Opinion of the Court.

254 U.S.

such land shall be valid unless approved by the court having jurisdiction of the settlement of the estate of said deceased allottee."

If in this instance the same court had had jurisdiction of the guardianship of the minor heirs and of the settlement of the estate of the deceased allottee, no embarrassment would have ensued; but as that was not the case, the question arises, whether it was essential that the guardian's conveyance, directed and approved, as it was, by the court having control of the guardianship, should also be approved by the court having jurisdiction of the settlement of the deceased allottee's estate? The Circuit Court of Appeals answered in the negative; and, while the question is not free from difficulty, we think that solution of it is right.

Of course, the purpose in requiring any approval is to safeguard the interests of the full-blood Indian heir. Where he is a minor he can convey only through a guardian, and no court is in a better situation to appreciate and safeguard his interests than the one wherein the guardianship is pending. Besides, as a general rule, a guardianship carries with it exclusive power to direct the guardian and to supervise the management and disposal of the ward's property. It is so in Oklahoma. This rule is so widely recognized and so well grounded in reason that a purpose to depart from it ought not to be assumed unless manifested by some very clear or explicit provision. The Act of 1908 contains no manifestation of such a purpose outside the proviso in § 9. That proviso seems broad, but so is the provision in § 6 subjecting the persons and property of minor Indians to local guardianship. As both are in the same act, they evidently were intended to operate harmoniously and should be construed accordingly. The proviso does not mention minors under guardianship; and to regard its general words as including them will either take all supervision of the sale of their interest in

inherited lands from the court in which the guardianship is pending, or subject that court's action to the approval of another court of the same rank. In either event conflict and confusion will almost certainly ensue and be detrimental to the minor heirs. But, if the proviso be regarded, as well it may, as referring to heirs not under guardianship-in other words, to adult heirs-the two provisions will operate in entire harmony and all fullblood heirs will receive the measure of protection intended. We think this is the true construction.

No. 215. Argued October 13, 14, 1920. Decided November 15, 1920.

1. A state tax upon the proportion of the net profits of a sister-state corporation earned by operations conducted within the taxing State, the enforcement of which is left to the ordinary means of collecting taxes, does not violate Art. I, §8, of the Federal Constitution by imposing a burden upon interstate commerce. P. 119. 2. In considering whether a state tax, purporting to be on the net income of a sister-state corporation earned within the taxing State, violates the Fourteenth Amendment by reaching income earned outside, it is not necessary to decide whether it is a direct tax on income or an excise measured by income. P. 120.

3. A state tax upon the income of a sister-state corporation manufacturing its product within the State but deriving the greater part of its receipts from sales outside the State, which attributes to processes conducted within the State the proportion of the total net income which the value of real and tangible personal property

Argument for Plaintiff in Error.

254 U.S. owned by the corporation within the State bears to the value of all its real and tangible personal property, is not inherently unreasonable and calculated to tax income earned beyond the borders of the State; and, unless it be shown to be so in its application to the particular case, cannot be held to violate the due process clause of the Fourteenth Amendment. P. 120.

4. Held, that the fact that the amount of net income so allocated to the taxing State greatly exceeded in this case the portion actually received there, does not prove that income earned outside was included in the assessment.

5. The principle discussed in Southern Ry. Co. v. Greene, 216 U. S. 400, 414, respecting the right of a State under the Fourteenth Amendment to impose discriminatory taxes on a sister-state corporation which had made large permanent investments in railroad property in the State before the tax law was enacted, is inapplicable to this case, involving a non-discriminatory tax on the locally earned income of a manufacturing corporation. P. 122.

94 Connecticut, 47, affirmed.

THE case is stated in the opinion.

Mr. Arthur M. Marsh and Mr. Arthur L. Shipman, with whom Mr. Charles Strauss and Mr. Eugene D. Boyer were on the brief, for plaintiff in error:

Assuming the tax to be what the statute itself says that it is, namely, a tax on net income:

Taxation upon net income is either (a) a direct tax upon the property out of which the income issues, which is another way of saying that it is upon the tangible and intangible assets of the corporation, or (b) it is a tax upon net income, as such, as a species of property disconnected from all other assets of the corporation.

If this tax falls under (a), it is clearly invalid, since, under the Connecticut allocation, that State takes 47 per cent. of all the property and, accordingly, is taxing assets outside of Connecticut, no allowance for intangibles being made.

If this tax falls under (b), then the situs of the net income, which is the property that is taxed, is all important,

113.

Argument for Plaintiff in Error.

and whether such situs is exclusively in Delaware as the domicile of the corporation, or is localized in part in various States, it certainly is not lawfully allocated by a division among the States upon a comparison of tangible assets only.

If the tax is a property tax upon the assets of the corporation in Connecticut, it is invalid because it is not dependent in fact on the value of such assets, no appraisal being provided, no recourse to the courts for ascertainment or correction of the valuation except as to the relative value of tangible assets in Connecticut to tangible assets everywhere, and there being no provision for ascertainment of their value unless by an arbitrary form of application of the so-called unit rule. This fundamental error is emphasized by the fact that there is no allowance or deduction for stocks, bonds, accounts receivable, bank deposits or other intangible assets of that character located outside of Connecticut.

If the tax could possibly be considered as a tax on property of the corporation in Connecticut measured by part of the net income, it is invalid because it is based upon the false assumption that net income is produced, and has a local situs, in proportion to the relative location of tangible assets only.

If the tax is regarded as an excise for the privilege of doing business in Connecticut, to be valid it should have been confined to the subject-matter which Connecticut is entitled to control; that is, the manufacturing and the business purely intrastate, consisting of sales and shipments from Hartford to Connecticut customers, also

leases, repairs, etc., in Connecticut for Connecticut customers, and probably if it is such an excise, it must have a suitable maximum. At all events, it must have some or reasonable relation to the exercise or value of

logical

these privileges.

If

not described and intended as such an excise, it

Argument for Plaintiff in Error.

254 U.S.

should, at the very least, operate in effect as such. But the measure adopted having no relation whatever to intrastate sales, leases and repairs, etc., and only the most arbitrary relation to manufacturing carried on in Connecticut, and having no maximum, cannot be regarded as satisfying the law. Forty-seven per cent. of the net income is arrogated to itself by Connecticut purely on the basis of tangible assets in Connecticut on a given day of the year, without any consideration of the volume of manufacturing at the factory or the ratio of income which might be said to issue out of the manufacturing operations, and the allocation is without allowance or opportunity for adjustment on account of varying ratios of net income produced by the various operations of the corporation, and without deduction on account of income issuing entirely and wholly out of business having no connection with Connecticut.

We submit that it was not intended by the legislature as an excise and, whether it was or not, its operation and effect render it invalid because it is unreasonable, arbitrary and has not even a remote relation to the business privileges which Connecticut can control. Furthermore, even regarding net income as a measure only, it is not open to Connecticut to assess foreign corporations upon data so irrelevant, so inadequate and so remotely related, both commercially and logically, to the exercise of local business privileges.

Upon every one of the above alternative theories of this tax, it either transgresses the commerce clause, or the due process clause, or it discriminates unlawfully against the foreign corporation, principally engaged in interstate commerce and established in the State prior to this legislation.

Mr. James E. Cooper and Mr. Hugh M. Alcorn, with whom Mr. Frank E. Healy, Attorney General of the State of Connecticut, was on the brief, for defendant in error.