1. In assessing an annual franchise tax upon foreign and
domestic corporations, on the basis of the value of outstanding
capital stock employed in business within the state, the amount of
the tax against a corporation having shares of stock without
nominal or par value may be ascertained by assigning a specific
value to such shares and applying to it the rate applicable to the
par-value stock, and a statute so providing does not operate as a
denial of the equal protection of the laws. P.
279 U. S.
432.
2. This method does not operate to tax the property or franchise
of a foreign corporation without the state, even though the value
so assigned to its nonpar shares that are apportioned to the state
exceed their present worth or the present value of its assets
within the state. Giving to the shares a specified value by which
the tax is measured only affects the rate of tax on the privilege
taxed . P.
279 U. S.
432.
Page 279 U. S. 430
3. A franchise tax imposed on a corporation, foreign or
domestic, for the privilege of doing a local business, if
apportioned to business done or property owned within the state, is
not invalid under the commerce clause merely because a part of the
property or capital included in computing the tax is used by it in
interstate commerce. P.
279 U. S.
433.
4. The Constitution of Missouri, § 28, Art. IV, which provides
that " no bill . . . shall contain more than one subject, which
shall be expressed in its title," is not violated by the Stock
Corporation Act of 1921, the title of which describes it as
"regulating" corporations having nonpar stock and as "prescribing
the method of determining . . . the capital of corporations"
issuing such shares, although § 12 of the Act operates, by
reference to the Franchise Tax Law, to change the tax on
corporations having nonpar stock. P.
279 U. S.
434.
5. The purpose of this constitutional provision is to prevent
the inclusion of incongruous and unrelated matters in the same
measure and to guard against inadvertence, stealth, and fraud in
legislation. It is sufficiently complied with when the title of an
Act indicates the subject so as to give notice of the general
character of the legislation, without entering into minute details.
Id.
29 F.2d 604, affirmed.
Appeal from a decree of a district court of three judges denying
an interlocutory injunction to restrain state officials from
levying and collecting franchise taxes on the plaintiff
corporation.
Page 279 U. S. 431
MR. JUSTICE STONE delivered the opinion of the Court.
This is a direct appeal under § 266 of the Judicial Code from an
order of a district court of three judges for the Western District
of Missouri denying an interlocutory injunction restraining the
appellees, state tax officials, from levying and collecting certain
franchise taxes assessed under the Corporation Annual Franchise Tax
of Missouri., 29 F.2d 604. The case involves, among others, the
questions this day decided in
New York v. Latrobe, ante,
p.
279 U. S. 421.
Section 9836 of the Missouri Revised Statutes of 1919 imposes an
annual franchise tax upon both foreign and domestic corporations of
1/20 of 1% of the par value of their outstanding capital stock and
surplus employed in business within the state. For the purpose of
ascertaining the tax, every corporation subject to it is
"deemed to have employed' within the state 'that proportion of
its entire [outstanding] capital stock and surplus that its
property and assets in this state bears to all its property and
assets wherever located."
The Stock Corporation Act of the Missouri Laws of 1921, p. 661,
first provided for the formation and regulation of corporations
with stock of no par value. By § 12 of that act, it was enacted
that, for the purpose of ascertaining any organization taxes
imposed by the laws of the state computed on the basis of the par
value of shares of stock, each share of stock without nominal or
par value should be considered the equivalent of a share having a
par value of $100. In
Missouri v. Pierce Petroleum
Corporation, 318 Mo. 1020, the Supreme Court of Missouri held
that this section supplemented and amended the earlier provisions
of the franchise tax law of the state by prescribing the method of
computing the tax, imposed by § 9836, in the case of corporations
having nonpar stock.
Page 279 U. S. 432
The tax was thus fixed in effect at the rate of not less than 5
cents on each share of nonpar stock employed within the state,
regardless of its actual value.
Appellant is engaged in the business of manufacturing and
selling shoes in both intrastate and interstate commerce. It has
gross assets of more than $97,000,000, of which 54 percent are
located in Missouri. It has 100,000 shares of preferred stock of
the par value of $100, and 3,760,000 shares of nonpar stock, for
which latter it received $9.60 per share. The total paid in capital
was thus $46,082,631.09. Appellant alleges that, prior to the
enactment of § 12, its nonpar stock was assessed on the basis of
the amount paid for it.
Cf. State v. Freehold Investment
Co., 305 Mo. 88. But, applying the statute as interpreted by
the state court in
State v. Pierce Petroleum Corp., supra,
the taxing authorities have assigned to appellant's outstanding
nonpar stock a value of $376,000,000, resulting in an increase of
appellant's annual franchise tax from approximately $25,000 to a
sum in excess of $100,000.
The market value of appellant's stock does not appear, and no
foundation is laid for assailing the tax as so excessive as to be a
denial of due process, but appellant argues, as did respondent in
New York v. Latrobe, supra, that the tax is a denial of
the equal protection of the laws. For reasons stated more at length
in our opinion in that case, we conclude that the present statute
does not infringe that clause of the Fourteenth Amendment. Although
it directs that the tax be ascertained by assigning a specific
value to the nonpar stock and applying to it the rate applicable to
par value stock, the resultant inequalities do not differ from
those complained of in that case, where the tax was computed at a
flat rate on nonpar stock used in the state, without assigning to
it any value.
