1. A statute of a state requiring savings societies, authorized
to receive deposits but without authority to issue bills, and
having no capital stock, to pay annually into the state treasury a
sum equal to three-fourths of one percent on the total amount of
their deposits on a given day imposes a franchise tax, not a tax on
2. Such a tax is valid.
3. Consequently the fact that a savings society so taxed has
invested a part of its deposits in securities of the United States
declared by Congress, in the act which authorized their issue, to
be exempt from taxation by state authority, does not exempt the
society from taxation to the extent of deposits so invested.
The Legislature of Connecticut, in 1863, enacted that the
several savings banks
in the state should make annual
return to the comptroller of public accounts "of the total
amounts of all deposits"
in them respectively on the first day
of July in each successive year, and that each should annually pay
to the treasurer of the state "a sum equal to three-fourths of one
percent on the total amount of deposits"
in such savings
bank on the days aforesaid. The statute declared that this tax
should be in lieu of all other taxes upon savings banks or their
With this statute in existence, the "Society for Savings" -- one
of the savings banks of Connecticut, and as such empowered by its
charter to receive deposits of money and improve them for the
benefit of its depositors, but having no capital stock or
stockholders -- had on the 1st July, 1863, $500,161 of its deposits
invested in securities of the United States, which, by the act of
Congress authorizing their
Page 73 U. S. 595
issue, were declared to be exempt from taxation by state
authority, "whether held by individuals, corporations, or
associations." [Footnote 1
Upon the amount of their deposits thus invested, the society
refused to pay the sum equal to the prescribed percentage.
On a suit brought by Coite, treasurer of the state, for the
purpose of recovering the tax thus withheld, the Supreme Court of
Connecticut decided that the tax in question was not a tax on
property, but on the corporation as such, and rendered judgment
accordingly for the plaintiff. [Footnote 2
The correctness of the judgment was the point now here on
Page 73 U. S. 602
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
Savings banks, and societies for savings, in the State of
Connecticut are required by the law of the state to pay annually to
the state treasurer for the use of the state a sum equal to
three-fourths of one percent on the total amount of deposits in
such institution on the first day of July in each year. Preparatory
to such an assessment the treasurer of every such institution is
required, within the first ten days of July in each year, to make
out under oath, and deliver
Page 73 U. S. 603
to the comptroller of public accounts, a correct statement of
the total amount of all such deposits on that day in their
respective institutions. Payment of the tax is required to be made
in semiannual installments, and the provision is that the tax, so
levied, shall be in lieu of all other taxes on said institutions
and the deposits therein. [Footnote
Institutions called savings and building associations are also
embraced in the same provision, but the clauses of the section
having respect to such associations are omitted, as they are not in
any view material in this investigation. They are stock
associations of a novel and peculiar character, organized under a
general law, and are quite distinct from savings banks and
societies for savings, which are merely banks of deposit and loan,
having no stock, and which were created under special charters from
the legislature of the state. [Footnote 4
Such institutions are banks of deposit, but they have no capital
stock or stockholders, and are without any authority to make
discounts or issue any circulating medium. Money in limited amounts
may be deposited in such banks for safekeeping and be withdrawn at
the pleasure of the owner, under such regulations as the charter
and bylaws may prescribe. Authority is vested in the corporation by
its charter to receive such deposits in trust for the owner, and to
loan, use, and improve the same, and to apply and divide the net
income and profits thereof in just proportions among the persons
making such deposits, subject to certain reasonable deductions as
Like other corporations they may choose their own officers and
may admit new members; and the charter also provides that they may
sue and be sued, that they may take and hold real estate, other
than such as is conveyed as security or in payment of debts, to a
limited amount, and may vest their funds in the stock of the state
banks or other public stock of the state or of the United States,
and may dispose of the
Page 73 U. S. 604
same from time to time in such amounts as will meet the demands
for the deposits made in such institution. [Footnote 5
Whole amount of deposits in the defendant bank on the first day
of July, 1863, was $4,758,273.37, of which the sum of $500,161 was
then invested and held in securities of the United States, declared
by act of Congress to be exempt from taxation, as appears by the
return of the treasurer of the bank to the comptroller of public
accounts and by the agreed statement in the record. Prompt payment
of the first installment of the tax, as required by law, was made
by the bank, less the prescribed percentage upon the amount of the
deposits invested in government securities, which they refused to
pay, insisting that the tax to that extent was unauthorized and
illegal. Due proceedings were accordingly instituted by the
plaintiff, as the treasurer of the state, to recover of the bank
the balance of the tax so withheld. [Footnote 6
] Judgment in the court below was rendered for
the plaintiff, and the defendants sued out this writ of error.
