , 43 S. L. ed. 669, 673, 19 Sup. Ct. Rep. 407; Commercial Nat. Bank v. Chambers, 182 U.S. 556, 560 , 45 S. L. ed. 1227, 1229, 21 Sup. Ct. Rep. 863; Jenkins v. Neff, 186 U.S. 230 , 46 L. ed. 1140, 22 Sup. Ct. Rep. 905.
According to this practical test, it seems to us that the scheme adopted by the state of New York for taxing shares in national banks cannot upon this record be denounced as violative of the limitations prescribed by 5219, Rev. Stat. (U. S. Comp. Stat. 1901, p. 3502). The holders of shares in state banks are subjected to precisely the same taxation, and with respect to other competitive institutions, such as trust companies, the franchise taxes imposed upon them apparently result in a substantially similar burden upon the [231 U.S. 373, 392] shareholder. Nor is there any discrimination in favor of savings banks. With respect to individual bankers, there is a difference, they being apparently subject to the local rate of taxation, and entitled to the privilege of deduction for personal debts; but as they are taxable upon the amount of the capital invested in the banking business, which is normally only such as remains after the deduction of debts, it is not plain that they possess any valuable privilege of reducing the tax assessment by deducting debts. Foreign bankers are separately treated, for reasons sufficiently obvious; but no criticism is made of this. If there be other forms of 'moneyed capital in the hands of individual citizens' of the state employed in a banking or quasi-banking business in competition with the national banks, and which are subjected to a more favorable rule of taxation, our attention is not called to them. Moreover, we agree with what was said by the court of appeals of New York in the Feitner Case (191 N. Y. 88, 96, 83 N. E. 592) that 'the state is not obliged to apply the same system to the taxation of national banks that it uses in the taxation of other property, provided no injustice, inequality, or unfriendly discrimination is inflicted upon them.' The court there took note of the fact that the flat rate of 1 per centum assessed upon national bank shares was more favorable to the relator than the general tax rate for the same year in the borough of Manhattan, where the banks were located. That local rate (for the lear 1901) was 2.31733 per centum. In the present case it is stipulated that the general tax rate locally applicable for the year 1908 to personal property, not including bank shares, was 1.61407 per centum. There are other considerations to be weighed in determining the actual burden of the tax, one of which is the mode of valuing bank shares-by adopting 'book values'-which may be more or less favorable than the method adopted in valuing other kinds of personal property. As against the owner of bank shares [231 U.S. 373, 393] who, by alleging discrimination, assumes the burden of proving it, and who fails to show that the method of valuation is unfavorable to him, it may be assumed to be advantageous.
Plaintiff in error contends that the statement of the New York court that 'when all things are considered, the rate, even without the privilege of deducting debts, is not greater than that applied to other moneyed capital in the hands of individual citizens of the state,' is based upon no facts of experience or investigation, and amounts to a pure surmise. We do not think it is to be so lightly treated; but, if it were, it still remains to be said that it was incumbent upon plaintiff in error to show affirmatively that the New York taxation system discriminates in fact against the holders of shares in the national banks, before calling upon the courts to overthrow it; and no such showing has been made.
Nor can we say that the taxing scheme contravenes the limits prescribed by 5219, Rev. Stat. (U. S. Comp. Stat. 1901, p. 3502), merely because in individual cases it may result that an owner of shares of national bank stock, who is indebted, may sustain a heavier tax than another, likewise indebted, who has invested his money otherwise. Such is, in effect, the objection urged by plaintiff in error to the position taken by the court of appeals of New York. In other words, it is insisted that 5219 deals with the burden of the tax upon the individual shareholder, rather than upon shareholders as a class. We think this argument is sufficiently answered by reference to the language of 5219. The declaration is that 'the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state.' And this restriction is imposed upon a grant of authority to tax 'all the shares of national banking associations located within the state.' The language clearly prohibits discrimination against shareholders in national banks, and in favor of the share- [231 U.S. 373, 394] holders of competing institutions, but it does not require that the scheme of taxation shall be so arranged that the burden shall fall upon each and every shareholder alike, without distinction arising from circumstances personal to the individual.
[ Footnote 1 ] Sec. 5219. Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the state within which the association is located; but the legislature of each state may determine and direct the manner and place of taxing all the shares of national banking associations located within the state, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state, and that the shares of any national banking association owned by nonresidents of any state shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either state, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed.
[ Footnote 2 ] EXTRACTS FROM NEW YORK TAX LAW.
[ Footnote 1 ] Consol. Laws 1909, c. 60.

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