Security Bank & Trust Co. v. Connors, 13221

• Decision Date: 24 May 1976
• Docket Number: No. 13221,13221
• Citation: 550 P.2d 1313,170 Mont. 59
• Parties: SECURITY BANK AND TRUST COMPANY et al., Plaintiffs and Respondents, v. Hollis G. CONNORS, as Montana State Treasurer, and Keith L. Colbo, as Director of Montana Department of Revenue, Defendants and Appellants. FIRST NATIONAL BANK AND TRUST COMPANY OF HELENA et al., Intervenor, v. SECURITY BANK AND TRUST COMPANY, a Montana Banking Corporation, et al., Defendants.
• Court: Montana Supreme Court

Page 1313

550 P.2d 1313

170 Mont. 59

SECURITY BANK AND TRUST COMPANY et al., Plaintiffs and Respondents, v. Hollis G. CONNORS, as Montana State Treasurer, and Keith L.

Colbo, as Director of Montana Department of

Revenue, Defendants and Appellants.

FIRST NATIONAL BANK AND TRUST COMPANY OF HELENA et al., Intervenor, v. SECURITY BANK AND TRUST COMPANY, a Montana Banking

Corporation, et al., Defendants.

No. 13221.

Supreme Court of Montana.

Submitted April 21, 1976.

Decided May 24, 1976.

Robert L. Woodahl, Atty. Gen., Joseph R. Massman, argued, Helena, for defendants and appellants.

Gough, Booth, Shanahan & Johnson, Ronald F. Waterman argued and Ward A. Shanahan, appeared, Helena, Morrow, Nash & Sedivy, Edmund P. Sedivy, argued, Bozeman, Towe, Neely & Ball, Billings, for plaintiffs and respondents.

HASWELL, Justice.

Defendants appeal through the Department of Revenue from a summary judgment in the district court ordering the state treasurer to refund to plaintiff Security Bank and Trust Company the corporation license tax for the year 1972 paid by plaintiff under protest. Appeal is also taken from the district court's decree on behalf of intervenor First National Bank and Trust Company of Helena, that the Department way not levy and collect a corporation license tax against intervenor, a federally chartered national bank, for the year 1972.

The controversy arises as a result of the passage by the United States Congress in 1969 and later, of amendments to the state taxation of national banks provision, United States Revised Statutes § 5219, 12 U.S.C. § 548, and certain Montana legislative enactments pursuant thereto. The only issue is whether the state of Montana is permitted to levy and collect a corporation license tax from either state chartered or federally chartered banks doing business in Montana for the tax year beginning January 1, 1972.

The facts upon which the district court based its summary judgment were stipulated in two separate documents between the parties, and are summarized herein.

Security Bank is a Montana banking corporation duly authorized and licensed under Montana law to engage in commercial banking, with its principal office in Bozeman, Montana. Defendant and appellant Connors was the treasurer of Montana; defendant and appellant Colbo was the director of the Department of Revenue.

Security Bank paid its corporation license tax for the year 1972, under protest to defendant state treasurer in the sum of $31,752.38; the payment was received by the Department and deposited with defendant treasurer. Security Bank filed a complaint to recover the payment in the district court within the time prescribed by law.

In the immediate bank trade territory of Bozeman, there were at the time of suit three named and several other national banks with banking charters from the United States government under the National Banking Act; all these banks were in competition with Security Bank.

The tax paid by Security Bank was a tax levied by the state of Montana on all nonexempt corporations licensed to do business in Montana under section 84-1501 et seq., R.C.M.1947; and for the year 1972 the state of Montana did not require any national bank to pay a tax based upon its net income as required by section 84-1501 et seq., R.C.M.1947, or any similar statute, and no such tax was paid by any national bank. The tax paid by Security Bank was computed on the basis of its net income and imposed on Security Bank under penalty of law.

The power of the state of Montana to tax national banks located in Montana is set forth in 12 U.S.C. § 548, as amended by Public Law 91-156. For the year 1972, the state of Montana did authorize the levy and assessment of a tax on national banks by assessing shares of stock of national banks under section 84-4601 et seq., R.C.M.1947. In the same year the state taxed state chartered banks by assessing shares of stock of state banks under the same statutory authority. The method of assessment of shares of stock and the rate of tax was identical for national and state banks.

The national banks in the trade area of Bozeman provided substantially the same commercial banking services and functions as provided by Security Bank and other state banks in the Bozeman trade area. However, national banks are regulated by federal law while state banks are regulated by state law. The different sources of their charters do not affect their classification.

