281 U.S. 313 (1930), 222, Missouri v. Gehner

Docket Nº:No. 222
Citation:281 U.S. 313, 50 S.Ct. 326, 74 L.Ed. 870
Party Name:Missouri v. Gehner
Case Date:April 14, 1930
Court:United States Supreme Court

Page 313

281 U.S. 313 (1930)

50 S.Ct. 326, 74 L.Ed. 870




No. 222

United States Supreme Court

April 14, 1930

Argued February 26, 1930


1. A judgment of a state supreme court so construing a state statute as to cause it to infringe federal rights is reviewable in this Court even though the federal question was first presented to the state court by a petition for rehearing which was denied without referring to the federal question, if the construction was one that the party affected could not have anticipated and the federal question was presented by him at the first opportunity. P. 320.

2. Property taxable by a state may not be taxed more heavily because the owner owns also tax-exempt bonds of the United States. P. 320.

3. A state statute providing generally that, in taxing the assets of insurance companies, the amounts of their legal reserves and unpaid policy claims shall first be deducted is unconstitutional in its application to an insurance company owning nontaxable United States bonds if it require that the deduction in such case shall be reduced by the proportion that the value of such bonds bears to total assets,

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thus inflicting upon the company a heavier tax burden than it would have borne had it not owned the bonds. P. 321.

322 Mo. 339 reversed.

Appeal from a judgment of the Supreme Court of Missouri sustaining on certiorari a property tax assessed against the relator insurance company by the city board of equalization.

Page 317

BUTLER, J., lead opinion

MR. JUSTICE BUTLER delivered the opinion of the Court.

Appellant is an insurance company organized under the laws of Missouri. It maintains that, as construed in this case, § 6386, Revised Statutes of Missouri 1919, is repugnant to the Constitution and laws of the United States.

Section 6386 provides:

The property of all insurance companies organized under the laws of this state shall be subject to taxation for state, county, municipal and school purposes as provided in the general revenue laws of this state in regard to taxation and assessment of insurance companies.

Page 318

Every such company or association shall make returns, subject to the provisions of said laws: first, of all the real estate held or controlled by it; second, of the net value of all its other assets or values in excess of the legally required reserve necessary [50 S.Ct. 327] to reinsure its outstanding risks and of any unpaid policy claims, which net values shall be assessed and taxed as the property of individuals. . . .

The company made a return in pursuance of that section. The total value of its personal property was $448,265.33, including $94,000 in United States bonds. The legal reserve and unpaid policy claims amounted to $333,486.69. It deducted such bonds, reserve, and claims, leaving.$20,778.64 as the net value to be taxed.1

The board of equalization declined to accept the return, and, after hearing, the parties held that the bonds of the United States are not taxable, that § 6386 contravenes provisions of the state constitution requiring uniform taxation, and that therefore the company was not entitled to deduct the amount of such reserve and claims.

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The board assessed the company's taxable property at $50,000 without disclosing how it arrived at the amount.

On the company's application, the state supreme court issued its writ of certiorari to bring up for review the record and action of the board. The court held the section valid, found the company's liabilities were chargeable against all its assets -- taxable and nontaxable alike -- declared that such reserve and claims should be apportioned between the two classes of assets according to their respective amounts, and determined that approximately 79.03 percent of such liabilities should be deducted from the value of the taxable personal property, leaving $90,710.80 as the net value to be taxed.2 And, as that exceeded the amount fixed by the board, the court refused to disturb the assessment, and entered judgment quashing the writ.

The company made a motion for rehearing on the ground, among others, that § 6386, as construed, violated the clause of § 8, Art. I, of the Constitution, which gives to Congress the power to borrow money on the credit of the United States, and also § 3701, Revised Statutes (31 U.S.C. § 742), which provides that all bonds of the United States shall be exempt from taxation by or under state, municipal, or local authority. The court overruled the motion and modified its opinion. The modified opinion was the same as the earlier one except as to details of calculation. It found $74,136.52 to be the taxable

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net value.3 The court did not refer to the federal questions raised by the motion for rehearing.

1. It is well settled that this Court will not consider questions that were not properly presented for decision in the highest court of the state. Ordinarily, it will not consider contentions first made in a petition to the state court for rehearing where the petition is denied without more. Citizens' National Bank v. Durr, 257 U.S. 99, 106. But here, the company, at the first opportunity, invoked the protection of the federal Constitution and statute. It could not earlier have assailed the section as violative of the Constitution and laws of the United States. The board of equalization completely eliminated the bonds from its calculations, and there is nothing in the language of the section to suggest that it authorizes any diminution of the amount of the deductible reserve and unpaid claims or an apportionment of such liabilities between taxable and nontaxable assets. It may not reasonably be held that the company was bound to anticipate such a construction or in advance to invoke federal protection against the taxation of its United States bonds. Upon the facts disclosed by this record, it is clear that appellant sufficiently raised in the highest court of the state the federal questions here presented, and is entitled to have them considered. Saunders v. Shaw, 244 U.S. 317, 320; Ohio ex rel. Bryant v. Akron Park District, 281 U.S. 74.

2. It is elementary that the bonds or other securities of the United States may not be taxed by state authority.

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That immunity always has been deemed an attribute of national supremacy and essential to its maintenance. The power of Congress to borrow money on the credit of the United States would be burdened and might be destroyed by state taxation of the means employed for that [50 S.Ct. 328] purpose. As the tax-exempt feature tends to increase and is reflected in the market prices of such securities, a state tax burden thereon would adversely affect the terms upon which money may be borrowed to execute the purposes of the general government. It necessarily follows from the immunity created by federal authority that a state may not subject one to a greater burden upon his taxable property merely because he owns tax-exempt government securities. Neither ingenuity in calculation nor form of words in state enactments can deprive the owner of the tax-exemption established for the...

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