A tax on the value of the capital stock of a corporation is a
tax on the property in which that capital is invested, and
therefore no tax can be levied upon the corporation issuing the
stock which includes property that is otherwise exempt.
The same rule that requires the exclusion from the assessment of
valuation of capital stock of tangible personal property
permanently situated out of the state applies to property sent out
of the state to be sold and which is actually out of the state when
the assessment is made.
As a state cannot directly tax tangible property permanently
outside the state and having no situs within the state, it cannot
attain the same end by taxing the enhanced value of the capital
stock of a corporation which arises from the value of property
beyond its jurisdiction.
While an appraisement of value is in general a decision on a
question of fact, and final, where it is arrived at by including
property not within the jurisdiction of the state, it is absolutely
illegal as made without jurisdiction.
The collection of a tax on a corporation on its capital stock
based on a valuation which includes property situated out of the
state would amount
Page 198 U. S. 342
to the taking of property without due process of law, and can be
restrained by the federal courts.
In assessing the value of the capital stock of a corporation of
Pennsylvania under the Act of that state of June 8, 1891, coal
which is owned by the corporation, but at the time of the
assessment situated in another state not to be returned to
Pennsylvania, should not be included.
The plaintiff in error brings this case here to review the
judgment of the Supreme Court of Pennsylvania, 206 Pa. 645, in
favor of that state on a question raised by the plaintiff in error
as to its liability to taxation by the state upon certain coal of
the value of $1,702,443, belonging to the plaintiff in error, which
had been mined in Pennsylvania and which, prior to the appraisement
of the value of the capital stock of the company, pursuant to the
Pennsylvania statute, for taxation in Pennsylvania, had been
transported to and was situated in other states awaiting sale.
The case arises under proceedings provided for by the
Pennsylvania statute for appraising, for the purposes of taxation,
the value of the capital stock of corporations, such as the
plaintiff in error, for the year ending in November, 1899. The
statute under which the appraisement was made was passed June 8,
1891 (amendment of act of 1889), printed on page 229
et
seq. of the Laws of Pennsylvania for that year. The sections
of the act in question are four and five, and are reproduced in the
margin.
*
Page 198 U. S. 343
In appraising the value of the capital stock of the plaintiff in
error pursuant to that statute, it is contended by it that the
appraising officers should have deducted from the value
Page 198 U. S. 344
of the stock the value of the coal mined in Pennsylvania by the
company and owned by it, but situated in other states, there
awaiting sale, and beyond the jurisdiction of the State
Page 198 U. S. 345
of Pennsylvania at the time the appraisement was made. This
contention was overruled by the state courts.
The facts upon which the judgment rests were found by the court,
and are as follows:
"1. The Delaware, Lackawanna & Western Railroad Company was
organized under the special act of the General Assembly of
Pennsylvania approved March 11, 1853, by the consolidation of the
Liggetts Gap Railroad Company, incorporated under the Act of April
7, 1832, whose name was, by the Act of April 14, 1851, changed to
Lackawanna & Western Railroad Company, and the Delaware &
Cobbs Gap Railroad Company, incorporated by the Act of April 7,
1849. Into the Delaware, Lackawanna & Western Railroad Company,
as formed by the merger of the Lackawanna & Western Railroad
Company and the Delaware & Cobbs Gap Railroad Company were
merged, December 27, 1865, the Keyser Valley Railroad Company;
August 12, 1870, the Nanticoke Coal & Coke Company, and June
17, 1870, the Lackawanna & Bloomsburg Railroad Company. The
company, as authorized by special act of Pennsylvania Legislature,
has its general office and treasury in the City and State of New
York, though its corporate home is in Pennsylvania. It is
authorized by law to own coal lands in Pennsylvania, and to mine,
buy, and sell coal and convey the same to market, and, in addition
to its business of owning and operating an extensive system of
railroads, is engaged in the business of mining, buying, and
selling coal. The proper officers of the company returned and
appraised its capital stock as of the actual value, between the
first and fifteenth days of November, 1899, of $48,470,000, and in
making up the claim of the state for taxes for said year, the
auditor general made no deductions whatever, but charged tax at
five mills upon said aggregate valuation of $48,470,000, the said
tax amounting to $242,350. Amongst other property in addition to
its railroad, the company owned coal located at points outside of
Pennsylvania, in New York, Illinois, and other states, of the value
of $1,702,443, and, as already stated,
Page 198 U. S. 346
no deduction was made by the auditor general in his statement of
account against the company for or with respect to this coal. All
taxes assessed against the company for 1899 in other states, on
coal located there, have been paid, according to the belief, and so
far as the secretary of the company can now, May 25, 1901,
recall."
