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tion by the Board, to be determined by the courts. The matter was submitted to the Circuit Court as an agreed case presenting two questions, (1) whether the company owed to the Commonwealth the sum of $464.84, or any part thereof, on account of the tax of its franchise, and (2) what method or basis should be adopted by the State Board of Valuation and Assessment for fixing the value of defendant's franchise for taxation in the Commonwealth of Kentucky. That court held that the Board had adopted an improper method, and that the company, by the payment it had made, had fulfilled its obligation to the State; reaching this conclusion by taking the aggregate market value of its capital stock and bonded indebtedness ($1,330,000), deducting the assessed value of the Ohio tangibles ($237,984), and apportioning the balance of $1,092,016 on the basis of 59 per cent. to Kentucky and 41 per cent. to Ohio. From 59 per cent. of $1,092,016, namely $664,289, it deducted the tangible property assessed in Kentucky, $452,000, which left a balance of $192,289 as the value of the Kentucky franchise. The State appealed to the Court of Appeals, where it insisted that by the method adopted by the Circuit Court the company was not taxed upon its entire property. The report of the case states (pp. 348, 349): "It is insisted for the State that the proper way to arrive at the valuation of the franchise is to take the total value, $1,330,000, and get 59 per cent. of it, which is $782,700, and that this presents the total of the tangible property and of the franchise in Kentucky. Therefore, if we deduct from this total $782,700, the assessment of the tangible property in Kentucky, $452,000, the balance, $330,700, is the value of the franchise. The board fixed the value of the franchise at $278,349, or considerably less than the result thus obtained." It was insisted for the Bridge Company that the Circuit Court had followed Henderson Bridge Co. v. Commonwealth, 99 Kentucky, 623, but the Court of Ap

Opinion of the Court.

244 U.S.

peals pointed out that in that case the Board had followed the method claimed by the Company, that as the action was brought by the State to recover taxes upon the assessment made by the Board, the State was not in a position to question the propriety of the assessment, and that there was nothing in that case, or in any subsequent case approving it, to prevent the Board from adopting a different basis. To a criticism that the Board had adopted an erroneous basis in the instant case, the court conceded the point, arguendo, but sustained the assessment upon the ground that it was no more onerous than it would have been had a correct method been adopted; and, in conclusion, declared (pp. 350-351): "We therefore conclude that the basis urged by appellant [the State] is the proper one for the assessment of the property under the agreed facts, and the board having fixed a lower assessment than this would make, the court erred in not enforcing the collection of the tax on the assessment made by the board." This was a precise answer to the equally precise contention urged in behalf of the State affecting each of the two questions that were submitted for decision, and it seems to us that it is binding upon the federal courts as a construction of the statute.

This, we repeat, does not necessarily result in including in the Kentucky franchise valuation tangible or intangible property not located within that State. It does permit the Kentucky officials to take into consideration extrastate tangibles, as well as intangibles, constituting portions of the unit of which they are valuing a part. This is permissible, even in applying the statute to non-resident corporations. It is settled that total stock or total assets, situate partly within and partly without the State but organically related, may be taken into consideration as a means of reaching the true cash value of property within the State, and that the mileage relation may be given its proper weight. State Railroad Tax Cases, 92 U. S. 575,

244 U.S.

Opinion of the Court.

608; Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 26; Pittsburgh &c. Railway Co. v. Backus, 154 U. S. 421, 430-431; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 26, 27; Fargo v. Hart, 193 U. S. 490, 499.

(10) Plaintiff's next point is that the Board took into consideration a mileage proportion of 35.15 per cent., which was the ratio borne by the roads operated by plaintiff within the State of Kentucky to its total operated mileage; whereas it should have included the controlled mileage within and without the State, which would have yielded to Kentucky a proportion of only 24.69 per cent. In this the District Court yielded to plaintiff's contention, and, we think, rightly so. By § 4079, Ky. Stats., where the company's lines extend beyond the limits of the State, the report to the Auditor shall in addition to other facts. show "the length of entire lines operated, owned, leased or controlled in this State, and in each county, incorporated city, town or taxing district, and the entire line operated, controlled, leased or owned elsewhere." And, by § 4081, "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." In Commonwealth v. L. & N. R. R. Co., 149 Kentucky, 829, 838, the very point was considered by the Court of Appeals, which declared: "If the railroad company owns a majority of the stock of any company, so that it may elect its directors and dictate its policy, there can be no doubt that it controls it within the meaning of the statute, and that such other railroad should be included in the report required to be made to the Auditor. If required to be reported, the Board of Valuation and Assessment may take them into consideration in fixing

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the value of the franchise of the controlling company in the State of Kentucky."

(11) The District Court (230 Fed. Rep. 199, et seq.) acceded to the contention of the plaintiff that the action of the Board in adding at first $2,468,612, and, finally, $2,318,244, to the Kentucky proportion of the value of the unit, on account of the excess value of the portion of the Kentucky intangibles over the mileage proportion thereof was not warranted; basing this decision upon the ground that the Board did not follow the only possible method that would have determined this excess with any certainty, and did not have before it the data that would have enabled it to do so. The point perhaps is covered by one of defendants' assignments of error; but no argument has been addressed to it, and we express no opinion upon it.

(12) The District Court, having found that the value of plaintiff's entire capital stock must be taken to be at least as much as $262,252,566, the amount found by, the Board, and that the apportionment must be upon the basis not of the operated mileage only, but of all mileage operated, owned, leased, and controlled within and without the State, was led to the further conclusion, as a corollary (230 Fed. Rep. 202-204), that the valuation of the total capital stock should include an item that the Board had overlooked, viz., the value of so much of the controlled mileage as was not represented by plaintiff's holdings. (Of course, in adopting the capitalization-of-income method of valuation, no account was taken of the interests of others than plaintiff in the controlled roads.) Plaintiff contends that the statute does not justify this procedure; that it is beyond the power of the State because it results in taxing property not belonging to the plaintiff; and that a more logical and consistent method would be to arrive at the operated, owned, leased, or controlled mileage by treating as controlled mileage not the

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total, but only a proportion corresponding to the amount of stock held by plaintiff in the controlled roads. The matter is not free from doubt; but we concur in the view of the District Judge that it was the legislative intent that, in fixing the percentage apportionable to Kentucky and to be taken into consideration in valuing the taxable franchise, the whole of the controlled mileage within and without the State was to be treated as a part of the aggregate "capital stock," not only in fixing the mileage, but also in fixing the valuation, upon which the apportionment is to be based. It is not to be supposed that the legislature intended to require that, in making the mileage apportionment, which as already shown is not conclusive but evidential upon the valuation of the taxable franchise, fractional interests in the controlled roads should be taken into the account, but rather that a controlled road should be treated the same as a road owned.

In order to avoid a double assessment of the franchise of so much of the controlled mileage as was within the State, the court found it necessary to deduct from the Kentucky apportionment of the "capital stock" the value of the Kentucky portion of the controlled mileage (in addition to the assessed value of the tangible property there situate) since these local franchises would be assessed against each of the separate organizations. In this view we concur.

But the court was unable to apply the proper correction to the Board's valuation (p. 232), because of there being nothing in the record to show either the value of the portion of plaintiff's total capital stock not considered by the Board (that is, the value of the outstanding interests in the controlled roads), or the value of that portion of the controlled mileage which was in Kentucky.

After the court delivered its opinion to this effect, and before the entering of the final decree, plaintiff tendered what is called a supplemental bill, which the court allowed to be filed, purporting to show all the facts respecting the

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