Bacon v. Board of State Tax Commissioners

Long, J.

Relator is a citizen of this State, a resident of the city of St. Clair, and the owner of a number of shares of stock of the New York Central & Hudson River Railroad Company, of the State of New York. • He is assessed upon the tax roll of said city $50,000 for personal property. This assessed valuation includes the shares of stock held by him in said railroad company. The real estate of said company, and its capital stock in excess of the real estate, are taxed in the State of New York. The stock owned in the State of New York is not taxed. The relator appeared before the board of State tax commissioners at a meeting held in said city on August 20, 1900, and made application to have said assessment reduced by reason of the fact that, as the property and franchises of said corporation are taxed in the State of New York, the stock is not taxable-in this State. The board refused to reduce said assessment, and the matter is presented to this court upon petition for mandamus to compel such reduction.

The questions raised by the parties involve the construction of certain subdivisions, of section 3831,1 Comp. Laws 1897. Those provisions are as follows:

“For the purposes of taxation, personal property shall include: * * * „
“5-. All goods, chattels, and effects belonging to inhabitants of this State, situate without this State, except that property actually and permanently invested in business in another State shall not be included. * * *
“7. All shares in corporations organized under the laws of this State, when the property of such corporations is not exempt, or is not taxable to itself, or when the personal property is not taxed. * * *
“9. All shares in foreign corporations, except national banks, owned by citizens of this State.”

It is contended by counsel for relator:

1. That the statute, in providing for taxation on foreign stocks, is unconstitutional, in that it is not uniform and equal. The argument is that because, under this statute, an individual holding stock issued by a domestic corpora*25tion which pays taxes on its capital stock is not taxed on such individual stock so held by him, the'same rule must be applied to persons owning stock in a foreign corporation whose capital stock is taxed. One owning shares in a corporation is substantially the owner of an aliquot part of the property of the corporation, although the legal title to such property is vested in the corporation, and not in him. The value of his shares can never vary greatly from the value of the property they represent. This is as true of shares of stock in foreign corporations as of those in domestic corporations. The law taxes both, with the exception of cases where the property of the corporation is taxed in this State. Stated thus (and this is the effect of subdivisions 7 and 9, taken together), there is no want of uniformity of method or rule; and there is no impropriety in thus stating it, for the Constitution cannot be supposed to have been framed with a view to what other States might do. It has no jurisdiction over corporations of other States; and when its citizens embark in foreign corporate enterprises, and pay money to them, taking certificates of stock therefrom, this State cannot tax the property of such corporation in its possession outside of this State. Yet, substantially, its citizens have as much property as before; and, if not taxed in another State, there is no reason why it should not be taxed here, like the stock of domestic corporations. The State has said, in effect, to its citizens, “If you invest your property in corporations, you shall be taxed upon the shares, except where the property of the corporation is taxed to the corporation by this State.” We may doubt the abstract justice of this; hut we believe the State has the power to tax the shares of residents in foreign corporations, and that this power is not affected by the action of another State in imposing taxes upon the corporations. Michigan owes much to the investment of foreign money in her corporations which she taxes, and it is probably to her interest that moneys so invested be not taxed again elsewhere; but she is powerless to prevent it, though it goes without saying that the *26property, in effect, is taxed twice. There are the questions of policy and abstract justice involved, both protesting-against double taxation; but the legislatures of the States are judges of both policy and propriety, so long as the constitutions have not forbidden it, and the weight of authority supports the claim that, in the absence of clear and express prohibition, they have not.

In the case of Youngblood v. Sexton, 32 Mich. 406 (20 Am. Rep. 654), a tax was objected to as violating the constitutional rule of equality and uniformity. It was said:

“If the precise point here is that the tax is unequal and unjust because it is not levied in proportion to the business done, then the objection is without force. It may possibly be true that an apportionment according to the business done would have been more just, but a question of this nature concerns the legislature, and not us. Courts cannot annul tax laws because of their operating unequally and unjustly. If they could, they might defeat all taxation whatsoever, for there never yet was a tax law that was not more or less unequal and unjust in its practical workings. * * * Apportionment of taxation is purely a legislative function.”

