Arizona republican., 1919-05-06
ATTACkSLAW TO TAX INTANGIBLE
 VALUES SYSTEM
Such Is Effect of Overruling of Judge Sawtelle In Stan dard Oil Case-Appellate
 Court Pronounces Com missions Valuation Err roneous and Unwarranted

SAN FRANCISCO, May 5.-The Standard Oil company of California to- day won it's fight against the state tax commission of Arizona, through a de- cision of the United States circuit court of appeals, granting a temporary in- Junction against the state tax comrnis i sion increasing the 1917 assessed valua- ton of the company from $342, ,706 to S2,910,579. A decision of the United Sites district court of Arizona, which upheld the increase, was overruled.
 The appellate decision upheld the company's apr cal which charged the tax commission with constructive fraud. and ruled the commissions val nation as fundamentally erroneous and unwarranted. The oil company al legged that the Arizona valuation fig ures included assets which were in the valuation in California, including s951, 37S income in California, 1917.
 This case came up in the United States court for Arizona before Judge Sawtelle on a petition asking for an injunction restraining the tax commits sion from assessing the property of the Standard Oil company in Arizona on it's intangible value. The petition was denied by Judge Sawtelle on the ground . that the plaintiff had another remedy, by beginning a suit in each of the counties in which it conducts business.
 The plaintiff, through it's attorneys, Ellinwood and Ross, counsel for Phelps Dodge and company, appealed from the order, denying the injunction. The case will now come back to the federal court for this state, to be tried on it's merits. No oral testimony will be of fered, nothing but the official records.
 The plaintiff attacks the tax commis- sion's system of assessment as funda- mentally wrong and in violation of the laws of this state, which require that property shall be assessed at its full cash value. When the matter has been finally decided as, according to the holdings of the court of appeals 1t will doubtless be. that will be the end of intangible value assessments in this state.
 Would Tax on Profits
 It was the theory of the commission that property should be taxed upon the profits. In the case of the Stand ard oil comapny, the commission all lowed the company d profit Of 20 per cent, a purely arbitrary figure, and 1t threatened at the same time i'll letter to the company that that generous al Iowance was only for this year; per haps next year it would not be so liberal.
 It is believed that this decision, if ex- tended, would invalidate the mine tax ing law of this state, which bases valu- ation for taxable purposes on produe- ton. But mining men who have all along believed that that law would not stand d test, have said that it would not be attacked by them so long as it is not made q vehicle for assessing them unreasonably. They do not care now the taxscommission arrives at the as- seshments, provided they are not eX- cessive.
 Ii was contended by the plaintiff that it had no other property in this state. than horses, wagons tanks and offices. None of the commodities in which the company deals are produced in Arizona They all come from Cali fonia- where they have been taxed. Much of the oil of the company IS shipped in tank cars directly to con sumers and is nowhere handled in the state except at the destination.
 The intangible value system of tax ation seems to have been based solely on the Adams Express company case from Ohio and it was sustained by the supreme court of the United states on the ground that lHe DuSlllcfSS O- 'hAS company could be considered only as a unity. It was made plain that the decl- sion applied to public utilities only, and it was stated in the opinion that 1t dld not apply to purely private enterprises such as factories. It was regarded as y franchise tax, for which the laws of ohio provided. There is, it is pointed out, no franchise law In this state, eX- cept as to railroads, telegraph, tele- phone and express companies, and the right of the state to impose that tax as to them is not definite. but 1t has been accepted.
 The plaintiff illustrated the opera ton of the intangible value system III this way: Two merchants each have a stock of goods, of the value of S1O,o00. One of them is energetic and conse- quently successful. His profits taken as the basis of valuation may subject him to an assessment of $100,OO0. The other merchant may so mismanage his business that he earns no profit. Ills assessment would not exceed the actual value of his stock