A-61100, JUNE 1, 1935, 14 COMP. GEN. 869

A-61100: Jun 1, 1935

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TAXES - HAWAII - FEDERAL FUNDS EARNED BY TERRITORIAL EMPLOYEE WHEN FEDERAL FUNDS ALLOTTED TO THE TERRITORY OF HAWAII ARE EARNED BY AN EMPLOYEE OF THE TERRITORY. IS REQUIRED TO PAY AN ANNUAL POLL TAX OF FIVE DOLLARS. EVERY EMPLOYER PAYING COMPENSATION TO SUCH EMPLOYEE IN THE TERRITORY IS REQUIRED TO WITHHOLD SAID TAX OF FIVE DOLLARS FROM SUCH COMPENSATION AND PAY IT TO THE TERRITORIAL OFFICER AUTHORIZED TO COLLECT THE INCOME TAXES. A TAX OF ONE-HALF OF ONE PERCENT PER MONTH FOR UNEMPLOYMENT RELIEF IS ASSESSED UPON COMPENSATION RECEIVED BY ANYONE FOR PERSONAL SERVICES PERFORMED AS AN EMPLOYEE WITHIN THE TERRITORY OF HAWAII. EACH EMPLOYER MAKING PAYMENTS OF COMPENSATION TO SUCH EMPLOYEE IS DIRECTED TO WITHHOLD EACH MONTH ONE- HALF OF ONE PERCENT OF SUCH COMPENSATION AND PAY IT EVERY MONTH TO THE COLLECTOR OF THE TAXATION DIVISION WHICH EMBRACES HIS PRINCIPAL PLACE OF BUSINESS.

A-61100, JUNE 1, 1935, 14 COMP. GEN. 869

TAXES - HAWAII - FEDERAL FUNDS EARNED BY TERRITORIAL EMPLOYEE WHEN FEDERAL FUNDS ALLOTTED TO THE TERRITORY OF HAWAII ARE EARNED BY AN EMPLOYEE OF THE TERRITORY, THE FUNDS BECOME PRIVATE MONEYS OF THE PARTICULAR CITIZEN AND SUBJECT TO TERRITORIAL TAX AS SUCH, AND THE FACT THAT THE UNITED STATES ORIGINALLY FURNISHED THE FUNDS INVOLVES NO TAX ON THE UNITED STATES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, JUNE 1, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF MARCH 27, 1935, AS FOLLOWS:

IT WOULD BE GREATLY APPRECIATED IF YOU WOULD RENDER AN OPINION UPON A MATTER WHICH HAS ARISEN IN THE TERRITORY OF HAWAII IN CONNECTION WITH THE PAYMENT OF SALARIES FROM FUNDS MADE AVAILABLE BY THE FEDERAL GOVERNMENT FOR COOPERATIVE AGRICULTURAL EXTENSION WORK PURSUANT TO THE SMITH-LEVER ACT OF MAY 8, 1914 (38 STAT. 372) AND THE CAPPER-KETCHAMACT OF MAY 22, 1928 (45 STAT. 711).

BY THE TERRITORIAL ACT OF MAY 11, 1932, EFFECTIVE JANUARY 1, 1933, EVERY INHABITANT OF THE TERRITORY OF HAWAII BETWEEN THE AGES OF TWENTY AND SIXTY, UNLESS EXEMPTED BY LAW, IS REQUIRED TO PAY AN ANNUAL POLL TAX OF FIVE DOLLARS, AND EVERY EMPLOYER PAYING COMPENSATION TO SUCH EMPLOYEE IN THE TERRITORY IS REQUIRED TO WITHHOLD SAID TAX OF FIVE DOLLARS FROM SUCH COMPENSATION AND PAY IT TO THE TERRITORIAL OFFICER AUTHORIZED TO COLLECT THE INCOME TAXES.

