Presumptively all property within the territorial limits of a
state is subject to its taxing power, and the burden of proof is on
one claiming that any particular property is by contract or
otherwise beyond the reach thereof; and, growing out of the
conditions of modern business, a large proportion of valuable
property is now to be found in intangible things such as
franchises, which are, like other property, subject to
taxation.
In grants from the public, nothing passes by implication, and,
in the absence of direct stipulations relinquishing the right of
taxation, a provision, in grants of privileges or franchises, that
the grantee shall pay something therefor is not to be construed as
an equivalent or substitute for taxes amounting to a contract of
exemption from future taxation within the impairment clause of the
federal Constitution.
The omission of the legislature for one year, or for a series of
years, to tax certain classes of property, otherwise taxable, does
not destroy the power of the state to subject them to taxation when
it sees fit to do so.
Nothing in the federal Constitution prevents a state from
granting exemptions from taxation, and the reduction, upon
equitable considerations, of payments made in the nature of taxes
by certain corporations on their franchises from the amount to
which they are subjected by a
Page 199 U. S. 2
general law does not entitle every franchise owner to a similar
reduction and render the tax invalid because it denies the holders
of some franchises the equal protection of the law or derives them
of their property without due process of law.
The difference between surface street railroads and subsurface
street railroads is sufficient to justify classification in the
mode and extent of taxation, and a tax otherwise legal on surface
street railroad franchises does not deprive the owners thereof of
the equal protection of the laws because subsurface street railroad
franchises are not subjected to a similar tax. The tax law of New
York as amended May 26, 1899, c. 712, p. 1589, imposing taxes on
certain public franchises is not repugnant, so far as the
franchises in this case are involved, to the equal protection, due
process, or impairment of obligation clauses of the federal
Constitution and of the Fourteenth Amendment thereto.
On May 26, 1899, the Legislature of New York passed an act
amending the tax law of the state. Laws of New York, 1899, c. 712,
p. 1589. The first section reads:
"Section 1. Subdivision three of section two of the tax law is
hereby amended to read as follows:"
"3. The terms 'land,' 'real estate,' and 'real property,' as
used in this chapter, include the land itself above and under
water, all buildings and other articles and structures,
substructures and superstructures, erected upon, under, or above,
or affixed to the same; all wharves and piers, including the value
of the right to collect wharfage, cranage, or dockage thereon; all
bridges, all telegraph lines, wires, poles, and appurtenances, and
supports and enclosures for electrical conductors and other
appurtenances upon, above, and under ground; all surface,
underground, or elevated railroads,
including the value of all
franchises, rights, or permission to construct, maintain, or
operate the same in, under, above, on, or through streets,
highways, or public places; all railroad structures,
substructures, and superstructures, tracks and the iron thereon;
branches, switches, and other fixtures permitted or authorized to
be made, laid, or placed in, upon, above, or under any public or
private road, street, or ground; all mains, pipes, and tanks laid
or placed in, upon, above, or under any public or private street or
place for conducting steam, heat, water, oil, electricity,
Page 199 U. S. 3
or any property, substance, or product capable of transportation
or conveyance therein or that is protected thereby,
including
the value of all franchises, rights, authority, or permission to
construct, maintain, or operate, in, under, above, upon, or through
any streets, highways, or public places, any mains, pipes, tanks,
conduits, or wires, with their appurtenances, for conducting,
water, steam, heat, light, power, gas, oil, or other, substance, or
electricity for telegraphic, telephonic, or other purposes;
all trees and underwood growing upon land, and all mines, minerals,
quarries, and fossils in and under the same, except mines belonging
to the state.
A franchise, right, authority, or permission
specified in this subdivision shall, for the purpose of taxation,
be known as a 'special franchise.' A special franchise shall be
deemed to include the value of the tangible property of a person,
copartnership, association, or corporation situated in, upon,
under, or above any street, highway, public place, or public waters
in connection with the special franchise. The tangible property so
included shall be taxed as a part of the special franchise. No
property of a municipal corporation shall be subject to a special
franchise tax."
The portions in italics are the new matter introduced by the
amendment. Other sections were added to tax law, of which section
46 is as follows:
"SEC 46.
