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As the general language used in the sentence from the opinion of February 4, 1899, and quoted in your letter, has apparently led to some doubt in your mind as to whether undivided profits, if used as working capital, become for purposes of taxation, either capital or surplus, I have reexamined the question, and now reaffirm the opinion of February 4, 1899, as I have interpreted it. I am clearly of opinion that Congress, in taxing capital, meant to tax only the capital of the bank in its strict technical sense under the banking laws, and that, in taxing surplus, it meant the fund formally set apart hy the board of directors as surplus in its restricted and technical sense in banking.

It is true that the word surplus, in its general and popular meaning, would include undivided profits; for the excess of receipts over disbursements is, in a certain sense, surplus or profits, but it could be said, with equal force, that the profits of a bank are part of its working capital if not distributed as dividends, and yet it can not be contended that, for purposes of banking, undivided profits constitute a part of the capital of a bank in the sense in which the word " capital” is ordinarily and generally used. The national banking laws clearly distinguish between surplus and undivided protits. By section 5199 of the Revised Statutes, every national bank is prohibited from declaring “any dividend until one-tenth part of the net profits of the preceding half year have been carried to the surplus fund, until a surplus of twenty per centum of the capital stock has been accumulated.” In determining whether the 20 per centum has thus been accumulated, it could not be pretended that the undivided profits were to be added to the fund formally known as surplus, and there is, therefore, a clear distinction between such fund and the undivided profits of a bank, for nine-tenths of the protits may be excluded from the fund called surplus." It is clear, moreover, from the section cited that, in addition to the capital,

, the bank must have the additional security of a surplus of at least 20 per centum of the capital stock before dividends are payable. This surplus fund, therefore, has the idea of permanence and, while not capital in its restricted sense, yet “assumes the character of capital.” Undivided profits, however, have no necessary permanence; they come to-day and

may

be
gone to-morrow.

If the necessary surplus fund is in existence, the undivided profits are immediately distributable among the stockholders in the form of dividends. It is thus apparent that the word surplus means a distinct and special fund, plainly recognized by statute, and which must exist independent of the fund called “ undivided protits” as a condition for the payment of dividends, and the Comptroller in requiring quarterly reports from national banking institutions requires this distinction to be observed. It is true that the present claimants are not national banking institutions and have no “surplus "fund, but Congress did not mean that the expression surplus should mean one thing when applied to national banks and another when applied to State banking institutions or trust companies. The only question, therefore, is whether Congress, when it provided by section 2 of the revenue law of 1898, that bankers should pay a special tax, and when it provided that, “in estimating capital, surplus shall be included," meant surplus in the restricted and technical sense with which Congress had used it in the national banking laws and in which banking institutions of every kind use the term, or whether Congress had reference to every form of excess of receipts over disbursements, however evanescent and uncertain in character. The latter construction would cause much confusion and uncertainty in the effort of your Department to administer the law and would often lead to inequality between banking institutions of the same class. Such construction should be avoided. I am clear that Congress used the word surplus in its technical and restricted sense, of a fund formally set apart and called surplus by the authorized officers of the bank, and the previous opinion of this Department, of February 4, 1899, is to be so understood. Very respectfully,

JOHN W. GRIGGS. The SECRETARY OF THE TREASURY.

CITIZENSHIP OF CHINESE-HAWAII.

Under the provisions of section 4 of the Hawaiian act of April 30, 1900

(31 Stat., 141), a Chinese person born or naturalized in the Hawaiian Islands prior to the annexation of that Territory, and who has not since lost his citizenship, is a citizen of the United States. The wife and children of such naturalized Chinaman are entitled to enter the territory " by virtue of the citizenship” of the husband and

father. A Chinese child born in Hawaii in 1885, and taken to China by his

mother is entitled to reenter that Territory, where his father still resides.

DEPARTMENT OF JUSTICE,

January 16, 1901. SIR: Your letters of December 6 and December 10 request my opinion upon the following questions of law relating to actual cases arising in the administration of your Department:

1. Whether a person born in the Hawaiian Islands in 1885 of Chinese parents, who are laborers, and taken to China with his mother in 1890, is entitled to reenter the Territory of Hawaii, where his father still resides!

2. Whether the wife and children of a Chinese person, who was naturalized in 1887 in Hawaii and still resides

entitled to enter that Territory “by virtue of the citizenship" of the husband and father?