The assignment to the shares of a value in excess of their
present worth or of the present value of the assets
Page 279 U. S. 433
within the state does not operate to tax property or business
without the state. The tax is a privilege, and not a property, tax.
Giving to the shares a specified value by which the tax is measured
only affects the rate of tax on the privilege, and does not give
the statute an extraterritorial effect. The result is the same as
if a flat tax of 5 cents per share upon that part of the capital
which is justly apportioned to the state had been imposed. So
apportioned, the tax cannot be said to reach the property or the
franchise of the corporation without the state.
Other objections to the tax require but brief comment. The mere
fact that a corporation is engaged in interstate commerce does not
relieve it of local tax burdens in respect of its property within
the state or its intrastate business.
Postal Telegraph Cable
Co. v. Adams, 155 U. S. 688,
155 U. S. 696.
Appellant does a substantial amount of local commerce. A franchise
tax imposed on a corporation, foreign or domestic, for the
privilege of doing a local business, if apportioned to business
done or property owned within the state, is not invalid under the
commerce clause merely because a part of the property or capital
included in computing the tax is used by it in interstate commerce.
St. Louis-San Francisco Ry. v. Middlekamp, 256 U.
S. 226,
256 U. S. 231
(ruling on the Missouri franchise tax);
Hump Hairpin Co. v.
Emmerson, 258 U. S. 290;
Underwood Typewriter Co. v. Chamberlain, 254 U.
S. 113,
254 U. S. 119;
St. Louis Southwestern Ry. Co. v. Arkansas, 235 U.
S. 350;
Kansas City, Ft. S. & M. Railway Co. v.
Kansas, 240 U. S. 227;
Kansas City, etc., R. Co. v. Stiles, 242 U.
S. 111;
Southern Railway Co. v. Watts,
260 U. S. 519.
Cf. United States Glue Co. v. Oak Creek, 247 U.
S. 321;
Shaffer v. Carter, 252 U. S.
37. The tax is distinguishable from those considered in
Air-Way Electric Appliance Corp. v. Day, 266 U. S.
71,
Looney v. Crane Co., 245 U.
S. 178, and
Cudahy Packing Co. v. Hinkle,
278 U. S. 460,
which either
Page 279 U. S. 434
were measured by authorized, instead of issued, capital stock or
were not limited to the part of the capital stock justly
apportioned to the taxing state.
It is urged, also, that the Stock Corporation Act of 1921
violates § 28 of Article IV of the Missouri Constitution, which
provides that "no bill . . . shall contain more than one subject,
which shall be clearly expressed in its title." The title of the
Act in terms described it as authorizing corporations to make
provision
". . . for the issue of either or both preferred or common
shares without nominal or par value; regulating the same and such
corporations, and prescribing the method of determining the number
of shares and capital of corporations issuing shares in such
manner."
It is said that, as § 12 operates, by reference to the Franchise
Tax Law, to change the tax on corporations having nonpar stock, it
is in effect a taxing act, and hence its title does not clearly
express the subject of the legislation. But its subject was the
method of ascertaining the value of nonpar shares for taxation and
other statutory purposes, a subject matter clearly embraced in the
title which described the legislation as "regulating" corporations
having nonpar stock and as "prescribing the method of determining .
. . the capital of corporations" issuing such shares. The purpose
of the constitutional provision is
"to prevent the inclusion of incongruous and unrelated matters
in the same measure and to guard against inadvertence, stealth, and
fraud in legislation."
See Posados v. Warner, Barnes & Co., ante, p.
279 U. S. 340;
Dickason v. County Court, 128 Mo. 427, 441. And it is only
necessary that the title indicate the subject so as to give notice
of the general character of the legislation, without entering into
minute details.
Dickason v. County Court, supra, at p.
441;
Garesche v. Roach, 258 Mo. 541, 560;
Cocoa Cola
Bottling Co. v. Mosby, 289 Mo. 462, 472;
Barrett v.
Imhof, 291 Mo. 603, 619;
State v. Mullinix, 301 Mo.
385, 389;
State ex rel. Missouri
Page 279 U. S. 435
Pacific R. Co. v. Danuser, 6 S.W.2d 907. The title of
the present act satisfies these requirements. One having but slight
familiarity with earlier Missouri legislation would have known
that, upon the enactment of legislation dealing with corporations
having a nonpar stock, some method of assigning a value to such
stock might appropriately be adopted in order to adapt and subject
the new type of corporation to existing legislation. This purpose
was plainly and sufficiently anticipated in the title of the
present act. It was not necessary that the title should go further
and indicate the earlier laws which were thus made applicable to
the new type of corporation.
Affirmed.
MR. JUSTICE McREYNOLDS thinks the effect of the statute is to
tax property beyond the state.