(^nmW ^mnuii ^iftatg THE GIFT OF U.9a.©iU;>t. o| ^onnrvnfWinxjL .A.;i8S13o 3i/TTr|..f-. Cornell University Library HD2753.U58 A4 1914 Special report on taxation suP|i!JS,'}l|f!?,V"9 Clin 3 1924 030 064 996 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924030064996 ^' DEPARTMENT OF COMMERCE BUREAU OF CORPORATIONS JOSEPH E. DAVIES, Commisaioner SPECIAL REPORT ON TAXATION SUPPLEMENTING PREVIOUS REPORTS ON THE TAXATION OF CORPORATIONS AND COVERING THE TAX MOVEMENT THROUGHOUT THE UNITED STATES DURING 1912 DECEMBER, 1913 WASHINGTON GOVERNMENT PRINTING OFFICE 1914 DEPARTMENT OF COMMERCE (/C, . BUREAU OF CORPORATIONS "-- JOSEPH E. DAVIES, Commissioner SPECIAL REPORT ON TAXATION SUPPLEMENTING PREVIOUS REPORTS ON THE TAXATION OF CORPORATIONS AND COVERING THE TAX MOVEMENT THROUGHOUT THE UNITED STATES DURING 1912 DECEMBER, 1913 WASHINGTON GOVERNMENT PRINTING OFFICE 1914 IV CONTENTS. Page. Massachusetts ^4 Summary ^4 Constitution 25 Administration 26 General corporation tax 26 Business corporations 28 Street railways 28 Stockholders and bondholders 29 Legacy and succession tax 29 Rhode Island 30 Summary 30 Administration 34 General-property tax 35 Steam and electric railroad and passcn^jcr car companies 36 Street railways 37 Steamboat, ferryboat, telegraph, telephone, and express companic j 38 Water, heat, light, and power companies 39 Mercantile, manufacturing, and miscellaneous companies 39 Stockholders and bondholders 40 Connecticut 41 Summary 41 Administration 41 Railroads 41 General-property tax 41 Telephone companies 42 Special commission on taxation of woodlands 42 Proposed constitutional amendments 43 CHANGES EFFECTED IN THE TAXATION OF CORPO:;ATI 0:.i SINCE THE PUB- LICATION OF PART n OF THE REPORT OF THE BUREAU ON THE TAXATION OF CORPORATIONS. New York 43 Summary 43 Administration 45 General-property tax 46 Organization tax 48 Computation of corporate taxes 48 Stock-transfer tax 49 Taxation of mortgages and secured debts 49 New Jersey 50 Summary 50 Administration 51 Pennsylvania 53 Summary 53 Constitution 54 Administration 54 Liens for taxes jj Exemption of machinery jj Oil, gas, and coal lands 56 Delaware j6 Summary 56 Administration c» Pailroad companies , « CONTENTS. V Delaware — Continued. Page. Manufacturing, mining, mercantile, and miscellaneous corporations 57 Telegraph, telephone, and electric light companies 58 Back taxes of corporations seeking to renew their charters 58 Maryland 58 Summary 58 Administration 58 Recording receipts — Corporate taxes 59 Manufacturing companies — Exemption 60 District of Columbia 60 Summary 60 CHANGES EFFECTED IN THE TAXATION OP CORPORATIONS SINCE THE PUB- LICATION OP PART III OP THE REPORT OP THE BUREAU ON THE TAXATION OF CORPORATIONS. Ohio 60 Summary 60 Constitution 61 Administration : 63 Certain terms defined 65 ■ Miscellaneous provisions 65 Maximum rate law 66 Indiana 66 Summary 66 Administration 67 Express, telegraph, telephone, and intercounty pipe-line companies 68 Building and loan associations 69 Maximum tax rate in cities of the first class 69 Illinois 70 Summary 7° Railroads 7° Capital stock tax 7^ Michigan 72 Summary 72 Administration 7^ Mortgage tax 73 Appraisal of mines 74 Railroads operating under special charter — Stocks and bonds 75 Vessel tonnage tax 7^ Telephone companies 77 Wisconsin 77 Summary 77 Administration 7^ Railway terminals 79 Street railway companies 8° Miscellaneous public-utility corporations 80 Vessels on international waters ^^ Water-power companies : °^ Telephone companies '^^ Income tax What income includes °^ Income of residents and nonresidents 82 Deductions allowed corporations °3 Exemptions ^ Vin CONTENTS. Page. Fees, taxes, licenses ^ Oil-inspection fee not a tax (North Carolina) > '3° Exemption from— Laundry (Montana) ■ • • '3^ Legislature may leyy different amounts of license in different districts- Auctioneers (Hawaii) ^37 Duress '37 Recovery of taxes paid under implied duress (Colorado) 137 What constitutes duress (Texas) 138 Exemptions '3* When patent of allottee Indians is a vested property right (Oklahoma) 138 Educational institutions (Washington) 139 Situs 139 Personal property (Porto Rico) 139 Inheritance tax 140 Not a tax on property — Transfer of property made in contemplation of death classed for purposes of taxation with inheritances (New York). . . 140 Initiative and referendum 141 Effect on form of government (Oregon) 141 Governmental agency 141 Licenses — ^Telegraph companies (Alabama) 141 ABSTRACTS FROM I912 DECISIONS OF INFERIOR FEDERAL COURTS RELAT- ING TO STATE TAXATION. Assessment 142 Jurisdiction — Relief afforded from unfair assessment (New Jersey) 142 Equality of assessment (Washington) 142 County levy — Validity of (Wyoming) 142 Interstate commerce 143 License tax — Municipal ordinances (Missouri) 143 Lands of the United States 143 In certain cases taxable to piu-chaser before issuance of patent (Oregon). . . 143 Liens '44 Distilled spirits in bond — Specific (Maryland) 144 Bankrupt's property (Massachusetts) 144 Dower (New York) 144 Exemptions 144 Exemption of property from ad valorem tax provided for in charter does not extend to interest in certain new terminal property (Georgia) 144 Irrigation work (Idaho) 145 Lands patented to Indians (South Dakota) 146 ABSTRACTS FROM 1912 DECISIONS OP THE HIGHER STATE COURTS RELAT- ING TO STATE TAXATION. Interstate commerce 146 Taxation of entire capital stock of foreign corporation doing interstate business upheld (Massachusetts) 146 Taxation of entire capital stock of either foreign or domestic corporations doing an interstate business prohibited (California) 147 Organization fee — License tax (California) 148 Shipments from foreign countries — Gay-Shattuck liquor license tax — Wil- son Act, construction of — Wholesale liquor business (Louisiana) 148 Telegraph company — Intangible values (Oklahoma) 149 Telegraph company — Mimicipal ordinance (Georgia) 150 CONTENTS. IX Taxation of entire capital stock of foreign corporation, etc. Continued. page. Occupation tax— Lightning rods, erection of (Georgia) 150 Occupation tax— Peddling (Arkansas) 151 Occupation tax— Oyster packing, etc. (Alabama) 151 Occupation tax — Oyster packing, etc. (Mississippi) 152 Wharfage fees (Iowa) 152 Excise tax — Imports — Computation of excise — "Merchandise" (Massa- chusetts) 15, Discrimination — Gross-receipts tax — Foreign and domestic oil companies (Oregon) 153 License 154 Constitutionality — Equality — Uniformity (South Dakota) 154 Constitutionality — Equality — Uniformity — Telegraph company (Nebraska) 154 Constitutionality — Restaurants (North Carolina) 155 Constitutionality — Ice business (Georgia) 155 Constitutionality — Nonintoxicating liquors (Louisiana) 155 Constitutionality — Tax for iising public roads — Lumber companies (North Carolina) 155 Constitutionality — Discrimination against nonresidents (North Carolina). . 156 Constitutionality — Discrimination — Insurance companies — Foreign (Ala- bama) 156 Prohibitory, invalid — Trading-stamp business (Kentucky) 157 Prohibitory, invalid — Peddling (Iowa) 158 Prohibitory, invalid — Transient merchants (Wisconsin) 158 Moving pictures— Municipal license sustained (Minnesota) 1 58 Sale of firearms — Police power (Texas) 1 58 Meat peddlers — Regulation (Texas) 159 Dog tax — Police power (Illinois) 159 Fertilizer dealers — State and municipal taxation (North Carolina) 159 Power to tax soda fountains (North Carolina) 160 Automobile garages (Mississippi) 160 Automobiles — Levy of license tax and property tax not double taxation (Florida) 160 Plumbers — Tax unauthorized (Missouri) 160 Mining — Unconstitutional (Louisiana) 161 Peddlers — Agents of veterans not exempt (Georgia) 161 Manufacturers' trading agent not a peddler (Nebraska) 161 Public-service corporations — Mimicipal license not impairment of obliga- tion of contract (California) 162 Municipal tax for revenue and not for regulation, illegal (Montana) 162 Abrogation of municipal authority to impose (Wisconsin) 163 Can not be based upon manner of conducting business (Alabama) 163 Void for uncertainty (Alabama) 163 Capital stock 164 Corporation's appraisal not conclusive of value (Pennsylvania) 164 Elements of value— Undivided profits (Pennsylvania) 164 Elements of value (Pennsylvania) 164 Elements of value— Assets— Good will— Franchise, etc. (Pennsylvania) . . 165 Foreign corporations— Cash and bonds in bank— Situs (Pennsylvania). ... 165 Taxable when corporation is in hands of receiver— Priority of tax lien (New York) ;■•• ^^5 Mercantile corporations — Local assessment (Illinois) 165 Application of term "Manufacturing and mercantile" (Illinois) 166 Application of tax rates (Texas) '^'^ X CONTENTS. Capital stock— Continued. ^^^^ Issued and outstanding— Shares held by corporation (New Jersey) i66 Organization tax-extension of charter (Kentucky) 167 Real estate corporation— Stock not taxable against corporation (Montana) 167 Capital employed in the State 168 Brokerage business — Doomage (Louisiana) 168 Mortgages of foreign insurance companies (Louisiana) 168 Bonus on capital stock — Investment in tools — Money borrowed locally (Pennsylvania) 168 Bonus on capital stock (Pennsylvania) 169 Bonus on capital stock — Situs of bills and accounts receivable — Volume of business (Pennsylvania) 169 Franchise 169 Special — Property subject to taxation (New York) 169 Special franchise — Assessment method (New York) 170 Assessment method (Kentucky) lyi City taxation of telegraph franchise (California) 171 Water-power act unconstitutional (Wisconsin) 171 Inheritance taxes 172 Stock in domestic corporations belonging to nonresident at time of death not taxable ( New Jersey) 172 Stock in domestic corporations belonging to nonresident at time of death taxable (California) ip Intangibles belonging to estate of nonresident decedent — Situs (Pennsyl- vania) 173 Foreign judgment — Full faith and credit — Parties liable — Antenuptial agreement — Compromise — Double taxation (Illinois) 173 Remainders — When taxable (New York) 174 Remainders — Exemption of (Illinois) 17 j Exemption — Applies to entire estate and not to individual — Bequests — Nature of tax (Montana) 175 Exemption — Amount received from property without the State not tax- able (Massachusetts) 176 Dower not taxable (Nebraska) 176 Religious society, bequest to — Exemption (New York) 176 Parol gifts — Statutory construction (Tennessee) 177 Valuation — Collection — Nature of tax (North Carolina) 177 Nature of tax — Statutorj- construction (Oklahoma) 177 Mortgage recording taxes 178 Payment exempts from ad valorem taxation (Michigan) 178 Exemption of certain mortgages not unconstitutional — Uniformity (Michi- gan) 178 Constitutionality — Uniformity (Minnesota) 178 Tax upon security — Amount determined by indebtedness (Minnesota) . . 178 Deeds absolute on face — Mortgages — County recording officer liable for tax if not collected (New York) 179 Subsequent advances under recorded mortgage — Power of legislature (New York) 180 Privilege tax — Not a tax on property — Constitutionality — Uniformity — Property partly outside State (Virginia) 180 Situs igi Corporations — Fictional domicile (Kentucky) 181 Corporations — Principal place of business — Intangible property (Virginia). 181 CONTENTS. XI Situs— Continued. Page. Corporations — Foreign — Boats of (Oregon) 182 Corporations — JForeign — Debts due (Montana) 182 Power plant of railroad (New Hampshire) 183 Moneys and credits — ^Absence of owner (Iowa) 183 Estates — Personal property — Prior to distribution (M.issachusetts) 184 Money deposited for transmission (Kentucky) 184 Property in transit (North Carolina) 184 Property in transit (Minnesota) 184 Ice in storage (Wisconsin) 185 Logs and lumber at mill (Maine) 185 Property brought into county after assessment day (Louisiana) 185 Power of legislature 186 Special legislation — Railroads (Kentucky) 186 General and special taxation (Arkansas) 186 Classification of mining property (Colorado) 186 National banks — Shares of stock (Alabama) 187 National banks — ^Allowed same deduction as State banks (Iowa) 188 Scope of (Arkansas) 188 Assessment 189 Equal protection of the laws — Extension of city limits (Georgia) 189 Equality — Abatement — Railroads (New Hampshire) 189 Equality — Estoppel (Michigan) 189 Equality — Full valuation not required (South Dakota) 189 Equality — Local-improvement assessments — Act not unconstitutional because of inequality (Mississippi) 190 Equality — Property assessed at higher ratio of true value than other prop- erty (Washington) 190 Equality — Property assessed at higher ratio of true valiie than other prop- erty (Washington) 191 Equality — Special assessments equal and uniform when laid in proportion to benefits conferred (South Dakota) 191 Equality of distribution not necessary, when assessment and distribution distinguished (Maine) 192 Equalization — Original assessment — Powers where vested (Colorado) 192 Equalization, State board of — Powers — Limitation on (Louisiana) 192 Equalization, State board of — Powers (Oklahoma) 193 Equalization, county boards of — Powers — Limitation on (Arizona) 193 Right of way — Land adjacent (Illinois) 193 Right of way — Local improvements (Georgia) 194 Right of way — Local improvements (Missouri) 194 Right of way — Local improvements (New Jersey) 194 Right of way — Local improvements (Wisconsin) 195 Right of way — Operating property — Street railway (Massachusetts) 195 Omitted property — ^Action — Proper parties (Kentucky) 196 Omitted property — Franchise — Turnpike company (Kentucky) 196 Omitted property — Under valued property can not be reassessed as- Detailed description necessary — Duty of board of supervisors (Ken- tucky) 197 Omitted property — Who may correct assessment rolls (Louisiana) 198 Omitted property, discovery of — Who may require compensation for (South Dakota) 198 Omitted property — Assessable against executors (Wisconsin) 198 XII CONTENTS. Assessment — Continued. ^^^^ Report not conclusive of value (Pennsylvania) 198 Report not conclusive of value (Rhode Island) i99 Coal lands— Unproductive— Valuation (Pennsylvania) 199 Consideration of value of property in adjoining State— When permissible (Massachusetts) ^99 Description on tax list — Particularity (North Carolina) 200 Mercantile stock — Average value — New business (Arkansas) 200 Manufactured goods (Maine) 201 Mines — Annual proceeds — Owner 's interest — Tax lien (Montana) 201 National-bank stock — Deduction of value of real property (Washington) . . 201 Public-service corporations — Intangible property — Method (Kentucky) . . 202 Street improvements — Excessive assessment invalid (Kentucky) 203 Rebates — Fraudulent contract — Street improvements — Assessment viti- ated (Missouri) 203 Temporary buildings assessable as realty— -Manufacturing company (Penn- sylvania) 204 Improvements, though old, not assessable as wreckage (Wisconsin) 204 Uniformity — Valuation — State — Municipal — Not required to be same (Florida) 204 Option for sale of land not taxable as moneys and credits (Iowa) 205 Contract to sell land taxable as moneys and credits (Iowa) 205 Property consigned for sale — Tax lien (Michigan) 205 Due process of law — Necessity of notice (Indiana) 206 Appeals — Power of legislature (Alabama) 206 Decisions of board of review — When conclusive (Iowa) 206 Exemptions 206 Manufacturing establishment — Beginning of period of exemption (Rhode Island) 206 Manufacturing company (Illinois) 206 Manufacturing establishment — Old business purchased by new corpora- tion — Not exempt (Kentucky) 207 Generating electricity held "manufacturing" — Land, buildings, and ma- chinery exempt — Distributing paraphernalia not exempt (Kentucky) . . 207 Manufacturing establishment — Faulty pleading — Release — Penalties (Ken- tucky) 208 Shares in domestic corporations and investments in domestic limited part- nerships (Michigan) 208 Shares of stock when corporation is taxed (Kentucky) 208 Shares in domestic manufacturing corporations — Municipal taxation (Georgia) 209 Savings bank in hands of bank commissioner (Massachusetts) 210 Savings bank — Bonds held by (California) 210 Educational, charitable, and religious institutions (Massachusetts) 210 Educational institutions — Hotel, cooperative store, etc., belonging to (Kentucky) 211 Educational institutions — Rented property (North Carolina) 211 Educational institutions — Land to be converted into money for benefit of (Iowa) 211 Benevolent corporations not exempt (Wisconsin) 212 Cemetery corporation not exempt — Statutory construction (Massachu- setts) 212 Church property — Rented land (North Carolina) 212 Church property — Rented land (Kentucky) 212 CONTENTS. XIII Exemptions — Continued. Page. Church property — Parsonage (Illinois) 213 Church parsonage (Illinois) 213 Indian lands (Oklahoma) 213 United States land grants (Minnesota) 214 Mining claim (Nevada) 214 Insurance companies— Surplus fund (New Jersey) 214 Street railways (Louisiana) 214 Exemption of one of a class unconstitutional (Wisconsin) 215 Inspection tax — Construction (North Carolina) 216 Machinery, etc., used by drainage district not exempt (Illinois) 216 Poll tax — Constitutionality — Uniformity — Equal protection of the laws (Kansas) 216 Miscellaneous 217 Income tax constitutional (Wisconsin) 217 Initiative and referendum — Comity taxes (Oregon) 217 Gratuity for veterans held appropriation for public purpose (Massachu- setts) 218 Delegation of legislative power of taxation (Maine) 218 State tax commission — Powers — Liberal construction (Alabama) 218 Levy in excess of adopted rate — Supreme Court — Appellate jurisdiction (Louisiana) 219 Special road tax laws — Validity (Alabama) 219 Forestry district tax — Validity (Maine) 220 Moneys and credits — Low uniform rate constitutional — General-property tax — Provision for deduction of debts repealed by implication (Minne- sota) 220 Public improvements — Ordinance must comply with petition (Arkansas) . 220 Payment of taxes on mortgaged property does not change mortgage into a deed (Texas) 221 " Debt due" — What constitutes (Massachusetts) 221 "Controlled" — Application of term to railroads — Reports required (Ken- tucky) 221 Taxation for road and bridge purposes — Constitutionality — Uniformity — Double taxation (Illinois) 221 Law providing for reduction of taxes — Constitutionality (Illinois) 222 Payment not voluntary (South Carolina) 223 Part payment no bar to collection of remainder (Georgia) 223 Bonds — ^Annual levy necessary — Levy in advance for full tax unconstitu- tional (Louisiana) 223 CHAPTER IV.— REPORTS OF TAX CONFERENCES, SPECIAL AND PERMANENT TAX COMMISSIONS. TAX CONFERENCES. National tax associations 224 Committee on uniform taxation of Southern States 226 Conference of New England state tax officials 227 Conference on uniform state laws 230 New York state conference on taxation 231 Ohio conference of state and local tax officers 233 North Dakota State Tax Association 234 Other conferences ,...,.....,. 235 XIV CONTENTS. SPBCIAL TAX COMMISSIONS. Page. Maine » 236 Investigation of railroad valuations 236 Authority ^3^ Personnel 236 Duties 236 Report 236 Massachusetts 236 Investigation of private charitable corporations and educational institu- tions 236 Authority 236 Personnel 236 Duties 236 Report 236 Exemptions 236 Educational institutions 237 Private charitable corporations 237 Special investigation of the taxation of foreign corporations 237 Authority 237 Personnel 237 Duties 237 Report 238 Rhode Island 238 Joint special committee on taxation laws 238 Connecticut 238 Investigation of taxation of certain corporations 238 Authority 238 Personnel 238 Duties 238 Report 238 Investigation of taxation of woodland 241 Authority 241 Personnel 241 Duties 241 Report 241 New Jersey 242 Investigation of tax assessments 242 Authority 242 Personnel 242 Duties 242 Report 242 Pennsylvania 243 Investigation of the corporation and revenue laws of the commonwealth... 243 Authority 243 Personnel 244 Duties. 244 First report 244 Second report 245 Delaware 246 Investigation of revenue and taxation 246 Authority 246 Personnel 246 Duties 246 Report 246 CONTENTS. XV Page. Maryland 246 Commission for revision of the taxation system 246 Authority 246 Personnel 246 Duties .' 246 Report 246 District of Columbia 248 Investigation of assessment and taxation of real estate 248 Authority 248 Personnel 248 Duties 249 Report 249 Michigan 250 Inquiry into taxation 250 Authority 250 Personnel 250 Duties 250 Report 250 Minnesota 252 Investigation of railroad taxes 252 Authority 252 Personnel 252 Duties 252 Report 252 Iowa 253 Examination of taxation and tax laws 2 53 Authority 253 Personnel .253 Duties 253 Report 253 Oregon 254 Special joint committee on taxation 254 Authority 254 Personnel 254 Duties 254 Report 2SS Utah 255 Investigation of revenue and taxation 255 Authority 255 Persoimel 255 Duties 255 Report 255 State board of equalization 256 Assessors 256 Moneys and credits 257 Inheritance tax 257 True consideration in deeds 258 Mines 258 Public-service corporations 259 Separation of state and local revenue 259 Idaho 26° Informal revenue law commission 260 Authority 260 XVI CONTENTS. Idaho — Continued. Informal revenue law commission — Continued. Paje. Personnel 260 Duties 260 Report , 260 Virginia 261 Commission on the reform of tax and assessment laws 261 Authority 261 Personnel 261 Duties 262 Report 262 Florida 25^ Special tax commission 26? Authority 263 Personnel 26? Duties 263 Report 263 Separation of sources of state and local revenue 264 Publicity of assessment rolls 261; Mississippi 26; Special tax commission 261; Authority 26c Personnel 25, Duties 265 Report . 265 Tennessee 261; Special inheritance tax commission 265 Authority 26i; Personnel 26? Duties 265 Report 266 Louisiana 266 Special tax commission ' 266 Authority 266 Personnel 266 Duties 266 Report ; 266 Kentucky 266 Special tax commission 266 Authority 266 Personnel 266 Duties 267 Report 267 PERMANENT TAX COMMISSIONS. Alabama 268 State Tax Commission 268 Authority 268 Personnel 268 Powers and ducies 260 Reports .- y^..^.^........ 269 Fixed rates 2g^ Shares of stock 2g„ Increased assessment g„ CONTENTS. XVII Page. Arizona 270 State Tax Commission 270 Authority 270 Personnel 270 Powers and duties '. 270 Report 270 Recommendations 271 Findings 271 The work of the tax commission 271 Percentage of assessed to cash value 271 Increase in assessed values 272 Necessity for amendment of tax laws 272 Municipal taxation 272 Limitation of tax liens 272 True considerations in deeds 273 Other data contained in report 273 Arkansas 273 Tax commission 273 Authority '. 273 Personnel 273 Powers and duties 273 Report 274 Increased power desired by the tax commission 274 Tax rates 275 Inheritance tax 275 Income tax 275 Mineral lands 275 Corporate excess 275 Railroads 276 Colorado 276 Tax commission ^ 276 Authority 276 Personnel 276 Powers and duties 276 Report 277 Public utilities 277 Valuations 277 True consideration in deeds 277 Mines 277 Connecticut 278 Tax commission 278 Authority 278 Personnel 278 Powers and duties 278 Report 279 Railroads 279 Comparison of savings-bank mortgages with assessed valuations. . 279 Water supply companies 280 Land leased for 999 years 280 Automobile tax 280 Natural resources 280 Woodlands 280 Franchise tax 280 5744°— 14 2 XVIII CONTENTS. Connecticut — Continued. Tax commission — Continued. Report — Continued. Page. Oyster beds 281 Codification 281 Inheritance tax 281 Indiana 282 State Board of Tax Commissioners 282 Authority 282 Personnel 282 Powers and duties 282 Report 282 Centralization 282 Assessment 283 Administration '. 283 Inheritance tax 283 Exemptions 283 Kansas 283 Tax commission 283 Authority 283 Personnel 284 Powers and duties 284 Report 284 Classification of property — Constitutional amendment 285 Mortgage statistics 285 Inheritance tax 285 Maine 286 Board of State Assessors 286 Authority 286 Persoimel 286 Powers and duties 286 Report 287 Maryland 287 Tax commissioner 287 Authority 287 Personnel 287 Powers and duties 288 Report 288 Massachusetts 289 Tax commissioner 289 Authority 289 Personnel 289 Powers and duties 289 Report 290 Michigan 293 Board of vState Tax Commissioners 293 Authority 293 Personnel 293 Powers and duties , 293 Report 294 Mercantile and manufacturing establishments 294 Public utilities 295 Mineral rights 295 Administration .- 295 True consideration in deeds 205 Secured debts 295 CONTENTS. XIX Page. Minnesota 296 Tax commission 296 Authority 296 Personnel 296 Powers and duties 296 Report 297 Low uniform rate 297 Sales method 298 Assessment at 50 per cent of true value 298 Coxmty-assessor system 298 Mineral rights 299 Gross-earnings tax 299 Situs 299 Corporate excess 299 New Hampshire 300 State Tax Commission 300 ' Authority 300 Personnel 300 Powers and duties 300 Report 301 Assessment of public-service corporations 301 Separation of sources of state and local revenue 302 Method of assessment employed by local assessors 302 Second annual report (1912) 302 Publicity 304 Forest taxation — Constitution — Intangibles 304 Working of the general-property tax in New Hampshire 304 New Jersey 305 Board of Equalization of Taxes 305 Authority 305 Personnel 305 Powers and duties 305 Report 306 New York 306 State Board of Tax Commissioners 306 Authority 306 Personnel i 306 Powers and duties 306 Report 307 Tax maps 307 True consideration in deeds 307 Railroad assessments 308 North Carolina 308 Board of State Tax Commissioners 308 Authority 308 Personnel 3°^ Powers and duties 309 Report 3°9 Listing and assessment of property 309 Mortgage-recording taxes 310 Equalization — Sale values 310 Inheritance tax 3^° County-assessor system 311 XX CONTENTS. Paje. North Bakota 3" Tax commission S" Authority 3" Personnel 311 Powers and duties 311 Report 312 Taxation of intangible personalty 312 Mortgage-recording tax 312 True consideration in deeds 313 Increased centralization of assessment 313 Repeal of the "corporate-excess" method advocated 313 Assessment of bank stock 313 Inheritance tax 314 Ohio 314 Tax commission 314 Authority 314 Personnel 314 Powers and duties 315 Report 315 Special report 315 Greater centralization of authority — County-assessor system 315 Annual assessments of real estate 316 Assessment of personal property 316 The proposed bill 316 General-property tax 317 Annual report 318 Constitutional amendments — Uniform rule — Production tax on minerals — Forestry and conservation — Inheritance and income taxes 318 Separation of sources of state and local revenues 319 Method of determining excise and gross-6amings taxes 319 County-assessor system — Centralization 320 Unincorporated banks 320 Tax limit 320 Work of the commission 321 Oregon 321 Board of State Tax Commissioners 321 Authority 321 Personnel 321 Powers and duties 322 Report 322 Rhode Island 3^3 Board of Tax Commissioners 323 Authority 323 Personnel 323 Powers and duties 323 Report 323 Texas 324 State Tax Board (Texas Tax Commission) 324 Authority 324 Personnel 324 Powers and duties 324 Report 324 CONTENTS. XXI Texas — Continued. State Tax Board (Texas Tax Commission) — Continued. Report — Continued. Page. Intangible property 325 State board of equalization 335 Separation of sources of revenue 335 Inheritance tax 326 Joint special committee 326 Vermont 326 Commissioner of taxes 326 Authority 326 Personnel 326 Powers and duties 326 Report 327 Separation of sources of state and local revenue 327 Railroads — Gross-earnings tax 327 Bank deposits 328 Inheritance tax 328 Local taxation 329 Deductions on account of debts owed 329 Forest taxation 329 Washington 330 State Board of Tax Commissioners 330 Authority 330 Personnel 330 Powers and duties 330 Report 331 Taxation of timberlands 331 Public utilities 331 True consideration in deeds 332 Motor vehicles 332 Assessment of water craft 332 West Virginia : 332 State tax commissioner 332 Authority 332 Personnel 33^ Powers and duties 332 Report 334 Wisconsin 334 Tax commission 334 Authority 334 Personnel 335 Powers and duties 335 Report 336 "Sales method" for determining real estate values 336 Railway terminals 33^ Minor or miscellaneous public utilities 336 Exemption of all personal property 337 Income tax 337 Inheritance tax 33^ Wyoming 34° Commissioner of taxation 34° Authority 34o Personnel 34° XXII CONTENTS. Wyoming — Continued. Commissioner of taxation — Continued. Page. Powers and duties 34c Report 341 Taxation of banks 34: Exemption of mortgages 341 REPORTS OP OFFICIALS IN STATES NOT HAVING PERM.^NENT TAX COMMIS- SIONS OR TAX COMMISSIONERS. Introductory 341 California state comptroller 342 General financial results 342 The effect of separation on state revenue 3^2 Inheritance tax 3^2 California State Board of Equalization 3^j Authority 343 Personnel 34j Powers and duties 34j Report 344 The new revenue system 344 Assessments of corporations 345 Validity of new system 34j Relative burdens of state and local t;ixe3 345 Utah State Board of Equalization 346 Authority 346 Personnel 346 Powers and duties 346 Report 346 Public-utility tax 347 Uniformity of valuations 347 Net proceeds of mines 347 County assessors 347 Maximum tax levy 347 Exempt property 34i GENERAL SURVEY BY BRIEF REFERENCES TO SELECTED ST'BJECTS OF TAX- ATION AS RECENTLY DISCUSSED IN CERTAIN STATE PUBLICATIONS. Assessment periods 347 Automobiles 348 Banks 349 Capital-stock tax 350 Car companies 351 Cattle : 351 Centralization 351 Classification of property 352 Coal 354 Constitutional amendments 355 Corporate excess 357 Corporate loan tax 357 Corporate taxation 357 Corporation tax 358 Deductions 358 CONTENTS. XXIIl Page. Distribution of taxes ,58 Electric companies ,r8 Evasions , en Exemptions jgo Express companies 363 Forests ,6, Franchise taxes 364 G^ 365 General-property tax 365 Graduated land tax 366 Gross earnings and receipts taxes 366 Home rule in taxation 367 Income taxes 368 Incorporation fees 370 Inheritance taxes 370 Insurance companies 376 Intangible personalty 377 Land tax, graduated 380 Levies 380 License fees 380 License taxes 381 Local option 382 Low uniform rate 383 Maps 383 Mines 384 Mortgages 385 Moving pictures 386 Oil 386 Oyster and fish laws 386 Personal-property tax 387 Physical valuation 387 Poll tax 387 Production taxes 387 Public-service corporations 388 Public utilities 388 Publicity of tax rolls 391 Railroads 391 Rates of taxation 391 Sales values 394 Secured-debts tax 394 Separation of sources of revenue 395 Single tax 397 Situs 397 Steamship companies 39^ Tax commissions 39^ Tax maps 4oi Tonnage taxes 4oi True consideration in deeds 4°! Valuations 403 Water power 4oS Water rights 4o6 Water-supply companies 4o6 XXIV CONTENTS. CHAPTER v.— CONSTITUTIONAL AMENDMENTS AND REFER- ENDUM LEGISLATION ON TAXATION. CONSTITUTIONAL AMENDMENTS. Page. Summary 407 Arrangement by States 407 Measures adopted 407 Measures rejected 409 Measures pending 410 Arrangement by subjects 410 Separation of sources of state and local revenue 410 Classification of property for taxation 411 Classification of property for taxation as to particular subjects 412 Graded taxes 412 Single tax 412 Home rule 413 Income taxation 413 Initiative and referendum 414 Exemptions 414 Water rights and conservation 415 Special tax levies 415 Indebtedness 415 Inheritance taxes 416 Administration 416 Corporations in general 416 Poll taxes 417 STATUTORY TAX MEASURES PASSED AND REJECTED BY REFERENDUM IN I912. Summary 417 Measures adopted 417 Minnesota 417 Oregon 417 Measures rejected 417 Arkansas 417 Oregon 418 NOTE ON THE INITIATIVE AND REFERENDUM IN VARIOUS STATES. Summary 418 The initiative 419 The referendum 420 Variation in methods 420 Index 422 TABI.E OF CASES. Page. Alabama Consolidated Coal & Iron Co. v. Herzberg, 59 South. Rep., 305 163 Alabama State Tax Commission v. Bailey & Howard, 60 South. Rep., 913 218 Alabama v. Ide Cotton Mills, 57 South. Rep., 481 206 Alabama v. Parker, 59 South. Rep., 741 151 Albany, City of, v. Brown, 74 S. E. Rep., 518 209 Arizona v. Board of Supervisors, 127 Pac. Rep., 727 193, 273 Atchison, Topeka & Santa Fe Ry. Co. v. O'Connor, 223 U. S., 280 138 Atlantic & S. R. Co. ■;;. State Board of Assessors et al., 77 Atl. Rep., 609 52 Attorney General (Massachusetts) v. Barney, 97 N. E. Rep., 750 176 Auburn, City of, v. Paul, 85 Atl. Rep., 571 218 Bailey v. Henry, 143 S. W. Rep., 1124 177 Baltic Mining Co. v. Commonwealth of Massachusetts, U. S. Supreme Court, Nov. 3, 1913 131 Barataria Canning Co. v. Mississippi, 58 South. Rep., 769 152 Barhydti;.. Cross et al., 136 N. W. Rep., 525 183 Bayou Terre-Aux-Boeufs Drainage District, Board of Commissioners for, v. Randolph, 59 South. Rep., 198 223 Berryman v. Whitman College, 222 U. S., 334 139 Bertron, Griscom & Jenks v. City of New Orleans et al., 59 South. Rep., 19. . . 168 Bissell V. Board of Review of Town of Dunlap, 138 N. W. Rep., 830 92, 205 Bixby, Collector, v. Roscoe et al., 81 Atl. Rep., 255 24 Blackstone Manufacturing Co. v. Town of Blackstone, 97 N. E. Rep., 58 199 Board of Commissioners for Bayou Terre-Aux-Boeufs Drainage District v. Ran- dolph, 59 South. Rep., 198 223 Board of Highway Commissioners ■;;. Bloomington, 97 N. E. Rep., 280 221 Board of Trustees of Lawrence University v. Outagamie County, 136 N. W. Rep., 619 215 Bogue et al. v. Laughlin, 136 N. W. Rep., 606 198 Boothbay, inhabitants of, ■«. E. I. du Pont De Nemours Powder Co., 83 Atl. Rep., 663 16,185 Boston & Maine R. R. v. City of Franklin, 84 Atl. Rep., 44 18, 183 Boston & Maine R. R. v. State of New Hampshire, 85 Atl. Rep., 616 189 Bowen v. Moeller, 137 N. W. Rep., 245 74 Browning v. City of Waycross, 74 S. E. Rep., 564 150 Burgess Estate, in re, 97 N. E. Rep., 591 174 Butte Land & Investment Co. v. Sheehan, County Treasurer, 120 Pac. Rep., 241 167 Calhoun County, Commissioners' Court of, v. City of Anniston, 58 South. Rep., 252 219 Callender Navigation Co. v. Pomeroy, 122 Pac. Rep., 758 182 Calvary Baptist Church v. Milliken, 147 S. W. Rep., 12 212 Campbell Turnpike Road Co. v. District of Highlands, 147 S. W. Rep., 37 196 Caswell & Smith v. Texas, 148 S. W. Rep., 1159 158 Caverly-Gould Co. v. Springfield, 76 Atl. Rep., 39 24 XXV XXVI TABLE OP CASES. Pase. Central R. R. Co. of New Jersey v. Mayor, Jersey City, 199 Fed. Rep., 237 142 Chicago, Milwaukee & St. Paul Ry. Co. ■:;. City of Milwaukee et al., 133 N. W. Rep., 1120 195 Choate v. Trapp, 224 U. S., 665 139 City Properties Co. et al. •!/. Jordan, 126 Pac. Rep., 351 148 Clement National Bank v. Vermont, Supreme Court, U. S., Nov. 10, 1913 328 Colorado, Opinion of Justices, 123 Pac. Rep., 660 192 Commissioners' Court of Calhoun County v. City of Anniston, 58 South. Rep., 252 219 Congregational Church, First, v. Board of Review, 98 N. E. Rep., 275 213 Connecticut Valley Street Ry. Co. v. City of Northampton, 99 N. E. Rep., 516. 26, 195 Consolidated Coal Co. •;;. Miller, 236 111., 149 ji Cottle, County Treasurer et al., v. Union Pacific R. R. Co., 201 Fed. Rep., 39, . 143 Countess De Noailles' estate, in re, 84 Atl. Rep., 665 173 Crawford v. Koch, 135 N. W. Rep., 339 205 Crowell, in re, 199 Fed. Rep., 659 144 Darnell, Executor, v. Indiana, 226 U. S., 390 136 Davis V. City of Salisbury, 76 S. E. Rep., 687 212 Delaware v. Coppermines Co., 80 Atl. Rep., 145 jj De Noailles' estate, in re, 84 Atl. Rep., 665 173 Des Moines National Bank et al. ■;;. City of Des Moines, 133 N. W. Rep., 767. .. 188 Detroit, Grand Haven & Milwaukee Ry. v. Fuller et al., 205 Fed. Rep., 86. . . . 76 Dexter Horton National Bank of Seattle v. McKenzie et al., 124 Pac. Rep., 915. 201 Dolese & Shepard Co. v. O'Connell, 100 N. E. Rep., 235 206 Dowling Ti. Webster County, 134 N. W. Rep., 870 206 Dusenbury v. Madere, 58 South. Rep. , 825 198 Ellingham v. Dye, 99 N. E. Rep., i 414 Ellsworth College v. Emmet County, 135 N. W. Rep., 594 211 Etchison Drilling Co. v. Floumoy, 59 South. Rep., 867 112, 161 Farr Alpaca Co. v. Massachusetts, 98 N. E. Rep., 1078 153 First Congregational Church v. Board of Review, 98 N. E. R:ep., 275 213 Fletcher Paper Co. v. City of Alpena, 137 N. W. Rep., 640 189 Foster County Assessor etal.-y. Hart Consolidated Mining Co., 122 Pac. Rep., 48. 186 Fourth National Bank of Greenville v. City of Greenville, 74 S. E. Rep., 126. . 223 Fraziert). W. H. H. Slack & Bro., 81 Atl. Rep., 161 24 Froug-Smullion Co. v. Pulaski County, 147 S. W. Rep., 72 200 Fulton, City of, v. Craighead, 147 S. W. Rep., 1128 160 Gaar, Scott & Co. v. Shannon, 223 U. S., 468 138 Georgia Railroad & Banking Co. v. Town of Decatur, 73 S. E. Rep., 830 194 Georgia R R. Co. v. Wright, 54 S. E. Rep., 52 209 Gilmore v. District Court Custer County, 122 Pac. Rep., 922 175 Gilsonite Construction Co. v. St. Louis, Iron Mountain & Southern Ry., 144 S. W. Rep., 1086 194 Goldfield Consolidated Co. xi. State of Nevada, 127 Pac. Rep., 77 214 Goldstein-Fineberg Co. v. State Board of Assessors, 83 Atl. Rep., 773 167 Grand Island, City of, v. Postal Telegraph-Cable Co., 138 N. W. Rep., 169 154 Grand Trunk Ry. Co. of Canada; see Detroit, Grand Haven & Milwaukee Ry. ■z;. Fuller et al. Great Southern Lumber Co. v. State Board of Equalization et al., 58 South. Rep., 874 192 Greenfield Savings Bank v. Massachusetts, 97 N. E. Rep., 927 210 Greenough v. Board of Canvassers, 82 Atl. Rep., 411 199 Gromer v. Standard Dredging Co., 224 U. S., 362 139 Table of cases. xxvit Page. Haggart v. Alton, 137 N. W. Rep., 372 91, 191 Hammond Lumber Co., Ltd., v. Smart, sheriff et al., 57 South. Rep., 277 185 Hart v. Delphey et al., 136 N. W. Rep., 702 214 Hawley -v. Maiden, 204 Mass., 138 29 Higginset al. v. Lacroix et al., 137 N.-W. Rep., 417 158 Hilson Co. V. State Board of Assessors et al., 80 Atl. Rep. , 929 53 Hopkins v. Fidelity Trust Co., 143 S. W. Rep., 1037 208 Houston &T. C. R. R. Co. v. McDonald, 148 S. W. Rep., 287 166 Howcott -v. Smart, State and Parish Tax Collector et al., 58 South Rep., 515. . . 219 Hume V. LeCompte, 142 S. W. Rep., 934 221 Illinois -D. Byrd, 97 N. E. Rep., 293 175 Illinois v. Chicago & W. I. R. R. Co., 100 N. E. Rep., 35 222 Illinois 1). Federal Security Co., 99 N. E. Rep., 668 165 Illinois V. Illinois Northern Ry. Co., 248 111., 539, 540 70 Illinois V. Lewy Bros. Co., 250 111., 613 71 Illinois V. National Box Co., 248 111., 141 71 Illinois i;. Terre Haute & Western Ry. Co., 100 N. E. Rep., 173 71, 193 Illinois V. Union Trust Co. et al., 99 N. E. Rep., 377 173 Income Tax Cases, 134 N.W. Rep., 673; 135N. W. Rep., 164; 148 Wis., 456.. 