Bennett v. Evatt
| Decision Date | 08 August 1945 |
| Docket Number | 30298. |
| Citation | 62 N.E.2d 345,145 Ohio St. 587 |
| Parties | BENNETT et al. v. EVATT, Tax Com'r. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
1. Under the provisions of Section 2, Article XII of the Constitution, authority is granted the General Assembly 'to determine the subjects and methods of taxation or exemptions therefrom,' subject to the provisions of Article I of the Constitution and to the limitations contained in Section 2, Article XII, that 'land and improvements thereon shall be taxed by uniform rule according to value,' and that 'no property, taxed according to value, shall be so taxed in excess of one per cent of its true value in money for all state and local purposes,' except as specially provided therein.
2. Section 5388, General Code, classifying and assessing tangible personal property at amounts less than the true value thereof in money, and Sections 5638 and 5638-1, General Code, classifying intangible personal property by providing that unproductive investments be taxed at the true value thereof in money and productive investments at a percentage of its income yield, are authorized by the provisions of Section, 2, Article XII.
3. The provision in Secton 2, Article XII, that 'no property, taxed according to value, shall be so taxed in excess of one per cent of its true value in money for all state and local purposes, but laws may be passed authorizing additional taxes to be levied outside of such limitation either when approved by at least a majority of the electors of the taxing district voting on such proposition, or when provided for by the charter of a municipal corporation,' restrains state and local governments from levying taxes beyond the established limitation, without special authority from the voters, or from the charter of a municipal corporation.
4. A taxpayer, assessed an amount in excess of one per cent of the true value thereof upon a productive intangible investment, who claims that the excess so levied is unlawful and void, to be entitled to relief, must show that no levy of taxes on excess of such one per cent has been authorized by the voters of the taxing district of his residence or by the charter of the municipal corporation within which he resides, and that therefore the limitation applicable to him is one per cent of the true value of the property so taxed.
This case presents an appeal from a decision of the Board of Tax Appeals. The appellants, Hugh M. Bennett and Lois M. Bennett of Upper Arlington, Ohio, on tax listing day, January 1 1941, were the owners of 20 shares of 6% cumulative preferred stock of the Republic Steel Corporation, having a par value of $100 per share.
During the previous year, Republic Steel Corporation had paid the appellants the regular dividend of $6 per share, and also an arrearage which had accumulated because of the nonpayment of cumulative dividends in prior years, which arrearages were in the sum of $16.50 per share. The appellants, in their tax return for the year 1941, reported a yield of $6 per share and paid the tax thereon at the rate of 5%. The appellants were the owners of these shares of stock since 1937, and from that year to 1941 had paid tax annually thereon at the 2-mill rate, as required for unproductive investments.
The state Tax Commissioner, on September 16, 1941, issued a preliminary assessment certificate in which a tax was assessed against the appellants on the 20 shares of stock in question on the basis of the income yield of $22.50 per share. An application by the appellants for review and redetermination of the preliminary assessment was denied by the Tax Commissioner.
An appeal was duly perfected to the Board of Tax Appeals, which held as follows:
'* * * the Tax Commissioner did not err in assessing a tax on the 6% cumulative preferred stock of the Republic Steel Corporation for the year 1941 on the basis of an income yield of $22.50 per share, and it is, therefore, ordered that the assessment heretofore made herein be, and the same hereby is, affirmed.' Hugh M. Bennett, of Columbus, for appellants.
Hugh S. Jenkins, Atty. Gen., and Daronne R. Tate, of Columbus, for appellee.
The appeal herein is based solely upon the contention of the appellants that the assessment made is violative of the provisions of Section 2, Article XII of the Constitution of Ohio, in that the tax assessed upon the stock was 'in excess of one per cent of its true value in money.'
It is conceded that the fair market value in money of the shares of stock in question, on December 31, 1940, was $100 per share. The tax assessed was $1.125 per share, which is in excess of one per cent of the true value.
It is the contention of the Tax Commissioner that, although it is conceded that the tax imposed by the intangible tax law is a tax on property and not an income tax, the method of taxing intangibles is not violative of the constitutional limitation, since the tax is not based on market or true value; and that the tax as levied is valid under legislation enacted pursuant to authority conferred by the Constitution, as amended in 1929, to classify property for taxation.
It is the further contention of the Tax Commissioner that the tax on income yielding intangibles is in the nature of a 'specific' tax.
The Tax Commissioner urges, too, that, if market value is a factor in the determination of the tax to be assessed, then the market value of all investments owned by the taxpayer on tax-listing day should be considered in determining the validity of the assessment.
Section 2, Article XII of the Constitution is as follows:
The statutory provisions necessarily considered in determining the question presented may be summarized as follows:
Section 5388, General Code, provides the rules applicable for listing and assessing tangible personal property, and provides that such property, used in business generally, is assessed at 70% of its true value in money, and makes special provision for listing certain property used in manufacturing at 50% of the true value thereof in money. Credits and other taxable intangibles are listed and assessed at the true value in money thereof on tax listing day.
Sections 5638 and 5638-1, General Code, classify intangible property and establish the rates as follows:
'Investments, five per centum of income yield or of income as provided by section 5372-2 of the General Code; unproductive investments, two mills on the dollar; deposits, two mills on the dollar;' and 'moneys, credits and all other taxable intangibles so listed, three mills on the dollar.'
Sections 5414-19 and 5639, General Code, provide for distribution of the moneys collected under these provisions to the various taxing districts of the state, in definite proportions.
Section 5392-1, General Code, penalizes corporations organized under the laws of this state or doing business in this state by assessing against the corporations taxes on the true value of their shares of stock owned by shareholders in this state, at the rate of two mills on the dollar, if such corporations declare a nominal dividend to their shareholders for the purpose of...
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