1. Payment is required to be made to the treasurer of the state,
for the use of the state, of a sum equal to three-fourths of one
percent on the total amount of deposits in such institution, on the
first day of July in each year, and the question is whether, by the
true construction of that provision, the assessment is properly to
be regarded as a tax on property or as a tax on the privileges and
franchises of the defendant corporation. Viewed as a tax on
property, the assessment, so far as respects the amount in
controversy, would be illegal, as it is well settled by repeated
decisions of this Court that the states cannot tax the securities
of the United States, declared by act of Congress to be exempt from
taxation, for any purpose whatever. Congress has power to borrow
money on the credit of the United States, and the people, by making
the government supreme, have shielded its action in the exercise of
that power from every species of unfriendly state legislation.
Undoubtedly the states may tax all subjects over which the
sovereign power of the state
Page 73 U. S. 605
extends, but they are not authorized to tax the instruments of
the federal government nor the means employed by Congress to carry
into effect the enumerated powers of the Constitution, or any other
power vested by the fundamental law in the government of the United
States. Such were the early doctrines of this Court upon the
subject, and those doctrines have been reaffirmed and enforced in
the recent decisions of the court.
All subjects over which the sovereign power of a state extends
are, as a general rule, proper objects of taxation, but the power
of a state to tax does not extend to those means which are employed
by Congress to carry into execution the powers conferred in the
federal Constitution. [Footnote
Unquestionably the taxing power of the states is very
comprehensive and pervading, but it is not without limits. State
tax laws cannot restrain the action of the national government, nor
can they abridge the operation of any law which Congress may
constitutionally pass. They may extend to every object of value
within the sovereignty of the state, but they cannot reach the
administration of justice in the federal courts, nor the collection
of the public revenue, nor interfere with any constitutional
regulation of commerce. [Footnote
True reason for the rule is that the Constitution of the United
States and the laws of Congress made in pursuance thereof are the
supreme law of the land, and the express provision is that the
judges in every state court shall be bound thereby, anything in the
constitution or laws of any state to the contrary notwithstanding.
2. None of these principles is denied by the original plaintiff.
On the contrary, he admits that the states do not possess the
power, by taxation or otherwise, to retard, impede, burden or in
any manner to control the operation of the constitutional laws
passed by Congress to carry into
Page 73 U. S. 606
execution the powers vested in the federal government. Conceding
all this, he still denies that the tax in this case is in any
proper sense subject to any such objection, but insists that in any
and every point of view it is a tax on the privileges and
franchises of the defendant corporation, which was created by the
legislature of the state, and which, by all the authorities, it is
entirely competent for the state to tax, with the other property of
the citizens, for the support of the state government.
Power to tax is granted for the benefit of all, and none have
any right to complain if the power is fairly exercised and the
proceeds are properly applied to discharge the obligations for
which the taxes were imposed. Such a power resides in government as
a part of itself, and need not be reserved when property of any
description, or the right to use it in any manner, is granted to
individuals or corporate bodies. [Footnote 10
Unless exempted in terms which amount to a contract, the
privileges and franchises of a private corporation are as much the
legitimate subject of taxation as any other property of the
citizens which is within the sovereign power of the state. Repeated
decisions of this Court have held, in respect to such corporations,
that the taxing power of the state is never presumed to be
relinquished, and consequently that it exists unless the intention
to relinquish it is declared in clear and unambiguous terms.
Corporate franchises are legal estates vested in the corporation
itself as soon as it is in esse.
