Opinion
Nos. 29791, 29792, 29793, 29794 and 29795
Decided April 19, 1944.
Taxation — Incorporated financial institution — Section 5407, General Code — Federal savings and loan association — Capital divided into shares withdrawable in money taxable as deposits — In addition to surplus or reserves and undivided profits — Sections 5324 and 5412, General Code — Listing day for deposits different from surplus or reserves and undivided profits, when — Section 5411-1, General Code.
APPEALS from the Board of Tax Appeals.
These causes are before this court upon appeals from decisions of the Board of Tax Appeals which overruled petitions of the appellant, The First Federal Savings Loan Association of Warren, for redetermination of assessments for taxation of its shares and deposits, for the years 1937, 1938, 1939, 1940 and 1941, and modified and affirmed assessments previously made.
By agreement, all of the appeals were submitted together and were heard by the Board of Tax Appeals upon a certain stipulation of facts and exhibits. The issues in each of these causes are identical.
The appellant is, and during the years in question was, a federal savings and loan association incorporated and existing under the laws of the United States of America and is an incorporated financial institution as defined in Section 5407, General Code.
The capital of the appellant is divided into shares and all these shares are withdrawable stock, in that the owners thereof are entitled to withdraw the amounts credited thereto, or any part thereof, in money. Appellant is not permitted by law to accept savings deposits except on account of the holder of such shares.
The record shows that appellant duly filed a "Financial Institution Return of Taxable Property" for each of the years in question, and preliminary assessment certificates were issued by the Tax Commission(er) and mailed by the Treasurer of State to the appellant, for each of these years.
Within the time specified by law, the appellant filed its several petitions on appeal from each of these assessments as they were made, and for each year paid to the Treasurer of State a payment which it claimed covered the amount due, which was a sum less than that shown in the preliminary assessment certificate for each year.
The Tax Commission or the Tax Commissioner, as the case may be, rejected the applications to amend the preliminary assessments, and appeals were perfected to the Board of Tax Appeals, where the causes were reviewed on the transcript of the proceedings before the Tax Commission(er) and the stipulations. A separate decision was made in each appeal.
In cause No. 29791, for the year 1937, the board modified and reduced the assessment and affirmed the decision of the Tax Commission(er) as thus modified.
By way of explanation of the action of the Board of Tax Appeals, the record shows that the return of the appellant for the year 1937 listed:
Deposits taxable as of November 9, 1936 $533,700.00 Book value of shares of invested capital as of Dec. 31, 1936 96,970.00 ------------ Total $630,670.00
The amount of tax as shown by appellant in the return $ 1,261.34
This return was corrected by the Tax Commission, which added to the taxable invested capital the sum of $27,820 which was a reserve created by the association for uncollected interest on mortgage security, and claimed an additional tax due in the sum of $55.64. This additional tax was eliminated by the Board of Tax Appeals which found that the tax due was approximately that shown by the appellant's return.
However, since appellant claimed that the assessment of the capital, withdrawable stock of the association as deposits was incorrect and illegal because not in accordance with Section 5412, General Code, the appellant, at the time of filing the appeal, had paid $249.06, the amount it claimed due. The Board of Tax Appeals held that "appellant's capital for said year was taxable on the basis of its undivided profits and reserves as of December 31, 1936, in the amount of $96,162.76," and that "appellant's deposits were taxable as of November 9, 1936, in the net amount of $533,700 as returned by the appellant and as assessed by the Tax Commission" and directed that a corrected assessment certificate be issued in accordance with its findings.
In cause No. 29792, the appeal from the assessment for 1938, the "Financial Institution Return of Taxable Property" was substantially different from the 1937 return. The Board of Tax Appeals, as shown by its entry, found "that the appellant, a financial institution, made its tax return for the year 1938 in which it returned its total net taxable deposits at $105,483.35 and its shares or the value of its capital as 'none'; that thereafter the Tax Commission made an assessment against the appellant assessing its net taxable deposits as of November 9, 1937, at $627,020.41 and its shares or capital as of December 31, 1937, at $119,556.11 * * *."
Quoting again from its entry:
"The board further finds that appellant's shares or capital was taxable on the basis of its undivided profits and reserves as of December 31, 1937, as assessed."
The board thereupon directed that an assessment certificate be issued in accordance with its findings.
The findings of the Board of Tax Appeals in causes Nos. 29793, 29794 and 29795 were substantially similar to the decisions in causes Nos. 29791 and 29792, ante. For the years 1939, 1940 and 1941, the appellant association showed in its "Return of Taxable Property" an amount for taxable deposits which did not include the amount of withdrawable capital stock issued, and showed also the value of the shares of its capital as "none."
In each instance, the Tax Commissioner added to the taxable deposits the book value of the association's withdrawable stock as of tax listing day, and also determined the value of its capital as the undivided profits and reserves of the association as of December 31 for each year.
