Opinion of Justices to Governor and Council

• Decision Date: 16 October 1929
• Citation: 269 Mass. 611
• Parties: OPINION OF THE JUSTICES TO THE GOVERNOR AND COUNCIL. (Opinions of the Justices.)
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

269 Mass. 611

OPINION OF THE JUSTICES TO THE GOVERNOR AND COUNCIL. (Opinions of the Justices.)

Supreme Judicial Court of Massachusetts.

October 16, 1929

The provisions of G.L.c. 63, Section 32, in the amended form set out in

St. 1929, c.

359, Section 2 were not declared unconstitutional and inoperative, within the meaning of G.L.c. 63, Section 52, as amended by

St. 1926, c.

219, either by final judgment, order or decree of the

Supreme Court of the United States in the case of Macallen Co. v Massachusetts, 279 U.S. 620; 280 U.S. 513, or by any such final order, judgment or decree of the Supreme Judicial Court of this Commonwealth.

It is only when the executive or legislative body has pending before it some question concerning which doubts exist as to its power and authority, or the power and duty of some subordinate officer under its direction, and where the settlement of such doubts is necessary to enable it to act legally and intelligently upon such pending question, that the justices are required or authorized to give an advisory opinion under c. 3, art. 2 of the Constitution.

While answering a question, submitted to them by the Governor and Council respecting the validity of certain corporation excise taxes in view of the decision of the Supreme Court of the United States in Macallen Co.

v. Massachusetts, 279 U.

S.620; 280 U.S 513, and the duty of the commissioner of corporations and taxation in the circumstances, the justices expressed doubt whether the inquiries related to subject matter with respect to which the Governor and Council had a present constitutional or statutory duty to perform, and whether an advisory opinion was required or authorized under c. 3, art 2 of the

Constitution; and stated that their having answered the question should not be regarded as establishing a precedent.

On October 16 1929, the Governor and Council adopted the following order:

WHEREAS, in view of the recent decision of the Supreme Court of the United States in the case of Macallen Company v. The Commonwealth of Massachusetts, great uncertainty has arisen as to the validity of a vast number of corporation excise taxes as well as uncertainly as to the duty of the Commissioner of Corporations and Taxation to make, within a limited period which may already be expiring, assessments under laws which may be revived; and

WHEREAS, the said decision gives rise to such grave uncertainty as creates a solemn occasion within the meaning of Article II. of Chapter III. of Part the Second of the Constitution of the Commonwealth;

ORDERED, That the opinion of the Justices of the Supreme Judicial Court be required by the Governor and Council upon the following important questions of law: --

First. Have the provisions of Section Thirty-Two of Chapter Sixty-Three of the General Laws as amended been declared unconstitutional or inoperative, within the meaning of Section Fifty-Two of said Chapter, as amended by Chapter Two Hundred and Nineteen of the Acts of Nineteen Hundred and Twenty-Six, either by final judgment, order or decree of the Supreme Court of the United States in the case of the Macallen Company v. The Commonwealth of Massachusetts decided by that Court May 27, 1929, petition for rehearing of which cause was denied October 14, 1929, or by any such final order, judgment or decree of the Supreme Judicial Court of this Commonwealth?

Second. If the answer to the question above propounded is in the affirmative what date constitutes "the date of entry of such final judgment, order or decree" within the meaning of Section Fifty-Two of Chapter Sixty-Three of the General Laws?

On October 30, 1929, the Justices returned the following answers: To His Excellency the Governor and the Honorable Council of the Commonwealth of Massachusetts.

