intangible property of a foreign corporation, created by the acquisition of franchises and privileges within the State, may be taxed. Mr. Justice Brewer said:

"It matters not in what this intangible property consists,whether privileges, corporate franchises, contracts, or obligations. It is enough that it is property which, though intangible, exists, which has value, produces income, and passes current in the markets of the world. To ignore this intangible property, or to hold that it is not subject to taxation at its accepted value, is to eliminate from the reach of the taxing power a large portion of the wealth of the country.

"Suppose an express company is incorporated to transact business within the limits of a state, and does business only within such limits, and, for the purpose of transacting that business, purchases and holds a few thousands of dollars' worth of horses and wagons, and yet it so meets the wants of the people dwelling in that state, so uses the tangible property which it possesses, so transacts business therein, that its stock becomes in the markets of the state of the actual cash value of hundreds of thousands of dollars. To the owners thereof, for the purposes of income and sale, the corporate property is worth hundreds of thousands of dollars. Does substance of right require that it shall pay taxes only upon the thousands of dollars of tangible property which it possesses? Accumulated wealth will laugh at the crudity of taxing laws which reach only the one, and ignore the other; while they who own tangible property, not organized into a single producing plant, will feel the injustice of a system which so misplaces the burden of taxation. . .

"Where is the situs of this intangible property? Is it simply where its home office is, where is found the central directing thought which controls the workings of the great machine, or in the state which gave it its corporate franchise; or is that intangible property distributed wherever its tangible property is located and its work is done? Clearly, as we think, • Adams Express Co. v. Ohio State Auditor, 166 U. S. 185, 41 L. ed. 965.

the latter.... The Southern Pacific Railway Company is a corporation chartered by the state of Kentucky; yet, within the limits of that state, it is said to have no tangible property, and no office for the transaction of business. The vast amount of tangible property which, by lease or otherwise, it holds and operates, and all the franchises to do which it exercises, exist and are exercised in the states and territories on the Pacific slope. Do not these intangible properties,—these franchises to do, exercised in connection with the tangible property which it holds, create a substantive matter of taxation, to be asserted by every state in which that tangible property is found?"

It has been thought worth while to quote at length from this opinion, because in it is expressed, more forcibly perhaps than anywhere else, a distinct tendency of the law; a tendency which is likely to lead to novel methods of taxing "values," to use a mercantile term, rather than property in the legal sense. To the extent of taxing the value of a business at the place where it is carried on, the law is already settled.

It is to be noticed that such a tax may include a tax upon tangible property. In that case if the tangible property has already been taxed as such in the same state, the tax on the business might to that extent be invalid as double taxation.10 What provisions have been adopted to prevent such double taxation will be discussed in connection with the laws of the States.

§ 505. Division of intangible property between States.

Where this intangible property results from the entire business carried on in several States, it is obvious that one of these States cannot claim the whole of the property as taxable. The proper proceeding in that case is to tax that portion of the whole amount which the amount of business done within the State bears to the total amount of business.11 And this 10 S. W. Tel. & Tel. Co. v. Merschuelt, (Tex. Civ. App.) 65 S. W. 381. 11 W. U. Tel. C. v. Mass., 125 U. S. 530, 31 L. ed. 790; Massachusetts v.

is usually done in the case of business carried on upon a tangible route, like that of a railroad or telegraph company, by dividing the whole value of the business among the States in proportion to the mileage; a method already approved for the division of rolling-stock among States for taxation. This method of division has been extended to the cases of palace cars and express companies, though they own no track of their own.12

§ 506. Taxation of corporate property as a unit.

A method commonly taken to impose taxation on the corporate excess locally is to regard the whole property of the corporation as a unit employed in business, a proportionate part of which exists wherever the business of the corporation is carried on. This theory and its justifiable limits were lately discussed most luminously by Mr. Justice Holmes, in an opinion which probably settles a vexed and difficult controversy.13 A State, he says, "can tax property permanently within its jurisdiction although belonging to persons domiciled elsewhere and used in commerce among the states. And when that property is part of a system and has its actual uses only in connection with other parts of the system, that fact may be considered by the state in taxing, even though the other parts of the system are outside of the state. The sleepers and rails of a railroad, or the posts and wires of a telegraph company, are worth more than the prepared wood and the bars of steel. W. U. Tel. Co., 141 U. S. 40, 35 L. ed. 628; Adams Exp. Co. v. Ohio State Auditor, 166 U. S. 185, 41 L. ed. 965; New York v. Roberts, 171 U. S. 658, 43 L. ed. 323; W. U. Tel. Co. v. Missouri, 190 U. S. 412, 47 L. ed. 1116; People v. Roberts, 152 N. Y. 59, 46 N. E. 161, 36 L. R. A. 756; Commissioners v. Old Dominion S. S. Co., 128 N. C. 558, 39 S. E. 558; Com. v. Standard Oil Co., 101 Pa. 119. See contra, Re Queenstown Heights Bridge, 1 Ont. Law. Rep. 114.

