to Massachusetts credit unions falls as harshly on them as on the federal associations. Nonetheless, the Massachusetts Legislature has concluded that credit unions are not similar to state cooperative and savings banks or to state and federal savings and loan associations.

When Congress required that federal savings and loan associations be placed in the same classification as "similar" state institutions, it certainly did not assume that every local and mutual or cooperative thrift and home-financing institution is similar to a federal association. See 12 U. S. C. § 1464 (h) (1964 ed.). It recognized that States might classify their own institutions in various ways. Massachusetts has excluded credit unions from a large classification that includes the institutions most closely resembling federal savings and loan associations. The composition of the class in which Massachusetts has placed the federal associations satisfies the federal statute's central purpose of protecting federal associations from discriminatory treatment. We conclude that Massachusetts has not imposed a greater tax on the federal associations than that imposed on other "similar" institutions."

credit unions had over $1 billion. App. 131-132; Annual Report of the Commissioner of Banks, Commonwealth of Massachusetts, Division of Banks and Loan Agencies, Sec. B (Credit Unions), iv (1973).

"Only two of the associations' remaining attacks on the statute deserve mention. They claim that Massachusetts' tax is not one of the enumerated taxes approved by §5 (h), which allows a nondiscriminatory "tax on [federal] associations or their franchise, capital, reserves, surplus, loans, or income." 12 U. S. C. § 1464 (h) (1976 ed.). Whether or not this tax may be characterized as a "franchise" or an "income" tax, it is certainly a tax "on" federal associations and therefore within the ambit of § 5 (h). The federal associations also argue that the state statute violates the Commerce Clause by creating a risk of multiple taxation. They claim that some neighboring State may at some time in the future attempt to tax the income from loans secured by property in that State. This argument is wholly speculative and unsupported by evidence in the record.

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Accordingly, the judgment of the Supreme Judicial Court is affirmed.

So ordered.

MR. JUSTICE BLACKMUN, concurring in part and dissenting in part.

Section 5 (h) of the Home Owners' Loan Act of 1933, as amended, 76 Stat. 984, 12 U. S. C. § 1464 (h) (1976 ed.), reads:

"No State, county, municipal, or local taxing authority shall impose any tax on such associations or their franchise, capital, reserves, surplus, loans, or income greater than that imposed by such authority on other similar local mutual or cooperative thrift and home financing institutions."

The Court, in speaking of this statute, has said: "This provision unequivocally bars discriminatory state taxation of the Federal Savings and Loan Associations." Laurens Federal Savings & Loan Assn. v. South Carolina Tax Comm'n, 365 U.S. 517, 523 (1961).

I agree with the Court's ruling today on the first issue, namely, that the lesser reserve deduction available for federal savings and loan associations of itself does not demonstrate that the associations pay a greater tax than similar Massachusetts savings banks.

On the second issue, however, I am in disagreement with the Court and, to that extent, dissent from its opinion. For this issue, the important focus of the statute is on the word "similar," and the measure of the Commonwealth's allowable tax is only that imposed "on other similar local mutual or cooperative thrift and home financing institutions."

There is no argument here that Massachusetts credit unions are not "local mutual or cooperative thrift and home financing institutions," within the meaning of § 5 (h). See Mass. Gen. Laws Ann., ch. 171, § 2 (West 1971). The Supreme Judicial

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Court so found, 372 Mass. 478, 492, 363 N. E. 2d 474, 483 (1977), and no challenge to that finding is made here. The question, then, is whether Massachusetts credit unions are "similar" to federal savings and loan associations. If they are similar, the tax Massachusetts would impose on the federal entities, see Mass. Gen. Laws Ann., ch. 63, § 11 (West Supp. 1977), violates the statute, for the Commonwealth's excise does not apply at all to Massachusetts credit unions.

