Hamilton Nat. Bank v. District of Columbia

• Decision Date: 31 May 1949
• Docket Number: No. 9833-9840.,9833-9840.
• Citation: 176 F.2d 624,85 US App. DC 109
• Parties: HAMILTON NAT. BANK OF WASHINGTON v. DISTRICT OF COLUMBIA and seven other cases.
• Court: U.S. Court of Appeals — District of Columbia Circuit

85 US App. DC 109, 176 F.2d 624 (1949)

HAMILTON NAT. BANK OF WASHINGTON v. DISTRICT OF COLUMBIA and seven other cases.

Nos. 9833-9840.

United States Court of Appeals District of Columbia Circuit.

Argued March 23, 1949.

Decided May 31, 1949.

Mr. Roger J. Whiteford, Washington, D.C., with whom Mr. Philip S. Peyser, Washington, D.C., was on the brief, for petitioner in No. 9833.

Messrs. Harry L. Walker, Assistant Corporation Counsel, District of Columbia, and George C. Updegraff, Assistant Corporation Counsel, Washington, D.C., with whom Messrs. Vernon E. West, Corporation Counsel, and Chester H. Gray, Principal Assistant Corporation Counsel, Washington, D.C., were on the brief, for respondent in No. 9833 and for petitioner in Nos. 9834-9840, inclusive.

Mr. William F. Kelly, Washington, D.C., with whom Mr. P. J. J. Nicolaides, Washington, D.C., was on the brief for respondent in Nos. 9835 and 9836.

Mr. Samuel O. Clark, Jr., Washington, D.C., with whom Mr. W. V. T. Justis, Washington, D.C., was on the brief, for respondents in Nos. 9837 and 9838.

Mr. George E. C. Hayes, Washington, D.C., for respondent in No. 9839.

Mr. Jo. V. Morgan, Washington, D.C., for respondent in No. 9834.

Mr. O. R. McGuire, Jr., Washington, D. C., with whom Messrs. Nelson T. Hartson and James C. Rogers, Washington, D. C., were on the brief, for respondent in No. 9840.

Before EDGERTON and WILBUR K. MILLER, Circuit Judges, and HARRY E. WATKINS, District Judge, sitting by designation.

WILBUR K. MILLER, Circuit Judge.

These eight cases differ slightly as to facts, but all involve the construction of Title 47, §§ 1701 and 1703, of the District of Columbia Code,¹ which have to do with the taxation of banks and trust companies. The cases were argued together and will be disposed of in a single opinion.

Section 1701, which was enacted by Congress in 1902, imposed in the District of Columbia a tax of six per cent of gross earnings upon "each national bank and all other incorporated banks and trust companies". The only other pertinent portion of the 1902 statute provided for a different method of taxing "savings banks having no capital stock and paying interest to their depositors", which is now the first paragraph of § 1703.

By an act of April 28, 1904, 33 Stat. 564, ch. 1815, Congress added to the District bank tax statutes what is now the second paragraph of § 1703. It provides that "incorporated savings banks paying interest to their depositors" shall pay upon their gross earnings, less the sums paid as interest to their depositors, an annual tax of four per cent. This amendment had the obvious effect of giving to "incorporated savings banks paying interest to their depositors" more favorable tax treatment than that which § 1701 gives to "each national bank and all other incorporated banks and trust companies".

The several banks of the District of Columbia include those incorporated under the federal bank acts, which are commonly known as national banks, and those incorporated under the laws of the District of Columbia or of one of the states, which are familiarly known as state banks. Each of the banks concerned here, whether state or national, conducts a commercial banking business and also has substantial savings deposits upon which it pays interest. All are under the regulatory control of the Comptroller of the Currency.²

For many years the taxing authorities of the District of Columbia consistently have classified state banks as "incorporated savings banks paying interest to their depositors" under the second paragraph of § 1703, and have collected taxes from them under the more favorable rate prescribed therein; but they have been equally consistent in classifying national banks for taxation under § 1701 and in imposing upon them the higher rate and less favorable treatment prescribed by that section.