Deduction from special franchise tax for local
purposes. -- If, when the tax assessed on any special
franchise is due and payable under the provisions of law applicable
to the city, town, or village in which the tangible property is
located, it shall appear that the person, copartnership,
association, or corporation affected has paid to such city, town,
or village for its exclusive use within the next preceding year,
under any agreement therefor, or under any statute requiring the
same, any sum based upon a percentage of gross earnings, or any
other income, or any license fee, or any sum of money on account of
such special franchise, granted to or possessed by such person,
copartnership, association, or corporation, which payment was in
the nature of a tax, all amounts so paid for
Page 199 U. S. 4
the exclusive use of such city, town, or village, except money
paid or expended for paving or repairing of pavement of any street,
highway, or public place shall be deducted from any tax based on
the assessment made by the state board of tax commissioners for
city, town, or village purposes, but not otherwise, and the
remainder shall be the tax on such special franchise payable for
city, town, or village purposes. The chamberlain or treasurer of a
city, the treasurer of a village, the supervisor of a town, or
other officer to whom any sum is paid for which a person,
copartnership, association, or corporation is entitled to credit as
provided in this section, shall, not less than five nor more than
twenty days before a tax on a special franchise is payable, make
and deliver to the collector or receiver of taxes or other officer
authorized to receive taxes for such city, town, or village, his
certificate showing the several amounts which have been paid during
the year ending on the day of the date of the certificate. On the
receipt of such certificate, the collector, receiver, or other
officer shall immediately credit on the tax roll to the person,
copartnership, association, or corporation affected the amount
stated in such certificate, on any tax levied against any person,
copartnership, association, or corporation on an assessment of a
special franchise for city, town, or village purposes only, but no
credit shall be given on account of such payment or certificate in
any other year, nor for a greater sum than the amount of the
special franchise tax for city, town, or village purposes, for the
current year, and he shall collect and receive the balance, if any,
of such tax, as required by law."
Other sections provide the machinery for assessment. This
assessment was to be made by the state board of tax commissioners,
and one section authorized certiorari to review their
proceedings.
Under this law, an assessment was made of the franchises
belonging to the plaintiff in error, a corporation created by the
consolidation of several corporations, having franchises for the
maintenance and operation of street railroads in the City
Page 199 U. S. 5
of New York. A certiorari to review this assessment was finally
decided by the Court of Appeals of the state, which, on April 28,
1903, 174 N.Y. 417, sustained the assessment and remanded the case
to the special term of the supreme court, by which court a final
judgment was entered, June 22, 1903. Thereupon this writ of error
was sued out. Plaintiff in error makes three assignments of
error:
"I. Error in declining to hold that the Act of the Legislature
of the State of New York, approved May 26th, 1899 (c. 712, Laws
1899), entitled 'An Act to Amend the Tax Law in Relation to the
Taxation of Public Franchises as Real Property,' insofar as it
authorizes the assessment imposed by the state board of tax
commissioners on March 20, 1900, upon the franchises of the
[plaintiff in error] relator above named, deprives said relator of
its property without due process of law, in contravention of the
Fourteenth Amendment of the Constitution of the United States."
"II. Error in declining to hold that said legislative enactment,
insofar as it authorizes the said assessment denies to said relator
the equal protection of the laws, in contravention of the
Fourteenth Amendment to the Constitution of the United States."
"III. Error in declining to hold that said legislative
enactment, insofar as it authorizes the said assessment, impairs
the obligations of contracts, in contravention of Section 10,
Article I, of the Constitution of the United States."
Prior to 1874, the Legislature of New York made direct grants of
franchises, rights, or privileges to use the streets of the City of
New York. In that year, the following amendment to the Constitution
was adopted. Constitution 1846, as amended, Art. 3, Section 18:
"The legislature shall not pass a private or local bill in any
of the following cases: . . ."
"Granting to any corporation, association, or individual the
right to lay down railroad tracks. . . ."
"But no law shall authorize the construction or operation
Page 199 U. S. 6
of a street railroad except upon the condition that the consent
of the owners of one-half in value of the property bounded on, and
the consent also of the local authorities having the control of,
that portion of a street or highway upon which it is proposed to
construct or operate such railroad, be first obtained, or, in case
the consent of such property owners cannot be obtained, the general
term of the supreme court, in the district in which it is proposed
to be constructed, may, upon application, appoint three
commissioners, who shall determine, after a hearing of all parties
interested, whether such railroad ought to be constructed or
operated, and their determination, confirmed by the court, may be
taken in lieu of the consent of the property owners."
