62 N.Y.S. 191 | N.Y. App. Div. | 1900
The tax against the relator is levied by the Comptroller pursuant to sections 182 and 190 of chapter 908 of the Laws of 1896, reading as follows:
“ § 190. Value of stock to be appraised.— In case no dividend has been declared by a corporation, association or joint stock company liable to pay a tax under section one hundred and eighty-two of this chapter, the treasurer or secretary of the company shall, under oath, between the first and fifteenth day of November in each year, estimate and appraise the capital stock of such company upon which no dividend has been declared, or upon which the dividend amounted to less than six per centum at its actual value in cash, not less, however, than the average price which said stock sold for during said year, and shall forward the same to the comptroller with the report provided for in the last section. If the comptroller is not satisfied with the valuation so made and returned, he is authorized and empowered to make a valuation thereof, and settle an account upon the Valuation so made by him, and the taxes, penalties and interest to be paid the state.”
The complaint is made by the relator that it has been assessed at more than the par value of its capital stock.
So far as I am aware, this precise question has never been directly passed upon in any case in this State, and counsel who have argued the case have apparently been unable to find any decision directly upon the question.
The case principally relied upon by the relator is. apparently the case of The People ex rel. U. T. Compony v. Coleman (126 N. Y. 433).
That case, however, was decided upon an entirely different statute from the one now under consideration. The tax there was levied pursuant to the provisions of section 3 of chapter 456 of the Laws of 1857, reading as follows : “ The capital stock of every company liable to taxation, except such part of it as shall have been excepted in the assessment roll, or as shall have been exempted by law, together with its surplus profits or reserved funds exceeding ten per cent of its capital after deducting the assessed value of its real estate, and all shares of stock in other corporations actually owned by such company which are taxable upon their capital stock under the laws ■ of this state, shall be assessed at its actual value and taxed in the same manner as the other personal and real estate of the county.”
It will be observed that under the present statute it is expressly provided that the actual value of the capital stock, in certain cases,, shall be determined by the market value of its shares, because it is-provided by' section 190 that the officers of the company shall “ estimate and appraise the capital stock of such company upon which no dividend has been .declared, or upon which the dividend amounted to less than six per centum at its actual valué in cash, not less, however, than the average price which said stock sold for during said year.”
Here, evidently, the capital stock and the share stock are considered as one and the same thing, because we know that there are no sales in the market, or no' market value for the capital stock of a corporation as distinguished from the share stock,
We have been cited to cases holding that the surplus of a coiv poration cannot be taxed as part of the capital stock. Without reviewing those cases, it seems to me that they have no application to the case now under consideration.
The statute we are now considering, as has been observed, expressly provides, under. certain circumstances, for the valuation of the capital stock at not lest than the average price which such-stock sold for during the year, that is, a valuation or appraisal at its average market value ; into that market value enters the amount of its earnings, its surplus, and the value of its- franchises; so that in asséssing such.stock upon its market value, indirectly -it is assessed upon its surplus.
Sections 182 and 190 of the Laws of 1896, while new in form, are the same in substance as chapter 542 of the Laws of 1880, as amended by chapter 361 of the Laws of 1881. Each provides for a franchise tax, and to determine the value of that franchise resort is had to the dividends declared by the company. The statute of 1880, as amended by the statute of 1881, came in question in the
taining the value of such enjoyment, and for that purpose aloue ivas reference made to dividends. The act provides that every corporation (with certain exceptions) shall pay annually into the treasury of the State, a tax upon its corporate franchise, to be computed as follows : If the dividend or dividends made or declared by such corporation, etc., during any year ending with the first day of November, amount to six or more than six per centum upon the par value of its stock, then the tax to be at the rate of one-quarter mill on the capital stock for each one per centum of dividends so made or declared; or, if no dividends be made or declared; or, if the dividends made or declared do not amount to six per centum upon the par value of the capital stock, then the tax to be at the rate of one and one-half mill upon each dollar of the valuation of the said capital stock, etc.”
“ The amount of dividends made or declared during the year ai-e thus made simply the measure of the annual value of the franchise upon which the tax is to be annually paid. As dividends can be legally made only out of earnings or profits, and cannot be made out of capital, they are assumed to approximate, as nearly as practicable, the just measure df the tax which should be imposed upon the corporation for the enjoyment of its franchise. Should a corporation earning six per cent or more withhold all dividends, or pa/y less than simper cent and accumulate its earni/ngs, or employ them as capital to improve its property, it would not thereby escape taxation, for it would then be taxable according to the actual value -of its capital stock, a/nd that value would be increased by the amount
While, perhaps, the portion of the foregoing opinion that I have italicized was not necessary to be said in deciding the question then ■ before the court, yet it seems to me a correct exposition of the statute then under consideration; and the provision of the existing statute upon the same subject being substantially the same, the language there used is applicable to the case before us.
The value of a franchise is fairly tested by its earning capacity; whether -those earnings are distributed in dividends, or are accumulated in surplus, makes no difference in the real value. Some test is the amount the incorporators are willing to pay for it; if they are willing to pay into the corporation treasury more than the par value of the stock, and thus create a surplus, it is presumably because they believe the franchise is worth it. So that,, whether the surplus is created by accumulated earnings, or by more than the par value being paid into the treasury for the stock, it is because of the worth of the franchise.
In the absence of dividends by which to measure the value of the franchise, the statute has provided that it shall be measured by the average price for which the stock is sold. Tlpt leads, in some instances, to-a valuation below the par value, and in some to a valuation above par.
Instead of leaving it to the assessing officer to determine its value, , the statute takes the determination of the business public, which, in making its estimate of value, takes into consideration the surplus of a corporation, as well as a deficiency.
All concurred, except Parker, P. J., dissenting.
Determination of the Comptroller confirmed, with fifty dollars costs and disbursements.