ill)ll>'lll!t!l)l(fl>>iMIUL' 38 TAXATION OF PEDERAli, STATE AND MUNICIPAL BONDS cumstances a tax may not be levied upon the shares of stock in the hands of the stockholders.^" 97. Rule in Oklahoma: — In a recent case in Okla- homa,''^ the Supreme Court of that State held that stock- holders of a national bank were entitled to deduct from the value of their shares that proportion of the value invested in non- taxable state bonds in valuing the shares for taxation. This decision, however, was distinguished by the court rendering it, from the general rule, on the ground that a direct contract for the exemption of such bonds from taxation had been made by the state with the bank. The bonds had been purchased by the bank directly from the state and the court said, that "there being a contract between the state and officers of the bank, acting both on account of the bank and in behalf of the shareholders, and the statute making the bonds non-taxable for any purpose, effect cannot be given the promised immunity, and upon which the bank acted, unless by allowing shareholders the right to deduct from the value of their shares that proportion of the value invested in non-taxable state bonds," 98. Stock of National Banks: — Many of the cases in which this question has arisen involved the taxation by a state of stock of national banks. It is to be noted in this connection that the power of the States to tax the stock of such banks depends upon a grant of authority by the Congress of the United States/^- National Banks being Federal agencies, except for this grant of power, the states would have no power to tax the stock of such banks.^" A territory, however, may tax a Federal agenej^ unless restrained by the enabling act or other act of Congress. Hence, it may tax the shares of stock of National banks, notwith- " Penrose v. Chaffraix, 106 La. 250; 30 So. 718. State V. Branin, 23 N. J. L. 484. Singer Mfg. Co. v. Heppenheimer, 58 N. J. L. 633; 34 Atl. 1061. Eichardson v. St. Albans, 72 Vt. 1; 47 Atl. 100. " In re Assessment of First Nat. Bank of Chickasha, 58 Okla. 508 ; 160 Pac. 469. " Rev. Stats. U. S. See. 5219. " Van Allen v. The Assessors, 3 Wall. (U. S.) 572, Owensboro Nat. Bank v. Owensboro, 173 U. S. 664. TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS 39 standing the fact that the act of Congress authorizing the states to tax such stock does not apply to the territories.^* 99. Rule Stated: — It may be stated as the general rule, that, unless the state or territory has contracted to exempt the corporation or its capital stock from taxation, the shares of stock in the hands of the stockholders may be taxed, without regard to the value of tax-exempt securities in which the capital of the corporation is invested. XV. NOTES AND CERTIFICATES OF INDEBTEDNESS. 100. This treatise is confined to the taxation of bonds. Notes and certificates of indebtedness, therefore, have not been dis- cussed. The general principles of taxation of Federal, state and municipal bonds, however, are also applicable to the taxation of notes and certificates of indebtedness issued by the United States, the several states or the subdivisions thereof. While a distinc- tion between bonds and notes or certificates of indebtedness is sometimes made by statute, ordinarily the distinction is one of name only. In a recent case in the Supreme Court of the United States, Mr. Justice Holmes, in delivering the opinion of the Court, said, "What is true about bonds is true about certificates of indebtedness. Indeed it is difficult to see any distinction be- tween the two as they are commonly known to the business world. The essence of each is that they contain a promise under the seal of the corporation, to pay a certain sum to order or to bearer. ' '-'^ The same principles of taxation have frequently been applied to bonds, notes and certificates of indebtedness.^^ " Talbot V. Silver Bow County, 139 U. S. 438. People V. Moore, 1 Idaho 504. Silver Bow County v. Davis, 6 Mont. 306. First Nat. Bank v. Allbright, 13 N. M. 514 ; 86 Pac. 548. Salt Lake City Nat. Bank v. Goldtng, 2 Utah 1. "Denver v. Home Sav. Bank, 236 U. S. 101. ■* State V. Assessors, 111 La. 982; 36 So. 91. In re First State Bank of Oklahoma City, 171 Pac. 864. 40 TAXATION OF FEDERAL, STATE AND MUNIdPALi BONDS PART 2. An analysis of the tax laws of the United States, of the several States, and of the Territories as affecting Federal, State and Municipal Bonds. The following tables are based upon the general laws of the various States and Territories, an examination of the innumer- able private acts authorizing bond issues being impracticable. In most instances, however, where special acts provide that the bonds issued thereunder shall be exempt from taxation, it will be found that the general acts of the State or Territory grant a similar exemption. The laws of the various States and Territories have been examined up to and including the year 1921, except in the follow- ing instances where the 1921 laws were not available at the time of going to press : — Arkansas Maryland California Massachusetts Colorado New Hampshire Connecticut Ohio Florida Pennsylvania Georgia Rhode Island Illinois West Virginia Maine Wisconsin TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS 41 UNITED STATES. Bonds issued by the United States are exempt from taxation by the Federal Government (Rev, Stats. U. S., Sec. 3701), except certain of the Liberty Bonds and Victory Loan Notes issued under authority of the following acts of the Congress of the United States: Ch. 4, Act of 65th Congress, 1st Session, approved April 24, 1917. Ch. 56, Acts of 65th Congress, 1st Session, approved Sept. 24, 1917. Ch. 44, Acts of 65th Congress, 2nd Session, approved April 4, 1918. Ch. 142, Acts of 65th Congress, 2nd Session, approved July 9, 1918. Ch. 100, Acts of 65th Congress, 3rd Session, approved March 3, 1919 (Vol. 40, U. S. Stats, at large). The Liberty Bonds and Victory Loan Notes which are subject to graduated additional income taxes, commonly known as sur- taxes, excess-profits and war-profits taxes, are described as fol- lows : 1. First Liberty loan converted 4 per cent bonds of 1932- 1947 (first 4s). 2. First Liberty loan converted 4l^ per cent bonds of 1932- 1947 (first 4i/4s, issue of May 9, 1918). 3. First Liberty loan second converted 4i/4 per cent bonds of 1932-1947 (first 414s, issue of October 24, 1918). 4. Second Liberty loan 4 per cent bonds of 1927-1942 (sec- ond 4s). 5. Second Liberty loan converted 4i/4 per cent bonds of 1927- 1942 (second 414s). 6. Third Liberty loan 4^4 per cent bonds of 1928 (third 41/4S). 7. Fourth Liberty loan 414 per cent bonds of 1933-1938 (fourth 414s). 8. Victory Liberty loan 4% per cent convertible gold notes of 1922-1923 (43/i per cent Victory notes). The First Liberty loan 31/2 per cent bonds of 1932-1947 and the Victory loan 3% per cent convertible gold notes of 1922-1923 42 TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS are not subject to the above mentioned graduated additional in- come taxes. The holders of the Liberty Bonds and Victory Loan Notes which are subject to such graduated additional income taxes are, however, entitled to certain limited exemptions there- from as follows: $5,000 in the aggregate of first 4s, first 4i4s (issues of May 9 and October 24, 1918), second 4s and 4i^s, third 4i^s and fourth 414s, and U. S. Certificates of Indebtedness. $30,000 of first 414s (issue of October 24, 1918, only), until the expiration of two years after the termination of the war, as fixed by proclamation of the President. $30,000 of fourth 4i/4s, until the expiration of two years after the termination of the war, as fixed by proclamation of the President. $30,000 in the aggregate of first 4s, first 4^48 (issues of May 9 and October 24, 1918), second 4s and 4i^s, third 414s, and fourth 4l^s, as to the interest received on and after January 1, 1919, until the expiration of five years after the termination of the war, as fixed by proclamation of the President. $45,000 in the aggregate of first 4s, first 4i/4s (issue of May 9, 1918, only), second 4s and 4l^s, and third 414s, as to the inter- est received after January 1, 1918, until the expiration of two years after the termination of the war, as fixed by proclamation of the President; this exemption conditional on original sub- scription to, and continued holding at the date of the tax return of two-thirds as many bonds of the fourth Liberty loan. $20,000 in the aggregate of first 4s, first 41^8 (issues of May 9 and October 24, 1918), second 4s and 414s, third 414s, and fourth 414s, as to the interest received on and after January 1, 1919; this exemption conditional upon original subscription to, and continued holding at the date of the tax return of one-third as many notes of the Victory Liberty loan, and extending through the life of such notes of the Victory Liberty loan. (See Acts of Congress above referred to and Ch. 176, Acts 65th Congress, Second Session, approved Sept. 24, 1918.) To work out a practical illustration, showing how the exemp- tions above provided for might be claimed, let us suppose that an individual, association or corporation, subject to surtaxes, excess- profits or war-profits taxes, now or hereafter imposed by the TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 43 United States, owns $200,000 of Liberty Bonds and Victory Loan Notes as follows : (a) $25,000 First 4s Nov. 15, 1917. (b) 25,000 First ^V^s May 9, 1918. (c) 40,000 First Second 414s Oct. 24, 1918. (d) 25,000 Second 4s Nov. 15, 1917. (e) 15,000 Second 414s May 9, 1918. (f) 25,000 Third 414s May 9, 1918. (g) 35,000 Fourth 4i^s Oct. 24, 1918. (h) 10,000 Victory ^%s May 20, 1919. In connection with these $200,000 bonds the following exemp- tions are permissible: $5,000. of bonds in the aggregate, included within Classes A to G inclusive are permanently exempt. 30,000. of bonds in Class C are exempt until the expiration of two years after the termination of the war, as fixed by proclamation of the President. 