# Reply Brief — First Union National Bank v. Florida Department of Revenue

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Reply Brief
- **Published:** January 1, 1988
- **Citation:** 485 U.S. 949

## Text

NO. 87-1074 YOSEPH F. SPANIOL, JR.

IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1987

FIRST UNION NATIONAL BANK OF FLORIDA
and FIRST UNION CORPORATION OF FLORIDA,

Appellants,
vs.

FLORIDA D®SPARTMENT OF REVENUE and
GERALD A. LEWIS, Comptroller of Florida,

Appellees.

ON APPEAL FROM THE
SUPREME COURT OF THE STATE OF FLORIDA

REPLY TO APPELLEES'
MOTION TO DISMISS OR AFFIRM

JOSEPH C. JACOBS
THOMAS M. ERVIN, JR.*
STUART E. GOLDBERG
ERVIN, VARN, JACOBS,
ODOM & KITCHEN
POST OFFICE DRAWER 1170
TALLAHASSEE, FL 32302
(904)224-9135

ATTORNEYS FOR APPELLANTS
*COUNSEL OF RECORD

QUESTIONS_PRESENTED

The Questions Presented by This Appeal
Are:
I. WHETHER PART VII, CH. 220,
FLA. STAT., VIOLATES THE FEDERAL
PUBLIC DEBT STATUTE, 31 U.S.C.
§3124, BY IMPOSING A STATE
INCOME TAX ON OBLIGATIONS OF

THE UNITED STATES GOVERNMENT.

II. WHETHER PART VII, CH. 220,
FLA. STAT., VIOLATES THE FEDERAL
PUBLIC DEBT STATUTE, 31 U.S.C.
§3124, BY DISCRIMINATING AGAINST
INVESTMENT IN OBLIGATIONS OF
THE UNITED STATES GOVERNMENT
BY TAX CREDITS GIVEN FOR SELECTED

FORMS OF IN-STATE INVESTMENT.

INTRODUCTORY STATEMENT AS

- TO CONTENTS OF REPLY BRIEF
As this is a reply brief authorized
by Rule 16.5, Rules of the Supreme Court
of the United States, appellants will
present herein only direct reply to appellees'
"Reasons for Dismissal or Affirmation,"
and will not repeat or reiterate the
other portions included as required in

Appellants' Jurisdictional Statement.

oifse

TABLE OF CONTENTS

PAGE(S)
QUESTIONS PRESENTED i
INTRODUCTORY STATEMENT AS ii
TO CONTENTS OF REPLY BRIEF
TABLE OF AUTHORITIES iv
REPLY TO APPELLEES' "REASONS | 1

FOR DISMISSAL OR AFFIRMATION"

I. THE TAX IMPOSED BY PART 1
VII, CHAPTER 220, FLORIDA STATUTES,
IS A PURE "INCOME TAX" WHICB
IS PROSCRIBED BY 31 U.S.C. §3124.

II. THE TAX IMPOSED BY PART 6
VII, CHAPTER 220, FLORIDA STATUTES

IS DISCRIMINATORY AND, THEREFORE,
PROHIBITED BY 31 U.S.C. §3124.

CONCLUSION 10

-iii-

ee

TABLE OF AUTHORITIES

ry

DERAL CASES:

= aS eS

American Bank and Trust Company
v. Dallas County, 463 U.S. 855

(1983)

Anderson v. Celebreeze, 460 U.S.
780 (1983)

Bowers v. Hardwick, 478 U.S. ’
106 S.Ct. , 92 L.Ed.2d 140
(1986)

Edutational Films Corp. v. Ward,
350 U.S. 492 (1931)

First National Bank v. Bartow

County Board of Tax Assessors,
470 U.S. 583 (1985)

Garfield Trust Co. v. Director,
Division of Taxation, U.S.

, 107 S.Ct. 390, 93 L.Ed.2d
345 (1986)

Hicks v. Miranda, 422 U.S. 332
(1975)

Maryland v. Louisiana, 451 U.S.
725 (1981)

Memphis Bank & Trust Company v.

Garner, 459 U.S. 392 (1983)

Metromedia, Inc. v. San Diego,

eae

453 U.S. 490 (1981)

-iv-

PAGE(S)

1,2,6

1,2,6

PAGE(S)
FEDERAL CASES CONTINUED:
Reuben L. Anderson-Cherne, Inc.

