Society for Sav. in City of Cleveland v. Peck
| Decision Date | 10 March 1954 |
| Docket Number | No. 33523,33523 |
| Citation | 118 N.E.2d 651,161 Ohio St. 122 |
| Parties | , 53 O.O. 53 SOCIETY FOR SAV. IN CITY OF CLEVELAND v. PECK. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
1. A state cannot levy a property tax on federal securities.
2. A state cannot levy a property tax against a corporation on its capital or on its net worth without excluding federal securities from the assets of the corporation in the computation of such capital or net worth.
3. A state may levy a property tax on the ownership interests of the owners of a corporation, even though all the assets of the corporation are federal securities and even though the net worth of the corporation is used as the measure of the value for such taxation of such ownership interests.
4. A property tax may be levied on the ownership interests in a corporation even though the corporation is required to pay the tax on behalf of those who own such interests.
5. Where an incorporated bank has no capital divided into shares and no capital stock and all its capital is derived from its depositors, the depositors of such bank not only have interests in such bank as creditors of the bank for the amounts of their deposits but also are ordinarily the owners of all the ownership interests in such incorporated bank.
6. A property tax may be levied on the ownership and other interests of the owners of a corporation in such corporation at amounts equal to their book values, although, as long as the corporation continues to operate as a going concern, such interests may be withdrawn only at fixed amounts less than their book values and identical interests may be acquired from the corporation by others at such fixed amounts less than their book values.
7. Where all the ownership interests of the owners of a bank are vested in depositors of a single class, such bank may be required by statute to pay a property tax levied on such ownership interests if and when such bank has available for apyment of interest to its depositors more than enough to pay the tax so levied.
8. With respect ot an incorporated
8. With respect to an incorporated by Section 5408, General Code, on 'the capital employed, or the property representing it, in a financial institution the capital of which is not divided into shares, or which has no capital stock,' is a tax on the ownership interests of the owners of such corporation and not a tax on any property or capital of the corporation.
9. As to an incorporated financial institution, the words, 'the value of the property representing the capital employed by such financial institution, not divided into shard' as found in the first sentence of Section 5412, General Code, describe the value of the intangible interests of ownership of the owners of such a corporation and do not refer to the value of any of the capital or property of or belonging to such corporation.
10. As to incorporated financial institutions, the words 'shares in and capital employed by financial institutions' as found in Section 5638-1, General Code, describe the interests of ownership of the owners of such corporations and not any property of or belonging to such corporations.
11. In ascertaining and assessing pursuant to Section 5412, General Code, the value of the intangible interests of ownership of the owners of an incorporated financial institution having no capital divided into shares at the aggregate amount of the capital, the surplus or reserve fund and the undivided profits of the corporation as shown in the report required of the corporation, the Tax Commissioner is not required to make any deduction from such amount on account of federal securities owned by the corporation.
The Society for Savings in the City of Cleveland filed with the Tax Commissioner an application pursuant to subdivision 2 of Section 1464-3, General Code, for a certificate of abatement for alleged overpayment of taxes assessed for the years 1947 to 1951, inclusive, pursuant to Sections 5408 and 5412, General Code, on 'the capital employed, or the property representing it, in' said Society for Savings, and levied pursuant to Section 5638-1, General Code. The Society for Savings is an incorporated financial institution having depositors but its capital is not divided into shares and it has no capital stock. It is organized under Sections 710-145 to 710-149, inclusive, General Code.
Section 5408, General Code, provides:
'All the shares of the stockholders in a financial institution, located in this state, incorporated or organized under the laws of the state or of the United States, the capital stock of which is divided into shares, excepting such as are defined as 'deposits' in section 5324 of the General Code, and all the shares of the stockholders in an unincorporated financial institution, located in this state, the capital stock of which is divided into shares held by the owners of such financial institution, and the capital employed, or the property representing it, in a financial institution the capital of which is not divided into shares, or which has no capital stock, located in this state, shall be listed and assessed at the book value thereof, and taxed in the manner provided in this Chapter.'
Section 5109, General Code, provides:
'The real estate of a financial institution shall be taxed in the place where it is located, in like manner as the real estate of persons is taxed; but the tax provided for in this chapter shall be in lieu of all other taxes on the other property and assets of such institution.'
By Section 5411, General Code, a report is required 'exhibiting in detail * * * the resources and liabilities of' a financial institution at the close of each year.
Section 5412, General Code, provides:
Section 5638-1, General Code, provides in part:
'Annual taxes are hereby levied on the kinds and classes of intangible property, hereinafter enumerated, on the intangible property tax list in the office of the auditor of state and duplicate thereof in the office of treasurer of state at the following rates, to wit:
'* * * deposits, two mills on the dollar; shares in and capital employed by financial institutions, two mills on the dollar * * *.'
In computing, pursuant to Section 5412, General Code, 'the aggregate amount of the capital, the surplus or reserve fund and the undivided profits as shown in' the reports made by the Society for Savings for the years 1947 to 1951, inclusive, there was included in the assets of the Society for Savings the amount of federal securities owned by it. It was contended on behalf of the Society for Savings that such federal securities should have been excluded from its assets in making that computation.
The application was denied by the Tax Commissioner. On appeal to the Board of Tax Appeals the order of the Tax Commissioner was reversed and he was directed to issue the certificate of abatement as requested.
The Tax Commissioner has appealed to this court from that decision of the Board of Tax Appeals.
C. William O'Neill, Atty. Gen., and Joseph S. Gill, Columbus, for appellant.
Thompson, Hine & Flory, Jerome C. Fisher, Edgar P. Stocker, Cleveland, for appellee.
The question to be decided is whether, in ascertaining and assessing 'the value of the property representing the capital employed by [an incorporated] financial institution, not divided into shares,' pursuant to Section 5412, General Code, the Tax Commissioner must eliminate federal securities owned by such institution in computing 'the aggregate amount of the capital, the surplus or reserve fund and the undivided profits' of such institution.
It should be observed that the word 'capital,' when used with reference to a corporation, may be used to describe at least three different things. For example, it may be used (1) to describe all the property or assets of the corporation (see National Bank v. Commonwealth of Kentucky, 9 Wall. 353, 76 U.S. 353, 19 L.Ed. 701, 702), (2) to describe a bookkeeping figure representing a part or all of the net worth of the corporation (State of Missouri, ex rel. Missouri Ins. Co. v. Gehner, Assessor, 281 U.S. 313, 50 S.Ct. 326, 74 L.Ed. 870), and (3) to describe part or all of the property interest in the corporation which belongs to its shareholders or other owners.
The difference between the first and third of the above-mentioned uses of that word is well demonstrated in the opinion by Mr. Justice Miller in National Bank v. Commonwealth of Kentucky, supra, where it is said:
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