Both the Government of the United States and the Government of the State of North Carolina have adopted the policy with reference to their financial operations which is generally pursued by other governments. When in need of money for governmental purposes, *707which it is not deemed wise to undertake to raise hy current taxation, they issue and sell their interest-hearing bonds. Purchasers and holders of these bonds rely for their security upon the good faith and unimpaired credit of the government whose bonds they buy and hold as investments. These bonds usually yield a less income than that derived from other investments of unquestioned security. They are usually, by express statutory provision, exempt from taxation in the hands of purchasers and holders. The difference in income from government bonds and from other investments of unquestioned security is measured to some extent hy the amount of the tax or taxes levied or assessed by the government on investments other than these bonds. Investors are thereby induced to buy government bonds notwithstanding the fact that they bear interest at a less rate than other sound investments. These investors rely upon the integrity of the statutory provisions exempting such bonds from taxation. Good faith to purchasers and holders of such bonds demands that the integrity of these statutory provisions, when they are clearly expressed and free from doubt, shall not he impaired by administrative or judicial construction. The credit of governments issuing nontaxable bonds is enhanced hy their free and unrestricted marketability. A policy which would restrict the marketability of nontaxable government bonds, after they have been sold and while they are in the hands of holders, would he in violation of good faith on the part of the government which has issued and sold said bonds and would necessarily tend to impair the credit of such government. Owners of property and of other investments which are by law subject to taxation would not be benefited by such a policy. It would result ultimately in an increase of their tax burden. They would be the chief sufferers from a policy which would be regarded as in violation of good faith and which would necessarily result in the impairment of the credit of their government.
It has been uniformly held by this Court that statutory provisions exempting bonds, issued and sold by the State of North Carolina under legislative authority, from taxation by the State or its taxing subdivisions, are valid, notwithstanding the provision in the Constitution which requires that all moneys, credits, investments in bonds, stocks, joint-stock companies or otherwise, shall be taxed by uniform rule. Holders of such bonds may avail themselves of such exemption. In Pullen v. Corporation Commission, 152 N. C., 548, 68 S. E., 155, it is said that the uniform and well-settled policy of this State, certainly since 1852, has been to exempt its own bonds and certificates of debts from taxation. The power of the General Assembly to declare that bonds issued by its authority shall be exempt from taxation by the State, has never been doubted or called in question. In the opinion written *708for tbe Court, sustaining tbe validity of a statutory provision exempting certain bonds of tbe State from taxation, Manning, J., said r
“Tbe State and its taxpayers are not without compensating advantage for tbis exemption from taxation conferred upon tbe bonds issued by tbe State, because it is thereby enabled to sell its bonds, bearing interest at only four per cent, not only at their par value, but at a premium, and thus, if residents and citizens of tbe State — those liable to pay it tribute in taxes — own tbe bonds of tbe State, what tbe State and its taxing subdivisions, created by it, may lose in revenue by permitting tbe bonds to be taxed, is saved by tbe State and its taxpayers in having to pay a much reduced rate of interest on tbe bonds.”
With respect to tbe liability of holders of bonds issued by tbe United States under tbe authority of Congress, to taxation on such bonds by a State, it is said to be well settled that bonds, treasury notes and other obligations of tbe United States are exempt from all taxation by or under State authority. Such bonds are means by which the United States performs its governmental functions and, on tbe principle that agencies of tbe Federal Government are not subject to taxation by a State, are exempt from State taxation. It is, therefore, not necessary for Congress to secure tbis immunity by a declaration in terms, as such declaration does not operate to withdraw from tbe States any power or right previously possessed by them. 26 R. C. L., p. 100, sec. 76.
It is not contended by tbe defendants in tbe instant case that plaintiff’s intestate was liable for tbe taxes assessed against him by reason of bis ownership on tbe first of May, 1925 and 1926, of tbe United States tax-exempt bonds, purchased by him in good faith, in tbe open market, prior to said dates. Defendants contend that be was liable for said taxes for that his transactions with reference to said bonds as found by tbe court, were in violation of a statute of tbis State and were a fraud upon tbe defendant, Nash County. Neither of these, contentions can be sustained.
Tbe statute relied upon by defendants is as follows: “Any person who, to evade tbe payment of taxes, surrenders or exchanges certificates of deposit in any bank in tbis State or elsewhere for nontaxpaying securities or surrenders any taxable property for nontaxable property, and, after tbe date of listing property has passed, takes said certificates or other taxable property back, and gives up said nontaxpaying securities or property, shall be guilty of a misdemeanor and upon conviction shall be fined not less than $50 nor more than $200 or imprisoned not less than one month- nor more than six months, or both.” Section 54, chapter 102, Public. Laws 1925; section 53, chapter 71, Public Laws 1927.
*709Upon tbe facts found by tbe judge of tbe Superior Court, to wbicb there was no exception, tbe transactions of plaintiff’s intestate witb reference to tbe bonds was not a violation of tbe statute. They were in good faitb and resulted in said intestate acquiring tbe title, botb legal and equitable, to said bonds, wbicb be beld on tbe day fixed by statute for listing property subject to taxation. As be did not own on said day a deposit in tbe bank to bis credit, be could not be beld liable for tbe tax assessed against bim by tbe defendant, Nasb County. Tbe statute does not undertake to make a transaction wbicb by its provisions is a misdemeanor, void, on tbe contrary tbe validity of tbe transaction, in so far as it affects tbe title to property, botb taxable and nontaxable, involved therein, is assumed. It is only when tbe purpose of tbe transaction, to wit, an evasion of taxation, is accomplished, that tbe transaction is made by statute a misdemeanor. Tbe statute cannot be justly construed as attempting to make a transaction within its provisions void. Tbe only penalty prescribed by tbe statute for its violation is a fine or imprisonment, or botb.
Nor can it be beld that tbe transactions of plaintiff’s intestate with reference to said bonds were a fraud upon tbe defendant, Nasb County. Tbe county has lost no taxes to wbicb it was entitled under tbe law as a result of said transactions. Tbe mere change in ownership of tbe taxable and of tbe nontaxable property did not relieve tbe owner of tbe taxable property on tbe first day of May from liability for taxes; nor could it impose such liability upon tbe owner on said day of tbe nontaxable property. Plaintiff’s intestate was not forbidden by statute or by any just principle of law from purchasing in good faitb prior to tbe date on wbicb be was required to list bis property for taxes, nontaxable property and paying therefor by bis check on a bank deposit wbicb would have been liable to taxation bad be owned tbe deposit on tbe tax-listing day, to wit, tbe first day of May, thereafter. We find no error in tbe judgment. It is
Affirmed.