WASHINGTON - The Supreme Court has let stand a ruling against Bankers Trust New York Corp. in its challenge of a New York City franchise tax policy.
The lower-court ruling, which the Supreme Court refused to consider, said New York may take into account income from federal securities in calculating franchise taxes on financial companies.
Federal law generally exempts interest on federal securities from state or municipal taxes. An exception to that rule allows cities and states to impose franchise taxes that take into consideration corporations' earnings from federal securities.
Bankers Trust's challenge involved about $4 million it paid in the 1976 tax year. New York's highest court upheld the city tax, saying it fell under the exception to the Federal Public Debt Statute.
The Supreme Court refused to consider Bankers Trust's claim that because New York State, not the city, actually grants companies their corporate franchise, the city's tax is not in reality a franchise tax, and therefore is unlawful when applied to interest from federal securities.
Fraud Appeal Denied
The Supreme Court also refused to review an appeal by a mortgage company owned by the nationalized Finnish bank Skopbank.
Union Mortgage Co. had challenged a $6 million punitive damage award against it for fraud involving an Alabama home improvement loan.
Calling the damages excessive, Union said Alabama courts that upheld the award improperly failed to consider the firm's deteriorating financial condition and the impact of the verdict on Finnish taxpayers.
The Finnish government supported the bank in its appeal.