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(1) Tax all shares of national banking associations, or
(2) Include dividends derived therefrom in the taxable income of an owner or holder thereof, or
(3) Tax such association on their net income, or (4) Tax such shares according to or measured by their net income.
Talbot vs. the Board of Commissioners of Silver Bow County, 139 U. S. 438, construed the word "state" to mean “territory” as well within the meaning of the National Bank Act.
The government of Guam therefore has authority to levy a tax on the “net income” of the Bank of America, as that term is used in the National Bank Act. The General Tax Law of Guam, Section 1, levies a tax based upon what it terms the "gross income” of certain business thereinafter enumerated.
The Internal Revenue Code defines net income as meaning gross income less statutory deductions (IRC, Section 21); further the code defines gross income as including gains, profits, and income derived from salaries, wages, or compensation for personal services of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce (IRC, Section 22). The California Code defines net income as meaning the gross income less deductions allowed and gross income as including practically all gains, profits and income derived from business. (California Revenue and Taxation Code, Reg. 17051, 17101). The General Tax Law of Guam defines gross income, when used within this law, as meaning the gross receipts received from personal services rendered or derived from trade, business, commerce or sales; and further defines gross proceeds of sale to mean the value actually proceeding from the sale of tangible personal property, without any deduction on account of cost or expenses of any kind allowed.
The definitions of “net” and “gross" income make no basic legal distinction between the two terms. One is merely the result of subtracting statutory deductions from the other. What then, if no statutory deductions are allowed? Logic would indicate that the terms come to designate one and the same thing, i.e. income in general. Surely the National Bank Act, in using the words “net income” did not intend to make it mandatory that all taxing jurisdictions allow deductions in computing the tax, for, to give such an intention any value or effect it would be necessary to spell out the required deductions and this is not done. Without such a provision the statute could be circumvented by merely allowing one token deduction and thereby making the distinction without legal or practical effect. The old common law maxim of interpretation and construction of written instruments that, “verba intentioni, non e contra, debent inservire”; that is to say, words ought to be more subservient to the intent, and not the intent to the words, would seem to be applicable in this case.
Further basis for this interpretation can be read from paragraph 1 (c) of the National Bank Act wherein it says that a state may tax the "entire net income received from all sources.” As “net income" within the narrow meaning is not “received” from the doing of business, but rather is a result of an over-all operation, i.e. the “income" received less certain allowable deductions of expenses, losses, etc., the term of necessity must be read as meaning only "income” generally, sometimes technically designated as "gross income.”
The purpose of Federal restrictions on state taxation of national banks has been stated many times by the courts as being to protect capital invested in national banks from unfriendly discrimination by the states through the exercise of their taxing powers and was not intended to control the power of the state on the subject of taxation, nor is it a weapon of defense against such taxation. (See 12 USCA No. 548, note 2 for this line of cases.)
The levy on "gross receipts” as worded in the General Tax Law of Guam could in no wise be considered discriminatory; all financial service institutions would be taxed in like manner as the statute is general and inclusive, rather than specific and exclusive.
Therefore, the tax levied against the Bank of America under Section 1 (c) of the Guam General Tax Law is within the grant of power to tax of 12 USCA (Banks and Banking 548)(3) and is a legal levy regardless of the name given it.
GOVERNMENT OF GUAM
Department of Law
Attorney General's Opinion SUBJECT: Applicability of the General Tax Law of Guam to insurance agents.
The following opinion was given by Attorney General Knight G. Aulsbrook on October 23, 1951, in reply to an inquiry relative to subject applicability.
In order to clarify the factual situation under which the Hawaiian Life Insurance Agents operate, a conference was held on October 4, 1951, in the Office of the Attorney General by Hogen J. Kallemeyn, Assistant Attorney General, with John W. Rose, Vice President of Guam Homes and Pedro E. Racelis, Administrative Manager. Mr. Rose and Mr. Racelis explained that Guam Homes, Inc. operate under a contract with the Home Office of Hawaiian Life Insurance Company, Ltd. as their general agents in Guam; this contract specifically provides that Guam Homes may not contract with any individual to be their sub-agent for the sale of Hawaiian Life Insurance policies. It is further agreed in this contract that Guam Homes shall exercise only a general supervisory power over the sub-agents, mainly as an intermediate clearing house between the home office and the sub-agents on Guam.
