Court Opinion

ID: 6255427
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:29:12.519865+00
Date Added: 2024-06-11T08:59:32.094418
License: Public Domain

Concurring Opinion by
Mr. Justice Simpson:
Upon the assumption that Dupuy v. Johns, 261 Pa. 40, is not to be overruled (and this seems to be the view of a majority of the court, including the three dissenting Justices), I concur in the order of reversal; not only because this court is “bound to prevent the abuse of its own decision” (Com. v. Moir, 199 Pa. 534, 561), but also for the reasons set forth in the opinion prepared by our Brother Kephart, more particularly because the Gulf Oil Corporation, — the value of whose shares of stock appellee seeks to exclude from consideration in fixing the tax due by him, — has no legal power to do anything except to hold the “stocks of subsidiary companies.” The place of taxation of such intangible assets is the domicile of the owner, whether a corporation or an individual, unaffected by the fact that the stock certificates may be in another jurisdiction; for, *272after all, they are only evidences of ownership, their location may change from day to day, and thus, unless the domicile of the owner is fixed as the place where they are to be taxed, they may readily escape all taxation.
That they have been taxed, in whole or in part, is a matter of no moment in deciding the question of exemption, for the point at issue is not whether a tax has been assessed and paid, but whether the corporation was “liable” to pay it; and when, as here, this issue is determinable by the charter itself, interested third parties have a right to require the courts to consider and decide it, irrespective of any previous determination by some nonjudicial taxing body. Any other conclusion would result in the gravest injustice, for large corporations could arrange to do a dollar’s worth of business in this State, or own a chair or table here, and by paying to the State a tax on this basis could exempt all their shareholders from personal liability on many million dollars’ worth of stock.
In my judgment, however, Dupuy v. Johns, supra, is wrong in principle and should be overruled. In construing statutes relating to taxation, three rules must be steadily borne in mind: (1) No tax can be collected in the absence of a provision clearly imposing it upon the class to which the taxpayer or his property belongs; (2) Where the taxpayer or his property is within the general language of the statute imposing the tax, all exempting provisions are to be strictly construed against the claim for exemption; (3) Provisions relating either to the imposition of or exemption from a tax, are to be so construed as to give effect, as nearly as reasonably may be, to the common law duty to tax equitably and ratably all those within the given class, this subject being partially dealt with also in article IX, section 1, of our Constitution. It was by giving no effect to rule (3) and mistakenly applying the principle embodied in rule (1) instead of that in rule (2) (the last two being often confused with each other, though in no *273way conflicting), that the exempting provision under consideration in Dupuy v. Johns, was held to relieve appellee from the tax therein sought to be collected.
The facts in that case, as taken from the opinion of the court, were, “The plaintiff is a resident of Pittsburgh; in his return for the year 1916 he failed to include certain shares of the preferred stock of the Crucible Steel Company of America, then owned by him. The concern in question is a New Jersey corporation, engaged in making steel and products thereof, the value of its total capital stock being approximately §75,000,000; of this amount, §14,000,000 is employed in Pennsylvania, and all except §29,000 exclusively in manufacturing. The company is licensed to do business in this State, and in 1916 it paid a capital stock tax on the before-mentioned §29,000 amounting to §169.17.” The portion of the Act of June 17,1913, P. L. 508, 509, under which the liability was sought to be established in that case, provides that residents of Pennsylvania shall be liable to pay a tax upon, inter alia, “all shares of stock in any bank, corporation, association, company, or limited partnership, created or formed under the laws of this Commonwealth or of the United States, or of any other state or government, except shares of stock in any bank, corporation or limited partnership that may be liable to a tax on its shares or its capital stock for state purposes under the laws of this Commonwealth, or relieved from the payment of tax on its shares of capital stock for state purposes by the laws of the Commonwealth.” We held that, under this excepting provision, the payment of the §169.17 relieved from taxation all Pennsylvania holders of any part of the §75,000,000 of stock, although our citizens who held stock in other corporations, domestic or foreign (save as exempt because employed in manufacturing, etc.), were liable to a tax on the full value of their shares, even though no part of the corporation’s tangible assets was located in this State. In my opinion appellee, in that case, should have been held liable to *274pay a tax upon 61/75 of the value, of his shares, and exempted from 14/75 thereof.
It will be noted the exempting provision is: “except shares of stock in any......corporation......that may be liable to a tax on its shares or its capital stock for state purposes......or relieved from the payment of tax on its shares or capital stock for state purposes.” If the provision quoted means, as Dupuy v. Johns says, that any payment, no matter how small, relieves the stockholder from the tax, then the employment here of any part of the corporation’s assets for manufacturing purposes, no matter how small, must have a like effect, and the holders of stock in foreign corporations, but a trivial part of whose activities are in the line of manufacturing, will wholly escape, though, under substantially similar language, the holders of stock of domestic corporations will escape only pro rata, that is, to the extent the assets are used in manufacturing and not beyond that. This is not only discriminatory and inequitable, but is also in direct antagonism to rule (2), above stated, and should not be tolerated, unless there is no reasonable way of escape therefrom. It is true stockholders in domestic corporations do not directly pay the tax on their shares, but the corporation pays it for them, and not as a tax on its own assets, — a fact too often overlooked in considering questions arising under these statutes. If “any” or some similar word had been used in the Act of 1913, when referring to the payment or relief from payment of the tax, we might perhaps be required to construe the exempting provision as was done in Dupuy v. Johns, despite the inequality occasioned thereby; but no such word appears, and hence under rule (2), and indeed upon the principle that the legislature will be presumed to know and adopt the construction placed by this court upon similar language in previous taxing statutes, the exemption should be limited accordingly.
*275A like conclusion was reached in construing the acts of assembly which exempted “institutions of learning, benevolence or charity, with the grounds thereto annexed and necessary for the occupancy and enjoyment of the same, founded, endowed and maintained by public or private charity,” for there we exempted fractions of buildings directly used for the purposes of the charity, and taxed other parts thereof from which a revenue was received: Young Men’s Christian Association v. Donohugh, 7 W. N. C. 208, approved in Phila. v. Barber, 160 Pa. 123, 128; Board of Home Missions, etc., v. Phila., 266 Pa. 405. This conclusion was reached upon equitable grounds and not because the statutes expressly so provided; no reason exists why like equitable consideration should not control the exempting provision in the Act of 1913.
If the reasons thus presented were allowed to prevail Dupuy v. Johns would be overruled, and this would result in a reversal of the order of the court below and a restatement of the tax, appellee being held liable for the greater part but not all of the amount claimed. It would also result in that equality of taxation, which necessarily is equity; would give full effect to the action of the state authorities in so far as they assessed a tax for state purposes; would destroy the method which may now be employed, whether by collusion or otherwise, to escape liability under these taxing acts; would remove all the difficulties suggested in the dissenting opinion; and would save the State and her citizens from the dire results which it is supposed may flow from the conclusion reached by the court.