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of the railroad. The State may ascertain the value of the whole line as a single property and then determine the value of the part within on a mileage basis, unless there be special circumstances which distinguish between conditions in the several States. Pittsburgh C.C. & St. L. Ry. v. Backus, 154 U.S. 421 (1894). briefly at numerous ports never acquire a taxable situs at any one of them, and are taxable in the domicile of their owners or not at all. 419 Thus, where airplanes are continuously in and out of a state during the course of a tax year, the entire fleet may be taxed by the domicile state. 420 Conversely, a nondomiciliary State, although it may not tax property belonging to a foreign corporation which has never come within its borders, may levy a tax on movables which are regularly and habitually used and employed therein. Thus, while the fact that cars are loaded and reloaded at a refinery in a State outside the owner’s domicile does not fix the situs of the entire fleet in that State, the State may nevertheless tax the number of cars which on the average are found to be present within its borders. 421 But no property of an interstate carrier can be taken into account unless it can be seen in some plain and fairly intelligible way that it adds VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00074 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1745 422 Wallace v. Hines, 253 U.S. 66 (1920). For example, the ratio of track mileage within the taxing State to total track mileage cannot be employed in evaluating that portion of total railway property found in the State when the cost of the lines in the taxing State was much less than in other States and the most valuable terminals of the railroad were located in other States. See also Fargo v. Hart, 193 U.S. 490 (1904); Union Tank Line Co. v. Wright, 249 U.S. 275 (1919). 423 Great Northern Ry. v. Minnesota, 278 U.S. 503 (1929). If a tax reaches only revenues derived from local operations, the fact that the apportionment formula does not result in mathematical exactitude is not a constitutional defect. Illinois Cent. R.R. v. Minnesota, 309 U.S. 157 (1940). 424 Howard, State Jurisdiction to Tax Intangibles: A Twelve Year Cycle, 8 MO. L. REV. 155, 160–62 (1943); Rawlins, State Jurisdiction to Tax Intangibles: Some Modern Aspects, 18 TEX. L. REV. 196, 314–15 (1940). 425 Kirtland v. Hotchkiss, 100 U.S. 491, 498 (1879). 426 Savings Society v. Multnomah County, 169 U.S. 421 (1898). 427 Bristol v. Washington County, 177 U.S. 133, 141 (1900). to the value of the road and the rights exercised in the State. 422 Or, a state property tax on railroads, which is measured by gross earnings apportioned to mileage, is constitutional unless it exceeds what would be legitimate as an ordinary tax on the property valued as part of a going concern or is relatively higher than taxes on other kinds of property. 423 Intangible Personalty.—To determine whether a State, or States, may tax intangible personal property, the Court has applied the fiction mobilia sequuntur personam (movable property follows the person) and has also recognized that such property may acquire, for tax purposes, a permanent business or commercial situs. The Court, however, has never clearly disposed of the issue whether multiple personal property taxation of intangibles is consistent with due process. In the case of corporate stock, however, the Court has obliquely acknowledged that the owner thereof may be taxed at his own domicile, at the commercial situs of the issuing corporation, and at the latter’s domicile. Constitutional lawyers speculated whether the Court would sustain a tax by all three jurisdictions, or by only two of them. If the latter, the question would be which two—the State of the commercial situs and of the issuing corporation’s domicile, or the State of the owner’s domicile and that of the commercial situs. 424 Thus far, the Court has sustained the following personal property taxes on intangibles: (1) a debt held by a resident against a nonresident, evidenced by a bond of the debtor and secured by a mortgage on real estate in the State of the debtor’s residence; 425 (2) a mortgage owned and kept outside the State by a nonresident but on land within the State; 426 (3) investments, in the form of loans to a resident, made by a resident agent of a nonresident creditor; 427 (4) deposits of a resident in a bank in another State, where he carries on a business and from which these deposits are derived, VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00075 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1746 AMENDMENT 14—RIGHTS GUARANTEED 428 These deposits were allowed to be subjected to a personal property tax in the city of his residence, regardless of whether or not they are subject to tax in the State where the business is carried on Fidelity & Columbia Trust Co. v. Louisville, 245 U.S. 54 (1917). The tax is imposed for the general advantage of living within the jurisdiction (benefit-protection theory), and may be measured by reference to the riches of the person taxed 429 Rogers v. Hennepin County, 240 U.S. 184 (1916). 