The question of exemption from taxation of deposits in savings
banks, as affecting the rule for the state taxation of national
bank shares, was very deliberately considered by this Court in
Mercantile Bank v. New York, 121 U.
S. 138, and the conclusion reached in that case was
reaffirmed in
Davenport Bank v. Davenport Board of
Equalization, 123 U. S. 83, and
it is impossible to distinguish this case from those cases.
The laws for the taxation of national banks in Massachusetts,
Mass.Pub.Stats. c. 13, §§ 8, 9, 10, do not deny to the banks as
taxpayers the equal protection of the laws in violation of the
Fourteenth Amendment to the Constitution of the United States, and
do not impose a disproportionate and unequal tax upon them in
violation of the provisions of the Constitution of that state.
It is the manifest intent of Rev.Stat. § 5219 to permit the
state in which a national bank is located to tax all the shares in
its capital stock without regard to ownership, subject only to the
limitations prescribed in that section, and in this case the law
permits the taxation of the shares in the bank of the plaintiff in
error which are owned by other national banks on the same footing
with all other shares.
This was an action at law in contract to recover taxes alleged
to have been illegally assessed. Judgment for defendant. Plaintiff
sued out this suit of error. The case is stated in the opinion of
the Court.
Page 125 U. S. 61
MR. JUSTICE MATTHEWS delivered the opinion of the Court.
This is an action at law brought by the plaintiff in error, a
national bank located in Boston, to recover from the City of Boston
the amount of $14,464, paid to the tax collector of the city upon
demand, he then holding a tax list and warrant for its collection,
after a protest in writing, being an amount which it alleges was
illegally assessed on its shares at $12.80 per $1,000 of valuation,
in violation of § 5219 of the Revised Statutes, of the Fourteenth
Amendment to the Constitution, and of the provisions of the
Constitution of the State of Massachusetts. The cause was submitted
to the court without the intervention of a jury. Judgment was
rendered in favor of the defendant upon an agreed statement of
facts. That judgment is brought here upon this writ of error.
The tax in question was levied under c. 13 of the Public
Statutes of Massachusetts, relative to the taxation of bank shares,
as follows:
"SEC. 8. All the shares of stock in banks, whether of issue or
not, existing by authority of the United States or of the
commonwealth and located within the commonwealth shall be assessed
to the owners thereof in the cities or towns where such banks are
located, and not elsewhere, in the assessment of all state, county,
and town taxes imposed and levied in such place, whether such owner
is a resident of said city or town or not; all such shares shall be
assessed at their fair cash value on the first day of May, first
deducting therefrom the proportionate part of the value of the real
estate belonging to the bank at the same rate and no greater than
that at which other moneyed capital in the hands of citizens and
subject to taxation is by law assessed. And the persons or
corporations who appear from the records of the banks to be owners
of shares at the close of the business day next preceding the first
day of May in each year, shall be taken and deemed to be the owners
thereof for the purposes of this section."
"SEC. 9. Every such bank or other corporation shall pay to the
collector, or other person authorized to collect the taxes of the
city or town in which the same is located at the time in
Page 125 U. S. 62
each year when other taxes assessed in the said city or town
become due, the amount of the tax so assessed in such year upon the
shares in such bank or other corporation. If such tax is not so
paid, the said bank or other corporation shall be liable for the
same, and the said tax, with interest thereon at the rate of twelve
percent per annum from the day when the tax became due, may be
recovered in an action of contract brought by the treasurer of such
city or town."
"SEC. 10. The shares of such banks or other corporations shall
be subject to the tax paid thereon by the corporation or by the
officers thereof, and the corporation and the officers thereof
shall have a lien on all the shares in such bank or other
corporation, and on all the rights and property of the shareholders
in the corporate property, for the payment of said taxes."
From these sections it appears that:
1st. The shares in national banks are to be assessed at their
fair cash value, after deducting therefrom the proportionate part
of the value of the real estate belonging to the bank.
2d. They are to be assessed at the same rate and no greater than
that at which other moneyed capital in the hands of citizens and
subject to taxation is by law assessed.
3d. The bank itself, as a corporation, is made liable in the
first instance for the payment of the taxes so assessed upon its
shares belonging to its shareholders.
4th. If not paid when due, the bank is liable to an action for
the recovery of the same, brought by the treasurer of the city or
town in which it is located, with interest thereon at the rate of
twelve percent per annum from the day when the tax became due.
5th. For the payment of said taxes the corporation has a lien on
all the shares in the bank, and on all the rights and property of
the shareholders in the corporate property, as an indemnity.