In the first case the Chinese person claims the right to enter the Territory of Hawaii because he is a citizen of the United States and of the Territory of Hawaii by reason of his birth in that territory; and in the second case the Chinese persons claim the same right because the husband and father is a citizen of the United States and of the Territory of Hawaii by force of his naturalization under Hawaiian laws. The exact question, then, upon which I have the honor to deliver to you my opinion is, whether a Chinese person, born or naturalized in the Hawaiian Islands prior to the annexation of that territory, is a citizen of the United States; for I conceive that there can be no doubt under existing law of the right of a citizen of the United States and of his wife and children to enter freely the Territory of Hawaii.

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The joint resolution of July 7, 1898 (30 Stat., 750), providing for the annexation of the Hawaiian Islands, contains the following paragraph:

“There shall be no further immigration of Chinese into the Hawaiian Islands, except upon such conditions as are now or may hereafter be allowed by the laws of the United States; and no Chinese, by reason of anything herein comtained, shall be allowed to enter the United States from the Hawaiian Islands."

The constitution of the Republic of Hawaii (sec. 1, art. 17) provided that “all persons born or naturalized in the Hawaiian Islands and subject to the jurisdiction of the Republic are citizens thereof." The act of April 30, 1900 (31 Stat., 141), providing a government for the Territory of Hawaii, declared (sec. +) that “all persons who were citizens of the Republic of Hawaii on August 12, 1898, are hereby declared to be citizens of the United States and citi. zens of the Territory of Hawaii. This discussion grants, as I understand it, that the two Chinese persons whose personal or family rights are in question, were citizens of the Republic of Hawaii on the crucial date, and does not require me further to scrutinize and to determine their status under "he constitution and laws of that Republic.

I lay aside important questions suggested by this inquiry, which may hereafter arise but are not now material, affecting the status and rights of various classes of Chinese persons not born or naturalized in the Hawaiian Islands prior to August 12, 1898, who may seek to enter Hawaii or desire to remain there, or who may seek to enter the United States from that Territory. Such questions, when they arise, will invoke inter alia the joint resolution from which I have quoted, the laws forbidding the naturalization of Chinese (sec. 14, act of May 6, 1882, 22 Stat., 58; Art. IV of the Treaty with China of 1894, 28 Stat., 1210; sees. 5, 7, 100, of the act of April 30, 1900, supra), and the permissive and restrictive provisions of section 101 of the act last cited relative to certificates of residence" for Chinese in the Hawaiian Islands. As to these matters I express no opinion, because we are concerned only with the definite class of Chinese

persons who were born or naturalized in the Hawaiian Islands prior to August 12, 1898.

The inquiry involves both the power and intention of Congress in dealing with the subject. As to the power, in Wong Kim Ark v. United States, 169 U. S., 649, decided several months before the adoption of the resolution for the annexation of Hawaii, which deliberately determined that a child born in the United States of Chinese parents who have a permanent domicile in this country becomes at birth a citizen of the United States, the court restated the inherent right of the United States, acting through Congress, to exclude or expel aliens; and, in a review of the exercise by Congress of the constitutional power “to establish an uniform rule of naturalization," again recognized as constitutional the denial of naturalization to Chinese persons, and, on the other hand, showed that through treaty, or by authority of Congress, certain classes of persons may be declared to be citizens.

“ It is true that Chinese persons born in China can not be naturalized like other aliens by proceedings under the naturalization laws; but this is for want of any statute or treaty authorizing or permitting such naturalization. * * * Chinese persons not born in this country have never been recognized as citizens of the United States, nor authorized to become such under the naturalization laws' [citing Fong Yue Ting v. United States, 149 U. S., 716, and In re Gee llop, 71 Fed. Rep., 274].

A person born out of the jurisdiction of the United States can only become a citizen by being naturalized either by treaty, as in the annexation of foreign territory, or by authority of Congress exercised either by declaring certain classes of persons to be citizens

or by enabling foreigners individually to become citizens by proceedings in the judicial tribunals, as in the ordinary provisions of the naturalization acts.

The Fourteenth Amendment, while it leaves the power where it was before, in Congress, to regulate naturalization, etc." (169 U.S., 701, 702, 703.)

In American Insurance Co. v. Canter, 1 Pet., 511, 512, Chief Justice Marshall, quoting the sixth article of the

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