30,000. of bonds in Class G are exempt until the expiration of two years after the termination of the war, as fixed by proclamation of the President. 30,000. of bonds in the aggregate included within Classes A to G inclusive are exempt as to the interest received there- on, on and after Jan. 1, 1919, until the expiration of five years after the termination of the war, as fixed by proclamation of the President. 45,000. of bonds, in the aggregate included within Classes A, B, D, E, & F are exempt as to interest received after Jan. 1, 1918, until the expiration of two years after the termination of the war, as fixed by proclamation of the President. This exemption is conditioned on original subscription to, and continued holding at the date of the tax return of two-thirds as many bonds of the Fourth Liberty loan. 44 TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS 20,000. of bonds in the aggregate included within Classes A to G inclusive as to interest received on and after Jan. 1, 1919. This exemption is conditioned upon original subscription to and continued holding at the date of the tax return of at least $6,666.67 Victory Loan Notes and extends through the life of such notes of the Vic- tory loan. $160,000. So far as Liberty Bonds and Victory Loan Notes are con- cerned, these exemptions are all that can be had from Federal Income surtaxes and profits taxes. Bonds issued by the War Finance Corporation are exempt from all taxes except graduated additional income taxes, com- monly known as surtaxes and excess- profits taxes and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, corporations or associations. Interest on $5,000 of such bonds owned by indi- viduals, partnerships, corporations or associations is exempt from such graduated income taxes. Vol. 40, U. S. Stats, at Large, p. 511. Acts 65th Congress, 2nd Session, Ch. 45. Farm Loan Bonds issued by Federal Land Banks or by Joint Stock Land Banks and the income derived therefrom are exempt from all taxation. Vol. 39, U. S. Stats, at Large, p. 380. Acts 64th Congress, 1st Session, Ch. 245. Smith V. Kansas City Title & Trust Co., U. S. Bonds of the United States are also exempt from taxation by the various States composing the United States and the Terri- tories thereof. (Rev. Stats. U. S., Sec. 3701.) The power of the United States to tax bonds of the States and Territories and of the subdivisions thereof is discussed in Sections 10 and 15, ante. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 45 ALABAMA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Gen. Acts 1919, No. 328, Sec. 2, Subd. (a). Hooper v. State, 141 Ala. Ill ; 37 So. 662. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Gen. Acts 1919, No. 328, Sec. 2, Subd. (a). 3. Bonds of subdivisions of the State. Bonds issued by counties and municipalities are exempt. Gen. Acts 1919, No. 328, See. 2, Subd. (a). 4. Bonds of other States and subdivisions. Taxable on sixty per cent of fair and reasonable cash value. Gen. Acts 1919, No. 328, See. 5, Subd. (g) and Sec. 7. 5. State Income Taoc. Interest upon obligations of the United States or its possessions, or securities issued under the provisions of the Federal Farm Loan Act of July 17, 1916, or bonds issued by the War Finance Corporation, or obligations of the State of Alabama, or of any municipal corpora- tion or political subdivision thereof, is exempt. Gen. Acts 1919, No. 328, Sec. 323, Pt. 2, Subd. (e). Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 46 TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS ALASKA (Territory) 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sec. 13. 2. Bonds of the Territory. Alaska is prohibited from creating or assuming any bonded indebtedness whatever. Comp. Laws 1913, Sec. 416. 3. Bonds of subdivisions of the Territory. Municipal corporations of Alaska are prohibited from creating or assuming any bonded indebtedness what- ever. Comp. Laws 1913, Sec. 416. 4. Bonds of other States and subdivisions. Exempt. Ante, Sec. 16. Bonds of other territories and subdivisions are taxable by municipalities unless exempted from such taxation by Act of Congress. The Territory itself does not tax such bonds. Laws 1913, Ch. 69, as amended by Laws 1915, Ch. 23. Ante, Sec. 13. 5. Territorial Income Tax None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDE RAL, STATE AND MUNICIPAL BONDS 47 ARIZONA 1. Bonds of the United States and Territories. Exempt, Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Const. Art. 9, Sec. 2. Rev. Stats. 1913, Sec. 4846. 3. Bonds of subdivisions of the State. Exempt. Const. Art. 9, Sec. 2. Rev. Stats. 1913, Sec. 4846. 4. Bonds of other States and subdivisions. Taxable. Const. Art. 9, Sec. 2. Rev. Stats. 1913, See. 4846. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 48 TAXATION OF FEDERAL, STATE AND MUNICIPAIi BONDS ARKANSAS 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S. Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. This State is prohibited from issuing any interest-bearing treasury warrants or scrip. Const. Art. 16, Sec. 1. In Hays v. McDaniel, 130 Ark. 52; 196 S. W. 934, the issuance of State notes to cover deficiencies in the State's general revenue fund was upheld. These notes, and such evidence of debt as the State may issue, are taxable. Dig. of Stats. 1916, Sees. 8461 & 8462. Ouachita County v. Rumph, 43 Ark. 525. 3. Bonds of subdivisions of the State. Counties, cities, towns and municipalities are prohibited from issuing any interest-bearing evidence of indebted- ness except such bonds as may be authorized by law to provide for payment of the existing indebtedness. Const. Art. 16, Sec. 1. Bonds are, however, issued by school, levee, road, bridge, drainage and other classes of districts. Such bonds are taxable. Dig. of Stats. 1916, Sees. 8461 and 8462. Ouachita County v. Rumph, 48 Ark. 525. 4. Bonds of other States and subdivisions. Taxable. Dig. of Stats. 1916, Sec. 8462. Eoff V. Kennefick-Hammond Co., 80 Ark. 138, 96 S. W. 986. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 49 CALIFORNIA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after November 4, 1902. Const. Art. 13, See. 1%. 3. Bonds of subdivisions of the State. Bonds of counties, cities and counties and municipal cor- porations or districts including school, reclamation and irrigation districts are exempt, if issued after Novem- ber 4, 1902. Const. Art. 13, Sec. 1%. 4. Bonds of other States and subdivisions. Taxable. Pol. Code 1915, Sec. 3607, as amended by Laws 1917, Ch. 226, and Sec. 3632. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless othenvise noted. 50 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS COLORADO 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Courtright's Stats., 1914 Edition, Sec. 5588. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Courtright's Stats., 1914 Edition, Sees. 5543 and 5581. 3. Bonds of subdivisions of the State. Taxable. Courtright's Stats., 1914 Edition, Sees. 5543 and 5581. 4. Bonds of other States and subdivisions. Taxable. Courtright's Stats., 1914 Edition, Sees. 5543, 5544 and 5581. Denver & R. G. Co. v. Church, 17 Colo. 1. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as weU as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 51 CONNECTICUT 1. Bonds of the United States and Territories. Exempt. Eev. Stats. U. S., Sec. 3701. Gen. Stats. Kev. of 1918, Sec. 1222. Coite V. Society for Savings, 32 Conn. 186 ; 6 Wall. (U. S.) 594. Batterson v. Hartford, 50 Conn. 558. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, when issued pursuant to any act which provides for exemption from taxation. Gen. Stats. Rev. of 1918, Sec. 1160, as amended by Pub. Laws 1919, Ch. 159. (See Gen. Stats. Rev. of 1918, Sec. 106.) 3. Bonds of subdivisions of the State. Bonds issued by counties, towns, cities, boroughs or other municipal taxing districts, after April 1, 1917, are ex- empt. Gen. Stats. Rev. of 1918, See. 1222. Bonds issued by any town or city in aid of the construc- tion of the railroad mentioned in Gen. Stats. Rev. of 1918, Sec. 1160, as amended Pub. Laws 1919, Ch. 159, or bonds issued to refund same are exempt in the hands of the holders thereof. Gen. Stats. Rev. of 1918, Sec. 1060. Stoddard v. Corbin, 109 Atl. 813. 4. Bonds of other States and subdivisions. Taxable in the hands of residents. Gen. Stats. Rev. of 1918, Sec. 1184. In the hands of non-residents, not taxable unless located in any town more than seven months during the year. Gen. Stats. Rev. of 1918, Sec. 1148. Secured Deht Act: Upon payment of proper fees State Treasurer will endorse certificate upon bonds as to ex- emption thereof, after which such bonds shall be ex- empt from all taxation in the State during the period 52 TAXATION OF FEDERAL^ STATE AND MUNICIPAIj BONDS for which said tax is so paid. (Fee is 2 per cent on face amount for five years, or, for a greater or less num- ber of years at the same rate.) Gen. Stats. Rev. of 1918, Sec. 1188. 5. State Income Tax.. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 53 DELAWARE 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Rev. Code 1915, Sec. 1098. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Rev. Code 1915, Sec. 1098. 3. Bonds of subdivisions of the State. Exempt. Rev. Code 1915, Sec. 1098. 4. Bonds of other States and subdivisions. Exempt, but income taxed after Nov. 1, 1921. Rev. Code 1915, Sec. 1098. Laws 1921, Ch. 9. 5. State Income Tax. Following income exempt : Interest upon obligations of a state, or any political sub- division thereof, or upon the obligations of the United States or its possessions. Laws 1917, Ch. 26, as amended by Laws 1919, Ch. 30. After Nov. 1, 1921, following income only exempt: Interest upon the obligations of the State of Delaware, or any political subdivision thereof, or upon the obliga- tions of the District of Columbia, the United States or its possessions. Laws 1921, Ch. 9. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 54 TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS DISTRICT OF COLUMBIA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, See. 13. 