430 Citizens Nat’l Bank v. Durr, 257 U.S. 99, 109 (1921). ‘‘Double taxation’’ the Court observed ‘‘by one and the same State is not’’ prohibited ‘‘by the Fourteenth Amendment; much less is taxation by two States upon identical or closely related property interest falling within the jurisdiction of both, forbidden.’’ 431 Hawley v. Malden, 232 U.S. 1, 12 (1914). The Court attached no importance to the fact that the shares were already taxed by the State in which the issuing corporation was domiciled and might also be taxed by the State in which the stock owner was domiciled, or at any rate did not find it necessary to pass upon the validity of the latter two taxes. The present levy was deemed to be tenable on the basis of the benefit-protection theory, namely, ‘‘the economic advantages realized through the protection at the place . . . [of business situs] of the ownership of rights in intangibles. . . .’’ The Court also added that ‘‘undoubtedly the State in which a corporation is organized may . . . [tax] all of its shares whether owned by residents or nonresidents.’’ 432 First Bank Corp. v. Minnesota, 301 U.S. 234, 241 (1937). The shares represent an aliquot portion of the whole corporate assets, and the property right so represented arises where the corporation has its home, and is therefore within the taxing jurisdiction of the State, notwithstanding that ownership of the stock may also be a taxable subject in another State. 433 Schuylkill Trust Co. v. Pennsylvania, 302 U.S. 506 (1938). 434 The Court found that all stockholders were the ultimate beneficiaries of the corporation’s activities within the taxing State, were protected by the latter, and were thus subject to the State’s jurisdiction. International Harvester Co. v. Department of Taxation, 322 U.S. 435 (1944). This tax, though collected by the corporation, is on the transfer to a stockholder of his share of corporate dividends within the taxing State and is deducted from said dividend payments. Wisconsin Gas Co. v. United States, 322 U.S. 526 (1944). 435 New York ex rel. Hatch v. Reardon, 204 U.S. 152 (1907). but belonging absolutely to him and not used in the business ; 428 (5) membership owned by a nonresident in a domestic exchange, known as a chamber of commerce; 429 (6) membership by a resident in a stock exchange located in another State; 430 (7) stock held by a resident in a foreign corporation that does no business and has no property within the taxing State; 431 (8) stock in a foreign corporation owned by another foreign corporation transacting its business within the taxing State; 432 (9) shares owned by nonresident shareholders in a domestic corporation, the tax being assessed on the basis of corporate assets and payable by the corporation either out of its general fund or by collection from the shareholder; 433 (10) dividends of a corporation distributed ratably among stockholders regardless of their residence outside the State; 434 (11) the transfer within the taxing State by one nonresident to another of stock certificates issued by a foreign corporation; 435 and (12) promissory VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00076 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1747 436 Graniteville Mfg. Co. v. Query, 283 U.S. 376 (1931). These taxes, however, were deemed to have been laid, not on the property, but upon an event, the transfer in one instance, and execution in the latter which took place in the taxing State. 437 Buck v. Beach, 206 U.S. 392 (1907). 438 Senior v. Braden, 295 U.S. 422 (1935). 439 Brooke v. City of Norfolk, 277 U.S. 27 (1928). 440 Greenough v. Tax Assessors, 331 U.S. 486, 496–97 (1947). 441 277 U.S. 27 (1928). 442 280 U.S. 83 (1929). notes executed by a domestic corporation, although payable to banks in other States. 436 The following personal property taxes on intangibles have been invalidated: (1) debts evidenced by notes in safekeeping within the taxing State, but made and payable and secured by property in a second State and owned by a resident of a third State; 437 (2) a tax, measured by income, levied on trust certificates held by a resident, representing interests in various parcels of land (some inside the State and some outside), the holder of the certificates, though without a voice in the management of the property, being entitled to a share in the net income and, upon sale of the property, to the proceeds of the sale. 438 The Court also invalidated a property tax sought to be collected from a life beneficiary on the corpus of a trust composed of property located in another State and as to which the beneficiary had neither control nor possession, apart from the receipt of income therefrom. 439 However, a personal property tax may be collected on one-half of the value of the corpus of a trust from a resident who is one of the two trustees thereof, not withstanding that the trust was created by the will of a resident of another State in respect of intangible property located in the latter State, at least where it does not appear that the trustee is exposed to the danger of other ad valorem taxes in another State. 