Source: https://supreme.justia.com/cases/federal/us/240/103/
Timestamp: 2019-04-20 16:56:18+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 240 › Stanton v. Baltic Mining Co.
Brushaber v. Un. P. R. Co., ante, p. 240 U. S. 1, followed to effect that the district court has jurisdiction of an action by a stockholder against the corporation to enjoin it from voluntarily paying the tax under the Income Tax Law of 1913 on the ground of its unconstitutionality.
This Court has, under § 238, Jud.Code, jurisdiction of a direct appeal from the judgment of the district court refusing to enjoin a corporation from paying the tax under the Income Tax Law of 1913, in a suit brought by a stockholder on the ground of unconstitutionality of the statute.
The Income Tax Law of 1913 is not unconstitutional as not conforming with, or being beyond the authority of, the Sixteenth Amendment. Brushaber v. Un. P. R. Co., ante, p. 240 U. S. 1.
There is no authority for taking taxation of mining corporations out of the rule established by the Sixteenth Amendment; nor is there any basis for the contention that, owing to inadequacy of the allowance for depreciation of ore body, the income tax of 1913 is equivalent to one on the gross product of mines, and, as such, a direct tax on the property itself, and therefore beyond the purview of that amendment and void for want of apportionment.
Independently of the operations of the Sixteenth Amendment, a tax on the product of the mine is not a tax upon property as such because of its ownership, but is a true excise levied on the result of the business of carrying on mining operations. Stratton's Independence v. Howbert, 231 U. S. 399.
The facts, which involve the constitutionality and construction of provisions of the Income Tax Law of 1913 and its application to mining corporations, are stated in the opinion.
sought in this case so far as the question of jurisdiction is concerned are substantially the same as those which were relied upon in the Brushaber case, it follows that the ruling in that case upholding the power to dispose of that controversy is controlling here, and we put that subject out of view.
Further, also like the Brushaber case, this is before us on a direct appeal prosecuted for the purpose of reviewing the action of the court below in dismissing on motion the bill for want of equity.
"That, under and by virtue of the alleged authority contained in said income tax law, if valid and constitutional, the respondent company is taxable at the rate of one percent upon its gross receipts from all sources, during the calendar year ending December 31, 1914, after deducting (1) its ordinary and necessary expenses paid within the year in the maintenance and operation of its business and properties, and (2) all losses actually sustained within the year, and not compensated by insurance or otherwise, including depreciation arising from depletion of its ore deposits to the limited extent of five percent of the 'gross value at the mine of the output' during said year."
by the legislation, as well as discrimination which the provisions of the act operated against mining corporations because of the separate and more unfavorable burden cast upon them by the statute than was placed upon other corporations and individuals -- averments all of which were obviously made to support the subsequent charges which the bill contained as to the repugnancy of the law imposing the tax to the equal protection, due process, and uniformity clauses of the Constitution, and (B) those dealing with the practical results on the company of the operation of the tax in question, evidently alleged for the purpose of sustaining the charge which the bill made that the tax levied was not what was deemed to be the peculiar direct tax which the Sixteenth Amendment exceptionally authorized to be levied without apportionment, and of the resulting repugnancy of the tax to the Constitution as a direct tax on property because of its ownership, levied without conforming to the regulation of apportionment generally required by the Constitution as to such taxation.
the ore body from which, during the year, ore was taken. Indeed, the following alleged facts concerning the relation which the annual production bore to the exhaustion or diminution of the property in the ore bed must be taken as true for the purpose of reviewing the judgment sustaining the motion to dismiss the bill.
"That the real or actual yearly income derived by the respondent company from its business or property does not exceed $550,000. That, under the income tax, the said company is held taxable, in an average year, to the amount of approximately $1,150,000, the same being ascertained by deducting from its net receipts of $1,400,000 only a depreciation of $100,000 on its plant and a depletion of its ore supply limited by law to five percent of the value of its annual gross receipts, and amounting to $150,000; whereas, in order properly to ascertain its actual income, $750,000 per annum should be allowed to be deducted for such depletion, or five times the amount actually allowed."
Without attempting minutely to state every possible ground of attack which might be deduced from the averments of the bill, but in substance embracing every material grievance therein asserted and pressed in argument upon our attention in the elaborate briefs which have been submitted, we come to separately dispose of the legal propositions advanced in the bill and arguments concerning the two classes.
"are unconstitutional and void under the Fifth Amendment in that they deny to mining companies and their stockholders equal protection of the laws and deprive them of their property without due process of law"
therefore not confined to the arbitrary five percent fixed as the basis for deductions by mining corporations.
(2) Because, by reason of the differences in the allowances which the statute permitted, the tax levied was virtually a net income tax on other corporations and individuals, and a gross income tax on mining corporations.
(3) Because the statute established a discriminating rule as to individuals and other corporations as against mining corporations on the subject of the method of the allowance for depreciations.
(4) Because the law permitted all individuals to deduct from their net income dividends received from corporations which had paid the tax on their incomes, and did not give the right to corporations to make such deductions from their income of dividends received from other corporations which had paid their income tax. This was illustrated by the averment that 99 percent of the stock of the defendant company was owned by a holding company, and that, under the statute, not only was the corporation obliged to pay the tax on its income, but so also was the holding company obliged to pay on the dividends paid it by the defendant company.
(5) Because of the discrimination resulting from the provision of the statute providing for a progressive increase of taxation or surtax as to individuals, and not as to corporations.
(6) Because of the exemptions which the statute made of individual incomes below $4,000, and of incomes of labor organizations and various other exemptions which were set forth.
But it is apparent from the mere statement of these contentions that each and all of them were adversely disposed of by the decision in the Brushaber case, and they all therefore may be put out of view.
(1) That, as the Sixteenth Amendment authorizes only an exceptional direct income tax without apportionment, to which the tax in question does not conform, it is therefore not within the authority of that Amendment.
(2) Not being within the authority of the Sixteenth Amendment, the tax is therefore, within the ruling of Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, a direct tax and void for want of compliance with the regulation of apportionment.
assumption that, looked at from the point of view of substance, a tax on the product of a mine is necessarily, in its essence and nature in every case, a direct tax on property because of its ownership unless adequate allowance be made for the exhaustion of the ore body to result from working the mine. We say wholly fallacious assumption because, independently of the effect of the operation of the Sixteenth Amendment, it was settled in Stratton's Independence v. Howbert, 231 U. S. 399, that such tax is not a tax upon property as such because of its ownership, but a true excise levied on the results of the business of carrying on mining operations. Pp. 231 U. S. 413 et seq.

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