Court Opinion

ID: 8535061
Source: CourtListenerOpinion
Date Created: 2022-11-23 11:05:31.896437+00
Date Added: 2024-06-11T16:51:51.376936
License: Public Domain

ON MOTION FOE REHEARING-
Mr. Chief Justice Travieso
delivered the opinion of the court.
The intervener, South Porto Rico Sugar Company (of New Jersey), feeling aggrieved by our decision of March 5, 1945, has asked us to reconsider the same and render another instead declaring that the application of § 28(a) of the Income Tax Act to foreign corporations not authorized to do business in Puerto Rico, is also unconstitutional.
The intervener admits that our former decision is correct in so far as it holds that the right to the equal protection of the laws may be invoked only by individuals or corporations who are within the insular jurisdiction. The ground of its objection to said decision is that, as the provisions of the twenty-first paragraph of § 2 of the Organic Act of Puerto Rico, to the effect that “the rule of taxation in Puerto Rico shall be uniform,” do not contain any territorial limitation, said provisions should equally protect all individuals and corporations, those within as well as those without the insular jurisdiction. The intervener adds that “if the National Congress had sought to limit the protection provided by the uniformity clause, it would have been very easy to draft said clause in like terms as the equal protection clause,” so as to read thus: “The rule of taxation in Puerto Rico shall be uniform for every person in said island.”
The purpose of the uniformity clause is to prevent discrimination against individuals or corporations similarly situated. That is why we held that the income tax should be the same for domestic corporations and for foreign corporations which have established a residence in Puerto Rico by obtaining a license to do business within the insular jurisdiction. On foreign corporations thus registered in Puerto Rico there can not be imposed a rate of taxation higher than *588the one imposed on domestic corporations, solely because the former are foreign, without violating the constitutional provisions regarding the equal protection of the laws and uniformity of taxation.
In Ballester v. Court of Tax Appeals, 61 P.R.R. 460, it was sought to impose a higher rate of taxation on a resident alien, and the Treasurer based such imposition upon the mere fact of alienage of the taxpayer. We held that the imposition was illegal and violative of the two constitutional provisions above mentioned.
The argument that if Congress had sought to limit tho protection of the uniformity clause it could have accomplished such purpose merely by adding to said clause the phrase “for every person in said Island,” is not convincing. The addition of said phrase would have deprived the Legislature of the power to divide the taxpayers into classes and to impose on each class a rate of taxation different from those imposed on the other classes; and in such case any individual or corporation domiciled in the Island could demand exemption from the imposition of a rate of taxation higher than the minimum rate imposed by the law upon any other individual or corporation, regardless of the character of the business in Avhich said individual or corporation were engaged. The fact that the territorial limitation suggested by the intervener was not added to the twenty-second paragraph of § 2 of the Organic Act is the best indication that Congress intended to confer on the Insular Legislature the power to classify taxpayers and to impose on each class a different rate of taxation.
In the exercise of that power to classify taxpayers, the Insular Legislature, by enacting § 28(a) of the Income Tax Act,' divided the corporations into two classes: (a) those incorporated in Puerto Eico; and (b) those incorporated in other jurisdictions. It imposed a 20 per cent tax on the in*589come.of the former and a 22 per cent tax on the income of the latter. When the Treasurer sought to collect the higher tax from foreign corporations which had obtained a license to do business in Puerto Eico solely because they were foreign, we held that by such action the Treasurer was denying to said corporations, who had become persons in said Island immediately upon obtaining a' license, the equal protection of the laws and likewise violating the uniformity clause. It was in connection with the division of the corporations authorized to do business in Puerto Eico, into two classes, to wit, (1) those organized in Puerto Eico, and (2) foreign corporations registered in Puerto Eico, that we held that such a classification was illegal as it was not based “upon some distinction _which can rationally and fairly be made the reason for different taxation.”
The grouping of corporations into two classes, (1) domestic corporations and foreign corporations authorized to do business in the Island, and (2) foreign corporations with no residence in Puerto Eico, is based on a distinction which, in our judgment, constitutes a sufficient reason for the difference in the rates' of taxation. A foreign corporation which receives income from sources within Puerto Eico and which chooses to remain in a condition of complete alienage in relation to the Island, without submitting itself to the jurisdiction of the local tribunals and without contributing in any way to the support of the government that protects the sources from which it derives income, is not entitled to the equal protection of the provisions of law requiring uniformity in the imposition of taxes, or to be included in the same class as the corporations organized or domiciled in accordance with the laws of this jurisdiction.
The difference of 2 per cent between the rate of taxation imposed on domestic corporations and foreign corporations registered in this island and the one imposed on nonresident foreign corporations is not unreasonable nor arbi*590trary and should he upheld as a lawful exercise of the legislative power to classify taxpayers and to impose upon them different tax rates.
The reconsideration sought must he denied.