Hanover Fire Ins. Co. v. Harding
272 U.S. 494 (1926)

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U.S. Supreme Court

Hanover Fire Ins. Co. v. Harding, 272 U.S. 494 (1926)

Hanover Fire Insurance Company v. Harding

No. 179

Argued October 18, 1926

Decided November 23, 1926

272 U.S. 494

Syllabus

1. While a state may forbid a foreign corporation to do business within its jurisdiction, or to continue it, and may fix conditions under which the exercise of the privilege may be allowed, it may not do so by imposing upon the corporation a sacrifice of its rights under the federal Constitution. Pp. 272 U. S. 507-509

2. At the end of the period for which a license to do local business has been granted to a foreign corporation, the state may impose as a condition precedent to a renewed license that its valid laws shall have been complied with in the past. P. 272 U. S. 514.

3. But the state may not make past compliance with an unconstitutional tax a condition precedent to renewal of the license. P. 272 U. S. 514.

4. A decision of a state supreme court construing a local law taxing foreign corporations as imposing a privilege tax, rather than a property tax, is binding on this Court; but this Court, in determining

Page 272 U. S. 495

the applicability of the equal protection clause of the Fourteenth Amendment, must decide independently whether the tax is part of the condition upon which admission to do business in the state is permitted, and is merely a regulating license by the state to protect the state and its citizens in dealing with such corporation, or whether it is a tax law for the purpose of securing contributions to the revenue of the state as they are made by other taxpayers of the state. Pp. 272 U. S. 509-511.

5. A foreign corporation which is duly admitted to do business in a state is to be classified with similar domestic corporations in testing the equality of the laws enacted for the purpose of raising revenue. P. 272 U. S. 511.

6. An Illinois tax on the local net receipts of foreign insurance companies was long construed and applied as a tax on personal property; and, like other personal property taxes, partly by law and partly by custom, was assessed on only 30% of the full value; but afterwards, by a change of construction, it was held to be an occupation or privilege tax, laid on such corporations annually, as a condition to their right to do business in Illinois, with the result that all of their local net income was taxed at the rate applicable to personal property, while domestic corporations of the same class and engaged in the same kinds of business paid only a tax on their personal property, assessed at the reduced valuation. Held a discrimination which denied the equal protection of the laws to a foreign corporation which had renewed its license in Illinois from year to year, built up a large business and goodwill in that state, and had many agents there and extensive records containing information concerning its policies and policyholders. P. 272 U. S. 516.

317 Ill. 366 reversed.

Error to a judgment of the Supreme Court of Illinois which affirmed a judgment dismissing the bill of the Insurance Company, a New York corporation, against Carr, the treasurer and tax collector of Cook County, Illinois. The bill prayed an injunction to prevent distraint of the plaintiff's property under a warrant for taxes due under an Illinois law which the bill challenged as unconstitutional under the state constitution and the equal protection clause of the Fourteenth Amendment. Harding, treasurer of Cook County, was substituted in this Court for Carr, his predecessor in office.

Page 272 U. S. 501

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