MR. JUSTICE MURPHY delivered the opinion of the Court.
This is an appeal under § 237 of the Judicial Code from a judgment of the Supreme Court of Oklahoma, denying recovery of taxes alleged to have been exacted from appellant, a national banking corporation, in violation of the provisions of R.S. 5219 and the Constitution of the United States.
Section 16 of the Oklahoma Income Tax Law of 1935, S.L. 1935, c. 66, art. 6,
The net income used as the measure of the tax under §§ 16 and 17 is determined by subtracting from gross income, as defined in § 18, certain deductions allowed by § 9. Section 18 defines gross income for the purposes of "National banking associations, state banks, trust companies and other financial corporations," § 8 (c). It specifically includes in gross income "interest upon the obligations of the United States, or its possessions, or upon securities issued under the authority of an Act of Congress, the income from which is tax free."
All other types of corporations are taxed at the flat rate of six per centum upon the net income allocable to business transacted within the state, § 6. Net income for this purpose is determined by making certain specified deductions from gross income, §§ 7, 9, which is defined expressly so as to exclude interest on tax-immune federal securities, § 8 (b) (4).
The appellee Oklahoma Tax Commission, in assessing appellant's tax for the year 1936 under § 16, included in gross income the dividends received by appellant on stock owned by it in a federal reserve bank and the interest received on bonds and notes issued pursuant to acts of Congress declaring the income from such securities tax exempt.
Oklahoma in the 1935 act expressly followed and adopted the method thus authorized in the amendment. See First National Bank v. Oklahoma Tax Commission, 185 Okla. 98; 90 P.2d 438. Subsection (b) of § 16 expressly declares that the state thereby adopts method numbered (4) authorized by R.S. 5219, 12 U.S.C. § 548.
The power of Congress to authorize a state to impose a tax on the franchise of a national banking association can not now be doubted. Van Allen v. Assessors, 3 Wall. 573. Compare Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 389; Helvering v. Gerhardt, 304 U.S. 405, 411-412n; Federal Land Bank v. Priddy, 295 U.S. 229, 234-235. Any immunity attaching to the franchise by virtue of R.S. 5219 as it read prior to the 1926 amendment, compare Pittman v. Home Owners' Loan Corp., 308 U.S. 21, could be withdrawn by Congress and the franchise subjected to state taxing power, just as national bank shares were so subjected by the Act of June 3, 1864. Van Allen v. Assessors, 3 Wall. 573. See Des Moines National Bank v. Fairweather, 263 U.S. 103; Peoples National Bank v. Board of Equalization, 260 U.S. 702.
The power of a state to levy a tax on a legitimate subject, such as a franchise, measured by net assets or net income including tax-exempt federal instrumentalities or their income is likewise well settled. Society for Savings v. Coite, 6 Wall. 594; Provident Institution v. Massachusetts, 6 Wall. 611; Home Insurance Co. v. New York, 134 U.S. 594; Educational Films Corp. v. Ward, 282 U.S. 379. Thus state laws taxing the shareholders of national banks in accordance with R.S. 5219 on the full net value of their shares, although the banks owned tax-exempt
Sections 16 and 17 of the 1933 act were for present purposes identical with the corresponding sections of the 1935 act, but § 18 of the prior act contained a provision expressly excluding from gross income the interest on tax-immune federal securities.
Appellant contends that the act of 1935, by expressly including in the measure of the tax the interest on federal securities which before had been expressly excluded from the measure, must be regarded not as a valid franchise tax but as an unconstitutional levy on the tax-immune income itself. In support of its position, its main reliance is placed upon our decision in Macallen v. Massachusetts, 279 U.S. 620.
A similar contention was urged against the California franchise tax measured by net income, including tax-exempt income on state bonds, which was upheld in Pacific Co. v. Johnson, 285 U.S. 480. In rejecting the claim, the holding in the Macallen case was referred to as follows (285 U.S. at 494): "There the Commonwealth, which had long imposed a tax on corporate franchises measured by taxable income of the corporation, amended
It cannot be said that the Oklahoma tax in question here was aimed at tax-exempt federal securities in the manner thus disclosed and condemned in the Macallen case. The history of the Oklahoma legislation on this subject discloses only that it sought to change its policy pursuant to the express authorization conferred by R.S. 5219. It has effected its purpose by including within the measure of its franchise tax on national banks the entire net income without respect to source and without discrimination against tax-exempt federal securities. See First National Bank v. Oklahoma Tax Commission, 185 Okla. 98; 90 P.2d 438.
