486

Opinion of the Court.

Graves v. Schmidlapp, 315 U. S. 657, 663, where the sovereign power of taxation was held to extend to a state resident who by will disposed of intangibles held by him as trustee with power of testamentary disposition under a nonresident trust. Nothing in these cases leads to the conclusion that a state may not tax intangibles in the hands of a resident trustee of an out-of-state trust.26

State courts construe their statutes according to their understanding of state policy and apply them to such situations as their interpretation of the statutory language requires. In so adjudging, they are the final judicial authority upon the meaning of their state law. It is only in circumstances where their judgments collide with rights secured by the federal Constitution that we have power to protect or enforce the federal rights. In adjudging the taxability under state law of a resident trustee's ownership of intangibles, without reliance upon the residence of settlor or beneficiary or the location of the intangibles, various conclusions have been reached under state law and without regard to the Constitution of the United States. They are pertinent to our problem only as illustrations of the different viewpoints of state law."

26 Goodsite v. Lane, 139 F. 593 (C. C. A. 6th), holds that a state property tax on a trustee's intangibles for the sole reason that he resides in the taxing state is invalid. It would seem this was so decided because of the Fourteenth Amendment. We do not think this case gives proper recognition to the state's power to tax the owner of the legal title to the res.

27 The state statute taxing property to the trustee validly applies to the resident trustee: Welch v. City of Boston, 221 Mass. 155, 109 N. E. 174; Harvard Trust Co. v. Commissioner of Taxation, 284 Mass. 225, 230, 187 N. E. 596, 598; Mackay v. San Francisco, 128 Cal. 678, 61 P. 382; Millsaps v. Jackson, 78 Miss. 537, 30 So. 756; McLellan v. Concord, 78 N. H. 89, 97 A. 552; Florida v. Beardsley, 77 Fla. 803, 82 So. 794.

The state tax statute is inapplicable to the resident trustee: Dorrance's Estate, 333 Pa. 162, 3 A. 2d 682; Commonwealth v. Peebles,

FRANKFURTER, J., concurring.

331 U.S.

Nor do we think it constitutionally significant that the Rhode Island trustee is not the sole trustee of the New York trust. The assessment, as the statute in question required, was only upon his proportionate interest, as a trustee, in the res. Whatever may have been the character of his title to the intangibles 28 or the limitations on his sole administrative power over the trust," the resident trustee was the possessor of an interest in the intangibles, sufficient, as we have explained, to support a proportional tax for the benefit and protection afforded to that interest by Rhode Island.30

Affirmed.

MR. JUSTICE FRANKFURTER, concurring.

In view of the dissents elicited by the Court's opinion, I should like to state why I join it.

Rhode Island taxes its permanent residents in proportion to the value of their property. The State imposes the tax whether its residents own property outright or

134 Ky. 121, 135, 119 S. W. 774, 778; Darrow v. Coleman, 119 N. Y. 137, 23 N. E. 488; Rand v. Pittsfield, 70 N. H. 530, 49 A. 88. Newcomb v. Paige, 224 Mass. 516, 113 N. E. 458, and Harrison v. Commissioner, 272 Mass. 422, 172 N. E. 605, declined taxation on the ground of comity and thus distinguished Welch v. City of Boston, supra, 272 Mass. 428-29, 172 N. E. 609.

28 Scott, Trusts, §§ 88.1, 103; Bogert, Trusts and Trustees, § 145. 29 Scott, Trusts, § 194; Brennan v. Willson, 71 N. Y. 502; Fritz v. City Trust Co., 72 App. Div. 532, 76 N. Y. S. 625, aff. 173 N. Y. 622, 66 N. E. 1109; In re Campbell's Estate, 171 Misc. 750, 13 N. Y. S. 2d 773.

30 The state courts have reached varying conclusions under their statutes: See People ex rel. Beaman v. Feitner, 168 N. Y. 360, 61 N. E. 280; Mackay v. San Francisco, 128 Cal. 678, 61 P. 382; McLellan v. Concord, 78 N. H. 89, 97 A. 552; Dorrance's Estate, 333 Pa. 162, 3 A. 2d 682; Newcomb v. Paige, 224 Mass. 516, 113 N. E. 458; Harrison v. Commissioner, 272 Mass. 422, 430-31, 172 N. E. 605, 609-10.

