A turnpike company whose right of way extended within the limits of a city became the purchaser of the franchises of a passenger railway company which had been authorized to lay a track along the road of the turnpike It subsequently released to the city of Philadelphia "all the interest of said company in that portion of their road occupying the bed of Market street within the limits of the city of Philadelphia." It was held that by such a grant the turnpike company gave up all their rights and franchises, and all their control and interests in the bed of Market street, which interest included not merely the right to maintain a turnpike or plank road, but also a right to lay and maintain railway tracks.1

14

14 West Philadelphia Pass. Ry. v. Philadelphia & West Chester Turnpike Road Co., 186 Pa. 459 (1898); affirming 19 Pa. C. C. R. 225 (1897); 6 Dist. 160 (1897.)

CHAPTER XLVI.

TAXATION.

295. Tax on Capital Stock and Dividends.

296. Bonus on Increase of Capital Stock.

297. Tax on Gross Receipts.

298. Tax on Loans.

299. Property Exempt from Local Taxation.

Tax on Capital Stock and Dividends.

300. Municipal Liens for Paving. 301. License Tax on Street Cars. 302. License Tax on Poles.

303. When Railroad is in Hands of a Receiver.

295. The tax upon the capital stock of a corporation is a tax upon the property, assets, and franchises of the corporation.1

The Acts imposing a tax on the capital stock of certain corporations for State purposes require the stock to be appraised at its actual value in cash, "not less, however, than the average price which said stock sold for during said year." An "average price" ascertained by multiplying the number of shares sold at each sale by the price paid per share, adding together the amounts paid at all the sales and dividing this sum by the number of shares sold, was held to be a proper method for ascertaining the average price for the year.2

Under the Act of June 8, 1891, the question of the actual value in cash of the capital stock of a corporation is a question of fact to be determined by considering the value of defendant's tangible property and assets of every description, including its bonds, mortgages and moneys at interest and its fran

I Com. v. New York, Pennsylvania & Ohio R. R., 188 Pa. 169 (1898); Erie & Pittsburg R. R. v. Pennsylvania R. R., 26 Pa. C. C. R. 641 (1902); II Dist. 254 (1902.)

2 Com. v. Peoples Trac. Co., 183 Pa. 405 (1898); Com. v. Union Trac. Co., 1 Dauph. 178 (1898.)

chises and privileges; and the amount of the incumbrances on its property and franchises is also a relevant fact to be considered, but it is not to be specifically deducted from the valuation so ascertained and determined. The actual value of the stock of a corporation being a question of fact, an insolvent corporation has no standing to complain of discrimination in the methods of appraisement as between itself and solvent companies, so long as its stock is not assessed in excess of its actual value.8

Under the Act of June 8, 1891, the amount and rate per cent. of dividends made by a corporation, and the amount carried to the surplus or sinking fund during the tax year do not furnish an absolute measure of the actual value in cash of the capital stock of a corporation, but are to be considered with other relevant facts.*

Evidence that a portion of a railroad in the State could be duplicated at a certain price, is not relevant in determining the value of capital stock."

A corporation is not entitled to any credit upon the tax assessed upon its capital stock, although it leases the properties of other corporations upon whose capital stock the tax has already been paid; but it is not liable for tax upon the portion of its capital stock, representing its ownership of shares of stock in other corporations which have been already taxed under Sec. 21 of the Act of June 8, 1891.6

The probable speedy exhaustion of coal fields in a region served by a railroad company is an element to be considered in

3 Com. v. New York, Pennsylvania & Ohio R. R., 188 Pa. 169 (1898); Com. v. Pine Creek Ry., 188 Pa. 198 (1898); Com. v. Fall Brook Ry., 188 Pa. 199 (1898); Com. v. Beech Creek R. R., 188 Pa. 203 (1898); Com. v. Ontario, Carbondale & Scranton Ry., 188 Pa. 205 (1898); Com. v. Jamestown & Franklin R. R., 6 Lacka. 234 (1900); 3 Dauph. 214 (1900); Com. v. Shamokin, Sunbury & Lewisburg R. R., 3 Dauph. 168 (1900); Com. v. Lake Shore & Michigan Southern R. R., 3 Dauph. 172 (1900); Com. v. Delaware, Lackawanna & Western R. R., 3 Dauph. 266 (1894.)