"There were other items in dispute in addition to the coal, and
they were covered by defendant's appeal, but the attorney general,
on behalf of the commonwealth, and counsel for the defendant,
entered into an agreement in writing as follows, viz.:"
" And now, to-wit, April 10, 1901, it is hereby agreed that the
jury shall deduct, and not include in its verdict, any tax upon
$1,702,444, being the value of coal held and owned at points in
states other than Pennsylvania, according to the facts as set forth
in the depositions of Fred. F. Chambers and W. H. Truesdale,
defendant's treasurer and president, respectively, hereto attached
and made part hereof. The said deduction having been made, final
judgment shall be entered upon the verdict of the jury in favor of
the commonwealth, and against the defendant. The question of
defendant's liability to the Commonwealth of Pennsylvania for taxes
upon or in respect of said coal held, owned, and stored at points
in states other than Pennsylvania, is hereby reserved, and it is
agreed that it shall be submitted for the determination of the
court. If the court shall be of the opinion that, upon the facts
stated in the aforesaid depositions of Fred. F. Chambers and W. H.
Truesdale, attached to and made part hereof, the defendant is
liable for tax to the Commonwealth of Pennsylvania upon coal thus
held, owned, and stored at points in states other than
Pennsylvania, then judgment shall be entered in favor of the
commonwealth and against the defendant for the further sum of
$8,512.21, being five mills upon the said $1,702,443, the value of
the said coal, to which amount there shall be added the usual
attorney general's commission of five percent, either of the
parties to be at liberty to file exceptions to, and appeal from,
the decision of the court upon the said reserved
Page 198 U. S. 347
point with like effect as if the case had been tried by the
court without a jury, under the Act of April 22, 1874."
"3. The case having been submitted to the jury, a verdict was
rendered as follows, viz.:"
Tax . . . . . . . . . . . . . . . . . . . . . . . . .
$111,250.00
Less five mills on coal, $1,702,443.00. . . . . . . .
8,512.21
-----------
$102,737.79
Less payment on account . . . . . . . . . . . . . . .
100,000.00
-----------
$2,737.79
Add attorney general's commission of five percent . . 136.88
-----------
Verdict for . . . . . . . . . . . . . . . . . . $2,874.67
"The judgment entered upon said verdict has been paid by
defendant, leaving open only the one question submitted to the
court, as aforesaid, of the defendant's liability to taxation with
respect to capital stock invested in coal located outside of
Pennsylvania."
