Memphis, Shelby County Ordered to Pay Midland Bank Back Local Taxes

Article excerpt

MEMPHIS -- The Tennessee Supreme Court has ordered the city of Memphis and Shelby County to pay back to Midland Bank & Trust Co. local bank taxes the governments should not have collected in 1977 and 1978.

The order, which Midland's attorney, David Scruggs, said will mean $88,378 in tax refunds and interest for the bank, had gone to the U.S. Supreme Court.

J. Minor Tait Jr., a lawyer for the city, said he will recommend that the city "pay whatever we owe." Mr. Scruggs said that amounts to $42,444.

William C. Bateman Jr., who represented the county, said he has no recommendation to make but will consider Mr. Tait's stance when he reviews the opinion. The city and county have been in accord during most of the legal process, and "I don't anticipate a falling out at this juncture," said Mr. Bateman. Mr. Scruggs said the county's share is $45,934.

Lawyers in the Tennessee attorney general's office will review the opinion and make a decision on whether to file for a rehearing before the State Supreme Court, said Joe C. Peel, assistant attorney general. The state has 10 days to file for a new hearing.

The suit stemmed from a change in local bank and corporate excise tax laws, which impose a tax of 3% of the net earnings of banks doing business in the state, less part of ad valorum taxes paid by the bank. The law taxed interest on U.S. government securities but not income from Tennessee obligations.

The U.S. Supreme Court in January 1983 rules that the tax discriminated against federal securities in violation of U.S. laws and sent the case back to the state courts for further action. Last year, the Tennessee legislature changed the law so that income from federal securities also is exempt from taxes. …