such property represented federal securities, violated the immunity of such securities from state taxation.20

29 In its opinion the court say: "We must inquire whether the law really imposes a tax upon the shares of stock as the property of their owners, or merely adopts the value of those shares as the measure of valuation of the property of the corporation, and by that standard taxes that property itself. The result of this inquiry is of vital importance, because there may be a tax upon the shares of a corporation, which are property distinct from that owned by the corporation, and with a different owner, without an allowance of the exemption due to the property of the corporation itself, while, if the tax is upon the corporation's property, all exemptions due it must be allowed."

After reviewing Bank of Commerce v. Commissioners (2 Black. 620; 17 L. ed. 451) and Bank Tax Case (2 Wall. 200; 17 L. ed. 793) the opinion continues: "The case at bar cannot be distinguished in principle from these cases. In the first case the tax was on the capital stock at its actual value; in the second case on the amount of the capital stock and the surplus earnings; and, in the case at bar, on the shares of the stock, taking into account the capital, surplus, and undivided earnings. It would be difficult for the most ingenious mind and the most accomplished pen to state any distinction between these three laws, except by the manner by which they all sought the same end, the taxation of the property of the bank. The slight concealment afforded by the omission of the property eo nomine is not sufficient to disguise the fact that, in effect, it is the property which is taxed. If, included in that property it is discovered that there is some which is entitled by federal right to an immunity, it is the duty of this court to see that the immunity is respected."

Of the line of cases affirming the doctrine of Van Allen v. Assessors (3 Wall. 573; 18 L. ed. 229), the opinion declares: "There is nothing in them which justifies the tax under consideration here, levied, as has been shown, on the corporate property. Without further review of the authorities it is safe to say that the distinction established in the Van Allen case has always been observed by this court, and that, although taxes by States have been permitted which might indirectly affect United States securities, they have never been permitted in any case except where the taxation has been levied upon property which is entirely distinct and independent from these securities. On the other hand, whenever, as in these cases, the tax has been upon the property of the corporation so far as that property has consisted of such securities, it has been held void. . . . It is said that where a tax is levied upon a corporation, measured by the value of the shares in it, it is equivalent in its effect to a tax (clearly valid) upon the shareholders in respect of their shares, because, being raid by the bank, the burden falls eventually upon the shareholders in proportion to their holdings. It was upon this view that the lower court rested its opinion. But the two kinds of taxes are not equivalent in law, because the State has the power to levy one, and has not the power to levy the other. The question here is one of power, and not of economics. If the State has not the power to levy this tax, we will not inquire whether another tax, which it

66

Where, however, the state tax may properly be held to be a franchise tax upon the state institution, it has been held valid notwithstanding the fact that United States stocks constitute a part of the assets of the institution. 'Nothing is more certain in legal discussion," the court say in Society for Savings v. Coite,30 30"that the privileges and franchises of a private corporation, all trades and avocations by which the citizens acquire a livelihood, may be taxed by a State for the support of the state government. Authority to that effect resides in the State wholly independent of the Federal Government, and is wholly unaffected by the fact that the corporation or individual has or has not made investment in federal securities." 31 So also in Home Insurance Co. v. New York 32 it was held that a state statute imposing a tax upon the "corporate franchise or business" of a company, and making reference to its capital stock and dividends only for the purpose of determining the amount of the tax, was not invalid as levying a tax on the capital stock or property of the company, but upon its corporate franchise, and, therefore, not subject to the objection that it imposed a tax on United States securities constituting a portion of the investments of the company. A tax levied upon shares of stock in the hands of their holders it has been uniformly held is not equivalent to a tax upon of the company, but upon its corporate franchise, and, therefore, it has been consistently held that the States may tax the shares of a national bank in the hands of the shareholders, or, similarly, the stock of corporations whose investments consist wholly or in part of federal securities.33

might lawfully impose, would have the same ultimate incidence. Precisely the same argument was made and rejected in Owensboro Nat. Bank v. Owensboro."

30 6 Wall, 611; 18 L. ed. 907.

31 Citing Osborn v. Bank of U. S. (9 Wh. 738; 6 L. ed. 204).

32 134 U. S. 594; 10 Sup. Ct. Rep. 593; 33 L. ed. 1025.

33 Van Allen v. Assessors (3 Wall. 573; 18 L. ed. 229); Provident Institution v. Massachusetts (6 Wall. 611; 18 L. ed. 907); Palmer v. McMahon (133 U. S. 660; 10 Sup. Ct. Rep. 324; 33 L. ed. 772.)

§ 53. Income from Federal Securities Exempt from State Taxation.