Each of the so-called sub-agents, of which there are at present eight, are under direct written contract with the home office of Hawaiian Life Insurance Company, Ltd. All of their activities are under direct control of the home office, their commissions are paid by check direct from the home office, and each sub-agent is individually bonded by the home office. Guam Homes, Inc. provides community office space for the use of the sub-agents whenever they desire it.
Hawaiian Life Insurance Company is at present, and has in the past, paid the gross receipts tax on the gross premiums collected by them from the sale of their policies in Guam. Guam Homes, Inc. receives directly from Hawaiian Life Insurance Company their commission, called an "override”, computed on the gross premium collected, and Guam Homes in turn pays the gross receipts tax on the amount of this override. The sub-agents receive their commission direct from the Home Office separate and apart from Guam Homes override.
Two questions presented are, first, should the sub-agent be assessed under the gross receipts tax on the commissions which they receive for the sale of insurance, and second, whether it is necessary that each subagent be licensed to do business in Guam by reason of their activities in selling insurance for Hawaiian Life Insurance Company.
From the facts stated above which were given this office by officials of Guam Homes, Inc. it is apparent that the referred to sub-agents are independent contractors with the Hawaiian Life Insurance Company, Ltd., and have no real business relationship to Guam Homes. Hawaiian Life Insurance Company, Ltd. treats these sub-agents, for the purposes of income tax withholding, as independent contractors pursuant to an opinion rendered by I. F. Warren, Tax Commissioner, government of Guam, in his letter of March 3, 1951 addressed to Roger E. Brooks, Presi. dent of Hawaiian Life Insurance Company, Ltd. Further evidence that the sub-agents are independent contractors is that Guam Homes, Inc. is not withholding, for the purpose of the income tax, from their commissions as they would if it was an employee-employer relationship.
As independent contractors the subject sub-agents are engaged in business as defined by Section 25, paragraph 7, General Tax Law of Guam, which states that "business” is used in this act shall include all activities engaged in with the object of gain or economic benefit, and paragraph 9 further defines "service business or calling” as any nonprofessional activity involving the rendering of a service but not to include those services rendered by an employee to his employer. Section 3 of this law, in providing for those businesses whose income is specifically exempt thereunder, makes no provision, either expressed or implied, for the exemption of the income from insurance agents or any similar class.
It is therefore clear that the income received by the subject subagents of Hawaiian Life Insurance Company, Ltd., as commissions for the sale of said insurance, under the facts stated above, comes within the intent and meaning of the General Tax Law of Guam and is therefore taxable.
In further reference to your letter you stated therein that the Hawaiian Life Insurance sub-agents are not licensed to do business in Guam. I call your attention to Section 21 of the General Tax Law of Guam which provides that any person who shall have gross income upon which a tax is imposed under this act shall obtain a license to engage in and conduct such business.
This letter is formal notice to you that the subject sub-agents are liable for the payment of the gross receipts tax as levied on their income derived as such sub-agents and assessed against them, and are also liable for procuring the proper license to do business. I trust that this opinion will clarify for you the questions outlined in your letter.
GOVERNMENT OF GUAM
Department of Law
Attorney General's Opinion
SUBJECT: Legal procedures relating to solemnization of marriages.
The following opinion was given by Attorney General Knight G. Aulsbrook on October 25, 1951, in reply to Honorable Paul D. Shriver's request for an opinion setting forth subject procedures.
Sections 69(a), 70(a) and 74 of the Civil Code of Guam require that the original of marriage license and the certificate of solemnization be filed with the civil registrar and that the statutory fee of $2.00 be deposited with the treasurer, within ten days after the ceremony.
