1. Shares of stock in the national banks are personal property,
and though they are a species of personal property which, in one
sense, is intangible and incorporeal, the law which created them
could separate them from the person of their owner for the purpose
of taxation, and give them a sites of their own.
2. The forty-first section of the National Banking Act of June
3, 1864 -- which in effect provided that all shares in such banks
held by any person or body corporate may be included in the
valuation of the personal property of such person or corporation in
the assessment of taxes imposed
Page 86 U. S. 491
under state authority at the place where the bank is located,
and not elsewhere -- did this.
3. This provision of the National Banking Act became a law of
the property, and every state within which a national bank was
afterwards located acquired jurisdiction, for the purposes of
taxation, of all the shareholders of the bank, both resident and
nonresident, and of all its shares, and power to legislate
accordingly.
4. Nothing in Article IX in the Constitution of Illinois of
1848, and which was still existing in 1867, prevented the
legislature of the state from providing for the taxation of the
owners of shares of the capital stock of a national bank in that
state at the place within the state where the bank was located,
without regard to their places of residence.
5. The act of the said legislature passed June 13, 1867, so
providing, was valid under the said constitution.
Appeal from the Circuit Court for the Northern District of
Illinois in which court the Merchants' National Bank of Chicago --
a bank incorporated under the "Act to provide a National currency,"
&c., approved June 3, 1864, [
Footnote 1] and having its banking house and carrying on
its operations of discount and deposit in the Town of
South
Chicago, Cook County, Illinois -- filed a bill against one
Tappan, collector of county and municipal taxes
in the said
Town of South Chicago, Cook County, to enjoin his collection
of such taxes upon
any of the shares of stock in the said
bank assessed under a statute of Illinois passed June 13, 1867.
Some shares of the bank were held by persons resident in the
said Town of South Chicago, Cook County, where, as already said,
the bank itself was situated and where Tappan, the collector of
taxes for that town, resided, but many were held by persons who,
though residing in Illinois, did not reside in the Town of South
Chicago or in the County of Cook at all, but resided out of both,
and many were held by persons who did not reside in the State of
Illinois at all, but resided in other states altogether.
The grounds upon which the bill was filed were apparently that
under the Constitution of Illinois, the taxes were not validly laid
on the residents of the state who resided out of the Town of South
Chicago and out of the County of Cook;
Page 86 U. S. 492
that therefore, under that constitution, which required
uniformity of taxation in respect to persons and property within
the jurisdiction of the body imposing the same, there were no taxes
laid on the shares of any persons resident in the Town of South
Chicago or in the county of Cook, and of course therefore no taxes
on any shareholders resident anywhere in Illinois, and as the Act
of Congress authorizing a taxation by the state of shares in the
national banks owned by persons who were not residents of such
state declared that there should be no tax imposed
on them
which was not imposed on residents of the state, there was no tax
laid on any shareholders anywhere.
The whole matter, it is thus obvious, turned upon the validity
of the tax laid under the state act of June 13, 1867, upon the
shares of residents of Illinois who resided out of Cook County and
out of the Town of South Chicago.
The case, as respected the Constitution of Illinois, the state
act of June 13, 1867, laying the tax, and the provisions of the
National Banking Act, or, to call it by its title, the "Act to
provide a National Currency," &c., was thus:
The Constitution of Illinois (adopted A.D. 1848) ordains:
"
ARTICLE IX"
"SECTION 2. The general assembly shall provide for levying a tax
by valuation, so that every person and corporation shall pay a tax
in proportion to the value of his or her property, such value to be
ascertained by some person or persons to be elected or appointed in
such manner as the general assembly shall direct and not
otherwise."
"SECTION 5. The corporate authorities of counties, townships,
school districts, cities, towns, and villages, may be vested with
power to assess and collect taxes for corporate purposes, such
taxes to be
uniform in respect to persons and property,
within the jurisdiction of the body imposing the same. And the
general assembly shall require that all the property within the
limits of municipal corporations, belonging to individuals, shall
be taxed for the payment of debts contracted under authority of
law."
