Court Opinion

ID: 3838446
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:07:26.219608+00
Date Added: 2024-06-11T09:26:00.229923
License: Public Domain

Petition for rehearing denied January 29, 1931                        ON PETITION FOR REHEARING                              (295 P. 461)
In Banc.
The petition for a rehearing is accompanied with two extensive briefs which display evidence of much industry facilitated by learning. Of the one brief the Attorney General is the author, while the other represents the labors of a group of attorneys whose interest in the attacked statute arose many months ago when those attorneys, together with others, made an effort to solve the tax problem of their state by suggesting some tax legislation. The skillful argument presented in these briefs tempts us strongly to set forth our views upon the many subjects discussed by the amplified arguments, but the fact that the biennial session of the legislature is now in progress persuades us that promptness in finally disposing of this suit will better serve the situation than a further recital of our views.
The Attorney General seems to remain convinced that chapter 429 of 1929 Session Laws, which is the act under attack, identifies itself as an income tax statute and that our decision fails to pay sufficient heed *Page 206 
to these identifying earmarks. However, we notice that tax legislation of other states which presented even more evidence of being income tax statutes, have been held to be in reality property tax statutes. See, for instance, Cudahy Packing Co. v.Minn., 246 U.S. 451 (38 S. Ct. 373, 62 L. Ed. 827). In determining the nature of the tax the practical operation of the statute and its actual effect are very important circumstances: Quaker CityCab Co. v. Pa., 277 U.S. 389 (48 S. Ct. 553, 72 L. Ed. 927);Shaffer v. Carter, 252 U.S. 37 (64 L. Ed. 445, 40 S. Ct. 221), and Nicol v. Ames, 173 U.S. 510 (43 L. Ed. 786, 19 S. Ct. 522). The ultimate effect of chapter 429 is to take from intangibles a part of their value. It clips from a bond a part of the interest coupons as effectively as if the state performed the physical act. That piece of tax legislation operates upon its subject-matter — intangible property — more directly than the ad valorem tax on real property. It is these circumstances together with the others mentioned in our previous decision which have brought us to our conclusion that this statute imposes a tax upon property.
Concern is expressed in the briefs lest our previous decision was intended to overrule Standard Lmbr. Co. v. Pierce, 112 Or. 314
(228 P. 812). No such thought was in our minds. Quite to the contrary we referred to that decision with approval. We believe that an obvious distinction exists between the situation brought before this court in that suit and the circumstances disclosed by the instant case. The statute there in question was conceded by all to be an income tax statute and hence this court was not called upon to determine its nature. Moreover, that act levied a graduated rate upon the net income received by the taxpayer from his various sources of income. The present act imposes a tax of 5 per cent upon the gross *Page 207 
income from a definite type of property only, that is intangibles. We believe that a very substantial difference exists between the nature of a tax which takes from interest, before it has become mingled with other items of income, a portion thereof, and another tax which lumps all income into one sum, and takes a part of it only after net income has been determined by the subtraction of many allowances. The former is the situation now before us; the latter was the tax legislation disposed of by Mr. Justice McCOURT'S decision in Standard Lmbr. Co. v. Pierce. A further distinction is also worthy of notice. The case just mentioned brought before the court only one act. In our present situation we are confronted with three; the two additional acts afford evidence of the nature of the third. One of the three is obviously an income tax statute and makes no pretensions to the contrary; another expressly states that it imposes "the excise tax" and defines those words as a levy upon the privilege of doing business in this state in corporate form. This evidence we feel is worthy of consideration in determining the nature of the remaining act. These various circumstances convince us that no conflict exists between Standard Lmbr. Co. v. Pierce and our previous decision in this case.
Counsel also evidence apprehension lest our quotation fromPortland v. Portland Ry. L.  P. Co., 80 Or. 271 (156 P. 1058), which applied the sections of our state constitution applicable to taxation as they existed prior to the amendment of 1917, was intended as a construction of the amended sections. The excerpt taken by us from that case was employed only by way of illustration, and not for the purpose of construction. We felt safe in so using it in view of the fact that our *Page 208 
decision nowhere attempted to construe the amended sections of our constitution. Our decision closes with the statement: "Chapter 429 is invalid, due to its conflict with the provisions of the 14th amendment to the federal constitution which guarantee the equal protection of the laws."
Next the suggestion is made that we should construe the three statutes, that is, chapters 427, 429 and 448 as three income tax statutes, and that having done so it will be apparent that no improper discrimination had been made between corporations and individuals. Until the petition for rehearing had been filed the Attorney General's brief referred to chapter 427 as a statute, which exacted a tax of corporations for the privilege of carrying on business in corporate form. We quote from his brief the following: "The amount of tax imposed by chapter 427, Laws of 1929, is computed upon the basis of net income, and is to be paid for the privilege of carrying on or doing business in this state. The procedure for determination of the net income upon which said taxes are computed is set forth in detail, and differs very materially from that applying to the tax imposed by chapter 429." Our study and analysis of that act brought us to the same conclusion. We are aware of no reason for changing that opinion. Being of that opinion it is evident that even if we should hold that chapter 429 is an income tax statute, still a discrimination would exist between the individual and the corporation. The former would be taxed at the rate of 5 per cent upon his gross income from intangibles and would also be subject to a further tax upon his net income from all other sources (levied by chapter 448) while the corporation would escape both of these taxes and be subject only to the excise tax. *Page 209 
It seems to us that if the Legislature did not intend that these three acts should reach different subjects of taxation it would not have entitled them with different names and would have written them as one act. This circumstance while not conclusive is very significant.
It is also argued that an excise tax upon corporations may be imposed as a substitute for a personal property tax payable by individuals without violating constitutional provisions and that the tax imposed by chapter 427 should be regarded as a substitute for the one imposed by chapter 429. We are willing to subscribe to the proposition of law upon which this argument is founded but do not believe that the tax imposed by chapter 427 was intended as a substitute tax. We remain convinced that it was intended as a charge for the benefits conferred by the corporate franchise. Moreover, while chapter 427 exempts the corporation from the personal property tax upon the payment of the excise tax, chapter 429, contains no such provision. The validity of numerous tax statutes has been sustained which dealt with the individual in a manner different from the corporation, yet in all of those instances the reason for the different treatment was made apparent. In the present statute the discrimination operates to the disadvantage of the individual, but no reason therefor has come to our attention.
Various other matters are argued in the petition for a rehearing. They have all received careful consideration, but we find in them no sufficient reason for departing from our previously announced decision.
The petition is denied.
KELLY and CAMPBELL, JJ., did not participate. *Page 210