54

the power of a State to tax securities situated as these are, while there have been frequent recognitions of its power to separate for purposes of taxation the situs of personal property from the domicile of the owner." Of the dictum of the court in State Tax on Foreign-Held Bonds that "personal property, consisting of bonds, mortgages and debts generally, has no situs independent of the domicile of the owner, and certainly can have none where the instruments, constituting the evidences of debt are not separated from the possession of the owners," the court say: "This last sentence, properly construed, is not to be taken as a denial of the power of the legislature to establish an independent situs for bonds and mortgages when those properties are not in the possession of the owner, but simply that the fiction of the law so often referred to, declares their situs to be that of the domicile of the owner, a declaration which the legislature has no power to disturb when, in fact, they are in his possession."

After citing various cases, including Tappan v. Merchants' National Bank,55 Savings and Loan Society v. Multnomah Co.56 and Kirtland v. Hotchkiss the opinion concludes: "It is well settled that bank bills and municipal bonds are in such a concrete tangible form that they are subject to taxation wherever found, irrespective of the. domicile of the owner; are subject to levy and sale on execution, and to seizure and delivery under replevin, and yet they are but promises to pay - evidences of existing indebtedNotes and mortgages are of the same nature; and while they may not have become so generally recognized as tangible personal property, yet they have such a concrete form that we see no reason why a, State may not declare that if found within its limits. they shall be subject to taxation."

ness.

In Bristol v. Washington Co.,58 decided in 1900, it was held that investments by a non-resident of a State are subject to taxation under the laws of the State, when made by a resident agent

54 15 Wall, 300; 21 L. ed. 179.

55 19 Wall. 490; 22 L. ed. 189.

56 169 U. S. 421; 18 Sup. Ct. Rep. 392; 42 L. ed. 803.

57 100 U. S. 491; 25 L. ed. 558.

58 177 U. S. 133; 20 Sup. Ct. Rep. 585; 44 L. ed. 701.

who is employed to invest the moneys received, the loans being made payable at his office, he retaining the mortgages securing them, and the notes taken for the loans being returned to him whenever required for renewal, collection, or foreclosure of securities. The fact that the agent was given no authority to execute satisfactions of mortgages was held not controlling. Here it is plain that the notes as property were separated from the person of the owner and given a situs where they were in fact held and the business relating to them carried on. The court, in its opinion, quoting with approval the opinion of the state court, say: "A credit which cannot be regarded as situated in a place mercly because the debtor resides there, must usually be considered as having its situs where it is owned, at the domicile of the creditor. The creditor, however, may give it a business situs elsewhere; or where he places it in the hands of an agent for collection or renewal, with a view to retaining the money and keeping it invested as a permanent business. . . The obligation to pay taxes on property for the support of the government arises from the fact that it is under the protection of the government. Now here was property within the State, not for a mere temporary purpose, but as permanently as though the owner resided here. It was employed here as a business by one who exercised over it the same control and management as over his own property, except that he did it in the name of an absent principal. It was exclusively under the protection of the laws of this State. It had to rely on those laws for the force and validity of the contracts on the loans and the preservation and enforcement of the securities. The laws of New York never operated on it."

...

In Blackstone v. Miller, 59 decided in 1903, the court hold that a State may tax the transfer, under the will of a non-resident, of debts due the decedent by its citizens. As to the doctrine that, generally speaking, in matters of succession the law of the domicile of the decedent is recognized in other jurisdictions, the court say: "It hardly needs illustration to show that the recognition is limited by the policy of the local law. Ancillary administrators 59 188 U. S. 189; 23 Sup. Ct. Rep. 277; 47 L. ed. 439.

pay the local debts before turning over the residue to be distributed, or distributing it themselves, according to the rules of the domicile. The title of the principal administrator, or of a foreign assignee in bankruptcy - another type of universal succession is admitted in but a limited way or not at all.

To come closer to the point, no one doubts that succession to a tangible chattel may be taxed wherever the property is found, and none the less that the law of the situs accepts its rules of succession from the law of the domicile, or that by the law of the domicile the chattel is part of a universitas and is taken into account again in the succession there.”

Distinguishing the doctrine of this case from that in State Tax on Foreign-Held Bonds the court say: "The taxation in that case was on the interest on bonds held out of the State. Bonds and negotiable instruments are more than merely evidences of debt. The debt is inseparable from the paper which declares and constitutes it, by a tradition which comes down from more archaic conditions. (Bacon v. Hooker, 177 Mass. 333.) Therefore, considering only the place of the property it was held that bonds held out of the State could not be reached. The decision has been cut down to its precise point by later cases."

