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U.S. Supreme Court

Hale v. State Board of Assessment & Review, 302 U.S. 95 (1937)

Hale v. State Board of Assessment and Review

No. 16

Argued October 18, 19, 1937

Decided November 8, 1937

302 U.S. 95


1. In determining the extent of a contractual obligation alleged to have been impaired by a state law, this Court will accept the judgment of the highest court of the State unless manifestly wrong. P. 302 U. S. 100.

2. Iowa legislation, in effect when state and municipal bonds were issued and acquired, declared that such bonds should not be taxed. Later, a tax on the net income of residents in the State was imposed for the first time, and income taxes were assessed to the bondholders, the interest derived from their bonds being included in the computation of net income. The state court assumed without deciding that the statutes of exemption should be treated as giving rise to contracts, but interpreted those statutes as limited to taxes laid directly upon property in proportion to its value, and not as touching taxes in the nature of an excise upon the net chanroblesvirtualawlibrary

Page 302 U. S. 96

income of the owner. This Court follows the state court's conclusion, finding that at the least it is not plainly wrong, and that it has support (a) in the State's statutory system of taxation viewed in its entirety (P. 302 U. S. 101), (b) in decisions of Iowa and other States before the bonds were bought and afterwards (P. 302 U. S. 103), and (c) in decisions of this Court. P. 302 U. S. 104.

3. Contracts of tax exemption are strictly construed. P. 302 U. S. 103.

4. The classification of a tax upon net income as something different from a property tax, if not substantially an excise, is not unreasonable. P. 302 U. S. 106.

5. The tax complained of in this case is not laid upon the obligation to pay the principal or the interest at all events not within the meaning of the contract of exemption, but is laid upon the yield, if any, of an aggregate of occupations and investments. P. 302 U. S. 107.

271 N.W. 168 affirmed.

Appeal from a decree sustaining the dismissal by the State District Court of a petition in equity praying annulment of an income tax assessment. chanroblesvirtualawlibrary

Page 302 U. S. 99

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