to say that the Board merely carried out the capitalizationof-income plan of valuation, perhaps to its logical extreme, but certainly not in a manner that enables this court to say that they pursued a fundamentally wrong method.

(8) The second point, the adoption of a 6 per cent. interest rate as the basis of capitalization, instead of the higher rate, called in the testimony the "composite percentage," reached by taking plaintiff's mileage in each of the thirteen States in which it operates, multiplying this by the legal rate of interest in that State, and dividing the total of the products by the total mileage, is, like the first, a criticism merely of the conclusion of the Board upon a question of fact which is not properly subject to review by the courts.

Therefore we concur in the opinion of the District Judge that, upon this record, the value of the capital stock must be taken to be at least as great as $262,252,566, the amount found by the Board.

(9) The Board's next step was to apportion to Kentucky a certain part of this total value, which of course included both tangible and intangible assets; after which it proceeded to deduct the assessed value of the tangible assets in Kentucky. Plaintiff insists that these steps should have been reversed; that the Board, having valued the total capital stock of the company, including assets tangible and intangible, should first have deducted the entire tangible assets wherever situate, and next have assigned a proper portion of the intangible to Kentucky.

What the statute requires, in this respect, is a question of state law, upon which we must follow the Kentucky Court of Appeals if that court has passed upon it. It is true that the only authority of the Board was to assess intangible property, and, whether it followed the local statute or not, it could not, consistently with the due process provision of the Fourteenth Amendment, include, at least as against any foreign corporation, any part of its

tangible property lying without the State; and it is not to be supposed that the statute intended to prescribe a different rule with respect to Kentucky corporations, since domestic and foreign corporations are dealt with in the same section (§ 4081). That section, according to its terms, first provides that the Board shall "fix the value of the capital stock as herein before provided," there being, as already shown, no provision respecting the method except that the ascertainment shall be based upon the statement of the corporation and such other evidence as the Board may have. The section proceeds to declare that "that proportion of the value of the capital stock which the length of the lines operated, owned, leased, or controlled in this State bears to the total length of the lines owned, leased, or controlled in this State and elsewhere, shall be considered in fixing the value of the corporate franchise of such corporation liable for taxation in this State." Referring now to the mode of procedure, these words evidently contemplate an apportionment, as an aid in reaching the ultimate result (valuation of franchise taxable in Kentucky); but it is an apportionment of "the value of the capital stock," which includes both tangibles and intangibles, within and without the State. This is not to say that any property without the State may be taxed. It requires state mileage valuation to be considered and compared with system mileage valuation, but it does not make this comparison conclusive. As the section was enacted originally, the words "considered in fixing" were not contained in it, so that upon the face of things the mileage pro-rate was conclusive in ascertaining the State's proportion of the value of the corporate franchise,-just as county and district mileage was and still is conclusive as to apportionment between those taxing districts. But by the Act of June 9, 1893, the words "considered in fixing" were inserted, the necessary effect of which was to make the relation of state

Opinion of the Court.

244 U. S.

mileage to system mileage a factor that must be considered, but not necessarily given conclusive weight. Section 4081 says nothing about deducting the value of tangible property, and the preceding sections speak of deducting only such tangible property as is located within the State. Indeed, there is no provision requiring the corporation to report its tangibles outside of the State. And, if all tangibles were deducted before apportionment, then the deduction of "all tangible property assessed in this State," specifically required by the proviso to § 4079, obviously would result in a double deduction. The sections are inartificially drawn in this as in some other respects. The District Court, upon elaborate consideration in the case of the 1912 assessment (209 Fed. Rep. 418-429), reached the conclusion that by the proper construction the entire value of capital stock should be first apportioned, having regard to the mileage, and that from Kentucky's portion of the whole the assessed value of the tangibles within the State should then be deducted; and that the Kentucky Court of Appeals had so decided in Commonwealth v. Covington & Cincinnati Bridge Co., 114 Kentucky, 343.

Plaintiff relies upon two cases, the first being Adams Express Co. v. Kentucky, 166 U. S. 171, 180, where this court, by Mr. Chief Justice Fuller, after referring to the statutory provisions now under consideration, and the use in the several sections of the words "franchise" and "corporate franchise," said: "But taking the whole act together, and in view of the provisions of sections 4078, 4079, 4080 and 4081, we agree with the Circuit Court that it is evident that the word 'franchise' was not employed in a technical sense, and that the legislative intention is plain that the entire property, tangible and intangible,

should be valued as an entirety, the value of the tangible property be deducted, and the value of the intangible property thus ascertained be taxed under these provisions; and as to railroad companies, whose lines ex

tend beyond the limits of the State, that their intangible property should be assessed on the basis of the mileage of their lines within and without the State. But from the valuation on the mileage basis the value of all tangible property is deducted before the taxation is applied." The matter of apportionment was not there involved, nor what method or order was prescribed by the statute; the question at the moment being whether the tax was a true franchise tax, or merely a property tax upon intangible property. The significant thing was that the value of tangibles was to be deducted; whether before or after apportionment was a matter of no present significance. And the last sentence quoted, in the expression “valuation on the mileage basis," indicates an apportionment of the entire capital stock, mile for mile, prior to the deduction of tangibles.

The second case referred to is Coulter v. Weir, 127 Fed. Rep. 897, 907-908, where the Circuit Court of Appeals for the Sixth Circuit, in dealing with the question whether the law was repugnant to the commerce clause or the Fourteenth Amendment, used this language: "Neither is the injunction in reference to a deduction of the value of tangible taxable property from the gross value of the whole corporate property limited to such as is situated within the state of Kentucky. If tangible property having a situs outside the state be included in the valuation of the company's intangible property, the purpose of the law, being to tax only intangible property, is defeated. We therefore read the act, as the Supreme Court seems to have read it in Adams Express Co. v. Kentucky, as requiring the deduction of tangible property from the gross value of all corporate assets, whether such tangible property be within or without the state." The question of apportionment, or of the particular method to be pursued in making the assessment, was not involved in this case, any more than in Adams Express Co. v. Kentucky, supra.

It is true, as the court said, that if tangible property having a situs outside the State were included in the valuation, the purpose of the law to tax only intangible property would be defeated. The same result would follow if tangible property within the State were included in the valuation. But it does not follow that tangibles, within or without the State, are to be included in the valuation because included in the apportionment. Any excess of tangibles, without or within the State, properly may be given its due weight as a factor modifying the tentative result reached by mere mileage apportionment. In the absence of special circumstances, this is not of itself necessarily an unjust method of apportioning such a tax. Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530, 552-553; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 18, 20, 22, 26.

However, the decision of the Kentucky Court of Appeals in the Covington & Cincinnati Bridge Co. Case, supra, is directly in point, and, being so, is conclusive upon the question of the proper statutory method. There the company's "capital stock," valued by the stock-and-bond method, amounted to $1,330,000. It owned an interstate bridge, 59 per cent. of the length thereof being in Kentucky, the remainder in Ohio; and it had tangible property in Kentucky assessed at $452,000. The State of Ohio assessed the portion of the bridge lying in that State at $237,984, and the company paid the taxes thereon. The Kentucky Board of Valuation and Assessment fixed the value of its entire property or capital stock at $730,349, and, deducting from this the assessment of tangibles in Kentucky ($452,000), took the difference, or $278,349, as the franchise valuation. The company, insisting that the correct valuation was $180,489, paid to Kentucky the tax on this amount, reserving the question of its liability for a claimed balance of $464.84, and of the method or basis upon which its franchise should be valued for taxa