I
v. Div. of Taxation, 423 U.S.
886 (1975) 1

Werner Machine Co. v. Director, Div.
of Taxation, 350 U.S. 492 (1956) 3

Westinghouse Electric Corp. v. Tully,
466 U.S. 388 (1984) 8

FEDERAL STATUTORY PROVISIONS:

U.S.C.

Vol. 31, §3124 1,2,5,6,7,8,9

STATE STATUTORY PROVISIONS:

Fla. Stat.

Part VII, Ch. 220 1,4,

§220.18

6
9
§220.182 9
§220.183 9

9

§220.184 —

-V~-

REPLY TO APPELLEES’ “REASONS
FOR DISMISSAL OR AFFIRMATION"

I. THE TAX IMPOSED BY PART VII,

CHAPTER 220, FLORIDA STATUTES,

IS A PURE “INCOME TAX" WHICH

IS PROSCRIBED BY 31 U.S.C. §3124.

Appellees' primary contention is
that the “income tax" issue has previously
been resolved by dismissal for want of
a substantial federal question in Reuben L.
Anderson-Cherne, Inc. v. Div, of Taxation,
423 U.S. 886 (1975), and Garfield Trust
Company v. Director, Div. of Taxation,

U.S. , 107 S.Ct. 390, 93 L.Ed.2d

345 (1986).

In this, appellees err. Reuben L.
Anderson-Cherne, Inc. v. Div. of Taxation,
supra, was dismissed in 1975, prior to
this Court's full decisions in American
Bank and Trust Company v. Dallas County,
463 U.S. 855 (1983), and First Nat. Bank

470 U.S. 583 (1985), which specifically

explained that the 1959 amendments to

31 U.S.C. §3124 were intended to prohibit
use of the "measured by” device or ploy
as a means to circumvent the prohibitions
of federal law and impose a state income
tax on federal obligations and interest
thereon.

Doctrinal developments may render
substantial an issue or question formerly
viewed as unsubstantial. Hicks v. Miranda,
422 U.S. 332 (1975). The recent pronounce-
ments by this Court in American Bank
and Trust Company v. Dallas County, supra,
and First Nat. Bank v. Bartow County
Board of Tax Assessors, supra, are such

doctrinal developments.

The precedential effect of a summary
affirmance extends no further than the
precise issues presented and necessarily

determined. Anderson v. Celebreeze,
460 U.S. 780 (1983). This Court's 1986

dismissal in Garfield Trust Company v.

Director, Div. of Taxation, supra, therefore

- fails as precedent because the statute

in question was an established franchise

tax which merely included as one component

part an income admeasurement. The case did

not present the issue of a pure state income
_tax imposed on United States obligations.

Finally, such summary dispositions

do not have the same precedential authority

in this Court as decisions rendered after

plenary consideration, Metromedia, Inc. v. San
Diego, 453 U.S. 490 (1981). This Court

may, and often does, grant plenary review
despite prior summary disposition. Bowers
v. Hardwick, 478 U.S. ___, 106 S.Ct.
_» 92 L.Ed.2d 140 (1986).

Appellees have relied heavily on
disjunctive language in Werner Machine
Co. v. Director, Div. of Taxation, 350
U.S. 492 (1956), in contending that said

decision is dispositive. Again, appellees

err for that decision merely recognizes

that a legitimate state franchise tax
may be measured by a yardstick which

includes tax-exempt income or property.

The decision does not hold that a pure
state income tax may be validated by
merely mislabeling it a franchise tax.

What appellees have steadfastly
attempted to obscure is that Part VII1
of Chapter 220, Florida Statutes, is
part of the Florida Income Tax Code.
In 1971 the State of Florida amended
its constitution for the specific purpose
of removing the prohibition against a
corporate income tax and authorizing
the income tax imposed under Chapter
220, Florida Statutes.

Part VII of Chapter 220, the purported
"franchise tax" on banks, te specifically
stated to be "in lieu of" the state corporate

income tax, and is identical in its

application and operation. Appellees
have not demonstrated or even offered
a single distinguishing characteristic,
other than legislative label, between
the Florida corporate income tax and
the purported "franchise tax" on banks.

