1. United States notes issued under the Loan and Currency Acts
of 1862 and 1863, intended to circulate as money and actually
constituting, with the national bank notes, the ordinary
circulating medium of the country, are, moreover, obligations of
the national government, and exempt from state taxation.
2. United States notes are engagements to pay dollars; and the
dollars intended are coined dollars of the United States.
This case, brought here by the Bank of New York, differed from
the preceding in two particulars: (1) that the board of
supervisors, which in the other cases allowed and audited the
claims of the banking associations, refused to allow the claim made
in this case; and (2) that the exemption from state taxation
claimed in this case was of United States notes, declared by act of
Congress to be a legal tender for all debts, public and private,
except duties on imports and interest on the public debt, while in
the other cases it was of certificates of indebtedness. These
United States notes, as is sufficiently known at the present, had
become part of the currency of the country. Their form (with
certain necessary variations for different denominations, place of
payment &c) was thus:
Page 74 U. S. 27
The mandamus in the state court was directed, in the case now
before the Court, to the board of supervisors instead of to the
officers authorized to issue bonds, as in the cases just
The judgment in the Court of Appeals sustained the action of the
board refusing to allow the exemption set up, and the case was
brought here by writ of error to that court.
Page 74 U. S. 28
THE CHIEF JUSTICE delivered the opinion of the Court.
The general question requiring consideration is whether United
States notes come under another rule in respect of taxation than
that which applies to certificates of indebtedness.
The issues of United States notes were authorized by three
successive acts. The first was the Act of February 25, 1862;
] the second, the
Act of July 11, 1862; [Footnote
] and the third that of March 3, 1863. [Footnote 3
Before either of these acts received the sanction of Congress,
the Secretary of the Treasury had been authorized by the Act of
July 17, 1861, [Footnote 4
issue Treasury notes not bearing interest, but payable on demand by
the assistant treasurers at New York, Philadelphia, or Boston, and
about three weeks later these notes, by the Act of August 5, 1861,
] had been made
receivable generally for public dues. The amount of notes to be
issued of this description was originally limited to fifty
millions, but was afterwards, by the Act of February 12, 1862,
] increased to sixty
These notes, made payable on demand and receivable for all
public dues, including duties on imports always payable in coin,
were, practically, equivalent to coin, and all public
disbursements, until after the date of the act last mentioned, were
made in coin or these notes.
Page 74 U. S. 29
In December, 1861, the state banks (and no others then existed)
suspended payment in coin, and it became necessary to provide by
law for the use of state bank notes or to authorize the issue of
notes for circulation under the authority of the national
government. The latter alternative was preferred, and in the
necessity thus recognized originated the legislation providing at
first for the emission of United States notes, and at a later
period for the issue of the national bank currency.
Under the exigencies of the times, it seems to have been thought
inexpedient to attempt any provision for the redemption of the
United States notes in coin. The law therefore directed that they
should be made payable to bearer at the Treasury of the United
States, but did not provide for payment on demand. The period of
payment was left to be determined by the public exigencies. In the
meantime, the notes were receivable in payment of all loans, and
were, until after the close of our civil war, always practically
convertible into bonds of the funded debt bearing not less than
five percent interest, payable in coin.
The Act of February 25, 1862, provided for the issue of these
notes to the amount of one hundred and fifty millions of dollars.
The Act of July 11, 1862, added another hundred and fifty millions
of dollars to the circulation, reserving, however, fifty millions
for the redemption of temporary loan, to be issued and used only
when necessary for that purpose. Under the Act of March 3, 1863,
another issue of one hundred and fifty millions was authorized,
making the whole amount authorized four hundred and fifty millions,
and contemplating a permanent circulation, until resumption of
payment in coin, of four hundred millions of dollars.
It is unnecessary here to go further into the history of these
notes or to examine their relation to the national bank currency.
That history belongs to another place, and the quality of these
notes as legal tenders belongs to another discussion. It has been
thought proper only to advert to the legislation by which these
notes were authorized in order that their true character may be
That these notes were issued under the authority of the United
States and as a means to ends entirely within the constitutional
power of the government was not seriously questioned upon the
But it was insisted that they were issued as money; that
Page 74 U. S. 30
controlling quality was that of money, and that therefore they
were subject to taxation in the same manner and to the same extent
as coin issued under like authority.
And there is certainly much force in the argument. It is clear
that these notes were intended to circulate as money, and, with the
national bank notes, to constitute the credit currency of the
Nor is it easy to see that taxation of these notes, used as
money and held by individual owners, can control or embarrass the
power of the government in issuing them for circulation more than
like taxation embarrasses its power in coining and issuing gold and
silver money for circulation.
Apart from the quality of legal tender impressed upon them by
acts of Congress, of which we now say nothing, their circulation as
currency depends on the extent to which they are received in
payment, on the quantity in circulation, and on the credit given to
the promises they bear. In these respects they resemble the bank
notes formerly issued as currency.
But on the other hand, it is equally clear that these notes are
obligations of the United States. Their name imports obligation.
Every one of them expresses upon its face an engagement of the
nation to pay to the bearer a certain sum. The dollar note is an
engagement to pay a dollar, and the dollar intended is the coined
dollar of the United States; a certain quantity in weight and
fineness of gold or silver, authenticated as such by the stamp of
the government. No other dollars had before been recognized by the
legislation of the national government as lawful money.
Would, then, their usefulness and value as means to the exercise
of the functions of government be injuriously affected by state
It cannot be said, as we have already intimated, that the same
inconveniences as would arise from the taxation of bonds and other
interest-bearing obligations of the government would attend the
taxation of notes issued for circulation as money. But we cannot
say that no embarrassment would arise from such taxation. And we
think it clearly within the discretion of Congress to determine
whether, in view of all the circumstances attending the issue of
the notes, their usefulness as a means of carrying on the
government would be enhanced by exemption from taxation, and within
the constitutional power of Congress,
Page 74 U. S. 31
having resolved the question of usefulness affirmatively, to
provide by law for such exemption.
There remains, then, only this question -- has Congress
exercised the power of exemption?
A careful examination of the acts under which they were issued
has left no doubt in our minds upon that point.
The Act of February, 1862, [Footnote 7
] declares that
"All United States bonds and other securities of the United
States held by individuals, associations, or corporations within
the United States shall be exempt from taxation by or under state
We have already said that these notes are obligations. They bind
the national faith. They are therefore strictly securities. They
secure the payment stipulated to the holders by the pledge of the
national faith, the only ultimate security of all national
obligations, whatever form they may assume.
And this provision is reenacted in application to the second
issue of United States notes by the Act of July 11, 1862. [Footnote 8
And, as if to remove every possible doubt from the intention of
Congress, the Act of March 3, 1863, [Footnote 9
] which provides for the last issue of these
notes, omits in its exemption clause the word "stocks" and
substitutes for "other securities" the words "Treasury notes or
United States notes issued under the provisions of this act."
It was insisted at the bar that a measure of exemption in
respect to the notes issued under this -- different from that
provided in the former acts, in respect to the notes authorized by
them -- was intended, but we cannot yield our assent to this view.
The rule established in the last act is in no respect inconsistent
with that previously established. It must be regarded, therefore,
as explanatory. It makes specific what was before expressed in
Our conclusion is that United States notes are exempt, and at
the time the New York statutes were enacted were exempt from
taxation by or under state authority. The judgment of the Court of
Appeals must therefore be
12 Stat. at Large 345.
Stat. at Large 259, § 6.
313, § 5.
12 Stat. 346, § 2.