Supreme Court Tax Decision May Aid Banks: Ruling Upholds Shares Levy, but Sends Signal to States

By Sudo, Philip T. | American Banker, March 21, 1985 | Go to article overview

Supreme Court Tax Decision May Aid Banks: Ruling Upholds Shares Levy, but Sends Signal to States


Sudo, Philip T., American Banker


NEW YORK -- A Supreme Court ruling that states may tax a portion of banks' holdings of federal securities may actually help banks in battling unfair tax laws, legal experts said Wednesday.

On Tuesday, the highest federal court upheld a year-old ruling by the Georgia Supreme Court that banks were required under a 1978 state law to pay taxes on a portion of their holdings in U.S. government obligations.

"This ruling, while technically adverse to the banking industry, ought to quiet things down and send a signal to states: 'No more funny business on tax law,'" said Robert S. Schwartz, an attorney for the Independent Bankers Association of America.

The state law in question, known as the sahres tax, was eliminated in a new tax law passed by the Georgia legislature in 1983 because of questions about the constitutionality of the shares tax. The new law became effective Jan. 1, 1984.

The shares tax law applied only to financial institutions. It permitted the state to levy taxes on banks based on their shareholders' equity, which it considered tangible personal property, allowing deductions for foreclosed property, the value of their buildings, and other items.

Banks argued that their holdings in tax-exempt federal obligations should also be deductible. Bartow County Bank, a $20.3 million-asset bank based in Cartersville, Ga., filed suit, and was joined by First National Bank of Atlanta and Citizens & Southern National Bank, also of Atlanta.

The constitutionality of the law was originally upheld in the Bartow County Superior Court and the Georgia Supreme Court. However, in July 1983, the U.S. Supreme Court struck down a similar law in Texas, stating that Congress meant to prohibit state taxes "to the extent they consider federal obligations in the computation of the tax." Georgia Court Compromises

Last year, the Georgia Supreme Court reconsidered its earlier ruling and struck a compromise position, stating that banks could deduct a portion of their federal obligations -- only those that it considered as assets.

The U.S. Supreme Court upheld the compromise Tuesday, ruling that exclusion "may be limited by charging the obligations and their interest a fair share of related expenses or burdens."

The high court warned, though, that the tax exemption on U.S. obligations "is not a tax shelter." It said, "Federal obligations may be acquired, in part, by liabilities, and, when they are, a pro rata method of allocating a fair share of the obligations to liabilities does not infringe upon the constitutional or statutory immunity the obligations enjoy."

Warren Akin, an attorney for Bartow County Bank, said: "I don't think the ruling is correct, but that's what they said, so we'll just have to pay tax on whatever it is.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Supreme Court Tax Decision May Aid Banks: Ruling Upholds Shares Levy, but Sends Signal to States
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.