Case Name: Stockdale v. The Insurance Companies
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1873-10
Citations: 20 Wall. 323
Docket Number: 
Parties: Stockdale v. The Insurance Companies.
Judges: 
Reporter: United States Reports
Volume: 87
Pages: 323–341

Head Matter:
Stockdale v. The Insurance Companies.
1. The cases of Barnes v. The Railroad (17 Wallace, 294), and United States v. Railroad Company (lb. 322), considered and compared.
-2. Held, that whether the tax on dividends arising from the earnings of corporations for the year 1869 be viewed as a tax on the shareholder or on the corporation, it was intended to tax the earnings for that year by the section which limited the duration of the income tax.
3. Sgouo.i seventeen of the act of July 14th, 1870, construing certain sections of the Internal Revenue law of 1864 to extend the tax to the year 1870 is valid, because it is not an attempt to exercise judicial power by construing a statute for the court, but is a mode of continuing or reviving a tax which might have been supposed to have expired.
4. As this merely imposed a tax retrospectively, it \Vas within the legislative power of Congress, and the case differs from an, effort to invade private rights by construing a law affecting those rights, over which Con- . gress had no power whatever.
Error to the Circuit Court for the District of Louisiana; the case being thus:
The 116th section of the act of June 30th, 1864, as amended by the 13th section of the act of March 2d, 1867, enacts:
“Section 116. That there shall be levied, collected, and paid annually upon the gains, profits, and income of every person re- • siding in the United Slates, or of any citizen of the United States residing abroad, whether derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation, carried on in the United States or elsewhere, or from any other source tohatever, a tax of five per centum on the amount so derived over $ 1000, and a like tax shall bo levied, collected, and paid annually upon the gains, profits, and income of every business, trade, or profession carried on in the United States by persons residing without the United States, and not citizens thereof. ' And the tax herein provided for shall be assessed^ collected, and paid upon the gains, profits, and income for the year ending the 31st day of December next preceding the time for levying, collecting, and paying said tax.”
The 117th section of the same act, as amended in the same way, required that there should be included, inter alia, in the estipiate of gains, profits, and income, which the act made it obligatory on the taxpayer to return, the share of any person of the gains and profits of all companies, whether incorporated of partnership, who would be entitled to the same if divided, whether divided or otherwise,
“Except the amount of income received from institutions or corporations whose officers, as required by law, withhold a per centum of the dividends made by such institutions, and pay the same to the officer authorized to receivo the same, and excep>t that portion of the salary or pay received for services in the civil, military, or naval, or other service of the United States, including- senators, representatives, and delegates in Congress, from -which the tax has been deducted.”
The 118th section related to 'the manner of the -party’s making and the assessor’s obtaining returns of that portion of the taxpayer’s income which was to be paid by such taxpayer directly.
The 119th section, as amended by the already-mentioned section of the act of March 2d, 1867, enacts:
“ Section 119. That the taxes bn incomes heroin .imposed shall be levied on the 1st day of March, and be due and payable on or before the 30th day of April in each year, until and ineluding the year 1870, and no longer.”
The 120th section, as amended by the 9th section of the act of July 13th, 1866, enacts :
“ That there shall be levied and collected a tax of five per .centum on all dividends thereafter declared due, whenever the same shall be payable to stockholders, policy-holders, ior depositors or parties whatsoever, as part of the earnings, income, or gains of any bank, trust company, savings institution, and of,any fire, marine, life, or inland insurance company, in the United States, and on all undistributed sums, or sums made or added during the year to their surplus or contihgent funds. And said banks, trust companies, savings institutions, and insurance companies shall pay the said tax, and are hereby authorized to deduct and withhold from all payments made on account of any dividends .or sums of money that may be duo and payable as aforesaid, the said tax of five per centum. And a list or return shall be made and rendered to the assessor. And for any default in the making- or rendering of such list or return, with such declaration annexed, the bank, trust company, savings institution, or insurance company making such default, shall forfeit as a penalty the sum of $1000.’’
The 121st section enacted that any bank of issue which should not make a dividend or add to its surplus fund,as Often as once' in six months should make a return to the assessor Of th,e district, where it was, of its profits during every six months preceding the 1st of January and July,’&c.