84,88, 217 Inhabitants of Boothbay v. E. I. du Pont De Nemours Powder Co., 83 Atl. Rep., 663 16, 185 Inhabitants of Peru -z;. Forster's Estate, 83 Atl. Rep., 670 201 Inhabitants of Sandy River Plantation v. Lewis et al., 84 Atl. Rep., 995 220 International Paper Co. v. Walpole, 75 N. H., 320 19 Inter-Southern Life Insurance Co. t). Milliken, 149 S. W. Rep., 875 181 Iowa City v. Glassman, 136 N. W. Rep., 899 158 Jackson, sheriff, v. Neff, 60 South. Rep. , 350 160 Jewel Tea Co. v. Lees Summit, ig8 Fed. Rep., 532 143 Jones V. Belzoni Drainage District of Washington County et al., 59 South. Rep., 921 190 Keckevoet v. City of Dubuque, 138 N. W. Rep., 540 92, 152 Keeney -v. New York, 222 U. S., 525 140 Kentucky Electric Co. v. Buechel, 143 S. W. Rep., 58 207 Kentucky ex rel. Hopkins -v. Fidelity Trust Co., 143 S. W. Rep., 1037 208 Kentucky v. Berea College, 147 S. W. Rep., 929 211 Kentucky r. Green, 150 S. W. Rep., 353 196 Kentucky v. Louisville & Nashville R. R. Co., 150 S. W. Rep., 37 221 Kentucky v. Prudential Life Insiu-ance Co., 149 S. W. Rep., 836 184 Kentucky v. Robinson, J. M., Norton & Co., 142 S. W. Rep., 406 197 Kentucky v. Southern Pacific Co., 149 S. W. Rep., 1103 186, 202 Kentucky v. United States Express Co., 149 S. W. Rep., 1037 171 Keystone Watch Co. -v. Massachusetts, 98 N. E. Rep., 1063 147 Kidd -v. Alabama, 188 U. S., 730, 732 136 King County et al. -v. Northern Pacific Ry. Co., 196 Fed. Rep., 323 142 Kohlsaat, H. H., & Co., v. O'Connell, 99 N. E. Rep., 689 166 Kraft V. Smothers, 146 S. W. Rep., 505 220 Lake Nebagamon Ice Co. v. McPhee, 135 N. W. Rep., 470 185 Lawrence University Board of Trustees v. Outagamie County, 136 N. W. Rep., 619 215 Lawrence i;. Middle ton, tax collector, 60 South. Rep., 130 160 Lehigh Valley R. R. Co. v. Jersey City, 78 Atl. Rep., 213 S^ Lenoir Drug Co. v. Town of Lenoir, 76 S. E. Rep., 480 160 Lloyd's Executorial Trustees v. City of Lynchburg, 75 S. E. Rep., 233 181 XXVin TABLE OP CASES. Paee. I/)ng Dock Co. V. State Board of Assessors, 73 Atl. Rep., 53 52 Lonsdale Co. v. Taft, 84 Atl. Rep., 795 206 Los Angeles Gas & Electric Corporation v. City of Los Angeles, 126 Pac. Rep., 594 162 Louisiana v. Frederick DeBary & Co., 58 South. Rep., 892; afiBrmed, 227 U.S., 108 148 Louisville & Nashville R. R. Co. et al. v. Wright, 199 Fed. Rep., 454 144 Louisville Car Wheel & Railway Supply Co. v. Louisville, 142 S. W. Rep., 1043. . 208 Louisville, City of, v. Benedict, 144 S. W. Rep., 43 .' 203 Ludwigr. Western Union Tel. Co., 216 U. S., 146 135 McCormick's estate, in re., 99 N. E. Rep., 171. : 176 McDougald v. Low et al., 127 Pac. Rep., 1027 ip McGannon v. Oklahoma ex rel. Trapp et al., 124 Pac. Rep., 1063 iry McNeal, appeal from (Oklahoma) State Board of Equalization, 128 Pac. Rep., =^5 193 Marshall v. Dye, U. S. Supreme Court, Dec. , 1913 410 Massachusetts, Attorney General •». Barney, 97 N. E. Rep., 750 176 Massachusetts, Opinion of Justices, 98 N. E. Rep., 338 218 Mayor and Common Council of Newark v. Lewis et al., 81 Atl. Rep., 1072 214 Merchants' National Bank of Baltimore v. Roxbury Distilling Co., 196 Fed., 76. 144 Merrell et al. v. City of St. Petersburg, 60 South. Rep., 349 204 Meyer v. Wells, Fargo & Co., 223 U. S., 298 M Michigan ex rel. Bowen v. Moeller, 137 N. W. Rep., 245 ^4 Michigan Telephone Tax Cases, 185 Fed. Rep., 634 77 Milford, Town of, v. Commissioners of Worcester County, 100 N. E. Rep., 60 212 Miller v. Thompson, 138 N. W., Rep. 628 204 Miller, Watt & Co. v. O'Connell, 251 111., 260 70,71 Milliken v. Crail et al., 98 N. E. Rep., 291 206 Milwaukee, City of, v. Milwaukee Electric Ry. & Light Co., 133 N. W. Rep., 593 80,163,391,405 Mineral R. R. Min. Co. v. Northumberland County Commissioners, 78 Atl. Rep., 991, 999 56 Minnesota v. Burlington Lumber Co., 136 N. W. Rep., 1033 184 Minnesota v. Fitzgerald, 134 N. W. Rep., 728 89, 178 Minnesota v. Minnesota Tax Commission, 134 N. W. Rep., 643 89, 220 Monidah Trust Co. v. Sheehan et al., 123 Pac. Rep., 692 182 Monroe, City of, v. Endelman, 138 N. W. Rep., 70 158 Montana ex rel Gilmore v. District Court, Custer County, 122 Pac Rep., 922. . 175 Montgomery, City of, v. Royal Exchange Assurance Corporation of England, 59 South. Rep., 508 156 Moss V. Edwards, Comptroller, 84 Atl. Rep., 198 172 Muldoon V. Board of Review, 98 N. E. Rep., 673 213 Mulford V. Curry, 125 Pac. Rep., 236 6, 134, 147,342,381 Musgrove v. Baltimore & Ohio R. R. Co., 75 Atl. Rep. 245 59 Mutual Benefit Life Insurance Co. v. Martin County, n6 N. W. Rep., 572 .... 178 Napa Savings Bank v. Napa County, 120 Pac. Rep., 449 210 Newark, Mayor and Common Cotincil of, v. Lewis et al., 81 Atl. Rep., 1072 ... 214 New Hampshire, Opinion of Justices, 79 Atl. Rep., 31 19 New York Bay Railroad Co. v. City of Newark, 83 Atl. Rep., 962 194 New York ex rel. New York Central & Hudson River R. R. Co. v. Priest, 99 N. E. Rep., 547 45,170 New York ex rel. New York Central & Hudson River R. R. Co., v. Woodbury etal., 99 N. E. Rep., 545 169 TABI^E OP CASES. XXIX Page. New York Terminal Co. v. Gaus, 98 N. E. Rep., 11... ° 165 New York v. Gass, 100 N. E. Rep., 404 lyg New York v. Gaus, 198 N. Y., 250 48 New York v. Gaus, 199 N. Y., 147 45 New York v. Gourley, 198 N. Y., 486 45 New York v. MenscHing, 187 N. Y., 8 49 New York v. New York Central & Hudson River R. R. Co., 200 N. Y., 328. . . 48 New York v. State Board of Tax Commissioners, 196 N. Y., 39 45 New York v. State Board of Tax Commissioners, 203 N. Y. , 1 19 45 New York t;. Trust Co., 98 N. E. Rep., 207 180 New York v. Williams, 198 N. Y., 238 48 New York v. Woodbury, 203 N. Y., 231 45 North Carolina Corporation Commission v. Oxford Seminary Construction Co., 76 S. E. Rep., 640 211 North Carolina v. Snipes, 76 S. E. Rep., 243 153 North Carolina v. Williams, 73 S. E. Rep., 1000 156 Nutwood Drainage & Levee District v. Board of Review, 99 N. E. Rep., 590. 216 Ohio Valley Tie Co. v. Bruner, 146 S. W. Rep., 749 167 Oklahoma State Board of Equalization, appeal of McNeal from, 128 Pac. Rep-. 285 193 Oklahoma v. Wells, Fargo & Co., 223 U. S., 298 135 Old South Association v. Boston, 99 N. E. Rep., 235 210 Opinion of Justices, Colorado, 123 Pac. Rep., 660 192 Opinion of Justices, Massachusetts, 98 N. E. Rep., 338 218 Opinion of Justices, New Hampshire, 79 Atl. Rep., 31 19 Oregon v. Standard Oil Co., 123 Pac. Rep., 40 153 Orr et al. v. Sutton et al., 137 N. W. Rep., 973 178 Pacific States Telephone & Telegraph Co. v. Oregon, 223 U. S., 118 141 Paxton, City of, v. Fitzsimmons, 97 N. E. Rep., 675 159 Penn Mutual Life Insurance Co.-!/. Board of Assessors etal., 59 South. Rep., 906. 168 Pennsylvania Stave Co., appeal of, 84 Atl. Rep., 761 204 Pennsylvania v. Atlantic Crushed Coke Co., 16 Dauphin County Rep., 11 165 Pennsylvania v. Cambria Inclined Plane Co., 16 Dauphin County Rep., 33. . . 164 Pennsylvania ■;;. Clairton Steel Co., 78 Atl. Rep., 131 5^ Pennsylvania x). Curtis Publishing Co., 15 Dauphin County Rep., 122; affirmed, 85 Atl. Rep., 360 i6s Pennsylvania v. EHis, G. W., Co., 15 Dauphin County Rep., 90; affirmed, 85 Atl. Rep., 414 169 Pennsylvania v. Girard Trust Co., 16 Dauphin County Rep., 26 164 Pennsylvania v. Independence Trust Co. , 81 Atl . Rep . , 928 55 Pennsylvania v. Matheson Automobile Co., 16 Dauphin County Rep., 14 169 Pennsylvania v. Mountain Ice Co., 16 Dauphin County Rep., 38 168 Pennsylvania ■». Perm Traffic Co., 16 Dauphin County Rep., 36 164 Pennsylvania T. Union Trust Co. of Pittsburgh, 85 Atl. Rep., 461 198 Pennsylvania v. White Haven Water Co., 16 Dauphin County Rep., i 164 Peru, Inhabitants of, v. Forster's estate, 83 Atl. Rep., 670 201 Philadelphia & R. C. & I. Co., ti. Northumberland County Commissioners, 79 Atl. Rep . , 109 56 Phillipsburg Horse Car R. Co. v. State Board of Assessors, 81 Atl. Rep., 1121. . . S3 Pierson v. Minnehaha County, 134 N. W. Rep., 212 198 Piatt -u. Parker-Washington Co., 144 S. W. Rep., 143 203 Pocahontas Co. v. Commonwealth, 73 S. E. Rep., 446 180 Pocomoke Guano Co. v. Biddle, 73 S. E. Rep., 996 184, 216 XXX TABI,B OK CASES. Paje. Pocomoke Guano Co. v. City of Newbum, 74 S. E. Rep. , 2 159 Postal Telegraph-Cable Co. -v. City of Los Angeles, 128 Pac. Rep., 19 171 Postal Telegraph-Cable Co. u. Mayor, etc., of Cordele, 76 S. E. Rep., 744 150 Powers V. Detroit, Grand Haven & Milwaukee Ry., 201 U. S., 543 76 Powers V. City of Worcester, 97 N. E. Rep., 95 231 Pullman Co. u. Kansas, 216 U. S, 56 i^j Quong Wing v. Kirkendall, 223 U. S., 59 ijg Rampton v. Dobson, 136 N. W. Rep., 682 92, 205 Red "C" Oil Manufacturing Co. v. Board of Agriculture, 222 U. S., 380 136 Reilly v. Hatheway, 125 Pac. Rep., 417 162 Rexford v. Phillips, 74 S. E. Rep., 337 200 Road Trustees v. George C. Brown & Co., 75 S. E. Rep., 40 155 Rockwell & Co. 7). Warren County et al. , 77 Atl. Rep. , 665 56 Rogers v. Arkansas, 144 S. W. Rep., 211; 227 U. S., 408 151 St. Louis, I. M. &S. Ry. Co. v. Board, 145 S. W. Rep., 892 186 Salem Iron Foundry v. Danvers, 10 Mass., 514 196 Sanderson v. Texarkana, 146 S. W. Rep., 105 188 Sandy River Plantation, Inhabitants of, v. Lewis et al., 84 Atl. Rep., 995 220 Sanford's estate. In re, 137 N. W. Rep., 864 176 Savage et ux. v. Pierce Coimty et al., 123 Pac. Rep., 1088 190 Sawtellr. City of Atlanta, 75 S. E. Rep., 982 155 Sawyer ■;;. Gilmore, 83 Atl. Rep., 673 192 Schubel V. Olcott, 120 Pac. Rep., 375 217 Shane et al. v. City of Hutchinson et al., 127 Pac. Rep., 606 216 Shaw V. Bridgers, 76 S. E. Rep., 827 177 Shreveport Suburban Railway Co. v. Hollingsworth, Assessor, et al., 59 South. Rep., 30 214 Shreveport, City of, v. Smith, 57 South. Rep., 652 155 Sioux Falls Savings Bank v. Minnehaha County, 135 N. W. Rep., 689 92, 189 Smith 7). Widdon, 75 S. E. Rep., 635 161 South Dakota v. Dorau, 134 N. W. Rep., 53 91, iS4 Sperry & Hutchinson Co. v. City of Owensboro, 151 S. W. Rep., 932 157 Spokane & Eastern Trust Co. ■;;. Spokane County et al., 126 Pac. Rep., 54 191 Spokane Valley Land & Water Co., v. Kootenai County, Idaho, 199 Fed. Rep., 481 145 Standard Oil Co. v. Alabama, 59 South. Rep., 667 163 Stratton v. Nebraska, 137 N. W. Rep., 903 161 Susquehanna Coal Co. v. City of South Ambo.y et al., 184 Fed. Rep., 941 53 Tarrant, Tax Collector, v. Bessemer National Bank, 61 South. Rep., 47 187 Terre-Aux-Boeufs Drainage District, Board of Commissioners for, u. Randolph, 59 South. Rep., 198 223 Tong V. Maher, 122 Pac. Rep., 279 201 Toyota v. Territory of Hawaii, 226 U. S., 184 137 Underground Electric Railways Co. v. Owsley et al. , 196 Fed. Rep., 278 144 Union Trust Co. of Maryland v. State, 81 Atl. Rep., 873 59 Union Trust Co. v. Common Council of Detroit, 137 N. W. Rep., 122. ... 74, 178, 208 United States Express Co. v. Minnesota, 223 U. S., 335, 348 89, 135 United States National Bank v. Poor Handmaids of Jesus Christ, 135 N. W. Rep., 121 212 United States v. Hemmer, 195 Fed. Rep., 790 146 United States v. Southern Oregon Co., ig6 Fed. Rep., 423 143 Van Duzer v. Irvin, 75 S. E. Rep., 649 223 Victor Cotton Oil Co. v. Louisville, 148 S. W. Rep., lo 207 TABLE OF CASES. XXXI Page. Wade, ex parte, 146 S. W. Rep., 179 159 Washington County v. Marquis, 82 Atl. Rep., 756 199 Water Power Cases, 134 N. W. Rep., 330 81, 171 Weilep et al. v. Audrian et al., 128 Pac. Rep., 254 213 Welch i;. City of Boston, 97 N. E. Rep., 893 184 Wells Fargo & Co., Meyer d. 223 U. S., 298 366 West Shore R. Co. v. State Board of Assessors, 81 Atl. Rep., 351 S^'Si Western Union Telegraph Co., in re assessment of, 130 Pac. Rep., 565 149 Western Union Telegraph Co. v. Andrews, 216 U. S., 165 132 Western Union Telegraph Co. -v. Kansas,- 216 U. S., i 132, 141 White Dental Manufacturing Co. u. Massachusetts, 98 N. E. Rep., 1056 146 White Dental Manufacturing Co. v. Massachusetts, U. S. Supreme Court, Nov. 3. 1913 i3i> 147 White V. City of Forsyth, 76 S. E. Rep., 58 189 Whitemire et al. v. Trapp et al., 126 Pac. Rep., 578 213 Williams v. Talladega, 226 U. S., 404 141 Wisconsin ex rel. Lake Nebagamon Ice Co. v. McPhee, 135 N. W. Rep., 470. . 185 Wisconsin ex rel. Miller v. Thompson, 138 N. W. Rep., 628 204 Wisconsin Income Tax Cases, 134 N. W. Rep., 673; 135 N. W. Rep., 164; 148 Wis., 456 84, 88, 217 Wisconsin Water Power Cases, 134 N. W. Rep., 330 81, 171 Wyatt ■!;. Board of Equalization, 74 N. H., 552 19 LETTERS OF TRANSMITTAL. Department op Commerce, Office of the Secretary, Washington, December 2g, 1913. Sir: I have the honor to transmit herewith a special report of the Commissioner of Corporations bringing up to January i, 1913, the four pubHshed parts of the Report on the Taxation of Cor- porations and showing the tax movement throughout the United States during 191 2, as indicated by constitutional amendments, legislation, judicial decisions, conclusions of tax conferences, and recommendations of tax officials. Very respectfully, W11.UAM C. Redfield, Secretary. The President. Department of Commerce, Bureau of Corporations, Washington, December 2g, 191 3. Sir : I have the honor to transmit herewith a Special Report on Taxation, made to the President under your direction, and in accordance with the law creating the Bureau of Corporations. This report brings up to January i, 19 13, the published parts of the Report on the Taxation of Corporations, and reviews the tax movement throughout the United States during 191 2, as indi- cated by constitutional amendments, legislation, judicial decisions, conclusions of tax conferences, and recommendations of tax officials. I desire to mention as especially contributing, under my direc- tion, to the preparation of this report, Mr. M. Markham Flannery, of this Bureau. Very respectfully, Joseph E. DaviES, Coimnissioner . To Hon. William C. Redfield, Secretary of Commerce. S744°-i4 ^3 ^''^"' LETTER OF SUBMITTAL. Department op Commerce, Bureau op Corporations, Washington, December 2g, igi^. Sir: I have the honor to submit herewith a special report on taxation. This report brings up to January i, 191 3, the four pub- lished parts of the Report on the Taxation of Corporations, and, in addition, covers the tax movement throughout the United States during 191 2, as indicated by constitutional amendments, legisla- tion, judicial decisions, conclusions of tax conferences, and recom- mendations of tax officials. The purpose of this report is to supplement the Report on the Taxation of Corporations, and to provide in convenient form for state legislatures, tax commissioners, state and local tax officials, specialists in taxation, and the public generally an adequate basis for a comprehensive study of the tax movement during the period covered. A striking feature of the legislation herein reviewed is New York's " secured-debts " law, enacted in 191 1 . This law extends a system of taxation whereby foreign, as well as domestic, mortgages, and the bonds, notes, or other evidences of debts secured thereby, are, upon the payment of a single fee (one-half of i per cent of face va'ue), exempt from all subsequent taxation. This system has been severely condemned, because it taxes unequally items of property of the same class, because it may deprive the State of the right to tax in the future property worth millions of dollars, and because it permits corporations, upon the payment of a nominal fee, to offer, tax free, entire issues of long- term bonds, thus placing the sale of tax-exempt railroad and indus- trial securities in direct competition with the sale of tax-exempt state, county, and municipal bonds. It has, however, been com- mended upon the alleged ground that experience in New York has proven that at the previous tax rate (one-half of i per cent) an annual tax on mortgages has had a decided tendency to raise the rates of interest thereon; that bonds and other taxable intangible XXXV XXXVI LETTER OF SUBMITTAL. personalty have generally escaped taxation; and that the annual yield from this system is almost wholly new-found revenue, collected at a comparatively small cost. Whether the competition between tax-free private and public securities has a tendency to lower the market price of the latter, and whether an annual tax on mortgages increases interest rates thereon, are questions hardly susceptible of definite proof, and the question of the legal right of the legislature to guarantee that secured debts thus taxed shall thereafter be tax free, is still unadjudicated. The inequaUty of the present system may be clearly shown by an example: Thus, a ten-thousand-dollar mortgage given for a term of three years is required to pay exactly the same amount of tax as a ten-thousand-dollar railroad bond maturing in 25 years. Assuming that each bears annual interest at the rate of 5 per cent, the total income from the bond will be more than eight times that from the mortgage, while the amount of tax paid in each case, namely, $50, equals 2,/4 per cent of the total income from the mort- gage, it equals but 0.4 of i per cent of the income from the bond. From a financial standpoint, the system, up to the present, has been productive of larger revenues to the State. During the first year of the operation of the " secured-debts " tax (19 12), which deals with foreign securities, the tax yield amounted to nearly $1,500,000. Comparative data, however, are not obtainable for former years. Between 1907 and 191 2 the annual tax yield from the "mortgage-recording" tax, which deals with domestic mort- gages and their accompanying securities, averaged about $3,800,000. Other noteworthy featiu-es are the decided trend toward greater centralization of the administration of tax laws and the classifica- tion of property for taxation pmposes. Wisconsin is a leading example of the one and Rhode Island of the other. Wisconsin, by its income-tax law, centralized its administration of assessments and successfully reached intangible property without employing the classification method. This is accomphshed by levying rates graduated according to the amount of taxable income, irrespective of class, and allowing a deduction for taxes on personalty paid under the general-property tax. Rhode Island has adopted the classification method under which selected classes are separated from the general property of the State, and each related class is taxed at a rate which differs from the general-pi'operty tax rate. LETTER OF SUBMITTAL. XXXVII Legislation with respect to the estates of nonresident decedents is also noteworthy. By reason of the lack of uniformity of state laws, such estates are sometimes subject to taxation three, and even fovu", times. Massachusetts, however, has recognized the princi- ple of taxing such property but once, namely, by taxing the real estate only. Personalty is not taxed, since such property usually passes in accordance with the law of the jurisdiction where the decedent was domiciled. New York, in addition to taxing real estate, taxes chattels located in New York, and Wisconsin has passed inheritance-tax legislation looking toward a complete physical-situs basis for taxation. Thus certain classes of securi- ties are taxed in proportion to the value of the physical property represented which is located in Wisconsin. The tendency toward further centralized administration in New England since the publication of Part I is very pronounced. New Hampshire aiid Rhode Island have each created a permanent tax commission; and Maine, Vermont, and Massachusetts have in varying degrees strengthened the power of their respective state central bodies. A concerted effort is being made, through the medium of tax conferences, to unify, to a certain extent at least, I he tax systems of the six States forming this group. Rhode Island, as noted above, has adopted the system of classification of property. Of the States of the Middle Atlantic group, New Jersey, Penn- sylvania, Delaware, Maryland, and the District of Columbia, each have had special tax commissions appointed for the purpose of recommending improvements in their respective tax systems. In the Eastern Central and Western Central groups, the most important tax legislation was the Wisconsin income tax of 1911. This is a substitute for the general-property tax on intangible per- sonal property, and is successfully and economically administered. The first assessment under this tax amounted to a little less than $3,500,000, of which $2,000,000, or 68 per cent, was collected from corporations. With respect to the other States of these groups, Michigan adopted the New York mortgage-recording tax system, and North Dakota created a permanent tax commission. Min- nesota, through the referendum system, raised the rate of the gross-earnings tax on railroads from 4 to 5 per cent. L-egislation during 191 2 in other States which have not been covered by the published parts of the Report on the Taxation of Corporations was of interest in Arizona and Idaho. The legisla- XXXVIII LETTER OF SUBMITTAL. ture of Arizona, at its first session, created a permanent tax commission and passed a number of laws relating to the taxation of corporations. The legislature of Idaho made several changes in the tax system of that State. Some of these related to the classification of lands, the exemption of growing orchards, and the assessment of property at less than full value. The voters of Louisiana rejected a number of constitutional amend- ments which were intended to give this State a modern and much- improved system of taxation. A large number of reports by special and permanent tax com- missions and tax officials, covering practically every phase of taxation, were issued during 191 2. Digests of many of these and of several reports of both earlier and later date appear in this report. Prominence is given to some of the more important subjects treated, but a regard for a reasonable limit to the size of this report forbade more than a reference to sources of information with respect to other subjects. Judicial decisions rendered during 191 2 dealt with a great variety of tax issues, but the most interesting was decided by the Massachusetts supreme court (Massachusetts v. White Dental Manufacturing Co., 98 N. E- Rep., 1056) and affirmed November 3, 191 3, by the Supreme Court of the United States. This deci- sion sustained the constitutionality of a Massachusetts statute, which provides in substance that certain kinds of foreign business corporations (mercantile, manufacturing, and miscellaneous) shall pay an excise tax of one-fiftieth of i per cent on the par value of the entire authorized capital stock, the total tax not to exceed $2, GOO. Respectfully, Joseph E. Davies, Commissioner of Corporations. The President. SPECIAL REPORT OF THE COMMISSIONER OF CORPORATIONS ON TAXATION. CHAPTER I. INTRODUCTION. Purpose and Plan. The marked .growth in the study of taxation in the United States has created a demand for the collection and publication of reliable information regarding the tax systems of the several States. The time has not long since passed when temporary expe- diency, rather than a regard for equity and justice, was almost the sole guide of legislators, who cared little for scientific prin- ciples in taxation. The natural result was in many States a lack of system, and the enactment of tax legislation, frequently with- out reference to existing laws in these States, and almost wholly without reference to the laws of other States. A start in the right direction has been made within the last few years, and the movement has received considerable impetus. It is a broad movement, not for the promotion of any particular theory or set of theories, but for the acquisition of tax knowl- edge ; one by which the advocates of theories may be heard and the merits of theories weighed. During 1912 special committees, or commissions, authorized in 24 Commonwealths were studying the tax systems of other States, hearing the testimony of interested witnesses, and seeking the assistance of experts in taxation, with a view of discovering and correcting so far as possible the faults in the respective systems. As a result of this movement several States have recently abolished tax boards composed of State officials elected primarily for the performance of entirely different duties, and have appointed in their stead permanent boards, the members of which are required to devote their time exclusively to taxation. The continuance of the movement seems to be assured by the widespread awakening of tax officials and the pubHc generally to the realization that the importance of taxation increases with the economic development I 2 SPECIAL REPORT ON TAXATION. of the State. This opinion is confirmed by the numerous tax conferences held in 191 2, ranging in size and importance from that conducted under the auspices of the National Tax Association to those conducted by groups of States or by single States, or to meetings of county officials to discuss purely local issues. With these evidences of increasing interest in taxation matters may be mentioned the educational campaigns conducted as a result of some of these conferences through the public press and through the interstate circulation of reports of tax officials, which but a few years ago were considered as of purely local interest. The purpose of this report is to present in one volume a survey of the taxation movement during 191 2 and to provide thereby basic data for the specialist in taxation, the legislator, the tax administrator, the special tax commissioner, and the public gen- erally. The report reviews all important actions of State legis- latures, courts, tax commissions, and tax conferences. It also includes data necessary to bring up to January i, 1913, the four published parts of the Report of the Commissioner of Corporations on State Systems of Taxing Manufacturing, Mercantile, Transpor- tation, and Transmission Corporations. For this reason, the legis- lation and the court decisions for the New England States cover four years; for the Middle Atlantic States, three years; for the Eastern Central Stales, two years, while similar and additional data for the remaining States are confined almost wholly to the year 1912. The material presented is so arranged as to include summaries under subject headings, giving a brief general view of the par- ticular subjects treated. Following this the same subject matter is described in detail and arranged so as to afford a ready com- parison of the information relative to each State or subject with that pertaining to any other State or subject. The second chapter of the report deals with legislation and is arranged by States and classified according to subjects; the third, with 1912 decisions rendered by the United States Supreme Court, the inferior Federal courts, and the higher State courts; the fourth, \vitli the work, purpose, and reports of tax conferences, and of special and permanent tax commissions; the fifth, with state constitutional amendments adopted, rejected, or pending, and statutory tax measures passed or rejected under the referendum during 191 2. Judicial decisions prior to 191 2 for the States already reported on, are covered partly in such previous reports and partly in the INTRODUCTION. 3 present volume in the discussion of legislation in such States since the issuance of those reports. For the States which have not yet been covered by the Bureau's reports, namely, those of the Mountain and Pacific and Southern groups (for which reports are now in preparation) the present volume gives the judicial decisions rendered in 191 2. Inefficient Administrative Machinery and Trend of Corrective Measures. Complaints against the general property tax system and the consequent unequal distribution of the tax burden thereunder are almost as numerous as formerly. The fault, however, is mainly conceded to exist in the lack of efficient administrative machinery and in the injustice of taxing certain classes of intangible person- al tv at rates which practically confiscate the income therefrom. A frequent cause of the lack of efficiency in administration of the general-property tax, according to many state reports, is the fact that the assessments are left to the hundreds of local assessors, each exercising his individual judgment as to the value of the property in the State without regard to his coworkers, without guidance, without in many cases training for the work, and with- out responsibility to any central authority. There are, of course, boards of equalization and boards of appeal, but lack of coordina- tion naturally results from such multiplicity of ungoverned indi- vidual action. Unsuccessful attempts to tax stock, bonds, and other evidences of intangible property at from 50 to 70 per cent of their usual in- come are frequently described, in the reports of States whose con- stitutions do not permit the classification of property. The in- equality usually complained of exists by reason of assessment of the intangibles at full value while other property is assessed at a frac- tion of its full value. The trend of corrective methods, as indicated by legislative action, by constitutional amendments, and by recommendations of state officials, lies in centralization for those States which have decentraUzed systems, greater centralization for most States having made a start in that direction, and in the classification of property for taxation purposes. Centralization and Taxation of Intangibles at a Low Uniform Rate. Two of the most important tendencies at the present time are found in the centralization of administration and the taxation of intangibles at a low uniform rate. 4 gPUCIAL REPORT ON TAXATION. Complete centralization of administration of assessment laws has not yet been attained by any of the States. The Wisconsin system, however, more closely approaches this in assessing prop- erty subject to the general-property tax than any other system now in force. It also obviates the necessity for setting up a separate classification for the purpose of reaching intangible per- sonalty, which, in other states, is often successfully reached by placing it in a separate class and applying a low uniform rate. These two distinctive features are combined in Wisconsin in what may be described as the first successful achievement in state (as distinguished from Federal) income taxation in the United States. This tax, which is primarily a substitute for the general-property tax on intangible personalty, is administered solely under state control. "Income assessors," one for each of 39 assessing dis- tricts, appointed under state civil-service re!:;ulation, thereby being removed as far as possible from the influences of political interference and local prejudices, are entrusted with a large meas- lu-e of control in the matter of ordinary assessment of property and with complete control in respect to the assessment of incomes. Another example of the trend of recent legislation toward cen- tralization is found in New Hampshire, while an example of the tendency toward taxation of intangibles at a low uniform rate is found in Rhode Island. New Hampshire replaced its board of equalization — a mere ad- \-isory bod>' in all matters relating to local assessment, with no real power to equalize the burden of taxation — by a permanent state tax commission, possessing broad supervisory and directive authority over assessments and assessing officials, with ample power to enforce the tax laws equitably. By a single act of the 191 2 legislature, Rhode Island's thoroughly localized system was partially centraHzed and otherwise greatly improved. It provides for the extensive taxation of intangibles heretofore untaxed in Rhode Island, and thereby reduces, to one- half, the state rate on general property. Furthermore, it provides that intangible personalty of public-service corporations shall be reached through a tax based on gross earnings, and that of mer- cantile, manufacturing, and miscellaneous companies through a tax based on corporate excess." I'hese taxes are in lieu of all other taxes against intangible personalty either to the corporation or 1 Corporate excess is that intangible value found by deducting from the aggregate value of the corporation's property, the value of exempted property and the value of property taxed locally. See p. 40. INTRODUCTION. 5 to the holder of its securities. Other corporate securities, moneys, debts, etc., are, like corporate excess, taxed at a low uniform rate. This act is defective, however, in one very important particular, namely, it fails to provide supervision over local assessing officials in the matter of uniform valuation and equalization. An act passed during the 191 3 session of the Ohio legislature gives this State, in theory at least, an exceedingly large measure of centralization. The new law contemplates, among other changes, the supervision of local assessments through the establish- ment in each county of one or more appointive officers, who in effect will be deputies of, and directly responsible to, the State Tax Com- mission. All elective real and personal property assessors and all elective boards of review and boards of equalization are abolished, and the work of the deputy tax commissioners (called district assessors) will, upon complaint, be reviewed and adjusted by an appointive district board of complaints, with a right of appeal to the State Tax Commission. The bulwark of safety, however, provided in the Wisconsin act, namely, the appointment of dis- trict assessors under state civil-service regulation, is lacking in the Ohio act, thus leaving the last named act open to those objec- tions usually urged against unrestricted appointive methods. Proposed constitutional amendments to authorize special methods of taxing certain classes of property, as distinguished from the method of taxing property in general, were before the voters of New Hampshire, Massachusetts, and Ohio; and for the classification of property without reference to any particular class, in California, Ivouisiana, Oregon, Kentucky, Utah, and North Dakota. Classification in some of these States is intended primarily for the taxation of intangible personalty at a low uniform rate and for the separation of sources of state and local revenue, although the Ohio amendment specifically prohibits the former. Separation of Sources with Relation to Centralization of Assess- ment Laws. Some States have sought to avoid unequal distribution of tax burdens by levying the general-property tax for county and other local purposes and reserving for state uses the revenue from special methods of taxation levied on subjects which are exempt from local taxation. This system avoids inequalities incidental to the levying of a state rate on assessments, which in some counties may be above and in other counties below the State's average valuation, thus limiting the tax inequalities between individual 6 SPECIAL REPORT ON TAXATION. parcels of property to such as may exist within a given county, but it does not obviate the necessity for strong centralized state administration of tax laws, since no method of selection has yet been devised which permanently guarantees a sufficiency of state revenue. School taxes are not considered in this connection, but it may be noted that some States now operating under the separation system either collect and apportion such taxes, or support the schools in part by appropriations from the general fund. California is the only State which has provided for separation of soiu-ces in its constitution. California, however, like all other States operating under the separation system, has provided for that elasticity in state revenue which all but New Jersey, Delaware, and Pennsylvania have at times found necessary, namely, the levying of the general-property tax for state purposes. California is at present levying a state general-property tax for the Panama- Pacific Exposition fund. Furthermore, by reason of the possible loss of revenue due to a recent judicial decision affecting the cor- poration license tax," and also on account of the uncertain future of the poll tax, which may be abolished by a proposed constitu- tional amendment to be voted upon at the 191 4 general election, California may be compelled to resort to the general-property tax for the purpose of supplying a part of the ordinary state revenue. Incorporation fees and annual taxation of corporations organ- ized to do business in other States have for many years supplied revenue which has obviated the necessity of levying the general- property tax for state purposes in New Jersey. This is also largely true as to Delaware. The permanency of these sources of revenue in New Jersey may or may not be affected by legislation * which has been enacted recently for the purpose of reforming the laws gov- erning the organization and conduct of corporations. As to Dela- ware it has been said that "the sale of corporation charters at bargain prices by a State was always questionable from an ethical point of view and has now become so from a financial stand- point." Delaware is a small State, composed of but three coun- ties, so that the importance of equalization of the tax burden under any system could not be as serious as it is in larger States. "Mulford V. Curry, 125 Pac. Rep., 236. 6 Laws of New Jersey, 1913, chaps. 13-19. These acts, popularly known as the "Seven sisters, " are intended to prohibit monopoly, to provide checks upon fictitious increases of capital and upon the issuing of corporate securities not based upon bona fide valuations, to prevent unfair methods of competition, and to limit in several ways the broad powers formerly granted to New Jersey corporations. INTRODUCTION. 