"4. The facts agreed upon by counsel for the commonwealth and
the company are set forth in the affidavits of W. H. Truesdale,
president, and Fred. F. Chambers, the secretary and treasurer of
the company, and, insofar as they relate to the reserved question,
are as follows, viz.:"
" Under powers conferred by special charter previous to the
adoption of the present Constitution of Pennsylvania, the Delaware,
Lackawanna & Western Railroad Company is largely engaged in the
mining and purchasing of anthracite coal in Pennsylvania, nearly
all of which coal it transports to points without said state, and
there sells. By far the greater part of this coal is transported
from the mines for immediate delivery at points in other states,
and is not kept or held in stock in said other states longer than
is necessary for the purpose of transferring possession from this
company to the purchaser, but at certain points in other states,
as, for instances at Buffalo, New York, and at Chicago, Illinois,
the company
Page 198 U. S. 348
keeps constantly on hand a stock of coal for purposes of sale,
the same being stored in yards or upon docks maintained by the
company for that purpose. The coal thus on hand awaiting sale
between the first and fifteenth days of November, 1899, the date
when the company's capital stock is required by law to be appraised
for taxation, was of the value of not less than $1,702,443, and was
included in the valuation of the company's capital stock upon which
tax was charged in the auditor general's account. The coal thus on
hand at that date was approximately the amount usually kept in
stock at such points. The said coal, when shipped from
Pennsylvania, was destined to said points in other states, with no
intention of ever returning the same to Pennsylvania. On the
contrary, said coal was intended to, and did, become part of the
general mass of property in said other states, and the company is
there annually taxed upon or in respect to the same, and was so
taxed for 1899. When the coal thus kept in stock in the states of
New York, Illinois, and other states outside of Pennsylvania is
sold, the proceeds are returned to the company's treasury in the
City and State of New York."
" In 1899, the company sold and delivered coal at points outside
of the State of Pennsylvania of the aggregate value of not less
than $18,587,258, but this was either contracted for before it left
the mines or delivered upon, or within a comparatively short time
after, its arrival at the points in other states to which it was to
be delivered. What I have said above was with reference only to
coal kept in stock at points outside of Pennsylvania for purposes
of sale."
"5. The corporation defendant is authorized by law to transact
business and to hold lands in other states for depot, wharfage, and
coal-yard accommodations, and to make such agreements and contracts
with corporations and individuals of other states as may be
necessary and expedient for the transporting and vending of coal
mined and purchased by it, and defendant is also authorized to have
and maintain its general office and place of business, and to hold
its stockholders'
Page 198 U. S. 349
meeting, in the State of New York, and to have as president,
directors, and other officers nonresidents of the State of
Pennsylvania. The company is taxable upon the value of the property
represented by its capital stock, and not upon the amount of the
latter. "
Page 198 U. S. 352
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
The Supreme Court of Pennsylvania bases its decision in this
case on the authority of
Commonwealth v. Pennsylvania Coal
Co., 197 Pa. 551, which it regards as controlling upon the
question involved. the right to include the value of the coal in
question in the valuation of the capital stock of the company is
based upon the construction given by the Supreme Court of
Pennsylvania to the Pennsylvania statute of 1891, and this Court is
concluded by that construction.
People v. Weaver,
100 U. S. 539,
100 U. S.
541.
The only question for this Court to determine is whether, in
refusing to deduct the value of the coal mined in Pennsylvania, and
which at the time of the appraisement, was situated outside the
jurisdiction of the state, from the value of the capital stock, the
state court denied any right of the plaintiff in error which was
protected by the federal Constitution.
The coal itself, when the appraisement of the value of the
capital stock was made, was concededly beyond the jurisdiction of
the State of Pennsylvania. It was taxable (and in fact was taxed)
in the states where it rested for the purpose of sale at the time
when the appraisement in question was made.
Brown v.
Houston, 114 U. S. 622. In
that case, the Court held that the coal was properly taxed by the
State of Louisiana, though it had but lately arrived from the state
of its origin (Pennsylvania), and was at the time of the taxation,
awaiting sale in Louisiana, and was, in fact soon thereafter, sold
and taken out of the country to a foreign state. It was said that
the coal, on arrival at New Orleans for the purpose of sale, at
once became intermingled with the general property of the State of
Louisiana, and was taxable like any other tangible property
therein. In
Coe v. Errol, 116 U.
S. 517, the question was relative to the validity of the
tax on the lumber imposed in the state of its origin, as that state
had taxed the lumber before it had actually left the state,
although it was
Page 198 U. S. 353
intended for transportation to another state for sale. It was
held that the tax was proper so long, and so long only, as such
transportation had not yet actually commenced. After that, the
state had no right to tax it. In the case at bar, the coal had been
transported to and was actually resting in another state for sale
when the appraisement was made, and, under the foregoing cases, it
was then intermingled with property in the foreign state where it
rested, and was at that time liable to taxation therein. The right
of the foreign state to tax under such circumstances was again
upheld in
Pittsburg & Southern Coal Co. v. Bates,
156 U. S. 577,
where the coal was taxed while awaiting sale in such state.