They are not mere naked
powers granted to the corporation, but powers coupled with an
interest which vest in the corporation upon the possession of its
franchises, and whatever may be thought of the corporators, it
cannot be denied that the corporation itself has a legal interest
in such franchises. [Footnote
Nothing can be more certain in legal decision than that
Page 73 U. S. 607
the privileges and franchises of a private corporation, and all
trades and avocations by which the citizens acquire a livelihood,
may be taxed by a state for the support of the state government.
Authority to that effect resides in the state independent of the
federal government, and is wholly unaffected by the fact that the
corporation or individual has or has not made investment in federal
Private corporations engaged in their own business and pursuing
their own interests according to their own will are as much subject
to the taxing power of the state as individuals, and it cannot make
any difference whether the tax is imposed upon their property,
unless exempted by some paramount law, or the franchise of the
corporation, as both are alike under the protection and within the
control of the sovereign power. [Footnote 14
Recurring to the language of the act, it is necessary to bear in
mind that the defendant corporation belongs to a class of savings
banks having deposits and assets, but which have no capital stock
or stockholders. Such a corporation as a savings and building
association, it seems, was unknown in that state at the time when
the first act was passed requiring savings banks and savings
associations to pay annually into the Treasury of the state a sum
equal to a prescribed percentage upon the total amount of deposits
in their respective institutions on a given day in each year.
The original act was passed in 1851, more than ten years before
the present securities of the United States were issued and put
into the market. Charters were subsequently granted by the state to
savings and building associations, which are stock companies, and
the Tax Act of 1857 was so modified as to include the stock of
those corporations. [Footnote
Savings and building associations, as they are called, are also
included in the act under consideration as well as savings
Page 73 U. S. 608
banks, and societies for savings. [Footnote 17
] Hence it is that stock as well as deposits
is mentioned in the provision, but it is clear that the word stock
applies solely to the former class of corporations, and not to the
latter, as the latter have not, and never had any capital
Amount of the tax required to be paid by the defendant
corporation is a sum equal to three-fourths of one percent on the
total amount of deposits in the institution on the first day of
July in each year. Reference is evidently made to the total amount
of deposits on the day named, not as the subject matter for
assessment, but as the basis for computing the tax required to be
paid by the corporation defendants. They enjoy important
privileges, and it is just that they should contribute to the
Views of the defendants are, that the sums required to be paid
to the treasury of the state, is a tax on the assets of the
institution, but there is not a word in the provision which gives
any satisfactory support to that proposition. Different modes of
taxation are adopted in different states, and even in the same
states at different periods of their history. Fixed sums are in
some instances required to be annually paid into the treasury of
the state, and in others a prescribed percentage is levied on the
stock, assets, or property owned or held by the corporation, while
in others the sum required to be paid is left indefinite, to be
ascertained in some mode by the amount of business which the
corporation shall transact within a defined period.
Experience shows that the latter mode is better calculated to
effect justice among the corporations required to contribute to the
public burdens than any other which has been devised, as its
tendency is to graduate the required contribution to the value of
the privileges granted, and to the extent of their exercise.
Existence of the power is beyond doubt, and it rests in the
discretion of the legislature whether they will levy a fixed sum,
or if not, to determine in what manner the amount shall be
Page 73 U. S. 609
Irregularity of taxation is a fruitful source of complaint, and
it is but right to say that the mode prescribed in this provision
of computing the sum to be paid is well calculated to distribute
the burdens in equal and just proportions. Arbitrary sums are
almost necessarily unequal, as the legislature cannot foresee the
varying circumstances of the future which may surround the business
of a corporation, and which may abridge or augment its receipts and
increase or diminish its profits.
Satisfactory inducements may be suggested as having prompted the
mode of taxation adopted by the legislature without imputing any
such motives as are supposed by the defendants. Common justice
requires that taxation, as far as possible, should be equal, and
the language of the provision in this case supports no other
inference than that the legislature in framing it was governed
solely by that consideration.
