A statute is not to be treated as unconstitutional because it contains clauses that in some instances would deprive a person of his property without due process of law or would interfere with interstate commerce, if in those instances a means is provided to prevent such results. So far as the bonds in this case are concerned, the difficulty is that the tax is figured on a proportionate valuation. As all described property in the state is to all such property wherever situated so is taxable net income to entire net income. We agree that the bonds themselves may not be taxed. So as to their income. But if their income is included in the entire net income which constitutes one term of this proportion, and their value not included in the other term, — "all such property wherever situated," — the result is what we hold may not be done. It is said that this is what the statute provides. If that be so, then I agree that it is unconstitutional, and we are driven to the question which Judge CARDOZO discusses. However, I do not so understand it.
For the privilege of doing business in this state a foreign corporation shall pay a tax computed on its net income, which income "is presumably the same as the income upon which such corporation is required to pay a tax to the United States." (Tax Law, § 209.) There are, therefore, cases where the income taxable here, and by the United States are not identical. This is made certain by a reference to a history of the law. Originally the tax was computed upon the net income "upon which income such corporation is required to pay a tax to the United States." (L. 1917, ch. 726, § 209.) The next year the section was enacted as it now stands, and *Page 67 the amended act was to be construed as taking effect as of the date of the original enactment. (L. 1918, ch. 276.) The amendment was in part made to meet the criticism that the taxpayer must be given an opportunity to be heard before a tax was imposed upon him. Under what conditions then do such cases arise?
Such a corporation shall annually make to the tax commission a report showing its net income for the preceding year "as shown," said the act of 1917, "in the last return of annual net income made by it to the United States treasury department." The amendment of 1918 added the words "and if the corporation shall claim that such return is inaccurate, the amount claimed by it to be the net income for such period." (Tax Law, § 211.) The report shall also contain a statement "of the portion of its net income which" the corporation "believes to be the basis upon which the tax shall be imposed." (§ 219-b.) Thus again, an opportunity to raise any question of the inaccuracy of the United States report, and to state its claim as to the proper basis of the net income term of the proportion was given the corporation. The report is also to contain such other facts as the tax commission may require for the purpose of computing the tax. (§ 211.)
The tax imposed on a foreign corporation was by the act of 1917 to be based on a proportion of the net income — the amount, obviously, returned to the United States — calculated according to certain rules. Now it is based upon "a proportion of such ascertained net income." The "ascertained net income" is as I understand it the net income returned to the United States corrected if "inaccurate" (§ 211) and also corrected by the commission because of a claim made under section 219-b. The tax imposed is three per cent "of the net income or portion thereof taxable within the state." (§ 215.)
If no report is made the commission shall make an estimate of the net income of the corporation. The corporation must be given an opportunity to be heard in *Page 68 respect thereto. An examination may be had and the commission shall fix "the tax due the state." (§§ 217, 195.) Within one year after an account for taxes has been audited and stated, the corporation may apply for its revision and if it appears that the account includes taxes which "could not have been lawfully demanded" then "the commission shall resettle the same according to law and the facts." (§ 218.) Its determination may be reviewed on certiorari. (§ 219.)
The net income returned to the United States being the basis of the state tax, the act of 1917 provided that if the amount so returned was changed or corrected by some competent authority the commission should accept such result and act accordingly. When in 1918 the return was made only presumptive evidence of the basis on which the tax was computed, the commission was called upon to make an independent investigation of the subject. (§ 219-d.) They shall return the true net income for the year but their proceedings or a reassessment are to be adjusted as provided by section 218. That is, the account reached by them shall not include taxes that may not be lawfully demanded.
In view of these various provisions I find no objection to the statute so far as the bonds are concerned. If the income derived from them is not included in the net income term of the proportion, no wrong is done the relator. The commission already has the power to make such exclusion. Its failure so to do is reviewable by the courts. The net income return to the United States is only presumptive evidence on the subject. If it contains now and then items which should not be reckoned when it comes to state taxation, the corporation has a remedy, and may in its state return claim that the United States return is inaccurate. For while "inaccurate" may refer to some mistake in computations or figures here taken in connection with section 219-b, I think it means that the return taken as a basis for state taxation contains items *Page 69 that are not properly to be considered for that purpose. Assume, therefore, in stating its net income to the United States it alleges that $35,000 interest on certain bonds should not be considered; that as a basis for state taxation to include them would be inaccurate; that the portion of its net income which it believes to be the basis upon which the tax should be imposed is $50,000 less the $35,000, it is entitled to a hearing. The law was expressly amended so that it might avoid the charge of unconstitutionality in that the taxpayer was deprived of this right. The tax is to be based on the net income as ascertained by the commission. It does determine the tax and as a prerequisite necessarily determines the net income which is one term of the proportion. If a revision is asked a hearing is to be had and if taxes are included which may not lawfully be demanded relief is to be granted. It necessarily follows that all the terms of the proportion must be reviewed. If the net income contains items which should not be included, then until they are corrected the account does include taxes which cannot be lawfully demanded.
I do not discuss the question of the stock. Upon this subject the amending act of 1918 expressly provides for a computation that the majority of the court consider improper. I agree that this amendment may be eliminated.