Democratic messenger. [volume] (Snow Hill, Md.) 1869-1973, 1921-04-09
STATE
CAPITAL
$4,000 MORE REVENUE.
Annapolis

Annapolis
Additional annual revenue OF prob.
ably more than $4,000 will come to
the State from foreign corporations as
result Of the opinion OF Attorney.
General Alexander Armstrong to the
State Tax Commission, defining the
term in the foreign corporation laws
amount Of capital employed in this
State"
So heavy will be the increase in
franchise taxes which many Of the cor.
porations will be called on to pay,
provided the Armstrong ruling stands,
that 1t Is not improbable that some OF
them will take the matter to the courts
Tor final decision.
Some OF the foreign corporations
evidently anticipated the Armstrong
ruling. for they sent checks for the
1921 franchise tax. on the old basis. to
the State Tax Commission in advance
Of bill from the commission. The
commission returned these checks.
pending the Armstrong opinion, and
said a bill would be rendered later. In
one instance foreign corporation
sent check for s25, which would have
been its tax under previously accepted
definitions of capital employed in this
State" This check was returned and
now, under the Armstrong definition.
q bill for more than $1,000 will be sent
to this corporation. There are many
other corporations which will have 10
pay similar increases.
In previous years foreign corpora.
tions paid their franchise taxes direct
to the Secretary OF State. The 1920
Legislature adopted a measure trans.
ferring these duties to the State Tax
Commission.
When the Secretary OF State. in pre-
vious years. sent out a QUESTIONABLE
on which to get data for basis for the
franchise tax. the only question asked
with reference to capital was What is
the amount OF capital employed in this
State?"
The foreign corporations invariably
their own methods. The usual method
was TO figure the total assets of the
corporation In all States, and then find
the proportion the assets in Maryland
bore to the total assets in all States.
This proportion OF the capital stock
then was figured as capital employed
in this State" and the tax paid on Il.
The Davis Coal and Coke Company
was one corporation which thus figured
its capital taxable for franchise pur.
poses. and 1t was in this instance that
the Tax Commission asked for a ruling
from the Attorney-General. The Tax
Commission maintained that the
amount OF gross assets in Maryland OF
the foreign corporation was the
amount that should be included as
"capital employed In this State" Mr..
Armstrong; opinion upholds the Tax
Commissions contention
What the difference will be can be
illustrated by citing one corporation.
Under the method adopted by the cor.
porations in previous years. this cor.
poration's estimate OF the amount OF
capital employed in this State" was
just little more than $4,000. It's
gross assets in Maryland. however, to-
tailed more than $3.500.0O0
II will now be taxed on the basis OF
$500 900. The law levies a tax OF
$25 for each full $4,000 OF capital
employed in this State" up to 100000,
and one-fortieth OF per cent on any
excess OF that amount up to 5000. 900.
This means that instead of paying s25
franchise tax. this particular corpora
ton now will be called on to pay
$1,000.
There was some discussion about the
advisability OF suits to recover amounts
from foreign corporations which would
have been paid had the Armstrong
view prevailed when the franchise tax
was placed on the statute books. This
would represent a huge amount, but II
is impractical to estimate it.
However. one in authority expressed
the belief that such a course would
avail the State little. as receipts in
full were given for the franchise taxes
by the Secretaries OF State in previous |
years. thus eliminating any State
claim at present.