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BLAKE V. NATIONAL BANK, 90 U. S. 307 (1874)

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U.S. Supreme Court

Blake v. National Bank, 90 U.S. 23 Wall. 307 307 (1874)

Blake v. National Bank

90 U.S. (23 Wall.) 307

Syllabus

1. Under the Internal Revenue Act of July, 1870, which enacts that "there shall be levied and collected for and during the year 1871, a tax of 2 1/2 percent on the amount of all interest paid by corporations, and on the amount of dividends of earnings hereafter declared by them," and which directs that such interest and dividends shall not after the 1st of August, 1870, be taxed under prior acts, interest paid and dividends declared during the last five months of the year 1870 are taxable, as well as those declared during the year 1871, it appearing that income of other chanroblesvirtualawlibrary

Page 90 U. S. 308

sorts was meant to be so taxed, and there being no apparent reason why income derived through corporations should not be taxed like income generally.

2. A badly expressed and apparently contradictory enactment (such as the one above mentioned) interpreted by a reference to the Journals of Congress, where it appeared that the peculiar phraseology was the result of an amendment introduced without due reference to language in the original bill.

Error to the Circuit Court for the Southern District of New York, in which court several National banks sued Blake, a collector of internal revenue, to recover certain taxes of 2 1/2 percent, upon dividends which had been declared and made payable by the banks during the last five months of the year 1870, which taxes Blake as collector had demanded, and which the banks had paid on compulsion and under protest.

There were other cases from other circuits, including one from the Eastern District of Pennsylvania, heard with these involving the same question and also the question whether additions to surplus and payments of interest made by corporations during the five months above mentioned -- that is to say, during the months of August, September, October, November, or December, 1870, were liable to be charged with the said tax.

The case depended upon certain statutes, and was thus:

The 118th, 119th, 120th, 121st, and 122d sections of an Act of June 30th, 1864, laid a tax of 5 percent on income, the tax commonly known as the "income tax." [Footnote 1]

So far as the income which was enjoyed by anyone was not obtained from dividends made by corporations, or from interest on their bonds or other securities, or from additions to the surplus, contingent, or other funds of such corporations, individuals, by the 118th and 119th sections of the act, were to make it known by return to the assessor, and were themselves to pay it directly to the collector. The tax thus payable directly by individuals was to be levied on the chanroblesvirtualawlibrary

Page 90 U. S. 309

first day of May in each year (on the gains, of course, of the preceding year), and be payable on or before the 30th of June following; and it was enacted that it should be levied until the year 1870 and no longer than until that year -- that is to say, that this tax of 5 percent should end with and in the year 1869.

So far as income came from dividends made by corporations or additions by the corporations to the surplus, contingent or other fund of undistributed earnings, or by the interest payable on bonds &c., of corporations, the matter was regulated by the 120th, 121st, 122d, and 123d sections.

The 122d section -- which imposed a duty of 5 percent upon interest on bonds issued, on dividends declared, and on undistributed profits earned by railroad and other corporations -- made it the duty of the officers of said corporations to return to the assessor and pay to the commissioner the tax within thirty days after the said interest and dividends became due and payable, and they were authorized to retain the tax so paid out of the interest and dividends due to bond and stockholders.

This Act of June 30th, 1864, was the only act, prior to July, 1870, which imposed a tax on interest and dividends payable by railroad companies.

In this condition of things -- that is to say, with an income tax law in 1864, which extended to and included the year 1869, but no later years -- Congress, on the 14th July, 1870, passed a new act. This new Act of July 14th, 1870, was entitled "An act to reduce internal taxes, and for other purposes," and in certain sections not now under consideration taxation was reduced.

The sections with which the present case was immediately concerned were the sixth, the seventh, the fifteenth, and the seventeenth, and they were in substance as follows:

"SECTION 6. There shall be levied and collected annually, as hereinafter provided, for the years 1870 and 1871 and no longer, a tax of 2 1/2 percentum upon the gains, profits, and income of every person residing in the United States, and of every citizen of the United States residing abroad, derived from any source

Page 90 U. S. 310

whatever, whether within or without the United States, except as hereinafter provided. [Footnote 2]"

"SECTION 7. In estimating the gains, profits, and income of any person, there shall be included all income derived from . . . the gains, profits, and income of any business, profession, trade, employment, office, or vocation, including any amount received as salary or pay for services in the civil, military, naval, or other service of the United States, or as Senator, Representative, or delegate in Congress, except that portion thereof from which, under authority of acts of Congress previous hereto, a tax of 5 percentum shall have been withheld."

"SECTION 15. There shall be levied and collected for and during the year 1871 a tax of 2 1/2 percentum on the amount of all interest or coupons paid on bonds or other evidences of debt issued and payable in one or more years after date, by any of the corporations in this section hereinafter enumerated, and on the amount of all dividends of earnings, income, or gains hereafter declared by any bank, . . . railroad company &c., whenever and wherever the same shall be payable, and to whatsoever person the same may be due, and on all undivided profits of any such corporation, which have accrued and been earned and added to any surplus, contingent, or other fund. And every such corporation having paid the tax as aforesaid is hereby authorized to deduct and withhold from any payment on account of interest, coupons, and dividends, an amount equal to the tax of 2 1/2 percentum on the same."

The sixteenth section provided that an account should be rendered by the corporation making a dividend &c., to the assessor on or before the tenth day of the month following the dividend of the amount of income and of profits and of taxes as aforesaid, and that the amount payable as tax should be paid within thirty days after it became due.

The next section was thus:

"SECTION 17. Sections 120, 121, 122, and 123 of the Act of June 30th, 1864 &c., shall be construed to impose the taxes therein mentioned to the 1st day of August, 1870; but after that date, no further taxes be levied or assessed under said sections,"

&c. chanroblesvirtualawlibrary

Page 90 U. S. 311

The difficulty now arose upon the peculiar phraseology of the above-quoted fifteenth s