We think this catchall provision, in view of the history detailed in the Madden case, supra, 309 U.S. page 89, 60 S.Ct. 406, 84 L.Ed. 590, 125 A.L.R. 1383, was designed to reach bank deposits outside the state, and that the postal savings deposits within the state are included not through deliberate legislative intent, but simply because they fall within the terms of the provision. The holdings in Commonwealth v. Madden's Ex'r, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379, and Madden's Ex'r v. Commonwealth, 277 Ky. 343, 126 S.W.2d 463, and in the United States Supreme Court case ( 309 U.S. 83, 60 S.Ct. 406, 84 L.Ed. 590, 125 A.L.R. 1383) were directed to the taxation of bank deposits without the state and to no form of deposit within the state. We conclude that the Madden case does not decide that the fifty cent tax is non-discriminatory and valid as between postal savings deposits made within Kentucky and all other deposits within the state taxed at the ten cent rate.
See, e.g., Brophy v. Powell, 121 P.2d 647, 656 (Ariz. 1942) (nature of banks makes placing them "in a class entirely distinct from other institutions" reasonable); Commonwealth v. Madden's Ex'r, 97 S.W.2d 561, 563-64 (Ky.Ct.App. 1936) (recognizing broad authority to classify institutions separately for tax purposes); Memphis Bank and Trust Co. v. Garner, 624 S.W.2d 551, 554 (Tenn. 1981) (banks may be classified separately under state constitution), rev'd on other grounds, 459 U.S. 392 (1983); Bank of Texas v. Childs, 615 S.W.2d 810, 815-16 (Tex.Ct.App. 1981) (banks sufficiently different from other businesses to validate differing tax treatment), rev'd on other grounds sub nom. American Bank Trust Co. v. Dallas County, 463 U.S. 855 (1983); State v. Clement Nat. Bank, 78 A. 944, 954 (Vt. 1911) (taxation of bank deposits does not violate proportionality requirement in state constitution), aff'd, 231 U.S. 120 (1913); In re National Bank of West Virginia at Wheeling, 73 S.E.2d 655, 665 (W.Va. 1952) (uniformity requirement does not extend to "different classes of businesses"). Just as banks differ from other business institutions, bank deposits differ from other investments.
The trust property is effectively localized in New York. Unlike the beneficiaries involved in the inheritance tax cases of Curry v. McCanless, 307 U.S. 357, and Graves v. Elliott, 307 U.S. 383, appellee possesses absolutely no power of disposition over the corpus, nor does she enjoy a single thread of control which in the eyes of the law would operate to transport the situs of the property to her domicile and thereby confer jurisdiction upon this state to levy a property tax. She merely has the bare right to receive, during her lifetime, the income which the trustees collect in New York. It is fundamental that it is violative of due process for a state to levy a property tax upon property situated elsewhere: Safe Deposit and Trust Company of Baltimore v. Commonwealth of Virginia, 280 U.S. 83; Commonwealth v. Madden's Ex'r., 265 Ky. 684; see Senior v. Braden, 295 U.S. 422. If the state wishes to effectively tax appellee for the benefits flowing from its protection of her receipt of income, an income tax provides the method: see New York ex rel. Cohn v. Graves, 300 U.S. 308, 312. Moreover, the tax is only nominally limited to the actual worth of appellee's equitable interest.
We are referred to no case, and we have found none, in which the facts are the same or even similar. The citations relate to an interest in an active partnership engaged in trading on the New York Stock Exchange where the Kentucky resident substantially participated there in business activities, as in Commonwealth v. Madden's Ex'r, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379 (1936), and to a corporation's commercial enterprise as in Board of Tax Supervisors, etc. v. Baldwin Piano Co., 296 Ky. 673, 178 S.W.2d 212 (1944). The Act relating to ad valorem taxes does not define "business situs" although it contains a number of definitions.
