Atlantic Coast Line R. Co. v. Daughton,
262 U.S. 413 (1923)

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U.S. Supreme Court

Atlantic Coast Line R. Co. v. Daughton, 262 U.S. 413 (1923)

Atlantic Coast Line Railroad Company v. Daughton

Nos. 724, 727, 744, 756

Argued April 25, 1923

Decided June 4, 1923

262 U.S. 413


1. A state may, consistently with the federal Constitution, impose a tax upon the net income of property, as distinguished from the net income of him who owns or operates it, although the property is used in interstate commerce. P. 262 U. S. 420.

2. The Income Tax Law of North Carolina directs that the "net operating income" of railroads within the state be determined upon the basis of accounts to be kept according to the method established by the Interstate Commerce Commission, and lays a tax upon the "net income," to be ascertained by deducting from "net operating income" only uncollectible revenue, certain taxes, and amounts paid for car hire, thus treating the railroad property within the state as the thing of which the income is taxed, and taking no account of other income of the corporation owning the railroad and making no deduction of its capital charges. Held that the statute, considering this distinction, does not in effect depart from the Commission's definition of net income, nor, as applied to

Page 262 U. S. 414

interstate railroads, does it directly burden interstate commerce or discriminate against it (other public service corporations, wholly intrastate, being treated in the same way); nor does it, with other railroad taxes of the state, make an aggregate burden violating the commerce clause; nor does it violate that clause by departing from the standard form of accounts prescribed by the Interstate Commerce Commission under the Transportation Act, 1920. P. 262 U. S. 421.

3. The above statute is not obnoxious to the equal protection clause either in refusing to public service corporations, including railroads, deductions of interest on funded debt, rentals, and worthless debts which are allowed to other corporations and individuals in calculating net income, or in not requiring certain short line railroads to keep the accounts required of other railroads. P. 262 U. S. 423.

4. The Constitution of North Carolina does not forbid taxing the net income of property operated as a railroad, as distinguished from the net income of the company owning the railroad. P. 262 U. S. 424.

5. The above cited statute does not violate the uniformity clause of the North Carolina Constitution in that the permissible deductions in computing net income of public service corporations are different from, and not so great as, those allowed individuals or other corporations. Id.

6. The statute is not retroactive and void under the state constitution because it lays a tax based upon the net income of the calendar year within which it was enacted. P. 262 U. S. 425.

7. A bill in the district court to enjoin the collection of state taxes alleged to be unconstitutional will not be dismissed upon the ground that a plain, adequate, and complete remedy exists in paying the taxes under protest and suing to recover the amount paid when the statute relied on as affording such remedy is recent, and has not been construed and applied by the highest court of the state. P. 262 U. S. 425.


Appeals from decrees of the district court dismissing the bills, after hearing the merits, in four suits brought by railroad companies to enjoin the enforcement of a state income tax.

Page 262 U. S. 415

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