Difficulties which have perplexed American courts in determining where property of various kinds may be lawfully taxed as such have commonly been of an essentially domestic nature; and if the effort to find the solution has at times betrayed confusion of thought, or apparent inconsistency, probably the result although commonly favorable to the assertion of the taxing power by the territorial sovereign, has not been one which would be regarded by foreign States when applied to property of their nationals as internationally illegal.1

A State may lawfully tax all persons as such who, regardless of their nationality, have, by reason of the closeness of their connection with its territory, established such a relationship with it as to justify the inference that they are residents thereof.2 Such a relationship does not require the acquisition of a domicile as that term is understood either in America or England. It is founded rather on the sheer fact of residence. Thus, an American citizen who had satisfied every requirement of the common law for the retention of a legal home in American territory, might still, in consequence of long-continued residence in a foreign country, be there subjected not unreasonably to the payment of an income tax.1

1 These difficulties seem to have been due in part, first, to the belief that corporeal property is, under any circumstances, taxable as such in a place where it is not to be found, and where, in consequence, it can not be levied upon, and secondly, to the belief that although notes and other evidences of indebtedness may be treated as chattels and taxed accordingly as such, there remains between them and the domicile of the owner a peculiar relationship serving at times to restrict the State where they are found in dealing with them as assets belonging within its domain, and at others, to extend the theoretical control of the State of the domicile over them as though they were in fact within its limits. See, in this connection, dissenting opinion of Mr. Justice Day, in Buck v. Beach, 206 U. S. 392, 409. It is believed that tangible property, embracing all that possesses a corporeal character, is to be taxed as such only where it is to be found and can be levied upon; and that difficulties in determining whether it strictly belongs where it is found, hardly justify recourse to a fiction even as a means of preventing property to escape taxation altogether.

It is probable, however, that as a practical matter, any objections on such a score which might be raised by an aggrieved foreign State, could be met substantially by the suggestion that the particular tax imposed was of a personal character rather than a tax on property, and that the connection of the owner with the domain of the territorial sovereign sufficed to subject him to the imposition of it.

2 Mr. Fish, Secy. of State, to Mr. Cushing, Minister to Spain, Jan. 12, 1876, MS. Inst. Spain, XVII, 432, Moore, Dig., II, 63, 64.

This is well illustrated by the exaction by Japan of an income tax from foreign missionaries. For. Rel. 1900, 760-762; see, also, Mr. Fish, Secy. of State, to Mr. Davis, Minister to Germany, Nov. 21, 1874, For. Rel. 1875, I, 488-489; Moore, Dig., II, 58-60. Compare the attempt of the authorities of Frankfort-on-the-Main, in 1887, to levy an income tax on Mrs. S. R. Honey, the wife of an American citizen, domiciled in the United States, For. Rel. 1888, I, 623, 630, 642, 650, 655, Moore, Dig., II, 60-61.

4

Memorandum of law officer of Department of State, March 1, 1909, For.

PERSONAL TAXES

[§ 206 Personal taxes levied upon individuals subject thereto may assume a variety of forms. When they are levied upon aliens, the law of nations appears to offer few restrictions beyond the possible requirement that the tax be in a broad sense uniform and general in its operation. Such individuals may be subjected, for example, to the payment of a poll tax,1 or of an income tax; 2 and in the latter case the tax may doubtless be assessed according to the amount of income from whatsoever source derived, and whether or not from assets outside of the taxing State. It may be doubted, moreover, whether any rule of international law forbids discrimination on grounds of alienage. When a tax is levied upon the income of a non-resident alien, it is obviously in the nature of a tax upon his property within the control of the territorial sovereign. rather than a personal tax.4

According to American opinion the State of the domicile of a decedent may tax the succession to the universitas as incidental Rel. 1909, 285. Compare Mr. Porter, Acting Secy. of State, to Mr. Emmet, June 8, 1885, For. Rel. 1885, 848, Moore, Dig., IV, 22, where the statement as to principle is believed to place undue stress upon domicile.