2. Bonds of the District. The only bonded debt of the District was incurred under Vol. 18, U. S. Stats, at Large, p. 116. Under the terms of section 7 of that act the bonds are exempt from state, federal or municipal taxation. Grether v. Wright, 75 Fed. 742. 3. Bonds of subdivbions of the Dbtrict. There are no subdivisions of the District, the corporations of Georgetown and Washington having been abolished by Vol. 16, U. S. Stats, at Large, p. 419. 4. Bonds of other States and subdivbions. Exempt. Ante, Sec. 16, for discussion of the power of a Federal Agency to tax bonds of a state or subdivision thereof. Bonds of territories of the U. S. and subdivisions thereof are taxable unless exempted from taxation by act of Congress. U. S. Stats, at Large, Vol. 19, Ch. 117, p. 396. Ante, See. 13. 5. District Income Tax. None. Bonds of the District are exempt from taxation under the Federal Income Tax Law. U. S. Revenue Law 1918, Sec. 213. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 55 FLORIDA 1. Bonds of the United States and Territories. Exempt. Kev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Bonds issued under Laws 1885, Ch. 3564, are exempt. Eev. Gen. Stats. 1920, Sec. 1045. No other statute exempting state bonds apparently exists. The constitutionality of this exemption has never been decided by the Supreme Court of Florida. The Con- stitution authorizes the legislature to exempt property from taxation for municipal, educational, literary, scien- tific, religious or charitable purposes. Ante, Sees. 24-45. Other bonds are taxable. Rev. Gen. Stats., 1920, Sees. 694 and 696. 3. Bonds of subdivisions of the State. Taxable. Rev. Gen. Stats. 1920, Sees. 694 and 696. 4. Bonds of other States and subdivisions. Taxable. Rev. Gen. Stats. 1920, Sees. 694 and 696. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 56 TAXATION OP FEDERAL, STATE AND MUNICIPAIj BONDS GEORGIA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Miller v. Wilson, 60 Ga. 505. 3. Bonds of subdivisions of the State. Exempt. Penick v. Foster, 129 Ga. 217; 58 S. E. 773. In this ease the court stated that the single question to be determined was whether bonds issued by a municipality of the State of Georgia were taxable in the hands of a citizen and resident of the State. The Court held that they were not taxable by force of the Constitution itself, and if taxable at all, were only so when [taxed by] the General Assembly either in express terms, or in such language that no other conclusion could be reached than that such was the intention of that body. The court also said that there was nothing in the various tax acts from 1880 down to the time of its decision (1907) which either in express terms, or by necessary implication, indicated that it was the purpose of the General Assem- bly to levy a tax for state or county purposes upon the bonds of the State, or any of its political subdivisions. No such tax act has been found since 1907 down to the present time, hence bonds of subdivisions of the State would seem to be exempt in the hands of any holder. 4. Bonds of other States and subdivisions. Taxable. Park's Anno. Code, Sec. 1002. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS 57 HAWAII (Territory) 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Ante, Sec. 13. 2. Bonds of the Territory. Exempt. Laws 1919, Act No. 207, Sec. 4. 3. Bonds of subdivisions of the Territory. Bonds of counties or cities and counties are exempt. Rev. Laws 1915, Sec. 2182. 4. Bonds of other States and subdivisions. Exempt. Ante, Sec. 16. Bonds of other territories and subdivisions are taxable, unless exempted from taxation by act of Congress. Rev. Laws 1915, Sees. 1236 and 1240, as amended by Laws 1915, Act 222, and Sec. 1255. Ante, Sec. 13. 5. Territorial Income Tax. Taxes interest upon notes, bonds and other securities, except such bonds of the Territory of Hawaii or of municipalities created by said Territory, the princi- pal and interest of which are by the law of their issu- ance exempt from all taxation. Rev. Laws 1915, Ch. 94. The income derived from bonds of the Territory or its subdivisions is exempt from taxation under the Federal Income Tax Law. U. S. Revenue Law 1918, Sec. 213. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 58 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS IDAHO 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S. See. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Comp. Stats. 1919, Sees. 3096 and 3102. 3. Bonds of subdivisions of the State. Taxable. Comp. Stats. 1919, Sees. 3096 and 3102. 4. Bonds of other States and subdivisions. Taxable. Comp. Stats. 1919, Sees. 3096, 3102 and 3268. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless othervrise noted. TAXATION OP FEDERAL, STATE AND MUNICIPAIi BONDS 59 ILLINOIS 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. People V. Bradley, 39 111. 130. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Rev. Stats. 1917 (Hurd), Ch. 120, See. 1. 3. Bonds of subdivisions of the State. Taxable. Rev. Stats. 1917 (Hurd), Ch. 120, Sec. 1. 4. Bonds of other States and subdivisions. Taxable. Rev. Stats. 1917 (Hurd), Ch. 120, Sec. 1. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State aa well as in the hands of residents, unless otherwise noted. 60 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS INDIANA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after April 23, 1903, and bearing in- terest. Burns Stats. Sec. 10156. Laws 1919, Ch. 59, Sec. 5, as amended by Laws 1921, Ch. 222. Bonds issued by the Indiana State Board of Argriculture are exempt. Laws 1921, Ch. 4. 3. Bonds of subdivisions of the State. Municipal bonds bearing interest are exempt, if issued after April 23, 1903. Burns Stats. Sec. 10156. Laws 1919', Ch. 59, Sec. 5, as amended by Laws 1921, Ch. 222. County and township bonds bearing interest at a rate not greater than four and one-half per cent issued for road improvement after March 4, 1911, are exempt. Burns Stats. Sec. 7726A. Laws 1919, Ch. 59, Sec. 5, as amended by Laws 1921, Ch. 222. County bonds for the construction of court houses and other public buildings issued under Laws 1917, Ch. 156, as amended by Laws 2nd Extra Session, 1920, Ch. 13, are exempt under the provisions of that act. County bonds for the erection of colosseums, auditoriums, me- morial or victory halls, etc., issued under Laws 1919, Ch. 55, are exempt, under the provisions of Sec. 5 of that Act. See also Laws 1919, Ch. 115, authorizing the issuance of county or city bonds for memorials which are exempt from taxation by Sec. 10 thereof. County road bonds issued after March 13, 1919, bearing interest at a rate not greater than five per cent per TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS 61 annum, under Laws 1919, Ch. 112, are exempt under the provisions of that act. Sanitaiy district bonds are exempt. Burns Stats. Sec. 6174i as amended by Laws 1919^, Ch. 11, Sec. 4. Bonds of school corporations, issued after July 20, 1920, redeemable within any determinate period of time not exceeding five years and bearing interest at a rate not exceeding six per centum per annum are exempt. Laws 2nd Extra Session 1920, Ch. 4, as amended by Laws 1921, Ch. 4. Bonds issued by or in the name of municipalities, political or civil subdivisions or taxing districts, after March 10, 1921, for streets, highways, drains, levees, parks, docks, waterways, boulevards, play- grounds, bridges, sewage disposal plants and other im- provements of public benefit, which are payable from special assessments or special taxes, are exempt. Laws 1921, Ch. 4, and Ch. 222. Other bonds, unless exempted by the acts authorizing their issuance, are taxable. Laws 1919, Ch. 59, Sec. 63. 4. Bonds of other States and subdivisions. Taxable. Laws 1919, Ch. 59, Sec. 63. Burns Stats. See. 10160. Buck V. Beach, 164 Ind. 37, rev. 206 U. S. 392. 5. State Income Tax. The income derived from bonds which are exempt from taxation is taxable as personal property. Laws 1919, Ch. 59, Sec. 25. A constitutional amendment providing for an income tax was agreed to by the Legislatures of 1919 and 1921, See Laws 1919, Ch. 247, and Laws 1921, Ch. 291. Note: Bonds listed above as taxable are taxable in the bands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 62 TAXATION OF FEDERAL, STATE AND MUNICIPAIj BONDS IOWA 1. Bonds of the United States and Territories. Exempt. Eev. Stats. U. S., See. 3701. Comp. Code 1919, Sec. 4504. Ottumwa Sav. Bank v. Ottumwa, 95 Iowa 176; 63 N. W. 672. Ante, Sees. 11-12. 2. Bonds of the State. Taxable at rate of 5 mills on dollar of actual valuation. Comp. Code 1919, Sees. 4490 and 4504. 3. Bonds of subdivisions of the State. Municipal, school, and drainage bonds or certificates is- sued by any municipality, school district, drainage dis- trict or county within the State of Iowa, after July 4, 1909, are exempt. Comp. Code 1919, See. 4482, 4. Bonds of other States and subdivisions. Taxable at rate of 5 mills on doUar of actual valuation. Comp. Code 1919, Sees. 4490 and 4504. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BOND S 63 KANSAS 1. Bonds of the United States and Territories. Exempt. Eev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Gen. Stats. 1915, See. 11302. 3. Bonds of subdivisions of the State. Bonds of counties, cities, school districts and other mu- nicipal bonds are exempt. Gen. Stats. 1915, Sec. 11302. 4. Bonds of other States and subdivisions. Taxable. Gen. Stats. 1915, Sec. 11149. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 64 TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS KENTUCKY 1. Bonds of the United States and Territories. Exempt, Kev. Stats. U. S., Sec, 3701, Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Const. Sec. 171, as amended by Laws 1914, Ch. 94. 3. Bonds of subdivisions of the State. Bonds of counties, municipalities, taxing and school dis- tricts are exempt. Const. Sec. 171, as amended by Laws 1914, Ch. 94. 