In 1884, an act was passed, Laws 1884, c. 252, p. 309, giving to
the local authorities power to grant franchised for street
railroads. This act provided:
"SEC. 7. The local authorities of any incorporated city or
village to whom application, under the provisions of this act, may
be made for consent to the construction, maintenance, use,
operation, or extension of a street surface railroad upon any
street, road, avenue, or highway, may at their option, provide for
the sale of and sell at public auction the franchise, subject to
all the provisions of this act, to so construct, maintain, use,
operate, or extend such street surface railway. . . ."
"
* * * *"
"SEC. 8. Every corporation incorporated under, or constructing
or operating a railroad constructed or extended under, the
provisions of this act, within the cities of the state having a
population of two hundred and fifty thousand or more, as aforesaid,
shall, for and during the first five years after the commencement
of the operation of any portion of its railroad, annually, on the
first day of November, pay into the treasury of said respective
cities in which its road is located to the credit of the sinking
fund thereof, three percent of its gross receipts for and during
the year ending the next preceding thirtieth day of September, and
after the expiration of
Page 199 U. S. 7
said five years make a like annual payment into the treasury of
said respective cities for the credit of said sinking funds, of
five percent instead of three percent of said gross receipts;
provided, however, that every corporation now existing and
operating a street-surface railroad which shall extend its tracks
or construct branches therefrom, and operate such extensions or
branches under the provisions of this act, or the corporation
operating such branches or extensions, shall pay such percentages
as aforesaid only upon such portions of its gross receipts as shall
bear the same proportion to the whole value thereof as the length
of such extension and branches shall bear to the entire length of
its tracks. . . ."
"SEC. 4. . . . The consent of the local authorities shall, in
all cases, be applied for in writing, and when granted shall be
upon the express condition that the provisions of this act
pertinent thereto shall be complied with, and shall be filed in the
office of the county clerk of the county in which said railroad is
located."
In 1886, an act amending a prior act of the same year was
passed, Laws 1886, c. 642, p. 919, which contained the following
terms:
"SEC. 1. The local authorities of any incorporated city or
village, to whom application may be made for consent to the
construction, maintenance, use, operation, or extension of a street
railroad, or a railroad or railway for the transportation of
passengers, mails, or freight, over, upon, under, or through any of
the streets, roads, avenues, parks, or public places in such city
or village, must provide, as a condition of the said consent to the
use of said street, road, avenue, park, or public place, that the
right, franchise, and privilege of using the said street, road,
avenue, park, or public place shall be sold at public auction to
the bidder who will agree to give the largest percentage per annum
of the gross receipts of said company or corporation, with adequate
security, as hereinafter provided, for the fulfillment of said
agreement, and for the commencement and completion of such road
according to the
Page 199 U. S. 8
plan or plans, and on the route or routes, fixed for its
construction, within the time or times hereinafter designated and
prescribed therefor; but this agreement shall not release any such
road from the percentages required to be paid by chapter two
hundred fifty-two of the Laws of eighteen hundred eighty-four. The
legislature expressly reserves the right to regulate and reduce the
rate of fare on such railroad or railway."
"
* * * *"
"And in the event of the failure or refusal of the party or
corporation operating or using the railroad to be constructed as
aforesaid, to pay the rental or percentage of gross earnings agreed
upon, then, upon notice to the said party or corporation -- of not
less than sixty days -- the said consent and right to operate such
railroad may be declared forfeited, and the same may be resold to
the highest bidder in the manner above provided."
The special acts passed before the amendment of 1874, which are
claimed to constitute contracts the obligations of which are
impaired by this tax legislation, are found, first, in c. 625 of
the Laws of 1868, which granted to certain persons the right to
construct, maintain, and operate and use a street railroad, with a
provision that
"the said persons, or their assigns, shall pay to the sinking
fund commissioners of the City of New York the sum of $1,000 per
annum, to be applied by them in the same manner as moneys received
on account of rentals and leases;"
second, in c. 19 of the Laws of 1871, which, granting the
privilege of occupying certain streets with street railroad tracks,
provided that the company should
"make compensation to the mayor, aldermen, and commonalty of
said City of New York for the value of the rights and privileges
herein granted or authorized,"
and also prescribed the mode of ascertaining that compensation
by three commissioners, whose decision should be final and
conclusive as to the company and the mayor, aldermen, and
commonalty of said city, adding
"the amount so fixed and determined shall
Page 199 U. S. 9
be paid to the commissioners of the sinking fund of said city,
by the said company, within thirty days after the same becomes
payable, according to the decision aforesaid, and applied to the
reduction of the debt of said city;"
third, in c. 508 of the Laws of 1874, which granted the right to
"construct, operate, maintain, and use railways" in certain streets
in the City of New York, and provided that
"the said persons, or their assigns, shall annually, on the
first day of November, pay into the treasury of the City of New
York one percent of the gross receipts of the road herein provided
for, the amount of which gross receipts shall be determined by the
sworn statement of the president and treasurer of said railway, but
subject to the inspection of its books by the comptroller of the
City of New York."
