Document: 392 U.S. 339 88 S.Ct. 2173 20 L.Ed.2d 1138 FIRST AGRICULTURAL NATIONAL BANK OF BERKSHIRE COUNTY, Appellant,v.STATE TAX COMMISSION. No. 755. Argued April 22, 1968. Decided June 17, Ronald H. Kessel, Boston, Mass., for appellant. Alan J. Dimond, appellee. Mr. Justice BLACK delivered the opinion of Court. 1 The principal issue raised by this case concerns extent to which States may tax a national bank. Supreme Judicial Court Commonwealth Massachusetts held that appellant, First Agricultural National Bank Berkshire County, was subject Massachusetts' recently enacted sales and use taxes1 on purchases its own tangible personal property. For reasons be stated we believe decision erroneous, reverse. 2 As long ago as 1819, in historic M'Culloch v. Maryland, 4 Wheat. 316, L.Ed. 579, declared unconstitutional state bank United since, according Chief Marshall, amounted 'tax operation an instrument employed government Union carry powers into execution.' Wheat., at 436 437. A line subsequent decisions has firmly established proposition are without power, unless authorized Congress, federally created, or, they presently called, national, banks. Owensboro Nat. City Owensboro, 173 664, 668, 19 537, 538, 43 850; Des Moines Fairweather, 263 103, 106, 44 23, 24, 68 191; Hartford, 273 548, 550, 47 462, 463, 71 767; Iowa-Des Bennett, 284 239, 244, 52 133, 135, 76 265. 1966, Fortas, speaking unanimous Court, thought ancient principle so well he used banks example holding American Red Cross immune from taxation: 3 'In those respects differs usual agency—e.g., employees not States, officials do direct everyday affairs—the is like other institutions—e.g., banks—whose status tax-immune instrumentalities beyond dispute.' Department Employment 385 355, 360, 87 464, 467, 17 414. (Emphasis added.) below recognized strong precedents against taxation, but been changed establishment Federal Reserve System2 should no longer considered nontaxable States. Essentially reasoning under present-day conditions regulations there substantial difference between banks; implication is, course, lack any unique quality giving them character federal instrumentality. Because pertinent congressional legislation banking field, find it unnecessary reach constitutional question whether today instrumentalities. 5 will seen, Congress far reluctant pass field. There important committees currency both Houses continually monitor affairs propose new when changes felt needed. purposes case, most piece 12 U.S.C. § 5483 originated part Act 3, 1864, c. 41, 13 Stat. 111. This section allows taxation one four specified ways addition taxes their real estate. Before originally sharp controversy over allowed vocal opponent powerful Senator Sumner Massachusetts, who said: 6 'If you allow State interfere with proposed system (of banks) way, embarrass it? Where shall stop? run line? 7 'Now, sir, every consideration, argument goes sustain great judgment (M'Culloch Maryland) concession power institution particular, directly or indirectly.' Cong. Globe, 38th Cong., 1st Sess., 1893—1894 (1864). 8 On side, amendments expressly permitting much broader local were introduced, debated, rejected Congress. Among these amendment introduced House would have made subject, exception, all general property: 9 'And said associations corporations severally municipal upon estate, same persons residing respective places business such laws.' 1392 10 result conflict legislation, finally passed, compromise permitted certain ways, prohibited forms taxation. Fessenden, Chairman Finance Committee, clearly defined being enacted: 11 reads bill perceive operations itself, circulation, deposits, everything can properly reserved General Government; cannot touch possible form; limited controlled; simple right given say property citizens invested contribute precisely property.' 1895 It seems clear us legislative history 548 intended prescribe only And certainly novel interpretation section, shown previous early 1899 declared: 'This (R.S. 5219, 548), then, Revised Statutes measure banks, franchises. By unambiguous provisions confined shares stock names shareholders assessment estate Any tax, therefore, excess of, conformity to, requirements, void.' 669, 539, 850. 