The New York herald., 1922-07-11
ARBITRARY VALUE Isl
INVALID AS TAX BASE
Appellate Court Holds Assess
ment on a Fixed Par
Valuation Illegal.


Foreign corporations operating in New
York State with capital stock Of no par
value will hereafter pay license taxes
and minimum franchise taxes on the
basis OF actual capital employed within
the State" according to a decision
handed down by the Appellate Division
Of the Supreme Court. third department.,
In Albany. made public here yesterday.
A section Of the corporation tax laws
for 1920 providing that In taxation each
such share shall be regarded as having
g. face value Of 500 was held unconsti-
tutional. and an earlier provision omit
ting such designation Of value was rein
stated. s.t 81
Tax experts regarded the opinion as Of
prime Importance. 1t was given on the ap-
peal OF the Terminal and Town Taxi Cor.
poration in certiorari proceedings asking
g. review Of the assessment Of the State
Tax Commission OF license tax OF
So, sos and an annual franchise tax OF
81. 0s3.70 for the year ending October 81, s
1921. Justice III. T. Keliogg wrote the
opinion. Henry NJ. Powell Of Powell 6e
Silver. of 81 Chambers street. argued the
appeal for the corporation. The court
snnuIled the determination OF the COM
mission and sent the case to tho cons
mission for further action in accord7
ance with this opinion" "ar ~
More then 200 corporations. chartered
In some other State and therefore tech
nically foreign" In New York. will be
affected by the decision. These have
an aggregate capitalization Of more thar
$500 100000 The amount in taxes
eventually involved may run into many
thousands OF dollars rs
I'VE think that the tax to which the
reiator (the taxi company Is liable un- /,
der that section must have as its base
the actual capital employed within this
State" Justice Kellogg wrote. te
The license tax, assessed when for
eign corporation first enters the stats
for business. Is a fee Of onc-cixnth OF 4
per cent, computed on the capital stock
utilized in the State during the first
year of business here. ~ ~
The minimum franchise tax provision, /.
10 which objection also was raised, pro-
vides that foreign corporations, wiar
certain exceptions. shall be subject to :
minimum tax OF one mill upon such pors
ton of issued capital stock at face. value
as the gross assets employed within the
State bear to the gross assets wherever
employed The section also contains .
clause setting forth that stock without
par yalue shall be deemed for the pur-
nose OF tax assessment to have value or
$780, A
The Appellate Court upheld the, conten-
tlon of Mr.. Powell that II the expression
shall be deemed" means shall be de-
termined." the provision has the effect
Of imposing q discriminatory tax.
I'VE cannot escape the conclusion that
tho expression shall be deemed as cm1
ployed in ths provision under considera
ton. does have the force OF shall be
determined the opinion continucs.V
'-rhe compulsory valuation Of 500 re-
quired by the provision as thus con-
strued TO be placed upon every share OF
no par value stock IL entirely arbitrary
and necessarily would result IN uneQus.
taxation.
Section 214 OF the Tax Law. as ~
read prior to the enactment OF chapter
GAO of the Laws OF 1920, did not contain
the objectionable provision which we re-
gard as unconstitutional. The law then
provided for minimum tax or not less
than one mill upon each dollar OF the
issued capital stock OF a foreign corpora.
tion apportioncd TO this State. 1t also
provided as follows: II such q corpora
ton has stock without par value. then
the base of the tax shall be on such n
portion of its paid in capital as It's real
and tangible personal property In the
In the State bears to it's entire real and
tangible personal property. This was .
nm cntirely reasonable PROVISION anu itu-
posed tax which would bear equally
upon all foreign corporations. sd
Chapter $40 OF the Laws OF 1920. by
which the unconstitutional provision
above referred TO was sought TO be Inn
posed, did not In express terms repeal
the reasonable provision Of section 2lt
of the Tax Law which we have referred
TO. The effect of our holding that tho
later provision Is unconstitutional Is,
therefore. to reinstate the earlier pro-
vision. The minimum franchise tax Inn
posable upon rclator Is, therefore. de-
terminable by its actual capital en-
ployed within the State"
The Terminal and Town Taxi Corpo
ration has an authorized capital stock
OF S1,e17.50o. consisting Of $4,000 pre-
ferred and 23.50o common. OF the for
mer, s.o47 of 800 par value have been
issued of the common. 1887 Of no par
value have been issued. The amount
paid In for the common stock was $117,-
500, or about 1855 n share.