BY THE TERRITORIAL ACT OF JUNE 2, 1933, EFFECTIVE JULY 1, 1933, A TAX OF ONE-HALF OF ONE PERCENT PER MONTH FOR UNEMPLOYMENT RELIEF IS ASSESSED UPON COMPENSATION RECEIVED BY ANYONE FOR PERSONAL SERVICES PERFORMED AS AN EMPLOYEE WITHIN THE TERRITORY OF HAWAII, AND EACH EMPLOYER MAKING PAYMENTS OF COMPENSATION TO SUCH EMPLOYEE IS DIRECTED TO WITHHOLD EACH MONTH ONE- HALF OF ONE PERCENT OF SUCH COMPENSATION AND PAY IT EVERY MONTH TO THE COLLECTOR OF THE TAXATION DIVISION WHICH EMBRACES HIS PRINCIPAL PLACE OF BUSINESS. THIS ACT IS NOT TO CONTINUE IN FORCE AFTER JULY 1, 1935.

THE QUESTION WHICH THIS DEPARTMENT WOULD LIKE TO HAVE CONSIDERED IS HOW THE UNIVERSITY OF HAWAII, AS AN EMPLOYER PAYING COMPENSATION TO ITS EMPLOYEES IN EXTENSION WORK, MAY, OUT OF EXTENSION FUNDS MADE AVAILABLE FOR THAT PURPOSE BY THE SAID SMITH-LEVER AND CAPPER-KETCHAM ACTS, PROPERLY DEDUCT THEREFROM AND PAY OVER TO THE PROPER TERRITORIAL OFFICIAL FIVE DOLLARS POLL TAX AND THE MONTHLY ONE-HALF OF ONE PERCENT OF SUCH COMPENSATION FOR UNEMPLOYMENT RELIEF.

IT IS RECOGNIZED, IN ACCORDANCE WITH YOUR DECISION OF JANUARY 16, 1933 (A -46031), THAT TITLE TO THE FUNDS SO PROVIDED BY THESE ACTS OF CONGRESS CONTINUES IN THE UNITED STATES UNTIL THE FUNDS ARE EXPENDED IN ACCORDANCE WITH THE REQUIREMENTS OF THE ACTS MAKING THEM AVAILABLE, IN VIEW OF WHICH IT WOULD SEEM TO BE OBVIOUS THAT THE STATE, BECAUSE THESE FUNDS, UNTIL EXPENDED, ARE FEDERAL AND NOT STATE FUNDS, IS WITHOUT AUTHORITY TO REQUIRE THAT ANY PORTION OR PERCENTAGE THEREOF SHALL BE DIVERTED TO PURPOSES OTHER THAN THOSE SPECIFIED BY CONGRESS; YET SUCH DIVERSION WOULD CERTAINLY TAKE PLACE IF EITHER THE FIVE DOLLAR POLL TAX OR THE MONTHLY ONE-HALF OF ONE PERCENT OF EXTENSION SALARIES FOR UNEMPLOYMENT RELIEF SHOULD BE DEDUCTED THEREFROM BY THE UNIVERSITY, OF ITS OWN MOTION, AND PAID OVER TO A STATE REPRESENTATIVE UNDER A TAXING STATUTE.

EVEN THOUGH IT THUS APPEARS THAT THE STATE MAY NOT LEGALLY REQUIRE THE UNIVERSITY TO DEDUCT THESE AMOUNTS, BEFORE PAYING SUCH EMPLOYEES THEIR SALARIES, IT IS THE DEPARTMENT'S UNDERSTANDING THAT THE EMPLOYEES, UNDER EXISTING CIRCUMSTANCES, ARE WILLING TO COMPLY WITH THE SPIRIT OF THESE TWO TERRITORIAL LAWS, TO THE EXTENT OF HAVING THE UNIVERSITY, AS THEIR "EMPLOYER," MAKE THESE DEDUCTIONS AND PAY THE AMOUNTS TO THE TERRITORIAL OFFICIALS, IF IT CAN BE DONE LEGALLY. TO ACCOMPLISH THIS, IT HAS BEEN SUGGESTED THAT EXTENSION SERVICE EMPLOYEES, DESIRING TO COMPLY WITH THE SPIRIT OF THESE TWO ACTS, SHOULD, IN WRITING, AUTHORIZE AND DIRECT THE UNIVERSITY (THEIR EMPLOYER) TO MAKE THESE TWO SPECIFIC DEDUCTIONS FROM THE SALARIES DUE THEM AND, AS THEIR AGENT, PAY THE AMOUNT SO DEDUCTED TO THE PROPER TERRITORIAL OFFICIAL.