This provision of fundamental law being in force in
Illinois,
Page 86 U. S. 493
Congress passed, June 3, 1864, the "Act to provide a National
currency," [
Footnote 2] already
mentioned. This act, after providing for the formation of
associations for the purpose of banking, declares:
"SECTION 12. The capital stock of any association formed under
this act shall be divided into shares of $100 each, and be deemed
personal property and transferable on the books of the
association."
"SECTION 40. The president and cashier of every association
shall cause to be kept at all times a full and correct list of the
names and residences of all the shareholders in the
association and the number of shares held by each, . . . and
such list shall be subject to the inspection of
all the
officers authorized to assess taxes under state
authority."
"SECTION 41. Nothing in this act shall be construed to prevent
all the shares in any of the said associations held by any person
or body corporate from being included in the valuation of the
personal property of such person or corporation in the assessment
of taxes imposed by or under state authority,
at the place
where such bank is located and not elsewhere, but not at a
greater rate than is assessed upon other moneyed capital in the
hands of individual citizens of such state."
Subsequently to the passage by Congress of this National Banking
Act, the State of Illinois passed the Act of June 13, 1867, under
which the tax now resisted was laid.
It enacted:
"No tax shall be assessed upon the capital of any bank or any
banking association organized under the authority of this state or
organized under the authority of the United States and located
within this state."
"But the
stockholders in such banks or banking
associations
shall be assessed and taxed on the value of
their shares of stock therein in the county, town, or district
where such bank or banking association is located, and not
elsewhere,
whether such stockholder reside in such town,
county, or district or not, but not at any greater rate than
is or may be assessed upon other moneyed capital in the hands of
individuals in this state. "
Page 86 U. S. 494
Before the passage of the act just above quoted, question had
arisen as to the meaning in the forty-first section of the National
Banking Act of the words "at the place where the bank is located."
Some courts, like those of Maine, supposed that Congress meant that
the shares should be assessed in and for the benefit of the taxing
district. [
Footnote 3] Other
courts, like those of Pennsylvania and Massachusetts, [
Footnote 4] were of a different
opinion, holding that the expression meant the state and not the
taxing district. Accordingly Congress, by an Act of February 10,
1868, enacted: [
Footnote 5]
"That the words
'place where the bank is located and not
elsewhere' in section 41 of the 'Act to provide a National
currency,' approved June 3, 1864, shall be construed to mean
'the state within which the bank is located.' And the
legislature of each state may determine and direct
the manner
and place of taxing all the shares of national banks located
within said state, subject to the restriction 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
provided always that the shares of any national bank owned by
nonresidents of any state
shall be taxed in the city or town
where said bank is located, and not elsewhere."
The bill filed by the bank, after setting out the facts of
nonresidence &c., already stated, and the violation of the
Constitution in levying the tax complained of, and a threat of the
collector to sell the stock of the bank if the taxes claimed were
not paid, alleged, by way of giving a jurisdiction in equity, that
the shareholders refused to pay the taxes and forbade the payment
of them by the bank, and threatened a multiplicity of suits against
the bank in case it paid them or in case it deducted the amount
thereof from any dividends upon the stock; that if the collector
sold the stock, irreparable damage would be done to the
stockholders; that the bank was the trustee of its stockholders,
and as such
Page 86 U. S. 495
entitled to protect their interests; and that a sale of their
stock would prejudice the bank in the public mind and work damage
to it incapable of remedy at law.
The court below on demurrer to the bill for want of equity --
disregarding the technical objection (for which
Dows v. City of
Chicago [
Footnote 6] was
cited as authority), that the bank had no power to interfere in the
way in which it had done, in behalf of its stockholders -- and
considering that the law of Illinois laying the tax was in
violation of its constitution, decreed an injunction. From that
decree this appeal was taken.
