Document: 365 U.S. 467 81 S.Ct. 659 5 L.Ed.2d 710 MICHIGAN NATIONAL BANK, Appellant,v.STATE OF et al. No. 155. Argued Jan. 18 and 19, 1961. Decided March 6, Rehearing Denied April 3, See 874, 900. Mr. Victor W. Klein, Detroit, Mich., for appellants. William D. Dexter, Lansing, appellees. Justice CLARK delivered the opinion of Court. 1 The State Michigan levies 'on privilege ownership' a 1/2-mill tax per dollar on value each common share stock in national banks1 located State. It requires federal state savings loan associations to pay, addition other taxes not here involved, its shareholders an intangibles 2/5 mill paid-in their shares.2 In addition, also pay franchise 1/4 capital legal reserves.3 Appellant National Bank, with banking offices eight cities, brought this suit recover paid under protest year 1952, claiming that levy Michigan's Act 9 resulted bank shares at least times greater than levied 'other moneyed hands individual citizens' State, violation § 5219 Revised Statutes United States.4 Initially attack referred insurance finance companies, credit unions individuals, as well associations. Before trial Court Claims, however, claim was limited latter only, asserting these institutions were substantial competition phase business, i.e., residential mortgage loans, preferentially taxed. resulting discrimination, appellant says, renders invalid controlling decisions highest court has upheld statute against claim. 358 Mich. 611, 101 N.W.2d 245. We noted probable jurisdiction, 364 810, 51, 40. have concluded practical operation, structure does discriminatory effect is, therefore, valid. This determination obviates necessity our considering voluminous confusing statistics relevant issue whether or there exists between banks 2 sole authorization upon which may rest is 5219. First Nat. Bank Guthrie Center v. Anderson, 1926, 269 341, 46 135, 70 L.Ed. 295; Des Moines Fairweather, 1923, 263 103, 44 23, 68 191. That qualified by proviso shall be 'at rate assessed citizens such coming into business banks.' assumed, without deciding, are carried banks, loans. question effects discrimination Background Relating To Problem. 3 first authorized organization 1887.5 They operate today same law 'cooperative' mutual accumulate only through sale members, retention permitted surplus reserve from profits. make loans real estate notes can neither carry nor received deposits6 Their reserves must equal 10% liabilities members associations' 5% assets.7 Earnings above currently stated periods. Congress 1933 Home Owners' .loan Act, 48 Stat. 128, amended, 12 U.S.C. §§ 1461—1468, U.S.C.A. 1461—1468. along general lines both insured Federal Savings Loan Insurance Corporation.8 4 course, engage Act.9 Prior 1916 they except certain farm lands. term over extent 50% mortgaged property.10 enlarged 1927 five years11 then 10 years 1935 49 706, increase 60% maximum proportion property loaned. 1934, purchase F.H.A. guaranteed mortgages.12 Ten later authority include V.A. Comptroller Currency decision found category mortgages.13 until time became any significant factor field. By 1952 ratio deposits total assets had more doubled, amounting 92% assets,14 having totaled 41% thereof passage organized 1941 150,000 $10 par resources about $68,000,000. it outstanding 500,000 (all been issued dividends) some $306,000,000. gross earnings account 91%, which, after all expenses (except dividends income tax), remained 31%. 16 building average net (before taxes) amounted 3.4% capital, approximately normal annual earning. A $1,000 investment National's (58.8 shares) worth $6,691.20 (157.5 61%. $1,308.80 cash period. 6 Construction Legislation. 