MR. JUSTICE HARLAN delivered the opinion of the Court.
In 1829 this Court decided in Weston v. City Council of Charleston, 2 Pet. 449, that obligations of the Federal Government are immune from state taxation. This rule, aimed at protecting the borrowing power of the United States from state encroachment, was derived from the "Borrowing" and "Supremacy" Clauses of the Constitution,
The two cases now before us involve the application of that rule, in a somewhat novel situation. Society for Savings in the City of Cleveland and First Federal Savings
The tax in question was assessed in the names of these banks under §§ 5408, 5412 and 5638-1 of the Ohio General Code,
The Supreme Court of Ohio recognized that this tax, based as it was upon the inclusion of federal obligations, would have to fall if directed against the banks. New York ex rel. Bank of Commerce v. Commissioners of
In so deciding the Ohio court relied upon a gloss on the rule of immunity stated above. It has been held that a state may impose a tax upon the stockholders' interests in a corporation, measured by corporate asset values, without making any deduction on account of United States securities held by the corporation. This doctrine had its origin in cases involving national bank stock. There, congressional consent to state taxation of the stock of national banks, upon certain conditions, was held, over strong dissent, to permit such taxes to be assessed without the exclusion of federal obligations owned by the banks. Van Allen v. Assessors, 3 Wall. 573 (1866); National Bank v. Commonwealth, 9 Wall. 353 (1870); Des Moines National Bank v. Fairweather, 263 U.S. 103 (1923). This result was reached in part on the theory that the stockholders' interests in a corporation represent a separate property interest from the corporation's ownership of its assets, so that a tax on the stockholders' interests is not a tax on the federal obligations which are included in the corporate property. This rationale has been carried over to cases involving stock of state-created banks, and thus a tax on their shareholders, though measured by corporate assets which include federal obligations, is held
The focal point of these appeals is thus whether we are to regard this tax as imposed on the banks or, as the Ohio court held the legislature intended, on their depositors. Were we free to construe Ohio's statute de novo we might have difficulty in reaching the conclusion which the Ohio court did. Suffice it to say at this point: The statute is barren of any language expressly imposing this tax on the depositors, and contains no provision giving the bank any right to recover the tax from the depositors, as might be expected if the bank had been regarded as a mere tax-collecting agent. By contrast, the taxes laid by the Ohio General Code on (a) the shares of incorporated financial institutions whose capital is divided into shares, (b) the shares of unincorporated institutions whose capital is divided into shares, and (c) deposits, are imposed on the shares "of the stockholders" (§ 5408) and on the deposits "as taxable property of its depositors" (§ 5673-2).
And beyond these considerations, one might not have expected the legislature to tax the ownership interests of the depositors of these banks on the same basis as stock-holders
We note, first, that should the bank be unable to pay the tax, after it has been assessed, there is no provision entitling the State of Ohio to collect it from the depositors. A tax against the depositors which is recoverable only from the bank looks like a tax against the bank. And if the tax is in fact against the bank, it does not matter
Next, it appears that the statute does not relieve the bank from having to pay the tax on the "intangible property interest" of a depositor who had an account with the bank on the assessment date of the tax, but has withdrawn his account before the collection date. And if the bank is required to pay on the former depositor's account, there is no provision entitling the bank to reimbursement from him. It should be observed that in the case of the deposit tax the statute does contain provisions protecting the bank in such a situation. §§ 5412, 5673-1, 5673-2.
Finally, and perhaps most important, if this tax is on the depositors, we must find somewhere a right in the bank to make itself whole from the depositors for the taxes paid on their account. In all the cases upholding state taxes against shareholders, without the exclusion of federal obligations owned by the corporation, an express or implied right of reimbursement was presupposed. See Van Allen and other cases at p. 147, supra. As already observed, in the case of the Ohio taxes on shares and deposits the statute contains such a right (§§ 5673,
The Ohio court thought that in charging the tax to surplus, the bank in reality would be reducing the depositors' interest in the surplus, which it described as being "owned" by them, and that therefore in no circumstance was a right of reimbursement necessary. But there are difficulties with this proposition. If this means that the corporate fiction should be disregarded, the result would be that the government bonds would have to be excluded, since on this hypothesis such securities should then be treated as the property of the depositors. On the other
Without provisions protecting the bank against the burdens of the tax, we cannot assume that the statute's operation will not infringe on the immunity of the federal obligations held by the banks. It is not adequate merely to suggest that a bank may be entitled to make itself whole from the depositors under Ohio common law. For no such common-law right has been called to our attention. Rather, the Ohio court's opinion indicates that the bank may be left without any right of reimbursement.