The 122d section, as amended by the 9th section of the act of July 13th, 1866, after enacting that any railroad, canal, turnpike, canal navigation, or slack-water company, indebted by bonds &c., upon which interest is to be paid, or any such company that may have declared any dividend, due or payable to its stockholders, as part of the earnings, profits, income, or gains of such company, and all profits of such company carried to the account of any fund, or used for construction, shall be subject to and pay a tax of jive per centum on the amount of all such interest, dividends, or profits, whenever the same shall be payable, proceeds:
“ And said companies are hereby authorized to deduct and withhold from all payments on account of .any interest, . . . and dividends, due and payable as aforesaid, the tax of five per centum; and the payment of the amount of said tax so deducted from the interest, or coupons, or dividends, and certified by the president or treasurer of said company, shall discharge said company.”
The 123d section of .the. same act, as amended by the 18th section of the act'of March, 1867, enacted:
“ Section 128. That there shall be levied, collected, and paid on all salaries of officers, or payments for services to persons, in the civil, military, naval, or other employment or service of the United States, including senators, representatives, and delegates in Congress, when exceeding the rate of $1000 per annum, a tax of five per centum on the excess above the said $1000; and it shall be the duty of all paymasters and all disbursing officers under the government of the United States, or persons in the employ thereof, when making any payment to any officers or persons as aforesaid, whose compensation is determined by a fixed salary, or upon settling or adjusting the accounts of such officers or persons, to deduct and withhold the aforesaid tax of five per centum; and the pay-roll, receipts, or account of officers or persons paying such tax as aforesaid,, shall bo made to exhibit the fact of such payment.”
On the 14th of July, 1870, Congress passed an act, entitled “An act to reduce internal taxation and for other purposes.” This act repealed certain sections of the previous internal revenue acts; limited the duration of others, • and reduced the income tax in certain cases from five to two and a half per cent. ; limiting its duration.
By its 17th section it enacted:
“ That sections 120, 121, 122, and 123 of the act of June 30th, 18G4, &c., as amended by the act of July 13th, 1866, and the act of March 2d, 1867, shall be construed to impose the taxes, therein mentioned to the 1st day of August, 1870, but affér that date no further taxes shall bo levied or assessed under said sections.”
In this state of statutory enactment, Stockdale, collector (if ihternal revenue at New Orleans, assessed a tax on the Atlantic Insurance Company (and on certain other insurance, railroad, and banking companies of that city),'“on the earnings which had accrued to said company between the 5th day of July, 1869, and the 30-th of June, 1870.” The dividend was declared after this latter date. The taxes were paid under protest and the companies having brought suits in the court below to recover them, and having there got judgments against the collector for them, that officer brought the cases here by the present .writ of error.
Two question's accordingly arose here :
1, Was the tax valid as to that part of the dividend which arose from the .earnings of the year 1869?
2. Was it valid as to that part which arose from tbe.earnings of the year'1870?
Messrs. Charles Case and J. D. Rouse, in support of the judgment below:
1. The tax of foe per cent, imposed upon the dividends of railroad companies by section 122 of the act of June 30th, 186.4, as amended, is a tax upon the income of the stockholder, and not a tax upon the corporation.
This is expressly decided in United States v. Railroad Company where the government sought to collect a tax from the Baltimore and Ohio Railroad Company, on interest due pn bonds of that company held by the city of Baltimore ; and where it failed because the revenues of a municipality, incorporated by the State are not taxable. If anything to the contrary to this was adjudged in the case of Barnes v. The Railroads, decided five weeks previously, it was' overruled in the later case. But the official reports of the two cases show plainly, that nothing different was adjudged, and that the leárned justice who announced the judgment of the court in the Barnes case, while he rightly announced the judgment, misconceived the ground upon which the majority of the court went; and that the decisioq in the later cáse is reconcilable with thd judgment in the former, though not'with certain assertions iu the opinion thop delivered by the learned judge who announced that judgment, as. to what “the court”- decided.
2. The tax upon incomes imposed by tfie act of June 80//i, 1864, as amended, expired by limitation the 31 st day of December, 1869.
The limitation is found iu section 119,. which provides .“ that the'taxes On incomes herein imposed shall be levied on.the 1st day of March, and be due and payable on or before the 30th day of April in each year, until and including the year 1870, and no longer.” It is elsewhere provided that the taxes so to be levied were to be levied upon the incomes “ for the year ending the 31st day of December next preceding the time for levying, collecting, and paying said tax.” Therefore the last levying of' such tax being for the year 1870, it was limited to income of 1869.
3. ’ There has been no legislation which could effect an extension of the time during which such tax could be imposed.
