Michigan National Bank v. Michigan
Headline: Michigan’s higher tax on national bank shares is upheld as not unlawfully discriminatory, allowing the State to keep the larger bank-share tax while savings and loan shares stay more lightly taxed for 1952.
Holding: The Court held that Michigan’s 1952 tax law did not, in practical operation, discriminate against national bank shareholders compared with savings and loan shareholders and therefore did not violate the federal statute limiting state bank-share taxes.
- Permits Michigan to keep the 1952 higher tax on national bank shares.
- Keeps savings and loan shares taxed at lighter rates in Michigan.
- Requires proof of real-world discriminatory effect, not just different nominal rates.
Summary
Background
A large Michigan national bank sued the State after paying extra taxes for 1952. Michigan’s law charged 5.5 mills on each dollar of a national bank share’s book value, while savings and loan shares paid 2/5 of a mill on paid-in value and state associations also paid a 1/4-mill franchise fee. The bank argued that savings and loan capital competed with the bank in residential mortgage lending and was taxed much more lightly, violating a federal rule that state bank-share taxes may not be higher than taxes on competing moneyed capital.
Reasoning
The Court assumed, without deciding, that banks and savings-and-loan associations competed in mortgage lending, then focused on whether Michigan’s tax scheme produced a discriminatory practical effect in 1952. The majority accepted Michigan’s Supreme Court interpretation that the Legislature set the bank-share rate after considering the greater moneyed capital controlled by a bank shareholder (for example, deposits available for lending). Looking at the actual numbers for 1952, the Court concluded the higher mill rate on bank book value did not impose a heavier burden than the lower rate on savings-and-loan paid-in shares when the difference in moneyed capital controlled was taken into account. For that year the Court found no illegal discrimination and affirmed the judgment.
Real world impact
The decision lets Michigan keep the 1952 tax scheme in place and affects how challenges to bank-share taxes are decided: courts will examine real-world tax effects, not only nominal rate comparisons. The majority noted the result was tied to practical operation in 1952 and could change if underlying facts shifted.
Dissents or concurrances
A dissent argued the opposite: the 55-cent-per-$100 bank rate was plainly over eight times the savings-and-loan rate, and the record showed substantial mortgage-competition and equal methods of valuation, so the tax violated the federal rule and the bank should win.
Opinions in this case:
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