§ 4624. Nonresident-owned shares in domestic corporations. A state may tax shares in a domestic corporation, owned by nonresidents, at the place where the corporation is located,32 when in creating the corporation it has reserved the right so to do.33 Undoubtedly, the state in which a corporation is organized may provide, in creating it, for the domestic taxation of all of the corporation's shares whether owned by residents or nonresidents.34 This right exists by virtue of the authority of the chartering state to determine the basis of organization and the liabilities of shareholders.35 32 United States. Tappan v. Merchants' Nat. Bank of Chicago, 19 Wall. 490, 22 L. Ed. 189. Connecticut. State v. Travelers' Ins. Co., 70 Conn. 590, 66 Am. St. Rep. 138, 40 Atl. 465. Illino's. Ottawa Glass Co. v. McCaleb, 81 Ill. 556. Maryland. American Coal Co. v. Allegany County Com'rs, 59 Md. 185; Baltimore v. Baltimore City Passenger Ry. Co., 57 Md. 31; State v. Mayhew, 2 Gill 487. Tennessee. Street R. 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; Stockholders of Bank of Abingdon v. Supervisors of Washington County, 88 Va. 293, 13 S. E. 407. Compare Oliver v. Washington Mills, 11 Allen (Mass.) 268; Com. v. Chesapeake & O. R. Co., 27 Gratt. (Va.) 344, aff'd 94 U. S. 718, 24 L. Ed. 310. A state may tax the memberships in an incorporated chamber of commerce which are owned by citizens of other states as well as those which are domestically owned. Rogers v. Hennepin County, 240 U. S. 184, 60 L. Ed. 594. Said the court: "It is urged that the memberships are intangible rights held by the member at his domicile. # But it sufficiently appears from the allegations that the memberships represented rights and privileges which were exercised in transactions at the exchange [within the state,] and we are of the opinion, applying a principle which has had recognition with respect to credits in favor of nonresidents arising from business within the state, and in the case of shares of stock of domestic corporations, that it was competent for the state to fix the situs of the memberships for the purpose of taxation, whether they were held by residents or nonresidents, at the place within the state where the exchange was located." 33A state may require its own corporations to return the foreign-held shares for the owner for the purposes of taxation." Covington v. First Nat. Bank, 198 U. S. 100, 49 L. Ed. 963. Unless the legislature, in creating a domestic corporation has reserved the right to tax the shares of stock directly to the corporation, the state has no power to tax the ones of such shares that are owned by persons residing out of the state's territorial jurisdiction. Judy v. Beckwith, 137 Iowa 24, 15 L. R. A. (N. S.) 142, 15 Ann. Cas. 890, 114 N. W. 565. 34 Hawley v. Malden, 232 U. S. 1, 58 L. Ed. 477, Ann. Cas. 1916 C 842, aff'g 204 Mass. 138, 90 N. E. 415; Corry v. Baltimore, 196 U. S. 466, 49 L. Ed. 556. 35 By reason of its dominant power Resi § 4625. Resident-owned shares in foreign corporations. dent owners of shares in a foreign corporation may be taxed thereon.36 to provide for the organization and conduct of national banks, Congress has fixed the places at which alone shares in those institutions may be taxed. U. S. Rev. St. § 5219; U. S. Comp. Stat. 1901, p. 3502; Hawley v. Malden, 232 U. S. 1, 58 L. Ed. 477, Ann. Cas. 1916 C 842, aff 'g 204 Mass. 138, 90 N. E. 415; Hannis Distilling Co. v. Baltimore, 216 U. S. 285, 54 L. Ed. 482; Corry v. Baltimore, 196 U. S. 466, 49 L. Ed. 556. 