4. Bonds of other States and subdivisions. Taxable. CarroU's Stats. 1915, Sec. 4020. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 65 LOUISIANA 1. Bonds of the United States and Territories. Exempt. Kev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Const. 1921, Art. 10, Sec. 4. 3. Bonds of subdivisions of the State. Exempt. Const. 1921, Art. 10, Sec. 4. 4. Bonds of other States and subdivisions. Taxable. Marrs Rev. Stats. Sec. 6202; Laws 1917, Act No. 15. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 66 TAXATION OP FEDERAL, STATE AND MUNICIPAIj BONDS MAINE 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after February 1, 1909. Rev. Stats. 1916, Ch. 10, Sec. 6, as amended by Laws 1919, Ch. 221. 3. Bonds of subdivisions of the State. Bonds of counties, municipalities, village corporations, water districts or sewerage districts, issued after Feb- ruary 1, 1909, are exempt. Rev. Stats. 1916, Ch, 10, Sec. 6, as amended by Laws 1919, Ch. 221, and Laws Spec. Session 1919, Ch. 247. 4. Bonds of other States and subdivisions. Taxable. Rev. Stats. 1916, Ch. 10, Sees. 2, 5 and 14. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 67 MARYLAND 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Provision is made in Annotated Code 1911, p. 1795, for the taxation of bonds of territories and of the District of Columbia, but this provision is clearly unconstitu- tional. Grether v. Wright, 75 Fed. 742. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after March 12, 1914, Laws 1914, Ch. 43. Road Bonds issued under Laws 1908, Ch. 141, are exempt from state, county and municipal taxation irrespective of the date of issuance under the terms of that act. 3. Bonds of subdivisions of the State. Exempt, if issued after March 12, 1914, and bonds of counties and municipal corporations, sold prior to March 12, 1914, under terms rendering such counties, cities or municipal corporations liable for the State tax thereon, are likewise exempt from all taxation. Laws 1914, Ch. 43. 4. Bonds of other States and subdivisions. Taxable in the hands of residents only. Anno. Code 1911, p. 1795. Mayor v. Hussey, 67 Md. 112 ; 9 Atl. 19. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 68 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS MASSACHUSETTS 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued since Jan. 1, 1906. Laws 1909, Ch. 490 Pt. 1, See. 5, Clause 15, as amended by Laws 1914, Ch. 83. Exempt if income taxed under Laws 1916, Ch. 269, 3. Bonds of subdivisions of the State. Bonds of counties, cities, towns, fire, water, light, watch and improvement districts, issued on or after May 1, 1908, stating on their face that they are exempt from taxation, are exempt. Laws 1909, Ch. 490, Pt. 1, Sec. 5, CI. 15, as amended by Laws 1914, Ch. 83. Exempt if income taxed under Laws 1916, Ch, 269. 4. Bonds of other States and subdivisions. Taxable. Laws 1909, Ch. 490, Pt. 1, Sec. 2. Hall V. County Comr's., 92 Mass. 100. 5. State Income Tax. Income derived from bonds not exempt from taxation by Laws 1909, Ch. 490, Pt. 1, See. 5, is subject to an income tax. Laws 1916, Ch. 269, Sec. 2. Note: Deposits in savings institutions are exempt from taxation, if invested in bonds of the State, issued after July 1, 1906, or in bonds of counties, cities, towns, fire districts, or water supply districts, issued on or after May 1, 1908, stating on their face that they are exempt from taxation. Laws 1909, Ch. 490, Pt. 3, Sec. 21. Personal property of fraternal orders operating under the lodge system and providing life, sick, accident or other benefits for members is exempt from taxation. Laws 1917, Ch. 204. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 69 MICHIGAN 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Highway bonds issued under Act No. 25, Pub. Acts Extra Session 1919, are exempt under the terms of that act. Soldiers' Bonus Bonds issued under Pub. Acts No. 1, Laws 1st Extra Session 1921, as amended by Senate Enrolled Act No. 1 of the 2nd Extra Session 1921, approved July 7, 1921, are exempt under the terms of that act. Other bonds are taxable in the hands of residents only, unless exempted by the acts authorizing their issuance. Comp. Laws 1915, Sees. 3995 & 4002. Village of Howell v. Gordon, 127 Mich. 517; 86 N. W. 1042. 3. Bonds of subdivisions of the State. Bonds of counties, townships, cities, villages and school districts are exempt from taxation, if issued after Au- gust 31, 1909. Comp. Laws 1915, Sec. 4194. 4. Bonds of other States aoid subdivisions. Taxable in the hands of residents. Comp. Laws 1915, Sees. 3995 & 4002. Secured Debt Act: The owner of any such bonds may pay to the County Treasurer of the county in which he resides a tax of one-half of one per centum of the face value thereof whereupon the Treasurer shall en- dorse thereon or give a receipt certifying that the bonds are exempt from taxation. Comp. Laws 1915, Sees. 4282-4286, as amended by Laws 1917, Act. No. 173. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 70 TAXATION OF FEDERAL, STATE AND MUNTCIPAIi BONDS MIN NESOT A 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Farmers Bank v. Minnesota, 232 U. S. 516. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued by the State or by any governmental board thereof after April 18, 1911. Gen. Stats. 1913, See. 1971. 3. Bonds of subdivisions of the State. Bonds issued by any county, city, village, township, com- mon or independent school district or any governmental board of any county, city or village thereof, after April 18, 1911, are exempt. Gen. Stats. 1913, See. 1971. 4. Bonds of other States and subdivisions. Taxable at rate of three mills on each dollar of fair cash value. Gen. Stats. 1913, Sees. 1969, 1994 and 2316. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OP FEDERAL, STATE AND MUNICIPAL BONDS 71 MISSISSIPPI 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after April 1, 1906. Hemingway's Code 1917, See. 6879, as amended by Laws 1918, Ch. 183. 3. Bonds of subdivisions of the State. Bonds of drainage districts are exempt. Laws 1908, Ch. 141. Bonds of counties, municipalities, school and levee dis- tricts and other political subdivisions or districts of the State are exempt, if issued after April 1, 1906. Hemingway's Code 1917, Sec. 6879, as amended by Laws 1918, Ch. 183. 4. Bonds of other States and subdivisions. Taxable. Hemingway's Code 1917, Sec. 6898. 5. State Income Tax. State and municipal bonds, which by the law of their issu- ance are exempt from taxation, are not subject to the State Income Tax. Hemingway's Code 1917, Sec. 4937, and Ch. 120. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 72 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS MISSOURI 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. St. Louis Bldg. Ass'n. v. Lightner, 47 Mo. 393. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Rev. Stats. 1919, Sec. 12766. 3. Bonds of subdivbions of the State. Taxable. State V. Gordon, 268 Mo. 713 ; 188 S. W. 160. Vice V. City of Kirksville, 280 Mo. 348; 217 S. W. 77. Rev. Stats. 1919, Sec. 12766. 4. Bonds of other States and subdivisions. Taxable. Rev. Stats. 1919, Sec. 12766. A Secured Debts Act was passed in 1917 (H. B. 406, p. 539) which provides for payment of graduated taxes to State, County, and cities & Towns, upon payment of which the secured debt shall be exempt from all other or further taxation by the State, Counties, Cities, Towns, Villages, School Districts, and other legal sub- divisions of the State. Rev. Stats. 1919, Sees. 13137-13142, as amended by Laws 1921, p. 667. 5. State Income Tax. Interest upon obligations of a state or any political sub- division thereof, or upon the obligations of the U. S., or its possessions is exempt. Laws 1917 (S. B. 415), p. 524, Sec. 4. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL^ STATE AND MUNICIPAL BONDS 73 MONTANA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Pol. Code 1907, Sees. 2498 and 2511. Seven per centum of the true value of such bonds is taken as the basis for the taxation thereof, and the tax is levied upon that proportion of the true value. Laws 1919, Ch. 51, as amended by Laws 1921, Ch. 248. The legislature is prohibited from exempting from tax- ation property not enumerated in Const. Art. 12, Sec. 2. Cruse V. Fisehl, 55 Mont. 258, 175 Pac. 878. 3. Bonds of subdivisions of the State. Taxable upon the same basis as State bonds. Laws 1919, Ch. 51, as amended by Laws 1921, Ch. 248. 4. Bonds of other States and subdivisions. Taxable on the same basis as bonds of the State. Pol. Code 1907, Sec. 2498. Laws 1919, Ch. 51, as amended by Laws 1921, Ch. 248. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 74 TAXATION OF FEDERAL, STATE AND MUNICIPAIi BONDS NEBRASKA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Dixon County v. Halstead, 23 Neb. 697 ; 37 N. W. 621. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Laws 1921, Ch. 133. 3. Bonds of subdivisions of the State. Taxable. Laws 1921, Ch. 133. 4. Bonds of other States and subdivisions. Taxable. Laws 1921, Ch. 133. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MU NICIPAL BONDS 75 NEVADA 1. Bonds of the United States and Territories. Exempt. Bev. Stats. U. S., See. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Rev. Laws 1912, Sees. 3621 and 3622. 3. Bonds of subdivisions of the State. Taxable. Rev. Laws 1912, Sees. 3621 and 3622. 4. Bonds of other States and subdivisions. Taxable. Rev. Laws 1912, Sees. 3621 and 3622. 5. State bicome Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 76 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS NEW HAMPSHIRE 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Opinion of the Justices, 77 N. Hamp. 611 ; 93 Atl. 311. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if bearing interest at a rate not exceeding 5 per cent. Laws 1913, Ch. 112, Sec. 1. 3. Bonds of subdivbions of the State. Bonds of counties, municipalities, school districts or vil- lage precincts bearing interest at a rate not exceeding five per cent are exempt. Laws 1913, Ch. 112, Sec. 1. 