4 Com. v. Delaware, Susquehanna & Schuylkill R. R., 3 Dauph. 249 (1894); Com. v. Jamestown & Franklin R. R., 3 Dauph. 255 (1893); Com. v. Delaware, Lackawanna & Western R. R., 3 Dauph. 266 (1894.)

5 Com. v. Lake Shore & Michigan Southern R. R., 3 Dauph. 172 (1900); 11 Dist. 318 (1900.)

6 Com. v. Union Trac. Co., 1 Dauph. 178 (1898.)

determining the value of a railroad company's stock for purposes of taxation. Dean, J., said: "It is very clear that if in five or ten years, the freight on which the defendants' road depends for prosperity no longer exists, the actual value of its capital stock is seriously depreciated: for the value of its franchise privileges, and assets must be based not only on past but on future probable prosperity.”

Real estate situated outside this State and not connected with nor constituting a part of the railroad may be deducted from the total appraisement in order to determine the value of its capital stock in this State.8

Where a railroad company is formed by the consolidation of Pennsylvania and New York corporations, it is taxable in this State on its capital stock in the proportion of mileage in Pennsylvania to the mileage in New York. The whole length of the road being 100.07 miles and 85.70 miles being in Pennsylvania, that proportion of the whole capital stock is taxable in this State

The capital stock of a domestic railroad corporation represented by its equipment in use, interchangeably on its lines within and without the State is taxable, under Sec. 4, Act of June 7, 1879, P. L. 114 and Sec. 21, Act of June 1, 1889, P. L. 429, in the proportion its mileage operated in this State bears to its entire mileage. But the capital of such company invested in real estate and other railroads outside the State, and in vessels, barges, and tugs built, registered and used wholly outside the State is not subject to such taxation; as such property is already taxable in the State where it exists and is used.1o

A covenant by a railroad lessee "to pay all taxes now or hereafter imposed by law upon the property hereby demised, and the earnings from or business thereof" of the lessor does not include the State tax on the capital stock of the lessor or

7 Com. v. Fall Brook Ry., 188 Pa. 199 (1898.)

8 Com. v. Lake Shore & Michigan Southern R. R., 3 Dauph. 172 (1900); 11 Dist. 318 (1900.)

9 Com. v. Fall Brook Ry., 188 Pa. 199 (1898.)

10 Com. v. Delaware, Lackawanna & Western R. R., 1 Dauph. 153 (1891); affirmed 145 Pa. 96 (1891); Com. v. Lake Shore & Michigan Southern R. R., 3 Dauph. 172 (1900); 11 Dist. 318 (1900.)

on the property and franchises upon which the valuation of its shares is made for the purpose of taxation after the lease.11

Where a street railway company is required by its charter to pay to a city a tax on “dividends declared," and the power to declare dividends is discretionary in the directors of the company, the tax can only be levied on dividends actually declared, but such dividends need not necessarily be in cash. Thus a street railway company leased its property and franchises to another street railway company under an arrangement by which the stockholders of the lessor transferred their stock to the lessee, and received eight shares of the lessee's stock for each share of their own. The lessor also transferred to the lessee the shares of a third street railway company and some real estate in consideration of the issue of additional shares of the lessee's stock to the stockholders of the lessor. It was held that the distribution of the value of the shares of the third company among the stockholders of the lessor was a dividend. and was taxable by the city.12

Three street railway companies agreed on a plan of consolidation. The first company's stock was worth per share five times as much as that of the second company, and ten times as much as that of the third company. To obtain a convenient divisor of the consolidated stock, the first company increased its shares, and the new stock was issued in proportion of ten shares for each one of the first company, two for each one of the second company, and one for each of the third company, thus preserving the proportionate value each to the other. It was held that the issue of the increased stock to the stockholders of the first company was not a dividend.1

13

A nominal or arithmetical increase of shares of stock without transferring to the stockholders anything out of the treasury or property of the corporation, and which is not a cover for distribution of accumulated profits, is not a dividend.14

II Erie & Pittsburg R. R. Co. v. Pennsylvania R. R. Co., 12 Dist. 657 (1903.)

12 Allegheny City v. Pittsburgh, Allegheny & Manchester Pass. Ry., 179 Pa. 414 (1897); 27 Pitts. 241 (1897.)

13 Allegheny City v. Federal St. & Pleasant Valley Pass. Ry. Co., 179 Pa. 424 (1897); 27 Pitts. 243 (1897.)

14 Allegheny City v. Federal St. & Pleasant Valley Pass. Ry. Co., 179 Pa. 424 (1897); 27 Pitts. 243 (1897.)