In re Bank of Manhattan Co.

Hill, P. J. The appellant, a New York State corporation, authorized to do a banking business, paid an unemployment pay-roll tax prior to and for the entire year of 1939. It questions the legality for that year and particularly after August 10th. Its objection rests upon section 4 of article XVI of the New York State Constitution which became effective January 1, 1939: “ Where the state has power to tax corporations incorporated under the laws of the United States there shall be no discrimination in the rates and method of taxation between such corporations and other corporations exercising substantially similar functions and engaged in substantially similar business within the state.” This section forbids discrimination as against Federal or State corporations. Either may complain of inequality. The State has no authority to tax corporations organized under the laws of the United States (national banks) except as Congress consents. (First National Bank v. Anderson, 269 U. S. 341; Peoples Natl. Bank & T. Co. v. County of Westchester, 261 N. Y. 342.) When congressional consent is given for the assessment by the State of real property owned by national banks, and the State acts thereon, then only may a tax be levied upon the real property of State banks; like nondiscriminatory action applies to franchise and unemployment pay-roll taxes. The contention by appellant that the word “ any ” should be read into the Constitution after the word “ has ” so that the first portion of the section would read “ Where the state has any power to tax,” etc.,is not persuasive. The Congress, by act effective August 10, 1939, gave consent that “ The legislature of any state may require any instrumentality of the United States * * * and the individuals in its employ, to make contributions to an unemployment fund under a State unemployment compensation law * * * ” [Internal Revenue Code, § 1606, subd. (b); U. S. Code, tit. 26, § 1606, subd. (b)]. The Legislature of the State of New York, [458] reciting such consent, authorized the levy of sudh a tax against national hanks beginning “ January first, nineteen hundred forty ” (Laws of 1940, ch. 506, effective April 15, 1940). This chapter became section 502-a of the Labor Law. The Legislature exercised its right to make this statute, enacted in April, retroactive to the first day of January. It did not, as it might, make it retroactive to August 10, 1939. If the argument by the State be correct, the power to levy a pay-roll tax against appellant and other State banks would not be affected had the Legislature, to the present date, failed to exercise the power granted by Congress. Under the Federal Act (§ 1606, supra) the Legislature had power to require national banks to pay the tax, and the right to tax State banks for a similar purpose was dependent, under the State Constitution, upon the exercise of that power as to national banks. The State has power to tax the pay rolls of national banks after August 10, 1939. On April 15, 1940, it chose to exercise the power as to pay rolls after January 1, 1940. Its failure to tax national banks between August 10 and December 31, 1939, when it had power to do so, made it an unconstitutional discrimination to tax State banks for the like period. Until the State had power to tax national banks for this purpose, there could be no discrimination. The statute as to the period before August 10, 1939, is constitutional.