4. Bonds of other States and subdivbions. Taxable. Public Stats. Title 9, Ch. 55, Sec. 7, Subd. 1, and Ch. 56. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL , STATE AND MUNICIPAL BONDS 77 NEW JERSEY 1. Bonds of the United States and Territories. Exempt. Kev. Stats. U. S., Sec. 3701. Laws 1918, Ch. 236 as amended by Laws 1920, Ch. 296. State, et al. v. Haight, 34 N. J. L. 130. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Laws 1918, Ch. 236, as amended by Laws 19'20, Ch. 296. 3. Bonds of subdivisions of the State. Exempt. Laws 1918, Ch. 236 as amended by Laws 1920, Ch. 296. 4. Bonds of other States and subdivisions. Taxable. Laws 1918, Ch. 236, Sees. 202 and 301. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 78 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS NEW MEXICO 1. Bonds of the United States and Territories. Exempt, Rev. Stats. U. S., See. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Const. Art. 8, See. 3. 3. Bonds of suhdivbions of the State. Bonds of counties, towns, cities, and districts are exempt. Const. Art. 8, See. 3. 4. Bonds of other States and subdivisions. Taxable. Stats. Anno. 1915, Sees. 5427 and 5437. 5. State hicome Tax. Interest upon bonds or securities of the United States, or the State, or any municipality thereof is exempt. Laws 1919, Ch. 123. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 79 NEW YORK 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Tax Law, Sec. 4, Subd. 6. Laws 1920, Ch. 647. 3. Bonds of subdivisions of the State. Bonds of all civil subdivisions of the State are exempt. Tax Law, Sec. 4, Subd. 6. Laws 1920, Ch. 647. 4. Bonds of other States and subdivisions. Exempt, except as to income. Laws 1920, Ch. 647. 5. State Income Tax. The income derived by natural persons, resident in the State from bonds other than bonds of the U. S. or its possessions, or bonds issued under the Federal Farm Loan Act of July 17, 1916, or bonds issued by the War Finance Corporation, or obligations of the State of New York or of any political subdivision thereof, or bonds upon which the Secured Debt Tax, provided for in Sec. 332 of the Tax Law, has been paid since June 1, 1917, accrued during the years for which said tax was paid, is subject to an income tax. Income derived from bonds by a non-resident is not taxable. Tax Law, See. 359, as amended by Laws 1920, Ch. 695. See Travis v. Yale & Towne Mfg. Co. 252 U. S. 60. It will be noted that bonds upon which the Secured Debt Tax has been paid since June 1, 1917, are exempted from the provisions of the above act. The original Se- cured Debt Tax Law, Laws 1911, Ch. 802, perpetually exempted from future taxation securities upon which 80 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS the tax had been paid under that act. The Income Tax Law of 1919 attempts to withdraw that exemption and to subject to taxation income derived from bonds which the State, for a valuable consideration had con- tracted to exempt from future taxation. It would seem that this provision of the act impairs the obligations of contracts and is unconstitutional. See discussion of the right of a State to withdraw an exemption from taxa- tion, ante, Sees. 46-52. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 81 NORTH CAROLINA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees., 11-12. 2. Bonds of the State. Exempt, if issued since January 1, 1853. Consol. Stats. 1919, Vol. 2, Sec. 7410. PuUen V. Corporation Comm'n. 152 N. C. 548; 68 S. E. 155. 3. Bonds of subdivisions of the State. Taxable. Const. Art. 5, See. 3. Consol. Stats. 1919, Vol. 1, Sec. 2682. Com'rs V. Webb, 160 N. C. 594; 76 S. E. 552. 3a. Possibly bonds of municipal corporations of the State may be exempted from local taxation. Consol. Stats. 1919, Vol. 1, Sec. 2682. In Com'rs v. Webb, supra, Supreme Court of N, C. said, "We do not know of any county or municipal bonds being exempted, but, if it can be done, the exemption would only extend to taxes of the county or municipality issuing such bonds. ' ' 4. Bonds of other States and subdivisions. Taxable. Const. Art. 5, Sec. 3. Pub. Laws 1919, Ch. 203, Sees. 30, 39 and 40. 5. State Income Tax. The income derived from property already taxed is exempt. Laws 1919, Ch. 90. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as weU as in the hands of residents, unless otherwise noted. 82 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS NORTH DAKOTA 1. Bonds of the United States and Territories. Exempt. Kev. State. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Bank Bonds, issued under Laws 1919, Ch. 148, are exempt from all taxation under the terms of that act. Mill & Elevator Bonds, issued under Laws 1919, Ch. 153, are likewise exempt from all taxation under the terms of that act. Prior to the amendment of Section 176 of the Constitu- tion (Laws 1919, Ch. 90) the power to exempt bonds from taxation was questionable. Other bonds are tax- able at the rate of three mills on each dollar of the fair cash value, except in the hands of incorporated banks or building and loan associations situated in the State. Laws 1917, Ch. 230, Sec. 1. 3. Bonds of subdivisions of the State. Taxable at the rate of three mills on each dollar of the fair cash value except in the hands of incorporated banks or building and loan associations situated in the State. Laws 1917, Ch. 230, Sec. 1. 4. Bonds of other States and subdivisions. Taxable at the rate of three mills on each doUar of the fair cash value except in the hands of incorporated banks or building and loan associations situated in the State. Laws 1917, Ch. 230, Sec. 1. 5. State Income Tax. The income derived from bonds of the United States and its possessions, bonds of the State and the political sub- divisions thereof, and from bonds issued under the pro- visions of the Federal Farm Loan Act of July 17, 1916, and amendments thereto, is exempt. Laws 1921, Ch. 123. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, S TATE AND MUNICIPAL BONDS 83 OHIO 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued prior to Jan. 1, 1913. Const., Art. 12, Sec. 2. Taxable, if issued since Jan. 1, 1913. Const. Art. 12, Sec. 2. Anno. Gen. Code, Sec. 5328. 3. Bonds of subdivisions of the State. Bonds of cities, villages, hamlets, counties, or townships, or bonds which have been issued in behalf of the public schools are exempt, if issued prior to Jan. 1, 1913. Bonds issued since that date are taxable. Const. Art. 12, Sec. 2. Anno. Gen. Code, Sec. 5328. 4. Bonds of other States and subdivisions. Taxable. Anno. Gen. Code, Sec. 5328. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 84 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS OKLAHOMA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Rev. Stats. 1910, Sec. 7302, as amended by Laws 1915, Ch. 107. Article 5, Sec. 50 of the Constitution prohibits the legis- lature from exempting property from taxation "except as otherwise provided in this constitution." The Su- preme Court of Oklahoma has held, however, that this prohibition was not intended to deny to the State the power to exempt its own bonds from taxation. Such bonds were held not to constitute property within the meaning of Art. 5, Sec. 50 of the Constitution. See In Re First Nat. Bank of Chickasha, 58 Okla. 508; 160 Pac. 469. See also In Re First State Bank of Okla- homa City, 171 Pac. 864. See ante, 'Sees. 24-45. 3. Bonds of subdivisions of the State. Exempt. Rev. Stats. 1910, Sec. 7302, as amended by Laws 1915, Ch. 107. The constitutionality of this exemption has not expressly been sustained by the Supreme Court of Oklahoma, but, as the political subdivisions of a state are merely its agencies created for governmental purposes, it would seem that the reasoning of the Supreme Court in the case of In Re Assessment of First National Bank of Chickasha, supra, is likewise applicable to the bonds of such subdivisions, and that such bonds also are not property within the meaning of Art. 5, Sec. 50 of the Constitution. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 85 See Penick v. Foster, 129 Ga. 217; 58 S. E. 773, where the Supreme Court of Georgia sustained this construc- tion. See ante, Sees. 24-45. 4. Bonds of other States and subdivbions. Taxable. Rev. Stats. 1910, Sec. 7302 as amended by Laws 1915, Ch. 107. Secured Deht Act : The owner of any bond may pay to the county treasurer a tax of two per centum of the face amount thereof for five years, or for a greater or less number of years at the same rate, whereupon the county treasurer shall make an endorsement on the bond certifying that it is exempt from taxation for the period for which the tax has been paid. Laws 1917, Ch. 264. Act cited in Salmon v. Johnson, 78 Okla. 1821; 189 Pac. 537. This act apparently has never been sustained by the Supreme Court of Oklahoma and in view of the provisions of Art. 10, Sec. 5 of the Constitution declar- ing that '*the power of taxation shall never be sur- rendered, suspended or contracted away" the constitu- tionality of the act is open to question. 5. State Income Tax. The income derived from bonds of subdivisions of the State is subject to the State Income Tax. Rev. Stats. 1910, Sec. 7302, as amended by Laws 1915, Ch. 107. A graduated income tax is provided for by Laws 1915, Ch. 164, as amended by Laws 1917, Ch. 265, and Laws 1921, Ch. 44. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 86 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS OREGON 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Bonds issued on or after May 24, 1921, for building or maintaining public roads, highway bridges, etc., exempt, but income therefrom taxable. Laws 1921, Ch. 355. Other bonds taxable. Oregon Laws 1920, Sees. 4232, 4234 and 4271. 3. Bonds of subdivisions of the State. Bonds issued by counties on or after May 24, 1921, for building or maintaining public roads, highway bridges, etc., exempt, but income therefrom taxable. Laws 1921, Ch. 355. Other bonds taxable. Oregon Laws 1920, Sees. 4232, 4234 and 4271. 