Subsequent to the law of 1884 above referred to, fifteen other
franchises now belonging to the relator were granted by the common
council of the City of New York. Most of them provided for annual
payment to the City of New York of either a fixed amount or a fixed
percentage, varying from two to eight percent of the gross
earnings.
Page 199 U. S. 35
MR. JUSTICE BREWER delivered the opinion of the Court.
The decision of the Court of Appeals settles that there is
nothing in the law or the proceedings in this case in conflict with
the constitution of that state. It is not contended by the
plaintiff in error that there is any constitutional objection to
the taxation of franchises. The right to subject them to a share in
the burden of supporting the government is conceded.
The main contention is that this tax legislation impairs the
obligation of contracts. It must be borne in mind that
presumptively all property within the territorial limits of a state
is subject to its taxing power. Whoever insists that any particular
property is not so subject has the burden of proof, and must make
it entirely clear that, by contract or otherwise, the
Page 199 U. S. 36
property is beyond its reach. In
Providence
Bank v. Billings, 4 Pet. 514, Mr. Chief Justice
Marshall, in delivering the opinion of the Court, said (p.
29 U. S.
561):
"That the taxing power is of vital importance, that it is
essential to the existence of government, are truths which it
cannot be necessary to reaffirm. They are acknowledged and asserted
by all. It would seem that the relinquishment of such a power is
never to be assumed. We will not say that a state may not
relinquish it, that a consideration sufficiently valuable to induce
a partial release of it may not exist; but, as the whole community
is interested in retaining it undiminished, that community has a
right to insist that its abandonment ought not to be presumed in a
case in which the deliberate purpose of the state to abandon it
does not appear."
In
Vicksburg &c. R. Co. v. Dennis, 116 U.
S. 665, Mr. Justice Gray cited many authorities, quoting
the different phraseology in which, by the several writers of the
opinions, the same rule was announced. In
Wells v.
Savannah, 181 U. S. 531, the
law was thus stated by MR. JUSTICE PECKHAM (p.
116 U. S.
539):
"The payment of taxes on account of property otherwise liable to
taxation can only be avoided by clear proof of a valid contract of
exemption from such payment, and the validity of such contract
presupposes a good consideration therefor. If the property be in
its nature taxable, the contract exempting it from taxation must,
as we have said, be clearly proved. It will not be inferred from
facts which do not lead irresistibly and necessarily to the
existence of the contract. The facts proved must show either a
contract expressed in terms or else it must be implied from facts
which leave no room for doubt that such was the intention of the
parties, and that a valid consideration existed for the contract.
If there be any doubt on these matters, the contract has not been
proven, and the exemption does not exist."
In
Chicago Theological Seminary v. Illinois,
188 U. S. 662, the
same Justice declared (p.
188 U. S.
672):
"The rule is that, in claims for exemption from taxation
Page 199 U. S. 37
under legislative authority, the exemption must be plainly and
unmistakably granted; it cannot exist by implication only; a doubt
is fatal to the claim."
See also Erie Ry. Co. v.
Pennsylvania, 21 Wall. 492;
Wilmington &
Weldon R. Co. v. Alsbrook, 146 U. S. 279;
Ford v. Delta & Pine Land Co., 164 U.
S. 662.
This rule is akin to, if not part of, the broad proposition, now
universally accepted, that in grants from the public nothing passes
by implication. As said by Mr. Chief Justice Taney in
Charles River Bridge v. Warren
Bridge, 11 Pet. 420,
36 U. S.
549:
"The inquiry, then, is does the charter contain such a contract
on the part of the state? Is there any such stipulation to be found
in that instrument? It must be admitted on all hands that there is
none -- no words that even relate to another bridge, or to the
diminution of their tolls, or to the line of travel. If a contract
on that subject can be gathered from the charter, it must be by
implication, and cannot be found in the words used. Can such an
agreement be implied? The rule of construction before stated is an
answer to the question. In charters of this description, no rights
are taken from the public or given to the corporation beyond those
which the words of the charter, by their natural and proper
construction, purport to convey. There are no words which import
such a contract as the plaintiffs in error contend for, and none
can be implied."