See
Kelley v. Rhoads, 188 U. S. 1;
Diamond Match Co. v. Ontonagon, 188 U. S.
82. We must therefore take it as plain, under the
foregoing decisions, that this coal, at the time of the
appraisement of the value of the capital stock for taxation by
Pennsylvania, had become intermingled with the mass of property in
the other states to which portions of it had respectively been
sent, and that it was a proper subject for taxation for both state
and local purposes in such states. Where the proceeds of the sale
might go when the coal was sold, whether into the treasury of the
company at its offices in New York City, or indirectly to the state
of its incorporation, is not important. The coal had not been sold
when the appraisement of the value of the capital stock was made,
and at that time it was outside the jurisdiction of the State of
Pennsylvania. A tax on that coal,
eo nomine or
specifically, could not then be laid by that state, as counsel
concede.
Now, was this tax, in substance and effect laid upon the coal
which was beyond the jurisdiction of Pennsylvania? The Supreme
Court of Pennsylvania has held that a tax on the value of the
capital stock is a tax on the property and assets of the
corporation issuing such stock.
Commonwealth v. Standard Oil
Co., 101 Pa. 119, 145;
Fox's Appeal, 112 Pa. 354;
Commonwealth v. Delaware &c. R. Co., 165 Pa. 44. This
Court has also frequently held that a tax on the
Page 198 U. S. 354
value of the capital stock of a corporation is a tax on the
property in which that capital is invested, and in consequence no
tax can thus be levied which includes property that is otherwise
exempt.
Bank of Commerce v. New York
City, 2 Black 620;
Bank Tax
Case, 2 Wall. 200;
Pullman's Car Co. v.
Pennsylvania, 141 U. S. 18,
141 U. S. 25;
Fargo v. Hart, 193 U. S. 490,
193 U. S.
498-499.
The cases of the taxation upon the value of the capital stock of
the banks, or on a valuation equal to the amount of their capital
stock paid in or secured to be paid in, as reported in 2 Black and
2 Wall.,
supra, involved the question of the taxation of
United States bonds and other securities of the United States in
which the capital of the banks was invested, which were exempt from
taxation; but the holding of the Court was that those bonds and
securities were in fact taxed by a tax upon the value of the
capital of the bank, which was invested in such bonds and
securities. Of course, the distinction between the capital stock of
a corporation, and the shares into which it may be divided and held
by individual shareholders is borne in mind and recognized, and
nothing herein affects that distinction. The question here is
simply as to the value of the capital stock with reference to the
assessment and taxation upon the corporation itself which issues
it, and has nothing to do with the individual shareholder.
Van Allen v.
Assessors, 3 Wall. 573;
Bank of Commerce v.
Tennessee, 161 U. S. 134,
161 U. S.
146.
Counsel for defendant in error find no fault with the principle
stated in
Brown v. Houston, supra, and that line of cases,
nor with the general proposition laid down in the other cases
cited, that a tax on the value of the capital stock is a tax on the
property of the corporation in which the capital is invested. They
deny, however, their applicability to the facts of this case. They
concede that the courts of Pennsylvania have held that tangible
property, permanently located outside of the state for the use and
benefit of the corporation and owned by it, is exempt from taxation
under this statute.
Page 198 U. S. 355
They also concede that it was never within the intent or the
power of the legislature to impose a tax upon tangible property
when held outside of the territorial limits of the state; but they
insist that this tax is not
eo nomine or specifically upon
tangible property outside the state, and they contend that the
state has the right to consider the value of the coal as having
entered into the value of the capital stock as soon as it was
mined, and that the state then had the right to treat the coal as
one of the items that went into the value of the capital stock,
just the same as they contend for the right to so treat the money
realized from the coal upon its sale in the foreign state when it
has been returned to the state, and has gone into the surplus fund.