7 Pennsylvania's method of taxing mortgages, notes, stocks, and bonds comes very near the general-property tax system. The special tax rate is all that can be said to differentiate it. The tax is assessed and collected locally, sent to the State, and then dis- tributed on the basis of one-fourth to the State and three-fourths to the locality. Pennsylvania, therefore, has, as part of its per- manent system, the taxation of the same subjects within certain limits for both state and local purposes, while, exclusive of school taxes, Vermont, Connecticut, and New York resort to the general- property tax for state revenue when emergencies seem to demand it, an action which New Jersey and Delaware, for the reasons above given, have not found necessary in many years. New Jersey, where a system of practically complete separation of sources of state from local revenue has existed for years, suffers at present, as it has in the past, from an unequal distribution of tax burden and the report of the recent special commission recom- mends as the chief remedy for this defect a strong centralized administration of tax laws. Aids to Assessors in Arriving at Proper Valuations. Nothing new in the nature of methods intended to aid the assessor to secure results approaching standard valuations and assessments has been noted in 191 2. For the purpose of securing accurate information as to the value of real estate and thus perfecting the "Wisconsin sales method," now in use in a number of States, legislation in various forms requiring the true consideration to be expressed in deeds has been recommended in the following 10 States: New York, Virginia, North Carolina, Michigan, Wisconsin, Colorado, Utah, North Dakota, Washington, and Arizona. Similar legislation for the District of Columbia has been recommended by an investigating committee of the House of Representatives. In New Hampshire, Florida, and some other States the pub- licity method has been officially advocated, namely, the requiring of every city and town to publish annually, for distribution among the taxpayers, inventories showing the value of real and personal property assessed to each individual. There also has been an increase in the number of States where meetings of local assessors are held under the direction of some state central authority for the purpose of discussing methods of assessing property with a view to arriving at more just and equitable valua- tions. 8 SPECIAL^ REPORT ON TAXATION. Corporate Taxation. Except in New Hampshire, Rhode Island, and Arizona changes in the laws affecting the methods of taxing corporations are, in the main, unimportant. There have been, however, some increases in rates levied under special taxes which directly affect corporations, and some increases in the number of property exemptions which indirectly affect them. New York has extended its method of commuting taxes on cor- porate and certain other classes of securities. Michigan has adopted the New York recording tax method. Maine has exempted mort- gages from taxation, and New Hampshire has exempted loans on real estate when bearing interest at 5 per cent or less. Income Taxation. Income taxation received a great deal of attention during 1912 from tax commissions and state officials generally. The present system of income taxation in force in a number of States is made the subject of complaint in annual reports. Thus, in Vir- ginia, where returns made by taxpayers are being investigated by the grand jury, it is said that, owing to poor administration due to the absence of centralization of assessments, the tax is not a success. In Oklahoma, due to weakness in administrative features of the law, it has produced little revenue. In South Carolina, also, the lack of general enforcement is considered unjust to those who actually pay the tax. In Wisconsin alone is the operation of this tax found satisfactory, but many States are awaiting further results in that State before adopting a similar income-tax system. Inheritance Taxation. A consoicuous feature of inheritance taxation is found in Mas- sachusetts, which consists in taxing the transfer of estates of non- resident decedents in respect to realty only, leaving the transfer of personal property to be taxed at the domicile of the owner. This is a further development of the New York system, which taxes the transfers of estates of nonresident decedents with respect to real property and chattels within the State. A movement in Wisconsin, which has proceeded to the stage of introducing a measure in the 191 3 session of the legislature look- ing toward a complete situs basis for inheritance taxation, has for its final object the taxing of the value of stocks and bonds on a proportional basis when the last residence of the decedent was INTRODUCTION. 9 outside of Wisconsin and the property represented by the secur- ities is located wholly or partly within the State. The present method of taxing inheritances in Wisconsin, as in all other States except New York and Massachusetts, namely, subjecting the same property to taxation twice or perhaps three times in as many States, is unjust, and there is probably no greater need among the States for uniformity of tax laws than in the taxation of inheritances. Forest Taxation. Forest taxation has also been the subject of much legislation. Massachusetts, the only State of the New England group which succeeded in amending its constitution, provided thereby for the taxation and conservation of its forests. Connecticut appointed a commission to investigate this subject, and certain exemptions with respect to planted forests were made by constitutional amend- ment in Ohio, and by legislative enactment in Maine, New Hamp- shire, and Connecticut. New York passed three forest taxation laws, two of which related to forest lands and one to wood lots. "Home Rule" in Taxation. During 191 2, unlimited "home rule," or authority to pass laws without regard to the restrictions imposed by the general laws of the State, was by constitutional amendment granted to cities of over 2,000 inhabitants in Colorado, and in a limited form to cities of over 5,000 inhabitants in Texas. Home rule in taxation, apply- ing to counties, cities, and minor subdivisions of the State, was defeated in California and repealed in Oregon. Oregon's experience is interesting, since this is the only State which has ever authorized universal and unlimited home rule in taxation. The only legislation attempted under this system con- sisted of three "single-tax" measures, proposed by initiative peti- tions in different counties, and all were defeated at the same election which repealed that section of the constitution providing home-rule authority. Constitutional amendments, providing for single-tax systems applying throughout the vState, were defeated in Oregon and Missouri. Evasion. A number of 191 2 reports call attention to various means employed to evade taxation. Thus, in T^xas a tax of 50 per cent lO SPECIAIv REPORT ON TAXATION. on the amount of gross receipts from sales of firearms was evaded by leasing them for 99 years at an amount equal to retail prices. In Minnesota, personalty was in some instances divided among several members of the same family when the ownership was m one member. In Massachusetts, ownership of their own shares was at times acquired by corporations for the purpose of escaping taxation under a law permitting domestic business corporations to deduct from the value of corporate franchises certain kinds of securities owned by them. In Oregon, South Dakota, Utah, Wis- consin, and some other States legislation was recommended con- taining more definite provisions for taxing, as inheritances, transfers of property made in contemplation of death. In Ver- mont, where the law permits the deduction of debts from credits, but does not provide for the corroboration of statements either as to amount or validity of debts, a declaration in the tax inventory that a certain amount is owing to nonresident creditors is a com- mon method of evading the tax on personalty. In this State, also, the chief objection to taxation based on gross earnings is the possibility of manipulation by which holding companies not sub- ject to taxation in Vermont assign to railroad lines operating in that State a smaller share of traffic revenue than the State is entitled to tax. CHAPTER II. LEGISLATION. A. CHANGES EFFECTED IN THE TAXATION OF CORPORA- TIONS SINCE THE PUBLICATION OF PART I OF THE REPORT OF THE BUREAU ON THE TAXATION OF COR- PORATIONS. MAINE. Summary. Since the publication of Part I of the Bureau's report (April 15, 1909), Maine has made practically no changes in its system of taxing corporations. It has, however, considerably improved its general-property tax system by ftirther centralizing the admin- istration thereof. As a result of this further centralization the total value of property in cities, towns, and plantations returned for taxation during the first year of its operation (19 10) increased more than $20,000,000. The gain, approximately $17,000,000 from real estate and $3,000,000 from personalty, is probably greatly in excess of the normal increase in property values, and it represents the greatest annual increase recorded in the State. These valuations were again increased in 1911 by more than $10,000,000. As a part of the general legislative plan to equalize the tax burden, rates applicable to the gross receipts of railroads, telegraph, telephone, express, palace car, sleeping car, and insur- ance companies, and building and loan associations, were increased. Taxes from these corporations assessed by the Board of State As- sessors for 1911 exceeded those for 19 10 by over $157,000. The increase for 191 1 was due largely to the additional increase in the tax rate applicable to the gross receipts of railroads. The only other change of importance was the exemption from taxation of mortgages on Maine real estate. Details with respect to the legislation passed during the regular sessions of 1909 and 191 1 are classified under the following sub- heads. No legislation affecting taxation was passed during the special session of 19 12. 5744°— 14 4 II 12 SPECIAL REPORT ON TAXATION. Administration. Ivaws respecting the Board of State Assessors were amended in 1909° so that the members of said board are now appointed by the governor instead of being chosen by the legislature. (See Part I of the Report on Taxation of Corporations, p. 30.) The same act also extended the powers of the board over local taxing authori- ties so as to provide better administrative methods for assessing property. It further provided that the board shall be composed of persons skilled in matters pertaining to taxation and that the members shall devote their whole time to the duties of their office. Among the duties assigned to the board by this act are: To see that property is assessed at "just value;" to enforce all laws relating to assessment and taxation; to reassess any and all property when necessary; and to publish statistics and informa- tion concerning taxation and revenue, and to require local assessors to furnish any information necessary for this and other purposes. These laws were further amended in 1911 * with respect to reports made to the Board of State Assessors by local assessors, and, further,'^ to provide that the term "real estate " as used in the act shall include water power, water rights, forests, and mineral products on such land. They were also amended ^ with respect to the assessment of property not listed by the owner. Railroads. The "annual excise tax" on railroads (see Part I of the Report on the Taxation of Corporations, p. 36) was amended in 1909^ and again in 191 1 .' The rate now as formerly is one-half of i per cent on the average gross receipts within the State when they do not exceed $1 ,500 per mile. The graduations applying to such receipts in excess of $1 ,500 per mile were, however, changed. Formerly the entire gross receipts were taxed at the rate of one-fourth of i per cent additional for each increase of $500, and the graduation con- tinued until 4X per cent, the maximum rate, was reached. Now they are taxed at the rate of one-fourth of i per cent additional for each increase of $400 until the maximum rate of 5^ per cent is reached.* " Laws, igog, chap. 220, amending part of chap. 8, Rev. Stats. 6 Laws, 1911, chap. 174, amending chap. 8, Rev. Stats. Ibid., amending Rev. Stats., chap. 9, sec. 3. ^ Ibid., amending Rev. Stats., chap, g, sees. 73 and 74. « Laws, 1909, chap. 81. / Laws, 1911, chap. 168. t Laws, 191 1, chap. 168. LEGISI/ATION. 13 A further change was made by providing that the rate should not exceed 3 per cent on raihoads operated exclusively for freight traffic." During the 1909 session railroads were permanently relieved from paying the expense of the Board of Railroad Commissioners.* Street Car Companies. In 1909 the law relating to street car companies (see Part I of the Report on Taxation of Corporations, p. 37) was amended by raising the rate of the "annual excise tax" from three-twentieths of I per cent to one-fourth of i per cent when the average gross receipts per mile do not exceed $1,000; and from three-twentieths of I per cent to one-fourth of i per cent, increase in rate, for each $1,000 additional gross receipts per mile, or fraction thereof; and by providing a maximum rate of 4 per cent--^ Telegraph and Telephone Companies. The "annual excise tax," as applied to telegraph and telephone companies, formerly provided a rate of i per cent on gross receipts from business wholly within the State when such receipts exceeded $1,000 and did not exceed $5,000. The tax rate was then grad- uated until 4 per cent, the maximum rate, was reached. By acts of 1909 and 191 1 the law was changed so that the rates on gross receipts are now as follows : When in excess of $1 ,000 and not more than $5,000 the rate is i>^ per cent; when over $5,000 and not more than $10,000 the rate is iK per cent; when over $10,000 and not more than $20,000 the rate is i %' per cent ; and the rate increases one-fourth of i per cent for each additional $20,000 or fractional part thereof, but can not exceed 6 per cent.'^ Prior to 1909 the law based the tax on gross receipts from business wholly within the State. The law now confines the basis to receipts "within this State on account of telegraph and tele- phone business.""^ It also repeals the provision allowing the deduction of the general-property tax on lands and buildings from the amount of the "annual excise tax."" <• Laws, 1909, chap. 8i. 6 Ibid., chap. 104, repealing sec. 30, chap. 8, Rev. Stats. « Laws, 1909, chap. 82, amending sec. 31, chap. 8, Rev. Stats. <* Rev. Stats., chap. 8, sees. 35-41, as amended by Laws, 1911, chap. 142, and Laws 1909, chap. 210. * Ibid., chap. 8, sees. 35-41, as amended by Laws, 1911, chap. 142, amending Laws 1909, chap. 210. 14 SPECIAL REPORT ON TAXATION. The legislature of 1911 imposed an additional tax of 2^ per cent on the value of telegraph lines in lieu of the general-property tax.» This law, however, is not enforced and telegraph companies are still taxed in practice as formerly with the exception of the changes above indicated. Express Companies. In 1909 the laws relating to express companies (see Part I of the Report on Taxation of Corporations, p. 39) were amended by increasing the rate of the "annual excise tax" from 2>^ to 3 per cent of the gross receipts, and by repealing the provision which allowed the amount paid under the general-property tax on real estate to be deducted from the amount paid under the "annual excise tax."* In 1 911 the rate was further increased to 4 per cent.'' Palace and Sleeping Car Companies. The rate of the "annual excise tax" on palace and sleeping car companies (see Part I of the Report on Taxation of Corporations, p. 38) was increased in 1909 from 4>^ to 6 per cent of the gross receipts."* Foreign Insurance Companies. In 1 909 the law was amended so as to exempt foreign insurance companies from the tax of i yi per cent on gross premiums received from the insurance of farm property.' The Laws of 191 1' provide that individuals, corporations, or firms representing foreign insurance companies shall pay a tax of 5 per cent on gross premiums. This provision does not apply to fraternal companies, nor does it apply in cases where it is im- possible to obtain insurance with domestic companies. Building and Loan Associations. Building and .loan associations are now required to make their reports to the State Board of Assessors instead of to the state treasurer. The tax is as formerly, one-fourth of i per cent per o Laws, 1911, chap. 105. (Note: This law was repealed in 1913.) 6 I 1905, chap. 124. « Laws, 1911, chap. 163. / Laws, 1909, chap. 14, amending Rev. Stats., chap. 9, sec. 27. 1 6 SPECIAL REPORT ON TAXATION. In 1909 planted forests, upon which 640 trees per acre (instead of 2,000 trees as formerly) are planted, were exempted from taxa- tion for 20 years." State and municipal bonds were specifically exempted the same year.* In 1 911 mortgages on Maine real estate were also specifically exempted from taxation."^ The Revised Statutes were slightly amended with respect to the taxation of personal property employed in trade, shipbuilding, and the mechanic arts, so that portable mills, and logs and lumber at such mills, are taxable where the property is situated."* The amended law specifically states that yachts and pleasure vessels owned by nonresidents or persons unknown shall be taxed either to the owner, if known, or to the persons having possession.' Decisions by county commissioners in abatement cases can now be appealed to the supreme judicial court.' A number of minor changes were made with respect to the assessment and collection of taxes on lands in places not in- corporated; " the collection of taxes in imorganized townships;* the assessment and collection of taxes on timber and grass on reserved lands ; ' the assessment of taxes in organized plantations, including the Maine forestry district; i and the assessment of taxes in cities for the pmpose of sprinkling streets.* NEW HAMPSHIRE. Summary. Two important changes have been accomplished with respect to the system of taxation in use in New Hampshire since the pub- " Laws, 1909, chap. 136, amending specification 10 of sec. 6, chap, g, Rev. Stats., as amended by Laws, 1907, chap. 169. I" Ibid., chap. 49, amending sees. 54, (>S, chap. 8, Rev. Stats. Laws, 1911, chap. 179, amending sec. 6, chap. 9, Rev. Stats. d Laws, 1909, chap. 4, amending specification i, sec. 13, chap. 9, Rev. Stats., and Laws, 1911, chap. 140. In a suit by the town of Boothbay to enforce the collection of taxes on personalty consisting of 550,000 feet of logs and 550,000 feet of sawed timber, held, that logs and lumber used at the mill for the manufacture of boxes for the manu- facturer's use in shipping explosives are taxable as personalty "employed in the mechanic arts" within Rev. Stats., chap. 9, sec. 13, par. 1, in the town where the mill is located. Inhabitants of Boothbay v. E. I. du Pont de Nemours Powder Co., supreme court of Maine, 83 Atl. Rep., 663 (June, 1912). < Laws, 1909, chap. 80, amending sec. 13, chap. 9, Rev. Stats. / Ibid., chap. 211, amending sec. 78, chap. 9, Rev. Stats. S Ibid., chaps. 226, 235. * Ibid., chap. 218. < Laws, 1911, chap. 139, amending sees. 49, 51. chap. 9, Rev. Stats, / Ibid., chap. 33. * Laws, 1909, chap. 47. LEGISLATION. 1 7 lication of Part I : First, by creating a permanent tax commission with broad supervisory and directive authority over assessment and assessing officers and with effective powers to enforce the tax laws; second, by exempting loans on New Hampshire real estate when bearing interest at 5 per cent or less. Several amendments to the constitution were submitted but none of them was ratified at the polls. In general, they provided for the taxation of growing timber, money at interest, incomes from stock of foreign corporations, inheritances, and income of corpora- tions and voluntary associations doing a public-service business. Administration. The 1 911 legislature abolished the board of equalization and created a permanent state tax commission. The duties of the board of equalization were to assess the property of railroad, telegraph, telephone, express, and sleeping-car companies, and to make an examination every four years of all property in the State for the purpose of sectiring a just apportionment of state and coimty taxes. This board was merely an advisory body in all matters relating to local assessments, with no power or authority to really equalize the burden of taxation." The duties of the board of equahzation were transferred to, and additional duties were imposed upon, the State Tax Commission. This commission consists of three members appointed by the supreme court and commissioned by the governor. One member devotes his time wholly to the duties of his office. The other two members devote as much of their time as important tax matters demand. The powers and duties of the State Tax Commission may be summarized as follows: 1. To assess the taxes upon railroad, railway, telegraph, tele- phone, express, and car companies. 2. To supervise the administration of taxation and assessment laws and to supervise and direct aU assessing officers in the per- formance of their duties, to the end that all assessments of prop- erty may be made in compliance with the laws of the State.* o Report of State Tax Commission, 1911, pp. 25-27. 6 Laws, 1911, chap. 169 (repealing Pub. Stats., chap. 15, sees. 8, 9; chap. 37. sees. 3, 4; chap. 63; chap. 64, sees, i, 3-12, inclusive); and Laws, 1907, chaps. 81, 91. 1 8 SPECIAI, REPORT ON TAXATION. Railroad, Telegraph, Telephone, Express, and Sleeping-Car Com- panies. Minor changes have been made in the method of determining the average rate applicable to railroad," telegraph, telephone, express, and sleeping car companies and in the method of apportioning railroad taxes. Average Rate. — Previous to the amendment of 1909 the property of railroad, telegraph, telephone, express, and sleeping- car companies (Part I, pp. 54-58) was taxed at "the average rate of taxation * * * upon other property throughout the State." * By the amendment of 1909'= the property of these companies is to be taxed at "the average rate of taxation * * * upon other property throughout the State, excepting property specially taxed, savings-bank deposits, and polls." The above-quoted amendment was occasioned by the fact that the State Board of Equalization determined the rate by " adding to taxes locally assessed the taxes assessed on savings-bank deposits, building and loan associations, and domestic insurance companies, and dividing this sum by the assessed value of general property in the State, plus savings-bank deposits taxable, and the capital of building and loan associations, and domestic insurance com- panies. The rate thus determined each year is from 20 to 25 cents less than the rate levied on general property." "* " The Boston & Maine R. R. brought suit against the city of Franklin for abatement of taxes assessed on a power plant in that city leased from the Concord & Montreal R. R. Pub. Stats., 1901, chap. 55, sec. 6, provides that real estate of a railroad not used in its ordinary business shall be taxed in the town where situated. Chap . 64, sec. i , provides for the taxation by the State of the road, rolling stock, and equipment of rail- road corporations. Held, that a power plant of a railroad company used to generate power for the operation of the railroad is not a part of its " road" and is not used in the ordinary business of the railroad, and hence is taxable in the town where situated, especially as chap. 55, sec. 6, when originally enacted as Laws, 1844, chap. 141, sec. i, only provided for the exemption from local taxation of the real estate of railroads on which a part of the capital stock had been expended, so as to entitle the town where it was situated to a portion of the state tax, as provided in Rev. Stats., 1843, chap. 39, sees. 4, 5. Laws, 1903, chap. 195, authorizing the Concord & Montreal R. R. to own and operate power plants, to purchase such plants, or to become a stockholder therein, does not relieve such power plants from local taxation. Boston & Maine R. R. i). City of Franklin, supreme court of New Hampshire, 84 Atl. Rep., 44 (June 28, 1912). 6 Pub. Stats., chap. 64, sees, i, 3; Laws, 1907, chap. 81, sec. 6; and Laws, 1907, chap. 91, sec. i. c Laws, 1909, chaps. 46, 66. ^ Report of New Hampshire Special Tax Commission, 1908, p. 7. LEGISLATION. 19 In Wyatt 7;. Board of Equalization, " this method was held in compliance with statute, and the amendment here referred to was recommended by the special tax commission in 1908. * Apportionment of Railroad Taxes. — Taxes received from railroads are distributed as follows: 1. One-fourth to the towns in which the railroad is located, to be prorated upon the basis of the amount expended by the railroad in each town for buildings and right of way, as shown by a return from the railroad to the state treasurer. (See Part I, p. 56.) 2. Of the remainder (three-fourths), each town receives a part proportioned to the number of shares held by its residents. In 1 909 " an amendment provided that no apportionment shall be made to a town on acccount of shares held therein by banks, trustees, treasurers of societies or corporations. Mercantile, Manufacturing,"* and Mining Companies. An act of 1909 provides that where towns vote to exempt a manufacturing concern from taxation for a term not exceeding 10 years, the assessors shall annually appraise such property and, in determining the total valuation for state and county purposes, shall include its valuation in the total valuation of all other prop- erty in the town assessed for state and county taxes. ' The law taxing real estate independently of any mines, or ores contained therein until such mines, or ores, shall become a source of profit, was amended by taxing such mines, or ores, or rights therein, to the owner thereof as realty, when owned by some person other than the one to whom the stnrface land is taxed, f General-Property Tax. » The following changes may be noted with respect to the general- property tax. a 74 N. H., 552 (1908). 6 Report of New Hampshire Special Tax Commission, 1908, p. 7. c Laws, 1909, chap. 55. <2 A foreign corporation engaged in the manufacture of wood pulp and paper in Vermont owning land in New Hampshire, which has a yard for storing logs, lumber, coal, and wood used in its manufacturing business, is taxable on logs stored in New Hampshire, as stock in trade under clause 6, sec. 7, chap. 55, Pub. Stats. International Paper Co. v. Walpole, 75 N. H., 320 (1909). < Laws, 1909, chap. 166. / Laws, 1911, chap. 74, amending sec. 4, chap. 55, Pub. Stats., 1901. a Under the constitutional requirements for equality of taxation as strengthened by long unbroken policy, a tax on credits can not be imposed upon their value at a lower rate than upon property in general. The same property may not be subject to a double tax, payable directly or indirectly by the same person. In re Opinion of Justices, 79 Atl. Rep., 31 (1911). 20 SPECIAIy REPORT ON TAXATION. Situs. — Boats and launches in excess of the aggregate value of $ioo, when owned by a resident of the State, were formerly taxable where the owner resided. Such property, like similar property of nonresidents, is now taxable where located on the first day of April. " Property Held for Water-Supply Purposes. — If yielding no rent, property held by a city, town, or precinct, in any other city or town, for the purpose of a water supply, shall be liable to taxation therein, only upon the average valuation of the land, without improvements, for three years last preceding the acquisi- tion thereof, the value for each year being reduced by the abate- ments thereon. * Exemptions. — The following subjects were exempted from taxa- tion by the 191 1 legislature: Certain highway bonds when held by residents of the State. " Bonds issued to provide additional accommodations for the New Hampshire State Hospital, and bonds issued in favor of the indus- trial school, when such bonds are owned by residents or savings banks of the State.'' Loans on New Hampshire real estate, when bearing interest at 5 per cent or less. « Certain land held in trust by the Society for the Protection of New Hampshire Forests, f Certain charitable institutions, such as the Army and Navy Asso- ciation, hospitals, etc. " VERMGNT.ft Summary. The method of taxing corporations in Vermont was not changed to any material extent since the date of the publication of Part I, Taxation of Corporations. The Vermont system, a striking example of separation of sources of state and local revenue, has worked satisfactorily, according to the commissioner of taxes. The aggregate amount of taxes collected from corporations has o Laws, 1911, chap. 49. 6 Ibid., chap. 40. c Ibid., chap. 182. d Ibid., chaps. i8g, 191. ^ Ibid., chap. 83. /Laws, 1911, chap. 178. 9 Ibid., chaps. 268, 295, 306, 309, 317, 328, 340. * This statement covers the acts of the 1910-11 legislature only. I^GISLATION. 21 been constantly increasing, and thus far it has been sufficient to meet the increasing expenditures for state purposes. This success, it is argued, may lead to increased state expendi- tures of a nature which tmder a state general-property tax would be checked when brought in the form of increased taxes directly before the voters of each locality. On the other hand, the system is credited with an improvement in economic conditions, which, under a state general-property tax, would have been materially retarded. This progress has probably been made without overtaxation, as some doubt is expressed by the commissioner of taxes as to whether certain corporations electing to pay the gross-receipts tax are at present bearing their full share of the tax burden. Although railroads practically without exception pay the gross- earnings tax, nevertheless the valuation of railroad property is necessary in order that these companies may intelligently exercise their option with respect to paying either the property tax or the gross-earnings tax. While the method of railroad property valua- tion in use in Vermont involves the consideration of many con- ditions, "ability to producfe," as reflected in the market price of stocks and bonds, is the chief but not always the governing factor. Thus, if a railroad were to produce no profit, the value of its property would, nevertheless, be taxable; while if the same road yielded a profit, its stocks and bonds would be the chief criterion. And again, if the stock was guaranteed to pay dividends, no con- sideration would be given to its value, for the reason that it would be influenced too much by the guarantee and too little by the actual value of the property. The increase in revenue was not caused by an increase in tax rates. It is due partly to the natural increase in business of cor- porations and partly to a change in the method of taxing savings banks and trust companies. Under the former law, deposits were taxed to the depositors; under the present law, they are taxed to the savings banks and trust companies. Relieving the depositor from this taxation, it is stated, has had the effect of retaining money in the State and of attracting funds to Vermont, where it is usual to pay 4 per cent on such deposits. " A desire to change the present method of taxing intangible per- sonalty is plainly indicated by the introduction of a bill which = During the first year of the operation of this law savings banks and trust companies ' deposits increased approximately $7,000,000. Report of the Commissioner of Taxes, 1912, p. 31. 22 SPECIAL REPORT ON TAXATION. passed both houses at the last legislative session but was vetoed by the governor. It provided for the taxation of intangible property exclusive of stocks at 7 mills on each dollar, a rate equal to a little more than one-third of the average rate on general property throughout the State. Such changes as were made in the laws relating to taxation of corporations indicate mainly a tendency toward further central- ization of administration of assessment laws and a closer super- vision over returns with respect to corporate stockholdings, etc. Administration. The title of commissioner of state taxes was changed to that of commissioner of taxes, by act 38, Laws, 1910. Additional powers were conferred upon the commissioner, of which the following were the most important : 1 . To call meetings of the town listers for the purpose of giving instructions with respect to a legal tax inventory, a valid grand list, the law governing their official duties, and the appraisal and listing of the various classes of property. 2. To collect data and information with respect to the methods of taxation and exemptions therefrom, and the work of the listers in the various towns. 3. To formulate blank inventories for the town clerks and super- visors of tmorganized towns and gores, containing suitable inter- rogatories requiring taxpayers to furnish a brief statement of all their taxable property, real and personal, and such other informa- tion as will enable the listers or supervisors to appraise the property and to make an abstract of the individual lists and the grand list in the manner prescribed by law. 4. To prepare and furnish to the town clerks blank books for the grand list and quadrennial appraisal, and to distribute among the taxpayers copies of the statutes relating to the same ; to pre- pare annually a list for state taxes from the abstracts on file in his office, and to furnish a certified copy thereof to the secretary of state and state treasurer; to, prepare annually a list for coimty taxes from the abstracts of the several towns, unorganized towns and gores in each county, and to transmit a certified copy thereof to the county treasurer ; to report biennially to the general assembly the rate per dollar, and the amount of all taxes assessed in each and all the towns, gores, school and fire districts, and villages for and LEGISIvATlON. 23 during the two years ending with the thirtieth day of June pre- ceding." Special provision is made in another law enacted in 19 10 * for an appeal by taxpayers to the Commissioner of Taxes from decisions of town listers and boards of civil authority with respect to the grand list or quadrennial appraisal. He is authorized, on approval of the governor, to appoint three appraisers in each county, residents and taxpayers therein, to whom such appeals, if not previously dis- missed by the commissioner, are referred for consideration, hear- ing, and decision. The commissioner is required to certify to each town lister and town clerk the names of all persons residing in their respective towns who are shareholders in domestic and foreign corporations, the names of such corporations, the number of shares standing in the name of each of their shareholders, and other information concerning the corporations located in the town, such as the par value of shares and the names of nonresident shareholders. ■= The title of commissioner and collector of taxes in unorganized towns and gores is changed to supervisor and collector of taxes, with duties the same as those of town listers.'^ Stockholders and Bondholders. All domestic and foreign corporations doing business in Vermont are required to file with the Commissioner of Taxes a sworn state- ment showing the name and residence in the State of each share- holder and the par value of the shares of stock on April i of the same year the report is made. Formerly railroads were excepted from this requirement. The same law provides for the certification by the commissioner to each lister and town clerk, of the names of all persons residing in their respective towns who are shareholders in such corporations, the name of each corporation whose shares are thus held, the number of shares standing in the name of each shareholder, the par value of such shares, the names of domestic corporations whose place of business is located in their respective towns, and the names of nonresident stockholders of such corporations.^ Stock held as collateral security, which has been transferred upon the books of the corporation, is returned to the commissioner of taxes, as provided above for the return of other stock.' ^ Laws, 1910, act 38. <* Ibid., act 38. » Ibid., act 40. « Ibid., act 37, sec. 517. c Ibid., act 37. /Ibid., act 37, sec. 518. 24 SPECIAL REPORT ON TAXATION. Manufacturing and Mercantile Corporations. Manufacturing and mercantile corporations now, as formerly, are subject to the "annual license tax" for state purposes, and their real and personal property is taxed in the town where situated. (Report on the Taxation of Corporations, Part I, p. 73.) Two cases (one in 19 10 and one in 191 1) were decided with refer- ence to the local exemption of manufacturing companies." Electric Railways. No legislative changes have been made with respect to the taxa- tion of electric railways since the publication of Part I. There has been a decision, however, regarding the taxation of their power plants.' MASSACHUSETTS. Summary. While the changes made in the system of taxing corporations in Massachusetts since the publication of Part I, Report on the Tax- ation of Corporations, are of minor importance, the amendrhent to the legacy and succession tax dealing with the estates of nonresident decedents is of general interest, and other acts were of importance " A corporation accepting the offer of a town to exempt all mantif acturing establish- ments investing a capital of over $5,000 which may be established and put in operation during the next 12 months following the enactment of such a law, does not forfeit its right to such exemption by ceasing to do business and leasing its real estate to another corporation after four years' operation of its plant, having established a manufacturing plant consisting of land, buildings, shafting, machinery, and power at a cost of $50,000 in the town. Caverly-Gould Co. v. Village of Springfield, 76 Atl. Rep., 39 (1910). Under a state statute authorizing towns to exempt manufacturing plants for not exceeding 10 years from the commencement of business, an offer of a town to exempt such a plant for a number of years is held to be for such a number of years from the commencement of business. A town may not withdraw an accepted offer to exempt a manufacturing plant for five years after three years' operation of the same. Bixby, Collector v. Roscoe et al., 81 Atl. Rep., 255 (1911). i> Property leased by an electric railroad company for 99 years and used exclusively in its business and in the operation of its road is not subject to general taxation, though the company may under lease use the property for other than railroad piurposes, and though it does not show that it does not intend to put the property to other uses in the future. Where property leased to an electric railroad for 99 years is used exclu- sively in the operation of its road, partly within and partly without the State, its taxation value is distributed in accordance with statutory rule, and the fact that the property is used partly within and partly without the State does not make it subject to general taxation. Frazier v. W. H. H. Slack and brother, 81 Atl. Rep., 161 (1911). LEGISLATION. 