RESPONDENT: Dallas County
LOCATION: Internal Revenue Service
DOCKET NO.: 81-1717
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: State appellate court
CITATION: 463 US 855 (1983)
ARGUED: Mar 29, 1983
DECIDED: Jul 05, 1983
Carroll R. Graham - on behalf of the Respondents
Ernest J. Brown - on behalf of the United States as amicus curiae
Earl Luna - on behalf of Respondents
Marvin S. Sloman - on behalf of the Petitioners
Facts of the case
Media for American Bank & Trust Company v. Dallas County
Audio Transcription for Oral Argument - March 29, 1983 in American Bank & Trust Company v. Dallas County
Warren E. Burger:
We will hear arguments next in American Bank and Trust Company against Dallas County.
Mr. Sloman, I think you may proceed whenever you're ready.
Marvin S. Sloman:
Mr. Chief Justice and may it please the Court:
This case involves a state property tax on the shares of state and national banks, authorized by Texas statute but imposed and calculated by local taxing authorities.
In the case before the Court the banks have paid the taxes as agents for the shareholders and they and the shareholders seek to have the tax assessment declared to be in violation of Revised Statutes Section 3701 as amended in 1959 to prohibit every form of taxation that considers United States obligations in the computation of the tax.
The Respondents calculated the taxable value of the shares of each bank according to the bank's net worth.
That is, as the court below put it at Appendix page 183, by taking the total assets of the bank other than real estate, which is taxed separately to the bank itself, and deducting the bank's liabilities, to come up with a net worth or equity capital or a number of names as it's known on call statements, financial statements or the taxing authorities, but in an accounting sense it is the net worth, the assets less the liabilities other than real estate.
Now, among those assets were various amounts of United States obligations that went into that net worth that was used to determine the taxable value of the shares.
Petitioners contend that Respondents thereby 3701.
Thus, at the center of the case is the effect of the word "considered" as used in that statute.
The word is given no special definition in the statute.
Now, of course the word "consider" can be used in two senses: One, which is the sense relied on by Respondents, and they repeatedly refer to the state of mind of the tax assessors, refers to a subjective state or a mental process inside the mind.
"In my considered judgment" or
"This Court considers a case for decision. "
But that sense of the word cannot be involved here because the word as used in the statute is addressed to and defines a prohibited form of taxation, which is incapable of a mental process.
Another sense of the word "considers" deals with an objective state of facts, which the statute itself purports to do, as reflected in the dictionary definition of "to take into account".
The general law of relativity considers the effect of gravity on light or takes into account the effect of gravity.
This is the meaning that makes sense in the context of Section 3701, so that, substituting the dictionary objective meaning, the statute prohibits every form of taxation that takes into account United States obligations in the computation of the tax.
And this is the sense in which this Court and the Texas courts and other authorities have described the computation of a share tax measured by net assets that included United States obligations.
For example, in Des Moines National Bank against Fairweather, cited in our brief, this Court was dealing with a share tax that was computed just exactly like the one at bar.
That is, assets, which included United States obligations, less liabilities resulted in a net worth that was the basis, the base for the tax.
At that time Section 3701 was in the form before the 1959 amendment and only prohibited taxes upon United States obligations and not those which considered United States obligations, and the Court upheld the tax without a deduction for United States obligations on the familiar distinction that a tax upon a shareholder's interest is not a tax upon the corporation or the corporation's assets, even though, as this Court said in describing the tax there, "controlling consideration" is given to those assets in the computation of the tax.
The Court in its holding said Section 3701 left no authority for taxing a United States obligation to the bank, to the bank itself,
"but only for taking it into account in valuing the shares of the stockholders. "
So that this Court in its description of this very kind of tax recognized that the tax considers United States obligations, takes them into account, but under the former form of the statute that was permissible because the tax was only upon United States obligations, whereas since the 1959 amendment taxes are prohibited, every form of tax that considers those obligations.
We cite in our brief at page 14 Texas authorities that have used similar language and a similar approach in describing the very share tax that's before this Court.
The assessment in the present cases take into account the bank's assets which include United States obligations and therefore come squarely under the statutory prohibition against considering United States obligations in the computation of the tax.
Respondents, however, would read an implied exception into the prohibition of the statute in spite of its apparent application.
But any implied exceptions are foreclosed by two specific exemptions that the 1959 amendment itself provided from its expanded prohibition.
Under the pre-1959 version of Section 3701, when only taxes upon United States obligations were prohibited, this Court had upheld share taxes, as in Des Moines against Fairweather and other cases, and it had upheld franchise taxes, and it had upheld death taxes or succession taxes, where the tax was measured by assets that included United States obligations.