Union Bank & Trust Company, the petitioner, organized under the laws of Alabama and located in Montgomery county, receives deposits and carries on a general commercial and savings bank business. It sued respondent in a state court to recover $2,521.69, alleged to have been illegally exacted as taxes assessed for the year ending September 30, 1931. The assessment followed section 6, Revenue Act of Alabama, 1923 (General Acts, 1923, p. 152), which directs: 'Every share of any incorporated bank or banking association incorporated under the laws of this State, or any other state, or of the United States, shall be assessed for taxation in the county, and in the city or town where such bank is located at sixty per cent of its fair and reasonable market value.'
During 1930, 1931, and 1932 there were building and loan associations, industrial loan companies and corporations, and industrial banks in Montgomery county which loaned money in substantial competition with petitioner to the extent of hundreds of thousands of dollars; the shares and the capital of which were exempted from ad valorem taxes. Also, there were mortgage companies and corporations, and individuals, persons, firms, and associations engaged in like business and employing moneyed capital to the extent of many thousands of dollars in substantial competition with petitioner, which were either untaxed or definitely exempted.
The federal court had ruled that shares of national banks in Alabama could not be subjected to taxation under section 6, Act of 1923, since the tax was not laid in conformity with section 5219, U.S. Rev. Stats., as amended by the Acts of March 4, 1923, c. 267, 42 Stat. 1499, and March 25, 1926, c. 88, 44 Stat. 223 (12 USCA § 548), which only permits taxation of shares of national banking associations at a rate no greater than the one required of other moneyed capital in the hands of individual citizens coming into competition with the business of such associations. The state officers had accepted these decisions as correct declarations of the law.
Petitioner based its claim to recover upon the theory that the tax assessed against its shares had been exacted in violation of the equal protection clause of the Fourteenth Amendment; also in violation of sections 211 and 217, Constitution of Alabama, which provide that all taxes shall be assessed in exact proportion to value, and the property of private corporations, associations, and individuals shall be taxed at the same rate.
The trial court gave judgment for petitioner. The Supreme Court reversed this action and denied any recovery, holding that the Legislature had not exceeded its powers in making classifications and exemptions; and, specifically, that there was no violation of the Federal Constitution.
Only the federal question is before us. Was the petitioner denied equal protection of the laws?
Because of existence within the state of untaxed moneyed capital and shares of corporations in actual competition with national banks, the shares of the latter during the years in question were not subject to ad valorem taxation under section 6, Revenue Act of Alabama of 1923, or otherwise. And the state Supreme Court so held.
We cannot say that the state Legislature exceeded its power to make reasonable classification when it directed that moneyed capital or the property and shares of building and loan associations, industrial loan corporations, industrial banks, mortgage companies, etc., should be exempt from ad valorem taxation or taxed on a different basis from the one prescribed for banks accepting deposits and doing a general commercial business, notwithstanding actual competition between them.
Mere competition between them is not enough to show two concerns must be burdened alike. The state Legislature reasonably might have determined that there was fair ground for distinction; and upon the record we may not hold that its action was arbitrary, capricious, or wholly unreasonable.
There was sharp disagreement in the court below, but none of the judges suggested disapproval of the view just stated. The minority did not discuss the federal question, but found violation of the uniformity clause of the state Constitution.
The doctrine applicable here was recently expounded in Ohio Oil Co. v. Conway, 281 U.S. 146, 159, 50 S.Ct. 310, 74 L.Ed. 775, and need not be restated.