Court Opinion

ID: 5003547
Source: CourtListenerOpinion
Date Created: 2021-10-01 01:40:53.568247+00
Date Added: 2024-06-11T08:17:11.313751
License: Public Domain

On Motion for Rehearing.
On motion for rehearing, appellant contends for the first time that the construction of the 1930 Franchise Tax Act contended .for by the state, and adopted by the trial court and this court, renders the act void as being violative of the equal protection of law clause of the Fourteenth Amendment to the Federal Constitution, in that the result of such construction “is to tax appellant on its capital stock invested in the electric light and power and water businesses at a sum very much in excess of the tax imposed upon other corporations having large outstanding bond issues and carrying on the same type of electric light and power and water businesses, but not the ice business.” Appellant further contends in substance as follows:
(1)That no difference has been shown or claimed between its light and power and water businesses and that of any other light and power and water utility which would justify taxing the capital engaged therein on any different basis.
(2) That it is entirely unreasonable to say that, because it owns capital invested in the light and power and water businesses, and also has other capital invested in the ice business, its capital invested in the first-named businesses should be taxed differently from other corporations engaged only in those businesses.
(3) That, however wide 'the latitude given the state to classify corporations as such for taxing purposes, the basis must be reasonable; and that there is no reasonable basis for the act in question on the ground that appellant is also engaged in the ice business in addition to its public utility businesses.
We bave reached the conclusion that these contentions cannot be sustained, for tbe following reasons:
(1) Tbe record and amicus eurise briefs filed herein show that in enforcing the act the state is taxing appellant exactly as it is all other corporations engaged in certain businesses which are public utility businesses and also in a business that is not a public utility; and that appellant is paying tbe same amount of tax imposed by the act upon all corporations engaged in the light, water, and ice businesses.
(2) That the act classifies corporations as such for the purpose of imposing the tax and not as to business purposes.
(3) That there is reasonable basis for the classification, and the act is not unreasonable and unconstitutional because it imposed a higher tax upon corporations engaged in the light, water, and ice businesses than it does upon corporations engaged only in the light and/or water businesses.
In our original opinion, we held that subdivision (a) of the act imposed the higher franchise tax upon every corporation not engaged solely as a public utility; that subdivision (d) imposed the lower 'tax upon “all public utility corporations * * * engaged solely in the business of a public utility”; that in the absence of legislative enactment, the manufacture and sale of ice to the public in Texas by appellant did not constitute it a public utility corporation or business; that a corporation engaged in the light, water, and ice businesses was not a corporation engaged solely in the business of a public utility within the meaning of the terms of subdivision (d) of the act; and that the act did not authorize corporations engaged partly as public utilities and partly as private businesses to allocate portions of its capital to its public utility businesses, and other portions to its nonpublic utility business as a basis for computing the *1027amount of the franchise tax due. We still maintain these views.
