RESPONDENT: Bartow County Board of Tax Assessors
LOCATION: New Mexico State Police Headquarters
DOCKET NO.: 83-1620
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Supreme Court of Georgia
CITATION: 470 US 583 (1985)
ARGUED: Oct 30, 1984
DECIDED: Mar 19, 1985
Alan I. Horowitz - on behalf of U.S. as amicus curiae
Charles T. Zink - on behalf of appellant
Grace E. Evans - for appellees
Grace P. Evans - on behalf of Appellees
Facts of the case
Media for First National Bank of Atlanta v. Bartow County Board of Tax Assessors
Audio Transcription for Oral Argument - October 30, 1984 in First National Bank of Atlanta v. Bartow County Board of Tax Assessors
Warren E. Burger:
We will hear arguments next in First National Bank of Atlanta against Bartow County Board.
Mr. Zink, you may proceed whenever you're ready.
Charles T. Zink:
Mr. Chief Justice, and may it please the Court:
This case involves a conflict between the state taxing law and a federal statute limiting state taxation.
Georgia had a bank share tax, which was measured by net worth.
The federal law revised at statutes, Section 3701, limits the state taxation in federal obligations.
The question before the Court is whether the taxing formula adopted by the Georgia Supreme Court considers or takes into account federal obligations in violation of Section 3701.
This case is making its second appearance before the courts.
In 1980, the bank deducted federal obligations from its net worth.
The Georgia Supreme Court denied any deduction for the obligations.
While that case was pending here, this Court decided the case of American Bank and Trust Company against Dallas County in 1983.
In American Bank, the Court decided that the amendment to Section 3701 that was enacted in 1959 required that there be a deduction of federal obligations.
Consequently, the Court remanded this case to the Georgia Supreme Court for reconsideration in the light of American Bank.
On remand, the bank urged the Georgia Supreme Court that it be permitted to take a complete exclusion of the federal obligations.
It urged that what the statute meant was that these be ignored and treated as nonexistent.
Instead, the Georgia Supreme Court construed the Georgia bank share tax to require only a proportionate deduction.
It devised a formula, and that is set forth on page 5 of our brief, whereby the percentage of federal obligations to total assets was determined.
And in the example given, that was 9.75 percent.
It then determined that only 9.75 percent of the bank's federal obligations were present in its net worth, and its formula would permit a deduction of only that amount, some $200,000.
Thus, the formula adopted by the Georgia Supreme Court had the effect of reducing the deductions for federal obligations by a factor of almost 10 from approximately $2 million to $200,000.
Because the taxing formula did not exclude or ignore federal obligations, but instead considered them and took them into account in the computation of the tax, the bank appealed the decision to this Court.
We feel the decision below should be reversed for at least three reasons.
The plain meaning of Section 3701 requires a complete and not a limited exclusion of federal obligations.
It requires that they be treated as nonexistent.
The legislative history of the statute shows that Congress intended for there to be a complete exclusion, and the rationale of the court below, if permitted to stand, would limit the protection for exempt obligations provided by the statute for all taxpayers and for all types of taxes in clear violation of the statute.
Now the language of Section 3701 reflects its purpose: to make federal obligations tax free as far as state taxes are concerned.
The idea is that an individual, a corporation, or a bank can purchase federal obligations and know that the purchase will not be affected by state taxes in any way.
The Georgia formula, by contrast, if there's a contribution of federal obligations to capital, or if a bank purchases federal obligations from earnings, the tax increases.
Now those consequences cannot be reconciled with the language of the statute.
In American Bank, the Court determined that the exemption contained in the statute as amended was sweeping.