The Justices of the Supreme Judicial Court, in reply to your order of October 16, 1929, copy of which is hereto annexed, respectfully express their opinion as follows:

The first point to be considered is the effect of the decision of the Supreme Court of the United States in Macallen Co. v. Massachusetts, 279 U.S. 620, on that part of the tax laws of the Commonwealth whereby an excise is imposed on business corporations for the privilege of doing business. The opinion in that decision deals exclusively with the practical and constitutional consequences of the definition of "net income" for the purpose of calculating that excise contained in St. 1925, c. 343, Section 1A, in its relation to the definition of "net income" in St. 1925, c. 265, Section 1, which was the last preceding form of paragraph 5 of Section 30 of c. 63 of the General Laws. After quoting the form of paragraph 5 of said Section 30, in St. 1925, c. 265, Section 1, and that in St. 1925, c. 343, Section 1A, that opinion states on pages 623 and 624, the practical and comparative effect of the two in these words: "Thus, under the original definition of net income, there was expressly excluded from the net income taxable at two and one-half per cent all interest received upon bonds, notes and certificates of indebtedness of the United States. And the definition had the effect of excluding, in the same respect, interest on state, county and municipal bonds. . . . The taxing authorities of the state assessed against appellant, for the year 1926, a tax under the provisions of the then-existing statute as first above quoted [G.L.c. 63, Section 32 as amended by St. 1923, c. 424, Section 1] adding, for the purpose of computing the assessment, to the amount of the net income of appellant as determined by the federal income tax returns of appellant, all sums of interest received by appellant from . . . United States, Farm Loan, and county and municipal bonds [owned by it]. Without this addition, and under the original definition of net income, the amount of the tax assessed would have been materially less."

The essence of the result of that decision is found in these three quotations from 279 U.S. page 630. "On the one hand, the state is at liberty to tax a corporation with respect to the doing of its business. On the other hand, the state cannot tax the income of the corporation derived from non-taxable securities. It necessarily follows that the legislature may not, by an artful use of words, deprive this Court of its authority to look beyond the words to the real legislative purpose." Page 631. "In the present case, it appears that the original statute exempted from consideration as a part of the measure of the tax all interest upon the non-taxable securities. The amended act now in force has the effect of repealing this original provision and imposing a burden upon the securities from which, by express language, they had theretofore been free. This was a distinct change of policy on the part of the Commonwealth, adopted, as though it had been so declared in precise words, for the very purpose of subjecting these securities pro tanto to the burden of the tax." Page 634. "We conclude that the amended act in substance and effect imposes a tax upon federal bonds and securities; and it necessarily follows that the act in substance and effect also imposes a tax upon the county and municipal bonds. In both respects, the act is void."

It seems to us that the attention of the Supreme Court of the United States was centered on St. 1925, c. 343, Section 1A, and that its holding as to unconstitutionality was confined to the changes wrought by that section upon the pre-existing statutory law in St. 1925, c. 265, Section 1, in their effect upon G.L.c. 63, Section 32, as amended by St. 1923, c. 424, Section 1. The sole consequence of that decision in our opinion is to render the part of St. 1925, c. 343, Section 1A, unconstitutional so far as it measures the excise in any degree by inclusion of net income derived from bonds, notes and certificates of indebtedness of the United States and from county and municipal bonds of this Commonwealth and from other securities expressly exempted from taxation by the law of the United States or of this Commonwealth. That decision does not in our opinion render invalid other provisions of G.L.c. 63, or of St. 1925, c. 265, Section 1, by which the excise upon corporations for the privilege of doing business is measured and ascertained.

Decisions have been made by the Supreme Court of the United States as to the effect of unconstitutional laws. It was said in Ex parte Siebold, 100 U.S. 371, 376: "An unconstitutional law is void, and is as no law." In Norton v. Shelby County, 118 U.S. 425, 442, are found these words: "An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed." In Chicago, Indianapolis

& Louisville Railway v. Hackett, 228 U.S. 559, 566, it was declared that a statute held to be unconstitutional was "as inoperative as if it had never been passed, for an unconstitutional act is not a law, and can neither confer a right or immunity nor operate to supersede any existing valid law." It must be presumed that the Supreme Court of the United States contemplated that its decision in the Macallen Company case should have the effect thus previously declared by it to be the operation of its decisions holding statutes to be unconstitutional. Since its decision in the Macallen Company case as to unconstitutionality was directed solely to St 1925, c. 343, Section 1A, and its effect upon other parts of the statutes imposing the excise on business corporations, it seems to follow that the enactment of that statute did not "operate to supersede any existing valid law." The existing law prior to the formal but ineffectual enactment of St. 1925, c. 343, Section...