It further appears from a comparison of the statutes on the
subject that the action given by § 9, for the recovery of the
taxes, with interest at twelve percent per annum, is the only mode
of collection provided in case of default, no power being
Page 125 U. S. 63
giving to any collecting officer to proceed by distraint or
other seizure of the property of the bank or the shares of the
stock for that purpose.
Chapter 11, Public Statutes of Massachusetts, provides that
personal property, for the purposes of taxation, shall include
goods, chattels, money, and effects, wherever they are, money at
interest, and other debts due the persons to be taxed more than
they are indebted or pay interest for, but not including in such
debts or indebtedness any loan or mortgage of real estate, taxable
as real estate, except the excess of such loan above the assessed
value of the mortgaged real estate; public stocks and securities;
stocks in turnpikes, bridges, and moneyed corporations within or
without the state; the income from an annuity, from ships and
vessels engaged in the foreign carrying trade, and so much of the
income from a profession, trade, or other employment as exceeds the
sum of $2,000 a year; but no income shall be taxed derived from
property subject to taxation, and no taxes shall be assessed upon
the shares in the capital stock of a corporation organized or
chartered in the commonwealth, which pays a tax upon its corporate
franchises, except for school, district, and parish purposes. It is
not disputed but that, under these and other provisions of the law,
all personal estate, included within this enumeration, and real
estate, are taxable, and were taxed, upon their fair cash value at
the same rate of $12.80 for each $1,000 of value levied during the
same period upon shares of capital stock of national banks located
in Boston. The amount of personal property in the City of Boston,
taxed during that period and at that rate, is stated to be
$189,605,672. The aggregate value of shares in national banks in
that city for the same year was $60,428,000.
Corporations chartered by the commonwealth or organized under
general laws for purposes of business or profit, having a capital
stock divided into shares, excepting banks, are subject to a tax
upon their corporate franchises. For purposes of taxation, the law
requires the corporate franchise in each case to be estimated at a
valuation thereof equal to the aggregate value of the shares in its
capital stock. The rate
Page 125 U. S. 64
of taxation is determined by an apportionment of the whole
amount of money to be raised by taxation upon property in the
commonwealth during the same current year, as returned by the
assessors of the several cities and towns, upon the aggregate
valuation of all the cities and towns for the preceding year. From
the valuation of the corporate franchise there is to be deducted,
in case of railroad and telegraph companies whose lines extend
beyond the limits of the commonwealth, such a portion of the whole
valuation of their capital stock as is proportional to the length
of that part of their line without the commonwealth, and also an
amount equal to the value of their real estate and machinery
located and subject to local taxation within the commonwealth; the
same deduction as to real estate and machinery being made in case
of other corporations.
Savings banks are required to pay to the treasurer of the state
a tax, on account of their depositors, of one-half of one percent
per annum on the amount of their deposits, excluding so much of the
deposits as are invested in real estate used for banking purposes,
or in loans secured by mortgages on taxable real estate, and also
for a certain period so much of the deposits as are invested in
real estate, the title to which has been acquired by the completion
of foreclosure or by purchase, and such deposits so taxed are
otherwise exempt from taxation in the hands of their owners.
Life insurance companies are required to pay an excise tax at
the rate of one-quarter of one percent per annum upon a valuation
equal to the aggregate net value of all policies in force on the
last day of the year next preceding, held by residents of the
commonwealth. All other insurance companies pay a tax by way of
excise of one percent on all premiums received during the year for
insurance, and one percent on all assessments made by such
companies upon policy-holders.
The Massachusetts Hospital Life Insurance Company is required to
pay a tax upon all deposits, trust funds, or funds held for
purposes of investment, except upon deposits invested in loans
secured by mortgages on taxable real estate, the same
Page 125 U. S. 65
rate of tax imposed upon savings banks on account of deposits,
and the same rule applies to all trust companies, safe deposit and
trust companies, banking and trust companies, loan and trust
companies, and other moneyed corporations incorporated in the
commonwealth. The American Bell Telephone Company is subjected to a
franchise tax, based upon an apportionment made upon the number of
telephones in use by or under its authority, or with its
permission, or under letters patent owned or controlled by it,
within and without the commonwealth, respectively, deducting the
market value of all stocks in other corporations held by it, upon
which a tax has been assessed and actually paid, either in
Massachusetts or in other states, for the preceding year.
Savings banks, under the laws of the commonwealth, are
authorized to receive deposits from any person until they amount to
$1,000, and to allow interest thereon to be compounded until the
principal with the accrued interest amounts to $1,600, no interest
to be paid on any greater sum. The deposits are to be invested only
as follows:
1st. In first mortgages of real estate situated in the
commonwealth to an amount not to exceed sixty percent of the
valuation of such real estate, but not exceeding seventy percent of
the whole amount of deposits.
