of the states are few. One of the questions upon which the courts are at odds is that of double taxation. The Federal Constitution does not inhibit such taxation, but, under some of the state constitutions, double taxation is invalid. And double taxation is a plea that has often been made to defeat taxes on shares of stock, and a plea that has given the courts a vast amount of trouble always. To reconcile the decisions would be impossible. All that can be done is to review them. As this has been done earlier in this chapter, more will not be said on the subject at this place. But notwithstanding all of this, it is true, as a general proposition, that the state may impose a tax upon the shares of the capital stock of a corporation in the hands of the individual shareholders, and that a municipal corpora stock unless they are "expressly ex- 6 See § 4589, supra. 8 United States. Bank of Commerce v. Tennessee, 161 U. S. 134, 40 L. Ed. 645; Tennessee v. Whitworth, 117 U. S. 129, 29 L. Ed. 830. Connecticut. State v. Travelers' Ins. Co., 70 Conn. 590, 66 Am. St. Rep. 138, 40 Atl. 465. Georgia. Bank of Georgia v. City of Savannah, Dudley, 130. Illinois. Greenleaf v. Board Review Morgan Co., 184 Ill. 226, 75 Am. St. Rep. 168, 56 N. E. 295. Indiana. Whitney v. Madison, 23 Ind. 331; Conwell v. Town of Connersville, 15 Ind. 150. Maryland. American Coal Co. v. Allegany County Com'rs, 59 Md. 185. Tennessee. Street Railroad Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853, 11 S. W. 348. Vermont. Town of St. Albans v. National Car Co., 57 Vt. 68. Virginia. Union Bank v. Richmond, 94 Va. 316, 26 S. E. 821; Com. v. Charlottesville Perpetual Building & Loan Co., 90 Va. 790, 44 Am. St. Rep. 950, 20 S. E. 364. Shares of stock in corporations, do mestic or foreign, are taxable to the shareholder personally for county as well as for state purposes. Whitesell v. Northampton, 49 Pa. St. 526. Shares of stock in the Associated Press are taxable in Indiana. Hart v. Smith, 159 Ind. 182, 58 L. R. A. 949, 95 Am. St. Rep. 280, 64 N. E. 661. Memberships in an incorporated chamber of commerce are property, and whether or not they shall be taxed is a matter of local law with which the federal courts are not concerned. Rogers v. Hennepin County, 240 U. S. 184, 60 L. Ed. 594. Shares in a joint stock association are personal property and are taxable as such. In re Jones' Estate, 172 N. Y. 575, 60 L. R. A. 476, 65 N. E. tion, authorized by the state so to do, also has the power to tax such shares. Since shares of stock in the hands of the stockholders are distinct from the capital and capital stock of the corporation, it has been held that they are taxable, although the capital of the corporation. is invested in nontaxable securities.10 Moreover, the corporation may be required to pay the tax on the shares and allowed to deduct the amount paid from dividends or otherwise collect it from the shareholders. Such a tax, although in form a tax against the corporation, is in substance a tax against the shareholders only.11 Under a statute * * * 9" Before municipal officers can rightfully assess a tax upon the shares of national banks, they must be authorized so to do by some law of the state. They are the creatures of state law, and derive their powers, in this respect, solely from state enactments." Stetson v. Bangor, 56 Me. 274. Where a city has the power to levy and collect an ad valorem tax, for general purposes, on all property, subject to state and county taxation, within its limits, it may tax its inhabitants on their shares of stock in foreign corporations. Seward v. Rising Sun, 79 Ind. 351. 10 Union Bank of Richmond v. Richmond, 94 Va. 316, 26 S. E. 821. See also Cleveland Trust Co. v. Lander, 184 U. S. 111, 46 L. Ed. 456. Ins. Co., 70 Conn. 590, 66 Am. St. Rep. 138, 40 Atl. 465. Illinois. Ottawa Glass Co. v. McCaleb, 81 Ill. 556. Maryland. American Coal Co. v. Allegany County Com'rs, 59 Md. 185; State v. Mayhew, 2 Gill 487. Tennessee. Street Railroad Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853, 11 S. W. 348. Vermont. Town of St. Albans v. National Car Co., 57 Vt. 68. Virginia. Union Bank v. Richmond, 94 Va. 316, 26 S. E. 821. Compare Conwell v. Town of Connersville, 15 Ind. 150. "Is this plan for the collection of the tax upon shares of stock liable to taxation subject to any constitutional objections? We see none. It is nothing more than a garnishment proceeding against the corporation, to better secure the payment of the tax out of dividends due or to become due. No injustice is done the company. The plan looks to a cheap, speedy, and sure means of collecting a tax otherwise exceedingly difficult to either assess or collect. The shares are the things taxed. It matters not who may own them, the dividends attach to and belong to the owner of the shares at the time they are declared, and out of these dividends the sum necessary to pay the tax must be reserved. Such methods of collection are not at all unusual or unique." taxing shares of stock, a corporation, it has been held, is taxable on shares of its own stock owned by it.12 Where stock is pledged, it is taxable to the pledgor, and not to the pledgee.13 South Nashville St. R. Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853, 11 S. W. 348, quoted with approval in Washington County v. State, 172 Ala. 242, 55 So. 623. On this subject, Judge Cooley says: "For the most part the taxes levied by the states are collected of the persons taxed, or enforced against the property in respect to which they are imposed. In a few cases, however, in which such a course would not work injustice, the state may reach the party taxed by indirection, and collect in the first instance from someone else, who in turn will become collector from the person on whom the tax is really imposed. The reason for this is, that in such cases it is more convenient to the state, and perhaps makes more certain the collection; and it could be resorted to only when the case is such that injustice could result to no one. A case of the kind is where a tax is imposed on the dividends or other receipts of shareholders from the profits of corporations, or upon their shares, or upon the interest paid by indebted corporations, and where the corporation is required to make the payment, which it would then deduct from the payment to be made to shareholders, or to the holders of the evidences of indebtedness. There is no doubt of the right to do this, except as to payments to be made to non-residents, nor even as to them, if the statute under which their interests were acquired provided for the levying and collecting of taxes in that manner. Cooley on Taxation (3rd Ed.), 832. Liability to pay the tax is not affected by insolvency of the corporation. American Casualty Ins. Co.'s Case (Boston & A. R. Co. v. Mercantile Trust & Deposit Co.), 82 Md. 535, 38 L. R. A. 97, 34 Atl. 778. Mandamus has been held a proper remedy to compel the corporation to pay the tax. Town of St. Albans v. National Car Co., 57 Vt. 68. Under a tax warrant authorizing the tax collector to levy upon property of the persons named, a collector cannot levy upon the property of a corporation to satisfy a tax against a stockholder on his shares, even though, by contract between the corporation and the stockholder, the corporation is bound to pay the tax. First Nat. Bank of Sandy Hill v. Fancher, 48 N. Y. 524. 12 Richmond & D. R. Co. v. Allamance County Com'rs, 84 N. C. 504. Compare Worcester v. Board of Ap peal in Tax Matters, 184 Mass. 460, 69 N. E. 330. 13 Waltham Bank v. Inhabitants of Waltham, 10 Metc. (Mass.) 334; Tucker v. Aiken, 7 N. H. 113. In a Georgia case, it appeared that stock in an Alabama railroad com § 4621. National bank shares. The shares of stock in national banks are taxable by the states by virtue of an act of Congress, as appears in other sections of this chapter,14 to which sections the reader is referred for the adjudicated law upon the subject. § 4622. Taxation of corporate bonds. Corporate bonds, in the hands of their owners, are personal property and are taxable as such,15 and the corporation may be charged with the duty of collecting a lawful tax 16 from interest due and payable.17 came the owner of its properties, including its equitable interest in the Alabama stock; that the New York trust company had the physical possession of the stock certificates, as well as the legal title thereto, but that every beneficial interest, including the right to receive dividends and to vote the stock, as well as the equity of redemption, was owned by the Central of Georgia Railway Company, subject only to its compliance with the terms of the bonds to secure which the deed of trust was given. On these facts, the Supreme Court of Georgia held (Central of Georgia R. Co. v. Wright, 124 Ga. 630, 53 S. E. 207), that, since the substantial beneficial ownership of the stock was in the Central of Georgia Railway Company, such company was liable to a Georgia tax on the stock. 14 See §§ 4599-4603, supra. 15 South Nashville St. R. Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853, 11 S. W. 348. 16 In a Tennessee case, however, it was held that a statute undertaking to convert corporations into agencies for the collection of taxes laid upon the holders of their bonds, by making the corporation pay the same, is void. South Nashville St. R. Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853, 11 S. W. 548. The state of Pennsylvania cannot compel a New York corporation doing business in Pennsylvania to act in New York as an assessor and collector VII Priv. Corp.