delivered the opinion of the Court.
This case is here on appeal, Jud. Code § 237, from a judgment of the Supreme Court of California, denying *488recovery of a tax paid by appellant, a California corporation, for the privilege of doing business within the state, and exacted .under a statute1 alleged to be in contravention of the contract clause, Art. I, § 10, of the Federal Constitution. 212 Cal. 148. The annual tax is, for domestic corporations, a\ specified percentage of the net income of the corporation for the next preceding fiscal or calendar year. By § 7 of the statute, net income is defined as “ gross income ” less certain allowed deductions, and § 6 provides that “gross income ... includes . . . -all interest received from federal, state, municipal or other, bonds ...” Section 1% of Art. XIII of the Constitution of California, adopted in 1902, provides that bonds issued by political subdivisions of the State and its municipalities “ shall be free and exempt from taxation.”
The State Franchise Tax Commissioner, in assessing appellant’s franchise tax for the year 1928, included in its gross income interest derived from improvement district bonds, issued after the adoption of the quoted exemption provision of the Constitution, but before the constitutional amendment and the statute authorizing the tax. The present suit was brought to recover so much of the tax as results from the inclusion, in the computation, of the interest received from the tax-exempt bonds. Appellant insists that, under the exemption clause of the State Constitution, it acquired a contractual immunity from state taxation of the bonds or their income, and that the later statute, by authorizing the inclusion of the bond interest in the' measure of the tax, in effect taxed the income and thus impaired the obligation of the contract.
*489If, as appellant argues, the exemption from taxation' of the bonds is contractual and extends fo the income derived from them, the question still remains whether the immunity is broad enough to secure freedom from taxation of a corporate franchise, to the extent that it is measured by tax-exempt income. This Court, in answering that question, will, in the absence of applicable state decisions antedating the alleged impairment, be guided by generally accepted principles -of construction which have been recognized and acted upon by this Court.
Until the article of the Constitution adopted in 1928, and the statute of 1929, there were no provisions in the Constitution and laws of California for taxing corporate franchises by the present method, and until .this case no decision by any court of the state had determined whether the granted immunity extends to a tax upon corporate franchises because tax-free property or income is included in its measure. Long before the adoption of the constitutional exemption, there was a well-recognized distinction between a tax on the privilege of exercising the corporate franchise and a tax bn corporate property or income, even though the former was measured by the latter, and tax immunity of the property or income-was not deemed to extend to the franchise.
The power of a state to levy a franchise tax measured by net property or income including tax-exempt bonds of the United States or their income was upheld by this Court in Society for Savings v. Coite (1868), 6 Wall. 694; Provident Institution v. Massachusetts (1868), 6 Wall. 611; Home Insurance Co. v. New York (1890), 134 U. S. 594. State laws taxing shareholders of national banks on the full net value of their shares, although the banks own tax-exempt federal securities, have also been consistently. upheld. Van Allen v. Assessors, 3 Wall. 573; Peoples National Bank v. Board of Equalisation, 260 U. S. 702; Des Moines National Bank v. Fairweather, 263 U. S. 103. *490Similarly Congress may 'impose a tax oil state banks measured by the average amount of their deposits, although deposits of state funds by state officers are. included. Manhattan Co. v. Blake, 148 U. S. 412. The rule that a tax upon a franchise, measured by net income, including that from tax-immune property, is not an infringement of the immunity, was re-examined and affirmed in Flint v. Stone Tracy Co., 220 U. S. 107, which was accepted, as authority in Macollen Co. v. Massachusetts, 279 U. S. 620, and followed in Educational Films Corp. v. Ward, 282 U. S, 379.
This distinction, so often and consistently reaffirmed, is but a recognition, that the franchise, the privilege of doing'; business in corporate form, which is a legitimate subject of taxation, does not cease to be such because it is exercised in the acquisition and enjoyment of nontaxables. The distinction is one of substance, not of form, and has been so recently discussed in Educational Films Corp. v. Ward that it need not be elaborated here. It suffices to say that the tax immunity extended, to property qua property does not embrace a special privilege, the corporate franchise, otherwise taxable, merely because the value of the corporate property or net income is included in an equable measure of the enjoyment of the privilege. The owner may enjoy his exempt property free of tax, but if he asks and receives from the state the benefit of a taxable privilege as the implement of that enjoyment,- he must bear the burden of the tax which the state exacts as its price.