BY FOLLOWING THE PROCEDURE SUGGESTED, THAT IS, BY THE PAYMENT OF ALL BUT A SMALL FRACTION OF A GIVEN SALARY BY THE UNIVERSITY TO THE EMPLOYEE TO WHOM IT IS DUE AND THE PAYMENT OF THAT SMALL FRACTION TO SOME OTHER PERSON OR OFFICER BY THE AUTHORIZATION AND DIRECTION OF SUCH EMPLOYEE, IT IS THOUGHT THAT THE ENTIRE SALARY WOULD, AS A MATTER OF LAW, HAVE BEEN PAID TO THE EMPLOYEE AND THAT THE EXTENSION FUNDS WOULD THUS BE PROPERLY DISBURSED AND THE EMPLOYEE, AT THE SAME TIME, WOULD BE COMPLYING WITH THE SPIRIT OF THE TERRITORIAL LAW BY HAVING HIS EMPLOYER DEDUCT AND PAY OVER PART OF HIS SALARY TO SOMEONE ELSE, FOR PURPOSES WHICH HE HAS SPECIFIED.

YOUR OPINION IS REQUESTED AS TO WHETHER, UNDER SUCH A METHOD OF AUTHORIZATION, DEDUCTION, AND PAYMENT, EXTENSION FUNDS SO USED WOULD BE DISBURSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE FEDERAL EXTENSION ACTS.

THE DECISION OF JANUARY 16, 1933, A-46031, CITED BY YOU HELD THAT TITLE TO FUNDS AUTHORIZED TO BE ALLOTTED TO THE STATES AND THE TERRITORY OF HAWAII FOR COOPERATIVE AGRICULTURAL EXTENSION WORK PURSUANT TO THE CITED STATUTES REMAINED IN THE UNITED STATES WHILE ON DEPOSIT TO THE CREDIT OF STATE AND INSTITUTIONAL OFFICIALS AWAITING EXPENDITURE IN ACCORDANCE WITH THE CONDITIONS STATED IN THE CONTROLLING STATUTES; THAT INTEREST ON SUCH DEPOSITS ACCRUE TO THE UNITED STATES AND THAT SUCH DEPOSITS ARE NOT SUBJECT TO STATE LAWS CONTROLLING MONEYS OF THE STATE ON DEPOSIT. SEE ALSO DECISION OF APRIL 9, 1935, A-46031, 14 COMP. GEN. 747. THE DECISION DID NOT HOLD, NOR PURPORT TO HOLD, THAT TITLE REMAINED IN THE UNITED STATES TO ANY PORTION OF THE FUND WHICH HAS BEEN EARNED AS SALARY BY THE EMPLOYEES OF A STATE OR TERRITORIAL INSTITUTION. WHEN EARNED, THE FUNDS BECOME PRIVATE MONEYS OF THE PARTICULAR CITIZEN AND SUBJECT TO STATE OR TERRITORIAL TAX AS SUCH. THE FACT THAT THE UNITED STATES ORIGINALLY FURNISHED THE FUNDS INVOLVES NO TAX ON THE UNITED STATES.

ACCORDINGLY, THERE WOULD APPEAR NO LEGAL OBJECTION UNDER FEDERAL LAW, TO THE PROPOSED WITHHOLDING BY THE UNIVERSITY OF HAWAII, OF AN AMOUNT FROM THE SALARIES PAID ITS EMPLOYEES SUFFICIENT TO COVER THE STATE TAX IN QUESTION.