(concurring in part and dissenting in part). I agree with my brothers with respect to their holding that reserve for deferred Federal income tax is included in surplus.
However, I must respectfully dissent as to the remaining portion of the opinion.
I am of the opinion that, as it applies to United Air Lines, Inc., for the period involved, the statutory táx allocation formula for aircraft is unreasonable, confiscatory, and unconstitutional and that the relevant portion of the decision of the trial court should be affirmed.
The trial court found that in the application of the statutory formula for computing the tax that only 2.6% of the revenue tons included in the numerator of one fraction and only .7 % of the revenues included in the numerator of the other fraction are related to intrastate commerce in Michigan; and that the statutory formula, in the case of this particular claimant (United), results in the exaction of a fee ($85,666) that is 37% of the gross revenues *248($228,688) produced from the privilege granted by the state to do intrastate business in Michigan.
The trial court also found that the percentage formula could be a fair apportionment under certain circumstances but that, as to United, it was not and stated in part as follows: “The result produced by the application of the special apportionment formula for carriers by aircraft provided in the Michigan privilege fee act is unreasonable and confiscatory as applied to claimant. It constitutes an undue burden on interstate commerce. The section as applied to claimant is in contravention of the interstate commerce clause and the due process amendment of the United States Constitution.”
Although the state in measuring its fee for the privilege of doing an intrastate business may include an interstate factor for the enhanced value given to that portion which is in the state as part of the whole system, that factor must be reasonable and related to the value of the privilege granted, i.e., the intrastate business, and not a burden on interstate commerce. In mechanically applying the statutory formula, the state cannot arrive at an unconscionable and unconstitutional result. The result must be free from excessiveness and discrimination. Any formula used must bear in its application a rational relationship to that which is taxed. It is the plaintiff’s task to show that the application of the formula results in a gross overreaching beyond values represented by intrastate assets purported to be taxed so as to violate the due procéss and commerce clauses of the Federal Constitution. See Hans Rees’ Sons, Inc., v. North Carolina (1931), 283 US 123 (51 S Ct 385, 75 L Ed 879). Norfolk & W. R. Co. v. Missouri State Tax Commission (1968), 390 US 317 (88 S Ct 995, 19 L Ed 2d 1201).
*249In the case of Wisconsin & Michigan Steamship Company v. Corporation & Securities Commission (1963), 371 Mich 61, 70, the Michigan Supreme Court, citing Spector Motor Service, Inc., v. O’Connor (1951), 340 US 602, 609, 610, (71 S Ct 508, 95 L Ed 573), stated as follows:
“A state may tax the privilege of carrying on intrastate business and, within reasonable limits, may compute the amount of the charge by applying the tax rate to a fair proportion of the taxpayer’s business done within the State, including both interstate and intrastate.”
Section 5a of the Michigan annual privilege fee statute, (MCLA § 450.305a [Stat Ann 1963 Rev §21.208(1)]), as applied to plaintiff, is not a fair measure of its business, receipts, capital, and activity in Michigan for the purpose of computation of its annual privilege fee. Michigan’s grant to plaintiff is confined to the right to do an intrastate business in this state. The value of the intrastate business may be enhanced by its organic relation to the entire system and for that reason an interstate factor may be included in determining the plaintiff’s annual privilege fee. However, rigid application of the statutory formula leads to a grossly distorted result in regard to this plaintiff.
“The facts of life do not neatly lend themselves to the niceties of constitutionalism; but neither does the Constitution tolerate any result, however distorted, just because it is the product of a convenient mathematical formula which, in most situations, may produce a tolerable product.” Norfolk & W. R. Co. v. Missouri State Tax Commission, supra, p 327.
The formula involved, as it applies to plaintiff, produces a distorted result due to the fact that practically all the numerator of both fractions is inter*250state commerce rather than intrastate commerce, which is being taxed. Since 99.3% of plaintiffs revenues and 97.4% of its Michigan tonnage are from interstate transportation, the formula results in basing the privilege fee almost entirely on interstate commerce. Interstate commerce, therefore, pays the bill. It is unreasonable and confiscatory, as evidenced by the fact, among others, that plaintiff paid over $85,000 for the privilege of doing an intrastate business of slightly more than $228,000 (which is the only privilege Michigan has granted), or over 37 % of its gross receipts for the privilege of receiving those gross receipts. The result demonstrates the excess burden placed upon the plaintiffs interstate business.
The tax rate must be applied to “a fair proportion” of the taxpayer’s business done within the state, both interstate and intrastate. As applied to plaintiff, the statutory formula here involved does not tax a fair proportion of the business done within the state including both interstate and intrastate. It taxes all. It seems clear that “a fair proportion” does not connote all. It connotes something less than all. Since quite clearly the fee may be measured by all the intrastate, it cannot be measured by all interstate.
The fee must be “reasonably related to the value of the intrastate business done.” Duluth, S. S. & A. R. Co. v. Corporation & Securities Commission (1958), 353 Mich 636, 657. The tax here involved is not reasonably related to the value of the intrastate business. It is related to all the business done including all the interstate business which plaintiff enjoyed long before Michigan granted the intrastate privilege. A tax of over one-third of the total gross receipts of intrastate business for the privilege of carrying on intrastate business is not reasonable. *251It bears no rational relationship to that which is taxed. There can be no profit for a business which pays over one-third of its gross receipts for the privilege of doing its intrastate business.
The disparity between the statutory percentage and the actual percentages exceeds the disparities found constitutionally objectionable in the Hans Rees’ Sons, Inc., v. North Carolina, supra, and Norfolk & W. R. Co. v. Missouri State Tax Commission, supra.
I am thus of the opinion that the judgment of the trial court should be affirmed in part and reversed in part.