United States v. State Tax Commission, Civ. A. No. 70-652-C.

• Decision Date: 09 August 1972
• Docket Number: Civ. A. No. 70-652-C.
• Citation: 348 F. Supp. 397
• Parties: UNITED STATES of America et al., v. STATE TAX COMMISSION et al.
• Court: U.S. District Court — District of Massachusetts

348 F. Supp. 397

UNITED STATES of America et al., v. STATE TAX COMMISSION et al.

Civ. A. No. 70-652-C.

United States District Court, D. Massachusetts.

August 9, 1972.

Joseph L. Tauro, U. S. Atty., Wayne B. Hollingsworth, Asst. U. S. Atty., Boston, Mass., Charles Stratton, Atty., Tax Division, General Litigation Section, Dept. of Justice, Washington, D. C., for the United States.

Edward O. Proctor, Chester M. Howe, Daniel B. Bickford, Ely, Bartlett, Brown & Proctor, Boston, Mass., for intervening plaintiffs.

Daniel J. Johnedis, Ass. Atty. Gen., Boston, Mass., for defendants.

OPINION

CAFFREY, Chief Judge.

This is a civil action for declaratory relief originally filed by the United States of America as plaintiff against the Massachusetts State Tax Commission and the individual members thereof. Six federally chartered federal savings and loan associations with places of business in various parts of the Commonwealth of Massachusetts were allowed to intervene as parties-plaintiff, both in support of the allegations in the original complaint and for the purpose of seeking additional declaratory relief.

A stipulation of facts executed by counsel for all parties was filed and thereafter a motion for summary judgment on behalf of all parties-plaintiff was submitted to the court on the basis of briefs filed with reference thereto. It was stipulated by counsel for all parties that they are of opinion that there is no issue of material fact presently outstanding herein and that, pursuant to Rule 56, Federal Rules of Civil Procedure, the case is ripe for a determination of the legal issues on the basis of the motion for summary judgment.

Questions going to the issues of standing, subject matter jurisdiction, propriety of the parties to the suit, and the need for a three-judge court, were all resolved favorably to plaintiffs in an order entered on July 8, 1971. These matters will not be rediscussed in this opinion.

This litigation is centered around M. G.L., c. 63, § 11 entitled "Taxation of Savings Banks, Cooperative Banks and Savings and Loan Associations." Plaintiffs claim that Section 11 violates both the Supreme Law clause and 12 U.S.C.A. § 1464(h). It provides, in pertinent part:

Every savings bank . . . every co-operative bank . . . and every state or federal savings and loan association located in the commonwealth shall pay to the commissioner an annual excise equal to the following:

. . . . . .

(2) one-twentieth of one per cent of the average amounts of its deposits or of its savings accounts and share capital . . . after deducting from such average amounts . . .

(ii) the unpaid balances on its loans secured by the mortgage of real estate taxable in this commonwealth or real estate situated in a state contiguous to the commonwealth, and within a radius of fifty miles of the main office of such bank or association. . . .

A cursory reading of the statute indicates that a deduction from the tax on deposits is allowed to banks on the balances of mortgage loans secured by real estate located in Massachusetts, or in a state contiguous to Massachusetts and within 50 miles of the home office. M. G.L., c. 168, § 34(2) provides that the lending area for savings banks shall be in Massachusetts or that portion of a state contiguous to Massachusetts and within 50 miles of the home office of the bank. M.G.L., c. 170, § 23 provides that the lending area for cooperative banks may be upon real estate in the Commonwealth or that portion of a state contiguous to the Commonwealth and within 25 miles of the home office. M. G.L., c. 93, § 34 provides only that the bank commissioner shall have the same powers with respect to savings and loans as he now has with respect to savings banks. A reasonable inference is that state savings and loan associations are limited to the same lending area as savings banks.

12 U.S.C.A. § 1464(c), however, provides that federal savings and loan associations shall lend their funds ". . . upon real property within one hundred miles of their home office or within the State in which such home office is located. . . ."

12 U.S.C.A. § 1464(h) provides in pertinent part:

"No state . . . taxing authority shall impose any tax on such associations . . . greater than that imposed by such authority or other similar local mutual or cooperative thrift and home financing institutions."

The nub of this entire controversy is plaintiff's contention that Section 11(a) of c. 63 violates 12 U.S.C.A. § 1464(h) because that statute operates in fact to impose a greater tax on federal savings and loan associations than on similar state-chartered institutions by denying to the federally chartered institutions a deduction which is available to the state institutions. Specifically, plaintiffs say that the state statute operates to deprive them of the deduction computed on the basis of the value of their outstanding secured loans, secured by property located in contiguous states but at a distance in excess of fifty and less than one hundred miles from the bank's home office.

The significance in dollar impact of this contention is established by Exhibit 3 of the Stipulation of Facts. Exhibit 3 to the Stipulation of Facts establishes that in the years 1966 through 1970 the total unpaid balances on loans made by federal savings and loan associations and secured by mortgages on real estate located outside of Massachusetts and...