7 1. Section 8 enacted 186415 passed 55 near century Section's existence. During period kept clearly view, said last case wrote, 'the various restrictions (§ 5216) * places methods taxation designed prohibit those systems discriminate operation class.' Tradesmens Oklahoma City Tax Comm., 1940, 309 560, 567, 60 688, 692, 84 947. Reverting one cases dealing Section, Mercantile New York Mayor, etc., York, 1887, 121 138, 826, 30 895,16 we find Matthews declared unanimous purpose passing provision 'to States imposing burden would prevent individuals freely seeking express object establish promote.' At page 154 U.S., 835 further held but approved exemption taxes, enumerated property, ground shown 'just reason' so do. essence stands proposition cannot, structure, create 'an unequal unfriendly competition' banks. followed light Hepburn School Directors, 1874, 23 Wall. 480, 112, where Chief Waite pointed out taxable necessarily determined nominal rather amount represents being.' 'Therefore plan devised ascertain what money interest actually represented stock.' 484 equivalence thus posed echoed re-echoed cases. subsequent supra, point raised Redemption Boston, 1888, 125 60, 772, 31 689, again written Matthews. Court, comparing two institutions, said: 'But while constitute corporations, do represent whole employed them. deposits, too, present record amount, Massachusetts, $132,042,332. part these, although large actual profitably conduct business. But necessary exact equality result modes taxation.' 67 776 quarter later, Pitney Amoskeag Manchester, N.H. Purdy, 1913, 231 373, 34 114, 58 274, commenting factors considered determining tax, 'There considerations weighed mode valuing shares—by adopting 'book values' (capital, surplus, undivided profits)—which less favorable method adopted kinds personal property.' 392 122 made even Brandeis Shreveport Louisiana 1933, 289 53 511, 77 1030, he fundamental difference mainly depositors, financial supplied otherwise deposits.' 64 512 And so, taught tax—its character—we look effect, rate. supra; Convington 1905, 198 100, 25 562, 963, point. 2. 9. 11 9, stated, 1/2 mills book separately imposed association shares, exclusive plus, reserves. appears prior enactment inequity State's thought exist Upon study problem recommendation Taxation Committee Bankers Association, Legislature decided 'exactly alike.' embodied proposal Association While no legislative history before us, according amicus curiae brief filed court, sponsors 'reasonable viewpoint public, equitable competitors, themselves.' responsible officials seven therein provided protest, save four was: 'Actual experience system shows produced reasonable revenue State; created competitive disadvantage among types institutions; proven simple administer.' Supreme proven. basis holding too clear, take finding associations, insofar concerned, meant that, court's Legislature, fixing (5 mills) either (1) taken consideration hand type institution, (2) if valuation permissible, intended exempt because functions repositories 'small accumulations industrious thrifty.' Such differences, (358 259), 'justified partial exemptions,' bound interpretations placed 639—640, 245, 259—260, accept interpretation took controlled thereby. 13 believe granted satisfaction qualifications 5219, offends discriminates class. say, could strike down interpreted unless manifest law. According cases, discussed above, enacting 5219.17 comprehensive examination fail system. 14 As repeatedly indicated decisions, invested controls many dollars measuring rod On hand, face value. power control proportionate available purposes. National, 21 share's stock, profits indicate. States, accounts $7,000,000,000 $100,000,000,000 (92% banks) greater. similar character, source being and, here, relatively small retained 15 immediate problem, $13,000,000, applied. $68,181. $134,000,000, applied 2/5-mill tax. resultant $53,260. Had (2/5-mill) ($283,000,000), product equaled application account. fact, $113,000, 1.7 bill appellant's shares. Similar results obtained Michigan. accounts, $166,700,000, when taxed rate, yield $917,000 taxes. $3,516,000,000, $1,406,000 1.5 obvious different methods18 rates, follow automatically violated. '(I)t valid objection (is) adifferent treatment fact unfavorable holders Cf. Covington supra. remember account, rates additional former. Since owner's equivalent profit-making itself investor similarly multiplied power, 'unfavorably' treated excess accounts. 