#### Pa. Co. for Ins. on Lives and Granting Annuities *v.*Com.

The intent to impose double taxation must be clearly expressed; it is never to be presumed.

The Act of June 30, 1885, providing for taxation of safe deposit companies, is a supplement to the Act of June 7, 1879, and, together, they are part of a system and, with other Acts, form a complete scheme of taxation, and under these Acts there cannot be a taxation of both the capital stock of a corporation and the shares in the hands of the shareholders.

The Act of June 7, 1879, 14, provided for a tax on the capital stock of certain corporations. The Act of June 30, 1885, $ 3, provided that the corporations may elect to collect annually a certain tax from their shareholders, and that, upon payment thereof, there shall be an exemption from all other taxation upon the shares and the capital stock and profits not invested in real estate. Section 5 of the Act of 1885, provided for a tax against the shareholders on their shares, upon failure to comply with the provisions of § 3. *Ileld,*that, where the corporation failed to pay a tax under *\*3 of the Act of 1885, and a tax was levied under $ 5 against the shareholders on their shares, the further levy of a tax on the capital stock under the Act of 1879 is double taxation and unauthorized.

May 31, 1888.

Error, No. 29, May T., 1887, to C. P. Dauphin Co., to review a judgment for defendant on an appeal from settlement by the Auditor General of taxes claimed by the Commonwealth, for the year ending the first Monday of November, 1885. Trunkey, J., absent.

The appellant filed the following specifications of objection to the settlement:

1. The Act of June 7, 1879, under which the tax mentioned in said account is claimed by the state, is repealed as to such tax by the Act of June 30, 1885, P. L. 193.

*6952. Appellant is a safe deposit company, and has elected to collect annually from its shareholders a tax of six-tenths of one per centum upon the par value of all the shares of said company, in accordance with the provisions of §3 of Act of June 30,1885. The proper authorities were duly notified of said election in writing prior to Dec. 1, 1885. By reason of said election and notification, appellant is exempt, under the laws of this commonwealth, from all taxation, except the payment of said tax of six-tenths of one per centum, on or before the first day of March in each year.

3. By § 5 of the Act of June 30, 1885, the expiration of the year for which an account of the taxes due by each corporation is to be settled is the 20th day of June. By § 20 of said Act, it went into effect immediately, and at the date of the approval of said Act no taxes had accrued or were due by appellant to the commonwealth.

The case was tried, by agreement, without a jury.

The court dismissed the appeal on the ground that no evidence had been given by the appellant that it was a trust and safe deposit company, the fact upon which it based its appeal, and entered judgment for the Commonwealth for $19,674.67. Subsequently, on exceptions and motion for a new trial, the appellant was allowed to show these facts by depositions, and the court then filed the following opinion:

“ There seems to have been a misunderstanding at the trial of this case about the evidence to be given by the defendant. Since the Attorney General does not object, we will consider the depositions recently taken as if they had been offered at the trial, and will correct the finding of facts so as to read as follows :

“ 1. The defendant is a corporation of this commonwealth, chartered in 1812, P. L. 94. It has received other powers and privileges by the Acts of 1829, P. L. 142; 1836, P. L. 49; 1853, P. L. 232; 1863, P. L. 65 ; 1865, P. L. 489; 1870, P. L. 985 ; 1872, P. L. 234; and 1872, P. L. 790. It has a capital stock of $2,000,000. These Acts are made part of this finding.

“ 2. During the tax year ending the first Monday of November, 1885, it declared two dividends, one of eleven per cent, on Jan. 5, and one of six per cent, on July 6. The account in suit is settled under § 4 of the Act of 1879, P. L. 114, to recover a tax of *8)4*mills upon its capital stock.

“3. On Oct. 26, 1885, the defendant gave written notice to the Auditor General that, in pursuance of the provisions of § 3 of the Act of 1885, P. L. 194, it had elected to collect annually from its shareholders a tax of six-tenths of one per centum upon the par value of all its shares, and that it would pay this sum, viz., $12,000, on or before March 1, 1886. Nó payment was made at any time, however, and no offer to pay until April 17, 1886, when the accounting department refused to permit it, as being too late, and required *696the defendant to report, under § 5 of the Act of 1885, a list of its shareholders and the other facts in that section specified.

*“4.*The defendant made this report, and, on June 16,1886, paid, on behalf of its shareholders, the tax due thereon from them, amounting to $22,493.43.

Conclusions of Law.

“ Our former conclusions of law will also require to be modified.

