system: You are a legal assistant. Answer concisely and accurately. When legal text is provided, rely on it and do not invent facts.

user: Read the following U.S. Supreme Court case excerpt and classify it into the correct legal issue area. Excerpt: 350 U.S. 492 76 S.Ct. 534 100 L.Ed. 634 WERNER MACHINE COMPANY, Inc., Appellant,v.DIRECTOR OF DIVISION OF TAXATION, DEPARTMENT OF THE TREASURY, STATE OF NEW JERSEY. No. 63. Argued March 5, 6, 1956. Decided March 26, 1956. Mr. Charles Goodwin, Jr., New York City, for appellant. Mr. Harold Kolovsky, Union City, N.J., for appellee. PER CURIAM. 1 The State of New Jersey imposes on each domestic corporation 'an annual franchise tax * * * for the privilege of having or exercising its corporate franchise' in the State.1 This tax, as applied to appellant, is measured by the corporation's 'net worth,' which is defined as the sum of the corporation's issued and outstanding capital stock, paid-in or capital surplus, earned surplus and undivided profits, other surplus accounts which will accrue to the shareholders (not including depreciation reserves), and debts owed to shareholders owning 10 percent or more of the corporation's stock.2 Appellant is a corporation organized under the laws of New Jersey, and is therefore subject to the tax. In assessing appellant's tax for 1952, the Tax Commissioner included in appellant's net worth the value of certain federal bonds held by appellant, thereby increasing the amount due by $320.07. Appellant protested, claiming that under R.S. § 3701, 31 U.S.C. § 742, 31 U.S.C.A. § 742, these bonds were immune from state taxation. The New Jersey courts upheld the Commissioner's assessment, and this appeal contests the validity of the state statute as so applied. 2 Appellant contends that this tax is not in reality a franchise tax, but is rather in the nature of a direct property tax on the immune federal obligations. Corporate franchises granted by a State create a relationship which may legitimately be made the subject of taxation, Home Ins. Co. of New York v. State of New York, 134 U.S. 594, 599—600, 10 S.Ct. 593, 595, 33 L.Ed. 1025; Flint v. Stone Tracy Co., 220 U.S. 107, 162, 31 S.Ct. 342, 353, 55 L.Ed. 389; Educational Films Corp. of America v. Ward, 282 U.S. 379, 388, 51 S.Ct. 170, 171, 75 L.Ed. 400; and the statute expressly declares this to be a franchise tax. Moreover, the Supreme Court of New Jersey has, on independent examination, found this to be 'a bona fide franchise tax.'3 While this is, of course, not conclusive here, Society for Savings in City of Cleveland, Ohio v. Bowers, 349 U.S. 143, 75 S.Ct. 607, 99 L.Ed. 950, we find no basis in this instance for not accepting the state court's conclusion that this tax is not imposed directly on the property held by the corporation. Cf. Pacific Co. v. Johnson, 285 U.S. 480, 495—496, 52 S.Ct. 424, 427, 428, 76 L.Ed. 893. 3 Appellant argues further that even if this is a franchise tax, it must fall because its effect is the same as if it had been imposed directly on the tax-exempt federal securities. Since the tax remains the same whatever the character of the corporate assets may be, no claim can be sustained that this taxing statute discriminates against the federal obligations. And since this is a tax on the corporate franchise, it is valid despite the inclusion of federal bonds in the determination of net worth. This Court has consistently upheld franchise taxes measured by a yardstick which includes tax-exempt income or property, even though a part of the economic impact of the tax may be said to bear indirectly upon such income or property. See, e.g., Society for Savings v. Coite, 6 Wall. 594, 18 L.Ed. 897; Provident Institution for Savings v. Massachusetts, 6 Wall. 611, 18 L.Ed. 907; Hamilton Co. v. State of Massachusetts, 6 Wall. 632, 18 L.Ed. 904; Home Ins. Co. of New York v. State of New York, supra; Educational Films Corp. of America v. Ward, supra; Pacific Co. v. Johnson, supra. We have only recently adhered to this principle in another aspect of this field of taxation. See Society for Savings in City of Cleveland, Ohio v. Bowers, supra, 349 U.S. at pages 147 148, 75 S.Ct. at pages 609, 610; New Jersey Realty Title Ins. Co. v. Division of Tax Appeals, 338 U.S. 665, 70 S.Ct. 413, 94 L.Ed. 439, on which appellant relies, is distinguishable, in that it did not involve a franchise tax, but rather a tax whose legal incidence this Court found to be upon the intangible assets of the corporation. 4 Since as applied here this is a permissible tax on the corporate franchise, the decision below must be affirmed. 5 Affirmed. 1 N.J.Laws 1945, c. 162, N.J.S.A. § 54: 10A—1 et seq. 2 Id., §§ 54:10A—4(d)(5). 3 Werner Machine Co. v. Director of Division of Taxation, 17 N.J. 121, 125, 110 A.2d 89, 91.

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