Evening journal., 1921-03-07
ASSERT STATE
MAY CUT OFF
Big REVENUE
(continued From First Page. }

chiSe tax of three per centum 6 per
cent? upon corporations, based upon
the amount of business done within
this State, be and the same is here
by disapproved by this body, for the
following reasons:
1T is we'll known that the revenue
derived from the corporate franchise
tax law, now on our Statute books, is
the foundation of the fiscal system
of this State. For twenty years or
more this State has relied, chiefly
for its revenues upon the franchise
taxes paid by corporations organized
under the Delaware law and this re-
venue has, since the time of the
adoption of the General Corporation
Law, been increasing year by year
until, at the present time this State
derives a revenue therefrom of ap-
proXimately one and one-half mil
lions of dollars CS1.5OO,OOO) This
revenue is larger by far, than any
revenue derived from any source
within the taxing power; conse-
quently it must be very apparent
that any new scheme of revenue
which may be contemplated by the
Legislature should be very careful
not to disturb this existing source
of revenue, and we believe that this
is the purpose Of the Legislature.
"An examination OF the Tax Law
shows that the bill depends for it's
Interpretation and operation upon
what the words doing business in
Delaware mean. In other words the
tax is based upon the amount of busi-
-, ,. d. IL
ment must first be ascertaiued before
the tax can be computed. The Della
ware Corporation Law is widely
known throughout the United States
and is very favorably considered by
/ businesses and attorneys practicing
in almost every city of the country.
The law is favored, because it is per-
haps the best corporation law now
existing within the United States. 1.
is simple in its operation, but affords
ample protection to all persons who
may become stockholders or creditors
of the corporation. 1t is not fair to
assume that any attorney who may
/ be called upon to organize a corpora
ton, on behalf Of his clients, will
examine very minutely into the intri-
cacies of this proposed bill, for the
purpose of determining whether or
not the corporation, which he pro-
poses to form, will come within the
provisions of this Bill or not. lie
will not take a chance After all
he will say to himself I cannot tell
! just what doing business in Della
ware means. Ii may be that the
( Delaware Courts may not agree with
any opinion that 1 may give now.
These words doing business in Del
aware are indefinite in the act and
will depend ultimately for their in
depreciation upon the decisions Of
the courts Of the State of Delaware.
as the many questions involved there
in may be presented to such court
and I will not advise my clients TO
incorporate in the State of Delaware
II can find some other State where
the tax laws are clear and positive.
This would be the attitude of al
most every attorney who might be
called upon to organize corpora
ton for his client. At the present
time undoubtedly such attorney
would give very careful considera-
ton to the Delaware law and the
chances are greatly in favor of his
welcoming Delaware as the place i'm
which to incorporate, but with such
a tax law on our statute books, we
feel confident that very little new
business in the way of organizing
corporations would come to the State
of Delaware.
In addition to this very formid-
able objection to the dill, we have
further to consider whether or not
existing corporations may not lire
wise leave the State, II this bin
should be passed. II is. after all, a
very simple matter for Delaware
corporation TO take out a charter in
another State, to transfer its assets
to such new corporation and to dis
solve the corporation organized un-
der the Delaware laws. In this par
ticular instance it may possibly be
true that corporation organized
under the laws OF Delaware might
have to pay a three per centum tax
upon its entire net income, depend
, Ing upon how the courts will ulti-
mately construe the meaning Of the
words doing business in Delaware.
II is quite obvious that no corpora
ton would stand for such tax
/ when by leaving this State and IN
cooperating in some other State. il
, could avoid this tax entirely. The
, state Of New York has adopted a
4. statute very similar to the present
bill, in fact the present bill is al
, most an exact duplicate Of the New
York Statute. The result has beer
. that no corporation organizes under
the laws Of the State of New York
unless by virtue of its circumstance
IL is compelled to do so. If this bill
should be passed, almost immedi.
ately our courts would be filled with
, litigation for the purpose of deter
v mining whether or not the transac
tions of Delaware corporations con,
, stituted business within this STATE
/, within the meaning of the statute
:, There is no serious attempt made in
the bill to define the meaning OF th'
! words doing business in this State.
3 Some apparent attempt is made in
}. Section 50 OF the original draft, bu
this attempted definition is so obscure
and indefinite that it means practi
cally nothing. Consequently tn,
!. courts might very we'll construe tn,
q act to mean, for instance, that ever,
contract for the sale Of goods ac
D cepted in Delaware by any corpora
~.