" For the purposes of this case, we now assume the defendant to be a safe deposit company within the provisions of § 3 of the Act of 1885, leaving the question open if in the future it should require decision. To safe deposit companies, among others, this section offered exemption from certain taxation ‘ in case ’ they elected to collect annually from their shareholders a tax of six tenths of one per centum upon the par value of all the shares, and paid the same into the state treasury on or before March 1st in each year. The defendant elected, but neither paid nor offered to pay in time, and therefore the exemption did not attach. This left the corporation precisely where it would have been if § 3 of the Act of 1885 had not been passed, viz., subject to tax upon its capital stock under §4 of the Act of 1879.

“ Its payment of the tax provided for by § 5 of the Act of 1885, has no bearing upon the present claim. That tax is not upon the corporation, but upon the shares of stock in the hands of the individual shareholders. Settlements are to be made 'against the individual shareholders,’ and the corporation has little to do with the matter other than to furnish the information specified by the section. For some reason, the defendant paid the tax itself, but paid it either on behalf of its stockholders, as their agent, or in their relief as a volunteer. It was due from them as individuals, and was accepted in full discharge of their liability. We cannot now apply this sum to the claim in suit, as we are asked to do, because it was properly applicable just where it has already been applied. In Com. *v.*Fidelity Ins. Co., Dauphin C. P., 384, Aug. T., 1886, the facts were different. There the company offered in proper time to pay $12,000, under § 3. The Commonwealth took the money, but, successfully denying the company’s right to the privilege of that section, on the ground that it was not proved to be a safe deposit company, pressed a claim for tax upon its capital stock. Plainly, the state could not have both sums. If the company was not entitled to the privilege it claimed, the Commonwealth was not entitled to the money paid therefor; and as both taxes were payable by the corporation, there was no difficulty in crediting, upon the settlement for tax or capital stock, the money actually paid under the other and erroneous claim. Here, however, the Commonwealth’s claim, under § 5, was a rightful one against the shareholders. The corporation chose to pay it, and, naturally, the state *697did not object. How can we now take this money and use it to pay the claim in suit?

“ The question sought to be raised by the 3d specification of appeal does not arise in this case, for the tax in suit is not claimed under a law repealed by the Act of 1885. The tax upon the capital stock of safe deposit companies, under § 4 of the Act of 1879 has not been repealed by the Act of 1885. It is still in force, except where § 3 of the latter Act applies, and this section does not apply to the case before us, for the reasons already given.

“We direct judgment to be entered for the Copimonwealth in accordance with the opinion previously filed.”

The previous opinion had directed judgment for $19,674.67, and judgment was accordingly entered for that amount for the Commonwealth. The defendant then took this writ.

*The assignments of error*specified the action of the court, 1, 4, in not sustaining, respectively, the first and third specifications of objection; 2, in holding that, notwithstanding the appellant is a trust and safe deposit company, it was, after the passage of the Act of June 30, 1885, liable to taxation under the Act of June 7, 1879; 3, in holding that, notwithstanding the appellant was a trust and safe deposit company, and had elected, under § 3 of the Act of June 30, 1885, to collect a six-mills tax from its shareholders, and had subsequently, in lieu of that tax, paid, on behalf of its shareholders, the tax provided for by § 5 of said Act, it was nevertheless liable to taxation under the Act of June 7, 1879, for the same period covered by the tax paid under § 5 of the Act of June 30, 1885 ; 5, in entering judgment in favor of the Commonwealth against the appellant for the sum of $19,674.67.

*Frank P. Prichard,*with him *John G. Johnson,*for plaintiff in error.

The question raised by the fourth specification of error has been decided by this court in McKellar *v.*Com., 10 Atl. *780.*The argument will therefore be confined to the question raised by the other specifications of error.

Under the tax system of Pennsylvania there are two classes of corporations. In one, the tax on capital stock is paid directly by the corporation; in the other, the tax on capital stock is paid by an assessment on the individual shares. The question in the present case is whether the Act of June 30, 1885, placed trust and safe deposit companies in both of those classes, so that such corporations alone, out of all the corporations of the state, were liable to a double taxation of their stock.

