Omaha daily bee., 1911-03-14
CORPORATION TAX LAW VALID

/ UVllI VIlhllVN INN LIN III IhulU
CONTINUED from First Page)
took up the contention that it was a direct
tax and unconstitutional for the same rea-
sons that the famous income tax law was
declared unconstitutional in 1895. He
pointed out that the income tax was held
to be direct because imposed upon property
simply because OF its ownership.
differs from Income Tax.
In the present case said Justice Day,
1 "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. The difference be-
tween the acts is not merely nominal, but
rests on the substantial difference between
the mere ownership OF 'pi operty and the
actual doing Of business in a certain way"
Justice Day next took up the objection
that the provisions in question levied a
tax on the exclusive right Of a state to
grant corporate franchises in that it taxed
franchises which are the creation of
state in tits sovereign right and authority.
I'VE think" says the opinion, 1T is the
result Of the cases heretofore decided in
this court that such business activities.
though exercised because Of state-created
I franchises, are not beyond the taxing
power of the United states"
After reviewing eases hitherto decided by
this court Justice Day said:
IF il be true that the forming of a state
corporation would defeat this purpose by
taking the necessary steps required by the
state law to create corporation and car
rying on business under rights granted by
state statute, the federal tax would be-
come invalid and that source of national
revenue be destroyed, except as to the bust
ness in the hands OF individuals or part
nerships. It cannot be supposed that it
was intended that It should be within
the power Of individuals acting under state
authority to thus impair and limit the
exertion Of authority which may be essen
tial to national existence"
Tax Not Arbitrary.
/ Justice Day next. addressed himself to
the objection that the tax was unequal and
arbitrary. He first considered whether, as
claimed, the law made an unconstitutional
distinction between corporations and part
nerships and individuals.
He said there was substantial differ
ence between the carrying on business be-
tween corporations taxed and the same
business when conducted by private firm
or individual.
"The thing taxed" said he, lis not the
mere dealing in merchandise. in which the
actual transactions may be the same,
whether conducted by individuals or cor
porations, but the tax IS laid on the pri-
vileges which exist in conducting business
with the advantages which inhere in the
corporate capacity Of those taxed and
which are not enjoyed by private firms or
individuals.
These ADVANTAGES are obvious and have
led to the formation Of such companies
in nearly all branches OF trade"
/ Measurement Of the tax by the net in
come of the corporation or the company
received by it from, all sources was next
defended by justice Day, as not being so
UNEQUAL and so arbitrary and baseless as
to fail outside Of the authority OF the
taxing power' - .+ rs 81
1--WE must not forget he said, that the
right to select the measure and objects Of
taxation devOlves on the congress and not
upon the courts and such selections are
valid unless constitutional limitations are
oyerstepped."
The court was Unable to find such viola
ton Of constitutional limitations.
Applies to ReaI Estate Companies.
Justice Day said it was especially OBJ
jected that certain Of the corporations
whose stockholders challenged the validity
of the tax were so called real estate com
panies
1--WE think IL clear" said he, that cor
poratlons organized for the purpose OF
doing business and actually engaged in
such activities as leasing property, collect
ing rents. managing office buildings, max
. mr.
lands and collecting royalties, maintaining
whsrves, dividing profits and in some
cases investing the surplus are engaged In
doing business within the meaning Of the
statute and In the capacity necessary tc
make such organizations subject TO law
) The court held that It was not part OF the
essential government functions Of state
TO provide means OF transportation, supply
artificial light, water and the like. There
fore. il was determined that the Coney Isl
and & Brooklyn Railroad company and
, the Interborough Rapid Transit company
: of New York were subject to the tax.
, Justice Day then came TO the attack upol
2 It based upon the so-called publicity tes
lures with the provisions which requlr
Z certain returns to be made to the govern
g ment as an aid in the assessment OF tar
e The taxation being, as we have held
4 said the justice, within the legitimat
n powers Of congress. it is for that body L
. determine what means are appropriate an
a adapted TO the purposes Of making the Law
n effectual."
The opinion thus summarized, cover
p fifteen Of the eighteen cases in which tn
: eonstitutionality Of the tax was assailec
T. The nonappiicability of the tax to the rea
0 estate trusts was decided in the other thre
y cases
I The law was held inapplicable to the de
= partment store trust ana TO the Cushin
real estate trust, both Of Boston, on tn
ground that these were not organized undS
/ the statutes Of the state or the Unite
States, but existed merely under the con
: mon law.
The Minneapolis syndicate was held M
liable to the tax because the real esta
| which Il held before a recent reOrganiEs
a ton had gone out OF the control and ther'
8 fore the syndicate was not doing bus
q ness" within the meaning OF the law.
History of the Law.