In such circumstances the Hamilton National Bank, on November 30, 1944, filed with the Board of Tax Appeals for the District of Columbia a petition for a reduction of the taxes based upon its assessment of September 1, 1944, complaining that the Assessor had refused to permit it to deduct from its gross earnings a large sum paid as interest to its savings depositors, before applying thereto the tax rate fixed by the statute. The Board of Tax Appeals affirmed the Assessor, whereupon a petition for review was filed with this court, which was disposed of by our opinion in Hamilton National Bank v. District of Columbia, 1946, 81 U.S.App.D.C. 200, 156 F.2d 843. We held that the simple ascertainment of whether a bank has a national charter or a state charter is not a proper method of determining whether the bank is or is not an incorporated savings bank since, as far as savings deposits are concerned, there is no difference between national banks and state banks. In the course of the opinion we said, 81 U.S.App. D.C. at page 203, 156 F.2d at page 846: "* * * We do not think that an administrative officer can restrict a statutory term such as `incorporated savings bank' by a definition having no relation to savings deposits or accounts. He cannot eliminate, by administrative definition, from the statutory provision some institutions identical in all respects related to savings deposits with institutions included in his definition. His attempt to do so is invalid as not in harmony with the statute."

We also noted that, historically, there is no incongruity in the District of Columbia between a savings bank and a national bank. The decision of the Board of Tax Appeals was reversed and the case was remanded "* * * with instructions to cancel the present assessment unless the tax Assessor, upon a reexamination of the entire subject of taxing banks under these statutes, removes the discriminations presently existing, in which latter event the validity of his further proposals may be considered."

After remand, the Assessor of the District of Columbia re-examined the status of the several banks with respect to taxation and concluded there is no bank in the District properly classifiable as an "incorporated savings bank paying interest to its depositors", within the purview of the second paragraph of § 1703. He proceeded accordingly to apply to all banks, both state and national, the higher rate of taxation provided for by § 1701. This action was promptly appealed by the state-chartered banks to the Board of Tax Appeals, which held in effect that the appealing banks are properly taxable under § 1703, due to the long-continued administrative practice of treating as "incorporated savings banks paying interest to their depositors" all state-chartered banks having interest-bearing savings deposits substantial in amount, even though such banks do not confine their activities to receiving savings deposits, but also receive commercial deposits and conduct a general banking business.

The petitions for review of the Board's decisions with respect to the state banks, filed by the District of Columbia, are the captioned cases numbered 9834 to 9840, inclusive.

After the Board of Tax Appeals had held, as above shown, that the state banks here involved are incorporated savings banks taxable under § 1703, the Hamilton National Bank endeavored to induce the Board to classify it for taxation in the same manner. The Board determined, however, after hearing evidence and argument, that Hamilton National is not "an incorporated savings bank paying interest to its depositors" within the meaning of § 1703, and held it taxable under § 1701. Thereupon Hamilton National filed its petition for review, which is No. 9833 among the eight cases captioned above.

Under the rulings of the Board of Tax Appeals which are now before us, the assessing officials of the District of Columbia are required to classify state banks as incorporated savings banks taxable at the favorable rate of § 1703, and are required to classify national banks as not being incorporated savings banks and therefore taxable at the higher rate of § 1701.

The Board avows it ordered the state banks taxed as incorporated savings banks "upon consideration of the character of business done by the appealing banks, and the legislative and administrative history of the applicable statutes," and not because they had state charters instead of national charters. From this the Board reasons that, as the state banks are not taxed at the lower rate merely because they have state charters, the unlawful discrimination against national banks which we condemned in our first Hamilton National opinion has been removed.

Measured by the standards used by the Board in concluding state banks are incorporated savings banks, national banks are seen to be of the same character. If it be conceded that the legislative history of the 1904 statute indicates a Congressional purpose at that time to tax commercial banks having state charters at the lower rate because of the nature of their business, i.e., because they received savings deposits, and a purpose to tax commercial banks having national charters at the higher rate because they did not then have savings departments, that particular reason for discrimination has long since ceased to exist. The record shows Hamilton National has substantial savings deposits, and it is common knowledge that other national banks also receive such deposits. Since the character of business done by national banks is identical with the character of business done by the state banks, and, since the statute's legislative history reveals no present reason for applying different tax rates to the two kinds of banking institutions, those two standards used by the Board in classifying state banks under § 1703 apply equally to federally-chartered banks.

The third test employed by the Board of Tax Appeals — the administrative history of the statutes — simply shows District authorities have for many years taxed state banks at one rate and national banks at another rate. But the administrative history...