36 United States. Wright v. Louisville & N. R. Co., 195 U. S. 219, 49 L. Ed. 167, rev'g 117 Fed. 1007 (mem. dec.); Sturges v. Carter, 114 U. S. 511, 29 L. Ed. 240. Alabama. State v. Kidd, 125 Ala. 413, 28 So. 480. California. City & County of San Francisco v. Fry, 63 Cal. 470. Connecticut. Lockwood v. Town of Weston, 61 Conn. 211, 23 Atl. 9. Georgia. Central of Georgia R. Co. v. Wright, 124 Ga. 630, 53 S. E. 207. Illinois. Greenleaf v. Board Review Morgan Co., 184 Ill. 226, 75 Am. St. Rep. 168, 56 N. E. 295; Porter v. Rockford, R. I. & St. L. R. Co., 76 Ill. 561. Indiana. Hart v. Smith, 159 Ind. 182, 58 L. R. A. 949, 95 Am. St. Rep. 280, 64 N. E. 661; Seward v. Rising Sun, 79 Ind. 351. Massachusetts. Inhabitants of Great Barrington v. Berkshire, 16 Pick. 572. Michigan. Graham v. Township of St. Joseph, 67 Mich. 652, 35 N. W. 808. Missouri. Ogden v. St. Joseph, 90 Mo. 522, 3 S. W. 25. New Jersey. Mechanics' & Traders' Bank v. Bridges, 30 N. J. L. 112; Newark City Bank v. Assessor of Fourth Ward of New Jersey, 30 N. J. L. 13; Fish v. Branin, 23 N. J. L. 484. North Carolina. Worth v. Ashe, 90 N. C. 409, 82 N. C. 420, 33 Am. Rep. 692. Ohio. Lander v. Burke, 65 Ohio St. 532, 63 N. E. 69; Hubbard v. Brush, 61 Ohio St. 252, 55 N. E. 829; Lee v. Sturges, 46 Ohio St. 153, 2 L. R. A. 556, 19 N. E. 560; Bradley v. Bauder, 36 Ohio St. 28, 38 Am. Rep. 547; Worthington v. Sebastian, 25 Ohio St. 1. Pennsylvania. McKeen v. County of Northampton, 49 Pa. St. 519, 88 Am. Dec. 515. Rhode Island. Rhode Island Hospital Trust Co. v. Tax Assessors of Providence, 25 R. I. 355, 55 Atl. 877; Dyer v. Osborne, 11 R. I. 321, 23 Am. Rep. 460. In Varner v. Calhoun, 48 Ala. 178, it was held that a tax on stock in a foreign corporation, though expressly named as taxable by the existing statute, could not be collected. This decision, however, is not followed by the later Alabama cases. In referring to it the Supreme Court of Alabama in a later case said: "In Varner v. Calhoun, 48 Ala. 178, it was held that a tax on stock in a foreign corporation, though expressly named as taxable by the existing statute, could not be collected. This decision, however, appears to be against the weight of authority, and at variance with the principle declared by this court in Boyd v. City of Selma, 96 Ala. 144, 16 L. R. A. 729. The latter case, we think, asserts the true doctrine, which is to the effect that, unless otherwise fixed by statute, the situs of shares of stock for the purpose of taxation is at the owner's domicile. * We are unwilling to follow the decision in Varner's case, supra, and it must be overruled." State v. Kidd, 125 Ala. 413, 28 So. 480. And according to some of the cases, this is true notwithstanding the fact that the tangible property 37 or capital stock 38 of the cor A statute which provides that "all property not expressly exempt, shall be subject to taxation" covers shares of the capital stock of both domestic and foreign corporations. Hasely v. Fnsley, 40 Ind. App. 598, 82 N. E. 809. See also Cook v. Board Com'rs Marion Co., 175 Ind. 218, 92 N. E. 876, rehearing denied 175 Ind. 218, 93 N. E. 995. Shares of stock in a foreign corporation, held by a domestic corporation, are taxable as property of the latter, under a constitutional provision that all taxation shall be uniform upon the same class of subjects, and ad valorem on all property subject to be taxed within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws, which is carried out by a statute authorizing a tax on all of the taxable property of the state and requiring taxpayers to make return of the number of shares of stock in foreign corporations which they owned, and the value thereof. Wright v. Louisville & N. R. Co., 195 U. S. 219, 49 L. Ed. 167, rev 'g 116 Fed. 669, 117 Fed. 1007 (mem. dec.). Shares of stock in a foreign corporation are not a part of the capital * of a business done out of this state" within the meaning of the Virginia statute which saves from the tax list bonds, demands, and claims constituting a part of the capital of such a business. Jennings v. Com., 98 Va. 80, 34 S. E. 981. A construction, by officers having the enforcement of the tax laws of the state since the enactment thereof to the effect that, under such laws, shares held by residents of the state in the stock of foreign railroad corporations having property in the state on which they pay taxes, and of consolidated railroad companies, are not taxable, does not bind the successors of such officers, nor the state, in the proper assessment and collection of taxes upon such shares. If it could, the consequence would be the lodging in their hands of the very power of exemption which the general assembly alone can validly wield, and that under the limitations of the Constitution. Lee v. Sturges, 46 Ohio St. 153, 2 L. R. A. 556, 19 N. E. 560. 