## Facts

- After ratification of the Sixteenth Amendment, Congress enacted the Revenue Act of Oct. 3, 1913, imposing a federal tax on net income and requiring certain withholding “at the source.”
- Union Pacific Railroad Co. was subject to the income tax and had statutory duties to withhold and remit tax on some payments to others (including bond interest).
- A shareholder, Frank R. Brushaber, filed an equity suit to enjoin the corporation from voluntarily paying or withholding the tax, alleging the tax would injure the corporation and shareholders.
- The district court dismissed the complaint for failure to state a claim; Brushaber appealed directly to the Supreme Court.
- The United States appeared as amicus curiae to defend the statute’s constitutionality.

## Issues

1. Whether the Sixteenth Amendment permits an unapportioned federal income tax, regardless of the source of income, and thus removes any apportionment requirement.
2. Whether the 1913 income tax violates the Fifth Amendment due process clause through confiscation, retroactivity, or arbitrary classifications and exemptions.
3. Whether the tax violates the Article I uniformity requirement for “Duties, Imposts and Excises.”
4. Whether requiring corporations to withhold and remit taxes for others, without compensation, violates due process.
5. Whether the federal anti-injunction provision (Rev. Stat. § 3224) bars a shareholder suit to restrain a corporation from voluntarily paying an allegedly unconstitutional tax.

## Decision

- The Court affirmed the dismissal and upheld the constitutionality of the 1913 income tax (Justice McReynolds not participating).
- The Court held the shareholder suit was not barred by Rev. Stat. § 3224 where it sought to restrain a corporation from voluntarily paying an allegedly unconstitutional tax, and the district court had jurisdiction to entertain it.
- The Court construed the Sixteenth Amendment to remove apportionment constraints for income taxes, without regard to the source of the income.
- The Court rejected Fifth Amendment due process attacks, including objections based on classifications, exemptions, and alleged retroactivity.
- The Court held the constitutional uniformity requirement is geographic and was satisfied because the statute operated throughout the United States on the same terms.
- The Court upheld source-withholding and related corporate administrative duties as permissible incidents of the taxing power and not a denial of due process.

## Legal Principles

- The Sixteenth Amendment authorizes income taxes without apportionment among the states, and this rule applies to income taxes “from whatever source derived.”
- The uniformity requirement for federal taxes is geographic; it does not require uniform economic incidence or identical outcomes across taxpayers.
- The Fifth Amendment due process clause generally does not invalidate federal tax measures based on objections to rate structure, exemptions, or legislative policy judgments when Congress acts within its taxing power.
- Congress may require payors, including corporations, to withhold and remit taxes on payments to others as a method of tax collection, even if the payor receives no compensation for administrative burdens.
- A shareholder may, in appropriate circumstances, seek to enjoin a corporation from voluntarily paying an allegedly unconstitutional federal tax without running afoul of Rev. Stat. § 3224.

## Conclusion

The Court sustained the 1913 federal income tax, holding that the Sixteenth Amendment removes apportionment limits for income taxes regardless of source, that uniformity is satisfied by nationwide operation, and that due process does not bar common tax classifications or source-withholding collection methods.


Brushaber v. Union Pac. R.R. Co., 240 U.S. 1 (1916)