4. Bonds of other States and subdivisions. Taxable. Oregon Laws 1920, Sees. 4232, 4234 and 4271. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 87 PENNSYLVANIA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Purdon's Dig., Vol. 7, p. 7613, Sec. 1. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Purdon's Dig., Vol. 7, p. 7613, Sec. 2. 3. Bonds of subdivisions of the State. Subject to a state tax of four mills on the nominal value, which is deducted by the Treasurer of the subdivision from the interest paid upon the bond, unless the bond is held by a non-resident, or unless the municipality contracts to pay the tax. Purdon's Dig., Vol. 7, p. 7618, Sees. 22-24, as amended by Laws 1919', Ch. 375 and Sec. 82. Bonds subject to the above tax are not subject to taxa- tion for county, school or other local purposes. Purdon's Dig., Vol. 7, p. 7618, Sees. 22-24, as amended by Laws 1919, Ch. 375. A county may contract to pay the State tax levied on its bonds issued for road purposes and thus issue "tax free" bonds. Purdon's Dig., Vol. 7, Taxes, Sec. 80. Bonds held by non-residents are taxable if actually located within the State. Purdon's Dig., Vol. 7, p. 7618, Sees. 1 & 22-24, as amended by Laws 1919, Ch. 375. 4. Bonds of other States and subdivisions. Taxable. Purdon's Dig., Vol. 7, Taxes, Sec. 1 and Sees. 22-24, p. 7618, as amended by Laws 1919, Ch. 375. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well aa in the hands of residents, unless otherwise noted. 88 TAXATION OF FEDERAL, STATE AISTD MUNICIPAL BONDS PHILIPPINE ISLANDS 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sec. 13. 2. Bonds issued by the Philippine Islands. Exempt from taxation by the government of the U. S., or by the government of the Philippine Islands, or by any political or municipal subdivision thereof, or by any State, or by any county, municipality, or other municipal subdivision of any State or Territory of the U. S., or by the District of Columbia. 33 U. S. Stats, at Large, 689. 3. Bonds of subdivisions of the Philippine Islands. Exempt (same as above). 33 U. S. Stats, at Large, 689. 4. Bonds of other States and subdivisions thereof. Exempt. Ante, Sec. 16. Bonds issued by Territories or subdivisions may be taxed by the Philippine Islands unless exempted from taxa- tion by act of Congress, but no law actually taxing such bonds has been found. Ante, Sec. 13. 5. Insular Income Tax. None. The income derived from the bonds of the Philippine Islands or its subdivisions is exempt from taxation under the Federal Income Tax Law. U. S. Revenue Law 1918, Sec. 213. Note: Bonds listed above as taxable are taxable in the hands of Hon- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 1 TAXATION OF FEDERAL, S TATE AND MUNICIPAIi BONDS 89 PORTO RICO 1. Bonds of the United States and Territories. Exempt. Rev. Stats., U. S., See. 3701. Political Code, Sec. 291. Ante, Sec. 13. 2. Bonds of the Government of Porto Rico. Exempt from taxation by the government of the U. S., or by the government of Porto Rico, or by any political or muncipal subdivision thereof, or by any state, or by any county, municipality, or other municipal sub- division of any state or territory of the U. S., or by the District of Columbia. 39 U. S. Stats, at Large, Ch. 145, p. 953, as amended, Laws 66th Congress, Public — No. 301. 3. Bonds of subdivisions of Porto Rico. Exempt (same as above). 39 U. S. Stats, at Large, Ch. 145, p. 953, as amended, Laws 66th Congress, Public — No, 301. 4. Bonds of other States and subdivbions. Exempt. Ante, Sec. 16. Bonds of territories and subdivisions are taxable unless exempted from taxation by act of Congress. Pol. Code, Sec. 290. Ante, Sec. 13. 5. Insulaur Income Tax. None. The income derived from the bonds of Porto Rico or its subdivisions is exempt from taxation under the Federal Income Tax Law. U. S. Revenue Law 1918, Sec. 213. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as v?ell as in the hands of residents, unless otherwise noted. 90 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS RHODE ISLAND 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. R. I. Hosp. Trust Co. v. Armington, 22 R. I. 33. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, only when exempted by the law authorizing their issuance. Gen. Laws 19t)9, Tit. 9, Ch. 56, Sec. 2. If not exempted as above, are taxable at uniform rate of 40 cents for each $100 of assessed valuation. Gen. Laws 1909, Tit. 9, Ch. 57, Sec. 11, as added by Laws 1912, Ch. 56, Sec. 1 and Ch. 769. Note : Since 1909 it has been the practice to exempt State bonds from taxation in the statutes authorizing their issuance. 3. Bonds of subdivisions of the State. Taxable at the uniform rate of 40 cents for each $100 of assessed valuation. Gen. Laws 1909, Tit. 9, Ch. 57, Sec. 11, as added by Laws 1912, Ch. 56, Sec. 1, and Ch. 769. 4. Bonds of other States and subdivisions. Taxable at the uniform rate of forty cents for each $100 of assessed valuation. Gen. Laws 1909, Tit. 9, Ch. 57, Sec. 11, as added by Laws 1912, Ch. 56, Sec. 1, and Ch. 769. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 91 SOUTH CAROLINA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Code 1912, Sec. 294 as amended by Laws 1919, p. 136. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Code 1912, Sec. 294 as amended by Laws 1919, p. 136. Nat. Union Bank v. Neil, 106 S. C. 173; 90 S. E. 744, seems to recognize the validity of a statute exempting State bonds from taxation. 3. Bonds of subdivisions of the State. Bonds of cities, counties and school districts, issued after Feb. 21, 1912, are exempt. Laws 1912, p. 682. School district bonds, issued pursuant to the vote of a majority of the qualified voters of the district after March 11, 1908, for the purpose of erecting or equipping school buildings, for maintaining public schools or to pay indebtedness of such districts are also exempt. Code 1912, Sec. 294, as amended by Laws 1919, p. 136. In the case of Chester County v. White Bros., 70 S. C. 433, 50 S. E. 28, the power of the legislature to exempt county bonds from taxation was sustained under Art. 10, Sec. 1 of the Constitution of South Carolina, the exemption being for a municipal purpose. 4. Bonds of other States and subdivisions. Taxable. Code 1912, Sec. 287. 5. State Income Tax. The State Income Tax Law (Code 1912, Sees. 354-360) was repealed by Laws 1918, p. 773. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless other- ise noted. 92 TAXA TION OF FEDEBAIi, STATE AND MUNICIPAL BONDS SOUTH DAKOTA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Ante, Sees. 11-12, 2. Bonds of the State. Exempt. Nat. Surety Co. v. Starkey, 41 S. D. 356 ; 170 N. W. 582. Bonds issued by the State Highway Commission are exempt. Laws 1921, Ch. 127. 3. Bonds of subdivisions of the State. Bonds of counties and municipalities are exempt. Laws 1919, Ch. 109, Sec. 8, Subd. 5. Nat. Surety Co. v. Starkey, 41 S. D. 356 ; 170 N. W. 582. In the above case, the Supreme Court of South Dakota had occasion to construe the provisions of the State constitution authorizing the taxing of property and investments in bonds, also the provisions of the State statutes authorizing the taxation of public securities. The court held it was not intended by the use of the word "bonds" in the constitutional provision to include the public securities issued by the State of South Dakota, its counties or municipalities, and neither was it in- tended by the use of the word "property" to include as taxable the bonds issued by the State of South Da- kota, its counties or municipalities. 4. Bonds of other States and subdivisions. Laws 1919, Ch. 109, Sec. 8, Subd. 5, is susceptible of the construction that it exempts such bonds from taxation. Prior to the enactment of this statute such bonds were taxable. Rev. Code 1919, Sees. 6667 and 6669. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as vrell as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 93 TENNESSEE 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Thompson's Shannon's Code 1917, See. 777. So much of Sec. 690 of said Code as attempts to tax in- come derived from bonds of the United States was held unconstitutional by the Supreme Court of Tennessee. Mosley v. State, 115 Tenn. 52 ; 86 S. W. 714. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after April 15, 1919. Pub. Laws 1919, Ch. 114. In the case of Foster v. Roberts, 142 Tenn. 350 ; 219 S. W. 729, decided March 27, 1920, the Supreme Court of Tennessee reversed its prior rulings to the effect that Const. Art. 2, Sec. 28 prohibited the legislature from exempting bonds from taxation and held that Ch. 114, Pub. Laws 1919, exempting State Bonds from taxation, is constitutional. Prior to this decision the Supreme Court had held that the legislature could not exempt from taxation property not enumerated in the consti- tution of the State. See Keith v. State, Funding Board, 127 Tenn. 441, 155 S. W. 142. The court based its decision on the fact that the issuance of bonds by a state is an exercise of its sovereign power to contract, which power is distinct from the taxing power and not subject to the limitations upon the exer- cise of that power. Consequently the state might con- tract to exempt its obligations from taxation. It was also held that such bonds are not property within the meaning of the taxation clause of the constitution. As the counties and municipalities of the state are mere agencies of the state for governmental purposes, it would seem that the reasoning of the court is equally applicable to the bonds of such subdivisions and that it is likewise within the power of the legislature to exempt such bonds from taxation. 94 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 3. Bonds of subdivisions of the State. Town and city bonds are exempt, if issued after Sept. 2, 1920. Pub. Laws 1920, Ch. 6. County bonds are exempt, if issued after Sept. 3, 1920. Pub. Laws 1920, Ch. 8; Pub. Laws 1921, Ch. 25. All other bonds are taxable. Thompson's Shannon's Code 1917, Sec. 777. 4. Bonds of other States emd subdivisions. Taxable. Thompson's Shannon's Code 1917, Sees. 777 and 779. 