37 Sturges v. Carter, 114 U. S. 511, 29 L. Ed. 240; City & County of San Francisco v. Fry, 63 Cal. 470; Bradley v. Bauder, 36 Ohio St. 28, 38 Am. Rep. 547. 38 A tax may be lawfully levied on shares of the capital stock held and owned by a resident of the state which imposes the tax, though the corporation has paid taxes on its capital stock or property under the laws of the state under which the corporation was created. Greenleaf v. Board Review Morgan Co., 184 Ill. 226, 75 Am. St. Rep. 168, 56 N. E. 295; Porter v. Rockford, R. I. & St. L. R. Co., 76 Ill. 561. The imposition of such a tax does not constitute double taxation, for the reason that it is well settled that the tangible property of a corporation, and the shares of stock therein, are separate and distinct kinds of property and belong to different owners, the first being the property of the artificial person, the corporation,— the latter the property of the individual owner thereof. Greenleaf v. Board Review Morgan Co., 184 Ill. 226, 75 Am. St. Rep. 168, 56 N. E. 295; Danville Banking & Trust Co. v. Parks, 88 Ill. 170. Under a statute providing that no stockholder shall be liable to taxation for shares held in a foreign corpora poration is taxed in another state, and notwithstanding a constitu tion which is, or the shares in which are liable to taxation in the state by which it was created, it is held that shares of stock in a foreign corporation are not exempt from taxation because a statute of the state of its domicile provides that all corporations incorporated under the laws of such state shall make annual return of the amount of capital stock outstanding, and pay an annual license fee varying in amount of such capital stock for the use of the state, by way of license for its corporate franchise, as such tax is not a property but a franchise tax, and under the statute first mentioned the payment of a franchise tax in the state by which the corporation was created is not a bar to the assessment and collection of a tax upon the market value of such shares in the state by which the statute was enacted. Rhode Island Hospital Trust Co. v. Tax Assessors of Providence, 25 R. I. 355, 55 Atl. 877. Under a statute providing that no person shall be required to list for taxation any share or shares of the capital stock of any company, the capital stock of which is taxed in the name of such company, it is held that investments in the stock of any corporation, foreign or domestic, are exempt from taxation when the capital of the corporation is taxed in its name in the state, and no investments in the stocks of either class of corporations are so exempt unless the capital stock is so taxed in its name, and the obligation imposed by the statute upon such corporations to return their property for taxation, is not equivalent to its actual return, nor sufficient to entitle the sharehold er to the exemption of his shares from taxation. The purpose of such statute being to exempt from taxation the shares of stock in all corpo rations, where the state had exercised the right to tax the capital stock in the name of the corporation, but not otherwise, the right of exemption, therefore, cannot arise where the property of the corporation is situated without the limits and taxing jurisdiction of the state, for in such case there is no means by which the right or power of the state to tax the property in the name of the corporation can be exercised. Lander v. Burke, 65 Ohio St. 532, 63 N. E. 69; Hubbard v. Brush, 61 Ohio St. 252, 55 N. E. 829. See Cuyahoga County Treasurer Brush, 18 Ohio Cir. Ct. 884. V. Under a statute providing that shares in all foreign corporations (except national banks) owned by inhabitants of the state shall be taxed, but shares in a corporation, the property of which is taxable to