In causes Nos. 29793, 29794 and 29795, the Board of Tax Appeals also modified and affirmed the findings of the Tax Commissioner and directed the issuance of assessment certificates.
Appeals are prosecuted to this court from all such decisions.
Mr. Robert G. Day, for appellant.
Mr. Thomas J. Herbert, attorney general, and Mr. Aubrey A. Wendt, for appellee.
The chief question "in these cases, as stated by the appellant, is "whether the assessment for taxation of the shares of capital stock owned by the shareholders in an incorporated financial institution whose capital stock is divided into shares, all of which are withdrawable, may properly include the amount of the capital stock in addition to the surplus or reserves and undivided profits."
Appellant, in its returns for the years 1938, 1939, 1940 and 1941 (causes Nos. 29792, 29793, 29794 and 29795), returned its capital as "none" and did not include therein "the surplus or reserve fund and the undivided profits as shown." (Section 5412, General Code.) In the causes now before this court, appellant now contends that "the capital stock as shown by the return must be excluded and the assessment of shares must be based only on the surplus or reserves and undivided profits." (Italics ours.)
Our first inquiry is whether, under Section 5412, General Code, the Tax Commission(er) properly included the amount of withdrawable shares as a taxable deposit. The action in taxing the "surplus or reserves and undivided profits" now seems not to be contested.
Section 5324, General Code, defines deposit as follows:
"The term 'deposits' as so used, includes every deposit which the person owning, holding in trust, or having the beneficial interest therein is entitled to withdraw in money, whether on demand or not, and whether evidenced by commercial or checking account, certificate of deposit, savings account or certificates of running or other withdrawable stock, or otherwise * * *."
Section 5412, General Code, provides as follows:
"Upon receiving such report the Tax Commission of Ohio shall ascertain and assess all the taxable shares of such financial institution, or the value of the property representing the capital employed by such financial institution, not divided into shares, at the aggregate amount of the capital, the surplus or reserve fund and the undivided profits as shown in such report, and the amount of taxable deposits of such institution. Such amounts shall be assessed in the name of such financial institution excepting that the amounts of the taxable deposits wholly withdrawn from each such institution within the times mentioned in Section 5411-2 of the General Code and separately set forth in such report shall be subtracted from the amount of taxable deposits so assessed and separately assessed in the names of such respective depositors. In the case of an incorporated financial institution all of whose shares constitute deposits as defined in Section 5324 of the General Code such assessment of shares shall exclude the capital stock thereof as so shown but shall include the surplus or reserve and undivided profits so shown." (Italics ours.)
Appellant concedes that withdrawable stock as herein considered is a deposit within the provisions of Section 5324, General Code. The returns for the years 1938, 1939, 1940 and 1941 contained this note or similar statements: "All shares are withdrawable and taxed as deposits under G. C. 5324." (Copied from the 1941 return.) But appellant contends that the last sentence in Section 5412, General Code, requires that the withdrawable shares be exempted from taxation and that the assessment be levied only on the aggregate of its "surplus or reserves and undivided profits."
It is axiomatic that all parts of a statute shall be construed together. Section 5412, General Code, provides the manner of assessing both the capital and the deposits of a financial institution. It provides that "the Tax Commission of Ohio shall ascertain and assess all the taxable shares of such financial institution * * * and the amount of taxable deposits of such institution. Such amounts shall be assessed in the name of such financial institution * * *."
The last sentence in this section provides that where the shares are "deposits," they shall not be taxed also as "capital stock," but instead, only the "surplus or reserve, and undivided profits" shall be taxed as capital. This clearly appears from a consideration of the entire section as a complete plan of assessment of financial institutions.
In making the assessment, the Tax Commission(er) properly applied the provisions of Section 5412, General Code. The withdrawable shares were included in the "deposits" and were excluded from the "capital" account. The appellant was taxed in the same manner as the provisions of Section 5412, General Code, require that assessments be levied on financial institutions which have non-withdrawable shares of stock and whose shares did not constitute deposits. Any other method would discriminate against the latter.
Finally, appellant contends that the tax levied on its "surplus or reserves and undivided profits" should have been determined as of the same date that assessments of taxes on deposits were determined, instead as of December 31 of that year, relying on Section 5411-1, General Code. This section provides in part that "on or before the fifth day of December, annually, the Tax Commission of Ohio shall fix the day as of which the taxable deposits in financial institutions shall be listed and assessed.
By its terms, this section is applicable to "taxable deposits" only, and makes no reference to "surplus or reserves or undivided profits." This provision applies only to deposits and has no other application in the assessment of such financial institutions.
The decision of the Board of Tax Appeals in each of these cases is affirmed.
Decisions affirmed.
WEYGANDT, C.J., MATTHIAS, ZIMMERMAN, BELL, WILLIAMS and TURNER, JJ., concur.