TABLE 11.-NUMBER OF BANKS, SELECTED INCOME ITEMS, AND SURPLUS ACCOUNTS, INSURED
MUTUAL SAVINGS BANKS, BY STATES AND OTHER AREAS, 1969

1 Insured mutual savings banks only; the total including noninsured mutual savings banks is 497 banks. 2 This is net current operating income after income and franchise taxes. It does not include nonrecurring items, realized profit or loss, or transfers from valuation adjustment provisions.

This category comprises Alaska, Delaware, Minnesota, Ohio, Oregon, and Puerto Rico.

Source: Federal Deposit Insurance Corporation, Federal Reserve Board, Comptroller of the Currency, 1969 Report of Income; Assets and Liabilities, Commercial and Mutual Savings Banks, Dec. 31, 1969, pp. 122–123, 104–105.

TABLE 12.-INCOME AND FRANCHISE TAXES, INSURED MUTUAL SAVINGS BANKS, BY STATES AND OTHER AREAS,

Source: Federal Deposit Insurance Corporation, Federal Reserve Board, Comptroller of the Currency, 1969 Report of Income; Assets and Liabilities, Commercial and Mutual Savings Banks, Dec. 31, 1969, pp. 122-123.

APPENDIX 3

Survey of State and Local Tax Expenses of Lasured Commercial Banks, 1969

banks during that year under the provisions of section 5219 (prior to the December amendment), and each State was limited to a choice of either an income or a shares tax in addition to a tax on real property. The largest revenue-producer among taxes levied upon banks by State and local governments was the tax on net income. In most States this took the form of an excise tax measured by net income, a form that permitted inclusion in the tax base of interest on U.S. Government securities-which is exempt from taxation under a direct income tax. This type of tax accounted for $235 million or roughly 38 percent of all 1969 State-local taxes on banks. In 21 States, it comprised more than half of all bank taxes, and in 8 additional States, between 10 and 50 percent of the total. Even in the over-all revenue picture of the States, the tax on net income of banks loomed important, since it accounted for nearly 7 percent of all 1969 State-local revenue from corporation income taxes ($3.5 billion).

Second in importance for banks is the real property tax, which totaled $179 million in 1969 and accounted for 29 percent of all Statelocal bank taxes in that year. This is a relatively significant tax for banks in every State, although its percentage share of total bank taxes varies widely among the States, from a low of 12 percent in Louisiana and Ohio to 75 percent in Florida. In 7 States, half or more of bank taxes were collected in this form.

Taxes levied on bank shares or capital structure, the least important of the major State-local bank taxes, accounted for close to one-fifth of the total, or $121 million. In 9 States, however, the proportion was half or more and in 8 additional States, between a fifth and a half. This form of tax, which has declined sharply in relative importance in recent decades, probably owes its continued significant role in bank taxation to section 5219.

The remaining 14 percent of bank taxes for 1969 was distributed among a variety of levies. The major one, accounting for over twofifths of the residual (6 percent of all State-local taxes on banks) was a tax on bank deposits, which generally is levied on the depositor but collected from and absorbed by the bank. This tax was dominant in Ohio and relatively important in only two additional StatesMichigan and Rhode Island. Other taxes making up the residual included the tangible personal property tax (dominant in Arkansas), the gross receipts tax (dominant in the District of Columbia), general sales and use taxes, which were reported by banks in nearly all States but were an important component of bank taxes only in the State of Washington, and a variety of miscellaneous imposts, such as auto license, documentary taxes, fees, etc.

(2) National versus State-chartered banks. National banks accounted for 57 percent of total State-local tax expense of all insured commercial banks in 1969 a slightly smaller percentage than the national bank share of the banking universe as measured by total assets or income. Accordingly, national banks as a group show somewhat lower ratios of tax expense to assets, net income before taxes, and other bases, than State-chartered banks as a group.

In most States, national and State chartered banks were taxed about the same. This included a number of States where the State levied types of taxes not authorized for national banks by section 5219mainly tangible personal property and sales and use taxes which some, if not all, the national banks paid voluntarily. In several other

States, however, taxes not permissible for national banks were applied only to State-chartered banks, without any offsetting adjustment to equalize burden. While section 5219 restrictions account in part for the higher tax ratios for State than national banks, structural and other differences between national and State-chartered banks also were contributing factors.