itself, shall not be assessed to the stockholders, and also providing that all corporate property, except where some other provision is made by law, shall be assessed to the corporation as a natural person, in the name of the corporation, and that personal property shall include "all goods and chattels within the state belonging to inhabitants of this state, whether at home or abroad, and their appurtenances," it was held that shares of stock in a foreign corporation, whose vessels were lying in their winter port in the state, were taxable therein, as such vessels were not taxable in the state. Graham v. Township of St. Joseph, 67 Mich. 652, 35 N. W. 808. The court said: "Vessels are a peculiar class of property. distinguished from property by the statute. erty, owned in other states, owes no duty to Michigan in passing over the waters of the lake, or floating upon its harbors during the close of naviga other They are personal This prop tional prohibition against double taxation.39 Moreover, in a case decided by the Federal Supreme Court, it was held that the taxation. of a resident of the state upon shares of stock which he holds in a foreign corporation which does no business and has no property within the state does not constitute an unconstitutional deprivation. of property within the meaning of the Fourteenth Amendment to the Federal Constitution. Thus holding, the court said: "It is conceded that the objection that the state authorizing the tax denies to the plaintiff in error the equal protection of the laws is not well taken; but it is contended that the shares were not within the jurisdiction of the state, and hence that the enforcement of the tax constitutes an unconstitutional deprivation of property. The power thus challenged has been continuously exercised by the state of Massachusetts for more than three quarters of a century, and its constitutionality has been sustained by repeated state decisions." 40 "While corporate shares possess some peculiar qualities and char tion, which would license the state to seize upon a portion of the boat's property, and use it to discharge the burdens of the state. For certain purposes, it is true, the boats while lying in the harbor, or riding upon the waters of the lake, within the limits of the state, are within the jurisdiction of the state. The free use of those waters, however, is secured to the owner of the vessel by the Constitution and laws of the land; and I do not think it was the intention of the legislature, under our tax law, to impose upon a vessel owned in another state the burden of contributing to the support of our state government because she lands her freight and passengers at our wharves, or rides at anchor in our harbors during the raging of the storm or the inclement season of winter." Under the law of Kansas, the owner of shares of stock in a foreign corporation which has its principal office in the state of its creation is required to list such shares for taxation at their full value, and is not entitled to any deduction although all or prac tically all of the capital of the corporation is invested in real estate and personal property which is domestically taxed. Hunt v. Board Com'rs Allen Co., 82 Kan. 824, 109 Pac. 106. That the shares need not be listed when the foreign corporation's principal office is in Kansas, see Patterson v. Board Com'rs Wilson Co., 83 Kan. 224, 109 Pac. 790. 39 City & County of San Francisco v. Fry, 63 Cal. 470. But see City & County of San Francisco v. Mackay, 10 Sawy. (U. S.) 431, 21 Fed. 539, 22 Fed. 602. 40 Hawley v. Malden, 232 U. S. 1, 58 L. Ed. 477, Ann. Cas. 1916 C 842, aff'g 204 Mass. 138, 90 N. E. 415. It was early decided in Massachusetts that shares of stock in a foreign corporation were taxable as property to the owner resident there, although the place of business and the entire property of the corporation were in another jurisdiction. Bellows Falls Power Co. v. Com., 222 Mass. 51, Ann. Cas. 1916 C 834, 109 N. E. 891, citing Great Barrington v. Berkshire, 16 Pick. (Mass.) 572. |