The 17th section of.-the act of July 14th, 1870, is simply declaratory of the opinion of Congress, and not a re'-enactmentof the law itself. This very attempt to continue the law in force by construction As an admission that it had expired. Now the construction of statutes belongs, not to Congress but'to the judiciary. If the law were still in force, the judiciary would be bound to place upon it a construction given by-Congress, and Congressional construction would have the'effect of legislation, after the passage of the act. But Congress cannot construe statutes retroactively. This is perfectly settled.
Mr. G. IT. Williams, Attorney-General, and Mr. S. F. Phillips, Solicitor-Gen eral, contra.
13 Stat. at Large, 281; 14 Id. 477.
13 Stat. at Large, 283; 14 Id. 480.
13 Ib. 283; 14 Id. 188.
These are the sections quoted supra, pp. 324 — 326-, &c.
17 Wallace, 322.,
Ib. 294.
Ib. 335, 336.
Ogden v. Blackledge, 2 Cranch, 272; United States v. Dickson, 15 Peters, 162; United States v. Klein, 13 Wallace, 128.

Opinion:
Mi'- Justice MILLER
delivered the opinion of the'court.
This was a suit brought in the court below agaiiist the plaintiff in error in his official character to recover taxes collected by him, which are alleged to have been illegally assessed against the insurance company. The appeal of the company to the Commissioner of Internal Revenue having' been decided against it, the tax was paid-'and suit' brought within six months, as provided' by the act of Congress. The insurance company recovered a'judgment in the Circuit Court, and the collector brings a writ of error in the interest of the. government, the object of which is to test the legality of the tax thus levied and collected.
An agreed'statement of facts-shows that the taxes complained of w.ere assessed upon dividends declared by the insurance company." on the earnings which, had accrued to •said company, between the. 5th day of July, 1869, and the 30th day of June, 1870;" and the dividend Was declared after the latter date.
This short .statement raises two questions: 1. Was the tax valid as to so much of the dividend as arose from the earnings'of the year 1869 ? ' 2. Was it valid as to that which' arose from the earnings ¡oí the year 1870?
As 'regards the first proposition, it,was much considered . in' the Barnes cases. It was argued in those case's with much ability,-and four members of the court were of .that' opinion that the entire income tax expired with the year 1869, and that'as-the tax in those cases, as in these, was assessed on' dividends declared in .the.year 1870, they were without authority of law.,
' The.argument in those cases, sofá-r as the opinion of the court was concerned, turned mainly on the question,whether the''law intended to .imposé the tax on the income of thé corporation, in which case it was obviously, the'income of' 1869 which was taxed, and; theréforq, properly taxed; or on the income'of .the stockholder, ascertained' by his dividend»in which case thé minority of'the' court thought'that dividends declared in 1870 wéré not-liable .to the tax, because the-taxing power under the law expired with the; preceding year. It is,.perhaps, fairly inferable from the report of those cases, and the .opinion in .the .subsequent case of The United States v. Baltimore and Ohio Railroad Company, that among those who composed the majority in- the. Barnes cases, therewepe some shades of difference' in the precise grounds on which the validity of the taxes rested.
Without reopening 'that subject for. an inquiry into those -differences, it may,he said that the question whether the tax' was, in those cases, a tax on the shareholder or on the corporation, was, and is, one of form rather than substance.
The tax is imposed by the statute alike on all dividends declared, and on all undistributed earnings of the corporation, and it is made the duty of the corporation to pay it.-
It is also made the duty of the corporation to make returns of these dividends and undivided earnings to. the proper internal revenue officer, under a heavy penalty.
In the case of dividends declared, the corporation is authorized to deduct the amount of the tax from the dividend due to the shareholder, before paying it to him.
And it follows from this, that, when a dividend is declared to any shareholder, whose dividend is for any special reason exempt from such tax, as in the case of the city of Baltimore on her stock in the railroad company, then the corporation declaring the dividend is not liable.
The effect of such a tax on the shareholder is the same, whether it be considered a tax on his share for the dividend fearned by his share, or on the corporation on account of said earnings. And it is.the same, whether the tax is imposed on the undivided earnings, or on those earnings after they have been divided; He in any and all these cases, in point .of fact, ultimately suffers to that eKt.ent, or loses the amount of the tax. We are of opinion that the statute intended to tax those earnings for the year 1869, whether divided or ,undivided, and that the tax nowin question is to that extent valid.
' The question arising, out of the tax in these cases, so far as the dividends are based on the earnings of the corporation for the year 1870,.presents other considerations.