GO

In State Board of Assessors v. Comptoir National D'Escompte, decided in 1903, it was held that a State is not forbidden by the federal Constitution to tax credits based upon loans on collateral security made by the local agent of a foreign corporation, the collateral being retained by the agent, and the credits. being either in the form of credits on Paris or London, or simply of overdrafts, upon which the customer was charged interest.

In Buck v. Beach,61 however, the court found itself obliged to deny the power of the State of Indiana to tax certain notes which were in the hands of an agent within the State, and which, it appeared, had been placed, together with the mortgages securing their payment, in his hands to escape their taxation in Ohio, but with nothing else to connect them with the State and give them a

60 191 U. S. 388; 24 Sup. Ct. Rep. 109; 48 L. ed. 232. 61 206 U. S. 392; 27 Sup. Ct. Rep. 712; 51 L. ed. 1106.

situs there. These notes were given and payable in Ohio by residents of that State, to a resident of New York, for loans made in Ohio on lands there situated. In other words, it was held that notes evidencing debts may not, for taxing purposes, be given a situs merely by their actual presence in the State. There must be, in addition, some facts which, aside from the mere fact of their being protected by the police power, will bring them under the operation and protection of the local law. The fact of an attempt to escape proper taxation in Ohio, it was declared, did not confer jurisdiction upon Indiana to tax property not really within its borders.2

§ 544. Taxation of Franchises.

The State which incorporates, and that State only, may tax the franchise of a corporation, that is, its right to be and operate as a corporation. In Louisville & Jeffersonville Ferry Co. v. Kentucky the court say, with reference to the attempt of Kentucky to include for purposes of taxation the valuation of a ferry franchise granted to Indiana: "Beyond all question, the ferry franchise derived from Indiana is an incorporeal hereditament derived from and having its legal situs in that State. It is not within the jurisdiction of Kentucky. The taxation of that franchise or incorporeal hereditament by Kentucky is, in our opinion, a deprivation by that State of the property of the ferry company without due process of law in violation of the Fourteenth Amendment of the Constitution of the United States; as much as if the State taxed the real estate owned by that company in Indiana."

It would seem, however, that the franchise or permission granted a foreign corporation to do business in a State may be taxed as property in that State. Also, of course, a yearly pay

62 In a dissenting opinion, concurred in by Justice Brewer, Justice Day declared: "In view of the recognition of the character of bills and notes as tangible property, it seems to me inaccurate to say that they are mere evidences of debt. They are tangible things, capable of delivery, passing from hand to hand, and for many purposes may be regarded as of the value of the debt which they evidence.”

63 188 U. S. 385; 23 Sup. Ct. Rep. 463; 47 L. ed. 513.

ment by the companies may be required by that State as a condition precedent to doing business in that State, but such payments partake more of the nature of a license fee than of a tax.

As regards a domestic corporation, a State may tax not only its property, and its franchise (valuing that franchise by net or gross receipts) but also may tax, as property, privileges or rights which it may have granted, as, for example, the use of the public streets. The fact that, at the time of the granting of this right or privilege, payment was made therefor by the company, either in the form of a lump sum or a continuing annual amount, does not exempt that right from taxation according to its pecuniary value, any more than does the purchase of a piece of land from the State and payment therefor exempt it from future taxation as property.

64

§ 545. Taxation of Good-Will

That a franchise may be taxed as a piece of property, and that, in estimating the value of this property, the value of the goodwill of the company may be included, is clearly established in Adams Express Co. v. Ohio.65

64 People v. Roberts, 154 N. Y. 101; 159 N. Y. 70.

65 166 U. S. 185; 17 Sup. Ct. Rep. 604; 41 L. ed. 965.

66

In the complex civilization of to-day a large portion of the wealth of a community consists in intangible property, and there is nothing in the nature of things or in the limitations of the federal Constitution which restrains a State from taxing at its real value such intangible property. . . . 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."

In State Railroad Tax Cases (92 U. S. 575, 603; 23 L. ed. 663, 669), is this language by Mr. Justice Miller, speaking for the court:

"That the franchise, capital stock, business, and profits of all corporations are liable to taxation in the place where they do business, and by the State which creates them, admits of no dispute at this day. Nothing can be more certain in legal decisions,' says this court in Society for Savings v. Coite (6) Wall. 607; 18 L. ed. 903), ‘than that the privileges and franchises of a private