486

FRANKFURTER, J., concurring.

own it, legally speaking, in a fiduciary capacity. It is not questioned that the intangible assets in controversy could be included in the measure of the tax against the person of this trustee if he owned them outright. The doctrine that the power of taxation does not extend to chattels permanently situated outside a State though the owner was within it, Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194; Frick v. Pennsylvania, 268 U. S. 473, is inapplicable. The tax is challenged, as wanting in "due process," because the Rhode Island resident is merely trustee of these intangibles and the pieces of paper that evidence them are kept outside the State.

Rhode Island's system of taxing its residents-subjecting them to the same measure for ascertaining their ability to pay whether they hold property for themselves or for others-long antedated the Fourteenth Amendment. Rhode Island has imposed this tax, "it may be presumed, for the general advantages of living within the jurisdiction." Fidelity & Columbia Trust Co. v. Louisville, 245 U. S. 54, 58. It can hardly be deemed irrational to say, as Rhode Island apparently has said for a hundred years, that those advantages may be roughly measured, for fiscal purposes, by the wealth which a person controls, whatever his ultimate beneficial interest in the property. "The Fourteenth Amendment, itself a historical product, did not destroy history for the States and substitute mechanical compartments of law all exactly alike." Jackman v. Rosenbaum Co., 260 U. S. 22, 31.

In any event, Rhode Island could in terms tax its residents for acting as trustees, and determine the amount of the tax as though a trustee owned his trust estate outright. Rhode Island has, in effect, done so by treating all Rhode Island residents alike in relation to their property holdings, regardless of their beneficial interests. That is the practical operation of the statute. It is that which con

JACKSON, J., dissenting.

331 U.S.

trols constitutionality, and not the form in which a State Lawrence v. State Tax Commission, 286 Wisconsin v. J. C. Penney Co., 311 U. S.

has cast a tax. U. S. 276, 280;

435, 443 et seq.

against his trust

Whether a Rhode Island trustee can go estate for the amount of the tax which Rhode Island exacts from him is of no concern to Rhode Island. Rhode Island's power to tax its residents is not contingent upon it. A trusteeship is a free undertaking.

MR. JUSTICE JACKSON, dissenting.

If Rhode Island had laid a tax on one of its citizens individually, I should think it unassailable even if the basis for taxing him was that he held this trusteeship, and perhaps the tax on him could be measured by the value of the trust estate. In that case the state would tax only its own citizen. One is pretty much at the mercy of his own state as to the events or relationship for which it will tax him. If it wants to make the holding of a trusteeship taxable, I know of no federal grounds of objection. But that is not what is being done, nor what this decision authorizes.

If Rhode Island had taxed the individual, he might have sought reimbursement from the estate. Whether the estate was chargeable would be left to determination by the courts of the state supervising the trust. They might consider the nature of the tax to be a personal charge, as an income tax would doubtless be. Or they might find it to be an expense of administration, such as a transfer tax, and properly to be borne by the fund. But here no such decision is left to the courts which control the fundthe tax is laid on the trustee as such-the estate is the taxpayer.

Rhode Island claims the power to tax the estate solely because one of its trustees resides in that state. No property is in Rhode Island and its courts are not supervising administration of the trust. The estate is wholly located

486

RUTLEDGE, J., dissenting.

in New York and the trustees derive their authority, powers and title from its courts and to them must account.

I had not supposed that a trust fund became taxable in every state in which one of its trustees may reside. Of course, in this instance it is proposed to tax only one-half of the estate as only one of the two trustees is resident in Rhode Island. But this seems to be an act of grace if there is a right to tax at all. The trustee has no power over, or title to, any fraction of the trust property that he does not have over all of it. If mere residence of a trustee is such a conductor of state authority that through him it reaches the estate, I see no reason why it should stop at a part, nor indeed why a trustee subject to the taxing power of several states, Cf. Texas v. Florida, 306 U. S. 398, may not also subject the trust fund to several state taxes by merely moving about.

The decision is a hard blow to the practice of naming individual trustees. It seems to me that there is no power in the state to lay the tax on the trust funds, despite unquestionable authority to tax its own citizen-trustee individually.

MR. JUSTICE MURPHY joins in this opinion.

MR. JUSTICE RUTLEDGE, with whom THE CHIEF JUSTICE concurs, dissenting.

I am in agreement with the views expressed by MR. JUSTICE JACKSON, except that I intimate no opinion concerning whether Rhode Island could lay a tax upon one of its residents for the privilege of acting as one of two or more trustees, when the state's only connection with the trust arises from the fact of his residence. This is not such a case.

Whether or not due process under the Fourteenth Amendment forbids state taxation of acts, transactions,