Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1911-03-14
CORPORATION TAX
IS CONSTITUTIONAL
SAYS. j. s. COURT
Court Ruled 1t Within Power
of Senate to Insert Corpora
ton Tax Provisions in the
Law


tuuonal by the supreme court CT ths
United States.
At 1925 Justice Day began TO teliver
the decision. He first announced that it
wasAwithin the power OF the senate to in
sert the corporation tax provisions In the
tariff law, which originated in the HOUSE.
and of which the tax provisions are q
part. Justice Day said. as IL appeared 20
those who listened to him. that the court
held the tax as an EXCISE tax on tae DO
ing OF business" which Is exactly the
basis on which the gcverament has de
Tended the law.
Justice Day next seemed to hostT that
the tax provisions were not the arbitrary
exercise OF power. This was urged IN
argument as one reason why the law
should be held unconstitutional.
BY regarding tho tax as measured BY
income rather than being . tax On in-
come. the opinion seemed. as Justice Day
proceeded, to hold that the law yas con-
stitutional, notwithstanding the law might
reach the income from non-table sources.
The court was unanimous IN the eorpor-
alton tax decision.
Near the outset OF the opinion "a the
statement that the tax els imposed not
upon the franchises OF the corporation
Irrespective OF their use In business, nor
upon the property OF the corporation. but
upon the doing Of corporate or insur-
ance business and with respect TO the
carrying on thereof. in a sum euuiva-
lent to 1 per centum Of the entire net
income over and above $500 received
from all sources during the year; that
Is. when imposed in this manner it is a
tax upon the doing OF business with
the advantages which inhere in the pc
culiarities OF corporate or joint stock
organization of the character described.
Thereby source OF income OF arproxi-
mately $3.50 900 annually was assured to
the government.
OF all the objections to the tax raised
by suits in all parts ee the country
none of them was found sufficient to
nullify the law. The court did net hold
that the tax was not applicable to the
real estate trust" OF Boston, which was
organized, not under any statute. but
under the common law The Law was
syndicate, real estate concern, on the
ground that It was not doing busi-
ness" within the meaning Of the Law.
''This tax, 1t Is expressly stated, is to
be equivalent to / per cent OF the entire
net income over and above 5000 received
from all sources during the year."
This is the measure of the tax explicit-
ly adopted by the statute. The income
is not limited to such as is received from
property used In the business. gtrictly
speaking. but Is expressly declared to Be
upon the entire net income above $500
from all sources. excluding the amounts
received as dividends on stock In other
corporations, Joint stock companies. or
associations or insurance companies also
subject to the tax.
Justice Day answered the various OBJ
Jections against the constitutionaiity Of
the tax. He first took up the contention
that it was a direct and unconstitutional
for the same reason that the income tax
law was declared constitutional In 1896.
He pointed out that the income tax was
held to be direct because imposed Upon
the property simply because Of its own
ership
I'm the present case" said Justice Day.
''the tax is not payable unless there is q
carrying on or doing Of business in the
designated capacity and this is made the
occasion for the tax, measured by the
standard prescribed.
Justice Day took up the objection that
the provisions IN questions levied a tax
upon the exclusive right of state to
grant corporate franchises, in that it
taxed franchises which are the creation
of a state IN its sovereign right ana
authority:
I'VE think" says the opinion. cit Is
the result of the cases heretofore decided
fa hat ~. f,rfe4
ties, though exercised because of state
created franchises, are not beyond the
taxing power OF the United States"
Justice Day addressed himself TO the
objection that the tax was unequal ana
arbitrary. He first considered whether,
as Reclaimed, the law made an uncon-
stitutional distinction between corpora
tions and partnerships or individuals.
He said there was a substantial diff
ference between the carrying on Of bus
mess between corporation taxed and the
same business when conducted by pri-
vate firm or individual.
THE thing taxed" said he, '1s not the
mere dealing in merchandise, in which
the actual transactions may be the
same, whether conducted by individuals
or corporations, but the tax is laid upon
the privileges which exist in conducting
business with the advantage which in
here IN the corporate capacity of those
taxed and which are not enJotned ty pr1- &
vate firms or individuals. These advant
ages are obvious and have led to the
formation of such companies in nearly
all branches OF trade.
1.-THE continuity of the business without
interruption by death or dissolution. the
transfer of property interests by the dis
position of shares Of stock, the adyan-
tages of business controlled and managed
by corporate directors, the general abb
sence of individual hability-these and
other things inhere in the advantages OF
business thus conducted, which do not
exist when the same business is conducted
by private individuals or partnerships. It
Is this distinctive privilege which is the
subject of taxation, not the mere buying
or selling or handling of goods which may
be the. same, whether done by corpora
tons or Individuals
Measurement of the tax by the net in
come of the corporation or the COM
pany. received by it from all sources.
was next defended by Justice Day in his
opinion as not being so unequal and so
arbitrary and baseless as to fall outside
of the authority of the taxing power.
CHALLENGED REAL ESTATE
Justice Day said it was especial OBJ
a.