4. Since normally intangibles are subject to the immediate control of the owner, this close relationship between intangibles and the owner furnishes an adequate basis for the tax on the owner by the state of his residence as against any attack for violation of the Fourteenth Amendment. P. 493.

5. The same rules apply to the taxation of intangibles held by a trustee as assets of a trust, since the trustee can sue and be sued as such and in this way the state of his residence affords him protection as the owner of intangibles. Pp. 493–496.

6.B

Brooke v. Norfolk, 277 U. S. 27; Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83; Graves v. Schmidlapp, 315 U. S. 657, distinguished. Pp. 496–497.

7. It is not constitutionally significant that the Rhode Island trustee is not the sole trustee of the New York trust, since the tax was only upon his proportionate interest, as a trustee, in the res and he possessed an interest in the intangibles sufficient to support a proportional tax for the benefit and protection afforded to that interest in Rhode Island. P. 498.

8. State courts are the final judicial authority upon the meaning of statutes of their states; but where their judgments collide with rights secured by the Federal Constitution this Court has power to protect or enforce such rights. Pp. 489, 497.

71 R. I. 477, 47 A. 2d 625, affirmed.

The Supreme Court of Rhode Island sustained a tax against a resident of Rhode Island for one-half of the value of intangibles held jointly by him and a resident of New York as trustees of a New York trust, and remanded the case to the Superior Court of Newport County, Rhode Island. 71 R. I. 477, 47 A. 2d 625. On appeal to this Court, affirmed, p. 498.

William Greenough and William R. Harvey argued the cause for appellants. With them on the brief was J. Russell Haire.

John C. Burke argued the cause for appellees. With him on the brief was Alexander G. Teitz.

MR. JUSTICE REED delivered the opinion of the Court.

Appellants are testamentary trustees of George H. Warren, who died a resident of New York. His will was duly probated in that state and letters testamentary issued to appellants as executors. A duly authenticated copy of said will was filed and recorded in Rhode Island and there letters testamentary were also issued. Letters of trusteeship were granted to appellants by a surrogate's court in New York. None were needed or asked for or granted by Rhode Island. At all times pertinent to this appeal, appellants, as trustees under the will, held intangible personalty for the benefit of Constance W. Warren for her life and then to certain as yet undetermined future beneficiaries.

The evidences of the intangible property in the estate of George H. Warren and in the trust in question were at all times in New York. The life beneficiary and one of the trustees are residents of New York. The other trustee resides in Rhode Island. During the period in question, he did not, however, exercise his powers, as trustee, in Rhode Island.

A personal property tax of $50 was assessed by the City of Newport, Rhode Island, against the resident trustee upon one-half of the value of the corpus of the trust. The applicable assessment statute for ad valorem taxes appears in the margin. At the time of this assessment, the property consisted of 500 shares of the capital stock of Standard Oil Company of New Jersey. The tax was paid by the

1 General Laws of Rhode Island (1938), c. 30, § 9:

"Fifth. Intangible personal property held in trust by any executor, administrator, or trustee, whether under an express or implied trust, the income of which is to be paid to any other person, shall be taxed to such executor, administrator, or trustee in the town where such other person resides; but if such other person resides out of the state, then in the town where the executor, administrator, or trustee resides; and if there be more than one such executor,

486

Opinion of the Court.

trustees and this suit instituted, under appropriate state procedure, in the Superior Court of the County of Newport to recover the tax from the city. The Superior Court by decision denied the petition. A bill of exceptions was prosecuted by these petitioners to the Supreme Court of Rhode Island which overruled the exceptions and remitted the case to the superior court. Thereupon judg

ment was entered for the appellees and an appeal allowed to this Court. All questions of state procedure and of the applicability of the state statute to the resident trustee in the circumstances of this case were foreclosed for us by the rulings of the Supreme Court of Rhode Island."

The appellants' contention throughout has been that the Rhode Island statute, under which the assessment was made, if applicable to the resident trustee, was unconstitutional under the due process clause of the Fourteenth Amendment to the Constitution of the United States. Their objection in the state courts and here is that Rhode Island cannot tax the resident trustee's proportionate part of these trust intangibles merely because that trustee resides in Rhode Island. Such a tax, they urge, is unconstitutional under the due process clause because it exacts payment measured by the value of property wholly beyond the reach of Rhode Island's power and to which that state does not give protection or benefit. Appellants specifically disclaim reliance upon the argument that the Rhode Island tax exposes them to the danger of other ad

administrator, or trustee, then in equal proportions to each of such executors, administrators, and trustees in the towns where they respectively reside."

