Opinion
Nos. 36781 and 36782
Decided July 12, 1961.
Taxation — Intangible personal property — Shares of stock in financial institutions — Section 5725.04, Revised Code — Exemptions — Charitable institutions — Section 5709.04, Revised Code.
1. Under the provisions of Section 5725.04, Revised Code, relating to stock in Ohio financial institutions, all shares of such stock owned by foreign or domestic insurance companies, or by resident or nonresident dealers in intangibles, are subject to the intangible personal property tax.
2. Under the provisions of Section 5709.04, Revised Code, such shares of stock owned by charitable institutions are not subject to such tax.
APPEALS from the Board of Tax Appeals.
On November 13, 1959, the Tax Commissioner of Ohio entered an order imposing an intangible personal property tax assessment on certain shares of stock of The National City Bank of Cleveland held by five different classes of shareholders during the years 1957 and 1958.
On an appeal to the Board of Tax Appeals, the order of the Tax Commissioner was affirmed except as to the assessment against shares of stock held by the class of shareholders known as charitable institutions.
The controversy is in this court by reason of appeals by both the National City Bank and the Tax Commissioner. The bank's appeal relates to the four classes of shareholders whose shares of stock were held taxable, while the commissioner's appeal involves the one class — charitable institutions — whose shares of stock were held exempt.
Messrs. McAfee, Hanning, Newcomer Hazlett, Mr. Rufus S. Day, Jr., and Mr. Bradford P. Colcord, for appellant in cause No. 36781 and appellee in cause No. 36782.
Mr. Mark McElroy, attorney general, and Mr. Joseph L. White, for appellees in cause No. 36781 and appellant in cause No. 36782.
As presented by the parol evidence, stipulations and exhibits, the controlling facts are not in dispute.
The questions of law here presented require the application of several statutes, especially Section 5725.04, Revised Code, which reads:
"All the shares of the stockholders in a financial institution located in this state, incorporated or organized under the laws of the state or the United States, the capital stock of which is divided into shares, except shares defined as deposits in Section 5701.05 of the Revised Code, and all the shares of the stockholders in an unincorporated financial institution located in this state, the capital stock of which is divided into shares held by the owners of such financial institution, and all the ownership interests of the depositors in the capital employed in an incorporated financial institution located in this state, the capital of which is not divided into shares, or which has no capital stock, and the capital employed, or the property representing the capital, in any other financial institution located in this state, the capital of which is not divided into shares, or which has no capital stock, shall be listed and assessed at the book value thereof, and taxed in the manner provided in Sections 5725.01 to 5725.26, inclusive, of the Revised Code.
"The capital employed in an incorporated financial institution located in this state, the capital of which is not divided into shares, or which has no capital stock, shall be deemed to mean and describe the ownership interests of the depositors in such incorporated financial institution and not any of the capital or property of or belonging to such incorporated financial institution."
In clear unambiguous terms it is provided in this statute that it is applicable to "all" such shares with the single exception of "shares defined as deposits in Section 5701.05 of the Revised Code."
A study of the above-quoted language of Section 5725.04 discloses that the tax there levied is not a tax on either foreign or domestic insurance companies or on dealers in intangibles. Instead it is a tax on "all the shares of the stockholders in a financial institution located in this state."
The bank contends that these classes of stockholders are impliedly exempted from payment of this tax by reason of the provisions of Sections 5725.25 and 5725.26, Revised Code. However, these sections significantly provide merely that these stockholders are not required to return the financial institution tax. This is quite different from the allowance of an exemption or exception which must be clear and not predicated on mere inference. National Tube Co. v. Glander, Tax Commr., 157 Ohio St. 407.
In referring to the provisions of Section 5725.04, Revised Code, supra, the Board of Tax Appeals said:
"The language of this section seems quite clear and even though appellant argues that the last two sections of Chapter 5725 of the Revised Code, namely, Sections 5725.25 and 5725.26, clearly exclude shares in a financial institution owned by foreign insurance companies, domestic insurance companies and resident and nonresident dealers in intangibles, we cannot subscribe to such a conclusion. The board is of the view that the provisions of Section 5725.04, Revised Code, above noted, impose a tax upon shares of stockholders in a financial institution and not upon domestic or foreign insurance companies or resident or nonresident dealers in intangibles."