14 more complete explanation meaning appears Court's California Association Richardson, 248 476, 39 165, 63 372, where 15 'There also doubt 548) comprehensively control dealt thus furnish exclusive rule governing agencies created provided section. * 16 'Two apparent adopted. First, absolute exclusion states prevent interference operations, integrity assets, administrative governmental affairs. Second, preservation taxing several impairment thereof arising existence end financial resources engaged development might withdrawn *. 'The first aim attained non-recognition whatever agencies, except specially for, and, powers. second reached recognition fact that, point view ultimate beneficial interest, available asset possessed enjoyed owned stockholders be, such. *' U.S., 483, 166. 18 Finally, doubt, consider words 191: shows, hold, what free authority, than taxable owners, stockholders, *.' 107, 24. Thus, least since decision, supra, 1899, abundantly marks outer limit within Now asked change prior precise do. For, pointed out above, field traditionally area particular concern marked responsive problems. illustrated alone. passed 1864 because 1863 Currency Act4 contained provision shares. In 1868 technical section.5 Then 1923 substantive which, among things, income dividends.6 Another declaration 'bonds, notes, evidences indebtedness' hands individual 'moneyed capital coming competition banks.' Just two years before, had ruled Merchants' Richmond Richmond, 256 635, 41 619, 65 1135 (1921), bonds notes moneyed covered 548. Pepper, spoke amendment, offered response placed erroneous section.7 again 1926, amended permit levy franchise excise measured entire (including tax-exempt securities) banks.8 1950, sent Senate Committee Banking levying did it.9 21 history, convinced if must come present limits. 22 With primary additional resolved. court held, contrary appellant's contention, imposed purchaser, vendors sell Of course true, object vendor decides burden through increased price. But bank, appellant exempt here affects immunity, purpose bound court's characterization tax. See Society Savings Cleveland Bowers, 349 143, 151, 75 607, 611, 99 950, cases cited therein. essentially is: whom does incidence fall? Kern-Limerick, Inc. Scurlock, 347 110, 121—122, 74 403, 410, 98 546. Also see Carson Roane-Anderson Co., 342 232, 72 257, 96 257. 23 appear indisputable terms purchaser imposes legal purchaser. Land St. Paul Bismarck Lumber 314 95, 99, 62 1, 86 65. Subsection provides: 24 'Reimbursement hereby paid each commonwealth add price collect full amount taximposed equal nearly practicable average equivalent thereof; debt vendor, added price, recoverable law manner debts.' Acts Resolves, 14, subsec. 3. 25 subsection requirement reinforced prohibits unlawful advertising assume absorb sale make. We accept simply sanction refuses (assuming true), means vendor. wording statute Legislature taxbe our purposes, least, intent controlling. force law, especially language regardless sanctions, businessmen attempt, commercial affairs, conform written. 26 reverse hold taxes. 27 Reversed. 28 FORTAS took consideration case. 29 MARSHALL, HARLAN STEWART join, dissenting. 30 I make Constitution prohibit applying uniform wastebaskets.1 me necessary decide order interpret bases decision. Moreover, refusal gives further life largely outmoded doctrine. 31 Brandeis rightly cautioned '(i)n involving issues must, sound conclusions, feel bring opinions agreement experience facts newly ascertained, judicial authority 'depend altogether supported."2 think light functions role day age constitutionally nondiscriminatory construed statutory immunity involved. I. 32 A. starting inquiry 579 (1819). That involved applicable Maryland 'without State,' i.e., Second chartered 1816. circulation (currency) payment 2% stamp alternatively, annually $15,000. Substantial monetary penalties violations statute, sued cashier M'Culloch. celebrated architect federalism, struck down statute. 33 Osborn 738, 204 (1824), applied strike Ohio attempted extract annual $50,000 branch operating authority. statutes found patently discriminatory (the specifically mentioned it), apply state-chartered however, his 850 (1899), little independent analysis Kentucky could discussion differences performed kind there, existed virtue quite distinct Osborn. 34 Virtually later depend three cases. One could, perhaps should, read discriminatorily view, Marshall's statement 'the involves destroy,' 431, relate entirely Frankfurter reference called 'seductive cliche': 35 web unreality spun famous dictum brushed away stroke 36 Holmes's pen: destroy while sits."3 37 Absent examination Osborn, justified either following grounds: alternative now constituted delineation permissible scope invalid based valuation included bank's required investment States.4 Or invalid, incorrect. 