Savage, John F.

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Constitutional Law - Due Process - Double Taxation

Marquette University Law School

Marquette Law ReviewVolume 17Issue 4 June 1933 Article 11Constitutional Law - Due Process - DoubleTaxationJohn F. SavageFollow this and additional works at: http://scholarship.law.marquette.edu/mulrPart of the Law CommonsThis Article is brought to you for free and open access by the Journals at Marquette Law Scholarly Commons. It has been accepted for inclusion inMarquette Law Review by an authorized administrator of Marquette Law Scholarly Commons. For more information, please contactmegan.obrien@marquette.edu.Repository CitationJohn F. Savage, Constitutional Law - Due Process - Double Taxation, 17 Marq. L. Rev. 299 (1933).Available at: http://scholarship.law.marquette.edu/mulr/vol17/iss4/11RECENT DECISIONSwhether conducted by individuals or corporations; but the tax is laid on thejrivilege of conducting business with the advantages which inhere in the corpo-rate capacity of those taxed. Flint v. Stone-Tracy Co., 220 U.S. 108, 31 Sup. Ct.342, 55 L.Ed. 389 (1910). But corporations are as much entitled to the equalprotection of the laws guaranteed by the Fourteenth Amendment as are naturalpersons. Southern R. Co. v. Greene, 216 U.S. 400, 30 Sup. Ct. 287, 54 L.Ed. 536,17 Ann. Cas. 1247 (1909) ; Kentucky Finance Corp. v. Paramount Auto Exchange,262 U.S. 544, 43 Sup Ct. 636, 67 L.Ed. 1112 (1922) ; Power Mfg. Co. v. Saunders,274 U.S. 490, 47 Sup. Ct. 678, 71 L.Ed. 1165 (1926).In the majority's opinion this case fell within that class of cases which isobnoxious to the constitutional guaranty of the equal protection of the laws,since it is a clear and hostile discrimination against a particular class. It is rea-sonable to assume, however, that the trend is to recognize a greater liberality inthe power of the legislature to tax chain stores where they are considered publicevils, as evidenced by the admission in the majority opinion that a tax merelybased on the number of stores is fair and reasonable.RALPH J. PODELL.CONSTITUTIONAL LAw-DuE PROCESS-DOUBLE TAXATION.-The deceased wasa subject of Great Britain, a resident of Cuba, and at the time of his deathhe owned certain stocks and bonds of both domestic and foreign corporationswhich were on deposit in the United States. None of these securities was pledgedfor indebtedness, nor were they used in business here. The Board of Tax Ap-peals decided that the securities were not subject to the inheritance tax providedby the Revenue Act of 1924 (26 U.S.C.A., sec. 1092-96), and the decision wasaffirmed by the Circuit Court of Appeals, 60 F. (2) 890. Held, on certiorari,judgment reversed. There were two questions involved: (1) Were the securitiestaxable under the Revenue Act of 1924? (2) Did Congress have the power to levysuch a tax in view of the "due process" clause of the Fifth Amendment of theFederal Constitution? Both questions were answered in the affirmative, but onlythe second will be considered in this article. Burnet v. Brooks, 53 Sup. Ct. 457(1933).The jurisdiction of a state to tax is limited by the "due process" clause ofthe Fourteenth Amendment of the Federal Constitution; in the case of tangibleproperty, Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194 (1905)(property tax) ; Frick v. Pennsylvania, 268 U.S. 473 (1925) (succession tax),and the rule has recently been extended to succession taxes of intangible prop-erty. Farmer's Loan & Trust Co. v. Minnesota, 280 U.S. 204 (1930); Baldwoin v.Missouri, 281 U.S. 586 (1930) ; Beidler v. South Carolina Tax Co-inmission, 282U.S. 1 (1930) ; First National Bank of Boston v. Maine, 284 U.S. 312 (1932).However, it has been held that there is no similar limitation in the "due process"clause of the Fifth Amendment which would restrict or limit the jurisdiction ofthe Federal Government to tax, even though the wording of the "due process"clause is identical in each Amendment. United States v. Bennett, 232 U.S. 299(1914) (property tax); Cook v. Tait, 265 U.S. 47 (1924) (tax on the incomefrom tangible property situated in a foreign country); and in the instant casethis