Veazie Bank v. Fenno - 75 U.S. 533 (1869)
U.S. Supreme Court
Veazie Bank v. Fenno, 75 U.S. 8 Wall. 533 533 (1869)
Veazie Bank v. Fenno
75 U.S. (8 Wall.) 533
1. The 9th section of the Act of July 13, 1866, amendatory of prior internal revenue acts and which provides that every national banking association, state bank, or state banking association shall pay a tax of ten percentum on the amounts of the notes of any state hank or state banking association paid out by them after the 1st day of August, 1866, does not lay a direct tax within the meaning of that clause of the Constitution which ordains that "direct taxes shall be apportioned among the several states, according to their respective numbers."
2. Congress having undertaken, in the exercise of undisputed constitutional power, to provide a currency for the whole country, may constitutionally secure the benefit of it to the people by appropriate legislation, and to that end may restrain, by suitable enactments, the circulation of any notes not issued under its own authority.
3. The tax of ten percentum imposed by the Act of July 13, 1866, on the notes of state banks paid out after the 1st of August, 1866, is warranted by the Constitution.
The Constitution ordains that:
"The Congress shall have power:"
"To lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the United States."
"To regulate commerce with foreign nations, and among the several states, and with the Indian tribes."
"To coin money, regulate the value thereof, and of foreign coin."
It also ordains that:
"Direct taxes shall be apportioned among the several states . . . according to their respective numbers."
"No capitation or other direct tax shall be laid unless in proportion to the census or enumeration hereinbefore directed to be made."
"The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people."
With these provisions in force as fundamental law, Congress passed, July 13, 1866, [Footnote 1] an act, the second clause of the 9th section of which enacts:
"That every national banking association, state bank, or state banking association shall pay a tax of ten percentum on the amount of notes of any person, state bank, or state banking association used for circulation and paid out by them after the 1st day of August, 1866, and such tax shall be assessed and paid in such manner as shall be prescribed by the Commissioner of Internal Revenue."
Under this act, a tax of ten percent was assessed upon the Veazie Bank for its bank notes issued for circulation after the day named in the act.
The Veazie Bank was a corporation chartered by the State of Maine, with authority to issue bank notes for circulation, and the notes on which the tax imposed by the act was collected were issued under this authority. There was nothing in the case showing that the bank sustained any relation to the state as a financial agent or that its authority to issue notes was conferred or exercised with any special reference to other than private interests.
The bank declined to pay the tax, alleging it to be unconstitutional, and the collector of internal revenue, one Fenno, was proceeding to make a distraint in order to collect it with penalty and costs when, in order to prevent this, the bank paid it under protest. An unsuccessful claim having been made on the Commissioner of Internal Revenue for reimbursement, suit was brought by the bank against the collector in the court below.
The case was presented to that court upon an agreed statement of facts, and, upon a prayer for instructions to the jury, the judges found themselves opposed in opinion on three questions, the first of which -- the two others differing from it in form only, and not needing to be recited -- was this:
"Whether the second clause of the 9th section of the Act of Congress of the 13th of July, 1866, under which the tax in his case was levied and collected, is a valid and constitutional law. "