(3) Home-State versus out-of-State taxes. Practically all 1969 Statelocal taxes of banks were paid to governments in their respective home-office States. Total payments to out-of-State jurisdictions amounted to less than $1.4 million, or 2/10 of 1 percent of all State-local bank taxes. Nearly three-fifths of the out-of-State payments were net income taxes, while real property taxes accounted for most of the remainder. Moreover, the bulk of these payments were reported by banks in 4 States-California, Illinois, Massachusetts, and New York-and represented in large part taxes paid by separately incorporated out-of-State subsidiaries of large banks. In 30 States, the sums reported as paid to other States were $1,000 or less, and in most of these States, banks reported no such taxes. Under section 5219, prior to the 1969 amendment, taxes other than real property taxes could be collected from national banks only by the State in which the bank was located, thus accounting for the negligible amounts reported. While State-chartered banks enjoyed no such immunity in law, their out-of-State taxes totaled only $218,000 in 1969, less than one-fifth the amount reported for national banks.

(4) Changes in taxes. The December 1969 amendment of section 5219 opened the door for States to apply additional types of taxes to national banks within their borders, other than an intangibles tax. In response to the request for information relating to tax law changes, 585 banks located in 41 States supplied estimates of what their 1969 taxes would have been if the changes had been in effect that year.3 The net result of changes reported by these banks would be to raise their total tax expense for 1969 by 9 percent and the 1969 total for all banks in the sample by 51⁄2 percent. Three-fifths of the increase was in sales and use taxes, which were already on the statute books in most States and readily could be made applicable to banks or extended to national banks in cases where State banks were already covered. Most of the remainder was in shares, gross receipts, and tangible personal property taxes. Because these increases in other taxes would have affected deductions or credits under the net income tax, a considerable number of respondents reported that their income taxes for 1969 would have declined, and these declines more than offset by a small margin the increases in net income taxes reported by other banks.

Information supplied in response to this question is suggestive of the kinds of changes that have been occurring under the "interim amendment" to section 5219, but it does not fully measure the expected impact of the interim changes since many States had not vet acted under their enlarged authority and, in some cases, respondent banks were not yet aware of changes in taxes that had occurred or were imminent. No attempt, of course, was made in this survey to deal with the additional changes that might occur in response to the "permanent amendment" to section 5219.

3 Respondents with total deposits under $15 million were given the option of not filling in this part of the questionnaire.

Need for the Survey

The purpose of the survey was to provide a quantitative foundation for the study of bank taxation which the Congress had requested. Detailed information about the magnitudes involved in State-local taxation of banks was needed in three major areas: (1) Data showing the types and amounts of taxes paid by national and State-chartered banks in the various States were needed as a basis for examining the effects of section 5219 on State tax structures-including any differences in the treatment of national versus State-chartered banks-and for evaluating the prospective impact of the changes in section 5219 enacted in December 1969. (2) Information on the amounts of taxes paid outside the State of domicile by type of tax and charter-class of bank was required for study of the interstate aspects of the "permanent amendment" to section 5219. (3) Information also was required as to the nature and quantitative effect of changes in State and local taxes that had been introduced subsequent to December 24, 1969, under the broader authority to tax national banks authorized at that time.

Detailed investigation of potential data sources led to the conclusion that the only feasible way to obtain the necessary information was through a special survey of commercial banks. Statistics of this type had not hitherto been compiled by any Government agency. An effort was made to collect the data directly from the States in a survey of State tax administrators being conducted in connection with the study, but early replies to this survey showed that State governments generally did not have detailed summaries of tax receipts from commercial banks and could not readily prepare them. While much of the needed information on State-local tax expense is regularly reported by banks in the deductions schedule of their Federal income tax returns, tabulation of data from these returns for either 1969 or another recent year proved infeasible, mainly due to variations in the manner of reporting such taxes and the physical impossibility of locating and processing the returns for any sizable pre-selected sample of individual banks within the time available. Thus, it became apparent that a special survey was required if the specific data needs for the study were to be met, and that the results of the survey might also provide valuable benchmark information that could serve a wide range of other potential research needs.

Reporting Form and Bank Sample

The major focus of the reporting form (which is reproduced at pp. 42-45) was to obtain information on the dollar amounts of major types of State-local tax expense incurred by banks for the calendar year 1969-the last year preceding amendment of section 5219 and the last full year before the study began. All types of State and local taxes allowable as deductions for Federal income tax purposes were to be reported (except State payroll taxes for unemployment compensation and disability insurance). The amounts of the various taxes to be reported were those reflected in the bank's 1969 "Consolidated Report of Income" that had been filed with the Federal bank super

4 The only pertinent tax information separately reported by banks in the "Consolidated Report of Income" is the amount of "Provision for State and local income taxes." These data are summarized for each State for the calendar year 1969 in the volume, "1969 Report of Income; Assets and Liabilities-Commercial and Mutual Savings Banks. December 31, 1969," published by the Federal Deposit Insurance Corporation, at pp. 114-121. See comment below in footnote 8 at p. 26.