440 The first case, Brooke v. Norfolk, 441 is distinguishable by virtue of the fact that the property tax therein voided was levied upon a resident beneficiary rather than upon a resident trustee in control of nonresident intangibles. Different too is Safe Deposit & T. Co. v. Virginia, 442 where a property tax was unsuccessfully demanded of a nonresident trustee with respect to nonresident intangibles under its control. A State in which a foreign corporation has acquired a commercial domicile and in which it maintains its general business offices may tax the corporation’s bank deposits and accounts receivable even though the deposits are outside the State and the accounts receivable arise from manufacturing activities in another State. Similarly, a nondomiciliary State in which a foreign corporation did business can tax the ‘‘corporate excess’’ arising from property em- VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00077 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1748 AMENDMENT 14—RIGHTS GUARANTEED 443 Adams Express Co. v. Ohio, 165 U.S. 194 (1897). 444 Alpha Cement Co. v. Massachusetts, 268 U.S. 203 (1925). A domiciliary State, however, may tax the excess of market value of outstanding capital stock over the value of real and personal property and certain indebtedness of a domestic corporation even though this ‘‘corporate excess’’ arose from property located and business done in another State and was there taxable. Moreover, this result follows whether the tax is considered as one on property or on the franchise. Wheeling Steel Corp. v. Fox, 298 U.S. 193 (1936). See also Memphis Gas Co. v. Beeler, 315 U.S. 649, 652 (1942). 445 Newark Fire Ins. Co. v. State Board, 307 U.S. 313, 318, 324 (1939). Although the eight Justices affirming this tax were not in agreement as to the reasons to be assigned in justification of this result, the holding appears to be in line with the dictum uttered by Chief Justice Stone in Curry v. McCanless, 307 U.S. 357, 368 (1939), to the effect that the taxation of a corporation by a State where it does business, measured by the value of the intangibles used in its business there, does not preclude the State of incorporation from imposing a tax measured by all its intangibles. 446 Delaware, L. & W.P.R.R. v. Pennsylvania, 198 U.S. 341 (1905). 447 Louisville & Jeffersonville Ferry Co. v. Kentucky, 188 U.S. 385 (1903). 448 Stebbins v. Riley, 268 U.S. 137, 140–41 (1925). ployed and business done in the taxing State. 443 On the other hand, when the foreign corporation transacts only interstate commerce within a State, any excise tax on such excess is void, irrespective of the amount of the tax. 444 Also a domiciliary State which imposes no franchise tax on a stock fire insurance corporation may assess a tax on the full amount of paid-in capital stock and surplus, less deductions for liabilities, notwithstanding that such domestic corporation concentrates its executive, accounting, and other business offices in New York, and maintains in the domiciliary State only a required registered office at which local claims are handled. Despite ‘‘the vicissitudes which the so-called ‘jurisdiction-to-tax’ doctrine has encountered . . . ,’’ the presumption persists that intangible property is taxable by the State of origin. 445 A property tax on the capital stock of a domestic company, however, which includes in the appraisal thereof the value of coal mined in the taxing State but located in another State awaiting sale deprives the corporation of its property without due process of law. 446 Also void for the same reason is a state tax on the franchise of a domestic ferry company which includes in the valuation thereof the worth of a franchise granted to the said company by another State. 447 Transfer (Inheritance, Estate, Gift) Taxes.—As a state has authority to regulate transfer of property by wills or inheritance, it may base its succession taxes upon either the transmission or receipt of property by will or by descent. 448 But whatever may be the justification of their power to levy such taxes, since 1905 the States have consistently found themselves restricted by the rule in Union VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00078 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1749 449 199 U.S. 194 (1905) (property taxes).. The rule was subsequently reiterated in 1925 in Frick v. Pennsylvania, 268 U.S. 473 (1925). See also Treichler v. Wisconsin, 338 U.S. 251 (1949); City Bank Co. v. Schnader, 293 U.S. 112 (1934). In State Tax Comm’n v. Aldrich, 316 U.S. 174, 185 (1942), however, Justice Jackson, in dissent, asserted that a reconsideration of this principle had become timely. 450 240 U.S. 635, 631 (1916). A decision rendered in 1926 which is seemingly in conflict was Wachovia Bank & Trust Co. v. Doughton, 272 U.S. 567 (1926), in which North Carolina was prevented from taxing the exercise of a power of appointment through a will executed therein by a resident, when the property was a trust fund in Massachusetts created by the will of a resident of the latter State. One of the reasons assigned for this result was that by the law of Massachusetts the property involved was treated as passing from the original donor to the appointee. However, this holding was overruled in Graves v. Schmidlapp, 315 U.S. 657 (1942). 