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it is to be sent out of the State later. So it has been held that a contractor's outfit, consisting of mules, scrapers, etc., to be used for several months in constructing a railroad bed was sufficiently fixed within the State to be taxed.65

§ 493. What property is situated within the State: credits in the hands of agents.

Where a foreigner has an agent within the State, by whom investments are made, who collects the income and transmits it to his principal, it is usually held that the "credits" have a situs in the hands of the agent within the State and may be taxed there.66 And so where money was permanently kept by a New York corporation in an English bank as a fund to defray expenses incurred in England and France, it was held not to be taxable in New York.67

If, however, the credit is left in the hands of an agent in the State not for investment, but merely to be collected and the proceeds transmitted to the owner abroad, the better view is that it is not property within the State.68 In such a case Chief Justice Magruder said: "Where the owner of such credits or securities is a non-resident of Illinois, and is absent from that state, his securities, remaining in this state in the hands of an agent, are only subject to taxation in this state when they are so left in the hands of the agent for the purpose of

65 Griggsry Constr. Co. v. Freeman, 108 La. 435, 32 So. 399.

66 New Orleans v. Stempel, 175 U. S. 309, 44 L. ed. 174; Walker v. Jack, 88 Fed. 576; Matzenbaugh v. People, 194 Ill. 108, 62 N. E. 546, 88 A. S. R. 134; Foresman v. Byrns, 68 Ind. 247 (semble); In re Jefferson, 35 Minn. 215; Finch v. York Co., 19 Neb. 50, 26 N. W. 589, 56 A. R. 741; People v. Smith, 88 N. Y. 576; Catlin v. Hull, 21 Vt. 152.

In Myers v. Seaberger, 45 Oh. St. 232, 12 N. E. 796, a distinction was made between a mere agent for collection and an agent for investment; credits not being taxable in the hands of the former.

In several cases, especially older ones, it is simply held that the credits are with the creditor and cannot be elsewhere. Hunter v. Board of Supervisors, 33 Ia. 376, 11 A. R. 132.

67 P. v. Feitner, 32 N. Y. Misc. 84.

68 Reat v. People, 201 Ill. 469, 66 N. E. 242; Myers v. Seaberger, 45 Oh. S. 232.

having them renewed or collected, in order that the money realized from such renewal or collection may be reloaned by the agent as a permanent business. The credits of the nonresident owner, so remaining in Illinois, must constitute the subject-matter or stock in trade of the business of the owner as conducted by the agent." 69

§ 494. What property is situated within the State: mortgage debts.

Where a credit is secured by mortgage, can it be taxed where the security is? It has been held in England that where a debt due to a foreigner is secured by real estate or other property within the State, it may be taxed to the extent of the value of the security thereby given; which may amount at most to the value of the security (provided that is no greater than the debt), but if there is other security outside the State that must be taken into account in estimating the value of the security.70 But though there may be a technical difference between the property held as security and the security thereby given, it is practically double taxation to tax both the property and the security. Indeed, it has been held in California double taxation, and for that reason unconstitutional, to tax both the property secured and the debt; and a tax on the bonds of a domestic corporation, secured by a mortgage of property of the corporation on which it paid a tax, was held void."1 And it has generally been held in this country that a credit belonging to a foreigner can in no way be taxed, though secured by mortgage of real estate within the jurisdiction.72 It is clear that such credits may be taxed in the State in which the creditor resides.73

69 Reat v. People, supra.

70 Walsh v. Queen, [1894] A. C. 144.

71 Germania Trust Co. v. San Francisco, 128 Cal. 589, 61 Pac. 178; In re Fair's Estate, 128 Cal. 607, 61 Pac. 184.

72 People v. Eastman, 25 Cal. 601; Comrs. v. Cutter, 3 Colo. 349; State v. Earl, 1 Nev. 394; Darcy v. Darcy, 51 N. J. L. 140, 16 Atl. 160.

73 State v. Gaylord, 73 Wis. 316, 41 N. W. 521.

CHAPTER XXI.

TAXATION OF INTANGIBLE PROPERTY.

§ 501. Situs of intangible property. | § 506. Taxation of corporate prop

502. Intangible property with a

real situs.

503. Corporate capital.

504. The "corporate excess."

505. Division of intangible property between States.

§ 501. Situs of intangible property.

erty as a unit.

507. The rule now established. 508. Franchise tax.

509. Privilege tax.

Mere intangible property, not represented by a tangible security of value, is not in fact situated anywhere, or subject to any jurisdiction by reason of its situs. It is, to be sure, often said that a chose in action has a situs with the debtor, or with the creditor; and courts are in hopeless confusion on the question whether the obligation should properly be held to be situated with the one or the other. But to assign place to an intangible and incorporeal thing is at most a mere fiction, upon which jurisdiction for taxation should not be founded. Such intangible property can be reached only through the owner and at his domicil, since it forms part of his property, and he may be taxed according to the amount of his property.

