Source: http://www.chanrobles.com/usa/us_supremecourt/294/199/case.php
Timestamp: 2017-10-23 09:46:52
Document Index: 730791153

Matched Legal Cases: ['§ 25', '§ 5219', '§ 320', '§ 5219', '§ 25', '§ 5219', '§ 5219']

DOMENECH V. NATIONAL CITY BANK OF NEW YORK, 294 U. S. 199 (1935) - US SUPREME COURT DECISIONS ON-LINE
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DOMENECH V. NATIONAL CITY BANK OF NEW YORK, 294 U. S. 199 (1935)
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3. Puerto Rico, being a dependency of the United States, may not tax an agency of the United States, such as a national bank, except by the clear and explicit consent of Congress, and the general power of taxation conferred on the insular government cannot be construed as a consent. Pp. 294 U. S. 204-205. chanroblesvirtualawlibrary
The respondent, a national banking association whose principal office and place of business is in New York, applied chanroblesvirtualawlibrary
for and obtained authority to operate branches in Puerto Rico, pursuant to § 25 of the Federal Reserve Act as amended. [Footnote 1] In 1932, the bank, as required by local law, filed with the petitioner a sworn statement of assets as a basis of assessment for taxation. By request, but under protest, it attached a memorandum, stated to be for information only, in which was set forth the amount of its total assets, the sum of its capital, surplus, and undivided profits, the percentage the latter was of the former, and the value of the assets in Puerto Rico. The Treasurer considered the same percentage of the assets in Puerto Rico fairly represented the capital there employed. The amount thus ascertained was $2,439,200, which he divided into three items -- real property and buildings, $732,560, other personal property, $1,611,400, and tangible personal property, $95,240. Applying the statutory rate to $2,439,200, he fixed the tax at $62,122.98. Upon appeal, the Board of Equalization sustained the Treasurer's action. The bank voluntarily paid $17,700.24, the amount attributable to real property and buildings, but paid under protest the balance of $44,422.74 demanded in respect of the personal property, and brought suit in the United States District Court for Puerto Rico to recover the amount. Judgment in favor of the Treasurer was reversed by the Circuit Court of Appeals. We granted a writ of certiorari [Footnote 2] because the case involves the application and scope of acts of Congress and their effect upon the taxing power of insular possessions of the United States. [Footnote 3] chanroblesvirtualawlibrary
Respondent concedes the competence of the island government to tax generally, [Footnote 4] but asserts that R.S. § 5219, as amended, [Footnote 5] prohibits a levy on the capital of a national bank. The further point is made that § 320 of the Political Code of Puerto Rico, [Footnote 6] to which the petitioner refers chanroblesvirtualawlibrary
as his authority, does not justify the imposition of the tax in question. This the petitioner denies, and adds that the point was not presented below, and cannot therefore be mooted here. In addition to contending that § 5219 as amended never extended to Puerto Rico, he claims that, in any event, the section was rendered inoperative in the island by § 25 of the Federal Reserve Act, as amended. [Footnote 7] chanroblesvirtualawlibrary
Taxation of a bank's branch is taxation of the bank itself. [Footnote 8] The system of national banks was intended to be coextensive with the territorial limits of the United States, and, while the consent to taxation given by § 5219 refers in terms only to the states, it extends also to territorial governments and sets the limits of their exercise of the power. [Footnote 9] The form of taxation here imposed is not permitted by the §. [Footnote 10] The organization of a national bank in Puerto Rico is within the contemplation of the National Banking Act, but, if there were doubt concerning the proposition, it finds support in legislation extending applicable laws of the United States to the island. [Footnote 11] Although the maintenance of branch banks is prohibited by the National Banking Act save under narrowly limited conditions, [Footnote 12] their establishment in foreign countries, dependencies, and insular possessions is authorized. [Footnote 13] Puerto Rico, an island possession, like a territory, is an agency of the federal government, having no independent sovereignty comparable to that of a state in virtue of which taxes may be levied. Authority to tax must be derived chanroblesvirtualawlibrary
The petitioner insists that this section is locally inapplicable for two reasons. The first is that the section was intended to apply only to taxation by the state, territory, or governmental agency within whose borders the bank has its principal place of business. The argument is that Puerto Rico cannot avail itself of the consent to the taxing of respondent's shares, or the dividends thereon, since the shares have no situs except New York, which is, in contemplation of law, the association's home. The position is that the section must be available in its entirety, or else wholly inapplicable. We think otherwise. If Puerto Rico can and does collect taxes of any of the types mentioned in R.S. § 5219, as amended, the mere fact that the situation prevents resort to one of the other kinds thereby chanroblesvirtualawlibrary
@ 17 U. S. 424-425.