National Bank of Commerce in St. Louis v. Allen

• Court: U.S. Court of Appeals — Eighth Circuit
• Citation: National Bank of Commerce in St. Louis v. Allen, 223 F. 472 (8th Cir. 1915)
• Decision Date: 25 March 1915
• Docket Number: 4260.
• Parties: NATIONAL BANK OF COMMERCE IN ST. LOUIS v. ALLEN, Internal Revenue Collector.

223 F. 472

NATIONAL BANK OF COMMERCE IN ST. LOUIS v. ALLEN, Internal Revenue Collector.

No. 4260.

United States Court of Appeals, Eighth Circuit.

March 25, 1915

A. C Stewart, of St. Louis, Mo. (Stewart, Bryan & Williams, of St Louis, Mo., on the brief), for plaintiff in error.

Homer Hall, Asst. U.S. Atty., of St. Louis, Mo. (Arthur L. Oliver U.S. Atty., of Caruthersville, Mo., on the brief), for defendant in error.

Before HOOK and CARLAND, Circuit Judges, and AMIDON, District Judge.

CARLAND Circuit Judge.

This is an action by the bank against the collector to recover the sum of $5,304.57 paid under protest as taxes assessed pursuant to section 38, Act of Congress approved August 5 1909 (36 Stat. 112-117 (Comp. St. 1913, Secs. 6301-6307)), for the years 1909, 1910, and 1911. Judgment was rendered by the court below against the bank on the pleadings. The following facts appear therefrom:

The bank is a national bank, organized under the laws of the United States and doing business at St. Louis, Mo. It made returns of its gross and net income to the United States Commissioner of Internal Revenue, hereafter called the Commissioner, for the years 1909, 1910, and 1911. From its gross income for 1909 it deducted $193,230.98; for the year 1910, $187,042.99; for the year 1911, $150,204.31-- which sums it had paid in the years in which deduction was made for taxes imposed by the state of Missouri by virtue of chapter 117, article 2, Revised Statutes of Missouri 1909. The Commissioner assessed against the bank on its return of net income for the year 1909, $9,848.57; for the year 1910, $7,824.61; for the year 1911, $6,257.76-- which the bank duly paid. In April, 1912, the Commissioner upon evidence produced before him decided that the returns of net income made by the bank for the years 1909, 1910, and 1911 were incorrect, in that the bank was not entitled to deduct the taxes imposed by the state of Missouri for those years by virtue of chapter 117, article 2, Revised Statutes of Missouri 1909. The Commissioner thereupon amended the returns of the bank for the years mentioned by adding to the reported net income the several amounts deducted by the bank as above stated and assessed against it on said additional net income a special tax for the year 1909, of $1,932.10; for 1910, $1,870.43; for 1911, $1,502.04. These are the amounts which the bank paid under protest and now seeks to recover.

There is no claim that the returns as made by the bank were intended to defraud. It is conceded that they were made in good faith under the belief that the bank had a right to deduct from its gross income the taxes referred to. The Corporation Excise Tax Law, so far as the present controversy is concerned provides as follows:

'Sec. 38. That every corporation, joint stock company or association, organized for profit and having a capital stock represented by shares * * * shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, * * * equivalent to one per centum upon the entire net income over and above five thousand dollars received by it from all sources during such year. * * *

'Second. Such net income shall be ascertained by deducting from the gross amount of the income of such corporation, joint stock company or association, * * * received within the year from all sources, (first) all the ordinary and necessary expenses actually paid within the year out of income in the maintenance and operation of its business and properties, including all charges such as rentals or franchise payments, required to be made as a condition to the continued use or possession of property; * * * (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any state or territory thereof.'

Section 11357 of article 2, chapter 117, Revised Statutes of Missouri 1909, is entitled:

'Sec. 11357. Assessment of manufacturing and business companies and stock in other corporations.'

The section then provides that persons owning shares of stock in banks incorporated under or by any law of the United States or of the state of Missouri shall not be required to deliver to the tax assessor a list thereof, but the president or other chief officer of such corporation shall under oath deliver to the assessor a list of all shares of stock held therein and the face value thereof, and such shares shall be valued and assessed as other property at their true value in money less the value of real estate, if any, represented by such shares of stock.