But there is a growing tendency to assign certain kinds of intangible property to some situs, and permit their taxation there. In Adams Express Co. v. Ohio State Auditor,1 Brewer, J., used this most suggestive and pregnant language:

"In conclusion, let us say that this is eminently a practical age; that courts must recognize things as they are, and as possessing a value which is accorded to them in the markets

1 166 U. S. 185, 41 L. ed. 965.

of the world; and that no finespun theories about situs should interfere to enable these large corporations, whose business is, of necessity, carried on through many states, from bearing in each state such burden of taxation as a fair distribution of the actual value of their property among those states requires." § 502. Intangible property with a real situs.

Certain exceptional kinds of intangible property may without too great use of fictions be assigned a real situs. Certain examples of this kind, established by authority, have already been considered; but these are assigned a situs by treating them as quasi-tangible. Property still recognized as intangible may, however, have such connection with some place as to give jurisdiction over it to the sovereign of that place. A type of such property is a judgment, which cannot be dissociated from the court that rendered it, and is entirely within the jurisdiction of such court.

Upon this principle it is held that the good-will of a business has a situs where the business is carried on, and only there; there can therefore strictly be no division between States of this portion of the intangible property of a corporation, but the entire value of the good will which results from exercising the corporate franchise and carrying on business within the State, is taxable there. So too it would seem that the franchise of a foreign corporation to do business within a State may be taxed there as property there situate. And so when this intangible property is a franchise for a ferry granted by another State, which is regarded as an incorporeal hereditament, it cannot be included in any scheme of taxation, for it is without the State, and is situate locally (like other real estate) in the State which granted it.4

2 People v. Roberts, 159 N. Y. 70, 53 N. E. 685, 45 L. R. A. 126; People v. Roberts, 55 N. Y. Supp. 317, 37 App. Div. 1. But see contra, Hart v. Smith, 159 Ind. 182, 64 N. E. 661, 95 A. S. R. 280 (semble).

3 London, etc., Bank v. Block, 117 Fed. 900; Oakland Sugar Mill Co. v. Fred W. Wolf Co., 118 Fed. 239.

* Louisville & J. Ferry Co. v. Kentucky, 188 U. S. 385, 47 L. ed. 513.

8503. Corporate capital.

The most important form of intangible property of a corporation is the "corporate excess:" the amount by which the aggregate value of the shares of capital stock exceeds the tangible property of the corporation. This excess represents the good-will of the business, the franchise of the corporation to act as such, and its franchise to carry on its business; broadly speaking, the value of the business as a going concern. In most States an effort is made to reach and tax this corporate excess. The simplest but least satisfactory method is to tax all the assets of the company, tangible and intangible, as a unit, or to place a valuation on the franchise as a separate item of property. Another method is to tax the capital stock as a whole; either by determining the aggregate value of the shares and taxing them, or by taxing the difference between such aggregate value and the value of the tangible property as "capital stock," in addition to taxing the tangible property. These methods will be examined in detail in connection with the laws of the particular States.

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The business capital of a corporation which is not invested in tangible property may be taxed at its place of business. Thus the Supreme Court of the United States has held that the

5 Ark. Stat. § 6462; 32 U. S. Stat. 619 (Dist. Colo.); Fla. Rev. Stat. App. ch. 1410, 8; Porter v. Rockford, R. I. & S. L. R. R., 76 Ill. 561; Ky. 1902, ch. 128, Art. 1, § 2 (for State tax); La. 1890, Act 106; Mich. 1893, Act 6, § 19; N. Car. 1903, Machin. Act, § 34; Washburn v. Washburn W. W. Co., (Wis.) 98 N. W. 539; Wyo. Rev. Stat. § 1775.

§ 8.

Tenn. 1901, ch. 174, § 22; Tex. Rev. Stat. Art. 5067; Wash. 1897, ch. 71,

7 Ia. Code, § 1323; Mass. 1903, ch. 437, § 74; N. Y. Tax L. § 12; Pa. P. L. 1893, p. 353.

8 Ala. 1901, Act 1151, § 6; Spring Valley W. W. v. Schottler, 62 Cal. 69; Ida. Polit. Code, § 1312; Ill. Rev. Stat. ch. 120, § 3; Ind. Rev. Stat. §§ 8422, 8435, 8492; Kan. Gen. Stat. ch. 158, § 28; Minn. Code, § 3758; Mo. Code, 9153; Neb. 1903, ch. 73, § 29; Nev. 1891 (Mar. 23), § 6; N. Dak. 1897, ch. 126, § 25; S. Dak. 1901, ch. 55, § 8.

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