5. State Income Tax. The income derived from bonds not taxed ad valorem other than state, county, city and town bonds which are exempted by the acts above mentioned, is taxable on the same basis as other personal property. Thompson's Shannon's Code 1917, Sec. 690. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STA TE AND MUNICIPAL BONDS 95 TEXAS 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Waco V. Amicable Life Ins. Co., 230 S. W. 698. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Vernon's Sayle's Civil Stats. 1914, Arts. 7503 and 7505. 3. Bonds of subdivisions of the State. Taxable. Vernon's Sayle's Civil Stats. 1914, Arts. 7503 and 7505 County, city and town bonds, issued to compromise and fund bonded indebtedness, are exempt from taxation by the subdivision issuing them. Vernon's Sayle's Civil Stats. 1914, Art. 689. 4. Bonds of other States and subdivisions. Taxable. Vernon's Sayle's Civil Stats. 1914, Arts. 7503 and 7505. State V. Fidelity & Deposit Co., 35 Tex. Civ. App. 214; 80 S. W. 544. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 96 TAXATION OF FEDERAL, STATE AND MUNICIPAIj BONDS UTAH 1 . Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., See. 3701. Salt Lake City Nat. Bank v. Golding, 2 Utah 1. Ante, Sees. 11-12. 2. Bonds of the State. All outstanding bonds are, by the various statutes author- izing their issuance, exempt from taxation for any pur- pose within the State of Utah. State bonds are not in- cluded among the properties which the legislature is ex- pressly authorized to exempt from taxation by Art. 13, Sec. 3 of the constitution. The power of the legisla- ture to exempt from taxation property not enumerated in that section of the constitution, has never been passed upon by the Supreme Court of Utah. The power of the legislature to exempt state bonds from taxation under similar constitutional provisions has been sustained, however, in other states. See ante. Sees. 24-45. Except for the tax exempt provisions in the respective statutes authorizing the issuance of the outstanding state bonds, the bonds would be taxable under Comp. Laws 1917, Sees. 5861 and 5865. 3. Bonds of subdivbions of the State. Taxable. Comp. Laws 1917, Sees. 5861 and 5865. 4. Bonds of other States and subdivisions. Taxable. Comp. Laws 1917, Sees. 5861 and 5865. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residerts if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. I TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 97 VERMONT 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Gen. Laws 1917, Sec. 684, exempts U. S. securities which are specially exempt from taxation by the laws of the U. S. at the time of listing personal property and also provides that interest and income from such securities may be taxed like other personal estate. This provision, so far as it attempts to tax bonds of the U. S. or of the territories thereof, or the interest or income from such bonds, is clearly unconstitutional. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued after Dec. 4, 1912, at a rate of interest not exceeding 4 per cent per annum, or if issued after Mar. 1, 1919, at a rate of interest not exceeding 5 per cent, per annum. Gen. Laws 1917, Sec. 684, Subd. 12, as amended by Laws 1919, Act No. 25. 3. Bonds of subdivbions of the State. Bonds of counties, towns, town school districts, villages, or incorporated school or fire districts, issued after De- cember 4, 1912, at a rate of interest not exceeding 4 per cent, and such bonds issued after March 1, 1919, at a rate of interest not exceeding 5 per cent are exempt. Gen. Laws 1917, Sec. 684, Subd. 12, as amended by Laws 1919, Act. No. 25. 4. Bonds of other States and subdivisions. Taxable. Gen. Laws 1917, Sec. 703. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 98 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS VIRGINIA 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt, if issued between February 14, 1882, and Feb- ruary 1, 1904, or if thereafter exempted by the statutes authorizing their issuance. Const. Art. 13, Sec. 183. Code (Annotated) 1919, Sec. 2301. 3. Bonds of subdivisions of the State. Bonds of drainage districts, issued under Tit. 15, Ch. 73, Code 1919, are exempt from county and municipal taxation. Code (Annotated) 1919, Sec. 1774. Bonds issued by counties, cities or towns and school boards thereof may be exempted by the authorities of such localities from local taxation. Const. Art. 13, Sec. 183. Code (Annotated) 1919, Sec. 2302. 4. Bonds of other States and subdivisions. Taxable. Code (Annotated) 1919, Sees. 2306 and 2307. 5. State Income Tax. All interest upon notes, bonds, or other evidences of debt of every description, including those of other States, or other countries (except bonds of this State and of the U. S.), is subject to the income tax. Laws 1918, Ch. 219. Interest on bonds of drainage districts issued under Code (Annotated) 1919, Tit. 15, Ch. 73, is exempt from in- come taxes. Code (Anotated) 1919, Sec. 1774. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 99 WASHINGTON 1. Bonds of the United States and Territories. Exempt. Eev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt. Remington's 1915 Codes and Statutes, Sec. 9093. State, ex rel. Wolff v. Parmenter, 50 Wash. 164 ; 96 Pae. 1047. 3. Bonds of subdivisions of the State. Bonds of counties, municipalities, and school districts are exempt. Remington's 1915 Codes and Statutes, Sec. 9093. 4. Bonds of other States and subdivisions. Bonds of states, counties, municipalities, and school dis- tricts are exempt. Remington's 1915 Codes and Statutes, Sec. 9093. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 100 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS WEST VIRGINIA 1. Bonds of the United States and Territories. Exempt, Kev. Stats. U. S., Sec. 3701. Old Nat. Bank v. County Court, 58 W. Va. 559 ; 52 S. B. 494. Ante, Sees. 11-12. 2. Bonds of the State. The only bonded debt ever incurred by the State is the issue of bonds delivered to the State of Virginia in set- tlement of West Virginia's share of the debt of that State as determined by the Supreme Court of the United States. The Act authorizing the issuance of those bonds (Laws Extra Session 1919, Ch. 10) provides that they shall be exempt from taxation. Neither State nor municipal bonds are included among the properties which the legislature is expressly authorized to exempt from taxation by Art. 10, Sec. 1 of the constitution. The power of the legislature to exempt from taxation property not enumerated in that section of the consti- tution has never been passed upon by the Supreme Court of Appeals of the State. The power of the legis- lature to exempt state bonds from taxation under simi- lar constitutional provisions has been sustained, how ever, in other states. See ante, 'Sees. 24-45. Except for the statute above noted, the bonds would have been taxable under Code 1913, Sees. 945-946. 3. Bonds of subdivisions of the State. Taxable. Code 1913, Sees. 945-946. Section 1547 of the Code of 1913 provides that bonds of counties issued under Sec. 1546 of the Code of 1913, for refunding purposes shall be exempt from county, district or municipal taxation, if so provided on the face of the bonds. The constitutionality of this statute^, however, has never been decided. Banks and trust companies are not required to list per- TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 101 sonal property for taxation, and, accordingly, in the hands of such institutions such bonds are not taxed. See Code 1913, Sec. 961-963. 4. Bonds of other States and subdivisions. Taxable. Code 1913, Sec. 947. 5. State Income Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. 102 TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS WISCONSIN 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Taxable. Wis. Stats. 1919, Sees. 1034 and 1038, subd. 10. Note: Apparently all outstanding evidences of debt of the State of Wisconsin are held by the Board of Com'rs of the Trust Funds in whose hands outstanding State Bonds would be exempt from taxation. State V. Donald, 160 Wis. 21 ; 151 N. W. 331. 3. Bonds of subdivisions of the State. Bonds issued by counties, towns, cities, villages, school districts or boards of school directors of any town or- ganized under the township system of school govern- ment in the State are exempt. Wis. Stats. 1919, Sec. 1038, Subd. 2m. 4. Bonds of other States and subdivisions. Taxable. Wis. Stats. 1919, Sees. 1034 and 1038, Subd. 10. 5. State Income Tax. AU interest derived from money invested in notes, mort- gages, bonds, or other evidences of debt of any kind whatsoever is taxable. Wis. Stats. 1919, Sec. 1087M-2. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. TAXATION OF FEDERAL, STATE AND MUNICIPAL BONDS 103 WYOMING 1. Bonds of the United States and Territories. Exempt. Rev. Stats. U. S., Sec. 3701. Ante, Sees. 11-12. 2. Bonds of the State. Exempt in the hands of residents, provided the owners list the same annually on their assessment schedule, marking opposite thereto the word * * exempt. ' ' Taxable in the hands of non-residents if having an actual situs in the State. Comp. Stats., Sec. 2323. It would seem that this statute violates Art. 4, Sec. 2 of the Constitution of the United States by denying citizens of other states an immunity granted to citizens of Wyoming. See Travis v. Yale & Towne Mfg. Co., 252 U. S. 60. 3. Bonds of subdivisions of the State. Bonds of counties, school districts, and municipalities are exempt in the hands of residents, provided the owners list the same annually on their assessment schedule, marking opposite thereto the word * ' exempt. ' ' All bonds are taxable in the hands of non-residents if hav- ing an actual situs in the State. Comp. Stats., Sec. 2323. Is this Act constitutional ? See preceding paragraph rela- tive to State Bonds. 4. Bonds of other States and subdivisions. Taxable. Comp. Stats., See. 2324. 