The only requirement of the aforementioned sections which is not clear and unambiguous is the place of deposit of the fee. However, Section 14 of Civil Regulations with the Force and Effect of Law in Guam provides, interalia, that officers authorized to collect monies arising from the revenues of the island, of whatsoever nature, must pay the full amount collected, to the treasurer, and render accounts therefor.
The practice of the judges of the Island Court referred to in your letter, is contrary to the procedure set forth in the above quoted sections, and as you remarked, it could very well be a matter of some importance in the event of a disputed marriage. I shall submit to the Judicial Council at its next meeting, a suggestion that the Clerk of the Island Court be instructed to forward to the Department of Records and Accounts, originals of all licenses and certificates of solemnization retained in the files of the Court.
By copy of this letter, the Department of Records and Accounts is advised that the Office of the Civil Registrar is the proper depository for the originals of all licenses of marriage and certificates of solemnization, from which certified copies may be obtained by any party entitled thereto, upon payment of the statutory fee of 25 cents provided in Section 74 aforesaid.
GOVERNMENT OF GUAM
Department of Law
Attorney General's Opinion SUBJECT: Legality of legislation prohibiting and abolishing employment agen
The following opinion was given to the Governor on December 5, 1951, in response to his request.
The United States Supreme Court, in a case involving legislation by the State of Washington making it criminal for employment agencies to charge or accept fees, stated:
.. We have held employment agencies were subject to police regulation and control. “The general nature of the business is such that, unless regulated, many persons may be exposed to misfortunes against which the legislature can properly protect them.'... But we think it plain that there is nothing inherently immoral or dangerous to public welfare in acting as paid representative of another to find a position in which he can earn an honest living. On the contrary, such service is useful, commendable, and in great demand ... “... Because abuses may, and probably do, grow up in connection with this business, is adequate reason for hedging it about by proper regulations. But this is not enough to justify destruction of one's right to follow a distinctly useful calling in an upright way. Certainly there is no profession, possibly no business, which does not offer peculiar opportunities for reprehensible practices; and as to every one of them, no doubt, some can be found quite ready earnestly to maintain that its suppression would be in the public interest. Skilfully directed agitation might also bring about apparent condemnation of any one of them by the public. Happily for all, the fundamental guaranties of the Constitution cannot be freely submerged if and whenever some ostensible justification is advanced and the police power invoked... “... We are of opinion that Initiative Measure Number 8, as constructed by the Supreme Court of Washington, is arbitrary and oppressive, and that it unduly restricts the liberty of appellants, guaranteed by the 14th Amendment, to engage in a useful business. It may not therefore be enforced against them ..." Adams et al. v. Tanner, 244 U. S. 590, 37 S. Ct. 662.
The provisions of the due process clause of the 14th Amendment of the Federal Constitution relied upon by the Supreme Court, above, do not extend to territories. However, Section 5(e), Organic Act of Guam, is a territorial counterpart of the above mentioned due process clause and would receive, in my opinion, an analogous interpretation.
Although the holding of the Adams case, supra, was questioned in the case of Lincoln Federal Labor Union v. Northwestern I. and M. Company, a 1948 United States Supreme Court case reported at 335 U. S. 525, 69 S. Ct. 251, the Adams case was not overruled and in my opinion, it is still the law on this subject.
However, it is quite clear that statutes regulating the conduct of, and fees charged by employment agencies are properly within the realm of legislative action. The Supreme Court held, in the case of Olson v. State of Nebraska, 313 U. S. 61 S. Ct. 262, that a statute, fixing the maximum compensation which an employment agency may collect as a $2 registration fee and ten per centum of all moneys paid or to be paid or earned by the applicant for the first months service growing out of the employ. ment, does not deny “due process of law” in violation of the 14th amendment.
It is my opinion that the enactment of subject legislation would be inderogation of Section 5(e), Organic Act of Guam.
RUSSELL L. STEVENS,