The position of the defendant in error, then, is this: the tax in
question is not a tax upon coal, treated as tangible property and a
tangible asset, specifically subject to tax, but is a tax upon the
value of the capital stock of the Pennsylvania corporation at the
fixed rate of five mills for each dollar of the actual value of the
whole capital stock, including bonds, mortgages, moneys at
interest, franchises, and property of other kinds, and that the
statute in question does not impose a tax on the coal itself.
Counsel do not contend that a tax on the value of the capital stock
of a corporation is not a tax on its property in a certain sense,
but they contend that, while a tax on capital stock is a property
tax, yet the property of the corporation, for the purpose of
taxation, is reached through the tax imposed directly upon the
stock (197 Pa. 553), and that there is a distinction between a tax
on capital stock and a direct tax on personal property. Therefore,
tangible property situated outside the state, under the
circumstances set forth in this case, is not directly taxed by a
tax on the value of the capital stock, or at least there is no
specific tax upon it, and the tax is not illegal. It is also said
that, by reason of the alleged transitory character of the coal, it
has never in law lost its original domicil, which still remains in
Pennsylvania, and is subject to be there included in the value of
the capital stock of the corporation.
Page 198 U. S. 356
The asserted transitory nature of this property does not seem to
us to be material. At the time of the appraisement, it had been
transported beyond the jurisdiction of the state, never to return
in kind, but was intended to be sold in the foreign state. Such
property is entirely unlike the property involved in
Commonwealth v. American Dredging Co., 122 Pa. 386. That
property consisted of vessels, or scows, or tugs, only temporarily
out of the State of Pennsylvania for the purpose of engaging in
business, and liable to return to the state at any time, and was
without any actual situs beyond the jurisdiction of the state
itself. However temporary the stay of the coal might be in the
particular foreign states where it was resting at the time of the
appraisement, it was definitely and forever beyond the jurisdiction
of Pennsylvania. And it was within the jurisdiction of the foreign
states for purposes of taxation, and in truth it was there taxed.
We regard this tax as, in substance and fact, though not in form, a
tax specifically levied upon the property of the corporation, and
part of that property is outside and beyond the jurisdiction of the
state which thus assumes to tax it. This is not a question as
between direct or indirect taxation such as arises under the
federal Constitution when Congress lays and collects taxes by
virtue of the power given it by that instrument. No question of
uniformity or apportionment of taxes arises here. The question now
discussed is simply whether, under this statute of the state,
property of the corporation is, in substance and effect, taxed
while it is beyond the jurisdiction of the state, and is never to
return. When the federal Constitution says no tax or duty shall be
laid on articles exported from any state, such articles cannot be
taxed, directly or indirectly, and a tax on foreign bills of lading
is void because it, in effect, is a tax on exports.
Fairbank v.
United States, 181 U. S. 283,
181 U. S.
289.
So, if the state cannot tax tangible property permanently
outside the state, and having no situs within the state, it cannot
attain the same end by taxing the enhanced value of the
Page 198 U. S. 357
capital stock of the corporation which arises from the value of
the property beyond the jurisdiction of the state.
We think the state court is right in deducting, as it does, the
value of the tangible property when permanently held in another
state, and we think that, for the same reason, the same rule should
obtain in the case of tangible property situated as this coal was.
We cannot see the distinction, so far as the question now before
the court is concerned, between a tax assessed upon property,
eo nomine or specifically when outside the state and a tax
assessed against the corporation upon the value of its capital
stock to the extent of the value of such property, and which stock
represents, to that extent, that very property. If the property
itself could not be specifically taxed because outside the
jurisdiction of the state, how does the tax become legal by
providing for assessing the tax on the value of the capital stock
to the extent it represents that property, and from which the stock
obtains its increased value? Can the mere name of the tax alter its
nature in such case? If so, the way is found for taxing property
wholly beyond the jurisdiction of the taxing power by calling it a
tax on the value of capital stock, or something else which
represents that property. Such a tax, in its nature, by whatever
name it may be called, is a tax upon the specific property which
gives the added value to the capital stock.