We do not now decide just what circumstances, if any, would bring a situation within the precise scope of the Macallen case, assuming that case still has vitality. It is sufficient to hold, as we do, that the statute in the instant case meets the test stated in Pacific Co. v. Johnson, viz: "Since the mere intent of the legislature to do that which the Constitution permits cannot deprive legislation of its constitutional validity, . . . the present act must be judged by its operation rather than by the motives which inspired it. As it operates to measure the tax on the corporate
Appellant finally contends that the tax here in question violates the restriction in R.S. 5219 that "the rate shall not be higher than . . . the highest of the rates . . . assessed upon mercantile, manufacturing, and business corporations doing business" within the state.
A consideration of the course of judicial decision on R.S. 5219 and its predecessors can leave no doubt that the various restrictions it places on the permitted methods of taxation are designed to prohibit only those systems of state taxation which discriminate in practical operation against national banking associations or their shareholders as a class. Compare First National Bank v. Hartford, 273 U.S. 548; Amoskeag Savings Bank v. Purdy, 231 U.S. 373; Covington v. First National Bank, 198 U.S. 100; Lionberger v. Rouse, 9 Wall. 468. Thus it is not a valid objection to a tax on national bank shares that other moneyed capital in the state or shares of state banks are taxed at a different rate or assessed by a different method unless it appears that the difference in treatment results in fact in a discrimination unfavorable to the holders of the shares of national banks. Amoskeag Savings Bank v. Purdy, 231 U.S. 373; Covington v. First National Bank, 198 U.S. 100.
The resolution of the issue raised by appellant thus turns upon an examination of the whole tax structure of the state. Counsel have stipulated that six thousand business and mercantile corporations, in addition to paying the income tax imposed by § 6 on six per centum of their net income, filed a corporation license tax return for the year 1936 and paid a tax based on one dollar per one thousand dollars of the value of the capital stock employed within the state, and that the Government bonds held by each were included as capital in the measure of the franchise tax. They further stipulated that only thirty-seven of these six thousand corporations owned Government bonds and that, in the case of all but three, the franchise taxes paid exceeded the additional amounts which would have been due under the income tax imposed by § 6 had their gross income, contrary to the fact, included the interest derived from the bonds. In addition to the foregoing taxes, so it is stipulated, each of these corporations paid an ad valorem tax on its moneyed capital.
This brief survey suffices to show that, considering all the taxes imposed upon business and mercantile corporations doing business in the state, the scheme of taxation adopted by Oklahoma does not discriminate against national banking associations. Discrimination is not shown merely because a few individual corporations, out of a class of several thousand which ordinarily bear the same or a heavier tax burden, may sustain a lighter tax than that imposed on national banking associations. Compare Amoskeag Savings Bank v. Purdy, 231 U.S. 373, at 393; Lionberger v. Rouse, 9 Wall. 468. Judged in the light of the established policy of Congress with respect to this subject, the 1935 Oklahoma taxing statute cannot be held to violate the provisions of R.S. 5219.
MR. JUSTICE McREYNOLDS took no part in the consideration or decision of this case.
"(a) In lieu of the tax imposed by Section 6, every national banking association located or doing business within the limits of the State of Oklahoma, shall annually, pay to this State, a tax according to, or measured by, its net income, to be computed in the manner hereinafter provided, at the following rates upon the basis of its entire net income for the next preceding fiscal or calendar year:
"Six (6%) per centum of the amount of the net income as herein provided.
"(b) The State of Oklahoma is hereby adopting method numbered (4), authorized by Section 5219, U.S. Revised Statutes, as amended. The tax imposed by this Section shall be exclusive and in lieu of all taxes imposed by the State of Oklahoma, or any subdivision thereof, on the property of any association liable to tax hereunder; provided, that nothing in this Section shall be construed to exempt the real property of national banking associations from taxation to the same extent, according to its value, as other real property is taxed."
"1. (a) The imposition by any State of any one of the above four forms of taxation shall be in lieu of the others, except as hereinafter provided in subdivision (c) of this clause.
"(c) In case of a tax on or according to or measured by the net income of an association, the taxing State may, except in case of a tax on net income, include the entire net income received from all sources, but the rate shall not be higher than the rate assessed upon other financial corporations nor higher than the highest of the rates assessed by the taxing State upon mercantile, manufacturing, and business corporations doing business within its limits:
"3. Nothing herein shall be construed to exempt the real property of associations from taxation in any State or in any subdivision thereof, to the same extent, according to its value, as other real property is taxed."