2d. In public funds of the United States and of certain
enumerated states and municipal corporations, or in the notes of
any citizen of the commonwealth secured by a pledge of any such
securities at their par value.
3d. In the first mortgage bonds of certain descriptions of
railroad companies, or in the notes of any citizen of the
commonwealth, secured by a pledge of any such securities at not
less than eighty percent of the par value thereof.
4th. In certain bank stocks, including the stocks of national
banks located in the New England states, or on the notes of any
citizen with such bank stocks as collateral security at not more
than eighty percent of the market value thereof, and not exceeding
the par value thereof, but the amount of such investments in such
bank stocks is specifically limited.
5th. In loans upon the personal notes of depositors of the
corporation, not exceeding one-half of the amount of the deposit,
in which case
Page 125 U. S. 66
the deposit is held as collateral security for the payment of
the loan.
6th. If the deposits cannot be conveniently invested in the
modes heretofore named, not exceeding one-third part thereof may be
invested in bonds or other personal securities payable at a time
not exceeding one year, with at least two sureties, all of whom are
to be citizens of the commonwealth and residents therein.
7th. Ten percent of the deposits of any such corporation, not
exceeding $200,000, may be invested in the purchase of a suitable
site and building for the transaction of its business.
8th. Any such corporation may hold real estate acquired by the
foreclosure of any mortgage owned by it or by purchase at sales
made under the provisions of any such mortgage, or for the
satisfaction of debts due to it, but all such real estate shall be
sold within five years after the title is vested in the
corporation.
The particular in which the plaintiff in error chiefly insists
that the tax imposed upon its shares is at a greater rate than that
assessed upon other moneyed capital in the hands of individual
citizens of Massachusetts is the alleged inequality existing in
favor of that imposed upon savings banks. The contrast, of which
this inequality is the result, is stated to be as follows,
viz., that in 1885 a tax of $1,564,995 was collected upon
national bank shares in Massachusetts of the value of $113,000,000,
while upon $163,000,000 of savings bank deposits in the same year
there was collected as a tax only $815,930.
In view of the state of the question as fixed by the previous
decisions of this Court, it is not perhaps very material now to
inquire whether this alleged contrast between the taxation of
national bank shares and of savings banks in Massachusetts is real
or only apparent. There are several particulars which might be
mentioned, and which, when properly allowed for, would certainly
reduce the apparent inequality. There is only one, however, which
we deem it important to notice. The tax on savings banks is based
upon deposits merely. This is because deposits furnish the only
capital which is invested and employed. The institutions
themselves, although corporations, have no capital stock, and are
managed by trustees not selected by the depositors, but by public
authority. The
Page 125 U. S. 67
whole amount of the deposits, with the exceptions noted, are
subjected to a tax of one-half of one percent. On the other hand,
the national banks pay a tax assessed upon the market value of the
shares as personal property, upon a valuation and at a rate exactly
equal to that of all other personal property subject to taxation in
the state. But shares of the national banks, while they constitute
the capital stock of the corporations, do not represent the whole
amount of the capital actually employed by them. They have
deposits, too, shown in the present record to amount, in
Massachusetts, to $132,042,332. The banks are not assessed for
taxation on any part of these, although these deposits constitute a
large part of the actual capital profitably employed by the banks
in the conduct of their banking business. But it is not necessary
to establish the exact equality in result of the two modes of
taxation. The question of the exemption from taxation of deposits
in savings banks, as affecting the rule for the state taxation of
national bank shares, was very deliberately considered by this
Court in the case of
Mercantile Bank v. New York,
121 U. S. 138,
121 U. S. 160,
and the conclusion reached in that case was reaffirmed in the case
of
Bank v. Davenport Board of Equalization, 123 U. S.
83. In the former case, deposits in savings banks in the
State of New York to the amount of $437,107,501, with an
accumulated surplus in addition of $68,669,001, were exempted by
the laws of the state from all taxation, neither the bank itself
nor the individual depositor being taxed on account thereof. It was
said in that case, p.
121 U. S.
161:
"However much, therefore, may be the amount of moneyed capital
in the hands of individuals in the shape of deposits in savings
banks as now organized, which the policy of the state exempts from
taxation for its own purposes, that exemption cannot affect the
rule for the taxation of shares in national banks, provided they
are taxed at a rate not greater than other moneyed capital in the
hands of individual citizens, otherwise subject to taxation."
