135 Ky. 324 | Ky. Ct. App. | 1909
Opinion of the Court by
Affirming.
This is. a proceeding begun in tbe Jefferson county court to assess as omitted property certain stocks
The first question is, what is the franchise to be taxed? The second is, how is its value to be ascertained? The third is, has it been done in- the manner provided by the statute?
Appellant contends that the franchise to be taxed is not the intangible property of the corporation, but is a privilege tax; that is, it is a tax imposed upon the privilege of engaging in a business that a natural person could not engage in. But that posi
So far the Legislature of this state has not provided for an income tax, and license taxes are imposed upon certain kinds of business, but not upon that of serving the public as do corporations like appellee gas company. The assessing board created and empowered by the statute (section 4077, supra) to value the franchises subjected to the tax is given a large discretion in the manner of its procedure; but it is required of the property owner subjected to the tax to make a report showing, among other things, the amount of the capital stock of the corporation, the nature of its business, how its shares are divided, the amount of paid-up stock, its par and market values, the highest price at which the stock has been sold at a bona fide sale in the preceding 12 months, the amount of surplus
It is thus made clear that - the tax imposed is a property tax, pure and simple. It groups all the property of the corporation, and values it according to its earning or producing capacity. In a sense the capital stock of the corporation represents all its property; but it was known that sometimes the market value of such stock differs from its actual or earning value. The franchise value takes into consideration all these elements which go to make the real value of the corporation property considered as an entirety. It has been so construed and held in Henderson Bridge Co. v. Commonwealth, 99 Ky. 623, 31 S. W. 486, 17 Ky. Law Rep. 389, 29 L.
The corporation in this state is required to pay taxes on all its property not specifically exempt by the Constitution from taxation. When the corporation does report and pay the tax on all its property, as required by the statute, then the stockholders of the corporation are not required to list their shares in the company for taxation. Section 4088, Ky. Stat.; Commonwealth v. Walsh’s Trustee, supra. The Louisville Lighting Company is a' domestic franchise-taxed corporation. Appellee gas company is a shareholder in the lighting company. The gas company’s liability to taxation upon the shares of the lighting company owned by it are precisely the same as on other shareholders. It is conceded that the lighting company was assessed and paid its franchise tax. Being so, the shareholders are not assessable. So appellee was not required to pay upon so much of its in
Appellee contends that the action of the State Board of Yaluation and Assessment in valuing a franchise for taxation is one act, not severable, and whether it considered all .the evidence bearing upon the value of the franchise, or omitted to take some evidence that it might have required, cannot be reviewed by the courts in a proceeding to list omitted property; that the thing being now considered, i. e., whether the bonds were included in the gas company’s report and the board’s estimate, might be omitted evidence, but not omitted property, as there was no warrant for the board to assess the bonds in any event as property. This franchise tax is new. It is substitutional as a method of valuation only. Its like existed under the old statutes of this state where dioses in action and the like were grouped as “miscellany.” Then a taxpayer could have reported, say, $10,000 in “miscellany,” which was supposed to embrace all his notes and accounts; but suppose he had notes to the amount, and solvent,
The Legislature could have required corporations to pay on each item of their intangible property, on their notes, bonds, accounts, capital stock, and so forth, in detail; but it allowed all these properties to be grouped for purposes of taxation, as a more convenient and just method of assessing. It was not contemplated that the privilege thus accorded the taxpayer was to be a shield for his neglect or fraud in omitting a material part of his property. If, for example, a railroad corporation owns two different lines of railroad in this state, but reports only one of them, and the earnings of but one, it must be apparent that the failure to report the other is something more than an omission of evidence. It would be an omission of property. It is not true that the bonds in appellee’s hands are not taxable. They are. The Constitution prohibits their exemption. Section 174. But the manner of assessing them is to have them reported to the state board, and there valued as a part of the owner’s “franchise.” When they are omitted, property liable to taxation is omitted. It may be brought in' and assessed as omitted property under section 424, Ky. Stat. (Bus-sell’s St. sec. 4815).
But were the bonds omitted? Appellant took the burden of showing that they were. He produced the reports, filed with the Auditor of State by the gas company. The reports did not name the bonds; but the reports did show that the company reported its gross income from “coke, tar, ammonia, etc.,”
The evidence in the record then is that the bonds were not omitted from the report, and actually went into the consideration of the board in fixing the value of the franchise; that is to say, the income produced by the interest on the bonds was treated as part of the company’s gross earnings, and, whether from bonds or the sale of gas, went to enhance the value of the company’s money earning capital by that much. So that it appears that the bonds were in fact, though perhaps not in name, as effectually valued in making the franchise assessment as if they had been reported specifically as they should have been.
Finding no prejudicial error in the record, the judgment must be affinned.