131 Mich. 109 | Mich. | 1902
The Stroh Brewery Company is a corporation organized under the laws of the State of West Virginia. All but one of its stockholders reside in Detroit, where its principal place of business is located, and where all of its property is situated and assessed for taxes. The authorities having assessed the relator for the value of his shares of stock in said corporation for city taxes for the year 1902, the circuit court ordered this assessment vacated, and the city has removed the case to this court by certiorari.
The Constitution of this State requires that there be a uniform rule of taxation, and we have held that this forbids double taxation; and while double taxation may occur under any law, and that fact may, perhaps, not invalidate an act not intended nor calculated to impose it, and may not invalidate assessments made under it and according to its provisions, a law which in its terms necessarily requires it, under ordinary conditions, must be held invalid, or so construed as to avoid it. Comstock v. City of Grand Rapids, 54 Mich. 641 (20 N. W. 623); Attorney General v. Board of Supervisors of Sanilac Co., 71 Mich. 16 (38 N. W. 639); Standard Life & Accident Ins. Co. v. Board of Assessors of Detroit, 95 Mich. 468 (55 N. W. 112); Detroit Citizens’ St. Ry. Co. v. Common Council of Detroit, 125 Mich. 675 (85 N. W. 96, 86 N. W. 809).
In this instance, all of the property of the corporation being in Detroit, and substantially all of the stock being owned there, the effect of these assessments is to impose a double burden on the owners of the corporate shares, for it is undeniable that they bear the' burden of the tax
Did the law provide for the assessment of all shareholders upon their shares in domestic corporations, and of all corporate property to the corporation, we should hesitate to say that such law was not in violation of the constitutional provision requiring uniformity. We are aware that many courts have held that such laws do not require double taxation, upon the very technical reasoning that the tax is not levied upon the same property, and that it is not imposed upon the same person; both of which propositions are true in a sense, but are also untrue in another substantial sense, as stockholders are likely to learn if the action of the authorities in this case is sustained. So, several of the text-books assert that the weight of authority sustains the rule that the States may impose taxes upon both corporation and stockholder, though, without exception, they admit the severity and injustice of such measures, and say that the courts will never permit it where the law; is susceptible of another construction. This practice is so palpably unjust that Michigan does not tax shareholders in domestic corporations, where the property of the corporation is taxed. It does not even tax private persons upon property invested in business outside of the State, provided they do not invest in business conducted by foreign corporations; thereby making a most invidious
“It is undoubtedly within the constitutional power of the legislature of a State to enact a statute that persons residing in that State, who are stockholders in a corporation created by another State, shall be taxed on their shares of stock at their residence within the former State. This principle of law is based on the fact that shares of stock are personal property; that they are distinct from the corporate property, franchises, and capital stock; that they follow the domicile of their owner, like other personal property; and that consequently he may be taxed therefor wherever he may reside. It accordingly is a question of policy and expediency with a State whether or not it will tax its citizens who are stockholders in foreign corporations. A few of the States levy such taxes. But New York pursues the more broad and liberal policy that shares of stock should not be taxed where the corporation is already taxed; that the State which furnishes facilities to the corporation for the earning of dividends should have the sole benefit of taxes on such corporate interests; that a tax on resident stockholders in nonresident corporations would generally result in a double taxation of stockholders not residing in the State creating the corporation; and*113 that interstate comity, interests, and financial investments are promoted best by taxing corporations directly, and not levying a tax on either resident stockholders in nonresident corporations or resident stockholders in resident corporations where the corporation itself is subject to taxation. The injustice of a tax on resident stockholders in foreign corporations is at once apparent when it is considered that the State creating the corporation nearly always taxes the corporation itself or all its stockholders, resident and nonresident, and that, if stockholders residing elsewhere are taxed again where they reside, they are taxed both in the State of the corporation, directly or indirectly, and also directly in the State where they reside. No reduction need be allowed in the latter State for taxes levied upon the corporation in another State.” 2 Cook, Corp. § 565.
