imposed on the franchise or the property of a corporation, or both. When imposed on its franchise, the amount of the tax may be measured by its capital stock, either at par or at its nominal value, or by its dividends, or it may be a specific amount. It may also be taxed on its property in which the capital is invested. And the stockholders may, in addition, be taxed on the value of their shares, and also on the profits or dividends as income...

§ 84. What Description Includes.-When there is no special tax imposed by law upon corporations, either by their charters or by the revenue laws, and no exemption from the general tax laws, the property of corporations is taxed in the same manner as that of natural persons. Corporations are included in the word "inhabitant," so as to be liable to rates for the poor in England,' and they are included in the words "every person or persons," so as to be liable to the same rates, even when the statute provides for an appeal from the decision of the tax commissioners, upon the execution by the person or persons of a recognizance, which would seem to indicate that only natural persons were intended. The same principle was applied where corporations were not named in a general tax law, which only spoke of "persons." So in Maine, an act to tax all personal property of "inhabitants" is held to include corporations holding charitable trusts, as well as others, and a moneyed corporation having its banking house in a village, is an "inhabitant." The two cases which seem to conflict with these views, are reconcilable. The Connecticut case was that of an insurance company doing a banking business. The company, by its charter, was required to, and did keep its office in the town of Hartford. Its bank stock was held not liable to taxation by the town, on the ground that it was not an inhabitant within the meaning of the act imposing taxes. Stress was laid upon the fact that the same act provided a mode of taxing the bank stock of individuals by taxing the shares.5 The New York case was that of a road tax, a commutation of the personal services required of citizens on the highways, a species of tax to which moneyed corporations are not liable. The personal labor is the thing assessed, and the service is analogous to military duty, which a corporation cannot render. The

4

1 Angell & Ames on Corporations, 8th ed. § 440.

2 Cortis v. Kent Water Works, 7 Barn. & Cres. 314; State v. Metz, 32 N. J. Law (3 Vroom), 199.

8 People v. Utica Ins. Co. 15 Johns. 382.

Baldwin v. Trustees of Ministerial Fund, 37 Me. (2 Heath), 369; Ontario Bank v. Bunnell, 10 Wend. 186.

Hartford Fire Ins. Co. v. Inhabitants of Hartford, 3 Conn. 15.

commutation tax is only the mode in which the labor is dispensed with. The word "residents," for purposes of jurisdiction of revenue, includes a corporation. In Pennsylvania, the rule is that the word person, in its legal import, includes corporations, while in statute and common parlance it does not embrace them. If there is anything in the statute to indicate an intention to include them, they will be embraced by the word person. A statute requiring a license to be procured by every person or association of persons who may carry on the business of dealing in, buying, selling, or discounting any kinds of bills of exchange, checks, drafts, &c., does not apply to savings banks, and they are not required to take a broker's license.

$85. Tax on the Franchise.-This tax is, in its essential nature, the same as the license tax, and the same principle as to the power of the State to tax applies to domestic corporations, when they are first chartered, as applies to foreign corporations. In the case of a foreign corporation, the bonus or tax is the amount paid for the privilege of exercising its corporate powers in the State; in the case of a domestic corporation, it is the amount paid as the price of its corporate existence. It only exists by permission of the State, and the State may prescribe the terms on which it will grant its permission. The price paid for this privilege of existence, when exacted for the purpose of revenue, is a tax; but if the price is fixed only with the view of enforcing regulations deemed for the good of the State, as in the case of licenses, it would be merely an exercise of the police power.

Not only is it true that a tax may be imposed on the franchise of a corporation at its creation, but if the corporation is chartered, and the charter contains no express provision exempting it from taxation, a tax may at any time be imposed on the franchise; and if a tax is imposed at its creation, the amount of such tax may be increased at any subsequent period, if there be no express exemption from further

taxation.

6

The case of Providence Bank v. Billings is criticised by some of our most popular legal writers. The bank was chartered in 1791, and its charter contained no provision on the subject of taxation. In 1822, the legislature of Rhode Island passed an act imposing a duty on licensed persons and others, and bodies corporate in the State, re

1 Bank of Ithaca v. King, 12 Wend. 390.

3 Carlisle Bank, 8 Watts, 291. 5 Ante, § 79.

2 State v. Metz, 32 N. J. Law (3 Vroom), 199. State v. Field, 49 Mo. 270. Providence Bank v. Billings, 4 Pet. 514 (Cond. U. S. 171); Gordon v. Appeal Tax Court, S How. 133 (Cond. U. S. 338); Portland Bank v. Apthorp, 19 Mass. 252. 7 Ang. & Ames on Corporations, §§ 465, 470.

quiring each bank to pay a tax of fifty cents on every $1,000 of capital. They claim that the court merely decided that the charter did not exempt the bank from taxation, whereas the real question was not whether the charter exempted the capital of the bank from taxation, but, did the grant of the charter open to the State any new source of revenue? Did the right to tax the franchise conferred by the State ever exist? It is very true that the court, in its opinion, did not discuss these questions raised by Messrs. Angell and Ames. The only questions discussed were, whether there was an exemption in the charter, and whether the power of taxing the franchise was inconsistent with the charter, because it might be so used as to destroy it.