67, 776, 689. Here 13.8 one, included, drops 8.5 one. say bank's computation statutes. However, computed statutes, capital.'19 17 said, contrary Minnesota 1927, 273 561, 47 468, 71 774. argued existed because, applicable deducting liabilities, ultimate same. (later Justice) Stone, writing rejected argument 'ignores measured deduction *.' 564, 469. Hartford, Wis. 548, 462, 767, Stone wrote handed day. There comparison widespread exempted taxed, led invalidation Wisconsin's statute. error Wisconsin 'construed requiring businesses substantially identical 555, 464. Minnesota's construed, broad, (including lower deduct other. implicit ruling base competing compared violate '(T)he corporations whose competes short, test. Moreover, congressional 1933,20 'in pari materia' throw cross light' (L. Hand Aluminum Co. America, Cir., 1945, 148 F.2d 416, 429) permitting creation contained respecting local part: 19 Unless recognized taxing free, spite own taxation, used language referring did statutes creating thrift institutions.21 insure creatures benefits, any, agencies, tied limitations action affecting Although statute, accommodation measures, potential, illustrates assimilation analogues, very fiscal are. Furthermore, grant liberal viewed action, amply supported doctrine still vital long 1887 organized. These weigh heavily evaluating 20 Under standard, not, discrimination. Its looks shareholder. If bankn—either state—the legislature considers fixes commensurate increased earning bank, shareholder market. Thus, his share, pays higher deposits. He (and comparatively minute allowed law), market concerned. Consequently indicated, approach realistic standpoint, economically sound fair taxpayer. results, giving advantage, cannot complain. future time, indicate improbable,22 fall level violative concerned year, permissible maximum. possibility, setting levels now 22 Having assumed element prerequisite clear earlier phenomenal growth despite heavy 'prevent investment' points merit. 24 Affirmed. STEWART case. 26 WHITTAKER, whom DOUGLAS joins, dissenting. 27 I respectfully resolutely dissent. Exposition my reasons will require full careful statement facts 28 consents conformity conditions consent. See, e.g., 347, 136, 295, 106, 24, (Act June 1864, c. 111, amended February 10, 1868, 34, 4, 42 1499, 25, 223), consented that: 29 'The determine direct, subject provisions section, manner place within limits. several derived therefrom owner holder thereof, (3) income, (4) following complied with: '1. (a) imposition forms lieu others '(b) 32 Prusuant consent, Intangibles 301, Public Acts 1939; Mich.Comp.Laws, 1948, 205.132; Mich.Stat.Ann., 1950, 7.556(2)) imposing, owners 3% from, 1/10 1% of, cents $100 'paid-in value' another imposed, (but federal) (Mich.Comp.Laws, 450.304a; Mich.Stat.Ann. 21.206)—thus making state, federal, 33 obedience appellant, doing cities Michigan,1 behalf shareholders, thereby 1952. Thereafter, 1953 205.132a, 1956 Supp.; 1959 Cum.Supp., 7.556(2a)), respects touching provide, pertinent part, follows: Acting ('Act 9'), 'shares' $49,929.27. After paying Claims recovery. value, former banks,' therefore violated trial, assessment collection entered judgment appeal, 246), though conceding 'both special category' held, inter alia, 'different narrow, restricted field,' receive matter law, come 'into banks' meaning inasmuch lawfully might entirely entities activities offending prefer granting grants violating assets, (thus putting liability repay debts), Michigan—.091 .089 associations—and this, 'establishes affirmed judgment, jurisdiction appeal. 35 adopts conclusion, affirms judgment. respect, ignores mode, plainly expressed purposes them, effectively defaces departs line Court's hammered out, case, course nearly century, squarely specifically decisive every 36 admitted tax—55 opposed shares—leaves, doubt than' latter—more Therefore, questions possibly open citizens,' 'coming (some phase3 of) 'substantial capitalization 558, 465, 767. 