Farmers & Mechanics Savings Bank v. Minnesota, 232 U.S. 516 (1914)
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Farmers and Mechanics Savings Bank
of Minneapolis v. Minnesota
No. 39
Argued May 8, 1913
Decided February 24, 1914
232 U.S. 516
ERROR TO THE SUPREME COURT
OF THE STATE OF MINNESOTA
Syllabus
A question, though novel itself, may be solved by the application of principles long established.
The entire independence of the general government from any control by the respective states is fundamental, and states may not tax agencies of the federal government. M’Culloch v. Maryland, 4 Wheat. 316.
Territories are instrumentalities established by Congress for the government of the people within their respective borders, with authority to sub-delegate the governmental power to the municipal corporations therein, and the latter are therefore instrumentalities of the federal government.
A tax upon the exercise of the function of issuing bonds is a tax upon the operations of the municipal government, and to tax the bonds as property in the hands of the holder is in effect a tax upon the right of the municipality to issue them.
A tax to any extent on bonds issued by a government or subdivision thereof, however inconsiderable, is a burden on the operation of that government. If allowed at all, it may be carried to an extent which shall entirely arrest such operations. M’Culloch v. Maryland, 4 Wheat. 316.
A state may not tax bonds issued by a municipality of a Territory of the United States. And so held as to an attempt by the State of Minnesota to tax bonds issued by municipalities of the Indian Territory and the Territory of Oklahoma held by corporations in Minnesota.
There is no provision of law that makes obligations of municipalities within the Indian Territory or the Territory of Oklahoma obligations of the Territory, nor were such obligations assumed by the State of Oklahoma on admission to statehood.
Exemption from taxation is a material element in the obligation of a bond issued by a municipality, and it will not be presumed that Congress would enact legislation that would impair that obligation by eliminating the exemption without the clearest legislative language expressing it.
Where bonds are exempted from state taxation under the federal Constitution, they cannot be included as assets in ascertaining the surplus of the corporation owning them for the purpose of imposing a state property tax thereon.
When a state statute is attacked as denying equal protection of the law by one class of those excepted from its benefits, the question of constitutionality can be confined to the particular class attacking it, and if there is reasonable ground for the classification as to that class, it will be upheld to that extent, without inquiring whether it is constitutional as to the other classes affected by it.
A provision in a state tax statute excepting from an exemption banks, savings banks, and trust companies is not unconstitutional under the Fourteenth Amendment as discriminating against savings banks as a class and denying them the equal protection of the law. The state court having held that there were reasonable grounds for the classification, this Court so holds in regard to the statute of Minnesota involved in this action.
114 Minn. 95 reversed in part.
The facts, which involve the constitutionality of certain tax statutes of Minnesota as applied to bonds issued by municipalities in Indian Territory and the Territory of Oklahoma, are stated in the opinion.