Maryland State and Municipal Bonds: Tax Exempt Status

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In 2009 I prepared a research memorandum on the history of tax exempt bonds in Maryland, focusing on the estate of Betsy Patterson Bonaparte.

It related to an inquiry concerning the National Association of State Treasurers (NAST) amicus brief and centered on the 1882 Supreme Court Decision involving the taxing of the bonds of Betsy Patterson. I was asked if we could document whether or not, during the time of the case, she and/or her heirs held any Maryland bonds that would have been exempt from Maryland taxes.

Our research established that Betsy Patterson held tax exempt State of Maryland Bonds at the time of the suit, but was taxed on other Maryland bonds that were not specifically exempted from State taxes by statute.

Betsy Patterson (former wife of Napoleon's brother and the daughter of a very wealthy Baltimore merchant), died in the midst of the court battle over whether the state of Maryland could tax her out of state bonds (the Supreme Court decided that Maryland could, by affirming the Maryland Court of Appeals decision in the case).

A copy of the brief on her behalf before the Maryland Court of Appeals is available on the MSA web site, the proper citation for which is:

Maryland State Archives, COURT OF APPEALS (Briefs) Appeal Tax Court of Baltimore City v. Elizabeth Patterson, Oct. Term 1878 No. 114 [MSA S375-106, 1/64/12/38]

Attached is a pdf of her inventory which on f. 7 lists the Maryland bonds she held at the time of her death. She had a considerable investment in Maryland State and Baltimore City municipal bonds. The proper citation for the attached image from her inventory is:

Maryland State Archives, BALTIMORE CITY REGISTER OF WILLS (Inventories, Original) Elizabeth Patterson Bonaparte, Box 52 [MSA T643-56, 2/34/9/22, f.7].

The Baltimore City bonds that the Pattersons and Bonapartes (Betsy Patterson's grandchildren) were taxed by Maryland, the proof of which comes from the records of the Comptroller that were kept in accord with the State tax law that was at the heart of her complaint in the 1882 Supreme Court decision (1881 term). Copies of the covers and the pages relating to the taxing of her municipal bonds are attached. There is a column indicating what taxes were levied for the City of Baltimore related bonds. The citation for these records should be:


Maryland State Archives, COMPTROLLER OF THE TREASURY (Baltimore City Stockholders) MSA S632 -

1 - List of holders of loans of Baltimore City Stock liable to state tax for 1879. (MdHR 2706, MSA S632-38, 2/64/12/34)

2 - List of holders of loans of Baltimore City Stock liable to state tax July 1, 1879. (MdHR 2707, MSA S632-39, 2/64/12/34)

3 - List of holders of loans of Baltimore City Stock liable to state tax July 1, 1879. (MdHR 2708, MSA S632-40, 2/64/12/34)

4 - Copy of names of stockholders of and state tax on, 1878 (MdHR 2704, MSA S632-36, 2/64/12/33)

5 - Copy of names of stockholders of and state tax on, 1878 (MdHR 2705, MSA S632-37, 2/64/12/33)


There is no ledger account listing any taxes on the $63,000 Betsy Patterson held in State Bonds, because they were tax exempt by law (see the attached copy of the 1868 law from the authoritative Archives of Maryland On Line on our web site), the web citation for which is:

http://www.msa.md.gov/megafile/msa/speccol/sc2900/sc2908/000001/000142/html/am142--2742.html


Unless the laws governing the issuance of bonds specifically indicated that they were exempt from State taxes, all bonds issued on behalf of the State and its subdivisions to 1914, subsequent to the 1876 law in question in the Patterson/Bonaparte Supreme Court Case were taxed (see: http://aomol.net/megafile/msa/speccol/sc2900/sc2908/000001/000199/html/am199--432.html).

In 1914 a law was passed exempting all such bonds from state taxes:

http://aomol.net/megafile/msa/speccol/sc2900/sc2908/000001/000533/html/am533--61.html.

Copies of both the 1876 and the 1914 laws are available from the MSA web site by following the above hyperlinks.

See also: Letter of thanks from Treasurer Nancy Kopp to Dr. Papenfuse

Charles Joseph Bonaparte, Betsy's grandson, lived on Roland Avenue in a house now a part of Roland Park Country School. On November 15, 2000, ecp gave a talk at the school entitled: The Heritage of a House: Charles J. Bonaparte and Good Government.