It is respectfully submitted that
this Court should neither dismiss nor
summarily affirm. Rather, this Court
should grant plenary consideration and
address the issue of whether Congress
intended to authorize imposition of such
a pure state income tax on government
obligations by providing in the 1959
amendments to 31 U.S.C. §3124 that:

§ 3124. Exemption from taxation

(a) Stocks and obligations

of the United States Government

are exempt from taxation by

a State or political subdivision

of a State. The exemption

applies to each form of taxation

that would require the obligation,

the interest on the obligation,

or both, to be considered in

computing a tax, except--

|

(1) a nondiscriminatory
franchise tax or
another nonproperty
tax instead of a
franchise tax, imposed
on a corporation; and

(2) an estate or
inheritance tax.

Congress, in 1959, was well aware
of the device and term "income tax,"
and by omission of same prohibited such

a tax. Such was the very intent of Congress,

American Bank and Trust Company v. Dallas

County, supra; First Nat. Bank v. Bartow

County Board of Tax Assessors, supra;

which intent may not be circumvented
by merely labeling a prohibited income
tax a "franchise" tax. Educational Films

Corp. v. Ward, 350 U.S. 492 (1931).

II. THE TAX IMPOSED BY PART

VII, CHAPTER 220, FLORIDA STATUTES,

IS DISCRIMINATORY AND, THEREFORE,

PROHIBITED BY 31 U.S.C. §3124.

Appellees' contention in favor of
dismissal or summary affirmance is that
the Florida tax in question only discriminates

6

in favor of investment in selected in-state
projects (rather than securities or obliga-
tions) and therefore, does not violate
the nondiscriminatory requirement of
31 U.S.C. §3124.

31 0.8.C. $3124 does not by its
terms restrict or limit the prohibited
discrimination against investment in
United States government obligations.
It simply commands that such a franchise
tax, in order to be valid, must be "nondis-
criminatory."

It is true that Memphis Bank & Trust

Company v. Garner, 459 U.S. 392 (1983)

addressed and referred to discrimination,
by exemptions, between federal and local
securities. That was the particular
form of discrimination before this Court.
The decision does not purport to hold,
however, that all other forms of discrimin-

ation are authorized.

While the precise issue (tax credits
for investment in in-state projects)
does not appear to have yet been determined
by this Court in the context of 31 U.S.C.
§3124, decisions respecting the Interstate
Commerce Clause provide guidance. In

Maryland v. Louisiana, 451 U.S. 725 (1981),

this Court struck down as discriminatory
a Louisiana "First Use" tax which imposed
a tax on natural gas brought into the
state but gave local users a series of
exemptions and credits.

More recently, in Westinghouse Electric
Corp. v. Tully, 466 U.S. 388 (1984),

this Court struck down as discriminatory
a New York franchise tax credit in favor
of exports shipped from a regular place
of business within New York. This Court
noted at 466 U.S. 404 that it was irrelevant
that the discrimination was effected

by tax credit rather than by differing

tax rates, in that the real discriminatory
effect of such measures would be identical.
By like measure, Congress has proscribed
any state tax on obligations of the United
States government, except a "nondiscrimina-
tory" franchise or other nonproperty
tax. 31 U.S.C. §3124. Florida discriminates
by granting certain tax credits against
the "franchise" tax for investment in
favored local projects (see, §§220.18,
220.182, 220.183, 220.184, Fla. Stat.)
while granting no corresponding tax credit
for investment in, or income from, obligations
of the United States government.
Appellees fail to recognize that
while the protected class under 31 U.S.C.
§3124 is limited to "stocks and obligations"
of the United States government, the
stocks and obligations which come within
that class are protected from all forms

of discrimination which would place them

at a competitive disadvantage or make
them less attractive as an investment.

CONCLUSION I\

For the foregoing reasons, appellants

urge that the motion to dismiss or affirm

should be denied, and plenary review

afforded.

THOMAS M. ERVIN, JR.

and

STUART E. DBERG
of the law firm of
Ervin, Varn, Jacobs,
Odom & Kitchen
P. O. Drawer 1170
Tallahassee, FL 32302
s (904) 224-9135

ATTORNEYS FOR APPELLANTS
FIRST UNION NATIONAL
BANK OF FLORIDA }
and FIRST UNION
CORPORATION OF FLORIDA

_—_

10

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