Page 86 U. S. 499
THE CHIEF JUSTICE delivered the opinion of the Court.
We are called upon in this case to determine whether the General
Assembly of the State of Illinois could, in 1867, provide for the
taxation of the owners of shares of the capital stock of a national
bank in that state at the place, within the state where the bank
was located, without regard to their places of residence. The
statute of Illinois under the authority of which the taxes
complained of were assessed was passed before the Act of Congress
approved February 10, 1868, [
Footnote 7] which gave a legislative construction to the
words, "place where the bank is located, and not elsewhere," as
used in section forty-one of the National Banking Act, [
Footnote 8] and permitted the state to
determine and direct the manner and place of taxing resident
shareholders, but provided that nonresidents should be taxed only
in the city or town where the bank was located.
The power of taxation by any state is limited to persons,
property, or business within its jurisdiction. [
Footnote 9] Personal property, in the absence of
any law to the contrary, follows the person of the owner, and has
its situs at his domicile. But for the purposes of taxation, it may
be separated from him and he may be taxed on its account at the
place where it is actually located. These are familiar principles,
and have been often acted upon in this Court and in the courts of
Illinois. If the state has actual jurisdiction of the person of the
owner, it operates directly upon him. If he is absent and it has
jurisdiction of his property, it operates upon him through his
property.
Shares of stock in national banks are personal property. They
are made so in express terms by the act of Congress under which
such banks are organized. [
Footnote 10] They are a species of personal property
which is, in one sense, intangible and incorporeal, but the law
which creates them may separate
Page 86 U. S. 500
them from the person of their owner for the purposes of
taxation, and give them a situs of their own. This has been done.
By section forty-one of the National Banking Act, it is in effect
provided that all shares in such banks, held by any person or body
corporate, may be included in the valuation of the personal
property of such person or corporation in the assessment of taxes
imposed under state authority, at the place where the bank is
located, and not elsewhere. [
Footnote 11] This is a law of the property. Every owner
takes the property subject to this power of taxation under state
authority, and every nonresident, by becoming an owner, voluntarily
submits himself to the jurisdiction of the state in which the bank
is established for all the purposes of taxation on account of his
ownership. His money invested in the shares is withdrawn from
taxation under the authority of the state in which he resides and
submitted to the taxing power of the state where, in contemplation
of the law, his investment is located. The state, therefore, within
which a national bank is situated has jurisdiction, for the
purposes of taxation, of all the shareholders of the bank, both
resident and nonresident, and of all its shares, and may legislate
accordingly.
The State of Illinois thus having had, in 1867, the right to tax
all the shareholders of national banks in that state on account of
their shares, it remains to consider at what place or places within
the state such taxes could be assessed.
It is conceded that it was within the power of the state to tax
the shares of nonresident shareholders at the place where the bank
was located, but it is claimed that under the constitution of the
state, resident shareholders could only be taxed at the places of
their residence. We have not been referred to any express provision
of the constitution to that effect. There is nothing which in terms
prohibits the general assembly from separating personal property
within the state from the person of the owner and locating it at
appropriate places for the purposes of taxation, but it
Page 86 U. S. 501
is insisted that sections two and five of Article 9 of the
Constitution of 1848, which was in force when the Act of 1867 was
passed, contain an implied prohibition.
Section two directs that
"The general assembly shall provide for levying a tax by
valuation, so that every person or corporation shall pay a tax in
proportion to the value of his or her property, such value to be
ascertained by some person or persons to be elected or appointed in
such manner as the general assembly shall direct, and not
otherwise."
Section five directs that
"The corporate authorities of counties, townships, school
districts, cities, towns, and villages may be vested with power to
assess and collect taxes for corporate purposes, such taxes to be
uniform in respect to persons and property within the jurisdiction
of the body imposing the same. And the general assembly shall
require that all property within the limits of municipal
corporations belonging to individuals shall be taxed for the
payment of debts contracted under authority of law."
