holder upon whose shares a tax is levied is not entitled to any exemption, abatement, or deduction, on the ground that the capital of the corporation, represented by its share certificates, has been invested in securities which are non-taxable, either under the Federal or the State law.1

ARTICLE IV. SITUS OF SHARES FOR THE PURPOSE OF TAXATION.

SECTION

2846. Jurisdiction either of person or property sufficient to support the right of taxation.

2847. Corporate shares taxable at the residence of their owners.

2848. Rule applicable to shares held by residents in foreign corporations.

SECTION.

2849. Legislature may change this situs and tax shares at residence of corporation.

2850. Even in the case of national bank shares held by residents.

2851. Subject to qualifications.

§ 2846. Jurisdiction Either of Person or Property Sufficient to Support the Right of Taxation. — In a case in Michigan this proposition is laid down: "A tax is a portion of the property of a citizen required by the government for its support in the discharge of its various functions and duties, and may be imposed when either person or property is within its jurisdiction. A personal tax cannot be assessed against a non-resident; neither can the property of a non-resident be taxed, unless it has an actual situs within the State, so as to be under the protection of its laws."2 So in a case in the Supreme Court of the United States, it is said by Chief Justice Waite: "The power of taxation by

1 Van Allen v. Assessors, 3 Wall. (U. S.) 573; People v. Commissioners, 4 Wall. (U. S.) 244; National Bank v. Commonwealth, 9 Wall. (U. S.) 353; Mercantile Bank v. New York, 121 U. S. 138; First National Bank v. Board of Reviewers, 41 La. An. 181; s. c. 5 South. Rep. 408; Board of Liquidation v. Thoman, 42 La. An. 605; s. c. 8 South. Rep. 482; Parker v. Sun Ins. Co., 42 La. An. 1172; s. c. 8 South. Rep. 618; Home Ins. Co. v. Board of Assessors, 42 La. An. 1131; s. c. 8 South. Rep. 481. Compare People v. Commissioners, 23 N. Y. 192; Batter

son v. Hartford, 50 Conn. 558. A failure to deduct from an assessment against the shares of stockholders the value of exempt State and city bonds owned by the corporation does not amount to a tax on such bonds, and so does not violate La. Const., art. 203, which requires that taxation shall be equal and uniform, or the constitutional provision as to the obligation of contracts. Parker v. Sun Ins. Co., 42 La. An. 1172; s. c. 32 Am. & Eng. Corp. Cas. 334; 8 South. Rep. 618. 2.Graham v. St. Joseph, 67 Mich. 652, 655.

any State is limited to persons, property, or business within its jurisdiction. Personal property, in the absence of any law to the contrary, follows the person of the owner, and has its situs at his domicile. But, for the purpose of taxation, it may be separated from him, and he may be taxed on its account at the place where it is actually located. These are familiar principles, and have been often acted upon in this court and in the courts of Illinois. If the State has actual jurisdiction of the person of the owner, it operates directly upon him. If he is absent, and it has jurisdiction of his property, it operates upon him through his property." 1 These quotations show that there are two theories, to either one of which a State may resort in taxing personal property, according to its necessities or its caprice: 1. The theory that a State has plenary power in respect of taxation over all property, fixed or movable, which has an actual existence within the limits of the State. 2. The fiction that movable property follows the person of the owner, and has a situs for the purposes of taxation wherever his legal domicile may be. These two theories open the road to one of the most frequent forms of double taxation, not only in respect of corporate shares, but also in respect of other personal property. For instance, a resident of Rhode Island owns shares in a manufacturing corporation existing in Massachusetts. The shares are taxed in Massachusetts in the form of a tax laid against the corporation, and the collection of the tax is coerced from the corporation. And yet, under this fiction that the situs of personal property for the purposes of taxation is the residence of the owner, the State of Rhode Island lays a tax upon the shares owned by the person named, and by exerting its process upon him, either by arresting his body or seizing his other property, coerces from him the payment of the tax, which results in a double taxation of the same property; a taxation by each sovereignty, each proceeding upon the theory that the property is within its own limits. Both of these theories cannot be right. The situs of the property is either within the one State or in the other; and if it is within the one State, the other has no rightful power of taxation over it, but the power which it exerts is un

-

Tappan v. Merchants' National Bank, 19 Wall. (U. S.) 490, 499.