We conclude that this tax is on the depositors in name only, and that for federal purposes it must be held to be on the banks themselves. Accordingly, the judgments in both cases are
MR. JUSTICE BURTON took no part in the consideration or decision of these cases.
"SEC. 5412. . . . Upon receiving such report the tax commissioner shall ascertain and assess all the taxable shares of such financial institution, or the value of the property representing the capital employed by such financial institution, not divided into shares, at the aggregate amount of the capital, the surplus or reserve fund and the undivided profits as shown in such report, and the amount of taxable deposits of such institution in each county in which the institution maintained an office or offices for the receipt of deposits. Such amounts shall be assessed in the name of such financial institution excepting that the amounts of the taxable deposits wholly withdrawn from each such institution within the times mentioned in section 5411-2 of the General Code and separately set forth in such report shall be subtracted from the amount of taxable deposits so assessed and separately assessed in the names of such respective depositors. In the case of an incorporated financial institution all of whose shares constitute deposits as defined in section 5324 of the General Code such assessment of shares shall exclude the capital stock thereof as so shown but shall include the surplus or reserve and undivided profits so shown."
"SEC. 5638-1. . . . 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; . . . ."
"It shall be the duty of every financial institution to collect the taxes due upon its shares of stock from the several owners of such shares, and to pay the same to the treasurer of state and any financial institution failing to pay the said taxes as herein provided, shall be liable by way of penalty for the gross amount of the taxes due from all the owners of the shares of stock, and for an additional amount of one hundred dollars for every day of delay in the payment of said taxes.
"SEC. 5673. . . . Such financial institution paying to the treasurer of state the taxes assessed upon its shares, in the hands of its shareholders respectively, as provided in the next preceding section, may deduct the amount thereof from dividends that are due or thereafter become due on such shares, and shall have a lien upon the shares of stock and on all funds in its possession belonging to such shareholders, or which may at any time come into its possession, for reimbursement of the taxes so paid on account of the several shareholders, with legal interest; and such lien may be enforced in any appropriate manner.
"SEC. 5673-1. . . . Taxes assessed on deposits in a financial institution in this state shall be a lien on the deposit of each person as of the day fixed by the tax commission of Ohio for the listing of such deposits. Taxes assessed on the shares of stock of such an institution, all of whose shares are withdrawable and defined as deposits in chapter four of this title, shall be a lien on such shares so defined as deposits as of the day so fixed. It shall be the duty of every financial institution to pay the taxes on the amount of such deposits and/or withdrawable shares assessed in its name to the treasurer of state and any such institution failing to pay such taxes as herein provided shall be liable by way of penalty for the gross amount of the taxes due on and with respect to all its deposits and withdrawable shares assessed in its name and for an additional amount of one hundred dollars for every day of delay in the payment of such taxes.
"SEC. 5673-2. . . . A financial institution so required to pay to the treasurer of state the taxes assessed upon its deposit accounts, as taxable property of its depositors, and/or upon its withdrawable shares as taxable property of its shareholders respectively, as provided in the next preceding section, may, upon receipt of notice of the day fixed for the listing of such deposits, charge the amount thereof to and deduct the same from the deposit of each depositor, or from the interest that is due or thereafter becomes due thereon, or from the dividends that are due or thereafter become due thereon, as the case may be, and shall have a lien upon such deposit, interest and/or dividends and on all funds in its possession belonging to such depositor or shareholder, or which may at any time come into its possession, for reimbursement of the taxes so payable, with legal interest. Such lien may be enforced in any appropriate manner at any time within six months after the payment of the taxes to the treasurer."
For §§ 5673-1 and 5673-2, see note 8, pp. 149-150, supra.