With reference to the fifth class of stockholders known as charitable institutions involved in the appeal by the Tax Commissioner, the Board of Tax Appeals analyzed the matter as follows:
"It appears to us that the only shares of a stockholder in a financial institution which are clearly exempted from taxation are those held by that class referred to and listed by appellant as charitable institutions.
"Section 5709.04, Revised Code, provides as follows:
"`Money, credits, investments, deposits, and other intangible property belonging, either legally or beneficially, to corporations, trust[s], associations, funds, foundations, or community chests, organized and operated exclusively for religious, charitable, scientific, literary, health, hospital, educational, or public purposes, exclusively for the prevention of cruelty to children or animals, or exclusively for contributing financial support to any such purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation, shall not be subject to taxation.'
"This statute, which must be read in pari materia with Chapter 5725 of the Revised Code, and in particular with the provisions of Section 5725.04, Revised Code, unequivocally spells out a clear-cut exception to Section 5724.04, Revised Code, inasmuch as it provides that investments belonging either legally or beneficially to charitable institutions shall not be subject to taxation.
"No such clear-cut exception has been brought to the board's attention by the appellant with respect to the other four classes of shareholders."
This court is of the opinion that the decision of the Board of Tax Appeals is correct as to all five classes of stockholders, and therefore such decision is hereby affirmed.
Decision affirmed.
ZIMMERMAN, J., concurs.
TAFT, MATTHIAS and O'NEILL, JJ., concur in paragraph two of the syllabus and in the judgment as to case No. 36782.
BELL and RADCLIFF, JJ., concur in paragraph one of the syllabus and in the judgment as to case No. 36781 but dissent from paragraph two of the syllabus and from the judgment as to case No. 36782.
RADCLIFF, J., of the Fourth Appellate District, sitting by designation in the place and stead of HERBERT, J.
I concur in the judgment in case number 36782, in paragraph two of the syllabus relating thereto, and also in that part of the judgment in case number 36781 relating to bank shares owned by nonresidents of Ohio.
However, in my opinion, the General Assembly has expressly and specifically provided that bank shares owned by a foreign insurance company or by a domestic insurance company or by a dealer in intangibles shall not be subject to the tax levied by Section 5725.04, Revised Code, on shares in a financial institution.
Section 5725.25, Revised Code, reads:
"The real estate of a domestic insurance company shall be taxed in the place where it is located, the same as the real estate of other persons is taxed, but the tax provided for by Sections 5725.01 to 5725.26, inclusive, of the Revised Code, shall be in lieu of all other taxes on the other property and assets of such domestic insurance company and of all other taxes, charges, and excises on such domestic insurance companies, and of all other taxes on the stockholders, members, or policyholders of such company by reason of their stock or other interest in such insurance company, except as to annuities or the right to receive the proceeds of a policy payable after its maturity in installments, or left with the company at interest. Sections 5725.01 to 5725.26, inclusive, of the Revised Code do not assess any tax on any foreign insurance company or affect any tax on a foreign insurance company under any laws of this state." (Emphasis added.)
By " the tax provided for by Sections 5725.01 to 5725.26, inclusive," the General Assembly must have had reference only to the "annual franchise tax on the privilege of being * * * a domestic insurance company" provided for by Section 5725.18, Revised Code. The word "tax" is singular. Thus, that annual franchise tax is to "be in lieu of all other taxes on the other property and assets of such domestic insurance company" other than taxes on real estate. Certainly, bank shares owned by a domestic insurance company are described by the words "other property and assets of such domestic insurance company."