Applying these well established rules to the several contracts,
it will be perceived that there was no express relinquishment of
the right of taxation. The plaintiff in error must rely upon some
implication, and not upon any direct stipulation. In each contract
there was a grant of privileges, but the grant was specifically of
privileges in respect to the construction, operation, and
maintenance of a street railroad. These were all that, in terms,
were granted. As consideration for this grant, the grantees were to
pay something, and such payment is nowhere said to be in lieu of or
as an equivalent or substitute for taxes. All that can be extracted
from the language used was a grant
Page 199 U. S. 38
of privileges and a payment therefor. Other words must be
written into the contract before there can be found any
relinquishment of the power of taxation.
In the well considered opinion of the Court of Appeals in this
case, it was stated by Mr. Justice Vann:
"The franchises are grants which usually contain contracts,
executed by the municipality, but executory as to the owner. They
contain various conditions and stipulations to be observed by the
holders of the privilege, such as payment of a license fee, of a
gross sum down, of a specific sum each year, or a certain
percentage of receipts, as a consideration, or 'in full
satisfaction for the use of the streets.' There is no provision
that the special franchise, or the property created by the grant,
shall be exempt from taxation. . . ."
"The condition upon which a franchise is granted is the purchase
price of the grant, the payment of which in money, or by agreement
to bear some burden, brought the property into existence, which
thereupon became taxable at the will of the legislature, the same
as land granted or leased by the state. There is no implied
covenant that property sold by the state cannot be taxed by the
state, which can even tax its own bonds, given to borrow money for
its own use, unless they contain an express stipulation of
exemption. The rule of strict construction applies to state grants,
and unless there is an express stipulation not to tax, the right is
reserved as an attribute of sovereignty. Special franchises were
not taxed until, by the act of 1899, amending the tax law, they
were added to the other taxable property of the state. This is all
that the statute does, so far as the question now under
consideration is concerned. No part of the grant is changed, no
stipulation altered, no payment increased, and nothing exacted from
the owner of the franchise that is not exacted from the owners of
property generally. No blow is struck at the franchise, as such,
for it remains with every right conferred in full force; but, as it
is property, it is required to contribute its ratable share,
dependent
Page 199 U. S. 39
only upon value, toward the support of government."
It would not be doubted that, if a grant was of specific
tangible property, like a tract of land, and the payment therefor
was a gross sum, no implication of an exemption from taxation would
arise. Whether the amount paid was large or small, greater or less
than the real value, if the payment was distinctly the
consideration of a grant, that which was granted would pass into
the bulk of private property, and, like all other such property, be
subject to taxation. Nor would this result be altered by the fact
that the payment for the thing granted was to be made annually,
instead of by a single sum in gross. If it was real estate, it
would be equivalent to the conveyance of the tract subject to
ground rent, and the grantee taking the title would hold it liable
to taxation upon its value. If this be true in reference to a grant
of tangible property, it is equally true in respect to a grant of a
franchise, for a franchise, though intangible, is nonetheless
property, and oftentimes property of great value. Indeed, growing
out of the conditions of modern business, a large proportion of
valuable property is to be found in intangible things like
franchises. We had occasion to review this subject in
Adams
Express Company v. Ohio, 166 U. S. 185,
where we said (pp.
166 U. S.
218-219):
"In the complex civilization of today, a large portion of the
wealth of a community consists in intangible property, and there is
nothing in the nature of things or in the limitations of the
federal Constitution which restrains a state from taxing at its
real value such intangible property. . . . It matters not in what
this intangible property consists -- whether privileges, corporate
franchises, contracts, or obligations. It is enough that it is
property which, though intangible, exists, which has value,
produces income, and passes current in the markets of the world. To
ignore this intangible property, or to hold that it is not subject
to taxation at its accepted value, is to eliminate from the reach
of the taxing power a large portion of the wealth of the country.
"
Page 199 U. S. 40
In
State Railroad Tax Cases, 92 U. S.
575,
92 U. S. 603,
is this language by Mr. Justice Miller, speaking for the Court:
"That the franchise, capital stock, business, and profits of all
corporations are liable to taxation in the place where they do
business, and by the state which creates them, admits of no dispute
at this day. 'Nothing can be more certain in legal decisions,' says
this Court in
Society for Savings v.