25 in the administration of tax laws in the State. The inheritance- tax amendment probably makes the law the first in which is recognized to the full the principle of taxing estates only with reference to such property as passes in accordance with the law of the taxing authority. The only property of a nonresident decedent which devolves in accordance with the law of Massa- chusetts is the real estate situated in Massachusetts. Under the amendment of 191 2, in the case of the estate of a nonresident decedent, taxation is provided only with respect to such real estate as is situated in the State, and not with respect to per- sonal property of any description, since such property usually devolves in accordance with the law of the State of domicile of the decedent. Legislation affecting the taxation of forest lands was provided for in an amendment to the constitution adopted by the Com- monwealth at the November, 191 2, election. Constitution. The amendment to the constitution, just mentioned, adopted at the November, 19 12, election, relating to forest lands is as follows: "Full power and authority are hereby given and granted to the General Court to prescribe for wild or forest lands such methods of taxation as will develop and conserve the forest resources of the Commonwealth. ' ' » = In answer to certain questions submitted by the house of representatives the attorney general, in an opinion dated May i, 1912, held that a proposed constitutional amendment, giving to the general court full power and authority "to prescribe for wild or forest lands such methods of taxation as will develop and conserve the forest resovu'ces of the Commonwealth, " if adopted (adopted November, 1912), would permit the enactment by the legislature of taxation laws with reference to woodlands and wood lots without regard to their size so long as said wood lots or woodlands were in a state of nature and tmcultivated except for the purpose of producing wood and timber. The term "wild or forest lands" does not include a tract of woodland located within fenced premises of which the principal use is for pasturage. The technical significa- tion of the term "wild or forest lands" has never been established or defined by the courts of this Commonwealth. The term "standing wood and timber," has not received, either in the statutes of this Commonwealth or in the decisions of the court, a fixed or technical definition or even one of general application. The proposed amendment to the constitution, which would confer upon the general court full power and authority to prescribe for wild or forest lands "such methods of taxation as will develop and conserve the forest resources of the Commonwealth, ' ' would authorize the enactment of laws to provide that wild or forest lands should be taxed without refer- ence to the element of value contributed by the growth thereon, and that the tax upon the value of such growth might be reduced or altogether omitted in the determi- nation of the tax to be assessed upon said lands. Report, Attorney General, 1912, pp. 62-67. 26 SPECIAL REPORT ON TAXATION. Administration. The power of the tax commissioner was increased in 1911, and he is now authorized to use any information in his possession to determine the amount to be contributed by cities and towns to county levies and state taxes. Formerly he was compelled to accept assessments as reported to him by boards of assessors, notwithstanding that he might have had knowledge of underval- uation, or excessive valuation, or other facts tending to cause cities and towns to bear unequally the biu-den of county and state taxes." Another act empowers the tax commissioner to secure infor- mation as to unpaid taxes in cities and towns, and to recover city or town taxes unaccounted for at the end of three years.' Under this provision the tax commissioner must check up the accounts of every municipal collector of taxes, must sectu'e from him a statement in full at a date not later than three years from the time taxes were committed to such collector for collection, and must, in the case of arrears, proceed by suit against the col- lector and his bondsmen for the recovery into the city or town treasury of unaccounted-for taxes. Thus, for the first time in the history of the Commonwealth, a state official is given power to enforce the collection of all assessed taxes and to compel their payment into the municipal treasiu-ies. Probably no other State has, as yet, made such provision. In Massachusetts there is a surprisingly small amount of arrearage on the part of collectors with respect to the taxes of 1909 and prior years. Thousands of dollars of back taxes have been turned into the municipal treasuries since the administration of the act began in the spring of i9i2.<^ General Corporation Tax. Amendments of minor interest were made to the general corpo- ration tax act (See Report on the Taxation of Corporations, Part I, p. 89) in 1909 and 191 1. Prior to the enactment of the 1909 amendment"* imderground conduits, wires and pipes laid in public streets by any corporation, except street railways, were assessed to the owners thereof in the cities and towns in which they were laid. This enactment changed the law so that the value of underground conduits, wires and pipes, laid by any corporation (except the two classes noted below) in " Acts, 1911, chap. 366, amending sec. loi, Pt. I, chap. 490, Acts, 1909. * Acts, 1912, chap. 272. c Statement of Charles A. Andrews, deputy tax commissioner. <* Acts, 1909, chap. 439. Connecticut Valley Street Ry. Co. v. City of Northampton, Sup. Court, Mass., 99 N. E. Rep., 516 (1912). LEGISLATION. 27 public streets, and poles, wires, conduits and pipes, together with the wires thereon or therein, laid in or erected upon private prop- erty or a railroad location by any corporation (except the two classes mentioned below) , are now taxed locally and their value is deducted from the value of the corporate franchises. As to street railways and railroads the situation is as follows: 1. Street Railways. — The conduits, poles, etc., of these com- panies, irrespective of their location, are, as formerly, taxed as part of the value of their corporate franchises. 2. Steam Railroads. — Steam railroads are not taxed locally on their underground conduits, wires, poles, etc., when laid in the "railroad location" of the owners. If, however, conduits, etc., owned by such a railroad, were laid in any place other than its own "railroad location," they would be taxed locally, and their value would be deducted from the value of its corporate franchises. In order to enable the tax commissioner to analyze the profit and loss accounts of corporations, all corporations are now required " to report to the tax commissioner the value of their merchandise and other assets, and their liabilities; and, in the case of a domestic corporation, the assets outside of the State. All corporations, except domestic business corporations, are required to include statements of their profit and loss for the preceding year. The right to inspect the returns of business corporations and returns relating to profit and loss of other corporations is restricted to the tax officials. An act was also passed >> providing that when certain real estate belonging to the Commonwealth is leased to corporations, its value shall be deducted from the value of their franchises. A former act "= provided that these lands should be taxed to the corporations leasing them as though held in fee by such corporations, but failed to authorize the deductions mentioned. The tax rate applicable to the value of railroads prior to 1909 was the average of all rates throughout the State for the current year. In that year the basis was changed so that the rate now equals the average of the annual rates for three years preceding the year in which the assessment is laid."* With respect to the rate of taxation, therefore, railroads are now on the same basis as all other corporations. tt Acts, 1911, chap. 379, amending Acts, 1909, chap. 490, Pt. Ill, sec. 40. 6 Laws, 1910, chap. 650. c Laws, 1909, chap. 490, Pt. I, sec. 12. ^ Ibid., chap. 513. 5744°— 14 S 28 SPECIAI, REPORT ON TAXATION. Business Corporations. Prior to 191 2 thexaethod of determining the corporate excess of domestic business corporations allowed, among deductions from the value of the corporate franchise, the deduction of value of securities which, if owned by a natural person resident in the State, would be exempt. Shares in corporations paying the corporate excess tax are so exempt from taxation to such holders. There- fore, when a corporation owned or acquired enough of its own shares to amount, together with other allowable deductions, to as much as the value of the corporate franchise from which such total deductions were to be made, there was no remaining value to tax. Many corporations were availing themselves of this situation to avoid being taxed. This was corrected in 19 12 by prohibiting any deduction of the value of shares of stock of the corporation itself when owned directly or indirectly by the corporation or for its benefit." The distribution of this tax on " corporate excess," is made with reference to the ownership of stock. All of the tax proportional to the shares of stock owned by nonresidents is retained by the State. Prior to 19 10, with respect to domestic business corporations, the rest of this tax was distributed one-half to the cities or towns where the tangible property of the corporation was located and the other half to the cities or towns where the stockholders lived. In accordance with chapter 456, Acts, 1910, it is now distributed to the cities or towns where the business of the corporation is carried on, and if a corporation has an office, or store, or factory in more than one place, the distribution is made in proportion to the value of the tangible property in each place on April i . If, however, a domestic business corporation does not conduct its business in Massachusetts and does not own any tangible property in the State other than furniture and equipment reasonably necessary for the use of the executive officers of the corporation, all of the tax is re- tained by the State. Street Railways. Amendments to the law relating to returns made by street rail- way companies '' require additional information to be reported to the tax commissioner with reference to stock holdings " and track mileage. ^ o Acts, 1912, chap. 491. c Laws, 1912, chap. 124. 6 Acts, igog, chap. 490, Ft. Ill, sec. 40. <2Ibid., chap. 457. IvBGISLATlON. 29 Stockholders and Bondholders. The law taxing to the holders thereof shares of foreign corpo- rations, other than shares of corporations paying the tax on cor- porate excess (see Report on the Taxation of Corporations, Part I, p. 88) has been judicially confirmed." Legacy and Succession Tax. One of the most interesting tax acts passed during 191 2 was an amendment to the legacy and succession tax. Prior to the pas- sage of this amendment Massachusetts taxed estates of nonresi- dent decedents with respect to real property, and with respect to personal property, including moneys, chattels, and bonds, physically in Massachusetts at the time of the nonresident's death, shares of Massachusetts corporations, and choses in action against residents of Massachusetts. Based upon the fundamental dis- tinction that personal property devolves in accordance with the laws of the domicile of the owner and real estate according to the laws of the jurisdiction in which it is situated, this amendment exempts the personal property and taxes only the real estate, or interest therein, belonging to estates of nonresident decedents.* In this Massachusetts has followed, and improved upon, New York's inheritance-tax law. New York now taxes the estate of a nonresident decedent with reference to real estate and chattels located within the State. Massachusetts has gone a step fur- ther and exempted chattels. The purpose of exempting the per- sonal property is to avoid the injustice of double taxation. Thus, if the State in which the personal property is located at the time of the nonresident's death taxes such property it is more than likely to be taxed again at the domicile of the decedent and in some cases it may be subject to taxation three or four times by as many States. The Massachusetts law is based on the theory that the tax is not upon the property but upon the privilege of giving away and of receiving property, by will, or of receiving it by laws of intestate succession." The tax, therefore, properly " The law taxing shares of stock of a corporation of another State held by residents of Massachusetts declared not to be in violation of the fotirteenth amendment of the Constitution of the United States. Hawley v. Maiden, 204 Mass., 138 (1910). S Laws, 1912, chap. 678, amending Laws, 1909, chap. 490, Pt. IV, as amended by Laws, 1909, chap. 268, sec. i, and chap. 527, sec. i. This amendment also increases the tax rate on legacies and successions. « Report of Tax Commissioner, 1911, p. 15 et seq. 30 SPECIAIv REPORT ON TAXATION. applies only to such property as passes according to the laws of Massachusetts. If the same principle were uniformly adhered to by all the States, much double taxation would be avoided. An act of 191 2 " further provides that the tax commissioner, at the request or consent of persons by whom the tax is payable, may alter a determination of value of the estate made by the tax commissioner under the provisions of section 19, Part IV, of chapter 490, Acts, 1909. Exemption of Savings-Bank Deposits Invested in Shares OE Domestic Trust Companies. — Chapter 189, Acts, 1912, provides that so much of savings-bank deposits as is invested in shares of stock of trust companies organized under the laws of Massachusetts, shall be exempt from taxation under the provision that savings banks shall pay on account of their de- posits an annual tax of one-half of i per cent of the amount of deposits, etc. Statistics. — The legislature of 191 2* provided that the tax commissioner should compile and report to the general court information furnished by assessors of cities and towns with respect to assessments made by them.'' RHODE ISLAND. Summary. The most important legislation passed by any New England State since the publication of Part I was the Rhode Island "Tax Act of 191 2." This act inaugm-ated many radical changes in a system which had been in force practically without change for many years. Its enforcement, affecting both state and local tax- "■ Acts, 1912, chap. 234. 6 Ibid., chap. 312. c " For very many years assessors had been required to report to the tax commis- sioner in the fall the facts of their assessment of property as of Apr. i of the then cur- rent year. These facts as thus reported by assessors in October were printed by the tax commissioner and submitted to the legislature, as the law required. There has been on the statute books for many years a law which gives to the assessors power in the month of December to assess as of Apr. i of that year any taxable property which through omission or otherwise the assessors had failed to enter upon their books pre- viously. There was no law requiring the assessors to make any report of these omitted assessments. Therefore, neither this department, nor the legislature, nor the pub- lic knew the amount of the omitted assessments which were made in the month of December and this chapter 312 of 1912 merely provides that the assessors shall in January report as to their December assessments (such assessments, you understand, being as of Apr. i of the then current year) in the same form as they are required to report the essential facts of the regular annual assessment made by them." State- ment of Charles A. Andrews, deputy tax commissioner. IvEGISLATION. 31 ation, and administration, was accomplished without undue trouble or annoyance to either taxpayers or assessing officers. The salient features of the new system of taxation may be sum- marized as follows : The creation of a permanent State Tax Commission; a reduc- tion of the state tax against cities and towns; the imposition of a low, fiat uniform rate of 40 cents on each $100 of valuation of intangible personal property; the application of the corporate excess method of taxation to manufacturing, mercantile and mis- cellaneous corporations, banks, trust companies, and banking associations (other than savings banks) in lieu of a tax upon the securities of such corporations in the hands of the holder; the application of the gross-earnings tax to public-service corpora- tions in lieu of a tax upon their securities in the hands of the holder; the relieving of savings and participation accounts from taxation in the hands of the holder; the taxation of tangible per- sonal property where found, with no offset for indebtedness; the offset of indebtedness against money on hand, at interest or on deposit, and debts due from others; the separate valuation of lands, buildings and improvements, tangible personalty and in- tangible personalty; uniform blanks for local assessment rolls; the reduction in the rate of taxation on mutual fire insurance companies; and the return by local assessors of all exempted property to the Board of Tax Commissioners. The powers granted the Board of Tax Commissioners appointed under this act are rather broad, except in one very important par- ticular, namely, the lack of supervision over local assessors. The state rate, which for many years had been 18 cents, was by this act lowered to 9 cents. The effect was to reduce the contri- bution from cities and towns from approximately $1,000,000 in 191 1 to about $500,000 in 191 2. The "Tax Act of 191 2 " put into effect a low uniform rate of 40 cents on each $100 of value of intangible personalty. The same rate is applicable to the corporate excess of mercantile, manufac- turing, and miscellaneous companies. The commission states that, while it is impossible to establish a reliable basis on which to estimate the actual amount received during the first year of the operation of the provisions establishing this rate, nevertheless, from a comparison with the total valuation of all classes of per- sonal property as assessed in 191 1, it is apparent that an enor- mous amount of intangible personalty was taxed in 191 2 which had previously escaped taxation. In addition to increasing the 32 SPECIAL REPORT ON TAXATION. revenue from this class of property, the low rate has resulted in the more equitable distribution of the tax imposed on intangibles without adding any new difficulties with respect to assessment methods. The corporate excess tax on mercantile, manufacturing, and miscellaneous companies has provided the largest single item of state revenue. According to the State Tax Commission, the corpo- rate excess tax has worked satisfactorily, not only with respect to the yield of revenue but in the matter of practicability of admin- istration and of distribution. However, the corporate excess of manufacturing companies, which have no plants in Rhode Island and which transact only a mercantile business in the State, are not generally reached in a satisfactory manner. To meet this situ- ation, the Tax Commission recommends that the act be amended so that a franchise tax, based upon gross receipts of foreign cor- porations transacting exclusively a mercantile business within the State, shall be imposed instead of a corporate excess tax as now required; and, further, that the corporations subject to the cor- porate excess tax be required to return the average amount and value (instead of the amount due on the last business day of De- cember) of indebtedness incurred and outstanding for the acqui- sition of real estate and tangible personal property. The gross-earnings taxes on public-service corporations imposed by the act are not franchise taxes but are in lieu of other taxes, to which the company or stockholders formerly were liable. From the standpoint of ease of administration and the production of rev- enue, the Board of Tax Commissioners finds that the gross-earnings tax on public-service corporations has met every expectation. The situs of tangible personal property has been uniformly made the same as that of real estate, namely, where located. The new act further provides that there shall be no deduction for indebtedness from the valuation of tangible personal property. The purpose of this law is to reach all tangible personalty without regard to residence or indebtedness of the owner. The result has been to remove some difficulties under which local assessors labored in certain cases where it was necessary to discover owner- ship and to uncover large amounts of tangible property heretofore tmtaxed. Goods on consignment, however, are in many instances not taxed, and the Board of Tax Commissioners suggests that the law be so aijiended that persons, having tangible personalty in their possession either as agent or consignee, should be Uable for the I.EGISI.ATION. 33 tax if the owner is unknown. It is further suggested that the tax be levied upon the average amount of tangible personalty instead of the amount on hand at a particular date. Certain exemptions with respect to live stock, tools, and machinery are also recommended. With respect to the offset of indebtedness against money on hand, at interest or on deposit, and debts due from others, the commission states that, while this provision can not properly be said to have met expectations in every respect, the indications are that it is an improvement over the old law. The advantages incidental to a separate valuation of lands, buildings, and improvements are that it requires an inspection of the property to be assessed and an inspection in fact of the ele- ments of value required by law to be separately listed. Accord- ing to the State Tax Commission, this method of valuation results in some instances in the discovery of property which had hereto- fore escaped assessment. It also corrected the practice of listing a large amount of property in a lump sum and taxing it as real estate. It has in some degree also resulted in an equalization of values within the separate taxing jurisdictions but not as between them. The basis of valuation as between cities and towns varies from 60 to 100 per cent, and such a variation is frequently found within the cities and towns, as some classes of property are valued on a much lower basis than others. As a result of the provision requiring the State Tax Commission to provide tmiform blanks for local assessors, Rhode Island is put, in this respect, considerably in advance of a vast majority of the States. No effort was made, however, to have the sheets precisely alike, but the blanks furnished were prepared with a view of secur- ing uniform information without requiring such radical changes in form as would tend to confuse, inconvenience, and delay city and town officials in making their reports. In order to equalize to a certain extent the taxation of different classes of insurance companies, the tax upon gross premiums of foreign and domestic mutual insurance companies was reduced from 2 to I per cent. With respect to the operation of the act, the State Tax Com- mission states: "It should be borne in mind that taxes have been levied, assessed, and collected under the provisions of this act, amounting to approximately one-third of the total receipts of the State for 191 1, and that substantially the whole of this income was derived from soiurces hitherto untaxed." 34 SPECIAL REPORT ON TAXATION. Administration. The "Tax Act of 191 2 " created a nonpartisan tax commission composed of three members appointed by the governor and con- firmed by the senate. The chief duties and powers of the com- mission are: To assess all corporations, joint stock companies and associa- tions subject to the gross earnings and corporate excess taxes; to have general charge of the assessment of all taxes payable under the " Tax Act of 1912 " to the general treasturer ; to confer with, to advise, and to request of local assessors such action as will tend to produce uniformity in valuation throughout the States ; to pro- vide uniform blanks for the use of local assessors; to determine the value of bank stock, the stock, bonds, and other indebtedness of manufacturing, mercantile, and miscellaneous corporations, and to notify banks and other corporations of such valuations of stock only; to require, if necessary, information in addition to that specifically prescribed by the statute; to examine books and witnesses; and to regard as confidential, mider penalty, all infor- mation required of corporations. Hearings with respect to valuations are granted by the board, and from the board's decision appeals lie to the superior court at Providence. All taxes assessed by the Board of Tax Commissioners are payable to the general treasurer. The general-property tax is payable to town collectors of taxes. Before the passage of this act and also since its passage, the state auditor has assessed the gross-earnings tax on street railways, known as the "franchise tax." The additional gross-earnings tax imposed on these companies by the "Tax Act of 191 2," which is in heu of any other tax on intangible property of street rail- ways, or on their securities in the hands of holders, is assessed by the Board of Tax Commissioners. The gross-earnings tax which replaced the gross-receipts tax on telegraph, telephone, and express companies, is also assessed by the Board of Tax Commissioners . " "» Sources of revenue in Rhode Island : Municipal and Local Districts. — (a) General-property tax; (b) gross-earnings tax on certain public-service corporations; (c) business taxes and licenses; (d) poll taxes; (e) fines, fees, etc. State. — (a) General-property tax; (b) corporation taxes; (c) taxes on participation and savings accounts and on bank shares; (d) leases of oyster grounds; (e) business taxes and licenses; (f) fines, fees, etc. LEGISLATION. 35 General-Property Tax. The ' ' Tax Act of 1 9 1 2 " reduces the state rate on general property , provides a uniform rate on intangible personal property, makes additional exemptions, determines the situs of tangible and intan- gible personal property for taxation purposes, and provides for a tax payable by lessees of oyster grounds. Reduction of State Rate.— The general law has been amended so that the state rate was reduced to 9 cents on city and town ratable property." For a number of years this rate has been 18 cents. The joint special committee* in recommending this reduc- tion adds that in its opinion the 9-cent rate can be further reduced, and even discontinued if deemed desirable. Uniform Rate. — The new act amends the general law by pro- viding that money (except in savings banks, banks, and trust companies) and debts due to persons, copartnerships, or corpora- tions (whether sectired or not) shall be taxable on such an amount only as the value of such money and of such debts shall exceed the amount of indebtedness to others (including in indebtedness to others any debts secured by mortgage or pledge) ; "^ stocks, bonds, and securities not exempt from taxation, and all other intangible personal property shall be taxed locally for state and local pmposes at the uniform rate of 40 cents on each $100 of value. Under a previous law, still in effect,'' savings banks, banks, and trust companies pay to the State for state purposes a tax of 40 cents on each $100 of savings and participation accounts, so that all moneys are now reached by a uniform rate. Personal Property Defined. — The new law, in section 40,* defines the various kinds of personal property, and it should be noted that where the old law taxed debts due from solvent debtors the new law omits the word "solvent." The tax act of 191 2 made debts taxable at their fair cash value, whether due from a solvent person or not. Exemptions. — The General Laws are amended by adding the following to the list of exempted property : f " Gen. Laws, 1909, chap. 39, sec. i, amended by Laws, 1912, chap. 769, sec. 34. 6 Report of Aug. 16, 1911, p. 14. <^ Gen. Laws, 1909, chap. 57, amended by Laws, 1912, chap. 769, sec. 41. <* Gen. Laws, 1909, chap. 39, sees. 3, 4. « Tax Act of 1912. / Gen. Laws, 1909, chap. 56, sec. 2, and chap. 57, sec. 9, amended by Laws, 1912, chap. 769, sees. 38, 39. 36 SPECIAL REPORT ON TAXATION. Bonds and other securities issued and exempted from taxation by Rhode Island; real estate used exclusively for military purposes; household furniture and family stores to the amotmt of $300; books in use in the family to the amount of $300; and manufac- tured property owned by nonresidents and brought into Rhode Island to be finished and rettimed to the owners. Indebtedness Deducted prom Intangible Personalty in Certain Cases. — Formerly deductions of indebtedness were allowed from all tangible personal property. " The new law ' pro- vides that money, or debts due from others, are taxable only upon the surplus of such property over actual indebtedness, but no deduction is to be made for contingent liabilities, nor to exceed the pro rata amount of any joint indebtedness. Partnership debts are not to be deducted from individual returns. Situs of Intangible Personal Property. — Section 39 of the tax act of 191 2 provides that intangible personal property in gen- eral shall be taxed where the owner resides. Taxes to be a Lien on Property.— Corporation and copart- nership taxes are made liens on their respective properties imder the new law in the same manner as the old law made taxes a lien on property of individuals. " Tax on Oysters. — In lieu of other taxes on oysters as the per- sonal property of the lessee, section 45 of the tax act of 191 2 provides an annual tax equal to 10 per cent of the rental payable by the lessees of oyster grounds. This tax is payable to the State, collected by the general treasurer, and paid by the lessee. Steam and Electric Railroad and Passenger Car Companies. The tax act of 191 2 "* imposes an additional tax on foreign and domestic steam and electric railroads and passenger car com- panies. ' This tax, i per cent upon gross earnings from operation within the State, is paid to the State for state purposes. ' Assessment, by the State Board of Tax Commissioners," is based upon reports from the companies.' Railroads whose tracks are located partly within and partly without the State are assessed " Gen. Laws, 1909, chap. 57, sec. g, sub. 10. * Laws, 1912, chap. 769, sec. 39, sub. 10. « Laws, 1909, chap. 60, sec. ^, as amended by Laws, 1912, chap. 769, sec. 44. <* Laws, 1912, chap. 769. « Ibid., sec. 25. / Ibid., sec. 28. 9 Ibid., sec. 26. LEGISLATION. 37 on such portion of their entire gross earnings as the length of their tracks (exclusive of sidings and turnouts) in the State bears to the total length of such tracks wherever located." Passenger car companies carrying on business within and without the State are assessed on such portion of their entire gross earnings as the number of car miles operated in the State bears to the total number of car miles wherever operated. The gross-earnings tax is in lieu of all other taxes on intangible personal property of the corporation or on the corporation's securi- ties in the hands of the holders.'' The new act also relieves railroads from bearing the salary and expenses of the railroad commissioner. ' No other changes with respect to the taxation of railroads and passenger-car companies are made by this new act, and these companies are now, as formerly, taxable locally for state and local purposes on their realty and tangible personalty. (See Part I of the Report on Taxation of Corporations, pp. 115, 122.) Street Railways. A tax of I per cent on gross earnings from operations within the State is imposed by the tax act of 19 12 on street railways. As in the case of steam railroads, this tax is paid to the State for state purposes; it is assessed in the same manner by the Board of Tax Commissioners; it is in lieu of other taxes on intangible personal property. It exempts the holders from taxation on stocks, bonds, and other evidences of indebtedness of such companies, and it reHeves street railways from the payment of the salary and expenses of the railroad commissioner. It specifically provides, however, that this tax shall be in addition to the state tax of i per cent <* on gross earnings, and in addition also to the general-property tax on real estate and tangible personal property paid and assessed locally for state and local purposes. Both of these methods of taxation were applicable to the street railways at the time the act became effec- tive. (See Part I of the Report on Taxation of Corporations, pp. "5, 123.) ^ " Laws 1912, chap. 769, sec. 27. ft Ibid., sees. 29, 30. " Ibid,, sec. 46. Ibid., p. 974. c An appeal was taken from the assessment of the tax on corporate loans of the Clairton Steel Co., a Pennsylvania corporation, which was taxed in 1906 on $2,760,833 LEGISLATION. 55 act also provides for the examination of witnesses and the investi- gation, under authority of the attorney general, of books, accounts, etc., belonging to any person or corporation liable by law to make report to the auditor general for the purposes of taxation or pay- ment of bonus. Provision is also made for the issuing of court orders compelling testimony and production of books in such cases and for penalizing the refusal to comply with such order. Liens for Taxes. By an enactment of 1911 "state taxes, unpaid bonus,* interest, and penalties are made a first lien on the franchises and property of corporations, companies, associations, joint stock associations, etc., and provision is made for the enforcement of such liens. Exemption of Machinery. By an enactment of 1911= machinery of all kinds is exempted from local taxation in cities of the second-class, namely, Pittsburgh and Scranton. indebtedness, the tax amounting to $10,933. The company paid $4,400 on the tax account and took an appeal on the balance. The Union Savings Bank held $1,261,000 of the steel company's bonds, and in paying the interest on the bonds the steel com- pany neglected to deduct the taxes from the interest. The savings bank was entitled to an exemption of taxes on these bonds, providing it paid this capital-stock tax by a certain time, which it failed to do. In reviewing the case, the court held that — where a corporation whose bonds are held by a state savings bank fails to comply with the act of June 30, 1885 (P. L., p. 193), requiring the treasurer of a corporation issuing bonds to deduct from the interest payable thereon the 4-mills tax imposed on corporate loans by the act of June 8, 1891 (P. L., p. 229), if the savings bank fails to pay its capital- Stock tax within the required time, by the act of July 15, 1897 (P. L., p. 292), which exempts state savings institutions from taxation on bonds owned by it in its own right upon payment of the tax imposed upon the shares of its capital stock before Mar. i of each year, the corporation itself is liable for the 4-mills tax on bonds, though the bank paid its capital-stock tax a few days after the time required by the statute and the corporation did not know of the bank 's failure to secure exemption. Commonwealth v. Clairton Steel Co., 78 Atl. Rep., 131 (1910). o P. L., p. 9SS- 6 The act of Apr. 29, 1874, sec. 44 (P. L., 107), fixing the rate of bonus payable by a corporation on its organization or on an increase of its capital stock, does not constitute a continuing contract with corporations organized thereunder, which is beyond the power of the legislature to disturb, but the legislature may increase the rate of the bonus and make the new rate applicable to an increase of stock of corporations pre- viously organized. A corporation organized in 1889 with a capital stock of $1,000,000, on increasing its capital stock in 1909 to $2,000,000, was required to pay a bonus of one-third of t per cent on the increase. The time of the actual increase and not the time of the legislative authorization for the increase controlled the rate. Common- wealth V. Independence Trust Co., 81 Atl. Rep., 928 (1911). P. L., p. 287. 