Although the coal may have entered into the value of the capital
stock when mined, the question is whether the value of the stock in
November, 1899, when the appraisement was directed by the statute
to be made, should not be decreased by deducting the value of the
coal therefrom which was not in the state at the time of the
appraisement. We think it should; otherwise the tax amounts in
substance to a specific tax on the coal. Taking the different
prices of the stock at different times in the year, and the average
price thereof, and otherwise following the provisions of the
statute, simply makes a way of finding the value of the stock
between the first and fifteenth of November in each year. That is
the material
Page 198 U. S. 358
time when the value is to be ascertained, and at that time this
coal was not in the state. An appraisement thus made, which
includes such property, is to that extent without jurisdiction and
illegal. It is true that, in general, an appraisement of or an
assessment of a tax upon value is a decision upon a question of
fact, and a difference of opinion as to the value between the
assessing officer and the court is immaterial, and the decision of
the former is final. But where the appraisement is arrived at by
including therein tangible property which is beyond the
jurisdiction of the state, and which therefore the assessing
officers had no jurisdiction to appraise (and none could be given
them by the statute), such an appraisement or assessment is
absolutely illegal as made without jurisdiction.
The next question is whether there is a right to relief in a
case like this, founded upon the provisions of the federal
Constitution. We think there is. The collection of a tax under such
circumstances would amount to the taking of property without due
process of law, and a citizen is protected from such taking by the
Fourteenth Amendment. In
Louisville &c. Ferry Co. v.
Kentucky, 188 U. S. 385, the
ferry company was operating a ferry across the Ohio River between
Jeffersonville, in Indiana, and Louisville, in Kentucky, under two
franchises, one granted by the proper authorities of Indiana for
maintaining a ferry across that river from the Indiana shore to the
Kentucky shore and the other granted by the State of Kentucky to
carry on a ferry business from the Kentucky to the Indiana shore.
The tax was laid by Kentucky upon the company, a part of which the
company insisted was a tax upon it by reason of its ownership of
the Indiana franchise, which it contended was property situated in
Indiana, and beyond the jurisdiction of Kentucky. The courts of
Kentucky held that, under the statute,
"the board of valuation and assessment did not attempt to assess
or tax its revenues coming from the exercise of its franchise in
the transportation of persons and property over the Ohio River.
But, under certain sections of the Kentucky statutes, it
assessed
Page 198 U. S. 359
the value of appellant's franchise, which is its intangible
property. The board did not assess, or attempt to assess, the
property, either tangible or intangible, which it owned in the
State of Indiana."
This Court stated:
"It thus appears from the admitted facts and from the opinion of
the court below that the state board, in its valuation and
assessment of the franchise derived by that company from Kentucky,
included the value of the franchise obtained from Indiana for a
ferry from its shore to the Kentucky shore. In short, as stated by
the Court of Appeals, the value of the franchise of the ferry
company was fixed 'as if it conducted all its business in the
territorial limits of the State of Kentucky,' making no deduction
for the value of the franchise obtained from Indiana."
It was held that the franchise granted by Indiana to maintain a
ferry from the Indiana shore was wholly distinct from the franchise
obtained from Kentucky to maintain the ferry from the Kentucky
shore, although the enjoyment of both was essential to a complete
ferry right for transportation of persons and property across the
river both ways. And each franchise was property entitled to the
protection of the law. After holding that the privilege of
maintaining a ferry in Kentucky from the Indiana shore to the
Kentucky shore was a franchise derived from Indiana, and as that
franchise was a valuable right of property, the question arose
whether it was within the power of Kentucky to tax it, directly or
indirectly, and this Court said:
"It is said that the Indiana franchise has not been taxed, but
only the franchise derived from Kentucky; that the tax is
nonetheless a tax on the Kentucky franchise, because of the value
of that franchise being increased by the acquisition by the
Kentucky corporation of the franchise granted by Indiana. This view
sacrifices substance to form. If the board of valuation and
assessment, for purpose of taxation, had separately valued and
assessed at a given sum the franchise derived by the ferry company
from Kentucky, and had separately valued and assessed at another
given sum the franchise obtained from Indiana, the result would
have been
Page 198 U. S. 360
the same as if it had assessed, as it did assess, the Kentucky
franchise as an unit upon the basis of its value as enlarged or
increased by the acquisition of the Indiana franchise."