1

"The sovereignty

The right to tax seems to have been assumed. of a State extends to everything which exists by its authority, or is introduced by its permission." This language of Judge Marshall is the only allusion to the point. In a subsequent case in the same court the point is distinctly stated, and decided, it is true, that in this case the court was of opinion that there was a contract in the charter by which a bank paid a price for its franchise, and in consideration of such payment, was exempt from all further taxation: "The franchise is their corporate property, which, like any other property, would be taxable, if a price had not been paid for it, which the legislature had accepted as the consideration for allowing them to use the franchise during the continuance of their charter. The capital stock is another property, corporately associated for the purpose of banking, but, in its parts, is the individual property of the stockholders in the proportions they may own them. Being their individual property, they may be taxed for it as they may for any other property they may own. A franchise for banking is in every State of the Union recognized as property. The banking capital attached to the franchise is another property, owned in its parts by persons, corporate or natural, for which they are liable to be taxed, as they are for all other property, for the support of the government." 3

And in a late case, the court say: "Nothing is better settled than that the franchise of a private corporation * * * is property, and of the most valuable kind, as it cannot be taken, for public use even, without compensation." If the principle announced in these

1 Marshall, J., 4 Peters, 564 (Cond. U. S. 176).

2 Gordon v. Appeal Tax Court, 3 Iow. 133 (Cond. U. S. 171).

3 Marshall, J., in 3 How. 150 (Cond. U. S. 346).

4 Wilmington R. R. Co. v. Reid, 13 Wall. 264-268; Attorney General v. Bank of Charlotte, 4 Jones' Eq. (N. C.) 287, and cases cited in § 69, and in latter part of $78, all of which sustain this view, especially Hamilton Co. v. Massachusetts, 6 Wall. 638.

cases be correct, that the franchise of a corporation is property of a valuable kind, distinct from the capital stock, or shares in the corporation, there can be but one answer to the queries of Messrs. Angell and Ames. The charter of a corporation does open to the State a new source of revenue. It creates a valuable property, which, like all other property, the State may require to contribute to the support of the government.

When is the Tax on the Franchise, as distinguished from the property of the corporation? This question has arisen in a number of cases under the act of Congress exempting United States bonds from. taxation; if the tax was laid upon the property of the corporation as such, all that portion invested in United States bonds was exempt, whereas if the tax was imposed on the franchise, it had no reference to the United States bonds, and the whole tax must be paid. When the tax is on the nominal capital of a bank, without regard to the value of the property of which it is composed, such a tax is annexed to the franchise as a royalty for the grant, and is a tax on the franchise, and not on the property. The legislature of Connecticut enacted that the savings banks of that State should make annual returns to the comptroller of public accounts, of the total amount of all deposits in them respectively on the first day of July in each year, and pay to the treasurer of the State a sum equal to three-fourths of one per centum on the total amount of deposits on hand on such days. It was claimed that this was a tax upon the assets of the institution, and the amount invested in United States bonds should be deducted in ascertaining the amount of the tax, but the court held that reference was evidently made to the total amount of deposits on the day named, not as a subject-matter of assessment, but as a basis for computing the tax required to be paid by the corporations for the important privileges enjoyed by them. To show the intention of the legislature, stress is laid upon the fact, that as to all property subject to tax, the owner is required to furnish a list to the assessor where he resides, and the tax is assessed on the appraised value of the property, while this tax is imposed without the intervention of lists, appraisements or assessors. And in Massachusetts, where prior to 1862, deposits were assessed directly to the depositors, an act was passed in that year, requiring every savings institution, to pay "a tax on account of its depositors of one-half of one per cent. per annum on the amount of its deposits, to be assessed one-half of said annual tax on the average amount of

2

1 Bank of Commerce v. New York City, 2 Black, 620–629.

Society for Savings v. Coite, 6 Wall. 594-608; s. c. sub nom. Coite v. Savings Bank, 32 Conn. 173.

its deposits, for the six months preceding the first of May, and the other half on the average amount of its deposits for the six months preceding the first day of November. This was regarded as a franchise tax, and not a tax on property. In the latter case, Bigelow, J., says, "It is the extent to which the corporation has exercised the franchise during a certain period that is made the basis on which to estimate the sum to be paid for the enjoyment of the privilege." In the cases in Connecticut, as well as those in Massachusetts, the payment of tax on the amount of deposits, was in lieu of all other taxes. This is one of the elements by which a franchise tax is distinguished from a property tax; another is that a property tax is imposed upon a valuation which is the basis of computation. It is assessed by assessors where it is situated, or at the residence of the owner, and is collected by the collector of the district; while the franchise tax is imposed directly by the legislature, is not assessed by assessors, and the amount depends on the amount of business transacted by the corporations, and the extent to which they have exercised the privileges granted in their charter, without reference to the value of their property, or the nature of the investments made of it.

A statute of Massachusetts required corporations, having a capital stock divided into shares, to pay a tax of one sixth of one per cent. upon the excess of the market value of the stock over the value of its machinery and real estate. The court say: "The only difference between this case and those just cited, is that different elements of calculation are prescribed as the basis of computation in ascertaining the amount of the required contribution," and the tax was held to be a tax on the franchise. An act taxing the cash capital of mutual insurance companies, according to a sworn statement to be made on the first of October in each year, is a tax on the franchise. In determining the cash capital, ascertained losses, though unpaid, are to be deducted, as they are fixed liabilities. So dividends which are declared in such a manner as to reduce the cash capital are to be deducted, but if they are applied to the payment of premium notes not included in capital, they are not to be deducted, though if the premium notes are included as a part of the capital, they are to be deducted.

Provident Institution for Savings v. Massachusetts, 6 Wall. 611, 630; Commonwealth v. People's Five Cent Savings Bank, & Allen, 431; s. P. Commonwealth v. Provident Inst. for Savings, 12 Allen, 298.

2 Hamilton Co. v. Massachusetts, 6 Wall. 632-639; s. c. 12 Allen, 300. In the three cases cited from 6 Wall., Judges Chase, Grier and Miller dissented, regarding the tax as a tax on property and not on the franchise.

3 Coite v. Connecticut, &c. Ins. Co. 36 Conn. 512.