Provision for taxation of foreign insurance companies is made in Chapter 5729 of the Revised Code. This explains the last sentence of Section 5725.25, Revised Code, which states as clearly as any words could that Section 5725.04, Revised Code, does "not assess any tax on any foreign insurance company or affect any tax on any foreign insurance company."
The majority opinion states that the tax levied by Section 5725.04, Revised Code, "is not a tax on * * * foreign * * * insurance companies" but "instead * * * is a tax on * * * shares of" such insurance companies. However, Section 5719.09, Revised Code, twice refers to this tax levied by Section 5725.04, Revised Code, as one "due * * * from the * * * owners of" the "shares," and the provisions of Section 5719.10, Revised Code, for enforcement of payment against such owners make it plain that the tax is a tax against the owners. Any doubt about this should have been removed by cases such as Union Savings Bank of Bellaire v. Pancoast, Treas. (1943), 142 Ohio St. 6, 50 N.E.2d 157; Society for Savings in City of Cleveland v. Peck, Tax Commr. (1954), 161 Ohio St. 122, 118 N.E.2d 651; First Federal Savings Loan Assn. of Warren v. Peck, Tax Commr. (1954), 161 Ohio St. 149, 118 N.E.2d 667; and Second Federal Savings Loan Assn. of Cleveland v. Bowers, Tax Commr. (1958), 168 Ohio St. 65, 151 N.E.2d 223.
Section 5725.26 reads:
"The real estate of a financial institution or dealer in intangibles shall be taxed in the place where it is located, the same as the real estate of persons is taxed, but the taxes provided for in Sections 5725.01 to 5725.26, inclusive, of the Revised Code, shall be in lieu of all other taxes on the other property and assets of such institution or dealer." (Emphasis added.)
In this section, unlike in Section 5725.25, Revised Code, the word "taxes" in the plural instead of "tax" in the singular is used.
Section 5725.26, Revised Code, was derived from Section 5409, General Code, relating to financial institutions, and Section 5414-3, General Code, relating to dealers in intangibles. Each of these sections used the word "tax" in the singular. The reason for using the plural in Section 5725.26, Revised Code, apparently was that the two General Code sections were combined. Thus, in order to refer to the " tax" on a financial institution and the " tax" on a dealer in intangibles, the two together being "taxes," it was necessary to use the word "taxes" in Section 5725.26, Revised Code.
That the use of the word "taxes" in that section did not effect any change in the law as set forth in the foregoing General Code sections is apparent from Section 1.24, Revised Code, which reads:
"That in enacting this act [ i.e., the Revised Code] it is the intent of the General Assembly not to change the law as heretofore expressed by the section or sections of the General Code in effect on the date of enactment of this act. The provisions of the Revised Code relating to the corresponding section or sections of the General Code shall be construed as restatements of and substituted in a continuing way for applicable existing statutory provisions, and not as new enactments."
The reference in Section 5414-3, General Code, to "the tax provided for in this chapter," which is now included in Section 5725.26, Revised Code, by a reference to "the taxes provided for by Sections 5725.01 to 5725.26, inclusive," necessarily referred only to the tax on dealers in intangibles then provided for by Sections 5414-1 to 5414-7, General Code, and now provided for by Sections 5725.13 to 5725.17, inclusive, Revised Code.
Hence, it is apparent that Section 5725.26, Revised Code, exempts from the tax levied by Section 5725.04, Revised Code, shares of bank stock owned by a dealer in intangibles just as Section 5725.25, Revised Code, exempts from that tax such shares owned by a domestic insurance company.
MATTHIAS and O'NEILL, JJ., concur in the foregoing opinion by TAFT, J.
I concur in that part of the judgment holding that the tax should be collected from certain owners, but dissent from that part of the judgment holding that the tax should not be collected on stock held by charitable institutions. The tax involved in this cause is levied upon the capital shares of banks by the state of Ohio. The tax is paid by the banks, and it is doubted that the owners of the shares are aware of its existence. As long as this condition prevails, the state of Ohio should collect the tax regardless of ownership of the stock.
BELL, J., concurs in the foregoing opinion by RADCLIFF, J.