CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT.
Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo
MR. JUSTICE ROBERTS delivered the opinion of the Court.
The respondent, a national banking association whose principal office and place of business is in New York, applied
for and obtained authority to operate branches in Puerto Rico, pursuant to § 25 of the Federal Reserve Act as amended.*fn1 In 1932 the bank, as required by local law, filed with the petitioner a sworn statement of assets as a basis of assessment for taxation. By request, but under protest, it attached a memorandum stated to be for information only, in which was set forth the amount of its total assets, the sum of its capital, surplus, and undivided profits, the percentage the latter was of the former, and the value of the assets in Puerto Rico. The Treasurer considered the same percentage of the assets in Puerto Rico fairly represented the capital there employed. The amount thus ascertained was $2,439,200, which he divided into three items, -- real property and buildings, $732,560; other personal property, $1,611,400; and tangible personal property, $95,240. Applying the statutory rate to $2,439,200, he fixed the tax at $62,122.98. Upon appeal the Board of Equalization sustained the Treasurer's action. The bank voluntarily paid $17,700.24, the amount attributable to real property and buildings, but paid under protest the balance of $44,422.74 demanded in respect of the personal property, and brought suit in the United States District Court for Puerto Rico to recover the amount. Judgment in favor of the Treasurer was reversed by the Circuit Court of Appeals. We granted a writ of certiorari,*fn2 because the case involves the application and scope of Acts of Congress and their effect upon the taxing power of insular possessions of the United States.*fn3
Respondent concedes the competence of the Island government to tax generally,*fn4 but asserts that R. S. 5219 as amended*fn5 prohibits a levy on the capital of a national bank. The further point is made that § 320 of the Political Code of Puerto Rico,*fn6 to which the petitioner refers
as his authority, does not justify the imposition of the tax in question. This the petitioner denies, and adds that the point was not presented below, and cannot, therefore, be mooted here. In addition to contending that § 5219 never extended to Puerto Rico, he claims that in any event the section was rendered inoperative in the Island by § 25 of the Federal Reserve Act as amended.*fn7
We find it unnecessary to determine whether the tax was authorized by § 320 of the Political Code, since we are of opinion that R. S. 5219 forbids its collection.
Taxation of a bank's branch is taxation of the bank itself.*fn8 The system of national banks was intended to be co-extensive with the territorial limits of the United States, and while the consent to taxation given by § 5219 refers in terms only to the states, it extends also to territorial governments and sets the limits of their exercise of the power.*fn9 The form of taxation here imposed is not permitted by the section.*fn10 The organization of a national bank in Puerto Rico is within the contemplation of the National Banking Act; but if there were doubt concerning the proposition, it finds support in legislation extending applicable laws of the United States to the Island.*fn11 Although the maintenance of branch banks is prohibited by the National Banking Act save under narrowly limited conditions,*fn12 their establishment in foreign countries, dependencies and insular possessions is authorized.*fn13 ...