56 SPECIAL REPORT ON TAXATION. Oil, Gas, and Coal Lands." The 191 1 legislature passed a joint resolution'' providing that the governor of Pennsylvania be requested to arrange a conference with representatives of the States of Ohio, West Virginia, and Maryland for the purpose of arriving at a proper method of taxing oil, gas, and bituminous coal producing property. DELAWARE. Summary. The 1911 legislature in Delaware passed laws relating to a special state revenue and taxation commission; to an increase in the amount of the annual commutation tax on the Delaware Railroad; to the taxation of manufacturing companies; to the payment of city, state, and franchise taxes by corporations seek- ing to renew their charters; and to taxation in various cotmties, cities, and towns. None of these changes affected the system of corporate taxation, though the basis for the application of the state tax on manufac- turing companies was modified to some extent and provision was also made that this tax should not apply to certain lines of pro- duction and manufacture which, but for their exception from the operation of the law, might be regarded as subject to the tax. Among the provisions relating to taxation in the various coun- ties, cities, and towns were some with respect to the exemption of manufacturing industries from town taxes for a period of years, the levy of town taxes on the poles of telegraph, telephone, and electric light companies, the power of a city board of assessment over assessors and collectors, etc. '^ The title to oil, gas, and minerals may be severed from grant of the surface of unseated lands [i. e., uncultivated lands subject to taxation], and may be separately taxed, if having taxable value. Rockwell & Co. i). Warren County et al., 77 Atl. Rep., 665 (1910). Coal lands must be assessed at their market value at the time of assessments and not at the value based upon earnings or productive power which may be developed in the future. Phila. & R. C. & I. Co. v. Northumberland County Commissioners, 79 Atl. Rep., 109 (1911). The purpose of requiring all tax laws to be uniform in application to the same class of subjects is to produce an equality of taxation, but, as absolute equality is not attainable, a substantial uniformity in application is a compliance with the constitu- tion. Method of valuing virgin, unproductive coal lands, and lands being operated, also treated in this case. Mineral R. R. Min. Co. v. Northumberland County Com- missioners, 78 Atl. Rep., 991, 999 (1911). * P. L., p. 1044. LEGISLATION. 57 Administration. Some tendency toward further centralization in tax administra- tion is indicated by the act giving the Board of Assessment, Revi- sion, and Appeals of the city of Wilmington general and super- visory power over assessors and collectors of taxes in that city." Railroad Companies. The State Revenue and Taxation Commission created by the laws of 1909 reviewed the question of taxes imposed upon steam railroads and concluded that the existing adjustments as to com- mutation in lieu of state taxes were sufficient except with respect to the Delaware Railroad, in which case, in the commission's judgment, the annual amount to be paid should be increased from $20,000 to $25,000.'' The 191 1 legislature acted favorably upon this recommendation." Manufacturing, Mining, Mercantile, and Miscellaneous Corpora- tions. The administrative feature of the "annual franchise tax" to which manufacturing, mining, mercantile, and miscellaneous com- panies are subject (see Part II, Report on the Taxation of Corpora- tions, p. 78) was strengthened by a judicial decision in 1911.'' The taxation of manufacturing companies was made the subject of study and recommendation by the special tax commission in i9io.« The legislature of 191 1 amended the law taxing these companies, so that a tax of one-twentieth of i per cent should be assessed upon " Laws, 1911, chap. 202. f> Report, Delaware State Revenue and Taxation Commission, 1910, p. 8. "Laws, 1911, chap. 12. ^ Basis of annual franchise tax where amount of capital stock is reduced during the year: The authorized capital stock of a corporation was $60,000,000 up to the 22d day of December, upon which day the amount was reduced to $5,000,000 by an amendment to the certificate of incorporation. On or before the first Tuesday in the following January the corporation reported that its authorized capital stock was $5,000,009. Held, that the determination of the annual license fee or franchise tax upon the basis of $60,000,000 capital stock for the portion of the year to December 22, and upon the basis of $5,000,000 from that time to the end of the year, was proper; that the secretary of state was not bound by the corporation's report, which he was authorized to inves- tigate and if necessary repudiate; and that the law requires the corporation in making its report to give accurately, truthfully, and fully the status of its capitalization for the whole year with reference to which its report is required to be made. State v. Coppermines Co., superior court of Delaware, New Castle, Mar. 10, 1911, 80 Atl. Rep., 145 (19")- « Report, Delaware State Revenue and Taxation Commission, 1910, pp. 5, 6. 58 SPECIAI. REPORT ON TAXATION. the aggregate value of property of the company in the State used in production or manufacture." Formerly this tax was graduated according to the cost value of property in the State used in pro- duction or manufacture, being at the rate of one-twentieth of i per cent upon the first $3,000,000 of such value, then one-fortieth of i per cent on the excess to and including $5,000,000, then $30 for each additional $1 ,000,000. The new law also provided that this tax should not apply to the distilling, brewing, manufacture, or production of alcoholic liquors, nor to the production or manu- facture of steam, gas, or electricity for heat, light, or power.' By another act of 191 1 manufacturing industries starting in the town of Delmar after the enactment of the act are to be exempt from town taxes for a period of 10 years." Telegraph, Telephone, and Electric Light Companies. The council of the town of Delmar was authorized to levy, at a certain rate for each and every pole, a tax on all telegraph, telephone, and electric light poles erected within the town limit.'' Back Taxes of Corporations Seeking to Renew their Charters. An act prescribing conditions tmder which corporate charters might be renewed, provided that any corporation seeking to renew its charter must first pay all the city, county, state, and franchise taxes which by law it wotdd have been liable to pay if its charter had not expired.* MARYLAND. Summary. The laws of Maryland affecting corporate taxation have not been materially altered since the publication of Part II. There is a decided tendency, however, toward improvement in methods, as shown by the passage of an act in 191 2, which provides for the appointment of a special commission to investigate the revenue system of Maryland and recommend changes therein to the next legislature. Administration. The Maryland statutes do not provide for revaluations of property at regular intervals, but the legislature from time to time provides for revaluations. Thus, prior to 19 10 annual taxes were levied upon valuations which were determined in 1896. The " Laws, 1911, chap. 13. d ibid., chap. 237, sec. 18. 6 Ibid., chap. 13, sec. 2. « Ibid., chap. 184, sec. 3. Ibid., chap. 237, sec. 14. I^SGISLATION. 59 law of 1910 « provided for a revaluation, and for the method by which it was to be made. Under this law assessors were required to personally inspect real estate and to value each parcel at full cash value. In valu- ing shares of stock* in any company, corporation, etc., the number of shares and the names of persons to whom assessed were to be stated, together with the respective taxable values, as ascertained by the state tax commissioner. In valuing bonds,<: securities, and other investments their nature and respective values were to be reported. The assessors were also required to correct assessment lists where they believed that property had been omitted or improperly assessed. When schedules were not furnished the assessors were required to place a value upon and assess the property, and from such an assessment there was no appeal. This 1910 law made it the duty of the state tax commissioner to strictly supervise the proceedings of the assessing officers, and penalties were provided for willful neglect of duty in the matter of returning schedules. By a provision of law enacted in 191 2 the governoi- was required to appoint a commission of six persons for the purpose of reviewing the revenue and tax laws of the State and recommending changes in the tax system to the next legislature of the State.'' In 191 2 ' the circuit courts were given jurisdiction over appealed assessments in the counties similar to the jurisdiction exercised by the appeals tax court of Baltimore City. Recording Receipts — Corporate Taxes. An addition was made to art. 81 of the Code' so as to provide for the recording of receipts for the payment of any bonus tax on "Laws, igio, cliap. 300, p. 251. 6 The tax on corporate stock imposed by Code, Pub. Gen. Laws, 1904, art. 81, sec. 150, requiring corporations to report annually to the state tax commissioner the number of shares of stock and the par value thereof with such information as may be required by the commissioner, and requiring the commissioner to assess the shares as of Jan- uary I, and levy the state taxes prescribed by law thereon, is a tax against the owners of the stock, within the requirement that it shall be assessed to the owner in the county or city in the State where he resides, the corporation being the medium through which the tax is collected. Union Trust Co. of Maryland v. State, 81 Atl. Rep., 873 (1911). 'With reference to the taxation of corporate bonds, see Musgrove v. B. & O. R. R. Co., 75 Atl. Rep., 245 (1909). ''Laws, 1912, chap. 779. «Ibid., chap. 599. /Laws, 1910, chap. 488, p. 249. S744°— 14 7 6o SPECIAL REPORT ON TAXATION. capital stock of corporations. A certified copy of such records is thereby made prima facie evidence of the payment of such tax on the day stated in the receipt. Manufacturing Companies — Exemption. By a law of 191 2 the county of Washington and the municipality of Hagerstown are authorized to exempt from county and munici- pal taxation, respectively, for 10 years, manufacturing industries employing 25 or more wage earners, including the land, machinery, stock in trade, and products located therein since igoj." DISTRICT OF COLUMBU. Summary. There has been no legislation since the pubUcation of Part II changiug the method of taxing corporations in the District of Columbia. The principal conclusions with respect to present conditions and the chief recommendations of a subcommittee of the House of Representatives, appointed for the purpose of investigating the tax system of the District of Columbia, are presented on page 248 of this report. C. CHANGES EFFECTED IN THE TAXATION OF CORPORA- TIONS SINCE THE PUBLICATION OF PART III OF THE REPORT OF THE BUREAU, ON THE TAXATION OF CORPORATIONS. OHIO. Summary. Amendments to the constitution form the chief changes effected in Ohio's tax system since the publication of Part III (published as of January i, 1911). Briefly stated, these amendments prohibit poll taxes, make all futiu-e issues of state and municipal bonds taxable, increase per- sonal property exemptions, encourage forestry, permit the con- traction of debts for internal improvements, but prohibit indebt- edness unless provided for by sinking funds, allow the passage of laws providing for graduated inheritance taxes, graduated income taxes and certain franchise taxes, and establish the initiative and referendum. "Laws, 1912, chap. 616. IvEGISIvATlON. 6 1 Two facts in connection with the adoption of these amendments are noteworthy: 1. The absence of any change in the following "uniformity clause" adopted in the Ohio constitution of 1851, copied by other States, and for some years generally condemned: " Laws shall be passed taxing by a uniform rule all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise; and also all real and personal property according to its true value in money." 2. The passage of any law under the initiative and referendum providing for the classification of property is specifically prohibited. The prohibition contained in the initiative and referendum clause makes plain the purpose of the constitutional convention to prevent what in the past has been frequently attempted in Ohio, namely, such a modification of the constitutional provision just quoted as would allow the classification of property for taxation purposes. A number of States which adopted the Ohio "uniform- ity clause" have either abandoned it or are trying to change it, and Ohio's failure to change this clause is not in harmony with the general trend toward the more equitable distribution of the tax burden, in so far as that burden is affected by the withholding of intangible personalty from taxation. The measures passed by the 191 1 legislature include provisions for the enactment of the budget system, the broadening of the statutory definitions of the terms "gross receipts" and "gross earnings," and an amendment, to the maximum-rate law, which, among other clauses, provides in effect immunity to taxpayers who failed or neglected to make proper returns in any year prior to 191 I. Constitution. The following amendments to Ohio's constitution were adopted in 1912: " An initiative and referendum measure was inserted in Article II, section i-e, which contained a provision, noted above, that it shall not be used to authorize any classification of property for the purpose of levying different rates of taxation, or authorizing the levying of any single tax on land or land values, or land sites, at a higher rate or by a different rule than is or may be applied to the improvements thereon, or to persona' property. o Election, Sept. 3, 1912. 62 SPECIAL REPORT ON TAXATION. The following special provision was made in Article II with respect to forest lands: ' ' Sec. 36. Laws may be passed to encourage forestry, and to that end areas devoted exclusively to forestry may be exempted, in whole or in part, from taxation." Article XII, section i, provides "No poll tax shall ever be levied in this State, or service required, which may be com- muted in money or other thing of value." This prohibits a poll tax for any purpose, either local or state. Formerly, this section permitted a poll tax in cities and towns. Section 2 remains unchanged with reference to the general- property tax provisions, but the provision exempting bonds of the State, bonds of minor subdivisions thereof, and bonds issued in behalf of public instruction, is amended so as to exempt only such bonds as are at present outstanding, and so as to give the legislature authority to tax all future issues of such bonds. The constitutional limitation of the exemption of personal property was increased from $200 to $500. Section 6, providing that the State shall never contract any debt for purposes of internal improvement, was amended so as to permit the contracting of such debt. Certain other changes in the constitution are contained in the following sections: "Sec. 7. Laws may be passed providing for the taxation of the right to receive, or to succeed to, estates, and such taxation may be uniform or it may be so graduated as to tax at a higher rate the right to receive, or to succeed to, estates of larger value than to estates of smaller value. Such tax may also be levied at different rates upon collateral and direct inheritances, and a portion of each estate not exceeding $20,000 may be exempt from such taxation. "Sec. 8. Laws may be passed providing for the taxation of in- comes, and such taxation may be either uniform or graduated, and may be applied to such incomes as may be designated by law; but a part of each annual income not exceeding $3,000 may be exempt from such taxation. "Sec. 9. Not less than 50 per centum of the income and in- heritance taxes that may be collected by the State shall be re- turned to the city, village, or township in which said income and inheritance tax originate. "Sec. 10. Laws may be passed providing for excise and fran- chise taxes, and for the imposition of taxes upon the production of coal, oil, gas, and other minerals. " Sec. II. No bonded indebtedness of the State, or any political subdivision thereof, shall be incurred or renewed, unless, in the LEGISLATION. 63 legislation under which such indebtedness is incurred or renewed, provision is made for levying and collecting annually by taxation an amount sufficient to pay the interest on said bonds, and to provide a sinking fund for their final redemption at maturity." Administration. The powers of the Tax Commission were slightly enlarged in 191 1 by an act which substantially reenacted the law of 1910 creating the commission. This was found to be necessary in order to remedy some administrative details and other minor defects. The commission was authorized to extend the time within which corporations are permitted to file their reports, it was given more specific authority to require detailed information from such corpo- rations, and the term of office of each commissioner was extended from three to six years. Budget System. — County commissioners, municipal officers, boards of education, and all other boards or officers authorized to levy taxes within the county, except taxes for state purposes, are now required to submit to the county auditor an annual budget specifically setting forth: 1 . The amount to be raised for each and every purpose allowed by law for which it is desired to raise money for the incoming year. 2. The balance standing to the credit or debit of the several funds at the end of the last fiscal year. 3. The monthly expendittures from each fund during the 12 months, and the monthly expenditures from all fxmds during the 12 months of the last fiscal year. 4. The annual expenditures from each fund for each year of the last five fiscal years. 5. The monthly average of such expenditures from each of the several funds for the last fiscal year, and also the total monthly average of all of them for the last five fiscal years. 6. The amount of money received from any other source and available for any purpose in each of the last five fiscal years, to- gether with an estimate of the probable amount that may be received during the incoming year from such source or sources. 7. The amount of bonded indebtedness, setting out each issue and the purpose for which issued, the date of issue and the date of maturity, the original amount issued and the amount outstanding, the rate of interest, the sum necessary for interest and sinking fund purposes, and the amount required for all interest and sink- ing fund purposes for the incoming year. 64 SPECIAIv REPORT ON TAXATION. 8. The amount of all indebtedness incurred under authority of section 5649-4 and the amount of such additional taxes as may have been authorized as provided in section 5649-5 of the Gen- eral Code, setting out each issue in detail as provided in the next preceding paragraph. 9. Such other facts and information as the Tax Commission of Ohio or the budget commissioners may require. The aggregate of tax permitted to be levied on the taxable property is limited as follows: In counties, to 3 mills; in muni- cipal corporations, to 5 mills; in townships, to 2 mills; and for school purposes, to 5 mills. These limited rates are exclusive of special levies for local purposes. The budget commission, composed of the county auditor, the mayor of the largest municipality in the county, and the prosecuting attorney, annually adjusts the rates of taxation. The auditor is required to lay before the budget commissioners the annual budgets, his estimate of the amount of money to be raised for state purposes in each taxing district in the county and such other information as the budget commissioners may request, or as the Tax Commission of Ohio may prescribe. The budget commissioners examine the budgets and estimates and then de- termine the total amount proposed to be raised in each taxing district for both state and local purposes. If the total amount of taxes proposed to be raised does not exceed the amount author- ized by law, this fact is certified to the cotmty auditor, but if in excess of the amount authorized, they may reduce any or all the budget items, but they can not increase the total of the budget or any item therein. When the budget has been certified the county auditor ascer- tains the rate of taxes necessary to be levied upon the taxable property within the county and minor taxing districts and places it on the tax list of the county. At the beginning of each fiscal half year the various boards are required to make appropriations for each of the several objects for which money has to be provided, from the revenue derived from taxation and other sources, and all expenditures within the following six months shall be made from and within such appro- priations and balances thereof, but no appropriation shall be made for any purpose not set forth in the annual budget, nor for a greater amount than the total amount fixed by the budget commissioners, exclusive of receipts and balances. Unexpended appropriations IvEGISI^ATION. 65 revert to the general fund and are subject to authorized uses by the boards. When deemed necessary the officers and boards authorized to fix the budget may propose an increase in the maximum rates by submitting a petition to the electors of the taxing district affected. » Certain Terms Defined. The terms "gross receipts," "gross earnings," and "pubUc- utiHty property," as used in the laws taxing corporations, were broadened in 191 1 by statutory enactment for the purpose of increasing the basis of the gross-earnings tax applicable to public- utility corporations. Gross receipts, as defined by this law, include the entire re- ceipts, and gross earnings include the entire earnings, without deduction of expenditiu-es, from business done tmder the exercise of the company's corporate powers, whether such receipts or earnings are derived from the operation of a public utility, or from any other business. The term "public-utility property" now includes the utility's plant and all real estate necessary to the utility's daily opera- tions, and all other property, moneys, and credits, owned or operated by it, wholly or in part, within the State, used in con- nection with or incidental to the operation of a public utility, whether the same be held in common or by individuals operating such utility. All such property held by a corporation within the State in the exercise of its corporate powers, irrespective of whether it is used in connection with the public-utility business or not, is declared to be the property of such public utiUty corpo- ration. * Miscellaneous Provisions. The Laws of 191 1 fix $10 as a minimum for the gross-receipts tax as applied to electric light, gas, telephone, waterworks, mes- senger or signal, imion depot, heating, coohng, and water-trans- portation companies. ' The law relating to the assessment of mineral lands for the purpose of taxation was amended so that it will be possible to assess annually instead of every four years the value of minerals hereafter discovered or developed.'' o Laws, 1911, pp. 270-273. - Ibid., p. 246. 6 Ibid., p. 232. <• Ibid., p. 90. 66 SPECIAI, REPORT ON TAXATION. Maximum Rate Law. In 1 910 an act was passed to become effective January i, 1911, limiting the general-property tax rate. Previous to that year tax rates in the State had varied from 1.4 per cent to 6.7 per cent, with an average rate for the State oi 2% per cent, and for the cities and villages of approximately 3>^ per cent. According to the Tax Commission, the limitation provisions in the 19 10 law were not entirely clear and the administrative features were bad. This caused an amendment to the law in 1911," which provided a maximum rate of i per cent, exclusive of levies for interest and sinking fund purposes. In cases of emergencies this rate may be increased by a vote of the people, of the jurisdiction affected, at any November election. The limitations provided for in this law (for maximum rates, see p. 64) are exclusive of levies for interest and sinking fund purposes, special assessments, levies for road taxes that may be worked out by the taxpayers, and levies and assessments in special districts for road or ditch improvements. The aggregate rate which may be levied in any taxing district for all purposes, including addi- tional levies authorized by a vote of the people, shall not in any event exceed 15 mills on the dollar. One of the important provi- sions of this act grants immunity to those who failed or neglected to make proper returns in any year prior to 191 1. According to the Tax Commission — ^ " The effect of this provision has been that many, who in former years had failed to return all their property or return the same at ■ full value, because of the excessive high rates of taxation, last year returned all their property at its full value, it being no uncommon thing for such returns to be three or four or more times greater than the return made in the preceding year." INDUNA. Summary. The Indiana tax laws have undergone but few changes since the publication of Part III. The most important law enacted was an amendment to the statute providing for the taxation of express companies. This law changed the method of valuing the capital stock which is used as the basis for determining the intangible value of express property in Indiana. "■ Report of the State Tax Commission, igii, p. 30. 6 Ibid., p. 31. LEGISLATION. 67 Some minor administrative changes affecting the collection of taxes and the right of taxpayers to appeal to the circuit court questions arising from the placing of omitted property on tax duplicates were authorized in 191 1. In addition, the law relating to the taxation of building and loan associations was somewhat modified. Administration. The administrative changes authorized by the legislature in 191 1 may be briefly summarized as follows: County treasurers when so directed by the county commissioners are authorized to open temporary offices for the collection of state and county taxes in cities and towns, other than county seats, having more than 900 inhabitants." The common council of all cities other than county seats may authorize the city treasurer instead of the cotmty treasurer, as was required by the old law, to receive and collect all city taxes;' taxpayers are granted the right of appeal, upon questions arising from the placing of omitted property on tax duplicates, to the circuit court of the county where the property is listed. " The State Board of Tax Commissioners in its biennial report for 191 2 states that there is a shocking lack of uniformity in the assessment of various items of personal property in the same coimty and between the same items of personal property as between dif- ferent counties, but under the law the state board has no way of correcting such inequalities. The only thing it can do is to increase or decrease the assessment of all personal property. Bank stock is assessed to the owner at the situs of the bank, and the board of review of one county may assess bank stock at 60 per cent, while in an adjoining county bank stock may be assessed at 85 per cent of its market value. Another striking lack of tmiformity is that money and credits have been assessed at 100 per cent, while bank stocks have been assessed at 65 per cent of their cash value. <^ The commission further states that while the Indiana tax system is regarded as archaic it is one of the best of its kind. The inherent de- fect of such a system isthe difficulty arising out of its administration. Since the act was passed establishing the office of county assessor, there has been a marked improvement in uniformity of assess- o Laws, 1911, chap. 199. 6 Ibid., chap. 158. " Ibid., chap. 195. d Biennial Report, Indiana State Board of Tax Commissioners, 1912, pp. 10, 11. 68 SPECIAL REPORT ON TAXATION. ments, and the concealment of property has been made more hazardous and difficult. During 191 1 the various county assessors of the State discovered and placed upon the tax duplicates the enormous total of more than $12,500,000 worth of unreported personal property." Express, Telegraph, Telephone, and Intercounty Pipe-line Companies. The law providing for the taxation of domestic and foreign express, telegraph, telephone, and intercounty pipe-line compa- nies, was amended in 191 1 by changing the method of valuing the shares of stock of such companies which is used as a basis in determining the intangible value of their property in Indiana. '' The method of valuing the property of express companies prior to 191 1 may be briefly described as follows: 1 . The market value of the entire capital accotmt was taken as a basis for the calculation. <^ 2. From the value of the capital stock thus found was deducted the value of all real estate belonging to the express company situated outside of Indiana and represented in its capital account. 3. A further deduction was then made for other investments employed in the business outside of Indiana and represented in the capital account, such as the value of stocks, bonds, etc. 4. From the remainder was taken an amount equal to the value of the personal property used in the business outside of the State of Indiana. This result was divided by the entire company's mileage exclusive of ocean mileage, thus giving the valuation per mile. The mileage in Indiana was then multiplied by the valua- tion per mile, which gave the Indiana proportion of the entire business of the company. From this result was deducted the value of all property situated in Indiana and locally assessed. The remainder was taken to represent the net intangible value of the business of the company located in the State.** - Biennial Report, Indiana State Board of Tax Commissioners, 1912, p. 13. ^ Laws, 1911, p. 685. " The collateral trust bonds are not included, because they are not directly employed in the express business. In practice the capital account has amounted to the market value of the capital stock of the principal express companies with one exception, namely, the express and banking transactions of one principal company were so intermingled that the above rule was not applicable. "i Letter, dated March 14, 1913, from former Chairman, State Board Tax Com- missioners. LEGISLATION. 69 The amendment was occasioned by reason of a suit which was decided adversely to the State. In this case an express company contended that market price should be determined by New York Stock Exchange quotations as of March i, the date fixed by law for making the assessment. The State Board of Tax Commissioners took the position that transactions in stock on the exchange were nominal and, therefore, did not reflect the real value of the prop- erty. The court held that the market value in New York was a controlling influence if the quotations were bona fide. The legis- lature, at the suggestion of the State Tax Board, then amended the law by making "actual" instead of "market" the standard value for determining the valuation of capital stock. This amendment was upheld by the United States Circuit Court of Appeals on an application of the Adams Express Co. for an injtmction to restrain the collection of the 191 2 assessment." This leaves the State Board of Tax Commissioners a broad range Lq deciding what factors shall determine the value of the capital stock. Building and Loan Associations. All building and loan associations as such were exempted from taxation, except upon their real estate, by the legislature of 191 1. Shares of stocks on which loans have not been made by the asso- ciation are held to be credits of the members individually and listed by and assessed to them and treated as other property for taxation purposes. * The commission states that this amounted practically to an exemption of the shares of stock, as no method was provided where- by assessors might ascertain the names of the owners of such shares, and in practice the owners failed to list them for taxation. " Under the old law building and loan associations were taxed on the amount paid to the association upon the outstanding shares of stock, less the amount loaned to shareholders secured by mortgage upon real estate listed for taxation. Maximum Tax Rate in Cities of the First Class. The maximum rate of 90 cents per $100 in cities of the first class was reduced by the 191 1 legislature to 75 cents. This provision does not affect special taxes for the maintenance of schools, public a Biennial Report, Indiana State Board of Tax Commissioners, 1912, p. 17. J>Laws, 1911, p. 394- c Biennial Report, Indiana State Board of Tax Commissioners, 1912, p. 16. 70 SPECIAL REPORT ON TAXATION. playgrounds, parks, police or firemen's pension funds, railroad- track elevations and depressions, or any other taxes provided for by special enactments." ZLLINOIS. Summary. No tax laws of importance have been enacted in Illinois since the publication of Part III. A demand, however, for substantial tax reform is indicated by the governor's yiaugural address to the general assembly of 191 3, strongly recommending the establish- ment of a permanent state tax commission, the abolition of the present State Board of Equalization, and an amendment to the constitution providing for the classification of property. Two judicial decisions important to Illinois were rendered since the publication of Part III. One (People v. Illinois Northern Ry. Co.) held that the right of way of a railroad should be assessed as a unit by the State Board of Equalization, regardless of whether the property was held in fee, or for years, or otherwise. The other (Miller, Watt & Co. v. O'Connell) affirmed the law requiring local officials to assess the capital stock, including franchises of corporations organized for manufacturing, mercantile, and other purposes. Railroads. As stated in Part III, railroad companies, except the Illinois Central Railroad, are taxed locally under the general-property tax for state and local purposes. In a suit to determine whether the right of way of railroads should be assessed by the State Board of Equalization, or by the local assessors, the court held, as follows: " We think it is too clear for argument, in view of the statute and the adjudicated cases, that a railroad company's right of way must be assessed as a unit ; that the only assessing body which can assess such right of way is the State Board of Equalization; that such board is given full power to assess real estate owned or operated by a railroad company as right of way, and that the jurisdiction of the State Board of Equalization is exclusive over the class of property designated by the statute as ' railroad track ' for assess- ment purposes, whether held by a railroad company in fee, or for years, or otherwise. In other words, that the use to which the property is devoted and not where the fee title rests, determines which of the assessing bodies — that is, the State Board of Equaliza- tion or local assessors — shall assess property in use by a railroad company for right of way purposes." (People v. Illinois North- ern Ry. Co., 248 111., 539, 540 (1911)-) o Ivaws, 1911, chap. 93. LEGISLATION. 71 This point was further emphasized in People ex rel. v. Terre Haute & Western Railway Co., as noted below under judicial decisions." Capital Stock Tax. The revenue laws, as amended in 1893, provided for the assess- ment of the capital stock, including franchise, of corporations organ- ized for manufacturing, mining, and selling coal, printing, publish- ing newspapers, and stock-breeding pmposes. In 1905 the legis- lature enacted a law exempting the capital stock of mercantile corporations, but this exemption was afterwards declared to be tmconstitutional.* (See Part III, p. 56.) In 1 911 the court held that the capital stock of manufacturing and mercantile companies should be assessed by local assessors."^ As construed by these decisions, the revenue law, as changed since the amendment of 1905, requires the local assessors to assess the capital stock and franchise of companies and associations organized for purely manufactin-ing and mercantile purposes, or for the min- ing and sale of coal, printing, publishing of newspapers, or for the improving and breeding of stock, while the capital stock and fran- chise of all other corporations must be assessed by the State Board of Equalization. In other words, the local assessors asses the capital stock and franchise of all corporations that were assessed by them previous to the amendment of 1905, and since that amend- ment are also required to assess the capital stock and franchise of mercantile corporations. Prior to 1911 the capital stock of these corporations was not in practice assessed,'' but, following the decisions in the cases above referred to, such corporations are now assessed on the excess value of capital stock, including franchise, over the value of their tangible property. According to information from local tax officials in Chicago and in Springfield few corporations are found to have an excess value of capital stock, including franchise, over the value of their tangible property. oSupreme court of Illinois, loo N. E. Rep., 173 (1912)- 6 Consolidated Coal Co. v. Miller, 236 111., 149 (1908). « Miller, Watt & Co. v. O'Connell, 251 111., 260 (1911); People v. National Box Co., 248 111., 141 (1911); and People v. Lewy Bros. Co., 250 111., 613 (1911). <* Report on the Taxation and Revenue System of Illinois, 1910, p. 17. 72 SPECIAL REPORT ON TAXATION. MICHIGAN. Summary. The important tax legislation enacted in Michigan since the pub- lication of Part III includes a mortgage-recording tax, a tax on stocks and bonds and other indebtedness of specially chartered railroads, a vessel tonnage tax, a law extending the powers of the State Board of Tax Commissioners, and a law authorizing the ap- pointment of a commission to review, investigate, and inquire into the entire system of taxation in Michigan." The law extending the authority of the State Board of Tax Com- missioners gives the board absolute power to change assessments on its own initiative, and authorizes the employment of necessary clerical and expert assistance. The new tax on mortgages was modeled after the New York mortgage-recording tax law. It is levied at the same rate as the New York tax, namely, one-half of i per cent, and is in lieu of all other taxation. An important work was undertaken and concluded by the State Board of Tax Commissioners in 1911 with respect to the appraisal of the Michigan mining properties, upon which the new assessments of iron mines were based. The iron-mine assessments were in- creased from about $19,600,000 to about $85,500,000, or approxi- mately 336 per cent. Administration. Under an extension of the powers of the State Board of Tax Commissioners, authorized in 191 1, the board is permitted to review and change local assessments on its own initiative. Pre- viously, the board could review tax assessments only upon writ- ten complaints of resident taxpayers of the assessing district in which the property sought to be reviewed was located. Under the present law the board has the absolute power to review assessments in any taxing district in the State, and when any property has been reviewed, assessed, and valued by the board, as authorized, such property can not be assessed or valued at a lower figure within three years, where the property remains substantially the same, without the consent of the board. ' "See Special Tax Commissions, p. 250, below. * Laws, 1911, act 17. LEGISI^ATION. 