An examination of the Act of 1879 shows that the Act provides, in §4, for a tax on the capital stock of corporations. That section expressly exempts from its provisions banks and savings institutions. In § 17, in enumerating the subjects of taxation in the hands of private individuals, shares of stock in ordinary corporations are not included, but shares of stock in banks and savings in*698stitutions are thereby expressly made subject to taxation. By the same section, a premium is offered to banks and savings institutions to pay this tax for their individual shareholders, the section providing that, if such institution elects to collect from its shareholders a tax of six mills upon the par value of the stock, and pay the same into the state treasury before June 20 in every year, the shares, capital and profits of such bank shall be exempt from all other taxation. The section further provides that the officers of the institution shall, before March 1st in each year, furnish a list of stockholders, &c., and the market value of the stock held by them, and that, if said officers fail to make such report, ten per cent, shall be added to the tax of the corporation.

It will be seen that,__ by this Act, the capital stock both of ordinary corporations and of banking corporations was taxed, with this difference, however, that, in the case of ordinary corporations, the tax is a tax on the aggregate capital, and not on the individual shares; while, in the case of banking institutions, the tax is a tax on the individual shares, and not on the aggregate capital.

It must be remembered that in neither case does the Act impose a double taxation. Where the corporation pays the tax the shareholder does not, and, vice versa, where the shareholder pays the tax the corporation does not.

The Act of 1879 was, in the above particulars, a substantial reenactment of the Act of May 1, 1868, P. L. 108, except that in the Act of 1868 it was made obligatory on, and not optional with, the banks to pay the tax for their shareholders. • The draughtsman of the Act of 1879, in the section making such payment optional and providing for collection from the individual shareholders, made two mistakes, viz., he made the date of the return of the names of the individual stockholders (March 1st) precede the date of the election of the bank to pay (June 20th), and he imposed, as a penalty for failure to make the return, an addition of ten per cent, to the tax on the bank, when, in point of fact, no tax was imposed on the bank. Both of these errors were corrected by the Act of June 10, 1881, P. L. 99, which reversed the respective dates of the election and return, and which, instead of the penalty of adding to a tax which was not imposed, substituted a process to compel the furnishing of the return.

This was the condition of the law when the Act of June 30, 1885, was passed. That Act was entitled a supplement to the Act of 1879. Sections 1, 2, 3 and 5 are substitutes for § 17 of the Act of 1879.

An examination of these sections shows that the provisions for taxation of shares of banks and savings institutions are substantially re-enacted, with the addition of the words “ safe deposit, guarantee, surety, and real estate title insurance or trust company,” thus bringing the latter institutions within the class of corporations whose capital is taxed in the hands of the stockholders instead of in the hands of *699the corporation. No intent to impose a double taxation on the capital of the trust and safe deposit companies appears, but, on the contrary, the old provision allowing the bank to collect from its shareholders and pay a six-mills tax, and thus relieve its capital from further taxation, is extended to trust and safe deposit companies. If it was intended by the Act to place the trust companies in both classes of corporations, so that a tax on their capital should be paid both by the corporation and by the shareholders, the provision allowing them to escape this by collecting the six-mills tax from their shareholders is offering a premium for such payment out of all proportion to the result to be obtained, which was originally, in the case of the banks, the convenience to the state of having one payment. Nor is it to be supposed that, while the legislature classed together both banks and trust companies, it intended that the result of a failure of the bank to collect from its shareholders would be only to render the shareholders liable to assessment, while the same failure on the part of the trust companies would be to double the taxation and render both shareholders and corporation liable to taxation.

Another absurd result flows from the interpretation put upon the law by the court below. The tax year under the Act of 1879 is from November to November, while under the Act of 1885 it is from June to June. The latter Act went into operation June 30, 1885. Under it, the shares of a trust and safe deposit company were liable to taxation for the year ending June 30, 1886, which would be avoided by a payment, on March 1, 1886, of the six-mills tax by the corporation for its shareholders. Such payment would relieve the corporation from all taxes from June 30, 1883, and yet, if the Act of 1879 still applied to such corporations, the state would, in November, 1885., be entitled to immediately sue for and obtain judgment for such taxes. So, in each succeeding year, the taxes, under the Act of 1879 would always become payable before the time fixed by the Act of 1883 for the election of the corporation to escape such taxation by the payment for its shareholders of the six-mills tax. It is impossible to suppose that the legislature ever intended such a result.

Another important feature of the Act of 1885 must not be overlooked. As was the case in all the preceding Acts, it prescribes the result which is to follow the election of the corporation to pay or not to pay the six-mills tax, and this result is the same in the case of the safe deposit companies as in the case of banks and savings institutions. If the six-mills tax was paid, the stock is exempt from all other taxation. If the tax is not paid, the company is to furnish a list of its stockholders and a valuation of its shares, and these shares are to be taxed. In the present case, the company has complied with these conditions, and the tax on the shares has been paid and there is nothing in the Act to show any intention on the part *700of the state to impose upon it an additional burden not imposed upon banks and savings institutions, to wit, a second tax upon its capital.

