An appeal was taken from the judgment of this court to the Supreme Court of the United States, and it was by that court reversed. NELSON, J., delivered the opinion of the court (2 Am. Law Reg. 614). He commences his opinion by saying that the question involved in this case is whether or not the stock of the United States, constituting a part of the whole of the capital stock of a bank organized under the banking laws of New York, is subject to state taxation. The capital of the bank is taxed under existing laws in that state upon a valuation like the property of individual citizens, and not as formerly, on the amount of the nominal capital, without regard to loss or depreciation. According to that system of taxation it was immaterial as to the character or description of property which constituted the capital, as the tax imposed was wholly irrespective of it. The tax was like one annexed to the franchise as a royalty for the grant. But since the change of this system it is agreed the tax is upon the property constituting the capital. This stock, then, is held by the bank the same as such stocks are held by individuals, and alike subject to taxation or exemption by state authority."

After stating the grounds upon which it was sought to distinguish the case before him from Norton vs. The City Council of Charleston, 2 Peters 449, the learned judge proceeds: "It will be seen, therefore, that the distinction claimed rests upon a limitation of the exercise of the taxing power of the state; that if the tax is imposed indiscriminately upon all the property of the individual or corporation, the stock may be included in the valuation; if not, it must be excluded or cannot be reached."

The reason why the states may not tax the stocks of the federal government, is, that it is a tax upon the exercise of the power of Congress to borrow money on the credit of the United States, and the exercise of such power is interfered with to the extent of the tax imposed. The tax was declared to be a violation, not of an act of Congress merely, but of the Constitution of the United States, and therefore void.

It will be remembered that the tax thus declared void by the

federal court was assessed under the act of 1857, upon the capital stock of the corporation at its actual value.

These propositions must be deemed to be decided by the case of the People vs. The Commissioners of Taxes.

1st. That a tax on the capital stock of a corporation at its actual value is a tax on the property actually owned by the corporation at the time the tax is assessed.

2d. That when such property consists in whole or in part of the stock of the United States, it is exempt from taxation; and

3d. A tax on such stocks, being the property of a corporation, is unconstitutional and void.

After the reversal of the judgment of this court by the Supreme Court of the United States, and in 1863, the legislature of this state passed an act entitled "An act in relation to the taxation of moneyed corporations." See chapter 240. of the Laws of 1863.

By the first section of that act it is provided that all banks and banking associations, and other moneyed corporations and associations shall be liable to taxation on a valuation equal to the amount of their capital stock paid in or secured to be paid in, and their surplus earnings less 10 per cent. of such surplus in the manner now provided by law, deducting the value of the real estate held by such corporation or association and taxable as real estate."

Banks from and after the passage of said act are liable to taxation on a valuation equal to the amount of their capital stock paid in. A valuation of what? Of its property? If so then the stocks of the United States owned by the bank are, under the decision of the federal court above cited, taxed in manifest disregard of that decision.

If the valuation contemplated by the act is of the stock of the bank, the case is still within the one cited, for in that case the assessment was on the capital stock at its actual value.

If there is to be a valuation, it must be a valuation of property of some sort, and if it is of neither the capital nor property of the corporation, I am unable to understand what the subject of valuation is that is intended by the act referred to.

It is said that the words "shall be liable to taxation on a valuation," are wholly unmeaning, that the act of 1863 is to be read as if no such words were in it, and that the intention of the legislature was to restore the provisions of the Revised Statutes of 1830; the act of 1857 introducing, as it is said, a new rule of taxation.

Whoever will refer to the reports of the Comptroller since 1830, will find repeated complaints against the injustice of the rule of taxation prescribed by the Revised Statutes. It was found that under them corporations were sometimes taxed upon the full amount of their capital when the largest part of it had been lost, and when, so far from deriving a profit from their capital they were running in debt.

The courts had held that if a corporation was in the receipt of any income from it, it was liable to be assessed on its whole capital, although one-half or two-thirds might have been lost by the vicissitudes of business. Bank of Utica vs. City of Utica, 4 Paige 399; Farmers' Loan and Trust Co. vs. The Mayor, &c., of New York, 7 Hill, 261.

