Opinion
No. 44094.
April 7, 1941.
D.F. Prince, of Washington, D.C. (Geo. E.H. Goodner, of Washington, D.C., on the brief), for plaintiff.
Hubert L. Will, of Washington, D.C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for defendant.
Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
Action by the Merchants National Bank of Mobile against the United States to recover a stamp tax paid by plaintiff.
Petition dismissed.
This case having been heard by the Court of Claims, the court, upon the stipulation of the parties and the evidence adduced, makes the following special findings of fact:
1. Plaintiff is a national bank incorporated under the laws of the United States, and is engaged in the banking business, with its principal place of business at Mobile, Alabama.
2. Prior to January 9, 1934, plaintiff filed with the Reconstruction Finance Corporation its application for the purchase at par by that corporation of $500,000 par value of its preferred stock. On January 9, 1934, the Reconstruction Finance Corporation, by action of its executive committee, resolved to buy 20,000 shares, $500,000 par value, of the preferred stock of plaintiff and authorized its proper officers to carry out that action.
3. Pursuant to the application of plaintiff and the resolution of the Reconstruction Finance Corporation, mentioned in Finding 2, plaintiff sold 20,000 shares of its preferred stock, par value $500,000, to the Reconstruction Finance Corporation and on February 6, 1934, issued and delivered a temporary certificate for those shares to the Reconstruction Finance Corporation. At that time no documentary stamp was attached to the certificate, but on July 26, 1934, in obedience to the demand of an Internal Revenue Agent, United States Documentary Stamp No. D39588D was affixed to sheet 1 A of plaintiff's general ledger, where the sale of the stock was recorded, and duly cancelled. Plaintiff paid the defendant $500 for that stamp, no part of which has been refunded to plaintiff.
4. On February 1, 1934, the plaintiff issued a certificate to the Comptroller of the Currency certifying that its shareholders had adopted a resolution providing for the issuance of preferred stock in the sum of $500,000 and that the sum of $500,000 had been paid into the bank in cash for the preferred stock and the premium thereon.
5. On February 1, 1934, the plaintiff issued an "Interim Receipt For Payment of Purchase Price of Preferred Stock In The Merchants National Bank of Mobile, Alabama."
6. On February 6, 1934, the Comptroller of the Currency issued a certificate approving the issuance by the plaintiff of preferred stock in the sum of $500,000.
7. On February 6, 1934, plaintiff issued the temporary certificate referred to above, certifying that the Reconstruction Finance Corporation was the owner of twenty thousand fully paid and non-assessable shares of the par value of twenty-five dollars ($25.00) each of the preferred stock of the plaintiff.
8. On August 8, 1934, plaintiff retired the twenty thousand shares of stock which it had sold to the Reconstruction Finance Corporation on February 6, 1934, and the temporary certificate was returned to the plaintiff by the Reconstruction Finance Corporation which had held it from February 6, 1934, to August 8, 1934.
9. On March 27, 1936, plaintiff filed with the Collector of Internal Revenue for the District of Alabama, a claim for refund of the amount paid by it for the documentary stamp No. D39588D, upon the ground that, "The issue of $500,000 of preferred stock was negotiated and sold directly to the R.F.C. and the stock issued in that name", and that the act of March 20, 1936, Public No. 482, provides for the exemption from taxation of shares of preferred stock of national banking associations while owned by the Reconstruction Finance Corporation. This claim was rejected by the Commissioner of Internal Revenue on September 29, 1936.
The question presented in this case is whether plaintiff is entitled to a refund of the stamp tax paid by it on 20,000 shares of its preferred stock which it issued to the Reconstruction Finance Corporation. The tax was collected under section 800 of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev. Acts, page 284, and that act as amended by section 722 of the Revenue Act of 1932, 26 U.S.C.A. Int.Rev. Acts, page 629, by which sections a stamp tax at a specified rate was imposed on the original issue of shares of corporate stock.