2 General Laws of Rhode Island (1938), c. 31, § 14; c. 545, § 6, as amended by c. 941, Public Laws of Rhode Island (1939-40); Greenough v. Tax Assessors, 71 R. I. 477, 47 A. 2d 625.

3 Chase Securities Corporation v. Donaldson, 325 U. S. 304, 311; see Huddleston v. Dwyer, 322 Y. S. 232, 237; American Federation of Labor v. Watson, 327 U. S. 582, 595.

valorem taxes in another state. The same concession was made in the Supreme Court of Rhode Island. We therefore restrict our discussion and determination to the issue presented by appellants' insistence that Rhode Island cannot constitutionally collect this tax because the state rendered no equivalent for its exaction in protection of or benefit to the trust fund.

For the purpose of the taxation of those resident within her borders, Rhode Island has sovereign power unembarrassed by any restriction except those that emerge from the Constitution. Whether that power is exercised wisely or unwisely is the problem of each state. It may well be that sound fiscal policy would be promoted by a tax upon trust intangibles levied only by the state that is the seat of a testamentary trust. Or, it may be that the actual domicile of the trustee should be preferred for a single tax. Utilization by the states of modern reciprocal statutory tax provisions may more fairly distribute tax benefits and burdens, although the danger of competitive inducements for obtaining a settlor's favor are obvious.' But our question here is whether or not a provision of the Constitution forbids this tax. Neither the expediency of the levy nor its economic effect on the economy of the taxing state is for our consideration. We are dealing with the totality

See McKinney's Consolidated Laws of New York, Tax Law, §§ 3, 350 (7), 365, 369, 377. Fidelity & Columbia Trust Co. v. Louisville, 245 U. S. 54. Compare Blackstone v. Miller, 188 U. S. 189; Curry v. McCanless, 307 U. S. 357, 363; Graves v. Elliott, 307 U. S. 383; Graves v. Schmidlapp, 315 U. S. 657; State Tax Comm'n v. Aldrich, 316 U. S. 174, 177, with Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204; First National Bank v. Maine, 284 U. S. 312.

5 Greenough v. Tax Assessors, 71 R. I. 477, 488, 47 A. 2d 625, 631. • Compare Harrison v. Commissioner of Corporations and Taxation, 272 Mass. 422, 172 N. E. 605.

Compare Mr. Justice Holmes' dissent, Baldwin v. Missouri, 281 U. S. 586, 595.

8 State Tax Comm'n v. Aldrich, 316 U. S. 174, 181.

of a state's authority in the exercise of its revenue raising powers.

The Fourteenth Amendment has been held to place a limit on a state's power to lay an ad valorem tax on its residents. Previous decisions of this Court have held that mere power over a resident does not permit a state to exact from him a property tax on his tangible property permanently located outside the jurisdiction of the taxing state.10 Such an exaction, the cases teach, would violate the due process clause of the Fourteenth Amendment, because no benefit or protection, adequate to support a tax exaction, is furnished by the state of residence." The domiciliary state of the owner of tangibles permanently located in another state, however, may require its resident to contribute to the government under which he lives by an income tax in which the income from the out-of-state property is an item of the taxpayer's gross income. It is immaterial, in such a case, that the property producing the income is located in another state. New York ex rel. Cohn v. Graves, 300 U. S. 308. And, where the tangible property of a corporation has no taxable situs outside the domiciliary state, that state may tax the tangibles because the cor

See Lawrence v. State Tax Comm'n, 286 U. S. 276, 279. Art. I, § 10, cl. 2 and 3, contain limitations on a state's power to levy import or export or tonnage duties.

10 Union Transit Co. v. Kentucky, 199 U. S. 194, 202; Frick v. Pennsylvania, 268 U. S. 473, 488; Cream of Wheat Co. v. Grand Forks, 253 U. S. 325, 328-29; Curry v. McCanless, 307 U. S. 357, 363-65, and note 3; see Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444; State Tax Comm'n v. Aldrich, 316 U. S. 174, 178.

11 Even where our cases have spoken of power over the person as though it alone might be a sufficient justification for ad valorem taxation of a resident on tangibles outside the taxing jurisdiction, the language was used in instances where there were other bases for the tax. State Tax on Foreign-held Bonds, 15 Wall. 300, 319; Southern Pacific Co. v. Kentucky, 222 U. S. 63, 76; Pearson v. McGraw, 308 U. S. 313, 318.

755552 0-48-35