It was to remedy this injustice that the act of 1857 was passed, whereby the actual instead of the nominal value of the capital stock was adopted as the measure of taxation.

Although the act of 1863 does not declare what is the subject of valuation, the doubt, if any, is removed by reference to other provisions of the statutes relating to taxation. By § 1, title 1, chapter 13, part 1st of the Revised Statutes, all lands and all per

sonal estate within this state are declared liable to taxation.

Section 3 of the same chapter declares that the terms "personal estate" and "personal property" whenever they occur in said chapter, shall be construed to include all household furniture, &c., stocks in moneyed corportions. "They shall also be construed to include such portions of the capital of incorporated companies liable to taxation on their capital as shall not be invested in real estate." It was property that the legislature intended to tax, and that property was, first, the real estate of the corporation, and second, its stock, at a valuation equal to the amount paid in or secured to be paid, less the amount paid for its real estate and stock held

by certain corporations. This was the measure of valuation of what the legislature had just declared to be the personal estate of the corporation.

The valuation is to be made from year to year, and it must necessarily be of the stock, at the time when each assessment is made, and it is none the less a valuation because the statute instead of the assessors ascertains and fixes the value. For these reasons I do not think it was the intention to revive the system of taxation introduced by the Revised Statutes. The measure of valuation only was revived.

But assuming that the act of 1863 is to be taken to be a restoration of the system of taxation under the Revised Statutes, I still deny that the tax is not assessed upon the property of the corporation. We have first the general provisions of the tax laws that real and personal property is the subject of taxation. This excludes the idea that franchises are the things to be assessed and taxed. Next we have the residue of the capital stock of corporations after deducting the cost of their real estate, declared to be personal property within the intent and meaning of the same law. In view of these provisions it cannot be said that it was the inten tion of the legislature to tax some ideal thing, existing only in the imagination, and disregard wholly the provisions to which I have just referred.

I have shown that before 1823 the property owned by corpora tions was taxed in the same way and to the same extent as that of persons. The act of 1823 recognized and adopted that method of taxation. The Revised Statutes required the taxation to be upon the capital, declaring so much of that capital to be personal estate as remained after deducting the sum paid for real estate. The reasons for this change are obvious. When a corporation was organized, the amount of its capital stock paid in was taken from the individual corporator and transferred to the corporation. This amount, unless subjected to assessment against the corporation, would be relieved from taxation altogether, and thus injustice done to other taxpayers of the state. If the tax was assessed directly on the property of the corporation as it existed when the

assessment came to be made, the debts of the company must be deducted and inquiry made into the profits or losses in its business. Such inquiries would involve assessors in great difficulties, and instead, therefore, of assessing the items of property owned by the corporation, its stock is made the subject of assessment.

It will be seen by reference to the provisions of the Revised Statutes above cited, that a distinction is made in the measure of assessment between manufacturing and turnpike corporations and other incorporated companies. Manufacturing and turnpike corporations are, like all other corporations, required to be assessed on their capital, but it is on the capital at its cash value in the market. Moneyed corporations were required to be assessed on the amount of capital paid in or secured to be paid in, after making certain specified deductions.

Both classes of corporations were taxed on capital, but that capital was not measured by the same standard of valuation. In the one case it was the actual cash value, in the other the amount paid in without regard to its value or the profits made or losses sustained by the corporation.

The act of 1857 adapted and applied to all moneyed corporations the provisions of the Revised Statutes in relation to manufacturing and turnpike corporations, which required the assessment to be made on the actual value.

Is the subject of taxation changed because the measure of valuation is altered? If the property of a corporation is actually assessed when its stock is entered in the assessment roll at its cash value, is not the same property taxed when its stock is valued at the amount originally paid or secured to be paid in? If the assessors found the value of the stock of a manufacturing company to be equal to the amount originally paid in, and the assessment on that basis is, in fact, a tax on the property then owned by the corporation under the decision of the federal court in the case of the Bank of Commerce, cited supra, a tax on the capital of a bank at its par value is also an assessment on its property within the same decision. It seems to me impossible to distinguish the

cases.