In Insurance Co. v. City of New Orleans, 1 Woods, 85, 89 (Fed. Cas. No. 7,052), it was said, quoting from State v. Lathrop, 10 La. Ann. 402:

“This is a suit for $1,000 tax on a foreign insurance company, not chartered by this State, and transacting business therein. * * * It is resisted on the ground that the same statute imposes a tax of but $500 upon an insurance company incorporated by the laws of this State and transacting business therein. The defendant contends that the distinction made between these two classes of insurance companies is a violation of article 123 of the State constitution, which declares that ‘ taxation shall be equal and uniform throughout the State.’ The provision of the constitution relied on by defendant has not deprived the legislature of the power of dividing the objects of taxation into classes. It merely obliges the legislature to impose an equal burden upon all those who find themselves in the same class.”

*27This doctrine is supported by Hughes v. City of Cairo, 92 Ill. 339; Lee v. Sturges, 46 Ohio St. 153 (19 N. E. 560, 2 L. R. A. 556); Sturges v. Carter, 114 U. S. 511 (5 Sup. Ct. 1014); Graham v. Township of St. Joseph, 67 Mich. 652 (35 N. W. 808).

We think the determination of this question is for the legislature, and not subject to review by the courts. It appears from the statute itself that shares in foreign cor-1 porations are taxed in this State but once, and the shares in domestic corporations or their representatives are also taxed. The question of the effect of statutes of foreign States cannot be considered, nor can such statutes have any effect in this State upon the question of the uniformity of the rules of taxation. The stock has a situs in this State, and is subject to the control of the legislature for the purpose of taxation.

2. It is further contended by counsel for relator that the law of 1893 (section 3831, 1 Comp. Laws 1897) has an element of doubt and uncertainty in it as to the intent of the legislature to include such property for taxation in this State, as it is provided by subdivision 5 that personal property actually and permanently invested in any other State shall not be included, while subdivision 9 includes for taxation all shares in foreign corporations owned by citizens of this State, except national bank stocks. It is also contended that it was the intent of the legislature to provide taxation upon such property against citizens of the State; that it is evident the legislature used the word “citizen” in its restricted sense, and that the act was intended to provide taxation against a citizen of the State residing in New York or Ohio, or any other place outside the State, — one who returns for the purpose of voting at elections, but resides for the most part in foreign jurisdictions; that the word “citizen,” as used in this statute, was intended to reach a large class of persons who are citizens of this State and reside elsewhere; that, under the construction contended for by the respondent, all citizens who are nonresidents of the State *28would escape taxation. It is claimed that the construction contended for by relator is made apparent from the change made in 1893 from the former provisions of the statute; that the statute of 1889 (Act No. 195) provided, as did the law of 1885, for taxation upon all ships, boats, and vessels belonging to inhabitants of this State, whether at home or abroad, and all goods, chattels, and effects belonging to inhabitants of this State, situate without this State, and all shares in foreign corporations, except national banks, owned by inhabitants of this State; that the law of 1889 used the word “inhabitant” in providing for taxation upon personal property, while in the enactment of 1893 this word was eliminated, and the word “citizen” substituted, when referring to stock in foreign corporations; that section 3831, 1 Comp. Laws 1897, by subdivision 5, provides for taxation upon all goods, chattels, and effects belonging to inhabitants of this State, situate without this State, except that property actually and permanently invested in business in any other State shall not be included; that the word “inhabitants,” as used in these statutes, reaches all persons who are residents of the State, while the word “citizens” as used is intended to reach a class of persons who are citizens of the State and reside elsewhere; that by this construction all citizens of the State who are nonresidents of the State could be taxed under this law, while, if it only provided that inhabitants of the State should be taxed, then nonresident citizens would escape taxation; and it is thus insisted that the change made in 1893, by striking out the word “inhabitant” and inserting in lieu thereof the word “citizen,” was made to meet this situation. It is claimed that, under this construction, a rule of taxation is provided which is not uniform, as it does not operate upon all of this kind of property alike, and whether it is taxable or not depends upon who is the owner of it. It is claimed that the statute does not provide that all foreign stocks shall be taxed; that it provides only for the taxation of stocks owned by citizens of the State.

