Court Opinion

ID: 7815779
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:35:44.458772+00
Date Added: 2024-06-11T16:30:35.814991
License: Public Domain

George Rose Smith, J. The principal issue presented here is the constitutionality of Act 396 of 1955, which provides a special procedure for the taxation of shares of stock in life insurance companies, hanks, and trust companies. Ark. Stats. 1947, 84-510 and 84-511. The present controversy over the proper assessment of the stock in the appellee corporation has gone forward in the usual way, proceeding from the county assessor’s original assessment to the equalization hoard and thence to the county court and the circuit court. This appeal is from a judgment holding the act in question to be invalid and exempting the appellee from compliance with its provisions. A preliminary issue is raised by one of the appellants, the Little Rock School District. When this proceeding reached the circuit court the school district sought to intervene, asserting that it is one of the agencies entitled to share in the revenues derived from the property tax and that it therefore has a direct interest in the outcome of the case. The circuit court refused to permit the intervention, although counsel for the school district were allowed to participate in the case. It is now contended that the district was entitled to intervene as a matter of right. The court below was right in refusing to permit the intervention. Necessary parties may intervene as a matter of right, but the question of permitting others to enter a case lies within the court’s discretion. “Intervention is not a common law right, but has long been recognized by the courts upon the principle that a party should be permitted to do that voluntarily which, if known, a court would require to be done.” Board of Directors of St. Francis Levee Dist. v. Raney, 190 Ark. 75, 76 S. W. 2d 311. The school district is obviously not a necessary party to every proceeding for the determination of the assessed value of taxable property. By statute the prosecuting attorney has the duty of representing the public in a proceeding such as this one. Ark. Stats., § 84-708. If the school district may intervene as a matter of right the same privilege would have to be extended to the county, the various cities, other school districts, the holders of municipal bonds, and all the other beneficiaries of property taxation. There is no reason at all for saying that the circuit court abused its discretion in this case. Turning to the merits, the basic purpose of Act 396 is to subject certain shares of stock to property taxation. To this end the president, secretary or principal accounting officer of each domestic life insurance company and of each bank or trust company is required to file with the assessor of the county where the company’s principal office is situated a sworn statement setting forth certain specified information about the market value of the corporation’s outstanding stock. The ensuing property tax is to be paid by the corporation, but the act declares that its purpose is to recognize the shares of stock as the property to be taxed. In harmony with this view the statute empowers the corporation to pass the tax on to its stockholders by deducting its amount from any dividend accruing on the stock. The act provides a criminal penalty for an officer’s failure to file the required return and also directs that the corporate charter be forfeited. Act 396 was evidently patterned after Act 262 of 1917. The earlier statute, however, was a comprehensive measure purporting to apply to the shareholders of all corporations. Section 1 of the 1917 act provided for the assessment of stock in domestic insurance companies, while Section 2 applied to stock in all other corporations, domestic and foreign. In two decisions of this court Section 2 was held unconstitutional, first as to foreign corporations and then as to domestic ones. State ex rel. Atty. Gen. v. Lion Oil Ref. Co., 171 Ark. 209, 284 S. W. 33; State ex rel. Atty. Gen. v. Williams-Echols Dry Goods Co., 176 Ark. 324, 183 Ark. 1150, 3 S. W. 2d 340. Finally, in 1954, these cases were construed as having also invalidated Section 1 of the 1917 act. Mashburn v. Auto Finance Corp., 224 Ark. 45, 271 S. W. 2d 621. At the next' meeting of the legislature Act 396 of 1955 was adopted. Thus there is reason to think that the legislature enacted Act 396 as a substitute for Section 1 of the 1917 statute and by oversight failed to realize that the remainder of what had originally been a comprehensive statute had previously been held to be invalid. With this background we come to the constitutional question, which is squarely presented and thoroughly discussed in the briefs. As a secondary contention, however, the appellee argues that even if the statute is valid its provisions for certain deductions from the market value of the stock should be so interpreted as to exempt this particular corporation from the tax. We find it unnecessary to explore this perplexing problem in statutory construction, for we are firmly of the view that the judgment must in any event be affirmed upon the controlling constitutional issue. The validity of Act 396 is clearly a matter of public interest, and we see no reason for seeking to postpone a decision of this question, especially as it would certainly be presented again within the immediate future. See Glover v. Henry, 231 Ark. 111, 328 S. W. 2d 382. The main challenge to the statute is based upon this language in Article 16, § 5, of the Arkansas Constitution: “All property subject to taxation shall be taxed according to its value, that value to be ascertained in such manner as the General Assembly shall direct, makingthe same equal and uniform throughout the State. No one species of property from which a tax may be collected shall be taxed higher than another. species of property of equal value.” The section then enumerates all the classes.of exempt property, such as that used for public purposes, charitable purposes, etc., and the next section prohibits any other exemption from the property tax. The appellee forcefully contends that Act 396 is in direct conflict with the constitution in that it singles out ■ the stock of life insurance companies, banks and trust companies for the assessment and collection of a property tax. It is pointed out that the substantial burden of taxation imposed by this act upon