Section 11359, Revised Statutes of Missouri, provides that the taxes assessed on shares of stock listed as above, shall be paid by the corporation and the corporation may recover from the owners of such shares the amount so paid by it or deduct the same from the dividends accruing on such shares, and the amount so paid shall be a lien on such shares, respectively, and shall be paid before a transfer thereof can be made.

Section 11360 provides that, if the president or other chief officer of any such corporation fails to comply with the provisions of the law above mentioned, he shall forfeit to the state of Missouri the sum of $1,000 to be recovered by indictment in any court of competent jurisdiction.

Section 11463 provides for the seizure and sale of the shares in case the tax thereon is not paid. The legislation of the several states in regard to the taxation of shares in national banks is of like character, although it may differ in matter of detail. A general knowledge of the power of the states to tax national banks is necessary in order to fully understand state legislation in relation thereto. The Supreme Court of the United States has uniformly held that the states cannot tax the property of national banks. As a result of this state of the law there was inserted in the National Bank Act of 1864 the following provisions:

'That the president and cashier of every such association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, in the office where its business is transacted; and such list shall be subject to the inspection of all the shareholders and creditors of the association, and the officers authorized to assess taxes under state authority, during business hours of each day,' etc. Act June 3, 1864, c. 106, Sec. 40, 13 Stat. 111 (Comp. St. 1913, Sec. 9773).

'Provided, that nothing in this act shall be construed to prevent all the shares in any of the said associations, held by any person or body corporate, from being included in the valuation of the personal property of such person or corporation in the assessment of taxes imposed by or under state authority at the place where such bank is located, and not elsewhere, but not at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state: (2) Provided, further, that the tax so imposed under the laws of any state upon the shares of any of the associations authorized by this act shall not exceed the rate imposed upon the shares in any of the banks organized under authority of the state where such association is located: (3) Provided, also, that nothing in this act shall exempt the real estate of associations from either state, county, or municipal taxes to the same extent, according to its value, as other real estate is taxed. ' Section 41, 13 Stat. 112.

Under this legislation of Congress the states have provided for the taxation of shares in national banks and also provided for the payment of the same by the bank. It is, therefore, now the law that a national banking corporation and its property is separate and distinct from its shares of stock, and that while the tax levied upon a national bank itself by a state would be invalid, a tax levied by a state upon the shares of stock in a national bank is valid. Van Allen v. Assessors, 70 U.S. (3 Wall.) 573, 18 L.Ed. 229; Home Savings Bank v. Des Moines, 205 U.S. 503, 27 Sup.Ct. 571, 51 L.Ed. 901; Hawley v. Malden, 232 U.S. 1, 34 Sup.Ct. 201, 58 L.Ed. 477; Clement National Bank v. Vermont, 231 U.S. 120, 34 Sup.Ct. 31, 58 L.Ed. 147.

The Supreme Court of Missouri has uniformly nullified every attempt to assess taxes by the state directly against the property of national banks, and has repeatedly pointed out that the tax could be levied only upon the shares of stock. Lionberger v. Rowse, 43 Mo. 67, affirmed 9 Wall. 468, 19 L.Ed. 721; First National Bank v. Meredith, 44 Mo. 500; City of Springfield v. First National Bank, 87 Mo. 441; State ex rel. v. Bank, 160 Mo. 640, 61 S.W. 676; State ex rel. v. Shryack, 179 Mo. 424, 78 S.W. 808; State ex rel. v. Bank, 180 Mo. 717, 79 S.W. 943. In State ex rel. v. Brinkop, 238 Mo. 298, 143 S.W. 144, the Supreme Court of the state of Missouri said:

'Under our statute, stock in a bank, federal or state, is assessed against the shareholder, but the tax is paid in the first instance by the bank, and the bank is reimbursed by the shareholder. That is merely a mode of convenience in collecting the tax, the effect is the same as if the shareholder paid it in the first instance.' In Bank v. Commonwealth, 9 Wall. 353, 19 L.Ed. 701, it is said:

'It is strongly urged that it is to be deemed a tax on the capital of the bank, because the law requires the officers of the bank to pay this tax on the shares of its stockholders. Whether the state has a right to do this we will presently consider, but the fact that it has attempted to do it does not prove that the tax is anything else than a tax on these shares. It has been the practice of many of the states for a long

...