just, arbitrary, and tyrannical. It is exactly the same as though an individual proprietor of a cloth manufactory situated in Massachusetts should have his personal domicile in Rhode Island, and should have a million dollars' worth of manufactured cloths at his mills in Massachusetts, and the State of Rhode Island should assume the power to assess and coerce from him the payment of a tax upon those cloths, upon the fiction that movable property follows the owner. 1

§ 2847. Corporate Shares Taxable at the Residence of Their Owners. - Corporate shares are personal property; 2 and the general rule, resting in a fiction of the common law, in regard to the situs of personal property, is that it follows the residence of its owner. This rule applies to corporate shares, so that, where a different rule has not been established by statute, such shares are regularly taxable at the residence of their owner. It follows that, unless the legislature has changed the rule, the shares of the stockholder cannot be listed for taxation at the place of residence of the corporation, that being different from the place of residence of the shareholder. Thus, the shares of stock in the Lawrence Gas, Coke & Coal Co. belonging to a shareholder who resided in Wakarusa township, and not in the city of Lawrence, could not be listed for taxation in the city of Lawrence.5

1 As to this fiction, see further post, § 2847; and compare ante, § 2786.

2 Ante, § 1066; Seward v. Rising Sun, 79 Ind. 351.

3 McKeen v. Northampton, 49 Pa. St. 519, 525; s. c. 88 Am. Dec. 515.

4 Conwell v. Connersville, 15 Ind. 150; Henkle v. Keota, 68 Iowa, 334, 340; Des Moines Water Co.'s Appeal, 48 Iowa, 324; Cook v. Burlington, 59 Iowa, 251; s. c. 44 Am. Rep. 679.

5 Griffith v. Watson, 19 Kan. 23. By statute in Missouri, the owner of personal property which is subject to municipal taxation must deliver to the assessor a list thereof, with the cash value, stating in the list the property by classes, the sixth of which is: "The amount of stock or shares in any

company or corporation not required by law to be otherwise listed." R. S. Mo. 1879, § 4701. The above principle applies in the application of this statute; so that a city of the second class in that State has power to tax shares of stock in a business corporation owned by a resident of such city, although the property of the corporation is outside the jurisdiction of the city, and cannot be taxed by it. Nor does it make any difference that the property of the corporation is situated in another State and taxable there. Ogden v. St. Joseph, 90 Mo. 522. Compare Rich v. Packard National Bank, 138 Mass. 527; Smith v. Burley, 9 N. H. 423.

§ 2848. Rule Applicable to Shares Held by Residents in Foreign Corporations. So, there are many cases holding that where the legislature has not prescribed a different rule, the owner of shares of stock of a foreign corporation is liable to be taxed in respect of the shares in the State of his residence, on the theory that such shares are personal property which accompanies the owner wherever he goes.1 It logically results from the foregoing proposition that shares in the stock of a foreign corporation are taxable in the hands of residents of the taxing State, although the tangible property of the corporation," or even its aggregate share capital, is taxed in and by the State of its situs, and even though the particular shares have been taxed as the property of the shareholder by the State of the situs of the corporation, and he has paid such tax. A statute subjecting to taxation all the shares held by residents of the State in foreign corporations, or in particular kinds of corporations, extends to shares held by residents in foreign corporations: the State having made no exception in favor of the holder of shares in such corporations, it is not for the courts to make any. In like manner, the owner of shares in a foreign corporation is

1 Great Barrington v. County Commissioners, 16 Pick. (Mass.) 572; McKeen v. Northampton, 49 Pa. St. 519; s. c. 88 Am. Dec. 515; Whitesell v. Northampton, 49 Pa. St. 526; Dyer v. Osborne, 11 R. I. 321; s. c. 23 Am. Rep. 460; Ogden v. St. Joseph, 90 Mo. 522, 529; Worth v. Commissioners, 82 N. C. 420; s. c. 33 Am. Rep. 692; Worth v. Commissioners, 90 N. C. 409; Dwight v. Spingfield &c. Fire District, 11 Met. (Mass.) 374; Strong v. O'Donnell, 10 Phila. (Pa) 575; Graham v. St. Joseph, 67 Mich. 652; s. c. 12 West. Rep. 416; 35 N. W. Rep. 808; Bradley v. Bauder, 36 Oh. St. 28, 35; s. c. 38 Am. Rep. 547; State v. Branin, 23 N. J. L. 484; Newark City Bank v. Assessor, 30 N. J. L. 13; Worthington v. Sebastian, 25 Oh. St. 1, 9.