urities business, the L N maintains an office in New York; (2) the books concerning the activities of the office are kept in New York; (3) the Board of Directors and Executive Committee of the company hold meetings in New York; (4) the day-to-day management of the securities in New York is the responsibility of the Vice President-Finance Agent, a resident of New York; (5) the intangible property is physically located there; (6) the income from the securities business is received in New York; (7) all accounts are kept in New York banks; (8) the authority to draw on these accounts is vested in the New York agent; (9) the expenses in connection with the activities of the office are paid from accounts in New York banks; (10) the agent has independent management of the securities; (11) the securities enterprise is of a permanent and continuous nature; and (12) the intangible personal property sought to be taxed is part of and is connected with a local business in New York. The L N cites Commonwealth v. Madden's Ex'r, 265 Ky. 684, 97 S.W.2d 561 (1936), and Standard Oil Company v. Commonwealth ex rel. Allphin, Ky., 311 S.W.2d 372 (1957), as reliable authorities for its position that the intangibles have acquired a business situs in New York. In Madden, we held that the Commonwealth of Kentucky had no power to subject to ad valorem taxation the interest of a Kentucky resident in the assets of a brokerage partnership owned in part by the Kentucky resident and located in New York. The assets that made up the brokerage firm were located in New York and completely controlled by an office there. Kentucky's only relationship was that Madden, from time to time, lived in Kentucky.
"(b) All intangible personal property of individuals residing in this state and of corporations organized under the laws of this state, wherever located." The question of whether Kentucky could constitutionally levy an ad valorem property tax on the intangible property of a resident where the intangibles had a business situs in another State was answered in the negative in 1936 by this Court in Commonwealth v. Madden's Ex'r, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379. There we held that securities owned by Mr. Madden, but wholly used in an investment partnership of which he was a member in New York City, were not things apart from the partnership itself and hence were not taxable in Kentucky on the theory of "mobilia sequuntur personam" — that movables follow the person. Our opinion was based upon one written earlier that year (1936) by Chief Justice Hughes in Wheeling Steel Corporation v. Fox, 298 U.S. 193, 56 S.Ct. 773, 80 L.Ed 1143, in which the Supreme Court applied the same rule to intangibles having a business situs in a State which governed the taxation of tangible personal property and real estate located in a State — that there was no jurisdiction to tax unless the property was in the taxing State, and the usual rule governing intangibles — that they follow the person — was not applicable where the intangibles clearly had a business situs outside the taxing State.
City of Louisville v. Tatum, Embry Co., 111 Ky. 747, 64 S.W. 836. More recently this principle was recognized in Commonwealth v. Madden's Ex'r, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379, where we held that the assets of a partnership "localized" in New York were not taxable in Kentucky where one of the partners resided. In the absence of an established place of business, perhaps the partners could properly designate McLean County, where the original business was organized, as the legal residence of the partnerships for taxation purposes.
But the court, speaking again through a majority, is not willing to extend the doubtful construction reached in the Hikes case, that the property was not subject to assessment for ad valorem taxation, even to cover the close distinction. The property right of Mrs. Helm must, therefore, be deemed subject to ad valorem taxation even as was similar rights in the analogous cases cited, and in Commonwealth v. Madden's Executor, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379, in which general deposits of a citizen of Kentucky in a New York bank was held to be taxable here. The reasoning of that opinion on the point in every respect justifies and requires this decision.
The rule in this jurisdiction is that intangibles such as notes, accounts receivable, bonds and other like securities owned by a non-resident, which are not just temporarily brought into the State but are being held here by a fiduciary or other agent, who controls, manages and invests them in the owner's business in Kentucky so that they become an integral part thereof, acquire a location or situs in this State for business purposes and are taxable. Higgins v. Com., 126 Ky. 211, 103 S.W. 306; Com. v. R. G. Dun Co., 126 Ky. 108, 102 S.W. 8597 10 L.R.A. N. S., 920; City of Henderson v. Barret's Ex'r, 152 Ky. 648, 153 S.W. 992; Com. v. Madden Ex'r, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379. But if such intangibles are only temporarily in this State in the agent's or fiduciary's possession and he does not use them in the owner's business in Kentucky and has no control over them except to forward the intangibles to the owner within a reasonable time or in the ordinary course of business, then such intangibles do not become ail integral part of the owner's business and are not localized in Kentucky and are not taxable.
In American Barge Line Co. v. Board of Sup'rs of Tax of Jefferson County, 246 Ky. 573, 55 S.W.2d 416, it was held that neither the tangible nor intangible personal property of the foreign corporation had acquired a business situs in Kentucky. In Commonwealth v. Madden's Ex'r, 265 Ky. 684, 97 S.W.2d 561, 107 A.L.R. 1379, Madden, a resident of Kentucky, was a member of a partnership engaged in business in New York. It was held that his interest in the partnership was not a thing apart from the partnership itself, and that the intangible personal property of the partnership was taxable in New York. The 1908 amendment to Section 4020 was not referred to in any of the foregoing cases, but in each case the decision was in harmony with our construction of the statute.