Coite, 6 Wall. 607,"
"than that the privileges and franchises of a private
corporation, and all trades and avocations by which the citizens
acquire a livelihood, may be taxed by a state for the support of a
state government."
"
State Freight Tax Case, 15
Wall. 232;
State Tax on Gross Receipts,
15 Wall. 284."
It is urged that, when the public grants a privilege on
condition of the payment of an annual sum, the contract implies
that the public shall exact no larger amount for that privilege,
that to impose a tax is simply increasing the price which the
grantee is called upon to pay for the privilege, and
Gordon v. Appeal Tax
Court, 3 How. 133, is relied upon as authority. It
is true, in the opinion of the Court, announced by Mr. Justice
Wayne, is this language (p.
44 U. S.
145):
"Such a contract is a limitation upon the taxing power of the
legislature making it, and upon succeeding legislatures, to impose
any further tax upon the franchise. But why, when bought, as it
becomes property, may it not be taxed as land is taxed which has
been bought from the state? was repeatedly asked in the course of
the argument. The reason is that everyone buys land, subject, in
his own apprehension, to the great law of necessity, that we must
contribute from it and all of our property something to maintain
the state. But a franchise for banking, when bought, the price is
paid for the use of the privilege whilst it lasts, and any tax upon
it would substantially be an addition to the price."
But there was in that case an express exemption from taxation,
in these words:
"And be it enacted that, upon any of the aforesaid banks
accepting and complying with the terms and conditions of
Page 199 U. S. 41
this act, the faith of the state is hereby pledged not to impose
any further tax or burden upon them during the continuance of their
charters under this act."
There being thus an express stipulation on the part of a state
not to impose any further tax or burden, the question decided was
really the extent of the exemption, and it was held to apply not
merely to the franchise, but to the property of the bank. The
statements of Mr. Justice Wayne were only by way of argument to
support the conclusion that the exemption went beyond the franchise
alone. Furthermore, that case has been repeatedly qualified and
limited by subsequent decisions. In
New Orleans City Railroad
Company v. New Orleans, 143 U. S. 192, MR.
JUSTICE GRAY, speaking for the Court, said (p.
143 U. S.
195):
"Exemption from taxation is never to be presumed. The
legislature itself cannot be held to have intended to surrender the
taxing power unless its intention to do so has been declared in
clear and unmistakable words.
Vicksburg &c. Railroad v.
Dennis, 116 U. S. 665, and cases cited.
Assuming, without deciding, that the City of New Orleans was
authorized to exempt the New Orleans City Railroad Company from
taxation under general laws of the state, the contract between them
affords no evidence of an intention to do so. The franchise to
build and run a street railway was as much subject to taxation as
any other property. In
Gordon v. Appeal Tax Court,
3 How. 133, upon which the plaintiff in error much relied, the only
point decided was that an act of the legislature continuing the
charter of a bank, upon condition that the corporation should pay
certain sums annually for public purposes and declaring that, upon
its accepting and complying with the provisions of the act, the
faith of the state was pledged not to impose any further tax or
burden upon the corporation during the continuance of the charter,
exempted the stockholders from taxation on their stock, and so much
of the opinion as might, taken by itself, seem to support this writ
of error has been often explained or disapproved.
Piqua Branch of State
Bank v. Knoop, 16 How. 369,
57 U. S.
386,
57 U. S. 401-402;
Page 199 U. S. 42
People v. Commissioners, 4
Wall. 244,
71 U. S. 259;
Jefferson Branch Bank v.
Skelly, 1 Black 436,
66 U. S.
446;
Farrington v. Tennessee, 95 U. S.
679,
95 U. S. 690,
95 U. S.
694;
Stone v. Farmers' Loan & Trust Co.,
116 U. S.
307,
116 U. S. 328. The case at
bar cannot be distinguished from that of
Memphis Gaslight Co.
v. Shelby County, in which this Court upheld a license tax
upon a corporation which had acquired by its charter the privilege
of erecting gas works and making and selling gas for fifty years,
and, speaking by Mr. Justice Miller, said:"
"The argument of counsel is that, if no express contract against
taxation can be found here it must be implied, because to permit
the state to tax this company by a license tax for the privilege
granted by its charter is to destroy that privilege. But the answer
is that the company took their charter subject to the same right of
taxation in the state that applies to all other privileges and to
all other property. If they wished or intended to have an exemption
of any kind from taxation, or felt that it was necessary to the
profitable working of their business, they should have required a
provision to that effect in their charter. The Constitution of the
United States does not profess in all cases to protect property
from unjust and oppressive taxation by the states. That is left to
the state constitutions and state laws."
