A-42025, MAY 26, 1932, 11 COMP. GEN. 449

A-42025: May 26, 1932

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DISTRICT OF COLUMBIA - PERSONAL PROPERTY TAXES THE DUTIES OF ASSESSING AND COLLECTING TAXES IN THE DISTRICT OF COLUMBIA ARE IMPOSED BY LAW ON OFFICIALS OF THE GOVERNMENT OF THE DISTRICT OF COLUMBIA AND THEIR DETERMINATION AS TO WHETHER A TAX SHALL BE ASSESSED IN A GIVEN CASE AND AS TO THE AMOUNT THAT SHALL BE ASSESSED ARE MATTERS NOT SUBJECT TO REVIEW BY THE GENERAL ACCOUNTING OFFICE. IN VIEW OF THE DOUBTFUL QUESTIONS ARISING AS TO WHETHER A CERTAIN TRUST FUND AND/OR THE INCOME THEREFROM HELD BY A LOCAL TRUSTEE FOR THE BENEFIT OF A CITIZEN OF A FOREIGN COUNTRY IS SUBJECT TO THE DISTRICT OF COLUMBIA INTANGIBLE PERSONAL PROPERTY TAX. LEAVING IT TO THOSE UPON WHOM THE TAX IS IMPOSED TO QUESTION THE VALIDITY OF THE ASSESSMENT AND COLLECTION BY JUDICIAL PROCEEDINGS.

A-42025, MAY 26, 1932, 11 COMP. GEN. 449

DISTRICT OF COLUMBIA - PERSONAL PROPERTY TAXES THE DUTIES OF ASSESSING AND COLLECTING TAXES IN THE DISTRICT OF COLUMBIA ARE IMPOSED BY LAW ON OFFICIALS OF THE GOVERNMENT OF THE DISTRICT OF COLUMBIA AND THEIR DETERMINATION AS TO WHETHER A TAX SHALL BE ASSESSED IN A GIVEN CASE AND AS TO THE AMOUNT THAT SHALL BE ASSESSED ARE MATTERS NOT SUBJECT TO REVIEW BY THE GENERAL ACCOUNTING OFFICE. IN VIEW OF THE DOUBTFUL QUESTIONS ARISING AS TO WHETHER A CERTAIN TRUST FUND AND/OR THE INCOME THEREFROM HELD BY A LOCAL TRUSTEE FOR THE BENEFIT OF A CITIZEN OF A FOREIGN COUNTRY IS SUBJECT TO THE DISTRICT OF COLUMBIA INTANGIBLE PERSONAL PROPERTY TAX, THE ADMINISTRATIVE DUTY WOULD APPEAR TO BE TO REQUIRE THE PAYMENT OF THE TAX BY THE TRUSTEE, LEAVING IT TO THOSE UPON WHOM THE TAX IS IMPOSED TO QUESTION THE VALIDITY OF THE ASSESSMENT AND COLLECTION BY JUDICIAL PROCEEDINGS.

COMPTROLLER GENERAL MCCARL TO THE PRESIDENT OF THE BOARD OF COMMISSIONERS OF THE DISTRICT OF COLUMBIA, MAY 26, 1932:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 21, 1932, IN WHICH YOU REQUEST TO BE ADVISED WHETHER A CERTAIN TRUST FUND AND/OR THE INCOME THEREFROM HELD BY THE NATIONAL SAVINGS AND TRUST ., SURVIVING TRUSTEE OF MARY SCOTT TOWNSEND, FOR THE BENEFIT OF THE HON. CONSTANT IN BRUN, HONORARY COUNSELOR OF THE SOVEREIGNTY OF DENMARK, IN SUBJECT TO TAXATION BY THE DISTRICT OF COLUMBIA UNDER THE ACT OF MARCH 3, 1917, 39 STAT. 1046, AS AMENDED BY THE ACT OF JUNE 29, 1922, 42 STAT. 668, PROVIDING FOR A TAX OF FIVE-TENTHS OF 1 PERCENT ON THE FULL MARKET VALUE OF INTANGIBLE PERSONAL PROPERTY.