The corresponding provisions of the Constitution of 1870 are in
substance the same.
The object of these sections is to secure uniformity of
taxation. That, it is said in
Bureau Co. v. C.B. & Q. R.
Co., [
Footnote 12] is
to be regarded as the cardinal principle, the dominant idea of this
article of the constitution. But uniformity in this connection is
only another name for equality, for the provision is for "levying a
tax by valuation, so that every person and corporation shall pay a
tax in proportion to the value of his or her property." The value
of the property being ascertained, the same rate of taxation must
be laid upon all.
Property is made the constitutional basis of taxation. This is
not unreasonable. Governments are organized for the protection of
persons and property, and the expenses of the protection may very
properly be apportioned among the persons protected according to
the value of their property protected.
The constitution does not undertake to fix the value of
Page 86 U. S. 502
the property. Neither does it prescribe any rules by which it is
to be fixed. That is left to the general assembly, for the
provision in that respect is "such value to be ascertained by some
person or persons to be elected or appointed in such manner as the
general assembly shall direct, and not otherwise." The mode and
manner in which the persons appointed to make the valuation shall
proceed are left to the discretion of the general assembly. In
fact, the whole machinery of taxation must be contrived and put
into operation by the legislative department of the government.
As part of this machinery, taxation districts must be created.
All property within the district must be taxed by a uniform rate.
If property is actually within a district, it is but proper that
the legislature should provide that it should be listed, valued,
and assessed there. In fact, the last clause of section five,
Article 9, seems to make that a duty, for it provides that the
general assembly shall require that all property within the limits
of municipal corporations belonging to individuals shall be taxed
for the payment of debts contracted under authority of law.
This power of locating personal property for the purpose of
taxation without regard to the residence of the owner has been
often exercised in Illinois, and sustained by the courts. [
Footnote 13] Since the adoption of
the Constitution of 1870, which did not enlarge the powers of the
general assembly in this particular, very extended legislation has
been had with a view to such location. Thus, livestock and other
personal property used upon a farm must be listed and assessed
where the farm is situated; property in the hands of agents at the
place where the business of the agent is transacted; watercraft
where they are enrolled, or, if not enrolled, where they are kept,
the property of bankers, brokers, merchants, manufacturers, and
many other classes of persons specially enumerated, at the place
where their business is carried on. This became necessary in order
that the burdens of taxation might be equally distributed among
those who should bear them.
Page 86 U. S. 503
We do not understand the counsel for the appellee to dispute
this power where the property is tangible and capable of having, so
to speak, an actual situs of its own, but he claims that if it is
intangible, it cannot be separated from the person of its owner. It
must be borne in mind that all this property, intangible though it
may be, is within the state. That which belongs to nonresidents is
there by operation of law. That which belongs to residents is there
by reason of their residence. All the owners have submitted
themselves to the jurisdiction of the state, and they must obey its
will when kept within the limits of constitutional power.
The question is then presented whether the general assembly,
having complete jurisdiction over the person and the property,
could separate a bank share from the person of the owner for the
purposes of taxation. It has never been doubted that it was a
proper exercise of legislative power and discretion to separate the
interest of a partner in partnership property from his person for
that purpose, and to cause him to be taxed on its account at the
place where the business of the partnership was carried on. And
this too without reference to the character of the business or the
property. The partnership may have been formed for the purpose of
carrying on mercantile, banking, brokerage, or stock business. The
property may be tangible or intangible, goods on the shelf or debts
due for goods sold. The interest of the partner in all the property
is made taxable at the place where the business is located.
A share of bank stock may be in itself intangible, but it
represents that which is tangible. It represents money or property
invested in the capital stock of the bank. That capital is employed
in business by the bank, and the business is very likely carried on
at a place other than the residence of some of the shareholders.