Appellant lays,-no foundation for the assertion that the state court erroneously construed the grant of immunity as limited to taxes imposed' on the bonds and their interest, and as not embracing taxes on the franchise measured by the net income of the taxpayer without discrimination as to its source. We cannot say that this construction, with which no judicial decision of the *491state conflicts, and which is supported by an unbroken line, of decisions of this Court, some of them antedating the grant, is erroneous or that the later. enactment of the challenged statute, in all respects consistent with it, impairs any contractual right which could be implied from the grant. Even if the construction were doubtful, thé doubt, upon familiar -principles, must be resolved in favor of the state. Grants of immunity from taxation, in derogation of a sovereign power of the state, are strictly construed. Providence Bank v. Billings, 4 Pet. 514, 561; Delaware Railroad Tax Case, 18 Wall. 206, 225-226; Jefferson Branch Bank v. Skelly, 1 Black 436, 447; Charles River Bridge v. Warren Bridge, 11 Pet. 420; Yazoo & Mississippi Valley R. Co. v. Thomas, 132 U. S. 174; Vicksburg, S. & P. R. Co. v. Dennis, 116 U. S. 665.
But appellant insists that even though the granted exemption is not broad enough to preclude, in. every instance, the inclusion of tax-exempt income in the measure of the tax, its inclusion by the present statute is not a casual incident to a scheme of taxation of franchises measured by all net income, such as was upheld in Flint v. Stone Tracy Co., supra, but is the result of a fully disclosed legislative purpose to subject to taxation the income of nbn-taxables, such as was deemed to invalidate the tax in Miller v. Milwaukee, 272 U. S. 713, and in Macollen Co. v. Massachusetts, supra. In support of .this contention, appellant points to the language of the taxing act, specifically- including the income from tax-exempt bonds in the measure of the tax, and to its legislative history.'
The California Constitution was amended and the legislation taxing corporate franchises was enacted shortly after the decisions of this Court in First National Bank v. Hartford, 273 U. S. 548, and Minnesota v. First National Bank, 273 U. S. 561, which held that the requirement of R. S. § 5219, of an approximate equality of state taxation *492of national banks and of moneyed capital competing yfith them, comprehends the taxation not only of moneyed capital employed by state and private banks, but also that of other corporations in substantial competition with national banks. The State of California had'previously imposed a tax on shareholders in banks, based on their proportionate share of the undivided profits, capital and surplus. Corporations other than banks, public utility, and insurance companies were taxed on the basis of t¡heir “ corporate excess/’ in the computation of which non-' taxable bonds were not included. In 1927 the California legislature created a commission to prepare a scheme of taxation which would secure the requisite equality. To attain this end the report of the Commission of August 10, 1928, (included in the final report of California Tax Commission of March 5, 1929, State Printing Office, Publication No. 63725, atp. 243, et seq.) recommended the adoption of the present corporate franchise tax as conforming to subdivision 4 of R.'S. 5219, which permits the state taxation of national banks “ according to or measured by their net income.” In the course of the report, specific reference is made to the belief of the Commission that .in the computation of such a tax the income of non-taxable federal bonds might be included in the measure of the tax, and it sufficiently appears from the report that the Commission was not unaware that income from bonds of the state would likewise be included by the proposed legislation and, indeed, that the desired equality of taxation of local corporations with that on national banks, measured by income, could 'not otherwise be secured. The adoption of the taxing act, as. recommended by the Commission, may therefore be taken, as appellant contends, to evidence a definite and specific legislative purpose to levy a new type of franchise tax, measured by corporate net income, including the tax-exempt income from federal and state bonds.
*493The view that a tax, although levied on a taxable subject, may be deemed invalid because purposely devised to include a non-taxable. subject in its measure, receives only a limited and qualified support from Miller v. Milwaukee, supra. There a state statute taxing, corporate dividends was framed in such manner as to tax them only so far as they were derived from corporate income from tax-exempt bonds of the United States. The taxing act thus, on its face, did more than exhibit an intention of the one sovereignty to include in the dividends taxed, those derived from income from a non-taxable instrumentality of the other, together with income from all other sources. That admittedly would have been permissible; see Des Moines National Bank v. Fairweather, supra; Flint v. Stone Tracy Co., supra; Educational Films Corp. v. Ward, supra. But it was the exclusion from the measure of the tax of all income except from federal bonds which rendered the tax invalid.
