municipality, or other municipal subdivision of any State, Territory, or possession of the United States, or by the District of Columbia.” It is therefore my opinion that the bonds, when issued in the amount and form proposed, will constitute valid and binding obligations of the People of Puerto Rico. Respectfully, To the SECRETARY OF WAR. WILLIAM D. MITCHELL PUERTO RICO-VALIDITY OF BOND ISSUE The proposed issue by the Government of Puerto Rico of bonds of the face value of $100,000, the proceeds from the sale of which are to be used in the payment of the principal of, and interest on, bonds previously issued and sold for the construction, operation, and maintenance of the Isabela Irrigation System, being authorized by Congress and by Joint Resolution No. 12 of the Legislature of Puerto Rico of July 3, 1929, and all statutory requirements regarding the issue and sale of the bonds having been complied with, said bonds, when issued in the amount and form proposed, will constitute valid and binding obligations of the people of Puerto Rico. DEPARTMENT OF JUSTICE, SIR: I have the honor to acknowledge receipt of your letter of December 13, 1932, stating that your Department has been authorized to sell for the account of the Government of Puerto Rico bonds of the face value of $100,000, the proceeds of which are to be used in the payment of the principal of, and interest on, bonds previously issued and sold for the construction of the Isabela Irrigation System and of the costs of maintenance and operation of said system until such time as the funds necessary for such purposes shall be produced from assessments levied upon lands included within the irrigation district. The proposed bonds are to be issued under authority contained in section 3 of the Act of Congress approved March 2, 1917, entitled "An Act To provide a civil government for Puerto Rico, and for other purposes," as amended by the Act of March 4, 1927 (c. 145, 39 Stat. 951, 953; c. 503, 44 Stat. 1418; U. S. C., Title 48, Secs. 741, 745), and Joint Resolution No. 12 of the Twelfth Legislature of Puerto Rico, approved July 3, 1929, a copy of which was inclosed with your letter. The validity of prior installments of bonds authorized by the same Joint Resolution was sustained in my opinions of November 27, 1929, December 9, 1930, and November 6, 1931 (36 Op. 107, 378, 469). The last-mentioned installment, however, was not actually issued. You state that the bonds are to be issued and sold by you at the request of the Treasurer of Puerto Rico, in coupon form, in the denomination of $1,000 each, to be dated January 1, 1933, and to bear interest at the rate of 5 per centum per annum, payable semiannually on January 1 and July 1 of each year, the principal thereof to be payable at the Treasury of the United States in series of $50,000 each on July 1, 1971, and July 1, 1972. A copy of the form of the proposed bond is submitted with your letter and you request my opinion upon the legality of the issue. Section 3 of the Act of March 2, 1917, as amended, provides: 66* * and when necessary to anticipate taxes and revenues, bonds and other obligations may be issued by Puerto Rico or any municipal government therein as may be provided by law, and to protect the public credit: Provided, however, That no public indebtedness of Puerto Rico and the municipalities of San Juan and Ponce shall be allowed in excess of 10 per centum of the aggregate tax valuation of its property *. In computing the indebtedness of the people of Puerto Rico, municipal bonds for the payment of interest and principal of which the good faith of the people of Puerto Rico has heretofore been pledged and bonds issued by the people of Puerto Rico secured by bonds to an equivalent amount of bonds of municipal corporations or school boards of Puerto Rico shall not be counted, but all bonds hereafter issued by any municipality or subdivision * * * for which the good faith of the people of Puerto Rico is pledged shall be counted." Your letter and the documents submitted by you show that the aggregate assessed valuation of real and personal property in Puerto Rico on June 30, 1932, amounted to $324,309,117, revised and reduced in the regular annual assesment to $305,436,236, as of October 24, 1932, that on November 3, 1932 (the date of the certificate of the Treasurer of Puerto Rico), there were outstanding bonds of the Government of Puerto Rico of the face value of $28,458,000, and notes evidencing temporary loans of the face value of $529,494.54, that since the amendatory Act of March 4, 1927, the good faith of the people of Puerto Rico has been pledged to the payment of principal and interest on outstanding municipal bonds aggregating $1,299,500, which under the statute must be added to the foregoing, and that subsequent to the date of the Treasurer's certificate there have been issued bonds in the amount of $500,000 for continuation of the so-called Toro Negro Project, which were approved in my opinion of October 29, 1932, making a total of $30,786,994.54. From this amount, however, there is to be deducted $958,787.17, representing the amount accumulated in the various sinking funds, pledged by statute and applicable only to the payment of unmatured obligations included in the foregoing total figures. (35 Op. 9, 14.) This makes a net total