An intention to impose double taxation is never to be presumed, and the courts will always lean to a contrary construction: School Directors *v.*Carlisle Bank, 8 Watts, 289; Phila. Sav. Fund’s Appeal, 4 Clark, 155, *186.

The fallacy in the reasoning of the court below lies in the fact that the two Acts of 1879 and 1885 are treated as distinct and independent Acts, to be literally interpreted as if each stood alone. This court has, however, uniformly adopted a different method of construing the tax laws of the Commonwealth: Com. *v.*Standard Oil Co., 101 Pa. 119; Fox’s Ap., 112 Pa. 337.

The construction put upon the Act of 1885 by the court below would make that Act violate the provision of article ix., § 1, of the Constitution as to uniformity of taxation. By the Act of 1879, all domestic corporations were liable to a single tax on their capital, since, as was said by the pourt in Lackawanna Co. *v.*First Nat. Bank, 94 Pa. 221, the tax on the shares of banks and savings institutions was but a substitute for the tax on the aggregate capital of other corporations. If the construction contended for by plaintiffs in error is correct, this uniformity is preserved, since safe deposit companies are merely put in the class with banks and savings institutions, and taken out of the class of other corporations. If, however, the court below is correct, safe deposit companies are put into a third class by themselves. They are, for purposes of taxation, classed with banks, inasmuch as their capital is taxed in the shape of the individual shares. Like banks, they are given the right to escape that taxation by a payment of a six-mills tax within a certain period; but, in case of a failure to make that payment, they are, apparently without any reason, subjected to an enormous penalty beyond that imposed upon the banks, to wit, another tax upon their capital. This cannot be because the legislature was of opinion that safe deposit companies should pay more taxes than banks, since they, like banks, can escape all other taxation by paying the six-mills tax. The difference is simply in the result of a failure to make prompt payment. In the case of banks, it is simply the collection of the tax from the shareholders; in the case of safe deposit companies, it is the collection of a double tax from the shareholders and the corporation. Such legislation would be, in effect, to impose the same taxation upon an entire class, and then to impose different penalties or results on account of a failure to make prompt payment.

*W. S.*Kirkpatrick, Attorney General, with him *John F. Sanderson,*deputy Attorney General, for the Commonwealth.

We print in full, as a part of our argument, the conclusions of law by the court below, and may well rest our case thereon.

Another view, however, may be suggested, which will sustain the judgment.

*701Prior to the passage of the Act of June 30, 1885, the plaintiff in error was taxable under the general provisions of the Act of June 7, 1879, which imposed tax upon the capital stock of corporations. Foreign insurance companies, banks, and savings institutions were excepted from the general provisions of the Act of 1879, imposing tax on capital stock, and the special provisions of this Act, as to such, were amended by the Act of June 10, 1881, P. L. 99, so that as the law stood prior to the passage of the Act of June 30, 1885, banks and savings institutions were enabled to collect from their stockholders the six mills upon the par value of the stock, and pay the tax into the state treasury prior to March 1, in any year. If the collection and payment were not made, then a return was required to be made, upon the basis of which an assessment was made against the shareholders, and the tax was collected from them.

The tax in question in this case was settled against the plaintiff in error on Dec. 15, 1885, and was a tax on capital stock, settled under the provisions of the Act of 1879, and for the whole of the tax year ending the first Monday of November, 1885. There was nothing in the title of this company which afforded the accounting departments notice of its present claim to be a trust and safe deposit company, and to be therefore within the special provisions of the Act of 1885.

The view which will harmonize the Acts of 1879 and 1885 is that which regards,the Act of 1885 as taking effect, for the purposes of this case, from the first Monday of November, 1885, so that the first year, during which the plaintiff in error, supposing it to be a trust and safe deposit company, might avail itself of the provisions of the Act of 1885, is the taxing year beginning the first Monday of November, 1886. This harmonizes the order of dates. It could then make its election prior to March 1, 1886, to pay the taxes for that current taxing year. Failing to make its election, and to follow it by payment, it would become subject to make the report required to be made on or before June 20, and, upon the basis of such report, the accounting officers would settle the tax against the shareholders.