The Court, in construing a similar federal statute, Rev. Stat. § 5219, as amended, 12 U. S. C. § 548 (1)(b), which had barred state taxation of the shares of national banks "at a greater rate than is assessed upon other moneyed capital . . . coming into competition with the business of national banks," and at a rate higher than the highest rates assessed upon business corporations, observed that Congress intended "to prohibit only those systems of state taxation which discriminate in practical operation against national banking associations or their shareholders as a class." Tradesmens Nat. Bank v. Oklahoma Tax Comm'n, 309 U. S. 560, 567 (1940); Michigan Nat. Bank v. Michigan, 365 U. S. 467, 473 (1961). The policy of § 5 (h) obviously is to assure that the States do not put federal associations to any competitive disadvantage with respect to local savings institutions.

The statutory term "similar" usually, and certainly here, does not mean "identical." The Massachusetts credit union and the federal savings and loan association are "similar" with respect to their fundamental elements. Each has mutuality of ownership and control. Each has the pronounced ability to attract savings. Each is empowered to make first mortgage residential real estate loans on substantially the same terms

1 See Commonwealth v. Fontain, 127 Mass. 452, 454 (1879); Chicago v. Vaccarro, 408 Ill. 587, 601, 97 N. E. 2d 766, 773 (1951); Thomas v. Consumers Power Co., 58 Mich. App. 486, 493-494, 228 N. W. 2d 786, 790 (1975); Miller v. Allstate Ins. Co., 66 Wash. 2d 871, 875, 405 P. 2d 712, 714 (1965)..

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and to approximately the same extent. The Massachusetts credit union has the statutory authority to make loans secured by first mortgages on real estate for terms up to 30 years, for 90% of the value of the property, and to a maximum amount of $40,000. See Mass. Gen. Laws Ann., ch. 171, §§ 24 (B)(a) (4) and (b)(8) (West Supp. 1977), and 1977 Mass. Acts, ch. 20. A federal association may make real estate loans for terms up to 30 years, for 80% of the value of the property, and to a maximum amount of $55,000. See 12 U. S. C. § 1464 (c) (1976 ed.); 12 CFR § 545.6–1 (a)(1)(i) (1977).

Although the Massachusetts credit union, to be sure, may make loans only to members and is required to give "preference" to "personal loans," see Mass. Gen. Laws Ann., ch. 171, 824 (West Supp. 1977), this distinction is minor and does not demonstrate that the credit union is not "similar" to the federal association, within the meaning of § 5 (h). There is no statutory limitation on the membership of the Massachusetts credit union, other than self-imposed conditions of residence, occupation, or association, see Mass. Gen. Laws Ann., ch. 171, § 7 (c) (West 1971), and a small deposit will qualify a prospective borrower as a member. In addition, there is no statutory enforcement of the "preference" in favor of personal loans. The Supreme Judicial Court observed, 372 Mass., at 493-494, 363 N. E. 2d, at 484, that in 1972 Massachusetts credit unions placed 30.1% of their total dollar investments in real estate mortgages, and 42% of their total loans in real estate mortgages. As of the end of 1973, they had $329 million as outstanding mortgage loans. Large Massachusetts credit unions may invest up to 80% of their assets in real estate loans, see Mass. Gen. Laws Ann., ch. 171, § 24 (B)(b) (7) (West Supp. 1977).

2

All this leads me to conclude that the Massachusetts credit union in all pertinent respects is "similar," and not dissimilar,

2 Federal associations had 87.7% of their total dollar investments in real estate mortgages and almost 98% of their total loans in such mortgages.

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Both perform the

to the federal savings and loan association. same functions in that they attract savings upon which they pay interest, and they make loans, substantial amounts of which are first mortgage residential loans. It follows, in my view, that, because of these similarities, the exemption of Massachusetts credit unions from the Massachusetts excise tax to which federal savings and loan associations are subject renders the tax invalid, under § 5 (h), as applied to the federal institutions.

I therefore would reverse the judgment of the Supreme Judicial Court of Massachusetts.

3 See Message of the President to the Congress on Tax Reduction and Reform, Jan. 20, 1978, 14 Weekly Comp. of Pres. Docs. 158, 172.