Bisbee daily review., 1919-05-11
ARIZONA TAXATION SYSTEM DECLARED BAS|CALLY WRONG
Such Is Purport of Decision by U. s. Circuit Court in
 Standard Oil Case

sent tax commission and state board of equalization, is declared funda- mentally erroneous in principle in the decision handed down recently by the United States circuit court of appeals for the ninth circuit in the case of the Standard Oil company, corporation, against Charles R. Howe, c. M. Zan- der and Rudolph Kuchler, members of the tax commission and of the board of equalization of the state of Arizona, ct al The decision is in an appeal of the Standard Oil com pany from a decree of the district court of Arizona denying appellants prayer for a temporary injunction and sustaining the appellee's motion to dismiss its bill of complaint. Cop ies of the decision were received in the Warren district yesterday after noon.
 The question involved the validity of the action of the state board of equalization of Arizona in ordering the assessed valuation of the proper ty of the Standard Oil company for the year 1917, to be increased from $342, ,706OQ as fixed by the county assessing and equalizing authorities, to $2,91O,579.64. In fixing the valua- tion of the company, the tax commits sion had determined that the com pany's net profit on it's Arizona sales for 1917 were S727,649.41, and had then capitalized these earnings at 25 per cent, an arbitrary figure, and thus produced a total valuation of $2,91O,- 579.64. From this last named sum the value that had been put upon the properties by the county authorities was deducted and the difference be- came the increase complained of in the case.
 The corporation alleges that the ae- tion of the board was wilful, arbitrary and constructively fraudulent; that the order for the increase was made upon an assumed earning capacity, which included the earnings and in- come produced in California, as well as in Arizona, and that the effect of the action of the board is to tax in Arizona property situated in California as well as to tax the company's trans action of interstate business. The opinion then reviews the tax laws of the state under which the board works
 After stating the case Justice Hunt sets forth from the facts heretofore stated, it is evident that the rule of assessment expressed and adopted by the board was that appellant oil com pany should be allowed" to earn 25 per cent on the assessed value of the property. The basis for such a rule was found in the consideration of what were called by the board "ex- cessive earnings" or what was re- garded intangible properties, not in cluded in the term real estate. The position of the board is that the meth ed followed is what ''is known as the capitalized income plan" for ascer- taining or valueing the intangible value of the corporation assessed and it is argued that the board used the term excessive earnings" in its ordi- narily accepted meaning, intending to convey the information that the in- crease was on that part of the capi- talized income over and above the value of the tangible property, and it is said that the method resolves it. self into a simple assessment of in- tangible valuation.
 "But there is no statutory authority in Arizona for taxation of the earn ings ol the appellant corporation; nor is there any provision which author izes the board to judge of what earn ings are excessive or as to how heavi- ly such earnings may be taxed. =. =. The judgment of the board seems to have been exerted merely with the purpose of fixing a percent age of the assessed value which, in the opinion of the board, the appellant should be allowed to earn. Having decided that point the board proceed. ed to capitalize appellants earnings at the rate fixed. The next step was to increase the assessment of the cor poration to the figure thus arrived at without regard to the cash value of the property owned by the COT poration"
 The decision than states that "the action of the board was fundamental ly erroneous in principle, the assess ment was unwarranted in law, and we think appellant should not be denied equitable relief. Assuming that there is remedy provided by the statutes of the state,s the enforce ment of such remedy would
 involve a multiplicity of suits in volving a question of law common to all of them" It is then pointed out that the federal courts in theil equity jurisdiction are not bound by the state law which forbids injunc ton against the state or any officei to prevent the collection of a ta1 levied under provisions of the law.
 As a second consideration in tho case the court declares that ''it would appear in the present case that tht state board considered not merely th' earnings and income produced by thu property of the Standard Oil compan! in Arizona but fin far greater part has taken into consideration the earn properties of the appellant situate il California"
 The case was remanded, with in structions to issue a temporary in junction. In effect this means tha the entire system used by the stat board for assessment for taxation puT poses is erroneous in principle ant