Provident Institution v. Massachusetts
73 U.S. 611 (1867)

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U.S. Supreme Court

Provident Institution v. Massachusetts, 73 U.S. 6 Wall. 611 611 (1867)

Provident Institution v. Massachusetts

73 U.S. (6 Wall.) 611

Syllabus

1. The preceding case, Society for Savings v. Coite, affirmed and declared to be applicable to this case.

2. Under the Constitution and laws of Massachusetts as interpreted by its highest court prior to the present case, in two cases not involving any question under the Judiciary Act and by long usage, a statute which enacts that every institution for saving incorporated under the laws of that commonwealth shall pay to the commonwealth "a tax on account of its depositors" of a certain percentage

"on the amount of its deposits, to be assessed, one-half of said annual tax on the average amount of its deposits for the six months preceding the 1st of May, and the average amount of its deposits for the six months preceding the 1st of November,"

is to be regarded as a franchise tax, not as a tax on property, and is valid. Nor is there anything inconsistent with this view in the decisions of this Court.

Page 73 U. S. 612

3. Accordingly, a savings institution in Massachusetts having a portion of its deposits invested in federal securities declared by the act of Congress authorizing their issue to be exempt from taxation under state authority, is liable under the above statute to a tax on account of such deposits as on account of others.

This case, which came here on writ of error to the Supreme Court of Massachusetts, involved as a general matter the same question as the case just preceding, to-wit, the taxation by state legislatures of federal securities held by savings banks created by them; the difference between the two cases being that the question in the former case arose under a statute of Connecticut having one form of language, and in this case arose under a statute of Massachusetts having another form, more or less different.

The present case was thus:

A statute of Massachusetts of 1862 (entitled "An act to levy taxes on certain insurance companies and on depositors in savings banks") provides by its fourth section that every institution for savings incorporated under the laws of that commonwealth should pay to the commonwealth

"a tax on account of its depositors of one-half of one percent per annum [Footnote 1] on the amount of its deposits, to be assessed one-half of said annual tax on the average amount of its deposits for the six months preceding the first day of May and the other on the average amount of its deposits for the six months preceding the first day of November."

The act by its twelfth section exempted "all property taxed" under the above section from taxation for the current year in which the tax was paid, and relieved savings banks from making return of deposits in accordance with the provisions of previous statutes.

With this statute in existence, the Provident Institution for Savings, a corporation having no property except its deposits and the property in which they were invested, and authorized by the general statute of Massachusetts to receive money on deposit for the use and benefit of the depositors,

Page 73 U. S. 613

and to invest its deposits in securities of the United States, had as its average amount of the deposits for the six months preceding the first day of May, 1865, $8,047,652.19, of which $1,327,000 stood invested in public funds of the United States, exempt by law of the United States from taxation under state authority. It paid all taxes asked of it except on the portion which stood thus invested; upon that it declined to pay a tax. On suit brought by the commonwealth to recover the same, the Supreme Judicial Court of that state, regarding the taxing as one on franchise and not on property, and therefore lawful, gave judgment for the commonwealth.

On error here, the question was the correctness of this judgment -- in other words, whether the state by force of the statutes could exact the tax on that portion of the society's deposits which was invested in the public funds of the United States.

Page 73 U. S. 620

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