LOCATION: Briarcrest Christian Academy
DOCKET NO.: 81-1613
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Tennessee Supreme Court
CITATION: 459 US 392 (1983)
ARGUED: Nov 29, 1982
DECIDED: Jan 24, 1983
Jimmy C. Creecy - on behalf of appellee, William M. Leech, Jr
J. Minor Tait, Jr. - on behalf of appellees Garner and Foster
K. Martin Worthy - on behalf of the Appellant
Facts of the case
Media for Memphis Bank & Trust Company v. GarnerAudio Transcription for Oral Argument - November 29, 1982 in Memphis Bank & Trust Company v. Garner
Audio Transcription for Opinion Announcement - January 24, 1983 in Memphis Bank & Trust Company v. Garner
In the other case, Memphis Bank & Trust Company is here on direct appeal from the Supreme Court of Tennessee.
The State of Tennessee imposed a tax on the net earnings of banks doing business within the state.
The bank tax defines net earnings to include income from obligations of the United States and its agencies but to exclude interest earned on the obligations of Tennessee and its political subdivisions.
The appellant, Memphis Bank & Trust Company brought a challenge in this Tennessee bank tax under 31 U.S.C. Section 742 and the Supremacy Clause.
742 makes the obligations of the United States immune from state and local taxation.
The Supreme Court of Tennessee held that the bank tax does not violate this provision because the bank tax falls within the exception for nondiscriminatory franchise taxes set forth in Section 742.
In an opinion filed today with the clerk, we hold that the Tennessee bank tax is "discriminatory" within the meaning of 742.
A state tax is discriminatory if it imposes a greater burden on holders of federal property than on the holders of similar state property.
The Tennessee bank tax discriminates in favor of securities issued by Tennessee and against federal obligations.
It does so by including in the tax base income from federal obligations while excluding income from comparable state and local obligations.
Accordingly, the judgment of the Supreme Court of Tennessee is reversed and the case is remanded for further proceedings not inconsistent with this opinion.
William J. Brennan, Jr.:
Thank you Justice Marshall.