Merchants' Nat. Bank of Richmond v. Richmond

Background

A national banking association challenged a 1915 Richmond ordinance and a Virginia law that together taxed national bank stock at $1.75 per $100 of value while other intangible investments like bonds and notes were taxed at $0.95 per $100. The bank first won relief in a local court, but the Virginia Supreme Court of Appeals reversed and refused correction. The dispute reached this Court to decide whether the higher tax on bank shares violated federal law.

Reasoning

The key question was whether a federal rule (section 5219 of the Revised Statutes) forbids taxing national bank shares more heavily than "moneyed capital" held by individual citizens. The Court reviewed the statute’s history and prior decisions and explained that "moneyed capital" includes investments such as loans, bonds, and other securities that compete with banks. Because evidence showed a substantial amount of such individual investments in Richmond that competed with the banks and were taxed at a lower rate, the Court concluded the city’s tax, as applied, exceeded the federal limitation and was therefore invalid.

Real world impact

The ruling prevents Richmond from enforcing that higher tax on national bank shares as applied in 1915 and protects bank shareholders from being taxed more heavily than comparable individual investments. The judgment was reversed and the case sent back for further proceedings consistent with the opinion. The Court also denied the bank’s separate petition for certiorari prior to deciding the case on the merits.

Dissents or concurrances

Justice Brandeis dissented, as noted at the end of the opinion.