37 Surely doubted owned association, engages profit, since settled question. 'include(s) interests enterprises carrying money, profit use money.' Mayor etc. 157, 836, 895. 'By terms (statute) excludes investments 557, 465. St. Paul, 469, 774; 348, 138 cited. 38 Whether 'competition mixed 'and (them) review order correctly apply law.' 552, 463. 39 dispute. uncontroverted evidence conducted Michigan, extensively engaged Competition them keen continuous. Both advertise solicit classes economic strata people communities. properties areas—one institution often refinancing retiring competitive, same, cases—particularly loans—they precisely exactly forms—forms prepared furnished Government. 40 Directed used, amounts, question, $433,000,000 $301,000,000 loans—which constituted 30% discounts. most directly 6,498 aggregating $32,000,000 (of $6,273,000 $26,058,000 conventional loans) holdings $97,000,000. Whereas, 2,728 $18,500,000 $10,869,000 F.H.A., $456,000 $7,245,000 $60,000,000. Those 40% discounts, 20% yielded 26% income. 41 whereas $166,724,000. period, $97,000,000 $13,038,000. Certainly undisputed 'moneyed capital' (a 43 seems altogether me essential denied plain words phase4 Yet, Did rate' shares? State.' 836; Does evidence, summarized detail, show Michigan? Do case? Respondents missing. Why, then, entitled recover? advanced respondents successfully urged Every contentions record, adversely respondents, facts, show. 45 First. argue 'deposits,' 'checkbook money' 'banking,' that—regardless record—they argument, analysis, comes contention restriction directed favor For they, runs, state-created 'banking business' hence, conclude, arose 138. '(t)he defendants position (in court) 5219) associations.' '* untenable reason rulings Id., 349, 139. summarizing render impossible foster favoring interested private operations normally banking. 155, 895; (263 103), 116, 23.' pages 347—348, (Emphasis added.) 'Moneyed (not only) (but) employed, features banking, investments, way loan, discount otherwise, notes, bonds securities view repayment reinvestment. surpa, (121 U.S.) (7 826); Palmer McMahon, 133 660, 667—668, 324, 772; Talbot (Talbott) Board Com'rs Silver Bow County, 139 438, 447, 594, 210.' Respondents' phases met possible conceive, There, 'apparently construed Consequently, class corporate form defined thought, favored.' 555—556, 464—465. logically pursued, mean competition. rejecting contention, recently occasion, reviewing subject, requirement approximate applies respect particular 'is securities, reinvestment.' 348 (46 138). doing, 836 (30 895), 556, 50 proceeded declare ringing intervening years—from today. 51 'Competition serious character merely favors sense arises who compete employment command. No permit contended for. restrict defeat purpose. fostering aid like Our conclusion wherever investors sort transactions locality business.' 557—558, Identical conclusions announced day 468.5 52 Here, Nor certainly 'when rule Hartford seem leave discriminatorily Second. the, largely historical, century. assumption, offend (see, Davenport Davenprot Equalization, 123 83, 73, 94; 689; Aberdeen Chehalis 1897, 166 440, 629, 1069), should 54 answered With unmistakable reference 'Some technical significance field invest mortgages now. December 251, 273; September 7, 1916, 461, 752, 754; 24.6 go hold absence allegation proof exists.' Then, theory respondents' 'With great concerns (774), decided, readily seriously curtailed. 56 nothing need said. 57 Third. taxation—i.e., churches, charities, municipal bonds, like—without 112; Adams Nashville, 95 l.Ed. 369; surpa; supra), follows banks—even Despite strongest implications contrary, occasion consider might, done so. 1/8 59 circumstances, runs teeth (by command' (273 465), 'that direct conclusive answer perceived. Fourth. argue, agrees, considered, really 61 brings us heart disagreement observing (than rates) property,' 392, 122, 274; see 484, 947, alone determines says: demonstrably wrong. provides 'shall dividing profits) number (see note 2), valued value'. deducted Hence, hardly plainer by' 'different,' methods. One elaborate truth simple. 