And again:
"We recognize the difficulty which sometimes exists in
particular cases in determining the situs of personal property for
purposes of taxation, and the above cases have been referred to
because they have gone into judgment, and recognize the general
rule that the power of the state to tax is limited to subjects
within its jurisdiction, or over which it can exercise dominion. No
difficulty can exist in applying the general rule in this case, for
beyond all question, the ferry franchise derived from Indiana is an
incorporeal hereditament derived from and having its legal situs in
that state. It is not within the jurisdiction of Kentucky. The
taxation of that franchise or incorporeal hereditament by Kentucky
is, in our opinion, a deprivation by that State of the property of
the ferry company without due process of law, in violation of the
Fourteenth Amendment of the Constitution of the United States -- as
much so as if the state taxed the real estate owned by that company
in Indiana."
And in conclusion, it was said:
"We decide nothing more than it is not competent for Kentucky,
under the charter granted by it and under the Constitution of the
United States, to tax the franchise which its corporation, the
ferry company, lawfully acquired from Indiana, and which franchise
or incorporeal hereditament has its situs, for purposes of
taxation, in Indiana."
It is plain that, in the case at bar, the coal had lost its
situs in Pennsylvania by being transported from that state to
foreign states for the purposes of sale, with no intention that it
should ever return to its state of origin. It was therefore as much
outside the jurisdiction of the State of Pennsylvania to tax it as
was the Indiana franchise in the case just cited, and it has been
taxed just as directly and specifically under the facts stated in
this case as was the Indiana franchise taxed in Kentucky by the
valuation of the Kentucky franchise, which value was increased by
the value of the franchise created
Page 198 U. S. 361
by Indiana. Taxation of the coal in this case deprived the owner
of its property without due process of law, as is held in the above
case, and the owner is entitled to the protection of the Fourteenth
Amendment, which prevents the taking of its property in that
way.
The judgment of the Supreme Court of Pennsylvania is reversed,
and the cause remanded for further proceedings not inconsistent
with the opinion of this Court.
Reversed.
THE CHIEF JUSTICE dissented.
* Sections of the Act of June 8, 1891.
"SEC. 4. That hereafter, except in the case of banks, savings
institutions, and foreign insurance companies, it shall be the duty
of the president, chairman, or treasurer of every corporation
having capital stock, every joint-stock association and limited
partnership whatsoever, now or hereafter organized or incorporated
by or under any law of this commonwealth, and of every corporation,
joint-stock association, and limited partnership whatsoever, now or
hereafter incorporated or organized by or under the laws of any
other state or Territory of the United States, or by the United
States, or by any foreign government, and doing business in and
liable to taxation within this commonwealth, or having capital or
property employed or used in this commonwealth by or in the name of
any limited partnership, joint-stock association, company, or
corporation whatsoever, association or associations, copartnership
or copartnerships, person or persons, or in any other manner, to
make a report in writing to the auditor general, in the month of
November, one thousand eight hundred and ninety-two, and annually
thereafter, stating specifically:"
First. Total authorized capital stock.
Second. Total authorized number of shares.
Third. Number of shares of stock issued.
Fourth. Par value of each share.
Fifth. Amount paid into the treasury on each share.
Sixth. Amount of capital paid in.
Seventh. Amount of capital on which dividend was declared.
Eighth. Date of each dividend declared during said year ended
with the first Monday of November.
