To the Honorable the Board of Assessors.

APRIL 16, 1890.

GENTLEMEN:- In reply to your letter of the 14th inst., in which you submit the following questions:

1. Are the assessors justified in allowing legal interest on capital invested, as the income of that capital; and in exempting its amount from assessment, as income derived from property subject to taxation?

2. Can the assessors legally allow a remission of the income tax upon taxable income, when the amount of such income has, during the twelve months preceding the first day of May, been invested in property which is taxable on that day, to the person to whom it has accrued? I have to say:

It is your duty, I think under the law, as construed and stated by the Supreme Judicial Court in the case of Wilcox v. County Commissioners, 103 Mass. 544, to assess a tax upon a merchant's or trader's income as well as upon the value of his stock, on or by which he is enabled (with his skill, etc.) to obtain such income, notwithstanding the provision of the statute that "no income shall be taxed which is derived from property subject to taxation." Pub. Stats., ch. 11, § 4. "The income," said the court, in said case," from a profession, trade, or employment, which is taxable under our system of laws, is an entirely different thing from the capital invested in the business, or the stock of goods, in the purchase of which the whole or a part of such capital may have been expended." The income meant by the statute is the income for the year, and is the result of the year's business. It is the net result of many combined influences; the use of the capital invested; the personal labor and services of the members of the firm; the skill and ability with which they lay in or from time to time renew their stock; the carefulness and good judgment with which they sell and give credit; and the foresight and address with which they hold themselves prepared for the fluctuations and contingencies affecting the general commerce and business of the country. To express it in a more summary and comprehensive form, it is the creation of capital, industry and skill."

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I understand it to have been the practice of your board to deduct from the whole of such an income (in addition of course to the $2,000) a sum which, in the opinion of the board, represents or is equal to the part of said income which is attributable to the stock itself, independently of, or separate from, the skill and ability." or the other "influences," by which the income was produced or realized; and, inasmuch as the Legislature has furnished you with no rule or guide in this respect, I do not see why you are not justified in allowing and deducting the amount of six per cent. of the value of the stock, if that, in your judgment, is the right amount, from said income, in order to arrive at that part of the income which may be taxed, without violating that clause of the law which I have quoted. (§ 4, ch. 11, Pub. Stats.)

There is, however, no reason, as far as I can see, why you should deduct the amount of six per cent of such value any more than the amount of four, five or seven per cent., or an amount arrived at in any other way, unless you find, of course, that the amount of six per cent. of such value is the right sum. The point is, in the practice of your board, I suppose, to deduct such an amount as is, or was, derived from the stock itself, if you can find what that amount is, so as to enable you to assess a tax only upon income derived from the skill, industry, etc., of the person to whom income "has accrued."

2. I do not see why, under the decision of the court in said case, you should abate or remit a properly assessed tax upon income, merely for the reason that, on or before the last day of April in any year, such income had been invested (and so on May 1 is found invested) in property which is on that day, May 1, taxable. I can see that this at first might appear like double taxation, but, under the definition of income given by the court in said case, I do not think that it is so. The income meant by the statute," says the court, "is an entirely different thing from the capital invested in the business." I think that it is something like what was formerly called sometimes a "faculty tax." It is like the old tax on income under the United States Internal Revenue system.

The tax on the income is one thing, taxble by itself, and the tax on the property is another tax on another thing; and, to some extent, each is a tax also for a different period of time; a tax on income on May 1 is a tax on income which "has accrued" (§ 4, ch. 11, Pub. Stats), a tax on property (real estate for instance) on the same May 1 is practically, at least, though not perhaps theoretically, for a time subsequent to that.

It does not, I think, make any difference, as to its taxability, what is done with the income. It may be all used up in living expenses, or saved and invested in property, yet, as income received or accrued," it is taxable just the same.

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A tax therefore on both income and on the property in which it is subsequently invested is not double taxation, though both are assessed on the same day.

Therefore to remit the tax on income which has accrued to any person during the twelve months preceding the first day of May of any year, for the reason that he has, on or before the said first day of May, invested such income in taxable property, is, it appears to me, to give up, in such a case, the tax on income provided for in said § 4, ch. 11, Pub. Stats., which the statute declares "shall be the subject of taxation."

The law provides that "no income shall be taxed which is derived from property which is subject to taxation," but it does not say that no income shall be taxed which is subsequently invested in property which is subject to taxation. I endeavor here merely to state what the law is. The policy of taxing such income, or income so invested, is another question, and not before me.

Very respectfully yours,

J. B. RICHARDSON,

Corporation Counsel.

See Melcher v. Boston, 9 Met. 73; Day v. Buffinton, U. S. Circuit Court, Mass. Dist., 1870, and same case reported with the decisions of the United States Supreme Court as The Collector v. Day, 11 Wall. 113.

INHABITANT.

A man must have a domicil somewhere; can have but one; in order to lose one, must acquire another. Pur

pose to change residence unaccompanied by actual removal does not constitute a change of domicil. The intent may be inferred from circumstances overriding declarations of the party.

If a minor leaves the domicil of his origin with the consent of his guardian, and lives for two consecutive years exclusively in another place, considering it as his home, with no definite intent on the part of his guardian to cause him to return, - he acquires a new domicil in the latter place, and his property is taxable there. Kirkland v. Whately, 4 Allen, 462.