It is impossible, in our judgment, to distinguish the present
from the case of the New York savings banks, or those of Iowa
considered in the case of the Davenport Bank. The
Page 125 U. S. 68
principal distinction, indeed, between the case of the New York
savings banks and those of Massachusetts, involved in the present
inquiry, is that the latter pay a tax of one-half of one percent on
the amount of their deposits, while the New York banks were exempt
from all taxation whatever.
The argument on behalf of the plaintiff in error, indeed, seeks
to establish another distinction. It is alleged that in
Massachusetts savings banks are permitted to transact a banking
business in the way of loans upon personal securities, which
assimilates them more closely to national banks and takes away the
reason for the application of the rule to them which was applied to
the case of the savings banks of New York. But the difference
mentioned, if it exists at all, is immaterial; the main purpose and
chief object of savings banks, as organized under the laws of
Massachusetts, are the same as those in New York, as considered in
the case of the Mercantile Bank. They are substantially
institutions, under public management, in pursuance of a great and
beneficial public policy, organized for the purpose of investing
the savings of small depositors, and not as banking institutions in
the commercial sense of that phrase. We adhere to the rule as
declared in the cases heretofore decided, which forecloses further
discussion as to the present point in this case.
A similar objection to the tax in question, founded on a
comparison of the taxation of national bank shares with that of
insurance companies and trust companies, the American Bell
Telephone Company, and the Massachusetts Hospital Life Insurance
Company, is equally untenable. Within the definition of that
phrase, established in the case of
Mercantile Bank v. New
York, 121 U. S. 138, the
interest of individuals in these institutions is not moneyed
capital. The investments made by the institutions themselves,
constituting their assets, are not moneyed capital in the hands of
individual citizens of the state.
People v.
Commissioners, 4 Wall. 244.
It is further contended, however, on the part of the plaintiff
in error that the taxation in question is not only at a greater
rate than that imposed upon other moneyed capital held by
individual citizens, but that it is repugnant to the Fourteenth
Amendment
Page 125 U. S. 69
to the Constitution of the United States because it operates to
deny to the taxpayer the equal protection of the laws and also that
it is disproportionate and unequal, in violation of the provisions
of the Constitution of Massachusetts. The two branches of this
proposition are equivalent; if the tax is not disproportionate and
unequal within the meaning of the constitution of the state, the
taxpayer is not denied the equal protection of the laws within the
sense of the Fourteenth Amendment. The point is fully met by the
reasoning and judgment of the Supreme Judicial Court of
Massachusetts in the cases of
Providence Institution for
Savings v. City of Boston, and
Pliny Jewell v. City of
Boston, 101 Mass. 575, 585.
Another point to be noticed arises upon the third count of the
declaration. It is therein alleged that other national banking
associations, some located in Massachusetts and others in the
several New England states, are the owners of 1,448 shares of the
capital stock of the National Bank of Redemption, on which the
amount of tax paid was $2,051. It is urged in argument that these
shares are not taxable by virtue of § 5219 of the Revised Statutes.
The language of the section is:
"Nothing herein shall prevent all the shares in any association
from being included in the valuation of the personal property of
the owner or holder of such shares, in assessing taxes imposed by
authority of the state within which the association is located, but
the legislature of each state may determine and direct the manner
and place of taxing all the shares of national banking associations
located within the state, subject only to the two restrictions;
that the tax shall not be at a greater rate than is assessed upon
other moneyed capital in the hands of individual citizens of such
state, and that the shares of any national banking association
owned by nonresidents of any state shall be taxed in the city or
town where the bank is located, and not elsewhere."
It is contended that no tax is thereby authorized upon the
national bank itself as a corporation, nor upon the personal
property of any such, and that therefore these shares in the
National Bank of Redemption are exempt from taxation by virtue of
their ownership. This, however, is not a reasonable
Page 125 U. S. 70
interpretation of the language of the section. manifest
intention of the law is to permit the state in which a national
bank is located to tax, subject to the limitations prescribed, all
the shares of its capital stock without regard to their ownership.
The proper inference is that the law permits, in the particular
instance, the taxation of the national banks owning shares of the
capital stock of another national bank by reason of that ownership,
on the same footing with all other shares.
Other questions have been raised by counsel for the defense. The
right of the plaintiff to sue is denied on the ground that the
right of action belongs to the owners of the shares taxed; the
right of recovery is denied on the ground that the payment by the
plaintiff was voluntary, and the right of action, if it exists, it
is alleged is against the collecting officer, and not the City of
Boston. These questions we have not considered it necessary to
examine or decide, preferring to rest our judgment upon the
validity of the tax.
The judgment of the circuit court is accordingly
Affirmed.
BRADLEY, GRAY, and BLATCHFORD, JJ., did not sit in this case or
take any part in the decision.