This is an appeal under § 237 of the Judicial Code, 28 U.S.C.A. § 344, from a judgment of the Supreme Court of Oklahoma, denying recovery of taxes alleged to have been exacted from appellant, a national banking corporation, in violation of the provisions of R.S. § 5219, 12 U.S.C.A. § 548, and the Constitution of the United States.
Section 16 of the Oklahoma Income Tax Law of 1935, S.L.1935, c. 66, art. 6, 68 Okl.St.Ann. § 887, lays a tax upon every national banking association located or doing business within the state 'according to, or measured by, its net income' at the rate of six per centum. Section 17, 68 Okl.St.Ann. § 888, provides for a similar tax upon state banks and Morris Plan Companies.
The net income used as the measure of the tax under §§ 16 and 17 is determined by subtracting from gross income, as defined in § 18, certain deductions allowed by § 9, 68 Okl.St.Ann. §§ 880, 889. Section 18 defines gross income for the purposes of 'national banking associations, state banks, trust companies and other financial corporations' (§ 8(c), 68 Okl.St.Ann. § 878(c)). It specifically includes in gross income 'interest upon the obligations of the United States, or its possessions, or upon securities issued under the authority of an Act of Congress, the income from which is tax free.'
All other types of corporations are taxed at the flat rate of six per centum upon the net income allocable to business transacted within the state (§ 6, 68 Okl.St.Ann. § 876). Net income for this purpose is determined by making certain specified deductions from gross income (§§ 7, 9, 68 Okl.St.Ann. §§ 877, 880), which is defined expressly so as to exclude interest on taximmune federal securities (§ 8(b)(4)).
The appellee Oklahoma Tax Commission, in assessing appellant's tax for the year 1936 under § 16, included in gross income the dividends received by appellant on stock owned by it in a federal reserve bank and the interest received on bonds and notes issued pursuant to acts of Congress declaring the income from such securities tax exempt. The present suit was brought by appellant to recover that portion of the tax, paid under protest, which resulted from including such dividends and interest in the computation.
R.S. § 5219, 12 U.S.C. § 548, 12 U.S.C.A. § 548, copied in the margin, authorizes four alternative methods whereby a state may impose a tax on national banking associations located within its limits. Method numbered (4) provides for a tax on such associations 'according to, or measured by' 'the entire net income received from all sources' subject only to certain restrictions as to the rate. This method was added to the three previously authorized under R.S. § 5219 by an amendment of March 25, 1926, c. 88, 44 Stat. 223, 12 U.S.C.A. § 548. The plain meaning of the amendment is confirmed by its legislative history showing beyond doubt that Congress intended to authorize a franchise tax measured by net income including interest on tax-immune federal securities.
Oklahoma in the 1935 act expressly followed and adopted the method thus authorized in the amendment. See First National Bank v. Oklahoma Tax Commission, 185 Okl. 98, 90 P.2d 438. Subsection (b) of § 16 expressly declares that the state thereby adopts method numbered (4) authorized by R.S. § 5219, 12 U.S.C. § 548, 12 U.S.C.A. § 548.
The power of Congress to authorize a state to impose a tax on the franchise of a national banking association can not now be doubted. Van Allen v. Assessors, 3 Wall. 573, 18 L.Ed. 229. Compare Keifer & Keifer v. R.F.C., 306 U.S. 381, 389, 59 S.Ct. 516, 517, 83 L.Ed. 784; Helvering v. Gerhardt, 304 U.S. 405, 411, 412n, 58 S.Ct. 969, 971, 82 L.Ed. 1427; Federal Land Bank v. Priddy, 295 U.S. 229, 234, 235, 55 S.Ct. 705, 707, 708, 79 L.Ed. 1408. Any immunity attaching to the franchise by virtue of R.S. § 5219 as it read prior to the 1926 amendment, compare Pittman v. Home Owners' Corp., 308 U.S. 21, 60 S.Ct. 15, 84 L.Ed. 11, 124 A.L.R. 1263, could be withdrawn by Congress and the franchise subjected to state taxing power, just as national bank shares were so subjected by the Act of June 3, 1864. Van Allen v. Assessors, 3 Wall. 573, 18 L.Ed. 229; See Des Moines National Bank v. Fairweather, 263 U.S. 103, 44 S.Ct. 23, 68 L.Ed. 191; Peoples National Bank v. Board of Equalization, 260 U.S. 702, 43 S.Ct. 98, 67 L.Ed. 471.