-54 of taxes owing to the state of Pennsylvania by residents thereof. So, as applied to a New York railroad company, a part of the road of which lies in Pennsylvania but which pays the interest on its scrip, bonds and certificates of indebtedness in the cities of New York and London, the Pennsylvania statute requiring corporations to assess the state tax on evidences of indebtedness issued by them and owned by residents of the state, and to deduct the amount assessed from the interest due upon the scrip, bonds and certificates thus issued and owned, is invalid. New York, L. E. & W. R. Co. v. Pennsylvania, 153 U. S. 628, 38 L. Ed. 846, followed in Delaware & H. Canal Co. v. Pennsylvania, 156 U. S. 200, 39 L. Ed. 396. 17 The requirement that corporations deduct from the interest due upon their bonds the amount of a tax on such securities is not taxing the corporations for property that they do not own. Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 232, 33 L. Ed. 892. A foreign corporation, doing business in Pennsylvania, which has made its debenture bonds payable at the office of a Pennsylvania trust company which holds no collateral for the corporation but to which the corporation's treasurer, whose office is in a third state, currently remits the money for the periodical interest payments on the corporation's bonds, is not within the operation of the Pennsylvania statute making it "the duty The situs of a debt for the purpose of taxation is the place where the holder of the evidence of the debt resides, and therefore bonds, notes or other evidences of debt issued by a foreign corporation held by a resident of the state may be taxed.18 So a resident of the state may be taxed on the bonds of a corporation of another state even of the treasurer of each private corporation doing business in this commonwealth, upon the payment of any interest upon any # # bond, issued by said corporation to residents of this commonwealth, and held by them to assess the tax imposed and provided for state purposes upon the nominal value of each and every said evidence of debt to report the assessment to the auditor general, and to deduct the tax and return it to the state treasurer. Com. v. Barrett Mfg. Co., 246 Pa. 301. 92 Atl. 302, recognizing the controlling effect of Delaware & H. Canal Co. v. Pennsylvania, 156 U. S. 200, 39 L. Ed. 396, and New York, L. E. & W. R. Co. v. Pennsylvania, 153 U. S. 628, 38 L. Ed. 846. * * * * * * * Under the Pennsylvania statute providing that "it shall be the duty of the treasurer of each private corporation, upon the payment of any interest on any * bond issued by said corporation to residents of this commonwealth, and held by them, to assess the tax imposed and provided for state purposes upon the nominal value of each and every said evidence of debt, and to report to the auditor general the amount of indebtedness of the corporation owned by residents of this commonwealth, as nearly as the same can be ascertained," and to deduct the tax and pay it into the state treasury, the duty of the corporation in the matter of the report is performed when it uses diligence to ascertain the residence of its bond. holders. Whether it does this is a question of fact to be determined from the evidence. Even in the case of a domestic corporation there is no presumption that its bonds are held by residents of the state, and hence the corporation does not have the burden of proving what bonds are exempt by reason of the nonresidence of their owners. Com. v. Lehigh Valley R. Co., 186 Pa. St. 235, 40 Atl. 491. A corporation chargeable under the Pennsylvania statute with the duty of collecting the tax on such of its bonds as are held by residents of Pennsylvania is not confronted with any presumption that its bonds are held by such residents so as to throw upon it the burden of proving what bonds are exempt by reason of the Lonresidence of their owners. Com. v. Lehigh Valley R. Co., 186 Pa. St. 235, 40 Atl. 491. See also Com. v. New York, L. E. & W. R. Co., 145 Pa. St. 57, 22 Atl. 212, 236. 18 United States. Kirtland V. Hotchkiss, 100 U. S. 491, 25 L. Ed. 558; State Tax on Foreign-held Bonds, 15 Wall. 300, 21 L. Ed. 179; Northern Cent. Ry. Co. v. Jackson, 7 Wall. 262, 19 L. Ed. 88. California. Mackay v. City & Coun ty of San Francisco, 113 Cal. 392, 45 Pac. 696; People v. Eastman, 25 Cal. 601. Indiana. Buck v. Miller, 147 Ind. 586, 37 L. R. A. 384, 62 Am. St. Rep. 436, 47 N. E. 8, 45 N. E. 647. Iowa. Davenport v. Mississippi & M. R. Co., 12 Iowa 539. Tennessee. Street R. Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853, 11 S. W. 348. Virginia. State Bank of Virginia v. Richmond, 79 Va. 113; Com. V. Chesapeake & O. R. Co., 27 Gratt. 344, aff'd 94 U. S. 718, 24 L. Ed. 310. |