The sun., 1902-03-10
state Taxation OF Corporations.

The validity of the law was disputed
in behalf of foreign corporations, upon
the ground that they could be taxed
only upon business done in the State and
this was admitted 10 be a sound prop
osition. The Court of Appeals. how
ever, held that il was the intention OF
the law 10 tax them only upon such
business, although tho tax, being uni
formly measured by the whole capital
stock, was the same in amount, whether
much or little business was done here.
Holding that it could not question the
propriety OF the measure Of the tax
adopted by the Legislature, tho Court
declared the law valid, but at the same
time characterized it as arbitrary. OPP
pressive and unjust.
The injustice had been so strongly
felt in the Comptroler's office, that
taxes had been accepted from foreign
corporations upon the basis of cap
| ital employed in the State, instead OF
on the whole capital, although there
was no warrant in law for so doing.
/ After this decision, upon the recon-
mendation of the Comptroller, the law
was amended so as TO measure the tax
/ by capital employed in the State, the
amendment applying to both foreign
and domestic companies. From 1885
until now, il has seemed to be the settled
policy of this State to tax the fran
chises of domestic corporations and the
business of foreign corporations upon
- 90 n,nvN1DNal hare
only, Under this just and reasonable
policy the State has received large
revenues. and has been in many ways
benefited by the large increase in the
number Of foreign corporations having
places of business here, especially in
the city of New York
In the present Legislature, il is pro-
posed to reverse this policy, and to go
back TO the plan rejected in 1885, after
several years trial, and tax foreign
corporations upon their whole capital,
however little may be employed here;
and 20 make the same change as TO
domestic corporations.
In the bill originally introduced for
this purpose, this method of taxation
was made applicable to all corporations,
except few specified classes. The bill
as amended. and now before the Senate,
limits its application to companies not
employing or investing 20 per cent. or
more of their gross assets, exclusive Of
patents, copyrights, trademarks, and
good will, in this State. The underlying
principle of the change made in 1885,
and of the policy then apparently set
tied, is, that, since the State can tax
foreign corporations only upon business
done here. the tax should be measured
by the capital employed here, rather
than by the whole capital wherever
employed, and that domestic corpora
tions should be taxed upon the same
plan so as not to put them at dis
advantage. Obviously, this principle
applies quite as much TO companies
doing small percentage of their business
and employing small percentage of
their capital in this State, as TO those
whose business and assets are more
largely located here. To exclude from
the benefit of the principle companies,
! domestic and foreign, which do but little
business and employ but little capital
/ here. seems wholly unreasonable. 1t
might be we'll enough, in order to re-
lieve the Comptroller, to fix an arbitrary
amount as minimum to be paid But
what reason is there for making the
minimum not a fixed amount but a
| percentage of the entire capital stock?
! Why should a company, doing a certain
amount of business here, and using a GER
tain amount of capital here, be charged
greater or smaller amount, according
10 the amount of it, business done and
capital employed in other States?
Aside from the question of Justice
or reasonableness, is it good policy 80
10 change the law? There are thou
sands Of companies, the bulk of whose
property is out of this State, which find
it convenient and advantageous TO
maintain offices here. and their being
here is in many ways a benefit to the
State, Such company, if il has large
capital employed elsewhere, will have
to pay for this privilege under the pro-
posed amendment very considerable
tax each year. II can have its office
across the river in Jersey City without
any such burden. II can perhaps go
without an office in or near the city Of
New York without much loss of bust
ness or Of convenience. Is il not proba-
bile that many of these companies will
leave us, to our injury, if the proposed
change is made;
Is the proposed change wise with
respect to domestic corporations? II is
current rimor that the animus back of
the proposal is disappointment as to the
effect of the changes made a year ago
in the corporation laws with a view Ia
encouraging the incorporation of large
enterprises under our law; and yet the
proposed change increases the taxa
tion Of domestic corporations doing
business chiefly in other States.
Where is the demand for any change
in this law? II is said that some large
companies. which it il thought might
just as we'll have come TO New York for
Incorporation. have, even since the
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