New-York tribune., 1902-02-07
THE CORPORATION T4X BILL.
WOULD BE DRIVEN OUT OF THE
STATE BY IT'S PASSAGE.
To the Editor of The Tribune.

STATE BY ITS PASSAGE
To the Editor of The Tribune
Sir: Senate Bill No 81. in relation the pay
ment Of State fees and taxes by corporations. has
been reported in the Senate without opportunity
being given for public hearing. It Is a
plete change from the law which substantially IN
its present form has been in force for nearly
twenty years. Corporations have been organized
and business engagements made with reference to
existing law which cannot be carried on If this
amendment prevails.
The amendment has one good feature in that Il
reduces the organization tax from one-twentieth
to one-hfueth Of l Per cent. as proposed by the
New-York Tax Reform Association.
In brief, the amended bill adopts the New-Jersoy
system Of taxing domestic business corporations
and applies it TO both domestic and foreign
porations. In New-Jersey for many years
State tax has been imposed domestic corpora
uons for the privilege Of corporate existence The
organization tax is one-fftieth Of l per cent, and
the annual is the of 81, 600 per $1,000 900
for the first 100000 Of authorized capital $500 per
81 100000 for the next 100000 and $50 per 100000
for the excess above 100000. The New-Jersey
theory is that for the privilege of being
poration payment should be made only TO The
State which grants the privilege, and that the
poration should be as free a natural person
engage in business in other States being taxed
only on its actual property wherever II may be
located In accordance with this theory New
Jersey imposes tax on foreign corporation f.
the privilege OF doing business in New-Jersey II
has statute which provides that II another state
imposes such tax on a New-Jersey corporation
the shall be imposed corporations Of
that State doing business I'm New-Jersey- The
New-Jersey theory is undoubtedly correct but the
annual is too high on capital stock Of s500oooO
and less
The existing law Of New-York Is based on an
entirely different theory from that Of New-Jersey
It domestic and foreign corporations alike
the amount Of capital employed within the
State. The amended hill adopts the New-Jersey
aaea and he Now Of XII he e.T-
tire authorized capital. and then applies II to all
business corporations doing business in this State
The New-Jersey law is favorable to corporations
with a very mall authorized capital stock
with very large authorized capital II is not
favorable 10 other corporations especially If most
OF their capital is employed outside the State The
New-York law is favorable 10 corporations which
employ much their capital outside the State.
There arc many corporations Of this kind which
would be forced from the State altogether II this
bill became law. They could not afford TO be in
ccrporated here or do business here. Examples
Of such corporations may be seen nearly every
page Of the Controllers report There before
me- four corporations organized under New-YOrl1
law Oh which taxes would he enormously increased
as follows: From 81 50 to 300. from Sl5 to 1000,
from 80 to 81 900 and from 81 % to S4,2G0 Many Of
The enormous corporations recently organized in
Ney-Jersey would also, doubt, withdraw from
the State.
On the other hand, there both domestic and
foreign corporations which employ Of their
have before examples of such corporations
whose taxes would be reduced from one-third to
one-haf.
Once before in 1881. the legislature attempted TO
tax all corpora tons doing business in this State
on the basis of their entire capital, without regard
70 the location Of their property. The act caused
much litigation, and in 1885 it was changed TO sub
stantially its present form. At the same time all
corporations allowed 10 settle their back
taxes on the basis Of the- capital employed here
This act was copied from the Pennsylvania
statute but the Pennsylvania courts refused to be-
Heve the legislature could have intended 10
tax all the property Of a foreign corporation With
out regard TO its location
In announcing the decision of the court I'm the
case of The Commonwealth agt. The Standard Oil
Company u0l Pennsylvania Statutes Judge Pax
said:
Speaking for myself. doubt the power Of the
a. E. the entire capital stock of foreign corpora
lion whose necessities compel it to transact por-
tion of its business, however small, within THIS
State. concede the power or the common"eaIth
her borders or She may impose license tax so
heavy practically to amount to the same thing;
but great and searching as her taxing power -.
deny that II can tax either persons or proptiLy
not within its Jurisdiction A foreign corporation
has domicile here and have none; hence. II
cannot be said to draw to itself the constructive
Whether l am corlect in this view or not II ls
that courtesy that springs from the comfy be
tween the States, has prevented the legislature
heretofore from asserting power or so doubt1uI
character.
We know now that Judge Parsons dctum was
not sound law, but It is certainly good sense and
good morals.
The definition of doing business and employing
capital in this State is made very much broader so
that many corporations would be compelled to take
out license which obliged 10 do so now.
A corporation which has not taken a license
cannot maintain action in State. The
amendment provides that the stock of foreign
corporation which mas not complied with the law
snail be taxable personal property in the hands
OF individual holders This would lead to great
injustice and uncertainty. Stockholders would
not know whether their stock was taxable
not and neither would assessors. The Controller
receives power to compel all corpora tons to give
any information he may be pleased require.
This is dangerous power of oppression. The
passage of this amendment would violate inter-
state comfy and lead to the passage and enforce
ment Of retaliatory acts like that of New-Jersey
LAWSON PURDY,
Secretary New-York Tax Reform Association
Ne8-Yorl1. Feb. 3. 1902.