Incomes derived from interest on federal securities, are exempt from state taxation. This was held with reference to the exemp tion from federal taxation of incomes derived from state securities, and the same reasoning would of course exclude from state taxation incomes derived from federal securities.35

37

§ 54. State Taxation of Circulating Notes of National Banks. Congress, by an act approved August 13, 1894, has provided that "circulating notes of national banking associations and United States legal tender notes, and othe. notes and certificates of the United States, payable on demand, and circulating or intended. to circulate, as currency shall be subject to [state] taxation as money on hand or on deposit." In Hibernia Savings and Loan Society v. San Francisco" the Supreme Court held that notwithstanding the act of Congress of 1862 declaring that "all stocks, bonds, treasury notes, and other obligations of the United States shall be exempt from taxation by or under state or municipal or local authority," certain United States treasur checks for interest accrued upon registered bonds of the Unieu States, where intended for immediate payment of interest, might be taxed by a State in the hands of the owner. "Had the government [of the United States]," said the court, "in the absence of money for the immediate payment of interest upon its bonds, issued new obligations for the payment of this interest at a future day, it might well be claimed that these were not taxable, as the taxation of such notes would, to the extent of the tax, impair their value and negotiability in the hands of the holder. But where the checks are issued payable immediately, they merely stand in the place of coin, which may be immediately drawn

34 Bank of Kentucky v. Com. (4 Bush, 48).

35 Pollock v. Farmers' Loan and Trust Co. (157 U. S. 429; 15 Sup. Ct. Rep. 673; 39 L. ed. 759).

36 200 U. S. 310; 26 Sup. Ct. Rep. 265; 50 L. ed. 495.

37 Rev. Stat., § 3701.

thereon.

While the checks are obligations of the United States, and within the letter of Sec. 3701, they are not within its spirit, and are proper subjects of taxation."

§ 55. State Taxation of Bequests to the United States.

Bequests to the United States may be subjected to state inheritance taxes, such taxes, the courts, beth state and federal, holding to be not upon the property bequeathed, but upon its transmission by will or by descent. "The legacy becomes the property of the United States only after it has suffered a diminution to the amount of the tax, and it is only upon this condition that the state legislature assents to a bequest of it." 38

"We

Further, in Plumber v. Coler39 it was held that the state inheritance tax might be collected upon a bequest consisting of United States bonds issued under an act of Congress specifically declaring them to be exempt from state taxation in any form. After an exhaustive review of authorities the court say: think the conclusion fairly to be drawn from the federal cases is that the right to take property by will or by descent is derived from and regulated by municipal law; that, in assessing a tax upon such right or privilege, the State may lawfully measure or fix the amount of the tax by referring to the value of the property passing, and that the incidental fact that such property is composed, in whole or in part, of federal securities, does not invalidate the tax or the law under which it is imposed." In Murdock v. Ward 40 it was held that a similar bequest of federal securities was not exempt from the inheritance tax imposed by the War Revenue act of Congress of 1898.

$56. State Taxation of National Banks.

By act of June 3, 1864, certain powers of taxation with reference to national banks were given by Congress to the States. This permission now constituting Section 5219 of the Revised Statutes

28 United States v. Perkins (163 U. S. 625; 16 Sup. Ct. Rep. 1073; 41 L. ed. 287).

39 178 U. S. 115; 20 Sup. Ct. Rep. 829; 44 L. ed. 998. 40 178 U. S. 139; 20 Sup. Ct. Rep. 775; 44 L. ed. 1009.

is as follows: "Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State in which the association is located; but the legislature of each State may determine and direct the manner and place of taxing all shares of national banking associations located within the State, subject to only the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any national banking association owned by nonresidents of any State, shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either state, county, or municipal taxes to the same extent, according to its value, as other real property is taxed."

As has been already pointed out this permission measures the entire extent of the State's power of taxation with reference to the national banks. This federal act has been construed to operate not as a grant by the United States to the States of a power not previously possessed, but as the removal by Congress of a hindrance to the exercise by the States of a power inherent in them. In Van Allen v. Assessors41 the court say: " It is said that Congress possesses no power to confer upon a State authority to be exercised which has been exclusively delegated to that body by the Constitution and, consequently, that it cannot confer upon the State the sovereign right of taxation; nor is the State competent to receive a grant of any such power from Congress. We agree to this. But as it respects a subject-matter over which Congress and the States may exercise a concurrent power, but from the exercise of which Congress, by reason of its paramount authority, may exclude the States, there is no doubt Congress may withhold the exercise of that authority and leave the States free to act. The power of taxation under the Constitution as a general rule, and as has been repeat

41 3 Wall. 573; 18 L. ed. 229.