2 McKeen v. Northampton, 49 Pa. St. 519; s. c. 88 Am. Dec. 515; Bradley v. Bauder, 36 Oh. St. 28; s. c. 38 Am.

Rep. 547; Worthington v. Sebastian, 25 Oh. St. 1; Watson v. Spratley, 10 Exch. 236; State v. Branin, 23 N. J. L. 484; Newark City Bank v. Assessor, 30 N. J. L. 13; Sturges v. Carter, 114 U. S. 511, 521; Worth v. Commissioners, 82 N. C. 420; s. c. 33 Am. Rep. 692.

3 Seward v. Rising Sun, 79 Ind. 351; Great Barrington v. County Com'rs, 16 Pick. (Mass.) 572; Bradley v. Bauder, 36 Oh. St. 28, 36; s. c. 38 Am. Rep. 547. Note the reasoning of the court in the last case on page 36 of the official report.

4 Dyer v. Osborne, 11 R. I. 321; s. c. 23 Am. Rep. 460. Note especially the reasoning of the court in support of its conclusion, found on page 327 of the official report. Compare Trowbridge v. Com'rs, 5 Hun (N. Y.), 595.

5 Great Barrington v. County Com'rs, 16 Pick. (Mass.) 572.

not entitled to a deduction from the tax upon his shares, by reason of a tax which may be laid upon the property of the corporation in the State wherein it is located.1

3

§ 2849. Legislature may Change this Situs and Tax Shares at Residence of Corporation. But it is competent for the legislature to change the situs of shares for the purpose of taxation, so as to make all the shares of a corporation taxable at the place of residence of the corporation,2 although this may draw (or keep) within the jurisdiction of the taxing State the shares held by residents of other States. Thus, the legislature of a State may, and often does, enact that all the shares of corporations created and doing business within the State shall be subjected to taxation at the situs of the corporation. Nor is there much difficulty in upholding this power on legal theories; for, although the situs of the shares for most purposes, including that of taxation, where a different rule is not prescribed by statute, follows their owners, yet the taxing power can be, and constantly is, exerted wherever property or business can be found within the jurisdiction, out of which the payment of the tax can be coerced. Besides, it is clearly competent for the State which has created the corporation to prescribe the condi

1 Dwight v. Boston, 12 Allen (Mass.), 316; s. c. 90 Am. Dec. 149. The rule has an analogy in regard to the taxation of debts secured by mortgages upon realty in another State. For the purpose of the taxation of such a chose in action, its situs is the domicile of the owner, and it may be taxed to the extent of its full value, notwithstanding the land itself may be also taxed to the same extent in the State where it is situated. Kirtland v. Hotchkiss, 42 Conn. 426; s. c. 19 Am. Rep. 546; s. c. affirmed 100 U. S. 491.

2 Ante, § 2846; Tappan v. Merchants' Nat. Bank, 19 Wall. (U. S.) 490; Street Railroad Co. v. Morrow, 87 Tenn. 406; s. c. 2 L. R. A. 853; 5 Rail. & Corp. L. J. 248; 11 S. W. Rep. 348; First Nat. Bank v. Smith, 65 Ill. 44, 53; Danville

&c. Co. v. Parks, 88 Ill. 170, 173. See also McLanglin v. Chadwell, 7 Heisk. (Tenn.) 389; Bedford v. Nashville, Id. 409; Nashville v. Thomas, 5 Coldw. (Tenn.) 500.

3 Street Railroad Co. v. Morrow, supra; Baltimore v. Baltimore &c. R. Co., 57 Md. 31; American Coal Co. v. County Com'rs, 59 Md. 185, 192; St. Albans v. National Car Co., 57 Vt. 68, 81; Mortensen v. West Point Man. Co., 12 Neb. 197; s. c. 10 N. W. Rep. 432; Stockholders v. Supervisors, 88 Va. 293; s. c. 13 S. E. Rep. 407. Contra, as to taxing their dividends, see Oliver v. Washington Mills, 11 Allen (Mass.), 268.

4 Post, § 2849.

5 Baltimore v. Baltimore &c. R. Co., 57 Md. 31, 36.

6 Ante, § 2847.