All bills against the bank are presented to the general book keeper's department for payment, but a thorough auditing of the bill is made before payment is allowed. It is absolutely vital to have a proper authorization for the liability which the bill presents. This having been procured, the items and computa tion of the bill are checked, figured, and approved, and, if found correct, the bill is submitted for payment. As a final precaution the bill is inspected to make sure of its correctness as to heading, discount allowance, and authority, and, if it successfully passes. this inspection, it is paid by cashier's check.
Taxes Among the expenses of the bank are taxes. Because of their number and variety these are often recorded in a special book, although they may be handled as an item of operating expense in the expense ledger. The following taxes are paid by a national bank in the state of New York : I. The Tax on Circulation. The circulation tax applies only to national banks, for a prohibitive io per cent tax is laid by the federal government on the issues of state bank notes. National banks are required to pay per cent tax on the average amount of their outstanding circulation if secured by United States 2 per cent bonds, and 7 a per cent tax on the average circulation secured by other United States bonds. The tax is payable in the months of January and July. Ten days after the first day of these months each bank is required to make a return, under oath of its president or cashier, to the Treasurer of the United States, of the average amount of its notes in circulation for the six months preceding the first day of January or July. The tax applies only to those notes strictly outstanding in circulation. Payment may be made by depositing the amount of the tax to the credit of the Treasurer of the United States, either with the Treasurer or with any federal reserve bank or national bank depository; if no depository is convenient, payment may be made by draft on New York or by shipment of lawful money or national bank notes.
The expenses incurred by the Comptroller in counting, can celing, or destroying mutilated notes and their expressage to Washington are assessed against the issuing bank annually as of June 30.
2. Tax on Capital Stock. Section 5219, U. S. Revised Statutes, denies the state in which a national bank is located the right to tax a national bank as such at all, but permits it to tax the shares of stock of that bank as personal property of the owners; the legislature of the state may fix the manner and place of taxing such shares, subject only to two restrictions: (I) that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of the state; and (2) that the shares of a national bank owned by non residents of any state shall be taxed in the city or town where the bank is located, and not elsewhere. The result of this law
has been to effect a great uniformity of tax methods as applied to banks; the legislatures find themselves in practice restricted to one method of taxing the national banks; national banks cannot be subjected to an income tax upon corporations imposed by the state nor to a license tax in the shape of a privilege ox occupation tax; and the limitation that the stock of national banks shall not be discriminated against as compared with other moneyed capi tal, "has been strictly interpreted as virtually (though not ex pressly) to mean that this method of taxing national banks is legal only in case other banks are taxed in practically the same way."' The courts are not in full agreement as to the meaning of "moneyed capital" in the statute. The bank shares are taxed by local officers under the general property tax or under some uniform method prescribed by the legislature. The latter system is the better and is best exemplified in the state of New York. The system may be described as follows: Each bank must report annually to the assessors of the local tax district the names of the stockholders, their addresses, and the number of shares of stock owned by each, the capital, surplus, undivided pro fits, and other data. These local assessors make the assessment on the owners in the tax district where the bank is located, regardless of their individual places of residence. The method of arriving at the value of the share is prescribed by law. The sum of the capital, surplus, and undivided profits is divided by the number of shares. The law also prescribes the rate of tax at r per cent of this assessed value; and it requires the bank to act as agent of the state in the collection of the tax, paying the tax out of its profits and holding a lien upon the shares of stock or other property of the stockholder in its hands. This tax is the only tax allowed in the state on the shares of stock; it is paid into the county treasury and distributed among the tax districts on the basis of their tax rates. It is assessed as of May t, and payable on or before December 31.