Central Nat Bank v. United States

• Decision Date: 08 December 1890
• Parties: CENTRAL NAT. BANK v. UNITED STATES
• Court: U.S. Supreme Court

137 U.S. 355

11 S.Ct. 126

34 L.Ed. 703

CENTRAL NAT. BANK v. UNITED STATES.

December 8, 1890.

This action was brought in the district court of the United States for the southern district of New York to recover certain amounts alleged to be due the United States for taxes on 'profits' made and realized by the Central National Bank from its business for the years 1866, 1867, 1868, and 1870, namely $56,555.69 for 1866, $79,003.22 for 1867, $78,800 for 1868, and $33,750 for 1870, of which no return was made to the assessor or assistant assessor of the district in which the bank was located, and on which no tax was paid to the collector, as required by law. A demurrer to various counts of the answer was overruled, with leave to the government to amend its complaint. 10 Fed. Rep. 612.

An amended complaint was filed which proceeded upon the ground that the bank in each of the above years 'declared a dividend or dividends in money due to its stockholders,' of the above amounts, for the years named, respectively, of which no return was made, and on which no tax was paid.

The action was based, chiefly, upon section 120 of the act of congress of June 30, 1864, entitled 'An act to provide internal revenue to support the government, to pay interest on the public debt, and for other purposes,' (13 St. pp. 223, 283, c. 173,) as amended by the act of July 13, 1866, (14 St. pp. 98, 138, c. 184.) That section provided: 'That there shall be levied and collected a tax of five per centum on all dividends in all scrip or money thereafter declared due, wherever and whenever the same shall be payable, to stockholders, policy-holders, or depositors, or parties whatsoever, including non-residents, whether it izens or aliens, as part of the earnings, income, or gains of any bank, trust company, savings institution, and of any fire, marine, life, inland insurance company, either stock or mutual, under whatever name or style, known or called, in the United States or Territories, whether specially incorporated or existing under general laws, and on all undistributed sums or sums made or added during the year to their surplus or contingent funds; and said banks, trust companies, saving 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 per centum. And a list or return shall be made and rendered to the assessor or assistant assessor on or before the tenth day of the month following that in which any dividends or sums of money became due or payable as aforesaid; and said list or return shall contain a true and faithful account of the amount of taxes as aforesaid, and there shall be annexed thereto a declaration of the president, cashier, or treasurer of the bank, trust company, savings institution, or insurance company, under oath or affirmation, in form and manner as may be prescribed by the commissioner of internal revenue, that the same contains a true and faithful account of the taxes as aforesaid. 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 one thousand dollars; and, in case of any default in making or rendering said list or return, or any default in the payment of the tax as required, or any part thereof, the assessment and collection of the tax and penalty shall be in accordance with the general provisions of law in other cases of neglect and refusal: provided, that the tax upon the dividends of life insurance companies shall not be deemed due until such dividends are payable, nor shall the portion of premiums returned by the mutual life insurance companies to their policy-holders, nor the annual or semi-annual interest allowed or paid to the depositors in savings bank or savings institutions, be considered as dividends.'

Section 121 of the same act is as follows: 'That any bank legally authorized to issue notes as circulation, which shall neglect or omit to make dividends or additions to its surplus or contingent fund as often as once in six months, shall make a list or return in duplicate, under oath or affirmation of the president or cashier, to the assessor or assistant assessor of the district in which it is located, on the first day of January and July in each year, or within thirty days thereafter, of the amount of profits which have accrued or been earned and received by said bank during the six months next preceding said first days of January and July, and shall present one of said lists or returns and pay to the collector of the district a duty of five per centum on such profits, and in case of default to make such list or return and payment within the thirty days as aforesaid, shall be subject to the provisions of the foregoing section of this act: provided, that when any dividend is made which includes any part of the surplus or contingent fund of any bank, trust company, savings institution, insurance or railroad company which has been assessed, and the duty paid thereon, the amount of duty so paid on that portion of the surplus or contingent fund may be deducted from the duty on such dividend.' 13 St. p. 284, c. 173.

The answer to the amended complaint denies, on information and belief, that during the period from the 1st of January, 1866, to the 31st day of December, 1866, the defendant declared a dividend or dividends in money due to its stockholders of the amount of $56,555.69, whereof no return was made, and on which no tax was paid; and denies that the alleged iv idend or dividends were liable to the tax of 5 per cent., as claimed by the government.

As a separate defense to the cause of action based upon the alleged declaration of dividends for the year 1866, the bank averred that, in 1866, it was required by the laws of New York, not only to retain from the dividends to its stockholders the amount of the municipal tax levied by that state against stockholders on the value of its shares of capital stock owned by them, respectively, but to pay over to the proper state officers, out of its funds, the amount of taxes thus levied upon the par value of said stock, and deduct the amount ratably from the dividends to be paid by...