First Nat. Bank of Boston v. Maine

1932-01-04

Headline: Maine denied power to tax stock of a nonresident who died in Massachusetts, as Court struck down the state’s inheritance tax on out-of-state shareholders and limited death taxes to the home state.

Holding: The Court held that under the Fourteenth Amendment Maine could not impose an inheritance tax on the transfer by death of shares owned by a decedent domiciled in Massachusetts, so only the decedent's home state may tax them.

Real World Impact:

Prevents a state from imposing death taxes on shares of nonresident stockholders domiciled elsewhere.
Limits inheritance taxes on intangibles to the decedent’s home state in most cases.
Allows states to still impose corporate transfer or registration taxes tied to company procedures.

Topics: inheritance taxes, estate taxation, state power to tax corporations, intangible property

Summary

Background

Edward H. Haskell, a Massachusetts resident, died owning most of his wealth in shares of the Great Northern Paper Company, a Maine corporation. His will was probated in Massachusetts, which levied and collected an inheritance tax. Ancillary administration was opened in Maine, and Maine assessed a larger inheritance tax on the same stock, allowing a credit for the Massachusetts tax. The executor sued to recover the balance, and the Maine high court upheld the Maine tax. The question reached the Supreme Court: may Maine tax the transfer by death of stock owned by a nonresident under the Fourteenth Amendment?

Reasoning

The Court reviewed prior cases and applied the principle that intangibles like stocks are generally taxed where the owner is domiciled, using the maxim mobilia sequuntur personam. It held that allowing two states to tax the same death transfer produces unjust double taxation. The Court distinguished stock transfer taxes tied to corporate procedures from a death duty and found Maine’s inheritance tax exceeded its power under the Fourteenth Amendment. The Supreme Court reversed the Maine judgment, so the executor prevailed and the Maine tax was invalidated for these facts.

Real world impact

Nonresident shareholders and estates cannot be compelled to pay a death transfer tax on corporate shares to the state where the corporation sits when the owner is domiciled elsewhere. States of incorporation still may impose transfer or registration taxes tied to corporate processes. The Court left open rare situations where intangibles might have a local situs in another state.

Dissents or concurrances

Justice Stone dissented, joined by Justices Holmes and Brandeis, arguing the decision ignored long practice and that states should be able to tax shares subject to their corporate control; he would have affirmed Maine’s tax.