73 Mortgage Tax. The 191 1 legislature enacted a law imposing a "specific" tax of 50 cents for each $100, or remaining major fraction thereof, on the principal debt or obligation evidenced by a mortgage or by a lien upon real property situated within the State and recorded on or after January i, 191 2. This, like the New York mortgage-recording tax, is in lieu of all general taxation on such mortgages. One-half of the revenue from this tax is retained by the county and the other half is transmitted to the State for state purposes. Mortgages given prior to January i, 191 2, on which the registry tax provided for in this act has not been paid, remain under the ad valorem system of taxation and are assessed and taxed under that law. Owners of mortgages recorded before this law took effect may pay the tax provided for in this act, and thereafter such mort- gages shall be treated the same as other mortgages so taxed. The law provides that no mortgage or land contract subject to the tax imposed by this act shall be released, enforced, discharged of record, or received in evidence in any legal action, nor shall any assignment of, or any agreement extending such mortgage or land contract be recorded until said tax has been paid. The law provides further that no judgment or final order in any action shall be made for the foreclosure or enforcement of any mortgage or land contract which is subject to the tax imposed by this act, or any debt or obligation secured thereby, until the tax so imposed is paid." The exemptions from this tax include mortgages upon real estate and the buildings thereon when owned and occupied by libraries, armories, benevolent, charitable, educational, or scientific institu- tions incorporated under the laws of Michigan, while occupied solely for the purposes for which they were incorporated ; mortgages on charitable homes of fraternal or secret societies; mortgages on houses of public worship, with the land on which they stand, and parsonages owned by any religious society in this State and occu- pied as such, recorded on and after January i, 191 2; and build- ing and loan mortgages. " Mortgage credits assessed on the general tax rolls of 191 1 amoimted to more than $39,000,000, which at the average rate of taxation for the State yielded approximately $800,000. Under the new law mortgage credits during the 1 1 months ending June 30, 1 9 1 2 , paid approximately $500,000. This sum included taxes on mortgages recorded prior to January i, 191 2, upon which the law o Laws, 1911, act 91. 74 SPECIAL REPORT ON TAXATION. permitted the recording tax to be paid and which became there- after exempt from general taxation." This law was sustained in 191 2, the court holding that the payment of the tax upon a real estate mortgage exempted it from all ad valorem taxation, including municipal taxation; and that the exemption from this form of taxation of mortgages on educa- tional, religious, or charitable property does not violate the consti- tutional rule of uniformity of taxation under Article X, section 4, of the Michigan constitution, as that provision has no reference to the power to exempt or remit taxes.' In another case section 6 of this law was construed to mean that holders of mortgages on the date of the taking effect of the law (Aug. i) might record them and pay, between that date and the date the act went into full operation (Jan. i), the tax upon the actual amount due on the mortgage, but if such a mortgage was presented after January i the tax was to be computed upon the same basis as mortgages executed after January i , namely, upon the amount specified in the mortgage. If not presented at all, they are taxed according to the ad valorem plan." Appraisal of Mines. One of the important duties of the State Tax Commission in 1 911 was the appraisal of the Michigan mining properties. A corps of engineers was employed for this purpose, and their report, from which the following abstract is taken, was used as a basis for deter- mining the assessed values of the various mining properties in the State: " This report is a calculation of the value of mines to the perma- nent owner for the production of minerals. It is based on three facts: First, average cost; second, average prices; and third, an estimate of future life. The first two factors are determined by experience. The third factor, the life of the mine, is based partly on developed ore and partly upon an assumption of continuance of known ore bodies beyond the present bottom levels of the mines. The assumption of continuance is based mainly upon the extent to which the continuity of the deposits has been proven for the district and for the type to which the mine belongs. It will be seen that these factors are quite as definite as those upon which calcula- tions in the world of business are generally founded. <• Report, Board State Tax Cominissionets, ipii-ii, p. 12. b Union Trust Co. v. Common Council of Detroit, supreme court of Michigan, 137 N. W. Rep., 122 (1912). e People ex rel. Bowen v. Moeller, supreme court of Michigan, 137 N. W. Rep., 24s (1912). IvEGISLATION. 75 "The future value of a series of dividends is reduced to a present value by the annuity method; that is, a sum is calculated upon which the series of dividends will pay 5 per cent interest and also provide each year a sinking fund instalment which, invested each year at 4 per cent interest, and added to prior instalments similarly invested and reinvested, will equal the sum taken. The sum is the amount which an investor can afford to pay for the property." The following table shows the assessments made by the Tax Commission with respect to iron-ore mines in 191 1 : County. Assessment valuation prior to 1911. Assessment valuation in 1911. $3. 735.800 4.943.158 1)993.500 8,951.050 28,343»ioo 34,725,000 _ . . _ Total 19.623,508 * 8s, 567, 500 a Percentage of increase, 336 per cent. The engineer's report showed that copper mines were assessed at practically their full value, and these assessments were not increased. '' The taxes on mining property are assessed to the mining com- pany on the total value of mines compiising both the lease- holder's and fee holder's interest therein. Railroads Operating Under Special Charter — Stocks and Bonds. An annual specific tax for state piu^joses, of 2 per cent upon shares of stock and i per cent upon bonds and other indebtedness of railroads operated under special charters in Michigan, was authorized by the legislature in 191 1. This tax is chargeable to the holders or owners of the stock or bonds, but the corporation is required to deduct the tax from any dividends, interest, or prin- cipal payable to such owners or holders and, should it neglect to do so, the amount of tax becomes a lien upon all of its property.'^ The Detroit, Grand-Haven & Milwaukee Railway Co. is operating under a special charter granted to the Detroit & Pontiac Rail- road Co., March 7, 1834. An amendment to this charter by an act of 1855 contains a provision permitting it to pay taxes at the rate of i per cent per annum upon its paid-in capital stock in lieu of all other taxes. "^ b Report, Board of State Tax Commissioners, 1911-12, p. c Laws, igii, act 95. <* Laws, 1855, act 140. 5744°— 14 8 76 SPECIAL RRPORT ON TAXATION. The amendment of 1855 was later held by the courts to have created a valid contract between the State and the railroad company named therein." This method of taxing the railroad company was used until 1897, when the company voluntarily commenced to pay taxes under the general law at a specific rate upon its gross earnings. Upon the enactment in 1901 of the law for ad valorem taxation of railroads, the State Board of Assessors included this railroad in the list of companies to be taxed under that system, but the State was restrained by the courts from col- lecting such tax on the ground that it was protected by charter contract,* and the company then resumed its charter basis of taxa- tion, namely, i per cent upon its paid-in capital stock. <= Before the act of 1911, imposing specific taxes on shares of stock and bonds of the railroad companies affected thereby, took effect, the Detroit, Grand Haven & Milwaukee Railway Co., and the Grand Trunk Railway Co., of Canada, which had guaranteed and held many of the bonds of the Detroit, Grand Haven & Milwaukee Railway Co., brought suit in the United States district court of Michigan to enjoin the enforcement of this statute. The court held, in overruling demurrers to the bills, that the law was class legislation and unconstitutional, as the railroad was the only one taxed under it and, further, that the Supreme Court had many times decided that property not held in the State can not be taxed by it, and that such collateral as was involved in the present suit was taxable only where the owner resided. "* Vessel Tonnage Tax. Steam vessels, steam barges, or steamboats, owned within the State, or hailing from any port thereof, and employed in the navi- gation of international waters or waters of the Great Dakes, are, in lieu of all other taxes, taxed to the owners at the rate of 20 cents per net registered ton on vessels carrying passengers, or passengers and freight, and 10 cents per ton on vessels carrying freight only. This tax is collected by the state treasurer, but is apportioned partly to the port of hail, partly to the county of the port of hail, and partly to the State.' <^ Report of Attorney General, 1912, p. 24. 6 Powers tj. Detroit, Grand Haven & Milwaukee Ry., 201 U. S., 543 (igo6). c Report of Attorney General, 1911, p. 27. <* Detroit, Grand Haven & Milwaukee Ry. 11. Fuller et al., 205 Fed. Rep., 86 (1913)' « Laws, 1911, act 70. I.EGISI,ATlON. 77 Telephone Companies. As stated in Part III," telephone companies, whose annual gross receipts within the State exceed $500, are subject to the state property tax, at the average rate of taxation, upon the true cash value of all property owned by them in Michigan, * except real estate not necessary to the exercise of their franchises. Such real estate is subject to the general-property tax for both state and local pur- poses." The law providing for this method of taxation was sustained by the Federal courts, which held that a statute imposing a tax on telephone companies can not be declared unconstitutional, unless it clearly appears to be an illegal encroachment on private rights, operating as a spoliation under the guise of an exercise of the taxing power; also, that said act was not discriminatory although companies earning not more than $500 diuing the preceding year were exempted therefrom. <* WISCONSIN. Summary. Differing from any American income-tax law thus far enacted, the Wisconsin law of 191 1 presents the most successful achieve- ment in state income taxation. Primarily, it is a substitute for the general-property tax on intangible personal property. It differs from the low uniform-rate method in that the tax paid by individuals bears a definite relation to the income from securities. In principle, it measures the ability to pay, and it is based on net not gross, income. It is administered by a state commission by whom " income assessors " are appointed and given a large measure of power with respect to the ordinary assessment of property and complete power as to the assessment of incomes. It grants liberal exemptions to individuals and permits none to corporations. It is principally a tax for local purposes assessed and collected at the expense of the State. The rates applicable to corporations are determined by the relation between the taxable income and the assessed value of the property used in producing such income. Corporations are taxed upon total profits, thus relieving the indi- vidual stockholder from a tax on dividends. The administration is comparatively inexpensive. The constitutionality of the law a Page 75. b Laws, 1909, act 49, sees. 13, 14. e Ibid., sec. 5. <* Michigan telephone tax cases, 185 Fed. Rep., 634 (1911). 78 SPECIAI< REPORT ON TAXATION. has been sustained, and its defects will probably be remedied as the system is further developed. A number of defects have been discovered in the law. Most of these, however, have to do with minor administrative details. According to the Wisconsin Tax Commission, however, "The economic soundness of the scheme for determining corporation rates is very doubtful." " The first assessments under this tax amounted to a little less than $3,500,000, of which over $2,000,000, or 68 per cent, was assessed against corporations. The average rate of taxation upon corporations was 5.4 per cent, and that upon firms and individuals was nearly 2 per cent. In Milwaukee the average income tax assessed per taxpayer was a little more than $30, while in the 16 counties having second and third class cities it was a little over $23, and in other counties approximately $15. In addition to the enactment of the income tax a number of changes were made during 191 1. The law relating to the taxation of gas, electric light, water power, and heat companies was amended so as to bring the assessment of the property of these companies under the direction of the Tax Commission. The duty of preparing forms for local tax officials was transferred from the secretary of state to the Tax Commission. The act creating the Tax Commission was amended so as to provide for auditing accounts of towns, counties, cities, and villages, and installing a uniform system of public accounting. The super- vision of the inheritance taxes was transferred to the Tax Com- mission, certain terminal property formerly taxed for the benefit of the State was made taxable for local purposes, a change was made in the basis of the distribution of the tax on street railways, and a tonnage tax on vessels was established. Administration. The enactment of the income tax in 191 1 brought new duties to the Wisconsin Tax Commission and increased centralized state control to a degree unattained in any other State. The income-tax law created a new office in the Wisconsin assess- ment system, namely, that of "income assessor." The Tax Com- mission divided the State into 39 taxing districts and placed an income-tax assessor over each. The duties of these newly created offices are to assess the incomes of individuals and to exercise "This provision of the law was, in 1913, replaced by a schedule of fixed rates which are practically double those imposed upon individuals. I^EGISI^ATION. 79 the functions formerly attached to the office of county super- visor of assessments, thus giving a large measure of control over local assessors to officials who are directly responsible to the State Tax Commission. Further, income assessors are appointed through the state civil-service commission, and for this reason are less likely to be affected by local prejudice and political inter- ference, the principal influences which prevent the equal assess- ment of both property and incomes. Corporations and joint-stock companies subject to the income tax are assessed by the State Tax Commission. The original authority given the Tax Commission relative to the collection and publication of statistical material and the establishment of a uniform system of accounting, was enlarged in 191 1, and the commission's duties in these respects made more definite. The commission has developed certain general classi- fications and methods of accounting which, upon application, are being installed in the municipaUties of the State. In 191 2 the the uniform accounting system was installed in three counties, in four cities and villages, and in nine towns.'' Other new duties imposed are the auditing of accounts of towns, cities, and villages; the preparation of forms for local taxing officers, formerly issued by the secretary of state; the supervision of the assessments of the property of companies furnishing water, light, heat, and power. The work done by the Tax Commission during 191 2 consisted of making the state assessment; administering the income and inheritance taxes; making the assessment of property of steam and street railways, express, telegraph, sleeping car, freight line, and equipment companies ; directing the local assessors in assessing the general property of the State and assisting them in assessing the property of pubUc utilities; hearing three appeals from equal- izations made by county boards; hearing 18 applications for re- assessment; making reassessment in 10 assessment districts; instalUng accounting systems in 16 political subdivisions, and auditing accounts in three cases;* and publishing a special report on the " Finances of the State Government." Railway Terminals. Grain elevators used in transferring grain between cars and vessels, and also ore and merchandise docks, although owned and « Laws, 1911, chap. 523; and Report of Wisconsin Tax Commission, 1912, pp. 9, 64. t> Report of Wisconsin Tax Commission, 1912, p. 9. 80 SPECIAIv REPORT ON TAXATION. operated by a railroad company, are now subject to local assess- ment." Formerly these were assessed by the Tax Commission in like manner as other railroad property. The effect of this change is to reduce state taxes and add to the taxes of cities and towns wherein such property is located. Milwaukee, Superior, and Ash- land have the most valuable dock properties. Street Railway Companies.* The law providing for the distribution of 85 per cent of the tax levied against street railways to the cities, towns, and villages wherein the railways operate, was amended in 191 1 by providing that the distribution should be in proportion to the property located and the business transacted in each district, instead of in proportion to the gross receipts of the company in each district. According to the Tax Commission some country districts receive sufficient revenue from this source to meet all ordinary town expenses. " This law was further amended so that it now includes not only electric but all Hght, heat, and power companies connected with street railway companies. ^ Miscellaneous Public-Utility Corporations. Gas, water, electric, water power, electric light, heat and power, river improvement, and reservoir companies not connected with a street railway, formerly assessed solely by local officials, were, in 1911,' made assessable as a unit by local assessors under the super- vision of the state board. When the property of such a com- pany extends beyond the limits of a single district, the assessors of the two or more districts in which the property is located jointly assess the entire property of the corporation and apportion it according to the ratio which the property located and business transacted in each bears to the total property and business. "■ Laws, 1911, chap. 540. b A license fee of $15 per car per year was imposed by municipal ordinance under authority of sec. 1862, Stats. The city of Milwaukee sued a street railway company for license fees unpaid from 1895 to 1910. Held, the gross-receipts tax law (Laws, 1895, chap. 363, as amended by Laws, 1897, chap. 223, and incorporated and enacted in Stats., sec. 1038, subdiv. 14) abrogated the right of cities to collect license fees under Stats., 1862, or under any power conferred upon cities by special charter provisions, other than any fees exacted under police power for the regulation and supervision of the business. City of Milwaukee v. Milwaukee Electric Railway & Light Co. (supreme court of Wisconsin), 133 N. W. Rep., 593 (igri). « Report of Wisconsin Tax Commission, 1912, p. 16. <* Laws, 1911, chap. 612. « Ibid., chap. 611. LEGISLATION. 8 1 Vessels on International Waters. Vessels owned within the State or hailing from any port thereof and employed regularly in interstate traffic in the navigation of international waters were made subject, at the option of the owner, either to the general-property tax or to a tax of 3 cents per net ton of registered tonnage in lieu of all other taxes. The term "international waters" is understood to include the Great Lakes, but not inland waters nor the Mississippi, St. Croix, or St. Louis Rivers. According to the Tax Commission the practical effect of the limitation as to vessels employed regularly in inter- state traffic is to confine the operation of the law to boats em- ployed in traffic between the ports of Wisconsin and ports of other States on Lake Superior and Lake Michigan." Water-Power Companies. A law was enacted in 1911 providing for a franchise fee to be paid by every appropriator of a franchise which allows the improve- ment and use of a navigable stream for hydraulic-power purposes, but in 19 1 2 this law was declared unconstitutional on several groimds, one of which was, that it deprived the owner of his property without due process of law.*" Telephone Companies. The gross-receipts tax on telephone companies was increased in 1911 from 4 to 5 per cent on gross receipts equaling or exceeding $500,000, and from 3X to 4 per cent when such gross receipts equal $300,000 and do not exceed $500,000. An additional tax equal to 5 cents for each telephone instru- ment owned or operated within the State is imposed on telephone companies, when the total gross-receipts tax paid by any person or company is less than 5 cents for each telephone instrument owned or operated by them within the State. ■= Income Tax. An annual income tax was provided for by the legislature in 191 1 for state and local purposes on individuals and on all corpora- tions except, first, corporations paying taxes and license fees directly to the State in lieu of other taxes, and second, mutual " Wisconsin Tax Laws, 1912, p. 35. * Wisconsin Waterpower Cases, supreme court of Wisconsin, 134 N. W. Rep., 330(1912). "Laws, 1911, cliap. 651. 82 SPECIAIv REPORT ON TAXATION. savings, or loan and building associations, religious, scientific, educational, and benevolent associations. The classes of corporations falUng under the first exception embrace railroad, freight and passenger car, telegraph, telephone, boom and improvement, plank road, insurance, express, surety and guaranty, street railway (including connected electric light), and heat and power companies. The more important details of the law follow : What Income Includes (Sec. 1087M-2. 2). — The term "in- come" as used in this act includes: 1. The rent of real estate, including the estimated rental of resi- dence property occupied by the owner thereof. 2 . All interest derived from money loaned or invested in notes, mortgages, bonds, or other evidence of debt of any kind whatso- ever. 3. All wages, salaries, or fees derived from services; provided, that compensation to public officers for public service shall not be computed as a part of the taxable income in such cases where the taxation thereof would be repugnant to the constitution. 4. All dividends or profits derived from stock or from the pur- chase and sale of any property or valuables acquired within three years previous or from any business whatever. 5. All royalties derived from the possession or use of franchises or legalized privileges of any kind. 6. All other income of any kind derived from any source whatever except such as falls within certain exemptions hereinafter noted. The income defined is gross income; the taxable net income is computed by subtracting the deductions and exemptions author- ized. Income of Residents and Nonresidents (Sec. 1087M-2. 3).— A nonresident may be taxed for income derived from sources within the State. A resident may be taxed upon all income derived from sources within the State. As to income derived by residents partly from within and partly from without the State a distinction is made as follows: If the income is derived from rentals, stocks, bonds, securities, or evidences of indebtedness the individual or corporation is taxed upon the whole of it, in analogy to the rule that intangible property follows the residence of the owner for purposes of taxation. If LEGISLATION. 83 the individual or corporation is engaged in business within and without the State and the income is derived from sources other than rentals, stocks, bonds, securities, or evidences of indebtedness (as, for example, in the case of a Wisconsin manufacturing corporation which has factories in Milwaukee and Chicago) the income tax is levied upon only that proportion of the income which is derived from business transacted and property located within the State. Deductions Allowed Corporations (Sec. X087M-3). — Every corporation, joint-stock company, or association is allowed to make from its gross income the following deductions: 1. Wages and salaries of officers and employees. 2. Ordinary and necessary expenses paid within the year out of income in the maintenance and operation of its business and property, including a reasonable allowance for the depreciation of the property from which the income is derived. Payments made for additions or improvements are not "ordinary and neces- sary expenses" and are not deductible from income. 3. Losses actually sustained within the year and not compen- sated for by insurance or otherwise. The amount of the loss and the manner in which it occurred are required to be set forth fully in the return made by the corporation. 4. Taxes paid upon property from which the income is derived. 5. Dividends or income from stock upon which the income tax has been paid. 6. Interest from bonds or other securities exempted from taxa- tion under the laws of the United States. Exemptions (Sec. 1087M-5). — Income of any mutual savings, or loan and building association, or any religious, scientific, educa- tional, benevolent, or other association of individuals not for profit is exempted. Income derived from property and privileges by persons now required by law to pay taxes or license fees directly into the treas- ury of the State in lieu of other taxes, such persons continuing to pay taxes and license fees as heretofore is exempted. This exemp- tion appears to include income from railroad, palace and sleeping car, freight line and equipment, express, street railway, including connected electric light, heat and power companies, telegraph, boom and improvement, plank road, fire insurance, life insurance, accident, surety, etc., telephone and title guaranty companies. This section does not exempt water, light, heat, power, and other 84 SPECIAL REPORT ON TAXATION. public utilities taxable locally. Inasmuch as the income-tax law permits the income tax to be offset by the personal-property tax, and as all the property of such public utilities, including land, is defined as personal property under the Wisconsin law, the income of public utilities not specifically exempted from the income tax appears to escape taxation under the income tax in almost all instances. Personal-Property Exemptions. — Amendments to the gen- eral laws defining personal property were included in the income- tax law which in effect excluded moneys and credits from taxable personalty. Other exemptions included stocks and bonds not otherwise specifically provided for, and household furnishings, machinery, implements and tools used in farm, orchard, or garden. These amendments also abolished certain limitations on exemp- tions, such as $200 on household furniture, $50 on mechanics' tools and farm and garden tools, and $50 on any watch carried by its owner." The Tax Commission states that the income tax is a substitute, in part at least, for the personal-property tax and quotes the follow- ing from the opinion of Chief Justice Winslow in the income-tax cases: ^ " By the present law it is quite clear that personal property taxa- tion for all practical purposes becomes a thing of the past. The specific exemptions of all money and credits and the great bulk of stocks and bonds, as well as of all farm machinery, tools, wearing apparel, and household furniture in actual use, regardless of value, goes far to eliminate taxation of personal property ; while the pro- vision that he who pays personal property taxes may have the amount so paid credited on his income tax for the year seems to put an end to any effective taxation of personal property. That taxa- tion of such property has proven a practical failure will be ad- mitted by all who have given any attention to the subject. Doubt- less this was one of the main arguments in the legislative mind for the passage of the present act. By this act the legislature has, in substance, declared that the State's system of taxation shall be changed from a system of uniform taxation of property (which so far as personal property is concerned has proven a failure) to a system which shall be a combination of two ideas, namely, taxation of persons progressively, according to ability to pay, and taxation of real property uniformly, according to value." "Laws, 1911, chap. 658, p. ggg. b Income Tax Cases, 148 Wisconsin, 456 (1912). Also Report of Wisconsin Tax Commission, 1912, p. 18. LEGISLATION. 85 Rates for Corporations (Sec. 1087M-6. 2).— The rate is ad- justed to the earning power of the corporation. The earning power is based upon the relation of the taxable income to the assessed value of the property used and employed in the acquisition of such income,'^ thus: If the proportion which the taxable income bears to the assessed value of the property ysed in making the income is — Less than i per cent, the rate of tax is X of i per cent. More than i per cent, but not over 2 per cent, the rate of tax is i per cent. More than 2 per cent, but not over 3 per cent, the rate of tax is rX per cent. More than 3 per cent, but not over 4 per cent, the rate of tax is 2 per cent. More than 4 per cent, but not over 5 per cent, the rate of tax is 2X per cent. More than 5 per cent, but not over 6 per cent, the rate of tax is 3 per cent. More than 6 per cent, but not over 7 per cent, the rate of tax is 3X per cent. More than 7 per cent, but not over 8 per cent, the rate of tax is 4 per cent. More than 8 per cent, but not over 9 per cent, the rate of tax is 4K per cent. More than g per cent, but not over 10 per cent, the rate of tax is 5 per cent. More than 10 per cent, but not over 11 per cent, the rate of tax is 5X per cent. More than 11 per cent, but not over 12 per cent, the rate of tax is 6 per cent. When more than 12 per cent, the rate of tax is 6 per cent. Administration (Sec. 1087M-10. 3). — Every corporation, joint- stock company or association, whether taxable under this act or not, is required to fturnish to the Tax Commission a true and accu- rate statement at such time, in such manner and form and setting forth such facts as the commission deems necessary to enforce the provisions of this act. Public-service corporations and benevolent, scientific, educa- tional, or religious associations are required to make a statement of the names and addresses of persons in their employ who receive salaries of more than $700 and the amount paid to each.* The cost of administering the income tax for the first year of its operation was close to $95,000 and the net expense over and above the former cost of the supervisors of assessment was approxi- mately $45,000, or 1.29 per cent, of the amount of tax assessed. The Tax Commission states that the Wisconsin income tax is, with respect to expense of administration, one of the most economical taxes known.'' Appeal and Review (Sec. 1087M-13). — Any corporation, joint- stock company or association subject to assessment by the State Tax Commission feeling aggrieved by the decision of said commis- sion regarding the assessment of income, is " granted the same rights " Replaced in 1913 by a table of fixed rates. 6 Wisconsin Income Tax Law, 191 1, p. 32. ' Report of Wisconsin Tax Commission, 1912, p. 41. 86 SPECIAL REPORT ON TAXATION. of hearing and appeal as are now granted corporations assessed by said commission," namely, any corporation alleging facts show- ing substantial injustice with respect to its assessment may, within six months from the payment of the tax, bring an action against the State to recover an alleged excess of taxes paid." Apportionment of Income Tax (Sec. 1087M-23). — The revenue derived from the income tax is divided as follows: Ten per cent to the State, 20 per cent to the county, and 70 per cent to the town, city, or village in which the tax is assessed, levied, and collected. Collections from the income tax are accounted for in the same manner as the state and cotmty property tax. Application of the Income Tax to Individuals. "Exemptions. — The following exemptions are allowed individ- uals : 1. To an individual, income up to and including $800. 2. To husband and wife, $1,200. 3. For each child under the age of 18 years, $200. 4. For each additional person, for whose support the taxpayer is legally liable and who is entirely dependent upon the taxpayer for his support, $200." The income of a wife is added to the income of her husband, and the income of children under 1 8 years of age to that of its parents, when said wife or child is not living separately from said husband or from one or both parents. Deductions. — Deductions allowed to individuals consist of ordinary and necessary expenses of the profession, occupation, or business; losses dining the year and not compensated for by insurance or otherwise; dividends or interest received from a corporation or association, the income of which has been as- sessed under the provisions of this act; interest paid on indebt- edness, providing the debtor reports the amount so paid, the form of the indebtedness, together with the name and address of the creditor; interest from exempt bonds; salaries of United States officials; pensions; taxes upon property which produced the income taxed; inheritances; and life insiurance. o Wisconsin Income Tax Law, 1911, p. 38. LEGISIyATlON. 87 Rates for Individuals. — After deductions and exemptions the income tax is computed, in thousands of dollars of taxable income or any part thereof, in the following manner: Taxable income. Rate. Tax. Total income taxed. Total tax. True rate on whole amoimt. First Second Third Fourth Fifth Sixth Seventh , Eighth Ninth Tenth Eleventh.... Twelfth .... Thirteenth!. Fifteenth 1 . . Twentieth » . $1,000 r,ooo 1,000 IjOOO 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Per cent. I li li li 2 2i 3 si 4 4 5 si 6 6 6 $10. 00 12.50 IS- 00 ij. SO 20. 00 25.00 30.00 35.00 40. 00 45.00 50. 00 SS- 00 60. 00 60. 00 60.00 $1,000 2,000 3,000 4,000 S,ooo 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 15,000 20,000 $10.00 22.50 37.50 55.00 75-00 100. 00 130.00 165.00 205. 00 250. 00 300.00 355- 00 415.00 535.00 835.00 Per cent. I I. 125 1.25 1.375 1-5 1.666 1.857 2. 0625 2.277 2.5 2.727 2-958 3-192 3-566 4-175 ^ Six per cent on any sum in excess of $12,000. Proposed Amendments to the Income-Tax Law. According to the Tax Commission, the income-tax act as a whole has proved an effective working measure. No radical change in the general scope of the law is regarded as desirable. However, it is admitted that experience has disclosed a number of defects, for which amendments have been suggested. Exact sta- tistics as to the operation of the law and the amount of net rev- enue it will yield can not be known until the 191 2 taxes have been paid, and for that reason the commission confines its recommenda- tions to such amendments as will insure greater certainty and simplicity in the administration of the act. A great many amendments are proposed by the Tax Commission for such minor defects in the law, and also for an important one affecting corporations, namely, a change in the rates." The Tax Commission states that paragraph 2 of section 1087M-6, prescribing rates for corporations, has proved unsatisfactory in practice. Under this section the progression is not based upon the amount of income, but upon the ratio which the taxable income bears to the assessed "A number of amendments to the income-tax law were made in 1913, among them was the replacing of the former method of determining rates applicable to corpora- tions by a table of fixed rates. 88 SPECIAL REPORT ON TAXATION. valuation of the property which produces it. Two corporations having the same taxable income may be required to pay different amounts of taxes. This is illustrated by the following statement: Assessed valuation. Income. Ratio. Rate. Amount of tax. $10,000 200,000 600,000 $2,000 2,000 6,000 Per cent. 20 I I Per cent. 6 J^ofi Mofi $120 10 30 The commission states that inequality similar to that shown by the foregoing table has actually occurred in the administration of the law. Many lines of business yielding substantial incomes require very little property and hence would be subject to the maximum rate. Other lines of business, yielding approximately the same incomes, require a greater amotmt of property and hence get the benefit of lower rates. The amount of property employed in producing a given income varies at different times of the year and may be more or less than normal at the time of assessment. Many corporations derive incomes from property not subject to assessment at all, such as stocks, bonds, mortgages, and similar securities. The statutes make no provision for determining the rate in such cases. It is believed that a gradation of rates according to amotmt of taxable income affords a sounder and more practical basis and that an adjustment can be made which will simplify administration and not materially affect the yield from corporations. The average rate for individuals during the first year's administration of the law was 1.96 per cent, while the average rate for corporations was 5.4 per cent, more than twice the rate in the case of individuals. If a different rate for corporations is to be maintained, it is believed that rates graded according to amount of income, but at double the rates applicable to individuals, would accomplish about the same purpose, greatly simplify the administration of the law, and more nearly conform to sound economic policy." " Report of Wisconsin Tax Commission, 1912, pp. 52-54. The constitutionality of the income-tax law was sustained in Income-Tax Cases (supreme court of Wisconsin), 134 N. W. Rep., 673; 135 N. W. Rep., 164 (1912). See "Judicial decisions," p. 217, below. LEGISLATION. 