THE PEOPLE, ex rel. The Bank of Commerce of New York, VS. THE COMMISSIONERS OF TAXES AND ASSESSMENTS FOR THE CITY AND COUNTY OF NEW YORK. The act of the legislature relative to the taxation of moneyed corporations and associations, passed April 29, 1863, should be construed as though it read "All banks, &c. shall be liable to taxation on a valuation of their capital stock, equal to the amount of their capital stock paid in, or secured to be paid in," &c.; that is on the amount of their capital stock paid in, or secured to be paid in. The legislature, by that act, intended to return to the principle of the revised statutes as to taxing corporations, which was, of taxing them to an amount, or for a sum equal to the amount of their capital stock paid in and secured to be paid in, without regard to its actual value or investment. Accordingly held that a bank was properly assessed on the whole amount of its capital stock, after deducting therefrom a certain amount for the cost of its real estate, and stock held by literary and charitable institutions ; although the affidavit of the cashier was produced to the commissioners, stating that the bank then held and owned, and held and owned on the 12th day of January, 1863, stocks, bonds and other securities of the United States, to an amount exceeding its entire capital; and that the total value of all its other personal estate did not exceed the amount of debts due from the bank. HE capital stock of the Bank of Commerce in the City of THE New York was $9,234,320. It was assessed, under the act of the legislature, of April 29, 1863, in relation to the taxation of moneyed corporations and associations, (Laws of 1863, p. 435,) on the whole amount of its capital stock, after deducting therefrom a certain amount for the cost of its real estate, and stock held by literary and charitable institutions, although the affidavit of the cashier of the bank was presented to the commissioners, stating that the bank then held and owned, and held and owned on the 12th day of January, 1863, stocks, bonds and other securities of the United States, to an amount exceeding its entire capital; and that the total value of all other personal estate of the said bank did not, on the 12th day of January, 1863, and did not then, exceed the amount of debts due from said bank. The proceedings of the commissioners were brought here for review, by certiorari, allowed under § 20 of the act of April 14, 1859, in relation The People v. Commissioners of Taxes and Assessments. to taxes and assessments in the city of New York. (Laws of 1859, ch. 302.) B. D. Silliman and Daniel Lord, for the relator. I. The act of 1863, ch. 240, relates solely to the taxation of banks and other moneyed corporations, and regulates the mode of such taxation. The subject matter of taxation is property. "All lands and all personal estate within this state, whether owned by individuals or corporations, shall be liable to taxation, subject to the exemptions hereinafter specified." (1R. S. 387, §1.) The "personal estate" to be taxed is defined by the statute, and declared to "include such portion of the capital of incorporated companies liable to taxation on their capital as shall not be invested in real estate." (Id. 388, § 3.) The statute specifies the property which shall be "subject to exemption" from such taxation, and enumerates, as thus exempt, "all property, real or personal, exempted from taxation under the constitution of the United States. (Id. 388, § 4.) II. The taxation intended by the act of 1863, is either on the franchise of the corporation or on its property. It must intend one or the other. If on its property, the relators are not subject to taxation, as their whole property is invested in stocks, bonds and other securities of the United States, which are exempt by law from taxation. (People ex rel. Bank of Commerce v. Tax Commissioners, Supreme Court of U. S. 1 R. S. 388, § 4.) We claim for the relators that the taxation intended is of property, and not of the franchise, nor as a bonus or license for the exercise of corporate privileges. III. The debt of the United States being, under the constitution, exempt from taxation by reason of its relation to the public service, it would imply an unworthy evasion on the part of the legislature to suppose an intent, by the act, to tax that debt with a knowledge of its immunity. Such immunity from taxation is the necessary privilege of the government as one of its means of public defense and safety. So The People v. Commissioners of Taxes and Assessments. long as that debt is part of the property forming the subject proposed for taxation, no mere mode of valuation can take away its immunity. That which the law forbids to be done directly cannot be done indirectly. This is familiar law, expressed in familiar maxims. IV. In construing the act of 1863, we have a safe guide in the rule that all such acts must be construed in conformity, and as auxiliary, to the paramount law. The language of the act certainly admits of such construction. V. There is no soundness in the proposition (urged as a reason for the construction claimed by the respondents) that the public revenue is wrongfully diminished by continuing to corporations the exemption claimed in regard to the public debt of the United States. Such exemption might with equal justice be denied to individuals. To the extent that corporations hold such debt, individuals do not hold it, but pay taxes on the property