1. The obligation of an outstanding contract is not impaired,
contrary to Const. Art. I, § 10, by a later state statute taxing
the proceeds of the contract. P. 271 U. S.
2. Minnesota Laws of 1923, c. 226, directing levy and collection
of a tax of 6 percent on royalties received for permission to
explore, mine, take out, and remove ore from land in the state, may
be reasonably interpreted as laying a tax upon interests in mineral
lands from which permission has been given to extract ores upon
payment of royalty, the amount of the exaction being determined by
reference to the sum actually received for the use of such
interests, Von Baumbach v. Sargent Land Co., 242
U. S. 305
, and does not violate the requirement of the
state constitution that "taxes shall be uniform upon the same class
of subjects and shall be levied and collected for public purposes,"
or the due process clause of the Fourteenth Amendment. P.
271 U. S.
3. As the tax is laid upon land, neither the owner's residence
nor the place fixed for payment of the royalty is important. P.
271 U. S.
4. Ore lands being a distinct class of property, the tax is
consistent with the equal protection clause of the Fourteenth
Amendment without being extended to other classes such as quarries
and forests. P. 271 U. S.
Page 271 U. S. 578
5. The state legislature may exercise wide discretion in
selecting the subjects of taxation so long as it refrains from
clear and hostile discrimination against particular persons or
classes. P. 271 U. S.
Appeals from decrees of the district court dismissing the bills
in suits against the Tax Commission of the State of Minnesota to
enjoin them from enforcing a tax on royalties from ore lands.
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
By their several bills in the United States district court,
appellants alleged the invalidity of chapter 226, Laws of
Minnesota, approved April 11, 1923, because of conflict with the
Fourteenth Amendment and the state constitution. They sought to
prevent its enforcement. That court held the enactment valid, and
by decrees entered
Page 271 U. S. 579
January 15, 1925, dismissed the bills. These appeals
The challenged Act (fourteen sections), effective from its
"Sec. 1. There shall be levied and collected upon all royalty
received during the year ending December 31, 1923, and upon all
royalty received during each calendar year thereafter, for
permission to explore, mine, take out, and remove ore from land in
this state, a tax of six (6) percent."
"Sec. 2. For all purposes of this Act, the word 'royalty' shall
be construed to mean the amount in money or value of property
received by any person having any right, title, or interest in or
to any tract of land in this state for permission to explore, mine,
take out, and remove ore therefrom, and the word 'person' shall be
construed to include individuals, copartnerships, associations,
companies, and corporations."
Succeeding sections relate to reports to the Tax Commission,
method of assessment, penalties, date of payment, etc. Section 5
"A person subletting land for the use of which he received
royalty shall be required to pay taxes only on the difference
between the amount of royalty paid by him and the amount
And Section 8:
"The situs of royalty for all purposes of this Act shall be in
this state, and the tax herein provided for shall be a specific
lien from the time the same is due and payable upon all and
singular the right, title, and interest of the person to whom such
royalty is payable, in and to the land for permission to explore,
mine, take out, and remove ore on which the royalty is paid."
Article IX, § 1, Constitution of Minnesota:
"The power of taxation shall never be surrendered, suspended, or
contracted away. Taxes shall be uniform upon the same class of
subjects, and shall be levied and collected for public purposes. .
. . "
Page 271 U. S. 580
Extensive areas in northeastern Minnesota contain beds of rich
iron ore and derive their chief value therefrom. Titles to these
lands are held by many resident and nonresident individuals and
corporations. For many years, these owners have followed the common
practice of making long-term leases (ordinarily 50 years) to
parties who agree to mine the ore and pay the lessor or his
successors at some designated place a specified amount ($ .125 to
$1.25), or royalty, for each ton removed. Some lessees have made
subleases, reserving to themselves something above what they are
obligated to pay.
Great bodies of ore are now subject to such leases, or
conveyances of similar import, and every year millions of tons are
mined thereunder, most of which goes out of the state. The
consequent royalties are very large-$16,000,000 during 1923.
In 1921, the Minnesota Legislature adopted the Occupation Tax
Act -- Chapter 223. It prescribes a charge upon those who engage in
mining, amounting to 6 percentum of the value of the ore extracted
and removed, after deducting costs of operation and royalties.