109 U. S. 109 U.S.
398,
109 U. S.
400.
Murray v. Charleston, 96 U. S. 432, is
not in point. The City of Charleston, having issued bonds,
subsequently passed an ordinance assessing a tax upon all real and
personal property in the city, and directed the treasurer to retain
out of the interest due on those bonds the amount of the tax.
Murray was a resident of Germany, and resisted the reduction of
interest, and it was held that the city could not, by way of a tax,
reduce the amount of the interest which it had promised to pay to
this nonresident holder, the Court saying in its opinion (p
96 U. S.
440):
"A nonresident creditor cannot be said to be, in virtue of a
debt due to him, a holder of property within the city, and the city
council was authorized to make assessments only upon
Page 199 U. S. 43
the inhabitants of Charleston, or those holding taxable property
within the same."
Chicago v.
Sheldon, 9 Wall. 50, is also not in point. An
ordinance was passed by the City Council of Chicago prescribing the
amount of work which a street railway company must do in the
grading, paving, etc., of the streets on which its railway was
authorized to be constructed. The company having accepted and
complied with the terms of this ordinance, the city attempted by
assessments for special improvements to compel the railway company
to pay for further work of the nature required by the original
ordinance, and it was held that the obligations assumed by the
railway company in respect to street improvements, as provided by
the ordinance, could not be increased by special assessments for
further improvements. But this involved no question of liability to
general taxation, and only held void the effort of the city, under
the guise of special assessments, to increase the obligations
specifically assumed by the railway company under the original
ordinance.
In
New Jersey v. Yard, 95 U. S.
104, there was a contract that a certain tax should "be
in lieu and satisfaction of all other taxation or imposition
whatsoever, by or under the authority of this state, or any law
thereof," and the decision simply upheld that exemption
specifically contracted for.
It is further contended that there has been a recognition and
practical construction in respect to the grants of these
franchises, and on these grounds: first, no attempt has been made
to legislate in respect to their taxation until 1899, although some
of them had been in existence for many years; second, Governor
Cleveland, in one of his messages, called the amount required to be
paid by the contract a tax, and Governor Roosevelt also spoke of
existing "taxes;" third, section 46 of the legislation authorizing
the tax upon these franchises provided that
"any sum based upon a percentage of gross earnings, or any other
income, or any license fee, or any sum of money on account of such
special franchise, granted to or possessed by such person,
copartnership, association, or
Page 199 U. S. 44
corporation, which payment was in the nature of a tax, all
amounts so paid for the exclusive use of such city, town, or
village, except money paid or expended for paving or repairing of
pavement of any street, highway, or public place, shall be deducted
from any tax based on the assessment made by the state board of tax
commissioners for city, town, or village purposes, but not
otherwise, and the remainder shall be the tax on such special
franchise payable for city, town, or village purposes;"
fourth, the Court of Appeals of New York in
Heerwagen v.
Crosstown Street Railway Company, 179 N.Y. 99, 104, said:
"In the first place, both in statutes and in judicial decisions,
the term 'tax' is frequently used in a much more comprehensive
sense than that which we have stated to be its accurate meaning. It
is not used so broadly as to include the revenue from private
property which the state or one of its political divisions may hold
for emolument, the same as other owners; but it certainly is used
to comprehend exactions for the privilege of exercising franchise
rights, which latter are often, especially in the case of foreign
corporations, merely the consideration received for privileges
which the state is at liberty to grant or to withhold at
pleasure."
We are not disposed to undervalue the force of these
suggestions, but it would be giving them undue significance to hold
that they are potent to displace the power of the state to subject
to the burdens of taxation property within its limits. The word
"tax" is not infrequently used in a general sense as denoting a
burden or charge, and not in the strict legal sense of the charge
or burden imposed by the state for the purposes of revenue for its
support. Undoubtedly the payment for the franchise of an annual sum
was a burden, and in that sense it might not unnaturally have been
spoken of as a tax. Being recognized as a burden, it may also well
be that, when the franchise itself was of comparatively little
value, the legislature did not see fit to subject it to the burdens
of ordinary taxation. But the omission of one legislature or a
dozen legislatures does
Page 199 U. S. 45
not destroy the power of the state. The language quoted from
section 46 indicates the desire of the legislature to deal
equitably with the corporations holding these franchises. Surely
the manifestation of this desire cannot be construed into a
repudiation of power. These annual charges are not called taxes,
but are spoken of as in the nature of a tax, and the legislature,
recognizing the equitable force of the claim based thereon,
provided that the corporation be given credit for sums thus
payable. In this connection, it is well to recall that, in section
1 of the act of 1886,
supra, these annual charges are
called "rental or percentage of gross earnings."
