284 U.S. 239 (1931), 15, Iowa-Des Moines National Bank v. Bennett

Docket Nº:No. 15
Citation:284 U.S. 239, 52 S.Ct. 133, 76 L.Ed. 265
Party Name:Iowa-Des Moines National Bank v. Bennett
Case Date:December 14, 1931
Court:United States Supreme Court

Page 239

284 U.S. 239 (1931)

52 S.Ct. 133, 76 L.Ed. 265

Iowa-Des Moines National Bank



No. 15

United States Supreme Court

December 14, 1931

Argued October 19, 20, 1931



1. A state tax on the shares of stock of a national bank at rates greater than those applied in exacting payment of domestic corporations in competition with it exceeds the permission of Rev.Stats. § 5219, and is therefore invalid. P. 244.

2. Intentional, systematic discrimination on the part of a state in exacting taxes on the shares of national and state banks at a higher rate than is applied to domestic corporations in competition with them, violates the equal protection clause of the Fourteenth Amendment. P. 245.

3. Though discrimination in assessing and collecting state taxes be not due to inequality in the state law itself, but to the unauthorized and illegal acts of subordinate taxing officials in applying it, the state is nonetheless chargeable with the discrimination, where it insists upon retaining the higher tax exacted in its name, and is sustained in so doing by its highest court. Barney v. New York City, 193 U.S. 430, distinguished. Pp. 244-246.

4. A taxpayer who has been subjected to discriminatory state taxation through the favoring of others in violation of his federal right, is entitled to recover the excess paid. He is not required to assume the burden of seeking to have the others' taxes increased; nor need he await such action by the state officials on their own initiative. P. 247.

___ Iowa ___, 232 N.W. 445, reversed.

Certiorari, 283 U.S. 813, to review judgments sustaining state taxes in mandamus proceedings brought by two banks against county officers to compel refunds.

Page 240

BRANDEIS, J., lead opinion

MR. JUSTICE BRANDEIS delivered the opinion of the Court.

These cases are here on certiorari to the Supreme Court of Iowa. They were argued together, and involve, in the main, the same questions. The petitioner in No. 15 is the Iowa-Des Moines National Bank. The petitioner [52 S.Ct. 134] in No. 16 is the Central State Bank, an Iowa corporation. In each case, it is charged that, for the years 1919, 1920, 1921, and 1922, the taxing officers of Polk county exacted from petitioner taxes on shares of its stock at rates higher than were exacted of competing moneyed capital, and that, in 1923, petitioner paid the taxes with interest and penalties under protest, after threat of seizure of its property. In each case, it is alleged that this unequal taxation contravened both the state law and the equal protection clause of the Fourteenth Amendment. In No. 15, it is also charged that § 5219 of the Revised Statutes of the United states was violated. In each case, the petitioner seeks by an action of mandamus to compel the appropriate county officers to refund the part of the taxes alleged to have been illegally exacted, and the interest and penalties. The county officers denied the discrimination charged and also set up many special defenses.

The trial court, after hearings which occupied more than sixteen weeks, denied relief in each case without making findings of fact or rendering an opinion. Its judgments were affirmed in the highest court of the state by a divided bench. 232 N.W. 445. The case is before us on an extensive record, but we have no occasion to examine the controverted issues of fact and of state law.

Page 241

The supreme court found, or assumed, that the systematic discrimination charged was in fact made; that the shares of the favored domestic corporations constituted a relatively material part of other moneyed capital employed in substantial competition with the business of the banks, and that the unequal exaction complained of violated the laws of Iowa. We have to consider only the legal effect under the federal law of this wrongful administration of the state law. There is no challenge of the validity of any state statute.

The taxes exacted from the petitioners were laid under Iowa Code, § 1322-1a, Supplement 1913. That section imposes upon "state, savings and national bank stock and loan and trust company stock and moneyed capital," an ad valorem tax based upon 20 percent of the actual value thereof, computed at the same rate at which tangible property is taxed under the consolidated levy for local, county, and state purposes. Compare First National Bank v. Anderson, 269 U.S. 341, 343. For the years in question, this levy ranged from 137.8 mills to 164 mills -- the equivalent of 27.5 mills to 32.8 mills on the actual value. By the terms of § 1322-1a, taxes on the same basis should also have been laid upon shares of competing domestic corporations and upon other moneyed capital coming similarly into competition with both the national and the state banks. But the taxes laid upon shares of such competing domestic corporations were, in fact, at the rate of only 5 mills on the actual value. This discrimination occurred because to them was applied not § 1322-1a, but § 1310, Supplement 1913. The latter section prescribes a tax of 5 mills on the dollar upon the full value of "moneys, credits and corporation shares of stocks, except as otherwise provided, . . . and . . . notes, including those secured

Page 242

by mortgage. . . ."1 Thus, the taxes laid upon the shares of the competing domestic corporations were at a rate only one-fifth to one-seventh of that applied to the shares of the petitioners.

The wrongful discrimination so effected was not attributable to any act of the assessing body.2 The shares in such competing domestic corporations had, in each year, been properly classified by the assessor in compliance with § 1322-1a, but the county auditor, in making up the tax list subsequently, changed these assessments and wrongfully extended them upon the books as "moneys and credits" subject to the 5-mill levy. In this form, the tax was certified by the auditor to the county treasurer for collection, and the treasurer exacted taxes in accordance with the auditor's certification.

The Supreme Court of Iowa, having found or assumed that there was systematic discrimination, as charged, in favor of shares in the competing domestic corporations, denied relief because it held that the auditor's acts in disregarding assessments properly made were a usurpation

Page 243

of power and a nullity; that the county treasurer was not bound to accept the auditor's unauthorized certification, and that his exaction of the taxes in accordance therewith was therefore also unauthorized.3 The Court declared that, since the wrongful exaction was made without [52 S.Ct. 135] authority from the state, it did not constitute discrimination by the state; declared that, since neither the auditor nor the treasurer had power to discharge a legally assessed tax, the competing domestic corporations remain, so far as appears, liable for the balance of the assessments, and held that the petitioners had no other remedy than to await action by the taxing authorities

Page 244

to collect the taxes remaining due from their competitors or to initiate proceedings themselves to compel such collection. In other words, it held that no right of petitioners under the state law was violated, because they were not overassessed; that no right under the federal law was violated, because the lower taxation of their competitors due to usurpation by officials was not an act of the state, and that...

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