U.S. Supreme Court HELVERING v. POWERS, 293 U.S. 214 (1934)

[Page 293 U.S. 214, 223]

Governor, with the advice and consent of the council, and their tenure and duties fixed by law. [Footnote 1] United States v. Hartwell, 6 Wall. 385, 393; Metcalf & Eddy v. Mitchell, 269 U.S. 514, 520, 46 S. St.Ct. 172. See Opinion of the Justices, 261 Mass. pages 542, 543, 550, 159 N.E. 55.

[Page 293 U.S. 214, 227]

The nature of the enterprise, and not the particular incidents of its management, would control.

We see no reason for putting the operation of a street railway in a different category from the sale of liquors. In each case, the state, with its own conception of public advantage, is undertaking a business enterprise of a sort that is normally within the reach of the federal taxing power and is distinct from the usual governmental functions that are immune from federal taxation in order to safeguard the necessary independence of the state. If, in the instant case, the commonwealth had acquired the property of the company and had organized management of it in perpetuity by the state government, instead of temporarily, or had taken over all the street railways in all its cities for direct operation by the commonwealth, there would appear to be no ground, under the principles established by the decisions we have cited, for holding that this would effect the withdrawal of the enterprise from the federal taxing power. And the fact that the state has here undertaken public management and operation for a limited time, and under the particular restrictions of the agreement with the company, cannot be said to furnish a ground for immunity.

If the business itself, by reason of its character, is not immune, although undertaken by the state, from a federal excise tax upon its operations, upon what ground can it be said that the compensation of those who conduct the enterprise for the state is exempt from a federal income tax? Their compensation, whether paid out of the returns from the business or otherwise, can have no quality, so far as the federal taxing power is concerned, superior to that of the enterprise in which the compensated service is rendered.

We conclude that the Congress had the constitutional authority to lay the tax.

Decree reversed. Footnotes

Footnote 1 The provision of section 1 of chapter 159 of the Massachusetts Special Acts of 1918 that the trustees shall not be considered public officers within the meaning of section 25 of chapter 514 of the Acts of 1909, and that section 1 of chapter 7 of the Revised Laws shall not apply to the trustees, creates special limitations of such a nature as not to derogate from their general status. See Opinion of the Justices, 261 Mass. page 543, 159 N.E. 55.