The law is well settled that in levying taxes the state has the power to classify corporations as such, and any reasonable classification will be upheld. Bell’s Gap Ry. Co. v. Pennsylvania, 134 U. S. 232, 10 S. Ct. 533, 33 L. Ed. 892; Texas Co. v. Stephens, 100 Tex. 628, 103 S. W. 481. That separation for taxation purposes of public utility corporations and nonpublic utility corporations will be upheld. Atlantic Coast Line Ry. Co. v. Doughton, 262 U. S. 413, 43 S. Ct. 620, 67 L. Ed. 1051. That likewise statutes classifying and taxing differently different kinds of public utility corporations have been upheld. Puget Sound Power & Light Co. v. King County, 264 U. S. 22, 44 S. Ct. 261, 68 L. Ed. 541. And, in reviewing the very wide discretionary power of the Legislature of the state to classify trades, businesses, corporations, and occupations for taxation purposes, the Supreme Court of the United States in a recent case of State Board of Tax Commissioners of Indiana v. Jackson, 283 U. S. 527, 51 S. Ct. 540, 543, 75 L. Ed. 1248, 73 A. L. R. 1464, held as follows:
“The principles which govern the decision of this cause are well settled. The power of taxation is fundamental to the very existence of the government of the states. The restriction that it shall not be so exercised as to deny to any the equal protection of the laws does not compel the adoption of an iron rule of equal taxation, nor prevent variety or differences in taxation, or discretion in the selection of subjects, or the classification for taxation of properties, businesses, trades, callings, or occupations. Bell’s Gap R. v. Pennsylvania, 134 U. S. 232, 10 S. Ct. 533, 33 L. Ed. 892; Southwestern Oil Co. v. Texas, 217 U. S. 114, 30 S. Ct. 496, 54 L. Ed. 688; Brown-Forman Co. v. Kentucky, 217 U. S. 563, 30 S. Ct. 578, 54 L. Ed. 883. The fact that a statute discriminates in favor of a certain class does not make it arbitrary, if the discrimination is founded upon a reasonable distinction. American Sugar Refining Co. v. Louisiana, 179 U. S. 80, 21 S. Ct. 43, 45 L. Ed. 102, or if any state of facts reasonably can be conceived to sustain it. Rast v. Van Deman, 240 U. S. 342, 36 S. Ct. 370, 374, 60 L. Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455; Quong Wing v. Kirkendall, 223 U. S. 59, 32 S. Ct. 192, 56 L. Ed. 350. As was said in Brown-Forman Co. v. Kentucky, supra, at page 573 of 217 U. S., 30 S. Ct. 578, 580:
“ ‘A very wide discretion must be conceded to* the legislative power of the state in the classification of trades, callings, businesses, or occupations which may be subjected to special forms of regulation or taxation through an excise or license tax. If the selection or classification is neither capricious nor arbitrary, and rests upon some reasonable consideration of difference or policy, there is no denial of the equal protection of the law.”
“It is not the function of this Court in cases like the present to consider the propriety or justness of the tax, to seek for the motives, or to criticize the public policy which prompted the adoption of the legislation. Our duty is to sustain the classification adopted by the Legislature if there are substantial differences between the occupations separately classified. Such differences need not be great. The past decisions of the Court make this abundantly clear.”
Manifestly there are substantial differences between corporations having the right under their charters to engage in businesses which are public utility businesses and in addition to engage in strictly private businesses, and corporations having the right under their charter to engage solely in the business of a public utility, as follows:
First, because the former enjoy at the hands of the state greater privileges and powers than the latter classification of corporations. Clearly a corporation authorized to engage in not only public utility 'businesses, but also in private business, is given broader privileges and powers than a corporation engaged solely in public utility businesses, Franchise taxes are imposed as consideration for the special privileges granted corporations ; and, where one is granted greater privileges than another, it should pay a greater franchise tax for the greater privilege. And, as regards the basis for the legislative classification of corporations in this regard, the difference in the privileges need not be great, just so it is substantial and reasonable; and, where such is the case, it is immaterial that classification may show some inequities or irregularities. State Board of Tax Commissioners of Indiana v. Jackson, supra; Western Public Service Co. v. Meharg, 116 Tex. 193, 288 S. W. 141, 292 S. W. 168.
Second, because the nonutility business of the first above named classification of corporations is not subject to any sort of public regulation or control, while the entire business of corporations engaged solely in the business of public utility is subject to some sort of public regulation or control of their rates or services. It is indisputable that the primary basis for the lower franchise tax in the instant case, as well as in all eases in favor of public utility corporations, is the right of the state to regulate and control them as to their rates or service. This fact alone would authorize the classification made by the act in question, and it is reasonable and founded upon real and substantial differences, because the two classes of corporations are engaged in different businesses, one being engaged in partly a public utility business and partly a private business, while the other one is en*1028gaged solely in the business of a public utility, whose rates or service is subject to public regulation or control.
The motion for a rehearing will be overruled.
Overruled.