451 Levy of an inheritance tax by a nondomiciliary State was also sustained on similar grounds in Wheeler v. New York, 233 U.S. 434 (1914) wherein it was held that the presence of a negotiable instrument was sufficient to confer jurisdiction upon the State seeking to tax its transfer. 452 Rhode Island Trust Co. v. Doughton, 270 U.S. 69 (1926). 453 277 U.S. 1 (1928). 454 The Court conceded, however, that the domiciliary State could tax the transfer of books and certificates of indebtedness found in that safe deposit box as well as the decedent’s interest in a foreign partnership. Transit Co. v. Kentucky, 449 which precludes imposition of transfer taxes upon tangible which are permanently located or have an actual situs outside the State. In the case of intangibles, however, the Court has oscillated in upholding, then rejecting, and again sustaining the levy by more than one State of death taxes upon intangibles. Until 1930, transfer taxes upon intangibles by either the domiciliary or the situs (but nondomiciliary) State, were with rare exceptions approved. Thus, in Bullen v. Wisconsin, 450 the domiciliary State of the creator of a trust was held competent to levy an inheritance tax on an out-of-state trust fund consisting of stocks, bonds, and notes, as the settlor reserved the right to control disposition and to direct payment of income for life. The Court reasoned that such reserved powers were the equivalent to a fee in the property. Cognizance was taken of the fact that the State in which these intangibles had their situs had also taxed the trust. 451 On the other hand, the mere ownership by a foreign corporation of property in a nondomiciliary State was held insufficient to support a tax by that State on the succession to shares of stock in that corporation owned by a nonresident decedent. 452 Also against the trend was Blodgett v. Silberman, 453 wherein the Court defeated collection of a transfer tax by the domiciliary State by treating coins and bank notes deposited by a decedent in a safe deposit box in another State as tangible property. 454 In the course of about two years following the Depression, the Court handed down a group of four decisions which placed the stamp of disapproval upon multiple transfer taxes and—by infer- VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00079 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1750 AMENDMENT 14—RIGHTS GUARANTEED 455 First Nat’l Bank v. Maine, 284 U.S. 312 (1932); Beidler v. South Carolina Tax Comm’n, 282 U.S. 1 (1930); Baldwin v. Missouri, 281 U.S. 586 (1930); Farmer’s Loan Co. v. Minnesota, 280 U.S. 204 (1930). 456 First National Bank v. Maine, 284 U.S. 312, 330–31 (1932). 457 307 U.S. 357, 363, 366–68, 372 (1939). ence—other multiple taxation of intangibles. 455 The Court found that ‘‘practical considerations of wisdom, convenience and justice alike dictate the desirability of a uniform rule confining the jurisdiction to impose death transfer taxes as to intangibles to the State of the [owner’s] domicile.’’ 456 Thus, the Court proceeded to deny the right of nondomiciliary States to tax intangibles, rejecting jurisdictional claims founded upon such bases as control, benefit, protection or situs. During this interval, 1930–1932, multiple transfer taxation of intangibles came to be viewed, not merely as undesirable, but as so arbitrary and unreasonable as to be prohibited by the due processclause. The Court has expressly overruled only one of these four decisions condemning multiple succession taxation of intangibles. In 1939, in Curry v. McCanless, 457 the Court announced a departure from the ‘‘doctrine, of recent origin, that the Fourteenth Amendment precludes the taxation of any interest in the same intangible in more than one State. . . .’’ Taking cognizance of the fact that this doctrine had never been extended to the field of income taxation or consistently applied in the field of property taxation, the Court declared that a correct interpretation of constitutional requirements would dictate the following conclusions: ‘‘From the beginning of our constitutional system control over the person at the place of his domicile and his duty there, common to all citizens, to contribute to the support of government have been deemed to afford an adequate constitutional basis for imposing on him a tax on the use and enjoyment of rights in intangibles measured by their value. . . . But when the taxpayer extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit of the laws of another State, in such a way as to bring his person or . . . [his intangibles] within the reach of the tax gatherer there, the reason for a single place of taxation no longer obtains, . . . [However], the State of domicile is not deprived, by the taxpayer’s activities, elsewhere, of its constitutional jurisdiction to tax.’’ In accordance with this line of reasoning, the domicile of a decedent (Tennessee) and the state where a trust received securities conveyed from the decedent by will (Alabama) were both allowed to impose a tax on the transfer of these securities. ‘‘In effecting her purposes,’’ the testatrix was viewed as having ‘‘brought some of the legal interests which she created within the control of one State by VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00080 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1751 458 These statements represented a belated adoption of the views advanced by Chief Justice Stone in dissenting or concurring opinions which he filed in three of the four decisions during 1930–1932. By the line of reasoning taken in these opinions, if protection or control was extended to, or exercised over, intangibles or the person of their owner, then as many States as afforded such protection or were capable of exerting such dominion should be privileged to tax the transfer of such property. On this basis, the domiciliary State would invariably qualify as a State competent to tax as would a nondomiciliary State, so far as it could legitimately exercise control or could be shown to have afforded a measure of protection that was not trivial or insubstantial. 459 308 U.S. 313 (1939). 460 307 U.S. 383 (1939). 461 307 U.S. at 386. Consistent application of the principle enunciated in Curry v. McCanless is also discernible in two later cases in which the Court sustained the right of a domiciliary State to tax the transfer of intangibles kept outside its boundaries, notwithstanding that ‘‘in some instances they may be subject to taxation in other jurisdictions, to whose control they are subject and whose legal protection they enjoyed.’’ In Graves v. Schmidlapp, 315 U.S. 657, 660, 661 (1942), an estate tax was levied upon the value of the subject of a general testamentary power of appointment effectively exercised by a resident donee over intangibles held by trustees under the will of a nonresident donor of the power. Viewing the transfer of interest in the intangibles by exercise of the power of appointment as the equivalent of ownership, the Court quoted from McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 429 (1819) to the effect that the power to tax ‘‘’is an incident of sovereignty, and is coextensive with that to which it is an incident.’’’ Again, in Central Hanover Bank Co. v. Kelly, 319 U.S. 94 (1943), the Court approved a New Jersey transfer tax imposed on the occasion of the death of a New Jersey grantor of an irrevocable trust despite the selecting a trustee there, and others within the control of the other State, by making her domicile there.’’ She had found it necessary to invoke ‘‘the aid of the law of both States and her legatees’’ were subject to the same necessity. 458 On the authority of Curry v. McCanless, the Court, in Pearson v. McGraw 459 sustained the application of an Oregon transfer tax to intangibles handled by an Illinois trust company, although the property was never physically present in Oregon. Jurisdiction to tax was viewed as dependent, not on the location of the property in the State, but on the fact that the owner was a resident of Oregon. In Graves v. Elliott, 460 the Court upheld the power of New York, in computing its estate tax, to include in the gross estate of a domiciled decedent the value of a trust of bonds managed in Colorado by a Colorado trust company and already taxed on its transfer by Colorado, which trust the decedent had established while in Colorado and concerning which he had never exercised any of his reserved powers of revocation or change of beneficiaries. It was observed that ‘‘the power of disposition of property is the equivalent of ownership, . . . and its exercise in the case of intangibles is . . . [an] appropriate subject of taxation at the place of the domicile of the owner of the power. Relinquishment at death, in consequence of the nonexercise in life, of a power to revoke a trust created by a decedent is likewise an appropriate subject of taxation.’’ 461 VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00081 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1752 AMENDMENT 14—RIGHTS GUARANTEED fact that it was executed in New York, the securities were located in New York, and the disposition of the corpus was to two nonresident sons. 462 306 U.S. 398 (1939). Resort to the Supreme Court’s original jurisdiction was necessary because in Worcester County Trust Co. v. Riley, 302 U.S. 292 (1937), the Court, proceeding on the basis that inconsistent determinations by the courts of two States as to the domicile of a taxpayer do not raise a substantial federal constitutional question, held that the Eleventh Amendment precluded a suit by the estate of the decedent to establish the correct State of domicile. In California v. Texas, 437 U.S. 601 (1978), a case on all points with Texas v. Florida, the Court denied leave to file an original action to adjudicate a dispute between the two States about the actual domicile of Howard Hughes, a number of Justices suggesting that Worcester County no longer was good law. Subsequently, the Court reaffirmed Worcester County, Cory v. White, 457 U.S. 85 (1982), and then permitted an original action to proceed, California v. Texas, 457 U.S. 164 (1982), several Justices taking the position that neither Worcester County nor Tex

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