interpretation is extended to a succession tax of intangibles.It is not so difficult to determine which state has jurisdiction to tax tanglibleproperty, for such property often acquires a permanent situs, in which case itTHE MARQUETTE LAW REVIEWis taxable only by the state in which it has so acquired a situs, Union Refrigera-tor Transit Co. v. Kentucky, supra. A more difficult question arises in the caseof intangible property, for strictly speaking such property can never acquire apermanent situs, and the term "situs" is not applicable to it, Farmer's Loan &Trust Co. v. Minnesota, supra, unless it has become an integral part of somelocalized business, so as to acquire a "business situs." New Orleans v. Stempel,175 U.S. 309 (1899). Where then can a succession or inheritance tax on intangi-ble property be levied? From the recent cases it seems that only the state ofthe domicile of the owner may tax the transfer. Farmer's Loan & Trust Co. v.Minnesota, supra (municipal and state bonds) ; First National Bank of Bostonv. Maine, supra (shares of stock) ; Beidler v. South Carolina Tax Conmission,supra (open account) ; Baldwin v. Missouri, supra (negotiable instruments). Ithas been held that the state of the domicile of the cestui que trust could not taxthe transfer of the trust fund from the donor to the trustee in another state,where the fund was to be kept. Safe Deposit Co. v. Virginia, 280 U.S. 83 (1930).The limiting of a state's jurisdiction to tax by means of the "due process"clause of the Fourteenth Amendment is criticized as reading into the FourteenthAmendment what is not there. Mr. Justice Holmes is a leader in the oppositionand wrote strong dissenting opinions in Farmer's Loan & Trust Co. v. Minne-sota, supra, and Baldwin v. Missouri, supra. The objection to the limitation seemsvalid, for the providing of a remedy against taxation of the same subject bymore than one state is a question for the legislature rather than for the courts,and therefore the remedy should come by reciprocal legislation by the states.30 Col. Law Rev. 405 (1930) ; 43 Harv. Law Rev. 792 (1930) ; see also 28 Col.Law Rev. 806 (1928). But the Federal Constitution is a compact between theUnited States to maintain peace and harmony among them; it is not a compactbetween the United States and foreign countries. Therefore there is a basisfor holding that the jurisdiction of a state's taxing powers is limited by theConstitution, and that there is no similar Constitutional Limitation of the Fed-eral Government's jurisdiction to tax. Taxation is one form of taking property;and therefore should be considered in view of the "due process" clause of theFifth and Fourteenth Amendments. So it is not difficult to see that in definingthe Constitutional limitation on the states' power to tax the court applied the"due process" clause of the Fourteenth Amendment. It has been held that theFederal Government may tax merely on the ground of citizenship, Cook v. Tait,supra; but this latter ground could not be applied in the instant case, for thedeceased was not a citizen. Nor does the jurisdiction of the Federal Governmentto tax depend on the nature of the tax. Cook v. Tait, supra. The court in theinstant case recognized that the evils of taxation of the same subject by morethan .one sovereignty should be dealt with by international treaties, and veryproperly finds it impossible to read a limitation out of the Fifth Amendmentwhich would prevent double taxation, i.e., taxation of the same subject by theUnited States and a foreign nation.JQHN F. SAVAGE.CONTEMPT-JURORS PRIVILEGE-NoN-APPLICATION OF PRIVILEGE.-The defend-ant was charged with contempt of court for giving answers which she knew tobe false and misleading in response to questions affecting her qualifications as ajuror. One Foshay and others were to be tried on the charge of using the mailsto defraud. The defendant was summoned as one of the panel of jurors. Evi-dence disclosed that she was opposed to serving on the jury until informed that

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Constitutional Law - Due Process - Double Taxation

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