New York has long recognized this rule. Pennsylvania has adopted a similar rule. New Jersey imposes no tax upon shares except of banks. Texas does not tax shares where the corporate property is taxed. In California the legislature relieved domestic corporations by the following enactment:
“Shares of stock in corporations possess no intrinsic value over and above the actual value of the property of the corporation which they stand for and represent, and the assessment and taxation of such shares and also of the corporate property would be double taxation. Therefore all property belonging to corporations shall be assessed and taxed, but no assessment shall be made of shares of stock, nor shall any holder thereof be taxed therefor.” 1 Deer. Codes & Stat. § 3608.
This act was sustained and applied in the case of People v. Badlam, 57 Cal. 594, and Spring Valley Waterworks v. Schottler, 62 Cal. 69, 118. “But the temptation to tax stockholders in nonresident corporations was yielded to,” in the face of the solemn declaration that “shares of stock in corporations possess no intrinsic value over and above the actual value of the property of the corporation which they stand for and represent.”
There is reason to believe that the concensus of opinion in Michigan is in accord with the views expressed in the quotation, for the provision requiring shares of stock to be
The taxation of shares to the shareholder, and property to the corporation, is clearly double taxation, within the spirit of the constitutional provision, and while we appreciate the fact that the shareholders and the corporation are different entities in the law, and that shares of stock are recognized as property, and distinct from the corporate property, it is plain that the shareholders are the corporation, and that they are the owners of its property. The Constitution does not permit the taxation of both property and shares, and we must, if possible, give such a construction to the law as to make it reconcilable with the Constitution.
A reference to the tax law of 1885 shows that it was the policy of the State at that time to tax shares of foreign corporations only when the property was not taxable in Michigan. See Graham v. Township of St. Joseph, 67 Mich. 654 (35 N. W. 808). In this case it was held that the shares were properly assessed, for the reason that the
A discussion of this question should not ignore the authorities, of which there are many. It has been said by many law writers and judges that a State has authority to tax both corporation and shareholder. Mr. Justice Cooley says, in his work on Taxation, that “a tax on the shares of stockholders in a corporation is a different thing from a tax on the corporation itself or its stock, and may be laid irrespective of any taxation of the corporation, when no contract relations forbid.” Cooley, Tax’n (2d Ed.), p. 231. See, also, Burroughs, Tax’n, § 86; 2 Cook, Corp. § 565. These authors refer to substantially the same authorities, of which the following are the more important: President, etc., of Tremont Bank v. City of
On the other hand, we find that this doctrine is denied in Ang. & Ames, Corp. § 461; and in Burroughs, Tax’n, p. 171, § 86, it is said that “in the work of Messrs. Angelí and Ames a contrary doctrine is asserted,” etc., though the author questions the authorities cited. In 2 Spell. Priv. Corp. § 1114, it is said that taxation pf property and shares is duplicate taxation. A large number of cases hold that it is double taxation, while they admit that
It is never to be presumed that a legislature intended a double tax if such conclusion can be reasonably avoided. Pennsylvania Co. for Ins. v. Com., 22 Week. Notes Cas. 340, 15 Atl. 456; Board of Revenue of Montgomery Co. v. Gaslight Co., 64 Ala. 269; Salem Iron Factory Co. v. Inhabitants of Danvers, 10 Mass. 514; Tennessee v. Whitworth, 117 U. S. 137 (6 Sup. Ct. 645); Hannibal, etc., R. Co. v. Shacklett, 30 Mo. 560; State v. Railroad. Co., 37 Mo. 265; New York, etc., R. Co. v. Sabin, 26 Pa. St. 245.
It follows that, when the assessors and board of review were advised of the assessment of all of the corporate property to the corporation, they should have removed the assessment against the shareholders.
We do not feel called upon to ignore the plain meaning of our Constitution by carrying the principles that the corporation and its shareholders are different persons, and the