IN A LETTER OF FEBRUARY 15, 1928, A-20296, RELATING TO THE QUESTION OF REFUNDING TAXES PAID TO THE DISTRICT OF COLUMBIA BY THE AMERICAN SECURITY AND TRUST CO. AS COTRUSTEE OF INTANGIBLE PERSONAL PROPERTY BELONGING TO A TRUST ESTATE ADMINISTERED BY IT AND ONE OTHER COTRUSTEE, IT WAS SAID THAT THE DUTIES OF ASSESSING AND COLLECTING TAXES IN THE DISTRICT OF COLUMBIA ARE IMPOSED BY LAW ON OFFICIALS OF THE GOVERNMENT OF THE DISTRICT OF COLUMBIA AND THEIR DETERMINATION AS TO WHETHER A TAX SHALL BE ASSESSED IN A GIVEN CASE AND AS TO THE AMOUNT THAT SHALL BE ASSESSED ARE MATTERS THERETOFORE REGARDED AS NOT SUBJECT TO REVIEW BY THIS OFFICE, AND, THEREFORE, IT WAS STATED THAT NO AUTHORITATIVE DECISION COULD BE RENDERED BY THIS OFFICE, BUT SINCE IT APPEARED FROM THE RECORD THAT THE CORPORATION COUNSEL AND THE AUDITOR OF THE DISTRICT OF COLUMBIA HAD EXPRESSED OPPOSITE VIEWS, THE MATTER WOULD BE GIVEN CONSIDERATION BY THIS OFFICE ON THE BASIS OF AN ADVISORY OPINION. WHAT WAS SAID IN THAT CASE IS EQUALLY APPLICABLE TO THE MATTER NOW PRESENTED UNDER SIMILAR CIRCUMSTANCES AND, THEREFORE, THE CASE WILL BE CONSIDERED ONLY ON THAT BASIS.

IT APPEARS FROM THE RECORD THAT THE TRUST FUND HERE IN QUESTION WAS ESTABLISHED BY THE LATE MRS. MARY SCOTT TOWNSEND BY DEED OF JUNE 29, 1928: THAT THE AMOUNT OF THE FUND WAS ABOUT $120,000 AND THE INCOME THEREFROM WAS TO BE PAID TO THE HON. CONSTANT IN BRUN FROM THE DATE OF HIS RETIREMENT AS MINISTER OF DENMARK TO THE UNITED STATES; THAT HIS RETIREMENT TOOK PLACE ON NOVEMBER 28, 1930; BUT THAT HE WAS APPOINTED AS OF THAT DATE AND HAS CONTINUED SINCE THEN AS A MEMBER OF THE DANISH LEGATION UNDER THE TITLE OF HONORARY COUNSELOR. IT APPEARS, ALSO, THAT UNDER THE DEED OF TRUST THE INCOME FROM THE INTANGIBLE PROPERTY WAS TO BE PAID TO MR. BRUN DURING HIS NATURAL LIFE ONLY, AND THAT AT HIS DEATH THE CORPUS OF THE TRUST IS TO REVERT TO THE GRANTOR OR HER ESTATE.

IN DECEMBER, 1931, MR. BRUN APPLIED FOR EXEMPTION OF THE TAX UPON THE GROUND THAT HIS DIPLOMATIC STATUS ENTITLED HIM THERETO, BEING A MEMBER OF THE DIPLOMATIC STAFF OF THE DANISH LEGATION.

AFTER INQUIRY AT THE DEPARTMENT OF STATE AS TO THE TREATMENT RECEIVED BY THE DIPLOMATIC OFFICERS OF THE UNITED STATES IN DENMARK, THE CORPORATION COUNSEL ADVISED THAT MR. BRUN WAS A DANISH SUBJECT ENJOYING A DIPLOMATIC STATUS AND THAT, SINCE FOREIGN CITIZENS IN DENMARK ENJOYING A SIMILAR STATUS ARE EXEMPT FROM PAYMENT OF PERSONAL TAXES ON CAPITAL AND INCOME, EXEMPTION SHOULD BE GRANTED ON THE BASIS OF INTERNATIONAL COMITY. MR. BRUN WAS SO ADVISED AND IN REPLY HE REQUESTED A REFUND OF THE PERSONAL TAXES THERETOFORE PAID BY THE TRUSTEES FOR 1931 AND 1932, AGGREGATING $569.61. THIS REFUND HAS BEEN OBJECTED TO BY BOTH THE ASSESSOR OF TAXES AND THE AUDITOR FOR THE DISTRICT OF COLUMBIA AND THEY HAVE REQUESTED A RECONSIDERATION OF THE ACTION GRANTING EXEMPTION.