In the view taken by this court in the Barnes eases, it did not become necessary to pass upon the validity and effect of' the seventeenth section of the act of 1870. That is entitled an act to reduce internal taxes, and for other purposes. -It repealed'several sections of the internal revenue law absolutely. It fixed a period in the future for the cessation of others, and it reduced the income.tax in a certain class of eases from five to two and a half per cent., and provided for its continuance through the-years 1870 and 1871; at the end of which all income tax was to cease.
The section we are considering declared that sections 120, 121, 122, and 123 of the internal revenue law of 1864, as modified by subsequent statutes,. " shall be construed to impose the taxes therein mentioned to the first day of August, 1870, and after that date no further taxes shall be levied or assessed under said sections; and all acts or parts of acts relating to the taxes herein repealed, and all the provisions of said acts shall continue in full force for levying and collecting all taxes properly assessed, or liable to be assessed, or accruing under the provisions of former acts.," &c., &e.
But for the unfortunate 'and unnecessary use of the word " construe" in this sentence, we apprehend that none of the. resistance to the class of taxes now under consideration would have been thought of.
The right of Congress to have imposed this tax by anew statute, although the measure of it was governed by the in'come of the past year, cannot be doubted; much less can it be doubted that it could impose such a tax on the incomé of the current year, though part of that year had elapsed when the statute was passed. The joint- resolution of July 4th, 1864, imposed a tax of five per cent, upon all income of-the previous year, although one tax on it had already been paid, and no one doubted the validity of the tax or attempted to resist it.
Both in principle and authority it may be taken to b^ established, that a legislative body may by statute declare! the construction of previous statutes so as to bind the counts in reference to all transactions occurring after the passage of the law, and may in many cases thus furnish the rule, to govern the courts in transactions which are past, provided no constitutional right of the party concerned is violated.
In the case of the Wheeling Bridge, this court, in a suit brought under its original'jurisdiction by the. State of Pennsylvania, liad declared the bridge a nuisance and decreed its modification or abatement. Congress then passed a law declaring it a post route and a lawful structure as it stood, and this court recognizing the right of Congress to regulate such a bridge under the commerce clause of the Constitution, dismissed the ease from i.ts further consideration.
This doctrine is reaffirmed in the case of the Clinton Bridge.
It is'undoubtedly true that, in our system of government, the law-rnhking power is vested in Congress, and the power to construe' laws in the course of their administration between citizens, in the courts. And it may be conceded that Congress canhot, under co.ver of giving a construction to an existing or an expired statute,.invade private rights, with which it could not interfere by a ne)v or affirmative statute.
But where it can exercise a pqwer by passing a new statute, which may be retroactive in its effect., the form of words 'which', it us.es to put this power in operation cannot be material, if the purpose is clear, aiid that'-purpose is within the power. Congress could have passed a law to reimpose this tax retrospectively, to revive the Sections under consideration if they had expired, to re-enact the law by a simple reference to the sections. Pías it done anything more ? Has it intended to do anything more? Are we captiously to construe the use of the word "construe" as an invasion of the. judicial function where the effect of the statute and the purpose of the statute are clearly within the legislative function ?
A critical view, of the whole of the statute of 1870 shows that it was designed to recast the- internal revenue laws, to repeal some taxes, modify others, and declare the re-enactment or continuance of others for a limited; time. And this was especially true of the class of taxes embraced under the general head of income taxes-of all kinds. The paragraph we luivo been considering was not in its essence an attempt to construe a statute differently from what the courts had construed it, for no construction on this subject bad been given by any court. Nor was it an attempt by construing a statute to interfere with or invade personal rights which were beyond the constitutional power of Congress. But it was a logitifinite exercise of the taxing power by which a tax, which might be supposed to have expired, was revived and continued in existence for two years longer.
It was, therefore, valid for that purpose,,and the tax must be upheld. It follows that on the agreed statement of facts judgment should have been rendered for the defendant in the Circuit Court, and the judgment of that court is reversed and the case remanded, with directions to enter such a judgment.
This opinion disposes of all the cases, thirteen in number, in which Stockdale is plaintiff in error, submitted with-this, and the same judgment is rendered in each of these cases.
17 Wallace, 294
17 Ib. 322.
16 Stat. at Large, 261.
Sedgwick on Statutory Law, 253; Municipality No. 1 v. Wheeler, 10 Louisiana Annual, 747.
18 Howard, 421.
10 Wallace, 454.