It will be noted that, at the date of the passage of the Act of June 30, 1885, eight months of the taxing year had elapsed. The day of election, March xst, had passed, the day of reporting had passed, and, considering the taxing year, 1885, as a unit, and as beginning and ending on the first Monday of November, there will be no room for the operation of the special clauses of the Act of 1885. This view preserves the practice of the accounting department, which regards the taxing year as ending on the first Monday of November.

The above suggestions are supported by the language of the court in Com. *v.*Lehigh Valley R. R., 104 Pa. 103, and Com. *v.*Dunbar Furnace Co., 4 Pa. C. C. R. 349.

*702Oct. 1, 1888.

Paxson, J.,

This was an appeal in the court below by the defendant company, from a settlement by the Auditor General, of taxes claimed by the Commonwealth, for the year ending the first Monday of November, 1885. The court below sustained the settlement made by the Auditor General. The account was settled under §4 of the Act of 1879, P. L. 114, and a tax imposed of eight and one-half mills upon its capital stock. During the tax year ending on the first Monday of November, 1885, the company declared two dividends, one of eleven per cent, on Jan. 5, and one of six per cent, on July 6. On Oct. 26, 1885, the defendant company gave written notice to the Auditor General that, in pursuance of the provisions of § 3 of the Act of 1885, P. L. 194, it had elected to collect annually from its shareholders, a tax of six-tenths of one per cent, upon the par value of all its shares, and that it would pay this sum, viz., $12,000, on or before March 1, 1886. This payment was not made, however. It was alleged the omission occurred by an oversight caused by the sickness of the president and his consequent absence from the office. An offer to pay was made on April 17, 1886, when the accounting department refused to receive it, as being too late, and required the defendant company to report, under § 5 of the Act of 1885, a list of the shareholders and the other facts in that section specified. The defendant made this report, and, on June 16, 1886, paid, on behalf of its shareholders, the tax due thereon from them, amounting to $22,493.43.

The omission to pay, from whatever cause, the $12,000, on or before March 1, deprived the company of the benefit of § 3 of the Act of 1885, and they stood precisely in the position as though said section had never been passed. It was, therefore, clearly competent for the accounting department to require said company to report under § 5 of said Act, and the tax, imposed on the shareholders in pursuance thereof, was strictly legal. So far there is no difficulty. But, in addition to this tax on the shares of the stock in the hands of the shareholders, the Auditor General, as I understand the facts, — and they are not very clearly stated, — settles an account against the company for a tax, upon the capital stock, of eight and one-half mills, under § 4 of the Act of 1879. This settlement was sustained by the court below, and is the subject of the present complaint. It was alleged that this was double taxation, and to, some extent, it is so. Had the company followed up its notice by paying its $12,000, in compliance with the 3d section of the Act of 1885, the difficulty would not have occurred, as said section expressly provides that all corporations specified therein, upon complying with its provisions, shall be exempt from all other taxation under the laws of the Commonwealth, so far as its shares and so much of the capital and profits as shall not be invested in real estate are concerned. The question now, as I understand it, is whether, by reason of the failure to pay under the 3d section of the Act of 1885, the company is obliged to pay a tax upon its capital *703stock under the Act of 1879, and its shareholders to pay a tax upon their shares, under the Act of 1885.

If we treat the Acts of 1879 and 1885 as separate and distinct Acts, there would be no difficulty in sustaining the action of the court below. The Acts are not distinct, however. The Act of 1885 is a mere supplement to the Act of 1879, and, together, they are parts of a • system, forming, with other Acts, a complete scheme of taxation. The learned judge below was of the opinion that the payment of the tax provided for by § 5 of the Act of 1885 has no bearing upon the present claim for the reason that it was not a tax upon the corporation, but upon the shares of stock in the hands of the individual shareholders, and that the company paid the tax on behalf of the stockholders as their agent, or in their relief as a volunteer. The fact remains, however, that no intent is apparent in our legislation upon this subject, treating the different statutes as a scheme of taxation, to tax both the capital stock and the shares in the hands of the shareholders.

Such taxation, notwithstanding the subtle distinction of the court below, would be substantially double taxation. Conceding the power of the Legislature to tax in this manner, its exercise is never to be presumed. The intent to impose double taxation must be clearly expressed.

We are of opinion that the shares of the defendant company having been taxed in the hands of the shareholders, under the Act of 1885, its capital stock cannot be taxed under the Act of 1879. It follows that the judgment below must be reversed.

Judgment reversed.