TWO POINTS HAVE ARISEN IN THIS CONNECTION: (1) WHETHER THE STATUS OF MR. BRUN IS SUCH AS TO ENTITLE HIM TO EXEMPTION BY INTERNATIONAL COMITY, THE AUDITOR CONTENDING THAT AMERICAN DIPLOMATIC OFFICERS IN DENMARK ARE NOT EXEMPT FROM THE PAYMENT OF TAX ON SIMILAR FUNDS, CITING CHARLES CHENEY HYDE, INTERNATIONAL LAW, VOLUME 1, SECTIONS 437 AND 440; AND (2) WHETHER MR. BRUN SHOULD BE GRANTED AN EXEMPTION FOR A TAX WHICH HE IS NOT REQUIRED TO PAY, BUT WHICH IS ASSESSED AGAINST AND PAID BY THE TRUSTEE BEFORE THE INCOME IS PAID TO HIM OR A REFUND OF THE TAXES WHICH WERE NOT PAID BY HIM BUT BY THE TRUSTEE, THE ASSESSOR OF TAXES CONTENDING THAT, UNDER THE PRACTICE ADOPTED BY HIS OFFICE PURSUANT TO FORMER RULINGS OF THE CORPORATION COUNSEL, THE TAXES ARE ASSESSABLE AGAINST AND COLLECTIBLE FROM THE TRUSTEES OF THE TRUST FUND REGARDLESS OF THE STATUS OF THE BENEFICIARY OR CESTUI QUE TRUST, CITING A CASE OF THE WASHINGTON LOAN AND TRUST CO., TRUSTEE OF CERTAIN PERSONAL PROPERTY OF THE ESTATE OF THE LATE WILLIAM J. SIBLEY HELD FOR CERTAIN INSTITUTIONS EXEMPT FROM TAXATION, A QUOTATION FROM THE OPINION OF THE CORPORATION COUNSEL BEING AS FOLLOWS:

THAT THE INCOME PAID TO THESE INSTITUTIONS IS EXEMPT FROM TAXATION SEEMS REASONABLY CLEAR. WHETHER THE PRINCIPAL IS EXEMPT IS ANOTHER QUESTION. NO PART OF THE LATTER BELONGS TO THE INSTITUTIONS NAMED, NOR HAVE THEY ANY CONTROL OVER IT. THE PRINCIPAL BELONGS TO THE ESTATE WHICH IS NOT EXEMPT. THE INCOME BELONGS TO INSTITUTIONS NAMED, AND IS EXEMPT BECAUSE OF THE CHARITABLE NATURE OF THESE INSTITUTIONS.

I AM OF THE OPINION THAT THE CORPUS OF THE FUND IS NOT EXEMPT.

AS TO THE FIRST OF THESE QUERIES IT SHOULD BE NOTED THAT THE DEED OF TRUST PROVIDED THAT THE INCOME FROM THE TRUST FUND SHOULD BE PAID TO MR. BRUN ONLY FROM THE DATE OF HIS RETIREMENT AS MINISTER FROM DENMARK, THAT IS TO SAY, THE INCOME WAS NOT TO BE PAID TO MR. BRUN UNTIL HE HAD SEVERED HIS CONNECTION AS A DIPLOMATIC REPRESENTATIVE OF DENMARK TO THE UNITED STATES. THE SEVERANCE, IT APPEARS, HAS TAKEN PLACE, BUT MR. BRUN HAS NOW BEEN GIVEN AN APPOINTMENT AS HONORARY COUNSELOR OF THE LEGATION. HIS DIPLOMATIC STATUS UNDER SUCH APPOINTMENT IS THUS DOUBTFUL. BY COURTESY OR INTERNATIONAL COMITY EXEMPTION FROM TAXATION IS GRANTED NOT ONLY TO THE HEAD OF THE DIPLOMATIC MISSION IN A FOREIGN COUNTRY, BUT ALSO TO HIS FAMILY AND OFFICIAL HOUSEHOLD. IN THE LATTER THERE ARE INCLUDED ATTACHES, BOTH CIVIL AND MILITARY, SECRETARIES AND SERVANTS. SEE 2 CORPUS JURIS 1303. UNDER AN APPOINTMENT TO AN HONORARY POSITION IT IS AT LEAST DOUBTFUL WHETHER MR. BRUN MAY BE CLASSED AS A DIPLOMATIC OFFICER IN A REPRESENTATIVE CAPACITY FOR DENMARK OR AS A PART OF THE OFFICIAL HOUSEHOLD OF THE HEAD OF THE DIPLOMATIC MISSION FROM THAT COUNTRY TO THE EXTENT OF ALLOWING HIM EXEMPTION TO THE PAYMENT OF TAXES ON INTANGIBLE PROPERTY IN THE DISTRICT OF COLUMBIA, FROM WHICH HE DERIVES MERELY AN INCOME DURING HIS LIFETIME AND PROVIDED, ALSO, APPARENTLY, UNDER THE DEED OF TRUST, HE IS NOT TO ACT AS THE HEAD OF SUCH DIPLOMATIC MISSION.