12 American Express Co. v. Indiana, 165 U. S. 255, 41 L. ed. 707; Adams Express Co. v. Ohio State Auditor, 165 U. S. 194, 41 L. ed. 683, 166 U. S. 185, 41 L. ed. 965; Adams Express Co. v. Kentucky, 166 U. S. 185, 41 L. ed. 965.

13 Fargo v. Hart, 193 U. S. 490.

or coils of wire, from their organic connection with other rails or wires and the rest of the apparatus of a working whole. This being clear, it is held reasonable and constitutional to get at the worth of such a line, in the absence of anything more special, by a mileage proportion. The tax is a tax on property, not on the privilege of doing the business, but it is intended to reach the intangible value due to what we have called the organic relation of the property to the whole system.14 And this principle, established by many cases, has been extended by the cases first cited above to the lines of express companies, although those lines are not material lines upon the face of the earth. There is the same organic connection as in the other cases."

But a limitation which has not previously been stated must be placed upon this doctrine; for it cannot be so applied as to tax property not really in the State.

"It is obvious, however, that this notion of organic unity may be made a means of unlawfully taxing the privilege or property outside the state, under the name of enhanced value or good will, if it is not closely confined to its true meaning. So long as it fairly may be assumed that the different parts of a line are about equal in value, a division by mileage is justifiable. But it is recognized in the cases that if, for instance, a railroad company had terminals in one state equal in value to all the rest of the line through another, the latter state could not make use of the unity of the road to equalize the value of every mile. That would be taxing property outside of the State under a pretense. 15 The same principle applies to personal property which the State would not have the right to tax directly." 16

In the case in question the State had included in the busi

14 Citing Western U. T. Co. v. Taggart, 163 U. S. 1, 21, 41 L. ed. 49, 57. 15 Citing Pittsburgh, C. C. & S. L. R. R. v. Backus, 154 U. S. 421, 431, 38 L. ed. 1031, 1038; Western U. T. Co. v. Taggart, supra.

16 Citing Adams Express Co. v. Ohio State Auditor, 165 U. S. 194, 227, 165 U. S. 185, 222, 223, 41 L. ed. 683, 697, 965, 978.

ness value of the corporate assets, of which a proportional part was taxed, certain stocks and bonds held by the foreign corporation in its State of charter as invested surplus. It was argued that by swelling the assets of the company the property added to its credit, and thus directly affected the value of the whole business. The court, however, held this point unsound, and declared the tax invalid.

"It will be seen that we are dealing with much more attenuated relations than when there is a physical line of rails or wires to be valued, every mile of which is a necessary condition of the use of the rest of the lines beyond, and therefore a reflex condition of the value of the line behind it. The case is stronger even than one of terminals having a large value as real estate independent of their use to the road. The express business added nothing to the value of the bonds in New York. Conversely, the utmost extent to which those bonds entered into the value of property in Indiana was in so far as they helped to make the public believe that the express company could be trusted, and therefore increased its good will. That they made a part of the public more willing to buy interests in the company because they were an assurance against personal liability was no concern of Indiana. But it is obvious that, merely from the point of view that the express company could be trusted by the public with the carriage of goods or money, the good will could not be measured by the assets.

"Certainly it is absurd to say that the business of such companies will bear an exact or any proportion to the stocks and bonds which they may own. Unless we are much mistaken, most people who want to send things by express employ a company simply because it is there, and they see its sign is out. The only effect that knowledge of the capital of the company could have would be to produce the conviction that the company was safe to employ. Assume that something is to be added to the good will of a company because it is safe, and that the good will, or a part of it, of the express business in Indiana may be considered in assessing its property there,