62 decision. says '(Michigan's) bank—either shareholder'; 'a profits'; 'Since share(s) *. 63 submit egregious error. Nothing contemplates 'controlled' 'increased (values) shareholder,' factors. Quite "Capital account' herein adding *, How valued, solely regard 'deposits' 'controlled shareholder'? surely assets; instead, shares—'determined (the) decision, put debts, impose opposition 65 Precisely supra: 66 'Petitioner argues credits, three credits ascertaining forty cent. urged, (Des 191), indeed novel, add corporae shares—a contradiction terms. likewise idle observe hence deposit deduct,7 amounts 'shareholders' 'shares,' figure zero, fiction. authorizes double talk. values method, Yet (taxed) banks'? 69 produce relevance demonstrate including just bak's Similarly, phenomenally prospered wholly irrelevant, criterion prosper, But, relevance, observed proportionately 1953, grown $1,700,000,000. Finally, Congress, restricting 'greater cooperative home financing institutions,' 1464(h), evidenced understanding intention impliedly repealed modified far assumption intended, lightly collaterally, repeal modify implication. if, former's accordingly compete. words, assess 'upon assesses associations—state federal—which phrase violates here. 72 proper situations peace endured today—for years. reason, submit, right. call depart deface unsettle certainty rules important substance. 73 years, proved recover. reverse Supp., 205.132a) 'For calendar thereafter, portion hereby resident nonresident collected specific ownership producing, preferred share.' 205.132, thereafter non-resident intangible item him. (T)he 1/25 cent shares.' 450.304a, provides: 'Every laws exercising transacting secretary fee reserve.' 1954, provide 489.371. R.S. with; banks: Provided, evidences indebtedness representing deemed section.' Mich.Pub.Acts 50. 489.37. 489.24. 1257, 1726, 1726. 21—200, 21—200. 754. 1232—1233. 1263. Loans Partially Guaranteed G.I. Press Release, Dec. 12, 1944. accounting terminology, liabilities. convenience hereafter. 111. (15 none changes import 1958 edition Code 548 Title 12. Also cited, People ex rel. Williams Weaver, 1879, 100 539, 705, incidence sought out. detail Professor Woosley work, Banks (1935). discussion Powell, Indirect Encroachment Authority Taxing Powers Harv.L.Rev. 321, 367 (1918). concludes lead disregard formal discrimination.' Woosley, op. cit., 16, pp. 24—25. 'capital (common outstanding. value.' includes inspection return statement. example, Industrial Association's $5,970,000. monthly report $283,000 $202,000 included disregards repaid. substance must, purchased member's withdrawal. 489.6. identical. (federal) franchise, reserves, institutions.' 134. 1469, 1261, 1261 (National Agricultural Credit Corporations); 380, 932, 932 (joint-stock land banks). From end 1951, grew $67,600,000 $272,500,000, $20,500,000. 1957, $481,000,000, showing almost $34,800,000 during passed. increased, average, $18,800,000 1951. $30,700,000 year. Appellant's main Lansing. maintains branch Cities Battle Creek, Flint, Grand Rapids, Marshall, Port Huron Saginaw. trust companies company share.'2 contains reads: 'some phase,' context 3. proposals limit banks—thus State—have Congress. Hearings Senate Banking S. 1573, 70th Cong., 1st Sess. (1928); H.R. 8727 House Currency, 3009, 73d 2d Sess.; 9045, historical Reserve (12 371, 371), prescribed reveals security estate, exception land. (39 754), exceeding run longer (44 1232), 27, 1934 (48 1263), II, Housing 1701 seq., seq.), commonly known mortgages. August (49 706), amending apraised principal amortized term. 1944, participate (or G.I.) program. 1950 Amendment (64 80), I, improvements modernization comparable subscribers to, purchasers therein. *'—and 'depositors' 'creditors' thereof. & League Municipal Finance Commission 1956, 347 311, 322, 79 590, 595.

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