The parties are agreed that the tax in question was properly collected unless the plaintiff was exempted from the provisions of that act by the act of March 20, 1936, 49 Stat. 1185, 12 U.S.C.A. § 51d et seq., by reason of the fact that plaintiff's stock was issued to the Reconstruction Finance Corporation. That statute reads in part as follows: "Notwithstanding any other provision of law or any privilege or consent to tax expressly or impliedly granted thereby, the shares of preferred stock of national banking associations, and the shares of preferred stock, capital notes, and debentures of State banks and trust companies, heretofore or hereafter acquired [before or after March 20, 1936] by Reconstruction Finance Corporation, and the dividends or interest derived therefrom by the Reconstruction Finance Corporation, shall not, so long as Reconstruction Finance Corporation shall continue to own the same, be subject to any taxation by the United States, by any Territory, dependency, or possession thereof, or the District of Columbia, or by any State, county, municipality, or local taxing authority, whether now, heretofore, or hereafter imposed, levied, or assessed [on, before or after March 20, 1936], and whether for a past, present, or future taxing period."
At the outset it should be observed that the tax in question was not levied against or collected from the Reconstruction Finance Corporation; the tax was collected from the plaintiff, a national bank, on account of the issuance of its stock to the Reconstruction Finance Corporation. Apparently the only manner in which the tax could even indirectly have affected the Reconstruction Finance Corporation was that the tax would constitute an expense of plaintiff and therefore would reduce the income which would otherwise be available for the payment of dividends on the stock to the Reconstruction Finance Corporation. Having in mind the well-established rule that an exemption from taxation must be clearly declared by the language of the statute which it is claimed confers such exemption, it is difficult to see how it could be said that this exempting statute (which undertakes to exempt from tax stock in a national bank when held by the Reconstruction Finance Corporation) could be held to exempt a national bank from a transfer tax on the issuance of that stock to the Reconstruction Finance Corporation.
This exempting statute was enacted by reason of a court decision which held that stock of a national bank when held by the Reconstruction Finance Corporation was subject to state and municipal taxes (Baltimore National Bank v. State Tax Commission of Maryland, 297 U.S. 209, 56 S. Ct. 417, 80 L.Ed. 586, affirming a decision by the Court of Appeals of Maryland, 169 Md. 65, 180 A. 260). In that case the State Tax Commission of Maryland was seeking to collect a direct tax from a national bank on account of the bank's stock which the Reconstruction Finance Corporation owned, and while the bank was being required to pay the tax the right of reimbursement existed on the part of the bank from its stockholders, in that instance the Reconstruction Finance Corporation. Stock of state banks was not similarly taxed in the State of Maryland where the case arose, and in many states stock of national banks was either not taxed at all or was taxed at varying rates. As will appear from the report of the Senate Committee on Banking and Currency, the exempting statute was enacted in order to remove not only the inequality of treatment as between state and national bank stocks but also because of the varying rates of tax levied by the several states. A further consideration was that taxes of that nature levied by a state or municipality on the stock of a national bank, collected from the bank, and deducted from the funds otherwise payable to the Reconstruction Finance Corporation, might well wipe out the small margin of profit which the Reconstruction Finance Corporation would receive from making such an investment (Senate Report No. 1545, 74th Congress, 2d Session).
Clearly the case with which we are concerned is vastly different from that which gave rise to the exempting statute in question. Here no attempt is being made to levy a tax on national bank stock held by the Reconstruction Finance Corporation nor is it sought to collect a tax from the Reconstruction Finance Corporation. The tax is levied against the plaintiff, a national bank, on the issuance of its stock to the Reconstruction Finance Corporation and is not a tax on the plaintiff's stock when held by the Reconstruction Finance Corporation. At most the Reconstruction Finance Corporation could be affected only in an indirect manner. Only by implication could the exemption be held to apply to plaintiff and that is forbidden by well-established rules of statutory construction. United States Trust Co., Executor v. Helvering, 307 U.S. 57, 59 S.Ct. 692, 83 L.Ed. 1104. Since no express exemption is set out in the statute which would relieve plaintiff from the tax burden complained of, the exaction must be sustained.
Plaintiff's petition is accordingly dismissed. It is so ordered.