1 Opinion of Justices, 7 Mass. 523; Opinion of Justices, 8 N. H. 573; Kuntz v. Davidson County, 6 Lea (Tenn.) 65.

2 Mr. Fish, Secy. of State, to Mr. Davis, Minister to Germany, Nov. 21, 1874, For. Rel. 1875, I, 488-489, Moore, Dig., II, 58-60. As to the procedure to be followed by an American citizen abroad who alleges that he is not properly liable to the exaction of an income tax in the country of his sojourn, cf. Mr. Hay, Secy. of State, to Mr. Harris, Minister to Austria-Hungary, May 31, 1899, For. Rel. 1899, 50; Moore, Dig., II, 61; also, Mr. Bayard, Secy. of State, to Mr. Honey, Mar. 21, 1887, For. Rel. 1888, I, 631, Moore, Dig., II, 61, note.

See Memorandum of the Solicitor of the Department of State, on the payment of income taxes by American Consular Officers in Great Britain, March 1, 1909, For. Rel. 1909, 285; correspondence with Germany in 1906, concerning the exemption of American citizens in the territory of that Empire from the payment of church taxes, For. Rel. 1906, I, 658-660; correspondence with Haiti in 1907, respecting the requirement of that State compelling foreign firms to take out retail licenses in lieu of the enforcement of the Haitian tax law of 1876, For. Rel. 1907, II, 728-742.

In 1910, the Department of State, noting that several European Powers opposed the collection of a supplemental income tax from foreigners engaged in business in Bulgaria, on the ground that by the operation of the capitulations existing under the Turkish régime which were "still in force in Bulgaria”, the government of that country lacked the right to enforce the collection of any new taxes upon foreign residents without the consent of their respective governments, gave its approval to representations made by the American Chargé d'Affaires, that American citizens be accorded the same treatment as that applied to other foreigners engaged in business in Bulgaria. For. Rel. 1910, 128.

3 Foreign Relations 1900, 760-762.

4 Thus, according to the Act of Sept. 8, 1916, 39 Stat. 756, provision was made for the taxation upon the entire net income received in the preceding calendar year from all sources within the United States "by every individual, a non-resident alien, including interest on bonds, notes, or other interestbearing obligations of residents, corporate or otherwise." See, in this connection, De Ganay v. Lederer, 250 U. S. 376, sustaining a tax under the Income

to the persona of the decedent.' This principle would doubtless be applied in the case of an alien who had established a legal home in the United States. It could not, however, logically be applied where an alien decedent, although residing therein, was acknowledged to have retained a legal home in the country of his nationality. It is the power of the State of the domicile to control the succession as such in connection with the probate of the estate of a decedent which justifies the claim of that State to tax the succession. On the other hand, it is judicially declared that the power of a State to control the transfer of the assets of the estate of a decedent within its domain at the time of his death, embracing both chattels and debts due the decedent (when the debtors are within its reach), justifies it in taxing the transfer which in legal contemplation is subject to its control.2 Obviously this principle is applicable in the case of the estate of a non-resident regardless of his nationality.3

Tax Law of Oct. 3, 1913, upon the income from certain stocks, bonds, and mortgages owned by a non-resident alien, and in the hands of his agent in the United States.

It should be observed that according to the Act of Oct. 3, 1917, 40 Stat. 337, it was declared that the existing Income Tax Law should not be construed as taxing the income of foreign governments received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments, or from interest on deposits in banks in the United States of moneys belonging to foreign governments.

1 Frothingham v. Shaw, 175 Mass. 59; Eidman v. Martinez, 184 U. S. 578; Blackstone v. Miller, 188 U. S. 189, 204; Bullen v. Wisconsin, 240 U. S. 625, 631, where it was said by Mr. Justice Holmes in the course of the unanimous opinion of the Court: As the States where the property is situated, if governed by the common law, generally recognize the law of the domicil as determining the succession, it may be said that, in a practical sense at least, the law of the domicil is needed to establish the inheritance. Therefore the inheritance may be taxed at the place of domicil, whatever the limitations of power over the specific chattels may be, as is especially plain in the case of contracts and stock.' See, also, Fidelity & Columbia Trust Co. v. Louisville, 245 U. S. 54, 59.