Thus, in our dual system of government, action of the one government in the proper exercise of its sovereign powers, regarded as innocuous and permissible notwithstanding its incidental effects on the other, may become offensive and be deemed forbidden if: it discriminates against the other. State taxes which, if non-discriminatory, would be upheld, even though they reach or affect those engaged in interstate commerce, are condemned if they discriminate against those so engaged, by placing .on them heavier burdens.than those'imposed on others within the state. Welton v. Missouri, 91 U. S. 275, with which compare Wagner v. Covington, 251 U. S. 95; Darnell & Son Co. v. Memphis, 208 U. S. 113; Bethlehem Motors Corp. v. Flynt, 256 U. S. 421. Cf. Reymann Brewing Co. v. Brister, 179 U. S. 445. See Genetal American Tank Car Corp. v. Day, 270 U. S. 367, 372.
But the present caséis not one of discrimination. There is no attempt, as'in Miller v. Milwaukee, supra, to meas*494ure the tax by exempt income while excluding from the measure all taxable income. The state seeks to do only what its contract permits it to do, to measure the franchise tax by all the net income of the taxpayer. If the words “ net income ” in the taxing statute may rightly be taken to include inqome from tax-exempt bonds, as they were in Flint v. Stone Tracy Co., supra, then there can be no tenable ground for saying .that the addition of the words “ income . . . includes ... all interest, received from federal, state, municipal or other bonds,” discloses any different purpose on the part of the legislature, or can have any different effect, or can more definitely infringe the exemption than did the tax upheld in Flint v. Stone Tracy Co., supra, or that in Educational Films Corp. v. Ward, supra.
But it is said that the ruling of this Court in Macallen Co. v. Massachusetts, supra, requires the condemnation of the present tax. There the Commonwealth, which had long imposed a tax on corporate franchises measured by taxable income of the corporation, amended its statutes so as to add the income from tax-exempt bonds of the federal government to the measure of the tax. It was held that this change of taxation policy, embodied in the statute and “ adopted as though it had been so declared in precise words for the very purpose of subjecting these securities pro tanto to the burden of the tax,” was invalid. Thus, the legislative abandonment of a policy which had previously discriminated in favor of tax-exempt securities was treated as a discrimination against them, and the tax, although in fact non-discriminatory, was condemned as analogous to the discriminatory tax held invalid in the Miller case. See Macallen Co. v. Massachusetts, supra, pp. 630, 631.
But the'State of California, in its legislation, has indulged in no reversal of policy so far as the measure*495ment of the franchise tax is concerned and in no discrimination either in favor of or against tax-exempt income. The entire history of its legislation discloses only that it has sought, in good faith, to conform its scheme of taxation of corporations to a permitted method of taxing national banks, to avoid discrimination against the latter. It has effected its purpose by- adopting, in a single legislative act, a new form of privilege tax'on corporations measured by their net income, without any form of discrimination as to the sources of the income included in the measure, differing in this respect in no material way from the similar tax upheld in Flint v. Stone Tracy Co. and in Educational Films Corp. v. Ward, supra. We should hesitate to say that any action of the legislature or any purpose disclosed by a state commission could restrict the power of the state by constitutional amendment to authorize a tax which admittedly it could have authorized without them. In any case, the use of words in the statute and report, indicating what would otherwise have been implied, that “income” includes income from tax-exempt bonds, could neither enlarge the exemption- nor diminish the constitutional power of the state.
• But we do not rest our decision upon any narrow distinction as • to the precise form of words which may be employed in taxing..statutes or the particular order in which its . provisions are incorporated. in the statute, whether by a single legislative act or by amendment or the addition of new provisions in successive reenactments. A taxing statute, like others, must , be read as a whole, as it stands on the statuté books at its applicable date, and the legislative purpose in enacting it must be taken, regardless of forms of words, to envisage the obvious consequences which flow from its operation. Since the mere intent of the legislature to do that which the Constitution permits cannot deprive legislation of its constitutional *496validity, and the purposeful choice by the state of a method of taxation which appellant’s contract allows, cannot alter the terms of the contract, the present act must be judged by its operation rather than by the motives which inspired it. As it operates to measure the tax on the corporate franchise by the entire net income of the corporation, without any discrimination between income which is exempt and that which is not, there is no infringement of any constitutional immunity.
Affirmed.