89 D. CHANGES EFFECTED IN THE TAXATION OF CORPORA- TIONS SINCE THE PUBLICATION OF PART IV OF THE REPORT OF THE BUREAU, ON THE TAXATION OF CORPORATIONS. MINNESOTA. Summary. No regular session of the legislature has been held in Minnesota since the publication of Part IV (published as of January i, 1912), but at a called session in 1912 the gross-earnings tax law, applicable to railroad companies, was amended by increasing the rate from 4 to 5 per cent, and by providing for semiannual, instead of annual, payment of the tax. The change with respect to the rates as required by the state constitution was ratified by the people at the November election. Two important judicial decisions, affecting corporate taxation, were rendered: (i) The supreme coiul of the State held that the classification of mon- eys and credits for taxation at a low uniform rate was consti- tutional under the provision that taxation shall be uniform upon the same classes of subjects and is within the discretion of the legislature, and that section 836, R. 1,., authorizing a deduction of debts from credits under the general-property tax, was repealed by implication on the enactment of chapter 285, Laws, 1911, taxing moneys and credits at the low uniform rate of 3 mills on each dollar of value;" (2) the Supreme Court of the United States affirmed the state coiu^;s, holding that to include earnings on interstate shipments transferred to or received from other com- panies in the State was an exercise in good faith of a legitimate taxing power, the measure of which taxation is in part the proceeds of interstate commerce, which could not in itself be taxed.* In another case it was held by the supreme court of the State that the mortgage registration fee law, payment under the terms of which exempts the security from general-property taxation, applies to a mortgage securing an indebtedness of $50 or less. ' An example of the efficiency of centralized assessing power is found in the action of the Tax Commission in ordering a reassess- ment by its special representatives in certain counties during the first year of the operation of the low uniform-rate law, which resulted in the discovery of omitted property belonging to approximately 6,800 persons, valued at more than $9,600,000. o State V. Minnesota Tax Commission, 134 N. W. Rep., 643 (1912). 6 United States Express Co. v. Minnesota, 223 U. S., 335, 348 (1912). c State V. Fitzgerald, 134 N. W. Rep., 728 (1912). 90 SPECIAC REPORT ON TAXATION. As shown in Part IV, page 13, the assessment of intangible property subject to the low uniform rate of 3 mills on each $100 of value, was increased from $13,000,000 to a little more than $122,- 000,000 in 191 1 without increasing the yield of revenue. In 1912 the assessment increased to $135,000,000, with a gain in the yield of revenue of approximately 1 1 per cent. Railroads. The legislatm-e in 19 12 reenacted the law providing for the taxation of the gross earnings of railroad companies " so that earnings from property other than that used in railroad operations are not to be incl uded in taxable gross earnings,* namely, the tax is now imposed on earnings from property used in operation only ; the tax is now payable to the State every six months instead of once a year ; and the rate of the tax is increased from 4 to 5 per cent. As required by the constitution, this, as all other laws relating to the taxation of railroads, was submitted to and affirmed by the voters at the November election."- The Tax Commission was directed "* to investigate and report to the legislature in 1913 the amount and value of real and per- sonal property owned by railroad companies subject to ad valorem taxation and, further, to cause all such property to be assessed. NORTH DAKOTA. Summary. The legislature in North Dakota has not met since the publi- cation of Part IV. Two proposed constitutional amendments passed at the 191 1 session of the legislature will, if again passed by the 1913 legis- lature, be submitted to the people for ratification. One provides for the initiative and referendum, and the other for the classifi- cation of property for taxation purposes. The proposed classifi- cation measiue provides "Taxes shall be uniform upon the same class of property, including franchises, within the territorial limits of the authority levying the tax, " and that raihoad, - Laws, igii, chap. 389, repealed by Laws, 1912, special session, chap. 10. S Laws, 1912, special session, chap. 9. ' Biennial Report of State Auditor, 1911-12, p. ix. According to the report of the State Auditor the payment of railroad taxes twice a year will obviate the necessity for borrowing money during the latter part of each calendar year, which will result in a saving of many thousands of dollars annually. The increase in the tax from 4. to 5 per cent, moreover, will produce from railroad taxes an additional income of about $1,000,000 a year. ' <* Concurrent resolution 3, special session, 1912. LEGISLATION. 91 express, car, telegraph, and telephone property shall be assessed "as may be provided by law.'' The constitution now provides for taxing by uniform rule all property according to its true value in money; and for the assessment of railroad, express, car, tele- graph, and telephone property at actual value and for the appor- tionment of such valuations to the local districts in proportion to the number of miles of such property therein. The first report of the permanent State Tax Commission is noted in another part of this report under the heading "Perma- nent Tax Commissions." (See p. 312, below.) SOUTH DAKOTA. Summary. The constitutional amendment proposed by the 1911 legis- lature in South Dakota," providing that gross earnings, net in- come, franchises and licenses to do business in the State, shall be considered in taxing corporations, and that the power to tax cor- porate property shall not be siurrendered or suspended, was rati- fied by the people at the general election of 191 2. Two decisions were rendered by the supreme court of the State bearing on the uniformity clause of the constitution dealing with taxation. The first held that "the constitutional rule that taxes shall be equal and uniform does not deprive the legislature of the power of dividing the subjects of license or occupation taxes into classes, and of taxing some and omitting others, when the classification itself is proper * * * . But the constitution does require that an occupation tax shall be equal and uniform as to all persons embraced within the same class." * The second held that, as applied to special taxation and special assessments for local improvements, the requirement that all taxation shall be equal and uniform is fully met when special assessments or taxes are uniform as to all property benefited by the local improve- ments for which they are laid, in proportion to the benefits con- ferred by such improvements.'' In another decision the supreme court of South Dakota laid down the rule that the State Board of Assessment and Equaliza- tion could not equalize one class of property at a certain per cent of its true value and another class at a different per cent, and a further rule that while the statute requires all property to be <» Laws, 1911, chap. 265, proposing an amendment to Art. XI, sec. 3. 6 State V. Doran, 134 N. W. Rep., 53 (1912). c Haggart -v. Alton, 137 N. W. Rep., 372 (1912). 5744°— 14 9 92 SPECIAL REPORT ON TAXATION. assessed at its true value, the state board, in raising the total assessments of the State, may not add more than $3,000,000." IOWA. Summary. No legislative session was held in Iowa during 191 2. The work of the Special Tax Commission authorized by the legislature of 191 1 is noted in another part of this report under the heading "Special Tax Commissions." (See p. 253.) Cases of importance decided by the supreme court of the State in 191 2 were; (i) That a contract of sale for land is taxable;'' (2) that an option for the sale of land is not taxable;"^ and (3) that the imposition of wharfage fees by a city on a boundary river of the State is not an interference with interstate commerce. ^ NEBRASKA. Summary. There was no legislative session during 191 2, but since the publication of Part IV the initiative and referendum have been made a part of Nebraska's constitution. A decision rendered in 191 2 by the supreme court of the State held that a city may impose a license tax on telegraph companies under a charter authorizing a tax on businesses and occupations.' The same court decided in another case that the dower interest of the widow, whether taken under will or by operation of law, is not subject to an inheritance tax.' According to an opinion of the attorney general the capital- stock tax as applied to foreign corporations should be levied on the basis of capital stock employed within the State. KANSAS. Summary. No legislative changes have been effected in the taxation sys- tem of Kansas since the publication of Part IV. The submission of a constitutional amendment to permit different methods of taxing the various classes of personal property, and the passage of an act providing for better supervision of local assessments, were urged by the Tax Commission in its report to the 191 3 legislature. a Sioux Falls Savings Bank v. Minnehaha County, 135 N. W. Rep., 689 (1912). 6 Rampton v. Dobson, 136 N. W. Rep., 682 (1912). <: Bissell V. Board of Review of Town of Dunlap, 138 N. W., Rep. 830 (1912). i Keckevoet 1/. City of Dubuque, 138 N. W. Rep, 540 (1912). « See ' ' Judicial Decisions, "p. 154, below. /Ibid., p. 176. LEGISLATION. 93 MISSOURI. Summary. There have been no legislative sessions in Missouri since the publication of Part IV, but two amendments to the constitution, b6th of which were defeated, were submitted under initiative petition at the general election of 191 2. One was a proposal to abolish the present system of taxation of individuals, corpora- tions, and business, and to substitute a land tax and a tax on public-utility franchises, and to exempt from taxation bonds of the State and its subdivisions. The other provided for the crea- tion of a permanent tax commission of three members to succeed to the duties of the present State Board of Equalization in the matter of assessing the properties of railroad, telegraph, tele- phone, and car companies and in equalizing the various classes of real and personal property in the counties, and to have general supervision over local assessments for purposes of the state tax. E. LEGISLATION DURING 1912 IN STATES NOT COVERED BY PUBLISHED REPORTS OF THE BUREAU. ARIZONA. Summary. The first legislature of Arizona met in both a regular and a special session in 19 12. This State was probably the first to enact, during its initial legislative session, tax laws providing for a marked degree of centralized administration. The State Tax Commission, with broad supervisory and directive powers, was created, and its members were made to form a majority of the State Board of Equalization, which board was provided for by the state constitution. Other laws passed at the first session provided for taxation of property at full cash value; taxation of railroad, telegraph, telephone, and mining property on the ad valorem basis; and the taxation of express, sleeping car, and private car companies on gross receipts, for state purposes, in lieu of all other taxes. At the second, or special, session of the legis- lature laws were passed taxing surety companies on gross-premium receipts, for state purposes, in lieu of other taxes for conducting the surety business; and taxing legacies and successions. Another act submitted to the people a constitutional amendment to per- mit the legislatiure to determine the " manner, method and mode of assessing, equalizing and levying taxes * * *. " This amend- ment was adopted at the general election of November 5, i9i2.« "The amendment was adopted by a vote of 15,967 for, and 2,283 against, giving the largest majority received by any of the five amendments submitted at the same time. 94 SPECIAI, REPORT ON TAXATION. Notwithstanding the necessity for broadening the constitution, . it is interesting to note that at its adoption provision was made against restricting the legislative power in regard to the classifica- tion of property for purposes of taxation. The importance of this is seen in numerous attempts to change constitutional pro- visions which, in 33 States, require that practically every kind of property shall be taxed by a uniform valuation and at the same rate." A memorial submitted by the International Tax Association for the consideration of the constitutional conventions of New Mexico and Arizona suggested the following as the sole provision necessary to be embodied in their constitutions on the matter of taxation : " The power of taxation shall never be surrendered, suspended, or contracted away. All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax, and shall be levied and collected for public pur- poses only." This language was adopted verbatim by Arizona, not, however, as the sole provision, but as the first of many provisions con- tained in 12 sections of Article IX, which relates to "public debt, revenue, and taxation." In contrast with this broad power granted in the first section there appeared restrictions in section 1 1 which at first seemed to be a serious barrier to accomplishing, in any appreciable degree, centralized tax administration. While some of these difficulties were avoided, the legislature found it necessary to submit to the people the constitutional amendment mentioned in the first para- graph of this summary, and described below (see " constitution "). As the constitutional time limit expired before all of the legisla- tion contemplated had been enacted, the governor called an extra session of the legislature to convene on May 23, 191 2, and among the purposes specified in his proclamation were the following relating to taxation: To consider providing sources of revenue for the support and maintenance of state institutions and departments of the State. To consider providing by law for an annual tax sufficient with other sources of revenue to defray ordinary expenses of the State and for levying an annual tax sufficient to pay the annual interest and principal on the state debt. « Discussion on this subject is found in the proceedings of the Fifth Conference of the International Tax Association, 1911, p. 451. LEGISLATION. 95 To consider enacting a general revenue law providing for the assessment of property for purposes of taxation, and the levying and collecting of taxes. Constitution. Section 1 1 , Article IX, of the constitution originally read as follows : "There shall be a State Board of Equalization, which, until otherwise provided by law, shall consist of the Chairmen of the Boards of Supervisors in the various counties of the State, and the State Auditor, who shall be ex-officio chairman thereof; and there shall also be in each county of the State, a county Board of Equal- ization consisting of the Board of Supervisors of said county. The duty of the State Board of Equalization shall be to adjust and equalize the valuation of the real and personal property among the several counties of the State. The duty of the county Boards of Equalization shall be to adjust and equalize the valuation of real and personal property within their respective counties. Each Board shall also perform such other duties as may be prescribed by law." It was proposed by Laws, 191 2 (regular session), chapter 58, that this section be so amended as to read as follows: "Sec. 11. The manner, method and mode of assessing, equalizing and levy- ing taxes in the State of Arizona shall be such as may be prescribed by law." Thi§ amendment was ratified by the people at the general election, November 5, 191 2. Administration. State Board of Equalization Created by Laws, 191 2 (Reg- ular Session) , Chapter 3 1 . — Under the authority given by sec- tion I r of Article IX of the constitution, the legislatiu-e, in chapter 31 of the Laws of 191 2, provides for a State Board of Equaliza- tion to take the place of the board named in the constitution. The new board is composed of the state auditor, chairman of the Corporation Commission, and the State Tax Commissioners. The state auditor is made president of the State Board of EquaUza- tion and the secretary of the Tax Commission is made secretary to the State Board of EquaKzation. This virtually merges the two state central boards and gives the Tax Commission a pre- dominating position, as the three members of the State Tax Com- mission constitute at all times a majority of the State Board of Equalization. The act makes it the duty of the State Board of Equalization to assess real and personal property, including fran- chise and intangible values of raikoad, telegraph, and telephone 96 SPECIAL REPORT ON TAXATION. companies, except such real estate of railroads as is not used in their daily operation; to equalize assessments by increasing or diminishing the value of property in any county, but it can not diminish the aggregate valuation of all counties; and to fix the rate of taxes for state purposes to be levied and collected in each county. State Tax Commission Created by Laws, 191 2 (Regular Session), Chapter 23. — The legislature, by chapter 23 of the Laws of 19 1 2, provides that the first three members of the Tax Commission are to be appointed by the governor and confirmed by the senate. As the term of each expires his successor is to be elected at general election for a term of six years. Members of the commission are prohibited from holding other offices of trust or profit and are required to devote their entire time to the duties of their office. The board is to hold continuous session. The principal duties and powers of the commission are as follows: To have general supervision over assessors and county boards of equalization; to have authority to direct assessors to raise or lower the value of property, and it is made the duty of the assessor under prescribed penalty to comply with the order of the Tax Commission ; to prescribe all forms of blanks and books used in assessments and collections of taxes ; to take charge of and superintend the enforcement of the direct and collateral inheritance-tax laws and the collection of the taxes provided thereunder; to assess express, sleeping car, and private car com- panies; to require individuals and corporations to furnish infor- mation concerning their capital, funded or other indebtedness, current assets, liabilities, earnings, etc.; to examine witnesses and require the production of books when necessary; to examine laws of other States and countries and recommend legislation; to employ expert and other assistance with respect to the per- formance of the various duties of the commission ; and to require county, city, or town officers to report information as to the expenditure of public funds for all purposes. General-Property Tax. It is the duty of the Tax Commission to supervise the assess- ment of all property, to the end that it shall be assessed at its full cash value." A tax of not to exceed 6 mills on the dollar was levied upon the real and personal property within the State for the fiscal year » I^aws, 1912 (reg. sess.), chap. 23, sec. 8, clause 2. I^EGISIvATlON. 97 ending June 30, 191 3, to defray the necessary ordinary expenses of the State and pay the deficiencies occasioned by reason of such expenses during the preceding fiscal year. Similar taxes, with maximum rates, were levied for the support of the various state institutions, to pay principal and interest of the state debt, etc., and it was provided that the State Board of Equalization should fix the rate which would be sufficient to produce the various sums appropriated, and certify such rate to the board of supervisors of the several counties." Another act provides that in the tax to be levied for state school purposes a rate shall be included suf- ficient to raise the sum of $2,500 for the care and instruction of blind children.* Railroad, Telegraph, Telephone, and Mining Companies. Railroad, telegraph, telephone,<^ and mining'' companies, do- mestic and foreign, are subject to an ad valorem tax on all their real and personal property, including franchise and intangible values of railroad, telegraph, and telephone companies. This tax is for state and local purposes. Railroad, telephone, and telegraph companies are assessed by the State^Board of Equalization, except such real estate of rail- roads as is not used in the daily operation of such roads. The board is not restricted under the provisions of the laws by pre- scribed methods of valuing franchises or other property, but is given practically unlimited power with respect to methods of arriving at such values. In addition to data specifically required to be reported by railroad, telegraph, and telephone companies the board may call for any other information which it deems essential to a complete knowledge of the true cash value of the properties to be assessed. Apportionment of railroad values is principally, but not wholly upon the main-track mileage basis. Property other than main track located in the various counties and municipalities must be considered in the apportionment. The apportionment of tele- graph and telephone valuations is based upon that proportion which the length of the fine in each county bears to the length of the whole line in the State. After apportionment the taxes are levied on all of these companies and collected by county and <• Laws, 1912 (spec, sess.), chap. 64. * Ibid., chap. 9. Ibid., sec. 1743, as amended by Laws, 1912 (extra sess.), chap. 8. c Ibid., sec. 1647, as amended by Laws, 1912 (extra sess.), chap. 8. <* Laws, 1912 (extra sess.), chap. 8, sec. 30. « Codes, sec. 1652, as amended by Laws, 1912 (extra sess.), chap. 8. } Ibid., sec. 1714, as amended by Laws, 1912 (extra sess.), chap. 8. ff Ibid., sec. 1646, as amended by Laws, 1912 (extra sess.), chap. 8. ft Ibid., sec. 1718, as amended by Laws, 1912 (extra sess.), chap. 8. I04 SPECIAL REPORT ON TAXATION. Exemptions. Several minor changes were made in the tax-exemption pro- visions: 1. Gromids appmlenant to buildings belonging to and used exclusively by any fraternal, benevolent, or charitable society, are now exempt. 2. One thousand dollars in "assessed valuation," » of property of resident United States soldiers and sailors of the Civil War, or their widows or orphans, is exempt when the value of their prop- erty is less than $5,000. The former provision allowed $1,000 in amount of their property when their " total assessment " was less than $5,000. Exemptions covered by this paragraph must be claimed. 3. Fruit and nut bearing trees under the age of 4 years are exempt from the time of planting in orchard form, and grapevines under the age of 3 years from the time of planting in vineyard form. 4. Private libraries, formerly exempt, are limited to an exemp- tion of $400 of assessed value. 5. There is added to the list of exemptions all wearing apparel in actual use, and instruments belonging to professional men. 6. Thfi exemption of water rights granted by mutual irrigation canal companies is limited so as to apply to lands of the owner when entirely within the State. 7. The former exemption of $200 for improvements was, by law, based on a 100 per cent assessment. By the present law it is based on a 40 per cent assessment and is limited so as to apply to any one family when improvements do not exceed $1,000.' Poll Tax. The annual county poll tax which was collected for the "current expense" fund of the county, prescribed in chapter 3, title 10, of the Codes, is repealed."^ The law authorizing counties to levy for highway pmposes a poll tax of not more than $4 upon each adult is amended by requiring such a tax to be imposed and prescribing that it shall be levied upon able-bodied males between 21 and 50 years of age; the amendment further provides that, when such tax is collected a Forty per cent of full cash value. 6 Codes, sec. 1644, as amended by Laws, 1911, chap. 171, and Laws, 1912 (extra sess.), chap. 8. c Laws, igi2 (extra sess.), chap. 3. LEGISLATION. 105 within incorporated municipalities, 75 per cent of the tax shall be turned over to such mimicipalities for their road fund. " The law authorizing the county commissioners to levy a special highway tax not to exceed $1 on each $100 in value of taxable property in the county is amended so as to authorize a levy not to exceed $1 on $100 of assessed valuation of taxable property in the county and to authorize the county commissioners to provide that the special tax may be paid by labor upon the highways.* Banks — State and National. Details as to assessment of state and national banks are changed by providing that the shares are to be valued by adding the sur- plus and undivided profits to the face value of the shares and then deducting therefrom any amount of the capital stock invested in real estate. The remainder is assessed at 40 per cent of its value. The shares of domestic trust and surety and fidelity companies are also to be assessed by this method. The former law specified that the shares should be valued with regard to undivided profits or surplus, and that the real estate of banks should be subject to taxation as other real estate. A provision is added whereby for- eign banks and private bankers, having no fixed capital used per- manently in their business, are to be assessed on the general aver- age, as shown by daily or monthly balances, of money used during the year.'^ By the amended law no deduction of debts from credits is al- lowed individuals on account of shares of stock held in state, savings, or national banks, or surety and fidelity companies, nor from moneyed capital used in competition with banks, namely, "moneyed capital" falling within the meaning of section 5219 of the Revised Statutes of the United States.-* Capital-Stock Tax. To the annual capital-stock tax provisions is added a require- ment that all corporations, domestic and foreign, except insurance, surety, corporations which are not organized for pecuniary profit, cooperative telephone and irrigation corporations, and mining corporations not owning productive mines, must procure annually o Codes, sec. 894, as amended by Laws, 1911, chap. 60, and further amended by Laws, 1912 (extra sess.), chap. 4. b Codes, sec. 901, as amended by Laws, 1911, chap. 60, and further amended by Laws, 1912 (extra sess.), chap. 11. « Codes, sec. 1672, as amended by Laws, 1912 (extra sess.), chap. 8. <* Ibid., sec. 1683, as amended by Laws, 1912 (extra sess.), chap. 8. I06 SPECIAL REPORT ON TAXATION. from the secretary of state a license authorizing them to do busi- ness in the State ; but, in order to secure exemption from the capital- stock tax, corporations of the three classes last named must file annual statements with the secretary of state. Changes were made with respect to the penalty for failure to pay the the capital-stock tax. After newspaper publication of a proclamation by the governor and after the date for payment, if the tax has not been paid, the charters of deHnquent corporations are forfeited to the State. Upon payment of taxes and penalties, corporations whose charters have been thus forfeited may be rein- stated. Formerly the penalty consisted in a fine, which, with the amoimt of the tax due, was recoverable in an action at law." Vessels. By an amendment to section 1678, Codes, the situs of unreg- istered vessels, boats, and small craft owned by a corporation is made, for taxation pmposes, the designated principal place of business of the owner. By the same amendment such property is made liable for all local taxes thereon.'' Fees. The list of fees to be paid the state insitfance commissioner is supplemented by the following : Ten dollars for filing amendments to articles of incorporation, and $10 for filing annual certificates showing whether fire insurance companies have made any deposit for the benefit of its policy holders and its creditors."^ KENTUCKY. Summary. Preparatory to revising the tax system of Kentucky, the 1912 legislature passed two important measures. One pi oposed a con- stitutional amendment which, if adopted by the voters of the State, will permit the classification of property for taxation pur- poses, the separation of sources of state and local revenue, and the submission of future tax legislation to the referendum of the people. The other" provides for the appointment of a temporary joint legislative commission, charged with the duty of examining the tax system of Kentucky and of other States for the purpose of aiding the legislature to revise the revenue system. " Laws, igi2 (extra sess.), cliap. 6. ^Laws, 1912, chap. 34. b Ibid., chap. 8. «H. R. No. 24. "Ibid., chap. 5. LEGISLATION. 107 Constitution. la Kentucky, as in most other States having constitutions which do not permit the classification of property for taxation purposes, shares of stock, bonds, and other Hke forms of intangible property, when assessed at full value are taxed more heavily than other classes of property. Under the present system, bonds held in certain cities of Kentucky are taxable to the extent of from 40 to 75 per cent of the usual income therefrom." This is one of the grounds upon which the former commission * urged the passage of the resolution submitting the proposed constitutional amendment. It also proposed the appointment of a tax com- mission which, during the time that this amendment is before the people, could be engaged in making a careful study of the entire subject of taxation, so that after the adoption of the amend- ment, and without tmdue loss of time, the legislature might begin the work of framing better tax laws tmder the wider dis- cretion that would be permitted by the amendment. The proposed amendment to the constitution"^ is designed to provide, in substance — " * * * not that taxes shall be uniform on all classes of property, as at present, but that the taxes shall be uniform upon all property of the same class, and, furthermore, to confer directly upon the Legis- lature the power to classify the sources of revenue, designating cer- tain sources of revenue exclusively for state purposes, certain other sources of revenue exclusively for city purposes, and certain other sources of revenue exclusively for county purposes. "^ Administration. Two acts" provide for uniformity in the matter of recording, collecting, and certifying taxes, and create the office of "super- visor of revenue agents. " The principal duty of revenue agents is to cause omitted property to be listed for taxation. Shares of Stock. In addition to the legislation mentioned, a tax was imposed on the shares of domestic life insurance companies.' This tax is for " " Tax revision, " Report of Temporary Tax Commission to the Governor, 1909, p. 14. 6 Ibid., p. 6. 'Code, sec. 171. •'"Tax revision," Report of the Temporary Tax Commission to the Governor, 1909, p. 4. 'Laws, 1912, chaps. 116, 131. /Ibid., chap. 65. 5744°— 14 10 I08 SPECIAL REPORT ON TAXATION. state and local purposes, and is assessed to the companies upon the value of their shares. It is chargeable by such companies against the accounts of stockholders. The act also provides that all funds held by such companies shall be treated for taxation purposes in the same manner as deposits in banks and trust com- panies, and that domestic life insurance companies shall be subject to the provisions of the Laws of 1906, chapter 22, Article IV, sub- division 2, governing taxation of banks and trust companies. A bill which in effect provided for the exemption of shares of stock of foreign corporations in the hands of resident holders was vetoed by the governor. LOUISIANA. Summary. Diuing 191 2 the Louisiana legislature had one regular and one special session. The only tax legislation passed at the regular session worthy of mention was a state-license tax on industries, principally extractive industries, an amendment to the inheritance- tax law, and the submission of proposed constitutional amend- ments. The special session was called for the specific purpose of passing acts submitting to the people proposed constitutional amendments, the majority of which failed of adoption. The amendments proposed, due to the important changes which were attempted, are here treated more fully and in different form from the general treatment appearing in another part of this re- port dealing with the constitutional amendments proposed, adopted, rejected, or passed during 191 2. (See pp. 407 et seq.) Constitution. The following amendments to the constitution were adopted by popular vote in November, 191 2: Exemptions. — To extend the time to January i, 1916, within which steamship companies may be organized and obtain certain exemptions from taxation granted by a constitutional amendment of 1910, i. e., upon tiling with the secretary of state proof that the company has been organized and its authorized capital stock paid in cash, such company, its capital stock, and all its property, are exempt from all state and local taxes and Hcenses for 15 years; provided, that it is domiciled in some port of the state; that its capital stock is at least $3,000,000, payable only in cash; and that it is a common carrier." "Laws, 1912, act 139, LEGISLATION. 109 Exempted from taxation, for 20 years from their organization, are corporations hereafter incorporated to lend money on country property at not more than 6 per cent, having a paid-up capital stock of $250,000." The legal reserve of domestic Ufe insurance companies is also exempted.* Vehicles. — Article 291 of the constitution was amended so as to permit parishes to tax vehicles using public roads, notwith- standing the property in the municipality within which the vehicle is kept may be exempt from parochial taxation."^ Local Improvement Bonds. — Article 281, as amendedin 1910, authorizing the issuance of bonds by local districts for local improvements and the formation of drainage districts for the reclamation of lands therein ahd the levy of an acreage tax upon the lands benefited, was amended by providing for court proceed- ings, on the application of any person in interest, to enforce the imposition or collection of taxes to retire said bonds or to pay the interest due thereon. The amendment also provides for renewals of such bond issues."^ The following proposed amendments were defeated by popular vote in 191 2: Railroads. — The proposal to exempt from taxation for a period of 10 years, any railroad constructed and completed between June I, 191 2, and January i, 191 7, the exemption, however, not to apply to terminal faciHties for which franchises have been granted, was ijot adopted." State Indebtedness. — The proposal to authorize the state bonded indebtedness to be retired by an annual tax of 1.2 mills was not adopted.' General Tax Legislation. — Another proposed amendment intended to change materially the tax system of the State was defeated. The provisions were substantially as follows: " The general assembly shall have power to classify all property for taxation and to adopt different rules and rates for different "Laws, 1912 (extra sess.), act 6. ''Ibid., act II. •'Laws, 1912, act 236. ''Ibid., act 132. « Ibid., act 230. A similar provision in the 1898 constitution exempted railroads for 10 years, thereafter constructed and completed prior to January, 1904; subsequently extended to January, 1909. / Laws, 1912, act 203. » Ibid, (extra sess.), act 13. no SPECIAL REPORT ON TAXATION. classes, subject to equality and uniformity within the class through- out the district levying the tax. The ad valorem property tax is limited to 4 per cent. Sources of state and local revenue shall be segregated, each taxing authority being restricted to its own sources of revenue as therein assigned. Unless changed by two- thirds vote of the leg- islatture, the sources of state revenue shall be the operative prop- erty of railroads, street railroads, combined street railroad, electric light and power business, heating plants; telegraph, tele- phone, express, car, steamboat, and pipe-line property; all banks and all insurance companies, except their real estate ; sugar refineries, rice mills, cottonseed-oil mills and refineries, and petroleum refin- eries; mines, oil and gas wells, and quarries. All other taxable property shall be sources of local taxation. State taxes may be imposed as follows: Taxes on transfers of stock; an organization tax upon domestic corporations, with a maximum-rate limit; an annual capital-stock tax on corporations, the tax on foreign corporations to be levied on the proportion used in the State in intrastate business; special provisions for auto- driven vehicles; a tax on future contracts with respect to cotton, grain, coffee, rice, and sugar; and a progressive inheritance tax (with numerous Hmitations). Other special taxes may be im- posed by two-thirds vote of the legislature. The general assembly shall have power to levy, classify, and graduate license taxes on businesses and occupations falling under the police power. The minor taxing jurisdictions shall have power to levy such taxes under certain restrictions. The assessment of property for state purposes shall be made by a state tax commission, whose duties are set out in detail. Public-service corporations shall be assessed on their physical property and franchises separately, but the general assembly may direct a combined assessment based on gross receipts, or by dividends and interest, or other available method. Detailed pro- visions are made as to the assessment of banks and insurance com- panies. Irrigation canals shall be taxed on gross receipts; the refineries and mills above referred to shall be assessed on a fair market valuation; and, until changed by a two-thirds vote of the legislature, mines, oil and gas wells, and quarries shall be taxed upon a percentage of gross value of the product. As to property reserved for local taxation a lower percentage of value may be established for personal than for real property, and a lower proportion of true value may be placed on improve- ments than on lands. LEGISLATION. 