2 Blackstone v. Miller, 188 U. S. 189, 205, where it was said: "If the transfer of the deposit necessarily depends upon and involves the law of New York for its exercise, or, in other words, if the transfer is subject to the power of the State of New York, then New York may subject the transfer to a tax."

3 It is not believed that a local statute imposing a higher duty on legacies made to non-resident aliens than upon those to residents of the State necessarily violates any requirement of international law. See Mager v. Grima, 8 How. 490, where a statute of Louisiana imposed a tax of ten per cent on legacies, when the legatee was neither a citizen of the United States, nor domiciled in Louisiana. Cf., also, Frederickson v. Louisiana, 23 How. 445. Treaty provisions may, however, raise obstacles, especially where the property concerned is land and is devised to non-resident aliens. See, for example, Succession of Rixner, 48 La. Ann. 552, Moore, Dig., IV, 24; McKeown v. Brown, 167 Iowa, 489. It should be observed, however, that the contractual limitations established by treaty may be "manifestly intended not to control or limit the right of either of the governments to deal with its own citizens and their property within its borders", but rather be "solely intended to restrict the power of both of the governments to deal with citizens of the other and their

$207. Customs.

CUSTOMS

(d)

[§ 207

In order to protect its revenues and its industries, as well as the morals of the inhabitants of its domain, a State may control and regulate imports into its territory, and in so doing, apply such restrictions as it may see fit. Incidentally, the territorial sovereign may impose appropriate penalties upon persons who unlawfully attempt to violate its prohibitory laws. Such penalties may assume the form of the confiscation of articles of which the importation is forbidden, or the fine or imprisonment of an offender.2

Tonnage duties may be levied on vessels from foreign ports,3 or upon foreign vessels; while additional duties may be charged upon articles imported in foreign vessels. The alien ownership of an article may also be the ground for the imposition of a duty. In practice, however, it is the foreign origin or means of transportation, rather than the foreign ownership of property, which commonly affords the basis of the exaction of duties.

A State may also levy discriminating duties, that is, "duties in excess of what would be charged, in the particular country, on one of its own vessels and the cargo imported in it." It has been

property within its dominions." Opinion of Chief Justice White in behalf of the Court in Petersen v. Iowa, 245 U. S. 170, 173, affirming In re Estate of Anderson, 166 Iowa, 617; Duus v. Brown, 245 U. S. 176, affirming In re Estate of Peterson, 168 Iowa, 511. Contra, In re Stixrud's Estate, 58 Washington, 339, 109 Pac. 343.

1 Mr. Fish, Secy. of State, to Mr. Williamson, Minister to Central America, Feb. 15, 1875, MS. Inst. Costa Rica, XVII, 232, Moore, Dig., II, 66; Mr. Hay, Acting Secy. of State, to Mr. Chen Lan Pin, Aug. 23, 1880, For. Rel. 1880, 304, 305, Moore, Dig., II, 72, 73.

2 See, for example, provisions of the Act of Oct. 3, 1913, with reference to the forfeiture of obscene books, lottery tickets, etc., sought to be imported into the United States, and also the penalties imposed by the Act upon an officer, agent or employee of the Government, knowingly aiding or abetting the violation of the law prohibiting the importation of such articles. 38 Stat. 194 and 195.

See Mr. Blaine, Secy. of State, to Mr. Bingham, M. C., Jan. 11, 1890, 176 MS. Dom. Let. 86, Moore, Dig., II, 68. Also For. Rel. 1901, 252-260, concerning complaint by a naturalized American citizen of the confiscation by Guatemala of silver belonging to him. Moore, Dig., II, 69.

