Stockdale v. Insurance Companies, 87 U.S. 323 (1873)
U.S. Supreme CourtStockdale v. Insurance Companies, 87 U.S. 20 Wall. 323 323 (1873)
Stockdale v. Insurance Companies
87 U.S. (20 Wall.) 323
1. The cases of Barnes v. Railroad, 17 Wall. 294, and United States v. Railroad Company, 17 Wall. 322, considered and compared.
2. Held that whether the tax on dividends arising from the earnings of corporations for the year 1869 be viewed as a tax on the shareholder or on the corporation, it was intended to tax the earnings for that year by the section which limited the duration of the income tax.
3. Section seventeen of the Act of July 14, 1870, construing certain sections of the Internal Revenue Law of 1864 to extend the tax to the year 1870 is valid because it is not an attempt to exercise judicial power by construing a statute for the court, but is a mode of continuing or reviving a tax which might have been supposed to have expired.
4. As this merely imposed a tax retrospectively, it was within the legislative power of Congress, and the case differs from an effort to invade private rights by construing a law affecting those rights over which Congress had no power whatever.
The 116th section of the Act of June 30, 1864, as amended by the 13th section of the Act of March 2, 1867, [Footnote 1] enacts:
"SECTION 116. That there shall be levied, collected, and paid annually upon the gains, profits, and income of every person residing in the United States, or of any citizen of the United States residing abroad, whether derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation, carried on in the United States or elsewhere or from any other source whatever, a tax of five percentum on the amount so derived over $1,000, and a like tax shall be levied, collected, and paid annually upon the gains, profits, and income of every business, trade, or profession carried on in the United States by persons residing without the United States, and not citizens thereof. And the tax herein provided for shall be assessed, collected, and paid upon the gains, profits, and income for the year ending the 31st day of December next preceding the time for levying, collecting, and paying said tax. "
The 117th section of the same act, as amended in the same way, required that there should be included, inter alia, in the estimate of gains, profits, and income which the act made it obligatory on the taxpayer to return the share of any person of the gains and profits of all companies, whether incorporated or partnership, who would be entitled to the same if divided, whether divided or otherwise,
"Except the amount of income received from institutions or corporations whose officers, as required by law, withhold a percentum of the dividends made by such institutions and pay the same to the officer authorized to receive the same, and except that portion of the salary or pay received for services in the civil, military, or naval or other service of the United States, including senators, representatives, and delegates in Congress, from which the tax has been deducted."
The 118th section related to the manner of the party's making and the assessor's obtaining returns of that portion of the taxpayer's income which was to be paid by such taxpayer directly.
The 119th section, as amended by the already-mentioned section of the Act of March 2, 1867, [Footnote 2] enacts:
"SECTION 119. That the taxes on incomes herein imposed shall be levied on the 1st day of March and be due and payable on or before the 30th day of April in each year until and including the year 1870, and no longer."
The 120th section, as amended by the 9th section of the Act of July 13, 1866, [Footnote 3] enacts:
"That there shall be levied and collected a tax of five percentum on all dividends thereafter declared due, whenever the same shall be payable to stockholders, policyholders, or depositors or parties whatsoever, as part of the earnings, income, or gains of any bank, trust company, savings institution, and of any fire, marine, life, or inland insurance company in the United States, and on all undistributed sums, or sums made or
added during the year to their surplus or contingent funds. And said banks, trust companies, savings institutions, and insurance companies shall pay the said tax, and are hereby authorized to deduct and withhold from all payments made on account of any dividends or sums of money that may be due and payable as aforesaid, the said tax of five percentum. And a list or return shall be made and rendered to the assessor. And for any default in the making or rendering of such list or return with such declaration annexed, the bank, trust company, savings institution, or insurance company making such default shall forfeit as a penalty the sum of $1,000."
The 121st section enacted that any bank of issue which should not make a dividend or add to its surplus fund as often as once in six months should make a return to the assessor of the district, where it was, of its profits during every six months preceding the 1st of January and July &c.
The 122d section, as amended by the 9th section of the Act of July 13, 1866, after enacting that any railroad, canal, turnpike, canal navigation, or slack water company, indebted by bonds &c., upon which interest is to be paid, or any such company that may have declared any dividend, due or payable to its stockholders, as part of the earnings, profits, income, or gains of such company, and all profits of such company carried to the account of any fund, or used for construction, shall be subject to and pay a tax of five percentum on the amount of all such interest, dividends, or profits whenever the same shall be payable, proceeds:
"And said companies are hereby authorized to deduct and withhold from all payments on account of any interest, . . . and dividends, due and payable as aforesaid, the tax of five percentum, and the payment of the amount of said tax so deducted from the interest, or coupons, or dividends and certified by the president or treasurer of said company shall discharge said company."
The 123d section of the same act, as amended by the 13th section of the Act of March, 1867, enacted:
"SECTION 123. That there shall be levied, collected, and paid on all salaries of officers or payments for services to persons in
the civil, military, naval, or other employment or service of the United States, including senators, representatives, and delegates in Congress, when exceeding the rate of $1,000 per annum, a tax of five percentum on the excess above the said $1,000; and it shall be the duty of all paymasters and all disbursing officers under the government of the United States, or persons in the employ thereof, when making any payment to any officers or persons as aforesaid whose compensation is determined by a fixed salary, or upon settling or adjusting the accounts of such officers or persons, to deduct and withhold the aforesaid tax of five percentum, and the payroll, receipts, or account of officers or persons paying such tax as aforesaid shall be made to exhibit the fact of such payment."
On the 14th of July, 1870, Congress passed an act entitled "An act to reduce internal taxation and for other purposes." This act repealed certain sections of the previous internal revenue acts, limited the duration of the others, and reduced the income tax in certain cases from five to two and a half percent, limiting its duration.
By its 17th section, it enacted:
"That sections 120, 121, 122, and 123 of the Act of June 30, 1864 &c., as amended by the Act of July 13, 1866, and the Act of March 2, 1867, [Footnote 4] SHALL BE CONSTRUED to impose the taxes therein mentioned to the 1st day of August, 1870, but after that date no further taxes shall be levied or assessed under said sections."
In this state of statutory enactment, Stockdale, collector of internal revenue at New Orleans, assessed a tax on the Atlantic Insurance Company (and on certain other insurance, railroad, and banking companies of that city), "on the earnings which had accrued to said company between the 5th day of July, 1869, and the 30th of June, 1870." The dividend was declared after this latter date. The taxes were paid under protest, and the companies having brought suits in the court below to recover them and having there got judgments against the collector for them, that officer brought the cases here by the present writ of error.
Two questions accordingly arose here:
1. Was the tax valid as to that part of the dividend which arose from the earnings of the year 1869?
2. Was it valid as to that part which arose from the earnings of the year 1870?