of $29,828,207.37 to be considered as the present indebtedness of the Government of Puerto Rico within the meaning of the Act of Congress, and the contemplated issue will not increase this to an amount beyond 10 per centum of the aggregate of the revised assessed valuation, the maximum permitted by law. Sections 3 and 4 of Joint Resolution No. 12, supra, provide: "SECTION 3. For the purpose of providing funds for the payment of principal of, and interest on, the bonds already issued and sold for the construction of the irrigation system, as well as for the operation and maintenance of said system until such time as the funds necessary for these purposes are produced by such assessments as may be levied on irrigated lands, as hereinbefore provided, and by the proceeds of other receipts, derived from said system, the Treasurer of Puerto Rico is hereby authorized, empowered and directed to issue bonds of The People of Puerto Rico to the amount of one million, two hundred and fifty thousand (1,250,000) dollars, or such part thereof as may be necessary. "SECTION 4. Said bonds shall be sold on such terms as may be most favorable to The People of Puerto Rico and shall be issued in series so that the proceeds of the sale thereof may be available on the dates and in the amounts stated below: It is further provided by the Joint Resolution that the bonds may be in coupon or registered form, in denominations of one thousand, five thousand and (or) ten thousand dollars, shall bear interest at a rate not exceeding five per centum per annum, payable semi-annually, and shall be redeemable in series on prescribed dates and in prescribed amounts; that the bonds may be sold by the Secretary of War or by the Treasurer of Puerto Rico, with the approval of the Governor, upon such terms as may be most favorable to the People of Puerto Rico, and that the Treasurer with the approval of the Governor, under the limitations prescribed therein, shall have absolute charge and authority in connection with all matters relating to said bonds; that the proceeds from the sale of the bonds shall be devoted to the payment of the principal of and interest on the bonds theretofore issued and sold for the construction of the irrigation system, and of the costs of operation and maintenance of the system until sufficient funds for these purposes are realized from the assessments levied by the Act. For the payment of both principal and interest the good faith of the People of Puerto Rico is irrevocably pledged. There was transmitted with your letter a statement signed by the Treasurer of Puerto Rico, setting forth his determinations in those matters left to his discretion, and this has been approved by the Governor, in accordance with the Joint Resolution. I find that all the statutory requirements regarding the issue and sale of the said bonds have been complied with and that the form of bond submitted is in compliance with the law and the determinations of the Treasurer, approved by the Governor. The form of bond properly recites that "under the provisions of Section 3 of the Act of Congress, approved March 2, 1917, as amended by the Act of March 4, 1927, this bond is exempt from taxation by the Government of the United States, or by the Government of Puerto Rico or of any political or municipal subdivision thereof, or by any State, Territory, or possession, or by any county, municipality, or other municipal subdivision of any State, Territory, or possession of the United States, or by the District of Columbia." It is therefore my opinion that the bonds, when issued in the amount and form proposed, will constitute valid and binding obligations of the People of Puerto Rico. Respectfully, To the SECRETARY OF WAR: WILLIAM D. MITCHELL. IMPORT TAX ON COAL-ATTORNEY GENERAL'S OPINION The Attorney General declines to express an opinion upon the question whether coal imported from countries having most favored nation treaties with the United States is subject to the tax imposed by section 601 (c) (5) of the Revenue Act of 1932 (47 Stat. 260), as that question must ultimately reach the courts for decision. The ruling of the Secretary of the Treasury of November 14, 1932, (T. D. 45991-6), that coal imported from countries having most favored nation treaties with the United States is not subject to the aforesaid tax, held invalid because in violation of section 502 (b) of the Tariff Act of 1930 (46 Stat. 731), requiring concurrence by the Attorney General in certain rulings of the Secretary of the Treasury. Treating the matter as now submitted in accordance with section 502 of the Tariff Act of 1930, supra, the Attorney General deems it proper to refrain from approving a reversal by the Treasury Department of its original ruling requiring payment of the tax on imported coal as prescribed by section 601 (c) (5) of the Revenue Act of 1932, supra, and to allow such tax to stand in order that the question may be judicially determined on protest and litigation by the importers. DEPARTMENT OF JUSTICE, SIR: I have the honor to acknowledge receipt of your letter of December ninth submitting for my consideration the question as to the proper interpretation of section 601 of the Revenue Act of 1932, approved June 6, 1932, and the correctness of the ruling of the Treasury Department with respect thereto. |