38 Such hoary would, require re-evaluation validity doctrine intergovernmental immunities—a rest specific Constitution, rather concepts federalism. 426; Graves New York ex rel. O'Keefe, 306 466, 487—492, 59 595, 601 604, 83 927 (1939) (Frankfurter, J., concurring); T. Powell, Vagaries Varieties Constitutional Interpretation, IV (1956). provide (and provided, infra, 362) establish. See, e.g., Detroit, 355 474, 78 478, 424 (1958); Maricopa County Valley Bank, 318 357, 361, 587, 588, 834 (1943); Railroad Co. v, Peniston, Wall. 5, 37—38, 787 (1873) (concurring judgment.). Given reason cling itself makes absence authorizing legislation. disparate kinds create difficulties ad hoc resolution abstract generally Waning Intergovernmental Tax Immunities, 58 Harv.L.Rev. 633 (1945); Remnant 757 (1945). sometimes realized: 'Wise flexible adjustment calls political economic considerations greatest difficulty delicacy. complex problems ones best qualified resolve.' 479. 40 B. never indicated desire reconsider toto has, noted trend toward restricting (from taxes) private seeking clothe themselves character,' Oklahoma Comm. Texas 336 U.S 342, 352, 69 561, 567, 93 721 (1949). wisdom counsels, think, rejection last Term, 'there test ascertaining closely related activity become taximmune instrumentality,' 358—359, 414 (1966) (holding immune). Various formulations controlling determine institutions individuals immune: 'have incorporated structure emjoy immunity,' Boyd, 378 39, 48, 84 1518, 1524, 713 (1964); 'are arms deemed essential performance functions,' integral parts (a department and) share fulfilling duties entrusted it,' Standard Oil Johnson, 316 481, 485, 1168, 1170, 1611 (1942) (Army post-exchanges immune); 'assimilated Government constituent parts,' Township Muskegon, 484, 486, regarded 'virtually arm Government,' 359—360, 467. 42 Under rubrics, looked various factors characteristics institution: organized profit, retained 'it 'servant' agency terms,' S.Ct., 485; effectuate program, 102, (1941); ownership, substantially totally, lies Government, Clallam Wash. 341, 343, 121, 328 (1923); Wall., 32, handle Stanard supra; officers significant portion appointed compare aid, charged carrying some Government's international commitments, performs 'functions indispensable workings' unit, 359, rubrics listed above—a list exhaustive—a privately corporation existing profit shareholders. governmetal function equally day-to-day nor ownership interest Appellant points leading conclusion instrumentalities: 'owe very legislation,' extensive regulation. to,' by, definitely basis alone determining immune. cf. Broad River Power Query, 288 178, 53 326, 77 685 (1933). Similarly, whole host businesses regulation 'federal instrumentalities' plain mechanically seminal M'Culloch, Owensboro. instructive, examine 45 instrumentality recent (Department Employment, supra): 20% remainder persons); President five directors, shareholder, participated election others; Secretary Treasury deposit public funds give why so; transmit charge; issued tender debts owing acted fiscal agent handling foreign exchange transactions. P. Studenski & Krooss, Financial History 88, 103—106 (2d ed. 1963); System, Studies 7—8, 18, 39—41 (1941). 46 Even warrant today. pursuant 18645 bolster Union's status, shaky Civil War. Studies, 43—46. Most importantly, standpoint analyzing served, War legislation,6 trace concerning currency. They currency, printed Department, payable Government. To insure stability insuring issuing ready market secure depositing Department. 14—16, 41—46; 154—155. All radically passage 1913, 251, amended, 221 et seq., developments respect System capsulize greatly, suffice System) agents 391. 1935, ceased so. 240; System: Purposes Functions X (5th rev. 1967). disminished importance functionaries compensated enactment designed competitive banking, 1228 (1927), 36(c); fiduciary powers, 668 (1962), 92a; rate loans, 48 191 (1933), 85; capitalization, 185 51; time savings 1232 371. sure, members therein, 222, sense parcel effectuation policies. But, my sufficiently quasi-public enjoy If enough, then seem elect join instrumentalities.7 49 event, competitor: source private; exists profit. More neither tender: 50 'With passing lost systems. Except automatic membership different examining boards, less standards examination, appraisal, like, main differentiation (state) formerly privilege issue.' Paris, Monetary Policies 1932—1938, (1938). 