Tax Type
Property Tax
Description
Bank Stock;Virginia National Bank Decision;Refunds
Topic
Property Subject to Tax
Date Issued
09-19-1974
This is in response to your recent request for my opinion on refunding to banks certain bank stock taxes erroneously paid on behalf of stockholders pursuant to §§. 58-466 and 58-475 of the Code of Virginia (1950), as amended.
Section 58-466, et seq., imposes a tax on the stockholders of banks based on the value of shares of stock in the bank. Valuation of the stock is determined under § 58-471 by adding the capital, surplus and undivided profits of the bank and deducting the assessed value of real estate and leased tangible personal property otherwise taxed in this state. I am advised that prior to the decision of the Virginia Supreme Court in the case of Virginia National Bank v. Commonwealth of Virginia, 214 Va. , 204 S. E. 2d 426 (1974), the Department of Taxation included in capital certain capital notes issued by the bank and collected tax assessed in part thereon. In Virginia National Bank v. Commonwealth, supra, the Virginia Supreme Court held that such capital notes could not be considered a part of bank capital for bank stock tax purposes within the meaning of the foregoing sections.
The Department should be protected against future claims by stockholders in connection with its refunds to banks of that portion of the bank stock tax which was assessed based on the inclusion in capital of capital notes which are to be excluded under Virginia National Bank v. Commonwealth, supra.
The tax levied by § 58-465, et seq., is unquestionably a tax on the stockholders of a bank who are taxed on their shares of stock therein. § 58-466. Richmond Trust Company v. Christian, 150 Va. 244, 142 S. E. 528 (1928). The role of the bank in connection with such taxes is to collect and pay to the Department of Taxation the taxes so assessed. § 58-480. Because the tax is a tax upon the stockholders of the bank, refunds of such taxes improperly paid should be distributed by the collecting banks to the shareholders of record as of January 1 of the year for which such taxes were collected. They should not be added to the assets of the bank. Richmond Trust Company v. Christian, supra.
Based on the foregoing, it is my opinion that the Department should refund bank stock taxes erroneously paid to the banks only to the extent that the banks refund the tax to their stockholders as of January 1 of the year for which the tax was collected and do not add any portion of the refunds to the capital of the bank. In my opinion the Commonwealth would be sufficiently protected against later assertions of claims by the stockholders if the bank files with the Department an indemnity agreement stating that the bank has made or will make proper refund to the stockholders for such taxes erroneously paid.
Attorney General's Opinion