Tax Type
BPOL Tax
Description
National Banks
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
08-21-1972
I have received your letter of July 26, 1972, inquiring in part:
- "The County of Henrico has enacted license tax provisions under the powers granted in § 58-266.3 of the Code of Virginia. It seeks to enforce these against national banks for their gross receipts from the sale of wigs, rings, and other items as part of bank promotions and for their gross receipts from the sale and lease of credit card imprinters.
"One of these banks has resisted this tax on the basis that they were exempt under Public Law 91-156, 12 U. S. C. § 548 (as amended).'
Public Law 91-156, 83 Stat. 434, granted to the states the power to tax national banks in the same manner and to the same extent that they taxed state banks with the exception of a tax upon intangible personal property. During the debates upon this act, concern was expressed regarding the effects of repealing the previous prohibitions upon national bank taxation. It was determined that various states had enacted a tax previously permitted by 12 U. S. C. A. § 548 upon both state and national banks in lieu of taxes imposed upon other businesses. Many of these other tax statutes did not expressly exclude state banks from their operation due to the existence of a statute excluding all state banks from taxes not valid as to national banks. See § 58-466.1, Code of Virginia (1950), as amended. Immediately upon the effective date of Public Law 91-156, such other taxes would be applicable to national banks; and because the state statutes excluding state banks from discriminatory taxation would then be inapplicable, a substantial increase in the total tax burden on all banks in those states would result. The other taxes as well as the in lieu taxes would be applied to all banking organizations and would unbalance banking's share of the state's taxes. To avoid this result, Congress included a saving provision requiring affirmative state action to give the states an opportunity to review their tax policy and presumably to reduce or eliminate the in lieu taxes when they imposed other taxes under the new grant of authority.
The saving provision was not made applicable to the following:
- "(1) any sales tax or use tax complementary thereto,
"(2) any tax (including a documentary stamp tax) on the execution, delivery, or recordation of documents, or
"(3) any tax on tangible personal property (not including cash or currency), or for any license, registration, transfer, excise or other fee or tax imposed on the ownership, use or transfer of tangible personal property,'
The answer to your question turns upon the interpretation of (3) above. Apparently Congress was of the opinion that the automatic imposition of the types of taxes mentioned in (1)(3) would not have the unbalancing effect previously discussed or that such effect would be minimal. Since the General Assembly of Virginia has not affirmatively subjected banks to additional taxation subsequent to the effective date of Public Law 91-156, it is only by including a license tax imposed upon the privilege of doing business and based upon gross receipts within (3) of the exceptions that the Henrico County retail license tax can be applied to national banking institutions.
The Henrico County retail merchant's tax is imposed "upon the privilege of doing business in the county.' See §§ 8-1 and 8-112 of the Henrico County ordinance. Congress apparently did not consider that the exceptions to the saving provision included such taxes, because it provided in § 4 of the act that the Board of Governors of the Federal Reserve System was to study the impact on the banking systems of "income taxes, intangible property taxes, so-called doing business taxes, and any other similar taxes which are or may be imposed on banks' and to report the results in order that Congress might place any limitation upon the imposition of such taxes that might be warranted. It was to prevent the imposition of significant taxes without affirmative state action that the saving provision was included. Intangible property taxes were completely excluded from the additional authority granted to the states by Public Law 91-156, and income taxes and taxes imposed upon the privilege of doing business were deemed of such significance as to require affirmative state action. This conclusion is supported by the Conference Report reprinted in 2 U. S. Cong. & Admin. News 1601, 1602 (1969), which stated that the only exceptions to the saving provision were . . . sales taxes, documentary taxes, and [tangible] property taxes. . . .'
With respect to your reference to First National Bank of Santa Fe v. Commissioner of Revenue, 80 N. M. 699 460 P. 2d 64 (1969), which upheld state taxation of the bank's receipts from a data processing bookkeeping service rendered to other banks, the case does present authority for the proposition that an ultra vires transaction is not shielded by the bank's tax immunity. However, it is doubtful that a bank's sale of articles of tangible personal property as part of a promotional campaign to increase its deposits is ultra vires. Furthermore, I submit that the Santa Fe authority is weakened in view of the subsequent change in state taxation of national banks permitted by Public Law 91-156.
For these reasons, I am of the opinion that the Henrico County license tax cannot presently be applied to a national bank in respect to the transactions under consideration.
Attorney General's Opinion