Schuykill Trust Co. v. Pennsylvania - 302 U.S. 506 (1938)


U.S. Supreme Court

Schuykill Trust Co. v. Pennsylvania, 302 U.S. 506 (1938)

Schuykill Trust Co. v. Pennsylvania

No. 447

Argued December 6, 1937

Decided January 3, 1938

302 U.S. 506

Syllabus

1. A state law, as construed by the State Supreme Court to sustain a tax, was found unconstitutional by this Court, and mandate issued reversing the judgment and remanding the cause for further proceedings not inconsistent with the opinion. Held, that the state court was not thereby precluded from reassessing the tax upon a revised construction of the statute eliminating the unconstitutional features. P. 302 U. S. 512.

2. Whether state courts, in construing a taxing act so as to avoid conflict with the Federal Constitution, in effect exercised legislative power in violation of the state constitution, held not a federal question. P. 302 U. S. 512.

3. The tax in respect of trust companies laid by the Pennsylvania Act of June 13, 1907, as amended, is a tax upon the shares, rather than upon the corporate assets. P. 302 U. S. 512.

4. In taxing shares of a trust company on the basis of their value as reflected from its paid-in capital stock, surplus, and undivided profits, a State is not obliged to exclude from the valuation obligations of the Federal Government or its instrumentalities belonging to the company. P. 302 U. S. 513.

But shares of national banks already taxed to the company, as owner pursuant to R.S. § 5219, cannot be included in such valuation.

5. Under Pennsylvania Act of June 13, 1907, as amended, the shares of a local trust company are valued for taxation on the basis of the amount of the company's paid-in capital stock, surplus, and undivided profits minus its investments in shares of Pennsylvania corporations which are liable to pay, or are exempted from, a capital stock tax, or which are relieved from a tax on shares. If the trust company fails to show that such investments represent capital, surplus, and undivided profits, rather than purchase with deposits, they are allowed a partial or "proportionate" exemption, computed by use of a formula.

Held:

(1) That, where obligations of the United States or its instrumentalities (other than national bank shares), were proportionately

Page 302 U. S. 507

exempted in the same way as other investments of a trust company, there was no ground to claim discrimination against such obligations in assessing the share tax. P. 302 U. S. 514.

(2) The fact that the shareholders of a trust company whose investments consist of national bank stock would pay no tax, because R.S. § 5219 permits but a single tax thereon which has been paid by the company as owner, whereas those holding shares in a trust company which owns only other federal securities would not be entitled to a similar total exemption, but only to a proportionate deduction, unless it could be shown that those securities were purchased from capital, surplus, and undivided profits does not evidence any illegal discrimination against such securities. P. 302 U. S. 514.

(3) The principle of equal protection does not demand that, because one company owns wholly exempt securities, with consequent exemption of its shareholders from the tax on shares, the State shall abstain from taxing the shareholders of another company whose investments carry no such exemption. P. 302 U. S. 514.

6. A state tax on the shares of a domestic corporation, assessed on the basis of the corporate assets and payable by or collected through the corporation, may, consistently with the Fourteenth Amendment, extend to shares owned by nonresidents. Corry v. Baltimore, 196 U. S. 466. P. 302 U. S. 514.

So held where the corporate charter antedated the creation of the tax liability, but was subject to a power to alter, amend, or repeal reserved by the state constitution.

7. Where a State has reserved the right to alter, amend, and repeal the charter of a corporation, every stockholder acquires his shares with full knowledge that his interest in the corporation is subject to regulation and taxation by the State. P. 302 U. S. 516.

327 Pa. 127, 193 Atl. 638, affirmed.

Appeal from the affirmance of a judgment redetermining a tax assessment. Cf. 296 U. S. 113.

Page 302 U. S. 508



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