The shareholder is protected in his person by the government at the
place where he resides, but his property in this stock is protected
at the place where the bank transacts his business. If he were a
partner in a private bank doing business at the same place,
Page 86 U. S. 504
he might be taxed there on account of his interest in the
partnership. It is not easy to see why, upon the same principle, he
may not be taxed there on account of his stock in an incorporated
bank. His business is there as much in the one case as in the
other. He requires for it the protection of the government there,
and it seems reasonable that he should be compelled to contribute
there to the expenses of maintaining that government. It certainly
cannot be an abuse of legislative discretion to require him to do
so. If it is not, the general assembly can rightfully locate his
shares there for the purpose of taxation.
But it is said to be a violation of the constitutional rule of
uniformity to compel the owner of a bank share to submit to
taxation for this part of his property at a place other than his
residence, because other residents are taxed for their personal
property where they reside. It is a sufficient answer to this
proposition to say that all persons owning the same kind of
property are taxed as he is taxed. Absolute equality in taxation
can never be attained. That system is the best which comes the
nearest to it. The same rules cannot be applied to the listing and
valuation of all kinds of property. Railroads, banks, partnerships,
manufacturing associations, telegraph companies, and each one of
the numerous other agencies of business which the inventions of the
age are constantly bringing into existence require different
machinery for the purposes of their taxation. The object should be
to place the burden so that it will bear as nearly as possible
equally upon all. For this purpose, different systems, adjusted
with reference to the valuation of different kinds of property, are
adopted. The courts permit this. Thus, in a case in Illinois
involving the system adopted for the taxation of bank shares, it
was said by the supreme court, [
Footnote 14]
"In view of this legislation, it must be apparent that a system
of taxation for bank shares was designed peculiar to itself and
independent of the general revenue laws of the state,"
and the authority of the law was sustained and enforced.
Page 86 U. S. 505
Again, it is said the law in question destroys the uniformity of
taxation, because it provides for the collection of the taxes
assessed on account of this kind of property in an unusual way. The
constitution does not require uniformity in the manner of
collection. Uniformity in the assessment is all it demands. When
assessed, the tax may be collected in the manner the law shall
provide, and this may be varied to suit the necessities of each
case.
Since the decree was rendered in the circuit court, the Supreme
Court of Illinois has passed upon this same question and declared
the law of 1867 to be constitutional. We might have contented
ourselves by acknowledging the authority of this decision, but we
are willing not only to acknowledge its authority but to admit its
correctness.
We have not felt called upon to consider whether the general
assembly could, under the provisions of the act of Congress,
provide for the taxation of shareholders at any other place within
the state than that in which the bank is located. It is sufficient
for the purposes of this case that it might tax them there.
Other questions have been discussed in the argument, and among
them one which relates to the power of the bank to interfere in
behalf of its stockholders in the manner which has been done. We
have not deemed it necessary to pass upon any of these questions,
as those already decided are conclusive of the case.
Decree reversed and the cause remanded with instructions to
proceed in conformity with this opinion.
[
Footnote 1]
13 Stat. at Large 99.
[
Footnote 2]
13 Stat. at Large 102.
[
Footnote 3]
Opinions of the Justices of the Supreme Court, 53 Me. 594.
[
Footnote 4]
Markoe v. Hartranft, 6 American Law Register, N.S. 490;
Austin v. Aldermen, 14 Allen 364.
[
Footnote 5]
15 Stat. at Large 34.
[
Footnote 6]
78 U. S. 11 Wall.
108
[
Footnote 7]
15 Stat. at Large 34.
[
Footnote 8]
13
id. 112.
[
Footnote 9]
82 U. S.
Pennsylvania), 15 Wall. 319.
[
Footnote 10]
13 Stat. at Large 102, § 12.
[
Footnote 11]
13 Stat. at Large 112.
[
Footnote 12]
44 Ill. 238.
[
Footnote 13]
City of Dunleith v. Reynolds, 53 Ill. 45.
[
Footnote 14]
McVeagh v. Chicago, 49 Ill. 329.