REGARDLESS, HOWEVER, OF HIS DIPLOMATIC STATUS, IT IS NOT APPARENT FROM THE RECORD AS SUBMITTED WHY MR. BRUN SHOULD BE GRANTED EXEMPTION FROM TAXATION UPON THE FUND IN QUESTION. THE TAX, IT APPEARS, IS ASSESSED AGAINST THE TRUSTEE RATHER THAN AGAINST THE BENEFICIARY AND IT IS ADMITTED IN THE RECORD, BY ALL CONCERNED, THAT BUT FOR THE STATUS OF THE CESTUI QUE TRUST THE CORPUS OF THE TRUST IS PROPERLY TAXABLE IN THE DISTRICT OF COLUMBIA. IT IS ADMITTED, ALSO, THAT THERE IS NOTHING IN THE LAW WHICH EXEMPTS DIPLOMATIC OFFICERS FROM TAXATION, THE ONLY BASIS BEING THE EXTENDING TO SUCH OFFICERS THE COURTESY OF INTERNATIONAL COMITY. SINCE NO TAX IS ASSESSED, LEVIED, AND COLLECTED ON THE INCOME AFTER IT IS RECEIVED BY MR. BRUN IT WOULD APPEAR THAT HIS STATUS AS A DIPLOMATIC OFFICER, IF IN FACT HE HAS ONE, IS DULY RESPECTED AND THE COURTESY OF DIPLOMATIC IMMUNITY EXTENDED TO HIM. HOWEVER, IN A CASE WHERE THE CORPUS OF THE FUND IS OTHERWISE TAXABLE, IT IS NOT BELIEVED THAT THE PRIVILEGE OF HIS DIPLOMATIC STATUS SHOULD BE SO EXTENDED AS TO EXEMPT FROM TAXATION SUCH CORPUS OF THE FUND OR THE INCOME THEREFROM WHILE IN THE HANDS OF THE TRUSTEES. IN THIS RESPECT, THE MATTER WOULD APPEAR ANALOGOUS TO THE OFFICER DERIVING AN INCOME FROM BUSINESS ENTERPRISES IN WHICH HE MIGHT ENGAGE IN THE DISTRICT OF COLUMBIA. AS TO THE HEAD OF THE MISSION, IT APPEARS THAT THE DIPLOMATIC IMMUNITY IS ABSOLUTE, BUT THAT DOES NOT EXTEND TO MEMBERS OF HIS OFFICIAL HOUSEHOLD, AND EVEN IN CASES OF THE HEAD OF A DIPLOMATIC MISSION ENGAGING IN BUSINESS, THE PROPERTY IS SUBJECT TO JUDICIAL PROCESS IN REM IF THE PROPERTY MAY BE REACHED WITHOUT INFRINGING UPON HIS DIGNITY AS A REPRESENTATIVE OF THE FOREIGN COUNTRY AND WITHOUT INTERFERING WITH THE PROPER DISCHARGE OF HIS DUTIES AS SUCH.

THE PRACTICE OF CONSIDERING IN CASES OF TRUST FUNDS SUCH AS INVOLVED IN THE PRESENT MATTER THAT THE TAX IS ASSESSABLE AGAINST THE TRUSTEE, REGARDLESS OF THE STATUS OF THE BENEFICIARY OR CESTUI QUE TRUST APPEARS TO BE PROPER AND AUTHORIZED UNDER THE LAW AND NO REASON APPEARS WHY AN EXCEPTION, AS PROPOSED BY THE CORPORATION COUNSEL, SHOULD BE MADE IN THE PRESENT CASE. IN VIEW OF THE DOUBTFUL QUESTIONS ARISING IN CONNECTION WITH THE MATTER AS HEREIN POINTED OUT AND THE DOUBTFUL PRECEDENT ESTABLISHED BY EXEMPTION, I AM OF THE OPINION IT WOULD APPEAR ADVISABLE TO REQUIRE THE PAYMENT OF THE TAX BY THE TRUSTEE IN THIS CASE, AS HERETOFORE, LEAVING IT TO THOSE UPON WHOM THE TAX IS IMPOSED TO QUESTION THE VALIDITY OF THE ASSESSMENT AND COLLECTION BY JUDICIAL PROCEEDINGS.