*29We think this contention has no force, and that it does not accord with the plain provisions of subdivision 9. We think the legislature intended to use the word “citizen” as synonymous with “inhabitant” or “resident.” As was said in McKenzie v. Murphy, 24 Ark. 155, 159:

“The word ‘citizen’ is often used in common conversation and writing as meaning only an inhabitant, a resident, of a town, State, or county, without any implication of political or civil privileges.”

In State v. Trustees of Delhi Township, 11 Ohio, 24, 27, it was said:

“Here a question is raised as to the meaning of the word ‘citizen’ as used in this connection. That this word does not always mean one and the same thing is clear. Thus we speak of a person as a citizen of a particular place,- when we mean nothing more by it than that he is a resident of that place. When we speak of a citizen of the United States, we mean one who was born within the limits of, or has been naturalized by the laws of, the United States. It can hardly be believed that the législature, in using the word ‘citizen’ in this statute, intended to make a distinction between native or naturalized citizens and resident aliens.”

We think it was not intended by the legislature to limit the word to persons who are actually citizens in a political sense. A liberal construction must be given to the tax laws for public purposes. Mr. Justice Grant said in Auditor General v. Hutchinson, 113 Mich. 245 (71 N. W. 514): “Tax laws should be liberally construed.” See, also, U. S. v. Hodson, 10 Wall. 395; U. S. v. Taylor, 104 U. S. 216.

3. One other question is raised. It is claimed that the taxation of relator’s stock is in contravention of section 1, art. 4, of the Constitution of the United States, which provides that “full faith and credit shall be given in each State to the public acts, records, and judicial proceedings of every other State.” This contention cannot be sustained. In Bonaparte v. Tax Court, 104 U. S. 592, the question the court was asked to decide was whether thq *30registered public debt of one State, exempt from taxation by the debtor State, or actually taxed there, was taxable by another State, when owned by a resident of the latter State. The court said:

“We know of no provision of the Constitution of the United States which prohibits such taxation. * * * It is insisted, however, that the immunity asked for arises from article 4, § 1, of the Constitution, which provides that full faith and credit shall be given in each State to the public acts of every other State. We are unable to give such an effect to this provision. * * * While the Constitution of the United States might have been so framed as to afford relief against such a disability, it has not been, and the States are left free to extend the comity which is sought, or not, as they please.”

It was further remarked in the case that:

“No State can legislate except with reference to its own jurisdiction. One State cannot exempt property from taxation in another.”

In Bradley v. Bander, 36 Ohio St. 28, 36 (38 Am. Rep. 547), it was said:

“The constitutional power to tax shares of stock owned by our citizens in corporations located without the State does not depend on whether the capital of the corporation is or is not taxed in the State where the corporation is created. The power is the same whether the capital of the corporation is there taxed or not; otherwise, the power of taxation conferred by the constitution would be made to depend upon the operation of laws of.a foreign jurisdiction, — a proposition so obviously ill-founded that the moment it is stated its falsity becomes apparent.”

See, also, Dwight v. Mayor, etc., of Boston, 12 Allen, 316 (90 Am. Dec. 149), where the same doctrine is laid down.

Cooley, in his work on Taxation, lays down the same rule. He says:

“The shares owned by residents in foreign corporations may be taxed to the owners, even though the corporations themselves are taxed in the jurisdiction where their operations are carried on.” Cooley, Tax’n (2d Ed.), 57.

*31The writ must be denied.

Montgomery, C. J., Hooker and Moore, JJ., concurred with Long, J.