The quotation from the Court of Appeals must be interpreted in
the light of the question presented. That was whether the appellee
company was entitled to avail itself of the provision of section 46
just quoted, it having been required by its charter to pay a
certain percentage of its gross receipts. It was held that it was
so entitled, and the argument was to show that the words "in the
nature of a tax" were used in a broad and comprehensive sense to
include a payment made on account of the privilege granted. No
question was made or considered as to the liability of the company
to the tax on its franchise. Its only claim was to the deduction on
account of the percentage of its receipts already paid. The court,
in addition to the language quoted, said (p. 106):
"The statute in question was enacted at a special session of the
legislature convened by the governor for that purpose. In his
message to the legislature, he recommended that"
"it should be provided that from the sum assessed by the state
authorities as the tax which a corporation must pay because of its
local franchise there shall be deducted the amount already annually
paid by it to the locality for such franchise. In no other way is
it possible to tax these corporations with uniformity and
equity."
It may be that this view is erroneous, and that the more
accurate and equitable way would be to determine the value of the
franchise, not as free and clear, but as burdened by the charges to
which it might be subject. Nevertheless,
Page 199 U. S. 46
it is plain that this view was accepted by the legislature, for
under the scheme provided by the present statute, the franchise is
to be assessed as real estate -- that is to say, not subject to
diminution for charges thereon, and the allowance for such charges
is made only by deducting them from the tax.
We are of opinion that no contract right of the relator was
impaired by the legislation in question.
It is further insisted that the special franchise tax law denies
the relator the equal protection of the laws and due process in
three separate and distinct aspects,
"namely: (1) in that it adds to the obligations of their various
contracts while preserving all the burdens of those contracts; (2)
in that it provides for the deduction of annual payments covered by
existing contracts from the amount of tax levied, by reason of
which deduction those who agreed to pay for their franchises lump
sums or annual amounts less than the new tax are discriminated
against, and (3) in that it discriminates against them and subjects
them to taxation while their competitors, operating under the
surfaces of many of the same streets, are to be exempted."
The first specification is answered by the conclusion that we
have reached in respect to the claim of an impairment of contract
obligations, for if there was no such impairment, the fact that the
companies have escaped the burden for these many years is their
good fortune, and in no manner discharges them from the ordinary
burdens of taxation which the present law imposes.
With respect to the second, it may be observed that the lump sum
is so obviously a payment for the franchise that it cannot be
considered in any just sense as possessing the nature of a tax. It
is not even rental. It is like money paid for a tract of land --
part of the purchase price. It does not, like a percentage of the
gross receipts, vary with the changes of business, has no
resemblance to a continuing discharge of the obligation which
property is under for contribution to the support of the
government. Further, this whole matter of allowing a reduction on
account of that which is spoken of as "in the nature of
Page 199 U. S. 47
a tax," is a matter of grace on the part of the legislature. The
franchises granted were, as we have held, subject to taxation, and
the fact that, upon equitable considerations, the state has
consented that a certain reduction shall, in some cases, be made
does not entitle every holder of a franchise to a like reduction.
It is akin to an exemption, and there is nothing in the federal
Constitution to prevent a state from granting exemptions from
taxation.
Bell's Gap Railroad Company v. Pennsylvania,
134 U. S. 232.
With regard to the third contention, it may be said that there
is a difference between surface and subsurface street railroads
sufficient to justify a diversity in the mode and extent of
taxation. In
Savannah &c. Railway Company v. Savannah,
198 U. S. 392,
just decided, taxation of a street railroad was challenged on the
ground that a steam railroad which ran into the city and along its
streets, and there did some of the same kind of work as the
ordinary street railroad, was not subject to the same tax, and
referring to this contention is this declaration by MR. JUSTICE
HOLMES: "The difference between the two railroads is obvious, and
warrants the diversity in the mode of taxation." Further, the
condition of the title to the only subsurface road in the City of
New York clearly puts it in a class by itself.
These are all the questions we deem it important to consider. We
find no error in the decision of the Supreme Court of New York, and
it is
Affirmed.