1 1 1 Provision is made for temporary reimbursement of the local districts for loss occasioned by the withdrawal of certain property from local taxation. Some of the provisions of the constitution which this proposed amendment was intended to repeal are : Taxation shall be equal and uniform throughout the limits of the authority levying the tax and all property shall be taxed in proportion to its value. A state board of appraisers shall assess the property of railway, telegraph, telephone, sleeping car, and express companies. Grad- uated license taxes are permitted on trades, professions, busi- nesses, and callings, and on those engaged in the business of severing natural resources from the soil or water. An inheritance tax may be levied except as to direct inheritances below $10,000. Foreign corporations may be licensed and taxed by a mode different from domestic corporations, but such different mode shall be uniform and equal as to such corporations transacting the same kind of business. Exemptions. — The following exemptions were proposed but none was adopted: To exempt from taxation, for 10 years from the date of completion, any new canals for irrigation, navigation, and power purposes, if completed within 5 years and if $5,000,000 shall have been expended in construction; " to authorize parishes and self-taxing municipalities to exempt from local taxation, for a period not to exceed 10 years, new industrial enterprises, and the value added by immigrants to unimproved homestead lands ; * to authorize parishes and municipalities to exempt by a referendum vote, an amount not to exceed $2,000 of the value of buildings exclusively occupied by the owners as residences; ' to exempt money in hand or on deposit;"^ to establish a referendum for each parish under which the voters thereof could determine whether or not cities and incorporated towns and villages therein could be released from parochial taxation and licenses, subject to the condition of contributing to parish expenses." General-Property Tax. Delinquent Taxes. — The rate of interest on delinquent taxes collected in the counties is reduced from 2 per cent per month to 10 per cent per annum.*" " Laws, 1912 (extra sess.), act 10. ^ Ibid., act 7. * Ibid., act 4. « Ibid., act 9. c Ibid., act 8. / Laws, 1912, act 171. 112 SPECIAL REPORT ON TAXATION. Floating or General Indebtedness. — All cities (except the city of New Orleans) which are now permitted to levy taxes at lo mills on the dollar for general revenue purposes are authorized to provide for the payment of any floating or general indebtedness, except bonded indebtedness already incurred, by setting aside, for a period not exceeding 25 years, one-fifth of the annual revenue from said tax. « Annual State Licenses. Extractive Industries, etc. — An annual license tax is levied upon persons and corporations engaged in certain industries, principally of an extractive character, including the timber, turpentine, mineral, oil, gas, sulphur, and salt industries. Quar- terly statements must be filed with the state auditor, showing the gross amount of the products so produced, the actual cash value thereof and the location. The tax equal to one-half of i per cent of the gross value of the total production, less the roy- alty, must be paid to the collector of the parish. Royalties are taxed to the owner of the royalty or to the owner of the land. The products are valued at the place where produced, and tim- ber is valued in its unmanufactured state after cutting. The payment of the license tax is in addition to all state and local taxes upon real and personal property.' Theaters. — The license fee on moving-picture theaters in towns of more than 25,000 and less than 50,000 inhabitants was slightly reduced. <= Inheritance Tax. The inheritance-tax law of 1906 is amended by placing the surviving wife or husband in the same class as direct descend- ants upon whom the tax is 2 per cent on property passing by death to such beneficiary, provided no tax shall be imposed on such property passing to the surviving wife or husband below $10,000 in amount or value. "^ - Laws, 1912, act 149. 6 Ibid., act 209. This act expressly repeals Laws, 1910, act 196, which imposed upon several specified products annual license fees, fixed according to quantity of product severed. Act 196, Laws, 1910, was, in Etchison Drilling Co. v. Flournoy, 59 Southern Rep., 867 (1912), held unconstitutional in part. « Ibid., act 229, amending Laws, 1910, act 294. <* Ibid., act 42. LEGISIvATION. 113 MISSISSIPPI. Summary. Among the most important laws passed by the 191 2 legisla- ture in Mississippi were those relating to the taxation of incomes, and of timber, the transfer tax, and the turpentine-extraction tax. A great many of the privilege-tax laws were modified or amended. Details with respect to the various legislative enactments follow under classified subheads. Administration. Assessment Roli^. — Chapter 88, Laws, 1912, amends Code, section 3317, by omitting the provision that municipal authori- ties, in making city-assessment rolls, shall copy the description and valuation of property from the county- assessment rolls. Chapter 89, Laws, 191 2, amends Code, section 4261, as amended by chapter 213, Laws, 1910, so as to somewhat change the form and captions to be used in compiling the general assessment rolls. PersonaIv Property. — Chapter 90, Laws, 19 12, amends Code, sections 4260 and 4270, so as to include provision for the assess- ment of bank capital, automobiles, typewriters, cash registers, adding machines, boats, launches, schooners, and certain other personal property. General-Property Tax. State Rate. — Chapter 87, Laws, 191 2, fixes the state rate at 6 mills for 19 12 and 191 3, and authorizes the governor to borrow money to defray current state expenses. Exemptions. — Chapter 118, Laws, 191 2, provides for the ex- emption from taxation for five years of all grain harvesters and separators, feed crushers and cutters, and rice and flouring mills of 20 horsepower or less. Code, section 4251, exempts certain other agricultural implements. Corporate Taxation. Sleeping Car Companies. — Chapter 95, Laws, 191 2, amends Code, section 3867, so that the state tax on sleeping car companies is now $2.50 per mile of road when their cars are operated on first- class railroads, and $1 .50 per mile of road when their cars are oper- ated on second and third class railroads. The tax was formerly a state tax of $300, and in addition 50 cents per male on first- class raihroad, and 30 cents per mile on second and third class railroads over which the company ran its cars in the State. (Code, sec. 3867.) 114 SPECIAL REPORT ON TAXATION. Gas Companies. — Chapter 104, section 4, Laws, 1912, provides an annual state tax on gas companies, as follows: In town or village less than 2 ,000 population $30 In city of 2,000 to 5,000 population 50 In city of 5,000 to 10,000 population 100 In city of 10,000 to 15,000 population 150 In city of 15,000 to 20,000 population 200 In city of 20,000 to 25,000 population 250 In city of 25,000 or more 300 The tax formerly ranged from $30 to $100, varying according to the population of the cities and villages in which operations were carried on. (Code, sec. 3817.) ElECTric-IvIGHT Companies. — Chapter 104, section 5, Laws, 19 1 2, provides an annual state tax on electric-lighting companies, as follows: In city, town, or village of less than 5,000 population $25 In city of 5,000 to 7,500 population 50 In city of 7,500 to 10,000 population 75 In city of 10,000 to 12,500 population 100 In city of 12,500 to 15,000 population 125 In city of 15,000 to 17,500 population 150 In city of 17,500 to 20,000 population 200 In city of 20,000 to 25,000 population 300 In city of 25,000 or more 400 The tax formerly ranged from $25 to $75, according to the pop- ulation of the cities and villages in which operations were carried on. (Code, sec. 3805.) Freight-Line and Equipment Companies — Gross-Earnings Tax. — Chapters 113 and 114, Laws, 1912, provide for a state gross- earnings tax of 3 per cent on freight-line and equipment companies in lieu of other taxation. Every car company doing business in the State is required to file annually a sworn statement with the state auditor showing the amount of gross earnings and other facts necessary for assessment, and the state auditor is given power to subpoena and examine the officers of the company for the pur- pose of ascertaining additional facts. The state auditor is required to certify to the state treasurer the amount of tax due. This tax is payable to the state treasurer. A penalty of 10 per cent is imposed for each month that the tax remains unpaid, and a fine is imposed for fai ure to file state- ments. Each refrigerator, oil tank, and stock car not owned, but oper- ated by a railroad, was formerly taxable to the road at the rate of $2 per car. (Code, sec. 3856.) LEGISLATION. 115 State Privilege Tax. Dyeing and Cleaning Plants.— Chapter 91, Laws, 1912, pro- vides a privilege tax on persons, firms, and corporations engaged in the business of cleaning, pressing, and dyeing. Peddling. — Chapter 92, Laws, 191 2, amends Code, section 3849, as amended by chapter 73, Laws, 1908, and chapter 95, Laws, 1910, so as to provide for a state privilege tax on parties, other than the producer, peddling farm products. Chapter 93, Laws, 1912, amends section 2 of chapter 96, Laws, 1910, so as to limit the number of peddler's licenses issued to any trader handling fruits or vegetables from cars. Employment Agencies. — Chapter 94, Laws, 191 2, provides an annual privilege tax of $500 for employment agencies employing laborers to engage in labor outside of the State, and imposes a penalty upon persons operating without license. Laundries. — Chapter 96, Laws, 191 2, amends Code, section 3830, as amended by chapter 97, Laws, 19 10, so as to change slightly the graduation of the privilege tax on laundries and so as to fix a privilege tax on agents for laundries located outside of the State. Certain Other Occupations. — Chapter 97, Laws, 1912, pro- vides state privilege tax on certain other occupations and businesses in the following terms : Cigar stands: On each cigar stand in cities and towns $io Cash registers : On all persons or firms having a place of business for sale of cash registers lo Dealers in oriental wares and novelties: On all persons, firms, and corporations dealing in oriental wares and novelties (does not apply to regular merchants) . . loo Marble dealers: On all concerns dealing in marble or marble monuments 15 Loan agents: On all persons, firms, and corporations acting as loan agents in dealing in securities or loaning money 25 Near-beer joints: On each joint dealing in near beer (provided, that the pay- ment of this tax shall not validate the sale of any liquors the sale of which, but for this act, would be illegal) 500 Pawnbrokers. — Chapter 98, Laws, 1912, amends Code, section 3848, as amended by chapter 94, Laws, 19 10, so as to increase the privilege tax on pawnbrokers from $100 to $250. Cottonseed-Oil Mills — Patent Medicine Vendors. — Chap- ter 99, Laws, 1912, amends Code, section 3801, by graduating the annual privilege tax on cottonseed-oil mills according to capacity of output instead of capital; the tax ranges from $85 to $1,250. The same act reduces the privilege tax on transient patent- medicine vendors from $500 (Code, sec. 3847) to $100 in each county. Il6 SPECIAL REPORT ON TAXATION. Mail-Order Merchants and Agents. — Chapter loo, Laws, 191 2, provides an annual state privilege tax of $10 on persons, firms, or corporations doing a mail-order mercantile business, and on agents receiving orders for sych companies. Railroads. — Chapter 102, Laws, 1912, amending Code, section 3856, divides railroads into various classes, for the purpose of levying the state privilege tax as specified below: On first class (except railroad on which levee tax is paid), per mile I45. 00 On second class (except railroad on which levee tax is paid) per mile 25. 00 On third class (except railroad on which levee tax is paid), per mile 10. 00 On narrow gauge (except railroad on which levee tax is paid), per mile 2. 50 On levee-district railroad of first class within levee district, on which levee- district tax is paid, per mile 20. 00 On railroad of second class within levee district, on which levee tax is paid, per mile 15. 00 On railroad of third class, within levee district, on which levee tax is paid, per mile 7. 30 On narrow-gauge railroad, within levee district, on which levee tax is paid, per mile 2. 50 Certain administrative details are also provided. By the provisions of the law formerly in force (Code, sec. 3856), railroads were divided into four classes and taxed from $2 to $22.50 per mile, according to class. Supervising Architects and Contractors. — Chapter 103, Laws, 1 91 2, extends the state privilege tax on architects (Code, sec. 3774) so as to require every person supervising the erection of buildings as architect to pay a state license of $10. It also amends Code, section 3793, so as to graduate the state privilege tax on building contractors according to the size of the city or village in which operations are carried on, and the number of men employed, instead of according to the cost of buildings erected. This tax ranges from $7.50 to $50. It makes contractors' foremen also liable to the tax. The tax does not apply in country districts. Billiard Tables, Bowling Alleys, and Certain Games.— Chapter 104, sections i and 2, Laws, 191 2, provides an annual state privilege tax on each establishment where billiards, pool, or similar games are played, as follows : In cities of 20,000 population or more $500 In cities of 10,000 to 20,000 population 400 In cities of 7,500 to 10,000 population 300 In cities of 2,500 to 7,500 population 200 Elsewhere 100 Where more than 7 tables, for each additional table 75 LEGISLATION. 1 1 7 This tax does not apply to homes or clubs where games are played privately without charge. No other privilege tax can be levied on such establishments or the tables therein, except a municipal tax, which can not exceeding 50 per cent of above tax. On each establishment where a bowling alley or similar con- trivance is provided for public use, a tax is imposed as follows: In cities of 10,000 population and over $ioo In cities of 5,000 to 10,000 nc In cities of 2 ,000 to 5,000 50 Elsewhere jo By the law formerly in force (Code, sec. 3778), public billiard, pool, and Jenny Lind tables and bowling alleys were taxed by the state privilege tax system from $10 to $75 each, varying according to the size of the village or city in which operated. Moving-Picture Shows. — Chapter 104, section 3, Laws, 191 2, provides an annual state privilege tax on moving-picture shows and similar amusement places in cities of a population of 2,500 or more, as follows: Where seating capacity is i ,000 or more $100 Where seating capacity is 750 to 1,000 75 Where seating capacity is less than 750 50 In cities or towns of less than 2,500 population the tax is based upon population and not upon seating capacity, as follows: Where population is more than 1,000 and not more tlian 2,500 $25 Where population is 1,000 or less 15 On all dance rooms and halls 10 The above tax is in lieu of all other privilege taxes, except munic- ipal taxes. Insurance Agents. — Chapter 105, Laws, 1912, provides that agents for all kinds of instuance, excepting fire and life, shall pay to the State an annual tax of $10, provided that any agent paying a license as a fire, life, or industrial insurance agent shall not be required to pay this tax in addition. The law formerly in force required insurance agents of the classes taxed by this law to pay state license fees varying from $5 to $30, according to place of doing business. (Code, sees. 3826 and 3828.) Realty Transfers. — Chapter 106, Laws, 191 2, provides a state tax of $1 per $1 ,000 (or fractional parts of $1 ,000 above $500) con- sideration, which shall not be less than value of property, on all realty transfers other than deeds of trust or mortgages of realty. Il8 SPECIAL REPORT ON TAXATION. Proprietary Drinks and Soda Fountains. — Chapter 107, Laws, 1912, amends Code, section 3790, as amended by chapter 94, Laws, 1910, amends Code, section 3868, and repeals section 7 of chapter 74, Laws, 1908, so that the state privilege tax on proprietary drinks and soda fountains is now as follows : On each proprietary-bottling establishment — Where daily capacity is less than loo dozen bottles $50. 00 Where daily capacity is not less than 100 nor more than 200 100. 00 Where daily capacity is not less than 200 and less than 400 150. 00 Where daily capacity is 400 dozen or more 400. 00 On each such establishment selling at wholesale except in bottles 50. 00 On each depot for distribution or shipping of proprietary drinks 100. 00 On persons selling such drinks at retail in towns of more than i ,000 population. 12. 50 On persons selling such drinks at retail in towns of 300 to 1,000, inclusive 7. 50 Elsewhere 5. 00 On soda fountains as follows : Oneachsodafountainintownsof 2,oooor more 10. 00 On each soda fountain in towns of 300 to 2 ,000 5. 00 Elsewhere 2. 50 Bottling establishments were formerly taxed $50, distrib- uting stations $150, and retailers from $2.50 to $25. (Code, sec. 3790-) Exemption. — Chapter 119, Laws, 1912, provides for the exemp- tion from a privilege tax of hotels, restaurants, stands for the sale of fruits, lemonade, nervo-cola, soda water, and proprietary drinks within the inclosure of any agricultural or county fair grounds; provided, the privilege to sell said drinks and to have restaurants and hotels be issued only by said agricultural or county fair associations. Automobiles. — Chapter io8. Laws, 191 2, provides for the numbering and registration of automobiles and for payment of the registration fee. It requires each owner of an automobile to report certain specified details to the state auditor who issues number tags. Penalty is provided for failure to attach said tags. Every automobile owner must accompany his report to the state auditor with a registration fee (which is payable annually) for state purposes, as follows: An automobile of 25 horsepower or less $5 An automobile of more than 25 horsepower but less than 40 15 An automobile of more than 40 horsepower but less than 50 20 An automobile of 50 horsepower or more 25 A nonresident may operate an automobile 30 days without pay- ing the registration fee. I^EGISLATION. ' 119 Trading-Stamp Companies. — Chapter 109, Laws, 1912, pro- vides a privilege tax on the business of selling trading stamps," as follows : On each person or company engaged in selling trading stamps to merchants $250 On each person or company engaged in redeeming trading stamps 250 Turpentine Extraction. — Chapter no, Laws, 1912, provides an annual state privilege tax of one-fourth of i cent for each cup or box used in the business of extracting turpentine from standing trees. Each person or company so engaged is required to file annually with the state auditor a sworn statement of the total quantity of turpentine extracted. The state auditor determines therefrom the amount of tax due and makes draft therefor, which he turns over to the state treasurer for collection. Failure to file a sworn statement with the state auditor is a misdemeanor. If said taxes are unpaid 30 days after demand by the state treasurer, 10 per cent is added and 10 per cent additional for each subsequent month, and if unpaid 60 days after said demand, sufficient goods and chattels of the delinquent may be distrained to pay the taxes and penalty, such property to be advertised and sold pubHcly. CrEOSOTing Plants. — Chapter iii, Laws, 19 12, provides a state privilege tax upon creosoting plants, as follows : Each plant is required to pay the state one-fortieth of one mill on each foot, board measure, of lumber treated at the plants and sold. A sworn statement for each plant is required to be filed annually with the state auditor by the operator, showing total output, feet, board measure, and total gross sales. The state auditor deter- mines therefrom the amount of tax to be paid and makes draft therefor, which he tiurns over to the state treasurer for collection. Failure to file statement is a misdemeanor. A penalty of 10 per cent is imposed for each month that the tax remains unpaid, and after 60 days sufficient property of the owner, operator, or lessee of the plant may be distrained to pay the tax and penalty, said property to be advertised and sold publicly. T1MBERI.AND.— Chapter 112, Laws, 1912, provides an annual state privilege tax of 20 cents per acre on the business of buying, owning, or holding more than 1,000 acres of timberland; pro- vided, if such lands are taxed 5 cents acreage tax for levy pur- poses, said levy tax is to be deducted from this state privilege tax. " A person or company engaged both in selling and redeeming said stamps requires only one privilege tax. I20 SPECIAL REPORT ON TAXATION. Each person, firm, or corporation liable to the tax is required to file annually with the state auditor a sworn statement of all land bought, owned, or held for year ending December 31, preceding. The state auditor determines the amount of tax to be paid and makes a draft therefor, which he turns over to the state treasurer for collection. Failure after demand to file said statement is a misdemeanor. A penalty of 10 per cent is imposed for each month that the tax remains unpaid, and if unpaid 60 days sufficient land may be seized and sold to pay the privilege tax and expenses. Renewal Exemption — Certain Manufacturing Enter- prises. — Chapter 115, Laws, 1912, amends Code, section 4251, subdivision v, by providing for the exemption for a period of five years from date of beginning of operation of permanent factories established before 1 9 1 8 and engaged in the following manufactures: Of cotton goods, cement, cement plaster, lime, rock and stone, ute, ramie, wool, furs, or metals; of manufacturing machinery or implements, or similar articles in a finished state; of wagons, carriages, buggies, furniture, clothing, or shoes; and of pulp from wood or wood fiber. Canneries and meat-packing houses having a paid-in capital of $20,000 or over, and creameries, are exempt. Claimants for exemption under this act are re- quired to make application to the state auditor who, with the attorney general, determines whether the exemption shall be allowed. The state auditor then notifies the chancery clerk in the county in which the factory is located. Municipalities may grant like exemptions, not exceeding 10 years. This act does not apply to factories which belong to a trust, pool, or combine. Theater Licenses. — Chapter 116, Laws, 1912, amends Code, section 3877, so that in cities of between 2,000 and 4,000 popula- tion the theater license is $35 instead of $50, as formerly. Peddlers License — Exemption. — Chapter 117, Laws, 1912, provides that any person who has lost both feet or is unable to walk is exempt from paying a peddler's privilege tax. Income Tax. Chapter loi. Laws, 1912, provides a state tax of 5 mills on the dollar on incomes in excess of $2,500. Each person Hable to the tax is required to fill out a blank showing his income from all sources and forward it to the state auditor, who notifies each county tax collector of the amount of taxes to be collected in his county. The law provides also other administrative details. LrEGISLATION. 121 NEVADA. Summary. There was no tax legislation of importance enacted at the special session of the Nevada legislature in 19 12. The governor urged the creation of a state tax commission, in lieu of the State Board of Assessors, such commission to have full inquisitorial powers with respect to the valuation of all kinds and classes of property in the State, and to be a State Board of Equalization, with power to act both upon its own initiative and upon appeal. He urges that it should have original power to assess railroad, telegraph, tele- phone, and all other public utilities and common carriers, to prescribe the method of such assessment, and to fix uniform valuations on cattle, sheep, horses, and swine, and upon land. This measm^e at the regular session passed the assembly by practically a imanimous vote, but was laid on the table in the senate. At the special session of the legislature held in 1912, it was defeated in the assembly. The advocates of the measure believed that it would result in lessening the onerous taxes on the small-property owners, and in equalizing them on the larger property owners, who are believed to be escaping their just share of the burden of state government. It was also believed that by this method a large amount of property would be placed on the assessment rolls that is now imdervalued or escaping taxation altogether. Such legislation as was passed at the special session of 191 2 follows. General-Property Tax. An act" fixed the annual state rate at 60 cents on each $100 of taxable property, including the net proceeds of mines and mining claims, and provided for apportionment of the proceeds among the various state funds. This law is practically the same as the 191 1 law.* Another act authorizing the State to borrow from the state school fimd " at such times and in such amounts as may be neces- sary * * * for the purpose of keeping the State on a cash basis," etc.,'^ provides for meeting the principal and interest on such loans by means of an ad valorem tax of 3 cents upon each $100 of all taxable property in the State, " including the net pro- ceeds of the mines. " The provisions of the act are to be executed imder the direction of a Board of Commissioners, consisting of the governor, state comptroller, and state treasurer."* a Laws, 1912 (spec, sess.), chap, s, ' Laws, 1912 (spec, sess.), chap. 2. 6 Laws, 1911, chap. 90. * Ibid., sec. 3. 122 SPECIAI, REPORT ON TAXATION, SOUTH CAROLINA. Summary. The 191 2 legislation in South Carolina was of little general interest. The laws passed, with but few exceptions, were local in character, relating principally to specific counties and minor taxing districts. Insurance. The law regulating insurance was amended by the enactment of additional sections." The original act and subsequent amendments,'' for which a con- cise statement is difficult, subject all insurance companies doing business in South CaroUna to pay fees and to comply with certain regulations. For the protection of policy holders with "any company, asso- ciation, inter-insurer, Lloyds, firm or individual, not licensed to do business" in South Carolina, the new sections provide: (i) A method by which fire losses due under such pohcies may be ad- justed by regularly Ucensed adjusters, namely, by paying 3 per cent of premiums if authorization of adjustment is obtained "within sixty days of the beginning of the insurance," and i per cent of the amount of the loss; if authorization is obtained after 60 days, then by paying an additional fee of one-fourth of the premium. (2) A method by which premiums on policies here- tofore written by unlicensed companies may be collected and remitted to such companies, namely, by paying a fee equal to i per cent of the net premiums collected within the State, and promising not to write new business in South CaroHna. Each insurance agent is required to procure a Ucense provided under previously enacted sections of the act. Quarterly payments of annual admission fees are also provided for companies admitted after October i of each year. Other Tax Legislation. Bonds hereafter issued by cities, counties, and school districts are exempted from taxation.'^ A provision of the Code<^ limits the municipal tax levy to i}{ per cent for cities containing over 5,000 inhabitants and to i per cent for cities and towns of 1,000 to 5,000 inhabitants. This "■ Laws, igi2, act 300. 6 Laws, 1908, act 434, amended by Laws, 1909, act 3, and Laws, igio, act 420. "Laws, 1912, act 385. (^Code, 1902, sec. 1984. LEGISIvATlON. 1 23 section has been amended" so as to permit the levy of additional taxes for the pa5rment of municipal bonds and the interest thereon. An act * provides that Kershaw County board of equalization shall be brought under the general law providing for such boards in all counties. The law regulating traffic in seed cotton and in packed hnt cotton " was amended "^ so as to change the dates between which persons engaged in such traffic in certain counties are required to secure a license. An additional county was exempted from the general law,« which provides that cotton and cotton seed shall be sold without city license or tax in all cities and villages of less than 50,000 population.' A number of acts" relate to road taxes in different counties. Nearly all of the acts referred to provide poll taxes, ranging from $1 to $3 per head, the proceeds of which are to be applied to road work. In most cases these acts prescribe that persons liable to road duty must, in Heu of performance of labor, pay the tax in cash. In one county a 4-mill rate on taxable property is provided for road work. In another the highway commission is given discretion as to the use of railroad taxes. Tliree acts* relate to school taxes in particular school districts. An act^ reheves the county treasm-er from attendance at con- venient places for the purpose of collecting taxes in WilHams- burg County. The act^' providing that certain cities (Columbia and Greenville) be permitted to tax abutting property for perma- nent street and sidewalk improvements has been amended so as to include Spartanbiu-g. Another act * changes in minor details the duties of township commissioners in Berkeley County. A license fee and recording fee, respectively, are provided for in two other acts.' The first requires all embalmers to pay an annual license fee of $10, the proceeds to be used exclusively for the maintenance of the State board of embalmers. The second pro- oLaws, 1912, act358. fflbid., acts 302, 305, 336, 369, ^VoiA., act 380. 461, 462, 463, 464, 469, 470. ^Laws, 1905, act 458; amended by ''Laws, 1912, acts 392, 394, 396. Laws, 1911, act 16. »Ibid., act 304. "iLaws, 1912, act 306. Hbid., act 315. «Laws, 191 1, act 17. *Ibid., act 343. /Laws, 1912, act 323. 'Ibid., acts 426, 491. S744°— 14 « 124 SPECIAL REPORT ON TAXATION. vides for the regulation and supervision of investment companies and requires a recording fee of $2.50 to accompany certain data which are to be filed by each company. Lands benefited by certain drainage projects are required by two acts to be classified." The scale of assessment upon such lands is to be in the ratio of 5, 4, and 3, namely, as often as 5 mills per acre are assessed against land in class A, 4 mills shall be assessed against class B, and 3 mills against class C. The c«sts of improvement are assessed against the property benefited at a maximum annual assessment of $5 per acre. VIRGINIA. Summary. No material change in Virginia's tax system was effected by the legislative acts of 191 2. Those of a general character provide for a modification in the method of assessing certain kinds of property, a municipal tax on the "franchise" of pubHc-utiHty companies, a slight extension of the license-fee system, and for several matters of minor importance. Taxation of Rolling Stock and of Assessment of Industrial Rail- roads. Formerly all of the local tax levied on the rolHng stock of any domestic railroad was collected and retained by the particular county or city wherein the principal office of the raihoad was located . For the purpose of allowing the counties and minor taxing districts through which the roads pass to participate in the revenue derived from such taxation, a new act' provides for apportionment and rates as follows : 1. Twenty -five per cent is assigned to the counties or cities wherein the principal office of the railroad is located. 2. The remaining 75 per cent is distributed among all counties and minor taxing districts through which the raihoad passes, in- cluding the county or city in which the principal office is located. This distribution is based upon that proportion which the state assessment of raihoad property permanently located within each such county, city, or minor taxing district bears to the total state valuation of raihoad property permanently located within the State. 3. The rates levied in each county or minor taxing district are required to be equal to those levied in the county or city wherein the principal office of such raihoad is located. "Laws, 1912, acts 411, 412. ^Laws, 1912, p. 274. LEGISLATION. 1 25 The rolling stock of foreign railroads is assessed on the average amount of such property used in the State. The valuation deter- mined by the State Corporation Commission is apportioned among the counties and minor taxing districts through which such roads pass. The act also provides for the apportionment by the State Cor- poration Commission of the valuation of rolHng stock of electric- railway companies which operate in cities or towns other than those in which the principal offices of such companies are located. This statute has been generally criticised by railway attorneys as well as by attorneys representing counties and cities in which principal offices of the railroad companies are located. Under the old law such counties and cities received all the rolling-stock tax. The statute in all probabiUty will be attacked on several grounds as unconstitutional." The revenue act ' relating to railroad and canal assessments is amended*^ so as to provide that industrial railroads (railroads owned by and operated in the interest of lumber, mining, and other concerns) carrying passengers or freight fcr hire shall be assessed by the State Corporation Commission on property used in rail- road operation; that when any railroad or canal company fails to file a report of property and earnings it shall be assessed by the State Corporation Commission upon the best information obtain- able. Bank Shares. The law providing for the deduction from the assessed value of shares of banks, banking associations, security and trust com- panies,'' the pro rata value of real estate owned by such banking companies in their own name, is amended '^ so as to provide for a proportional deduction of the value of real estate occupied by such companies and owned by them through ownership of stock in a holding company. Mineral and Timberlands, etc. Formerly mineral lands, improvements, fixtures, and machinery connected therewith were assessed every five years by persons appointed to assess all real property, and during intervening years " Letter, Chairman State Corporation Commission, July 17, 1912. * Revenue act, sec. 27, amended, Laws, igio, p. 394. c Laws, igi2, p. 490. ^ Revenue act, amended Mar. 12, 1908, sec. 17. « Laws, 1912, p. 18. 126 SPECIAL REPORT ON TAXATION. such property was assessed by the various commissioners of reve- nue." Under amendment '' this property is to be assessed every year by the commissioner of revenue in the district where the property is located, jointly with a special assessor appointed by the Corporation Commission. In case of disagreement between the two, the question at issue is referred to the circuit court, or to the corporation court if the mining property is located within corporate limits. On motion of the owner, or of the State Cor- poration Commission, appeal lies to the court of appeals. In like manner the owner may appeal from the valuations agreed upon by the assessors. The inquiry of the court in this case is not, how- ever, confined to the adjustment of items embraced in the petition, but upon motion the State may put at issue the assessments of all mining property owned by the complainant. The Code " provides for reducing the assessment of buildings when they have been injured or destroyed. This section is amended "^ so as to provide also for the reduction of assessments of timber lands when the value is reduced, by the removal of timber, to the extent of $200 or more, provided the owner of the land is the owner of the timber. The provision of the Code ' relating to assessments of abutting property is amended so as to limit, in towns of 12,000 population or less, the assessment on abutting property to three-fourths the cost of the improvement.' Minor changes with respect to notice, appeal, etc., are also made by this amendment. Division of the "State Franchise Tax" on Certain Public-utility Companies. The "state franchise tax" of i per cent on the gross receipts of water, heat, light, and power companies," the whole of which is for state purposes, is reduced to one-half of i per cent, and the municipalities are authorized to levy a tax of one-half of I per cent upon the gross receipts from business within the municipalities. From the municipal tax is deducted any sum paid in the form of merchant's license, but this amendment does not ex- empt such corporation from the prescribed annual fee, or from assessments '' for local improvements and road levies. o Code, sec. 437a, amended, Laws, 1910, p. 52. « Code, sec. 1041a. ("Laws, 1912, p. 162. /Laws, 1912, p. 414. « Code, sec. 484. B Laws, 1910, p. 92.