5. State hicome Tax. None. Note: Bonds listed above as taxable are taxable in the hands of non- residents if having an actual situs in the State as well as in the hands of residents, unless otherwise noted. INDEX Bondholders. page rights of, where recital as to exemption from taxation is invalid 30 Bonds. distinction between bonds and notes ordinarily one of name only 39 Capital Stock. element of taxable value when in hands of cor- poration 36 Certificates of Indebtedness. principles of taxation applicable to bonds, fre- quently applied to 39 Congress. may authorize States to tax Federal agencies .... 38 Constitutional Limitations. due process of law 3 upon Federal taxing power 2 upon taxing power of States ., 3 Contracting Power. taxation of 17 is a governmental function 17 Contracts. when exemptions from taxation are 19 when exemptions from taxation are not 19 Secured Debts Acts authorize contracts for ex- emption from taxation 20 105 106 INDEX Contractual Rights. page none conferred by invalid recital ^ 30-31 Corporate Stock. taxation of, 35, 39 effect upon capital invested in tax-exempt securities 36 not a tax upon capital of corporation 35 collection of taxes upon 37 State may require corporation to pay tax. . 37 not taxed when corporation or capital stock exempt ^- 37-38 Corporation. may be exempted from payment of taxes by contract 37-38 Coupons. tax on bond cannot be applied to coupons sep- arated from bond 7 District of Columbia. bonds of, not taxable by States 4 Direct Tsixes. general classes of ^ 21 of Federal Government must be apportioned among the States 3, 23 Double Taxation. taxation of property and income therefrom not . . 21 not prohibited by Federal constitution 30 Due Process of Law. contractual obligations may not be impaired without 18 attempt to tax bonds without jurisdiction de- prives owner of _. 28 INDEX 107 Estoppel. PAGE cannot be invoked when recital as to exemption is invalid 31 recital must cover matters of fact .j 31 Exemption. effect of invalid recital as to 30-32 Exemption From Taxation. as a property right ^ 18 when a contract 19 when not a contract 19 effect upon power to tax income of security 26-27 power of the United States to withdraw 18 power of Territories to withdraw 18-19 power of State to withdraw 19-20 power of legislature to exempt State and munici- pal bonds 8 effect of constitutional limitations 8-18 effect of uniformity clause 8-18 Georgia rule 10 Louisiana rule 10 Missouri rule 13 Montana rule j. 14 North Carolina rule 11 Oklahoma rule 12 South Carolina rule 11 South Dakota rule 13 Tennessee rule 9 no distinction between State and municipal bonds 16 exceptions to rule discussed ^ 14 summary of decisions 14-18 108 INDEX Federal Agency. page territories may tax unless restrained by Act of Congress ., 25, 38 Federsd GovernmenL relation to States 5 property and instrumentalities of, not taxable by States 16 Fifth Amendment. prohibits United States from impairing obligation of contracts 18 Fourteenth Amendment. does not apply to United States ._ 18 Franchise Taxes. nature of 35 may be levied upon exempt securities 35 power of States to levy 35 Fraud. invalid recital of tax exemption no ground for action on theory of fraud 31-32 Governmental Function. borrowing of money is an exercise of 17 taxation of 17 Income Teixes. nature of tax ^.^ 20 not a property tax 20-21 not a direct personal tax 21 not a privilege tax 21 power to enact not dependent upon constitutional grant 20 INDEX 109 PAGE graduated taxes held constitutional 21 taxation of non-residents 21 jurisdiction of person not required 21 Inheritance Taxes. constitutionality of 33 power of levy 33 levied upon right to inherit 34 may be levied upon exempt securities 34 may be levied upon bequest to United States. . . 35 power of United States to levy 35 Interpretation of Lavrs. is province of courts 31 Interstate Commerce. may not be taxed by States 3 income tax on non-resident not tax upon 21 Instrumentality of Government. taxation of 16 Invalid Recital. effect when exemption unauthorized 30-32 does not affect validity of bond 30 Legislature. power to exempt State and municipal bonds .... 8 effect of uniformity clause on power to exempt bonds from taxation 8-18 may authorize municipalities to exempt bonds from local taxation 32 Lex Situs. governs taxation of tangible personal property of non-resident 28 governs taxation of public securities of non- resident 28 110 INDEX Municipal Bonds. not taxable by United States not taxable by Territories may be taxed by other States may be taxed by municipalities power of United States to tax income of Territories may not tax income of State may tax income of Municipal Corporation. is political subdivision of State Municipalities. cannot exempt bonds unless authorized by statute power to exempt bonds from local taxation cannot be held on warranty because of invalid recital National Banks. are Federal agencies. rule in Oklahoma as to taxation of stockholders of taxation of stock of Non-Residents. may not be taxed at higher rate than resident double taxation of taxation of bonds of taxation of income of bonds owned by subject to income tax on income earned in State subject to income tax on income received from residents tax may not be deducted from interest paid to . . . may not be taxed at higher rate than residents . . tax may not be deducted from interest on bonds of situs for taxation of personal property of PAGE 5 6 7 7 22-25 25 26 17 30-31 32 31 38 38 38 29-30 30 28-29 21 21 21 6-7 3 29 27 INDEX 111 North Carolina. page distinction between State and municipal bonds . . 16 Notes. distinction between notes and bonds ordinarily one of name only 39 principles of taxation applicable to bonds, fre- quently applied to 39 Obligation of Contract. may not be impaired by United States 18 impaired by deducting tax from interest paid non-resident 6-7, 29 not impaired by deducting tax from interest paid resident 7 may not be impaired in taxing bonds 7 impaired by applying tax on bond to coupons separated therefrom 7 Oklahoma. rule as to taxation of stockholders of National banks , 38 Privilege Taxes. nature of 35 power of States to levy 35 effect upon exempt securities 35 Property. of corporation, element in determining taxable value of stock 36 Property Right. exemption from taxation as 18 Residents. may not be taxed at lower rate than non-residents 29-30 tax may be deducted from interest on bonds of. . 6-7 112 INDEX Secured Debt Acts. page constitutionality of 32-33 authorize contract for exemption from taxation . . 20 ordinarily provide for exemption from taxation for limited period 32 Securities. if converted to defraud government money in- vested is taxable 33 Situs for Taxation. of bonds of non-residents 28 temporary presence of bond in the State does not fix 29 Sixteenth Amendment. necessity for 23 effect of 23-24 Special Legislation. constitutionality of exemptions by special act. . . 8 State Bonds. not taxable by United States 5 not taxable by Territories 6 may be taxed by the State 6 may be taxed by other States 7 power of United States to tax income of 22-25 Territories may not tax income of 25-26 State may tax income of 26-27 States. each State a sovereign State ^ 1 power of taxation inherent 1 taxation of 17 property of, presumed exempt from taxation .... 16-17 INDEX 113 may not tax income of Federal bonds power to tax income of State bonds power to tax income of municipal bonds power to tax income of bonds exempt from taxa- tion may contract to exempt bonds from taxation. . , . power to withdraw exemption from taxation obligation of contracts may not be impaired by. . Fourteenth Amendment applies only to power to levy franchise or privilege taxes power to tax stock of National banks no inheritance tax on devise to, unless expressly levied Stock. shares of, element of taxable value in hands of stockholders Surplusage. invalid recital must be regarded as Taxing Power. definition subjects of includes all methods of taxation of the United States of the States extent of power of the States limitations upon Federal taxing power constitutional limitations upon taxing power of States purposes for which it may be exercised power to select subjects of taxation power of States to tax Federal agencies and property PAGE 26 26 26 26-27 20 19-20 19 18 35 38 35 36 32 1 1 20 1 1 1-2 2 3 2 2 114 INDEX power of States to tax non-residents at higher rate power of States to tax interstate commerce Taxpayer. cannot evade taxation by temporarily converting property Territorial Bonds. power of Federal Government to tax not taxable by States power of Territories to tax income of exempt from Federal income tax Territories may tax income of State may not tax income of Territories. not sovereign States relation to Federal Government power of taxation not inherent in taxing power delegated by United States may not tax income of municipal bonds. .^ may not tax income of State bonds may tax Federal agency unless restrained by Act of Congress power to withdraw exemption from taxation .... Uniformity Clause. application to exemption of bonds from taxation PAGE 3 3 33 3 4 4-5 22 25 26 6 1,22 1 6 25-26 25-26 25,38 18-19 8-18 United States. may not tax States or their instrumentalities .... property of States and municipalities not taxable by Congress may tax income of Federal bonds 5 21-22 INDEX 115 Congress may tax iucome of territorial bonds .... taxing power not extended by the Sixteenth Amendment power to levy inheritance taxes power to levy franchise or privilege taxes Fourteenth Amendment does not apply to Fifth Amendment prohibits impairment of con- tractual obligations by power to withdraw tax exemption United States Bonds. power of Federal Government to tax not taxable by States power of Territories to tax power of Congress to tax income of taxation of income of by Territories State may not tax income of Warranty. municipality cannot be held on, because of in- valid recital PAGE 22 24 35 35 18 18 18 3 4 4-5 21-22 25 26 31 J. xiis uooK IS jj u jj on tne last date stamped below 10*4) LO-ua u DEC € 1972 5m-6,'41(3644) AA 000 892 637