the stockholders of a few selected corporations is not shared by many other persons similarly situated, such as the stockholders in the various other kinds of insurance companies, in building and loan associations, in mercantile corporations, and, in fact, in every other type of business corporation. The appellants’ attempt to defend the validity of the statute really consists of two arguments which must be examined separately, as they are not entirely consistent with one another. On the one hand the appellants take the position that the statute is valid even though it involves some discrimination, because the legislative classification is said to be a reasonable one. Here it is pointed out that life insurance companies, banks, and trust companies are all financial institutions that customarily maintain extensive investments in tax-exempt United States bonds. This situation results in the payment by these corporations of relatively small income taxes and personal property taxes. Hence, the appellants say, the legislature was justified in subjecting the shareholders in these companies to a property tax that is not imposed upon the owners of other corporations. This argument rests upon a basic misconception of the constitutional clause in question. In the levy and collection of property taxes classification is permissible only when it does not run counter to the fundamental requirement of equality. The property of public utilities, for example, may be assessed differently from other property, owing to the peculiar difficulties incident to the valuation of such utilities. But the differing methods of assessment must still result in all property of the same value being taxed at the same rate. This point was made clear in Hays v. Mo. Pac. R. Co., 159 Ark. 101, 250 S. W. 879: “It is true that property such as railroads may be classified for taxation and assessed by different methods and by different officers from those assessing other property. Bnt the object is nevertheless the same, and that is to arrive at the value of the property and tax it according to its valué, making the same equal and uniform throughout the State. While exact equality in taxation cannot be achieved, intentional inequality of assessments violates the mandate of the Constitution in question and invalidates the tax.” The language of the constitution is too plain to be misunderstood: “No one species of property . . . shall be taxed higher than another species of property of equal value.” It could not seriously be contended that shares of stock in a life insurance company might constitutionally be taxed at twice the rate applicable to fire insurance company shares of equal value. Still less can it be argued that the one class of stock may be subjected to a tax from which the other class is wholly exempt. Among our uniform holdings to this effect a recent example is McArthur v. Smallwood, 225 Ark. 328, 281 S. W. 2d 428. There we held that the constitution prevents the legislature from exempting state bonds from property taxation, when privately owned. The appellants’ alternative defense of Act 396 narrows down to an insistence that this statute actually involves no discrimination when it is considered in the light of our tax laws as a whole. In substance it is contended that all personal property is required by law to be assessed for taxation, and therefore it is immaterial whether the assessment and payment are made by the corporation itself, under Act 396, or by the stockholder under the general laws. This argument is unsound. To begin with, our general corporation law provides that no stock issued by a corporation created under that act shall be taxed for any purpose when owned by a nonresident of the state. Ark. Stats., § 64-1004. Thus the statutes as a whole involve discrimination in this respect: A nonresident who owns stock in an ordinary business corporation is not subject to any property tax upon his holding, but under Act 396 a nonresident who owns stock in a life insurance company is compelled to pay a property tax upon his holding. Counsel’s only answer to this inconsistency in the law is that we should declare this section of the general corporation statute to be invalid, as violating the constitutional prohibition of exemptions other than those granted by the constitution itself. Apart from our disinclination to strike down one act simply as a means of upholding a different act, it is evident that the mere elimination of a section of the general corporation law would not end the discrimination created by Act 396. It is apparent that Act 396 would prove to be an efficient tax-gathering measure, for delinquency carries a criminal penalty and a forfeiture of the corporate charter. Hence the stockholders of life insurance companies, banks and trust companies, would in practice be compelled to pay the taxes levied by Act 396. By contrast, however, the stockholders of other corporations receive more lenient treatment, as the general laws for the assessment of personal property do not carry severe penalties for disobedience. Ark. Stats., 84-424, 84-428, and 84-440. It is a matter of common knowledge that intangible personal property is actually not assessed at all in many instances, and certainly the voluntary assessment of such property does not reach the degree of uniformity that could be expected under Act 396. Consequently the situation created by Act 396 is analogous to the familiar rule that statutes, although ostensibly fair, may become invalid as a result of inequalities in administration. Carr v. Young, 231 Ark. 641, 331 S. W. 2d 701. Finally, even if we should assume that the voluntary assessment of corporation stock pursuant to general law would be just as uniform as the compulsory assessment under Act 396, the county and the other beneficiaries of the general property tax are still in no better position to defend Act 396. For if this assumption be true then no revenue will be lost as a result of the invalidation of Act 396, inasmuch as it is being assumed that the stockholders in life insurance companies and the other concerns falling within Act 396 will then voluntarily make the same assessments and pay the same taxes that would result from the enforcement of Act 396. Thus it conclusively appears that the appellants would gain nothing if there really existed the only conceivable set of facts upon which Act 396 could be sustained. Affirmed. McFaddin, J., dissents.