Ninth. Rate percentum of each dividend declared.
Tenth. Amount of each dividend during the year ended with the
first Monday in said month.
Eleventh. Gross earnings during the year.
Twelfth. Net earnings during said year.
Thirteenth. Amount of surplus.
Fourteenth. Amount of profit added to sinking fund during said
year.
Fifteenth. Highest price of sales of stock between the first and
fifteenth days of November aforesaid.
Sixteenth. Highest price of sales of stock during the year
aforesaid.
Seventeenth. Average price of sales of stock during the year,
and in every case any two of the following-named officers of such
corporation, limited partnership, or joint-stock association,
namely: the president, chairman, secretary, and treasurer, and
after being duly sworn or affirmed to do and perform the same with
fidelity, and according to the best of their knowledge and belief,
shall, between the first and fifteenth days of November of each
year, estimate and appraise the capital stock of the said company
at its actual value in cash, not less, however, than the average
price which said stock sold for during said year, and not less than
the price or value indicated or measured by net earnings or by the
amount of profit made and either declared in dividends or carried
into surplus or sinking fund, and when the same shall have been so
truly estimated and appraised they shall forthwith forward to the
auditor general a certificate thereof, accompanied with a copy of
their said oath or affirmation, signed by them, and attested by a
magistrate or other person duly qualified to administer the same:
Provided, That if the auditor general and state treasurer,
or either of them, is not satisfied with the appraisement and
valuation so made and returned, they are hereby authorized and
empowered to make a valuation thereof based upon the facts
contained in the report herein required, or upon any information
within their possession or that shall come into their possession,
and to settle an account on the valuation so made by them for the
taxes, penalties, and interest due the commonwealth thereon, with
right to the company dissatisfied with any settlement so made
against it to appeal therefrom in the manner now provided by law,
and in the event of the neglect or refusal of the officers of any
corporation, company, joint-stock association, or limited
partnership for a period of sixty days to make the report and
appraisement to the auditor general as herein provided, it shall be
the duty of the auditor general and state treasurer to estimate a
valuation of the capital stock of such defaulting corporation,
company, joint-stock association, or limited partnership, and
settle an account for taxes, penalty and interest thereon, from
which settlement there shall be no right of appeal.
"SEC. 5. That every corporation, joint-stock association,
limited partnership, and company whatsoever, from which a report is
required under the twentieth section hereof, shall be subject to
and pay into the treasury of the commonwealth annually a tax at the
rate of five mills upon each dollar of the actual value of its
whole capital stock, of all kinds, including common, special, and
preferred, as ascertained in the manner prescribed in said
twentieth section, and it shall be the duty of the treasurer or
other officers having charge of any such corporation, joint-stock
association, or limited partnership, upon which a tax is imposed by
this section, to transmit the amount of said tax to the treasury of
the commonwealth within thirty days from the date of the settlement
of the account by the auditor general and state treasurer:
Provided, That for the purpose of this act, interests in
limited partnership or joint-stock associations shall be deemed to
be capital stock, and taxable accordingly;
Provided, also,
That corporations, limited partnerships, and joint-stock
associations liable to tax on capital stock under this section,
shall not be required to make report or pay any further tax on the
mortgages, bonds, and other securities owned by them in their own
right, but corporations, limited partnership and joint-stock
associations holding such securities as trustees, executors,
administrators, guardians, or in any other manner, shall return and
pay the tax imposed by this act upon all securities so held by them
as in the case of individuals:
And provided further, That
the provisions of this section shall not apply to the taxation of
the capital stock of corporations, limited partnerships and
joint-stock associations, organized exclusively for manufacturing
purposes, and actually carrying on manufacturing within the state,
excepting companies engaged in the brewing or distilling of spirits
or malt liquors, and such as enjoy and exercise the right of
eminent domain:
Provided further, in case of fire and
marine insurance companies the tax imposed by this section shall be
at the rate of three mills upon each dollar of the actual value of
the whole capital stock."
