Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1922-09-20
PERMANENT
INJUNCTION
IS SOUGHT
Railroads in State File Ac-
ton in Equity Against N.
D. In Tax Case.
Seek to Restrain State From
Collecting Special Ex-
else Tax.

Fargo, N. D., Sept. 2O.-An action
In equity against the state of North
Dakota through certain state officers
has been filed In the federal district
court here by attorneys acting for
James G. Davis, director general of
Grating In the state, seeking per-
manent restraining order from the
court to prevent the collection of the
special excise tax levied under the
law enacted by the North Dakota leg
islature in 1919, against each of the
railroad organizations.
Bismarck, N. D.. Sept. 20.-North
Dakota'ss always have notified Tax
Com1,sssian 6 q inverse ttsat
tion sof the state excise tax, levied
against them for four. years, ana the
collection OF. which the roads have
twice resisted successfully in the
courts. ~ ~
The tax which the railway COM
panies are resisting, Is, known as the
capital stock tax or the, excise tax, is
assessed under the provisions Of
chapter 222 Sof< the sessions laws OF
1919, being the first law inc the his.
tory Of the state imposing capital
stock tax. The tax is imposed at
the rate Of SO cents for each one
thousand dollars Of the fair value Of
the capital stock and bonds of the
corporation, including in the valua-
ton the value Of the surplus and
undivided profits. The statute pro-
vides for an exemption often thou
sand dollars. This tax Is applied both
to. corporations organized within the
state and those organized under the
laws of other states but transacting
business in this state.
The law provides that in case of a
corporation engaged in business part
ly within this state and partly with
out the state, the tax shall be assess
ed upon the capital actually invested
IN the transaction OF business in this
state, and prescribes a method of de-
ternining the amount OF such invest
ment which should be apportioned to
this state The railroads have always
resisted the capital stock tax upon
the contention that the apportion-
When the assessment was first made,
the apporttonment in the case = of
railroad properties was madN. upon
the ratio which the mileage within
the state Of the several railroads
bears to the total mileage OF the
several roads. The railroads resisted
this method Of apportionment upo1,
the ground that the railroad mileage,
was not an accurate index of the
state. for the reason that much
larger sum per mile Is invested in
some of the other states the noun
tain states, for instance. The point
made by the railroad was not that
mileage was not the basis of appor-
tionment prescribed by the legisla-
! ture, but that the legislature exceeded
its powet in prescribing an arbitrary
method of apportionment, which did
not accurately reflect the true appor-
tionment of Investment. The rail-
courts In enjoining the collection Of
the tax levied. upon the mileage basis
Of apportionment.
Was Assessed Second Time.
/ The capital stock tax was again
assessed, and the apportionment was
made upon a basis of the ratio which
the property Of the corporation with
in. the state bears to its entire prop
erty employed in such business, both
within and without the state. The
railroads, likewise, contested the
validity OF this basis OF apportion-
ment, taking the position that the
statute having prescribed the mile
age basis of lapportionment, 1t was
not lawful to assess the tax upon any
other basis even though the mileage
basis was unlawful. In other words,
the railroads contended and were up
held by the federal courts In their
contention, that there was no au-
thority in the statute for the use OF
the property basis OF superintendent.
The decision OF the supreme court
was rendered IN January of the PRES
!, ent year. Il The tax commissioner pro-
ceeded to assess the tax for the third
time. this time, using as basis Of
apportionment the ratio which the
business Of the several railroad COM
panies within the state bears to their
total business within and without the
state. It Is this method OF appor-
tionment which the railroads are now
challenging The assessment last
made is based upon the following
provision Of the statute: - '',' Gin the
case ofwa corporation engaged IN
business partly within ana partly
without the state. Investment within
the state shall be held to mean that
proportion Of Its entire stock and
bond issue which Its business within
the state bears to- its total business
within ana without the state. 80" &