Oliver Iron Mining Co. et al. v. Lord, 262 U.
, sustained this Act. The legislature evidently
intended that Chapter 226, Laws of 1923, should supplement Chapter
223, Laws of 1921, and thus secure payment to the state of 6
percentum upon the value of all extracted ores, less the expense of
raising them. If the owner operates, he must pay this 6 percentum,
under the Occupation Tax Act; if a lessee mines, the Act requires
him to pay the same amount less royalty. The Act of 1923 lays a
charge of 6 percentum upon the royalty. See State v.
207 N.W. 727, 731.
Appellants -- corporate and individual -- receive royalties from
iron mines under lease or similar contracts at designated places,
sometimes within and sometimes without the state. Some of them
reside within the state, and
Page 271 U. S. 581
some without. Some own the fee, some are lessees, who have
executed subleases. They maintain that the tax prescribed by
Chapter 226 of 1923 is not laid uniformly upon the same class of
subjects, as required by the state constitution; that its
enforcement would deprive them of the equal protection of the laws
and of property without due process of law, contrary to the
Fourteenth Amendment, and that it impairs the obligation of their
contracts, and thereby violates Article I, § 10, of the federal
Titles to all the lands and leases were obtained subject to the
state's power to tax. If the statute now in controversy is within
that power, it cannot impair the obligation of appellants'
contracts; if beyond, it is, of course, invalid. Accordingly, there
is no occasion further to discuss the application of Article 1, §
The only provision of the Minnesota Constitution which
undertakes to limit the power of taxation is in Article IX, § 1:
"Taxes shall be uniform upon the same class of subjects, and shall
be levied and collected for public purposes." The state courts have
said nothing to the contrary, and it seems to us sufficiently plain
that this provision goes no further than the Fourteenth Amendment.
Consequently, if the legislation under review does not offend that
amendment, there is no conflict with the state constitution.
In Von Baumbach v. Sargent Land Co., 242 U.
, we considered mining leases like those now
before us and pointed out that, under the Minnesota decisions,
their avails are regarded as rents and profits of the land, "the
compensation which the occupier pays the landlord for the species
of occupation which the contract between them allows." Ultimate
construction of Chapter 226 is for the state courts, but, in the
absence of that, we think the enactment may be reasonably
interpreted as laying a tax upon interests in mineral lands from
Page 271 U. S. 582
has been given to extract ores upon payment of royalty. The
amount of the exaction is determined by reference to the sum
actually received for the use of such interests.
As the tax is laid upon land, neither the owner's residence nor
the place fixed for payment of the royalty is important.
The remaining question is whether the legislature may treat ore
lands as a distinct class of property and impose upon them a tax
not extended to quarries, forests, etc., without depriving their
owners of the equal protection of the laws guaranteed by the
Fourteenth Amendment. And this question must be answered in the
affirmative, under the principles announced in Heisler v.
Thomas Colliery Co., 260 U. S. 245
where we sustained a tax confined to anthracite coal against the
objection of arbitrary classification in that bituminous coal was
not included. The state legislature may exercise wide discretion in
selecting the subjects of taxation (Oliver Iron Mining Co. v.
Lord, 262 U. S. 172
262 U. S.
), so long as it refrains from clear and hostile
discrimination against particular persons or classes (Bell's
Gap Railroad Co. v. Pennsylvania, 134 U.
, 134 U. S.
). Certainly, ores differ as much from other products
of the land as anthracite coal does from the bituminous variety,
and ore gives character to appellants' holdings. Lands chiefly
valuable for ore are depreciated by its extraction, and probably
will yield less and less under an ad valorem
tax as the
mining continues. The situation is very different where the
principal value depends on other uses which do not deplete. The
selection of the business of mining only for imposition of the
occupation tax was not arbitrary, and certainly we cannot say that
the classification by the legislation now assailed was without any
There is nothing to show purpose by the state officers to insist
upon a construction or application of the statute which will
deprive appellants of their constitutional
Page 271 U. S. 583
rights, and, considering the true construction of the Act, no
ground appears which would justify an injunction to prevent them
from proceeding with its orderly enforcement.