Intervenor First National is a national banking association in commercial banking, located in Helena, Montana. First National paid a tax on shares of stock for the years 1971 and 1972 as required by Montana law; but First National was not required by the Department to, nor did it pay, any corporation license tax to the treasurer of Montana for the same years, as none had been levied.

Before detailing the proceedings in the district court, a review of the sequence and substance of the pertinent statutory enactments is in order.

Prior to 1969, 12 U.S.C. § 548, provided in pertinent part to this appeal:

's 548. State Taxation

'The legislature of each State may determine and direct, subject to the provisions of this section, the manner and place of taxing all the shares of the national banking associations located within its limits. The several States may (1) tax said shares, or (2) include dividends derived therefrom in the taxable income of an owner or holder thereof, or (3) tax such associations on their net income, or (4) according to or measured by their net income, provided the following conditions are complied with:

'1. (a) The imposition by any State of any one of the above four forms of taxation shall be in lieu of the others * * *.'

This section will hereinafter be referred to as the 'old § 548'.

Prior to 1969 the state of Montana elected the alternative of taxing the shares of national banks in Montana. The state also taxed the shares of state banks and, until 1969, additionally imposed the corporation license tax on state banks only.

Uniformity of taxation between state and national banks was established in 1967 by the enactment of section 84-1501.4, R.C.M.1947:

'State banks organized under the Montana Bank Act shall not be required to pay the Montana corporation license tak provided for under chapter 15 of title 84 of the Revised Codes of Montana, 1947, until and unless the said tax is required to be paid by national banks organized under the laws of the United States.'

In 1969 Congress undertook the abolition of national bank state tax immunity. Public Law 91-156 added this section to old § 548, as a temporary amendment:

'5. (a) In addition to the other methods of taxation authorized by the foregoing provisions of this section and subject to the limitations and restrictions specifically set forth in such provisions, a State or political subdivision thereof may impose any tax which is imposed generally on a nondiscriminatory basis throughout the jursidction of such State or political subdivision (other than a tax on intangible personal property) on a national bank having its principal office within such State in the same manner and to the same extent as such tax is imposed on a bank organized and existing under the laws of such State.'

This provision is hereinafter referred to as the 'temporary amendment'.

Public Law 91-156 also comtained a 'permanent amendment' to take effect January 1, 1972, at which time the entire old § 548 and the temporary amendment were repealed automatically. The permanent amendment now in effect and hereinafter referred to as the 'new § 548' states in its entirety.

'For the purpose of any tax law enacted under authority of the United States or any State, a national bank shall be treated as a bank organized and existing under the laws of the State or other jurisidiction within which its principal office is located.'

Pursuant to this new taxing authority granted by Congress to the states under the temporary amendment and new § 548, the Montana legislature in 1971, enacted sections 84-1501.6 and 84-1501.7, R.C.M.1947:

'84-1501.6. State and national banks subject to tax. Effective with taxable years beginning on or after January 1, 1971, every bank organized under the laws of the state of Montana or of any other state and every national bank organized under the laws of the United States are subject to the Montana corporation license tax provided for under Title 84, chapter 15, R.C.M.1947.'

'84-1501.7. Effective dates. For the taxable year beginning on and after January 1, 1971, section 1 (84-1501.6) of this act is effective in accordance with Public Law 91-156, section 1 (12 U.S.C. 548(5).) For taxable years beginning on and after January 1, 1972, section 1 (84-1501.6) of this act is effective in accordance with Public Law 91-156, section 2 (12 U.S.C. 548).'

An additional section of this 1971 act repealed section 84-1501.4 R.C.M.1947, as state bank immunity from the corporation license tax was no longer necessary when national banks were subject to the same tax.

Finally, about ten months after the enactment by the Montana legislature of the above act, the Congress amended Public Law 91-156 with Public Law 92-213 which extended the life of the temporary amendment and old § 548, and delayed the effective date of new § 548 for one year, until January 1, 1973.

With the foregoing background in mind, Security Bank sued for refund of its 1972 corporation license tax on the ground it was an unconstitutional deprivation of property to impose the tax on state banks but not on national banks. Originally, the only parties to this action were Security Bank, and the defendants represented by the Department. On the first stipulation of facts the district court entered conclusions of law on November 19, 1974, which essentially held: (1) the Department was authorized by section 84-1501.6, R.C.M.1947 and old § 548, 12 U.S.C. with the temporary amendment, to subject national banks to the corporation...