3 Report of Mr. Bayard, Secy. of State, to the President regarding Section 14 of the Act of June 26, 1884, and the Act of June 19, 1886, relative to the imposition of tonnage and lighthouse dues on vessels from certain foreign ports or places, and the suspension of the collection thereof, Jan. 14, 1889, For. Rel. 1888, II, 1857-1864, Moore, Dig., II, 74. See, also, Section 36, Tariff Act of Aug. 5, 1909, on Imports into the United States.

4 See, for example, the discriminating duty on goods imported in foreign vessels, in the Act of Oct. 3, 1913, 38 Stat. 195, and the limitations with respect to its application. Also, Mr. Hay, Acting Secy. of State, to Mr. Chen Lan Pin, Aug. 23, 1880, For. Rel. 1880, 304, 305, Moore, Dig., II, 72, 73. J. B. Moore, Principles of American Diplomacy, 1918, 172.

declared that since the Act of Congress of May 24, 1828, the United States has made "a standing offer . . . for the reciprocal abolition of all discriminating duties, without regard to the origin of the cargo or the port from which the vessel came." Arrangements in pursuance of this Act have been effected by treaty,2 and by executive proclamation suspending the collection of discriminating charges.3

No rule of international law prevents a State from entering into reciprocal commercial arrangements with any other, providing, for example, for a reduction in the existing tariff rate on special articles to be imported into the territory of one of the contracting parties from that of the other; or from concluding a treaty giving to a particular State certain privileges of importation which, by the terms of the agreement, are not to be conceded to any other.5

The suddenness of the change of the tariff laws of a State does not necessarily justify complaint by foreign powers whose nationals may be thereby adversely affected. That the territorial sovereign may at any time exercise the right to amend its tariff, is always to be anticipated. The situation is otherwise, however, where a State has given any class of aliens special reason to believe that no change is to be anticipated within a certain period of time. The United States has, under special circumstances, protested against the repeal of such laws without reasonable notice.' Ar

1 J. B. Moore, Principles of American Diplomacy, 1918, 173. For the Act of May 24, 1828, see 4 Stat. 308, Rev. Stat. § 4228. The Act as amended July 24, 1897, 30 Stat. 214, specified the conditions upon which the President might suspend discriminating duties. See, in this connection, Moore, Dig., II, 70–72. See, for example, commercial arrangement between the United States and Germany, July 10, 1900, in conformity with the Customs Act of the United States, of July 24, 1897, Malloy's Treaties, I, 558; Arts. VII and VIII of treaty with Spain, July 3, 1902, Malloy's Treaties, II, 1703.

2

Mr. Hay, Acting Secy. of State, to Mr. Chen Lan Pin, Aug. 23, 1880, For. Rel. 1880, 304, Moore, Dig., II, 72.

4 Commercial convention with Cuba, of Dec. 11, 1902, and approved by Act of Congress of Dec. 17, 1903, Malloy's Treaties, I, 353. See United States v. American Sugar Refining Co., 202 U. S. 563, in relation to the date when the agreement took effect.

Commercial agreement with the Hawaiian Islands, Jan. 30, 1875, Malloy's Treaties, I, 915.

Thus, the Tariff Act of Aug. 5, 1909, 36 Stat. 118, provided, in Sec. 42, that except as otherwise therein specially provided, the Act should take effect the day following its passage. See Mr. Adee, Acting Secy. of State, to Mr. Furniss, Minister to Haiti, Sept. 22, 1906, For. Rel. 1906, II, 883.

7 Mr. Frelinghuysen, Secy. of State, to Mr. Hall, Minister to Central America, Aug. 20, 1884, For. Rel. 1884, 41, Moore, Dig., II, 67; also, case in Guatemala referred to in correspondence contained in For. Rel. 1888, I, 159-163, Moore, Dig., II, 68. See objections made by the United States in 1910, and 1911, to the levying by Germany of an export duty on potash salts, For. Rel. 1911, 198-243.