Deposits are not capital stock in any point of view, and they
are not even investments in the sense in which the word is employed
in that provision. [Footnote
] Where the deposit is general and there is no special
agreement proved, it is doubtless true that the title of the money
deposited in a bank passes to the bank, and the bank becomes liable
to the depositor for the amount as a debt. [Footnote 19
] Regarded entirely as a transaction
between the bank and the depositor, it would be correct to say that
the money deposited became the assets of the bank, and it may also
be conceded that all such assets, unless invested in property or
securities exempted from taxation, might be required to contribute
to the support of the state government as the property of the bank,
but it is obvious that the word "deposits," as employed in that
provision, is not used by the legislature in any such sense.
Whenever the law imposes a tax on property in that state, it makes
provision that the value of the property shall be ascertained by
appraisement, and the requirement is that the tax shall
Page 73 U. S. 610
be assessed on the appraised value of the property. Taxpayers
are required to furnish to the assessors of the town in which they
reside a schedule, under oath, of all their taxable property, and
it is made the duty of the assessors to appraise the same and enter
the value thereof on the appropriate lists. Municipal corporations
as well as the state may levy taxes on the taxable property of the
citizens, but all taxes, state and municipal, are collected by the
collectors of the towns. Joint stock companies, and all chartered
corporations except banking, insurance, railroad, and savings
corporations &c., are subject to these regulations.
Attention to those regulations, even for a moment, will show
that none of them has any application to the assessment described
in the provision under consideration. Instead of a list furnished
to the assessors of the town, the requirement is that a return
shall be made to the comptroller of public accounts, and the
assessment as required to be made is wholly irrespective of value
or of profit or loss. Town collectors have nothing to do in
collecting the amount, and the tax, when paid, is in lieu of all
other taxes on the institution. Other corporations in the state,
with certain exceptions, are taxed upon a valuation "in the same
manner and to the same extent as if such property was owned by an
individual resident in this state." [Footnote 20
] But the corporation defendants are only
required to pay to the treasurer of the state a sum equal to
three-fourths of one percent on the total amount of their deposits
on the first day of July in each year. They pay nothing for
municipal and local taxes, either to the cities, towns, or
districts in which they are located, and they are expressly
exempted from all other taxation. Much weight is also due to the
fact that the taxes are imposed directly by the legislature,
without regard to investment or value, and if the amount was fixed
by law, all, we think, would agree that the assessment was a tax
upon the corporation, and not upon its property as contended by the
Page 73 U. S. 611
Neither investment nor the value of the deposits being mentioned
in the provision, it seems clear that they are unimportant in this
investigation, as the amount of the tax is the same whether the
deposits, on the day named, have or have not been invested, and
whether they are above the par value or of no value at all. Moneys
received constitute deposits in the sense in which the word is used
in that provision, and the total amount of such deposits on that
day furnishes the true basis of computation, wholly irrespective of
their market value or of the disposition made of the funds by the
Looking at the case in any point of view, we are of the opinion
that there is no error in the record.
Judgment affirmed with costs.
THE CHIEF JUSTICE, GRIER, J., and MILLER, J., dissented on the
ground that the tax was a tax on the property, and not upon the
franchises and privileges of the plaintiff in error.
See the 73 U. S.
12 Stat. at Large 346.
Coite v. Savings Bank,
32 Conn. 173.
Session Laws 1862, p. 49.
Comp. Stat 218.
2 Private Laws 1049.
7 General Statutes 61.
4 Wheat. 429.
12 Wheat. 448; Weston
2 Pet. 467.
Constitution, Article VI.
Providence Bank v.
4 Pet. 563.
P. & W. R. Co. v.
10 How. 393.
Dartmouth College v.
4 Wheat. 700.
Osborn v. Bank of the
9 Wheat. 859.
Angell & Ames on Corporations (8th ed), § 438;
12 Wheat. 444.
Comp.Stat. 218; Session Laws 1859, p. 58.
Session Acts 1862, p. 49.
Bank for Savings v.
3 Wall. 514.
5 Wall. 678.
Revised Statutes 709.
Savings Bank v.
3 Wall. 514.