When a life interest in personal property terminates at any time after the first of May, the life tenant or his representatives must bear the whole tax for the year. Holmes v. Taber, 9 Allen, 246.

See DOMICIL.

INTEREST.

On Certain Taxes.

Pub. Stats., ch. 11, § 67; ch. 13, § 9.
See DISTRICT TAXES.

LIEN.

An invalid assessment is, or may be, an incumbrance or lien upon real estate. "The fact that the assessment is invalid does not remove the lien or incumbrance upon his land. The proper officers could, by proceedings in due form, correct the errors and reassess the same amount upon the land, and, if it was not paid, sell the land." Morton, C. J., in Coburn v. Litchfield, 132 Mass. 451.

MACHINERY.

The (fixed) machinery of manufacturing corporations. organized under the laws of this Commonwealth is taxable by the local assessors. See Pub. Stats., ch. 11, § 6, and ch. 13, §§ 38-41.

Pipes and meters of a gas light company are to be regarded as machinery.

Commonwealth v. Lowell Gas Light Co., 12 Allen, 75 (1886).

Pipes of an aqueduct company are not to be regarded as machinery.

Dudley v. Jamaica Pond Aqueduct Co., 100 Mass. 183 (1868).

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A portable steam saw-mill temporarily located in a town on the first day of May is not taxable there as "machinery employed in any branch of manufactures and situated or employed" there, within the meaning of the Pub. Stats., ch. 11, § 20, cl. 2; nor can its product in timber and sawed lumber be taxed there if the owner's temporary occupancy of land with the saw-mill is the only evidence that he there occupied a manufactory, store, shop or wharf, as required by cl. 1.

Ingram v. Cowles, 150 Mass. 155.

MONEY.

At any meeting subsequent to the annual town meeting which is held before the rate of taxation for the year is fixed, money may be voted for any lawful purpose, and the amount so voted must be included in the tax of the current year. Freeland v. Hastings, 10 Allen, 571.

NATIONAL BANKS.

Taxation of Shares in.

Pub. Stats., ch. 13, §§ 8-19; ch. 11, § 33.

A State may tax shares held in national banks organized under U. S. Stat. of 1864, ch. 106, and may authorize the assessment of such tax in the city or town within the same State where the owner resides. Austin v. Boston, 14 Allen, 359 (1867).

It has been decided by the supreme court of the United States in a recent case, that the shares in national banks are taxable to the owners thereof at their market value, without any deduction on account of the investments of the bank in United States securities.

Under the law of this Commonwealth above given, however, a proportionate deduction must be made from the value of each share of Massachusetts national banks owned by non-residents, for real estate owned by the bank and taxed in the place where the bank is located

The whole subject of the taxation of the shares in national banks has been fully considered by the supreme court of Massachusetts in the cases of the Providence Institution for Savings v. City of Boston. Same v. F. U. Tracy. Pliny Jewell v. City of Boston. Same v. F. U. Tracy, March, 1869. The court, after reviewing the previous deci

sions, and considering the various objections, conclude their opinion as follows:

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The conclusion, then, at which we arrive is, that the statute of 1868, ch. 349, does not transcend, or conflict with, the limitations expressly set forth in the acts of Congress; that practically it produces no appreciable di-proportion among tax payers as compared with each other; that the omission of the shares of non-residents from the town valuations produces no actual want of due proportion, for the reason that the general result of the taxation, supposing the statute to be held valid, is substantially identical to each tax payer with what it would be if the shares of non-residents were included in those valuations, and taxed in the same manner in all respects as the real estate of non-resident owners is taxed; and that, although in one mode of proceeding, the sum total of the valuations is less than the other, yet the aggregate of the amount to be raised under the heads of county, municipal and state taxes, is diminished in exactly the same proportion. As to the objection that it is retrospective in its operation, it seems to be enough to say that, under the acts of Congress, the property was certainly taxable in such lawful manner as the Legislature of the Commonwealth should direct. Whoever, then, on the first day of May, 1868, held such property, knew, or was bound to know, that it was taxable, like other moneyed capital as of that day, in such manner as by law might be provided." *101 Mass. 575 (1869).

In the recent case of the National Bank of Redemption v. the City of Boston (1888), the Supreme Court of the United States sustained the validity of our statutes in relation to the taxation of shares in national banks.

List of Shareholders, how returned.

Pub. Stats., ch. 13, § 11.

Authority to make the examination required by this section is also Act of Congress, contained in the following extract from the act of Congress estab- June 3, 1864, lishing national banks: -

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And be it further enacted, That the president and cashier of every such association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, in the office where its business is transacted; and such lists shall be subject to the inspection of all the shareholders and creditors of the association and the officers authorized to assess taxes under state authority, during business hours of each day in which business may be legally transacted; and a copy of such list, on the first Monday of July in each year; verified by the oath of such president or cashier, shall be transmitted to the comptroller of the currency."

The word "person" in the Pub. Stats., ch. 11, §§ 69, 71, 72, and the statute of 1890, ch. 127, § 1, relating to the abatement of taxes, extends to a corporation.

A list, with the name of each shareholder, his residence, and the number of his shares, as required by the Pub Stats., ch. 13, § 11, to be furnished to the assessors of taxes where a bank is located, and where, by § 8, all the shares are to be assessed, satisfies, in the case of national banks, the requirement of the Pub. Stats., ch. 11, § 72, which provide that no person shall have an abatement of taxes unless

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