51 Today perform services competitors. insured depository. checking accounts carried today, When securities offered, receive applications purchasers. redeemed exchanged, transactions handled Those administer loan districts. Functions, 225—234, 274—277; 260—265. 600, Stone wrote Court: '(T)he implied form construction, narrowly restricted. expansion correspondingly curtails sovereign invoked citizen tends operate benefit expense corresponding whose name claimed.'8 54 situation here; heed instrumentalities.9 am bit mystified practical effect pay dealing contractors (who Government), see, Alabama King Boozer, 43, (1941), profit-making corporation, II. 55 holds ante, n. 'was Ante, 343. candid acknowledge supported precedent. virtue. origin premise correct. reject concerned, ought examined freshly, 'immunity (should not) resurrected implication.' 319 598, 1284, 1286, 1612 (1943). 56 Section mentions types taxes: shares, dividends 'according by' income. provides imposition 'shall lieu others.' statement, together omitted note (ante, 341-342, 3),10 equality preventing subjected enumerated taxes, multiple income, taxed similar fashion. subsections 1(b), (c), (d), 10. majority aware Maryland. following: 57 deprive possessed. extend proerty common State, institution, description throughout State.' (4 436.) areas itself. 'merely inherent in' case—'e.g., shares—be exercised fashion.' Liberty Buscaglia, N.Y.2d 370, N.Y.S.2d 33, 235 N.E.2d 101, 108 (1967). Tradesmens Comm., 309 560, 60 688, 692, 947 (1940), restrictions (§ methods systems discriminate class.' else assuredly sole State's argue existed, saw need permitted. Aside misreading entails, just as, 258 (1913), 531; land 380 (1916), 931; many institutions;11 Reconstruction Corporation, (1932), 607; Public Housing Administration, 890 (1937), 1405(e), government-owned corporations.12 relevance construing me, exist adopted factor raising revenue until 1930's, 1926. H.R.Rep. 565, 89th 608 (1965). having narrow encompassing broad prohibitory application. better recognize limits set forth Only way re-evaluate situation. bear action. put namely, seeks exemption 61 major policy foster Logan, Utah Walker 252, 492, 343 (1966); Lewis Fidelity Deposit 292 559, 848, 1425 (1934). ought, decisive, promote retard policy. stated, affirm. HARLAN: Brother MARSHALL's opinion, joined, affirm Reardon's upheld application 229 245, 251—260. §§ 2. December 6, seq. part: legislature direct, place located (1) (2) include derived therefrom owner holder thereof, (3) net (4) '1. (a) above others '3. Nothing herein subdivision extent, value, taxed.' February 25, 1863, 58, 665. 10, 1868, 7, 34. March 4, 1923, 267, 1499. 64 Cong.Rec. 1454 (1923). 223. Hearing S. 2547 before Subcommittee Matters Currency, 81st 2d (1950). reductio absurdum text unlike most, somewhat accurate. item informed supplier, wastebasket (as '1 Box 5X Index Cards'). record reveal liability taxes; total $575.66 months year 1966 here. Burnet Coronado Gas 285 393, 412—413, 443, 449—450, 815 (1932) (dissenting opinion), quoting Passenger Cases, How. 283, 470, 702 (1849) (Taney, C.J.). People 489, 490, 603, Panhandle Mississippi Knox, 277 218, 223, 451, 453, 857 (1928) opinion). viewed prohibiting condition borders granted exacting (Such after (1940).) apart aspects, similarly viewed: alternatively State; transact there. While holdings go preferable interpreting flatly aside exceptions (see 361). 665 ('An *.'); *.'). acts, 1865, 484; July 13, 1866, 9, 146. 31, composed 1,351 state-chartered, 4,799 24—25. Accord, Indian Motorcycle 283 570, 580, 601, 1277 (1931) (Stone, dissenting). Compare contention it, instrumentality, labor laws, NLRB America, 130 F.2d 624, 627 (C.A.9th Cir. 1942) (footnote omitted): 'It managed operated stockholders. merely enabled created. relevant portions read: '(b) greater assessed banks: Provided, bonds, indebtedness representing investments business, '(c) association, may, received sources, higher highest rates mercantile, manufacturing, doing limits: on, financial, laws individuals, includes domestic likewise corporations, corporations. '(d) taxed, capital. '2. association nonresidents district elsewhere; associationshall return thereon nonresident shareholders.' E.g., intermediate credit 1111; Home Loan 1433; associations, 1464(h). Insurance Corp., 1825. Corporation Control 1945, 597, 841

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