which they hold instead. If corporations did not hold it, individuals would, and would have exemption from taxes thereon, while the corporations would then pay the taxes on the property in which their investments would be made, in place of this debt. It makes no difference to the public revenue whether the exempted property is in the hands of the one class of holders or the other, or whether the taxes are received from the hands of the one or the other. The aggregate amount of exemption, and the aggregate amount of taxes received into the public treasury-the results are the same in either case. The reason why these corporations are taxed is not because they are corporations, but because the property of their owners is thus more conveniently and certainly reached. And this is the reason why those owners (the stockholders) are not taxed on so much of their property as is invested in the corporations. (1 R. S. 388, § 7.) They pay it through the corporation. VI. The act of 1863 changes the previous law only in directing the tax commissioners to assume an arbitrary amount for assessment in the case of banks and other moneyed corpo The People v. Commissioners of Taxes and Assessments. tions, to the extent of their original capital, and estops them from denying the ownership of property to the amount of their original capitals. It has regard merely to the artificial or statutory valuation of subjects liable to taxation, and cuts off allowances for the depreciation of taxable property below its original cost as an investment, but it has no reference to subjects not capable of taxation. It does not declare or intimate any repeal of the law exempting such subjects. As to the surplus profits the question of amount is left as open as in the case of any other property. VII. All taxation is, and has always been, on a "valuation" of property. This act therefore prescribes no new basis of taxation by merely requiring assessments on "valuations." VIII. Under the original provisions of the statute, (1 R. S. 414, §§ 1 to 6,) taxes were imposed on the corporation on the amount of its capital, (less the cost of its real estate,) whether that capital had been impaired by losses or increased by aggregated profits. (Bank of Utica v. City of Utica, 4 Paige, 399. People v. Supervisors of Niagara, 4 Hill, 20.) The act of 1853 (ch. 654) added surplus profits as subjects of taxation. The act of 1857 (ch. 456) diminished the amount of taxes in proportion to the diminished value of the corporate property, when such diminution had occurred. The act of 1863 merely re-establishes the basis of taxation as it stood prior to the act of 1857. The act of 1863 harmonizes with the other provisions of the general tax laws only on the construction that it intends the valuation of property and the taxation of property. IX. It is claimed by the respondents that under the act of 1863, the corporations themselves are the subject of taxation, and not the property owned by them at the time the assessment is made. This proposition has been virtually passed upon by the court of appeals in People v. The Tax Commissioners, (23 N. Y. Rep. 192,) where a majority of the court expressed the opinion that it was untenable. The construction claimed by the respondents is inconsistent VOL. XL. 22 The People v. Commissioners of Taxes and Assessments. and irreconcilable with the whole plan and policy on which our tax system is founded and administered. (a.) If the act of 1863 intends a tax, not on property but on the corporation or its franchise, it subjects it to twice the amount of taxes heretofore exacted, inasmuch as the express provision that its property shall be taxed, (1 R. S, 387, § 1; Id. 388, § 3,) is not repealed. It is liable, therefore, to pay that tax on its property, and also the further tax now claimed by respondents, under the act of 1863, on its franchise. (b.) If the tax, by the act of 1863, is on the corporation or its franchise, and the corporation is not also required to pay the tax on its property, then such property escapes taxation altogether. The owners of the bank (the stockholders) do not pay taxes on it, for they are expressly relieved from such payment. (1 R. S. 388, § 7.) It is only because the bank pays the tax that the statute excuses the stockholders from doing so. (c.) The respondents themselves have given to the act of 1863 the construction claimed by the relators. Their whole assessment is, in fact, of the property of the bank. They deduct from the personal estate, " for literary and charitable institutions, $21,000." Why this deduction? Simply because the act requires the assessment to be made "in the manner пого required by law," and the general provision of the statute (1 R. S. 388, § 4) declares such exemption, but it equally declares the exemption of "all property, real or personal, exempted from taxation *** under the constitution of the United States." (1 R. S. 388, § 4.) X. Had the legislature intended so radical a change of our tax system as either double taxation of moneyed corporations, or the absolute relief of the property from taxation, and the substitution of a license fee, or franchise tax, it would have distinctly declared such intent, and would have modified the assessment laws accordingly. But there is nothing in the language of the act of 1863, declaring or fairly indicating such intent. On the contrary, the subject is distinctly treated as that of taxation—and that taxation, like all other taxa |