38 S.E.2d 774 | Ga. | 1946
1. Where a perpetual corporate charter granted by the legislature confers tax exemptions upon the corporation, the exemption is irrevocable. Accordingly, article 1, section 3, paragraph 3 of the Constitution of 1945 (Ga. L. 1945, p. 8), purporting to revoke such charter provisions, is void and of no effect.
2. Where, as here, such charter provision limits the tax on the "stock" of the corporation to 1/2 of 1 percent "on the net proceeds of their investments," it is a property tax and constitutes no bar to the collection by the State under the 1931 income tax law as amended (Ga. L. 1931, Ex. Sess., p. 24) of an income tax from a lessee of the corporation on its net income derived from the use of the corporate property on which the charter thus limits the property tax.
Atlantic Coast Line Railroad Company, in resistance to a tax assessment by the State Revenue Commissioner for income taxes for which the Commissioner claimed that it was liable under the 1931 income tax statute as amended (Ga. L. 1931, Ex. Sess., p. 24), claimed that it was exempt from such tax assessment under an act of 1833 (Ga. L. 1833, p. 256), incorporating Georgia Railroad Company, which later by amendment to its charter became Georgia Railroad and Banking Company; and that the income against which the tax under the assessment is claimed was realized *857
as a lessee in the operation of the railroad. The assessment was appealed to the superior court and the case was submitted to the judge without the intervention of a jury. The railroad filed a special plea of res judicata, alleging that the judgments in the cases of State of Georgia v. Georgia Railroad Banking Co.,
There was no conflict in the evidence on the material facts. It was shown that Georgia Railroad Banking Company, on May 7, 1881, leased the railroad properties to William M. Wadley and his assigns for a term of 99 years, beginning April 1, 1881, for an annual rental of $600,000; and that by successive leases and assignments Atlantic Coast Line Railroad Company became and is the lessee of a one-half interest in the railroad property. It has, at all times up to the present, made payments to the State of taxes on its stock on the basis provided in section 15 of its charter, by paying *858 as there provided 1/2 of 1 percent of net income realized from the operation of the railroad. In making these calculations and payments, the corporation took the net income of Atlantic Coast Line Railroad Company during each year it had operated, and calculated 1/2 of 1 percent of such net income and paid that amount to the State. Atlantic Coast Line Railroad Company has at no time paid any property tax on its lease, nor has it paid any income tax on the net income realized from its operation of the railroad. It was stipulated that section 15 of the act of 1833, supra, if valid and applicable to this case, applied to the main line of Georgia Railroad Banking Company from Augusta to Atlanta, Georgia, and to the branch line from Union Point to Athens. It was further stipulated that the State of Georgia had never before demanded that the lessees of the railroad should return the net income received from the operation of the main line and the Athens branch; and that similar assessments have been made against Louisville Nashville Railroad Company, which owned the other half interest in the lease.
The trial court overruled the State's special plea questioning the constitutionality of section 15 of the original charter, and rendered judgment in favor of the railroad. The State Revenue Commissioner excepts to a judgment overruling his motion for new trial, and assigns error also on the judgment overruling his special plea raising the constitutional question.
1. There appears in the Constitution of 1945 (article 1, section 3, paragraph 3) the following provision: "All exemptions from taxation heretofore granted in corporate charters are declared to be henceforth null and void." There are two specific and inescapable legal reasons why the provision of the new Constitution just quoted does not and can not alter or affect the existing rights of the Atlantic Coast Line Railroad Company involved in this case. The first of these solid legal reasons is that the quoted provision does not purport to be retroactive; and even if it was expressly made retroactive, it would nevertheless be completely ineffective in so far *859
as the fixed and established rights of this party are here concerned. The second reason is that this State is powerless by legislative enactment or constitutional provision to nullify or impair in any respect whatever its existing contractual obligations. If the charter provisions referred to are invalid, there would be no need for this constitutional declaration. If they are valid, then this declaration is empty and without legal effect. Article 1, section 10, Constitution of the United States;Wheeler v. Board of Trustees,
2. In the view that we take of this case, we find it unnecessary to pass upon the validity of section 15 of the charter, upon which the railroad relies. If it be conceded that the charter provision referred to is valid, that the legislative branch of the government had the legal power thus to surrender a part of the sovereignty of the State and thereby tie the hands of all future legislatures, in so far as legislating freely upon the question of taxation of this corporation, and if it be conceded that the constitutional inhibition against the inclusion, in the body of an act, of matter different from and foreign to the subject embraced in the caption did not render this act void — we come, after all, to the plain provision of the charter which is dealing with and is confined to the subject of a property tax, unrelated to the question we now have of the liability of the corporation for its share of an income tax under the existing laws of the State. The exact language of the charter upon which the railroad relies is as follows: "The stock of the said company and its branches shall be exempt from taxation for and during the term of seven years from and after the completion of the said railroads or any one of them; and after that, shall be subject to a tax not exceeding one-half percent per annum on the net proceeds of their investments."
The decisive question is, whether or not this charter provision refers to and embraces income taxes, or is limited strictly to a property tax. It can not be denied that any and all tax exemptions must be strictly construed, and unless the language clearly grants *860 the exemption, it is the duty of the court to rule in favor of the State and against the corporation. Here we have the very foundation of the exemption or limitation stated at the outset to have reference to "the stock of the said company and its branches." If the rule of construction of exemptions above referred to is to be given any meaning whatever, it compels a construction of this provision that limits it to the stock or property of the corporation. Had it been intended that the corporation as a legal entity should forever be free from any sort or form of taxation except the one-half of one percent as therein provided, it would have been a simple matter to have so provided and thus to have made clear such an intent. In failing to make clear such an intent, it is assumed that the legislature intended that the courts apply the rule of construction and restrict the exemption to the limits there stated, and never extend it by writing in something more. There should be no difficulty in seeing clearly that the reference to income was intended solely as a statement of a basis for the calculation of the property taxes there expressly referred to. The fact that the net income is made this basis, and the tax limited to one-half of one percent of such income, in no wise renders the provision one for an income tax against the corporation. A number of railroad charters existing at the time or subsequently granted contained similar provisions for taxation, but there existed in this State at that time no general law providing for income taxes. It was almost a century thereafter before the legislature enacted our present income tax statute.
We are not unmindful of certain language of the Federal courts indicating that those courts regarded the tax referred to in this charter provision as an income tax. See Wright v. Georgia Railroad Banking Co.,
Having decided that the charter refers to a property tax on the stock of the corporation, and that only, we move on to the further question of whether or not the charter is a bar to the collection of the income tax here sought, which tax is based upon a law enacted in 1931 as amended, Code (Ann. Supp.) § 92-3102, as follows: "Every domestic corporation and every foreign corporation shall pay annually an income tax equivalent to five and one-half percent of the net income from property owned or from business done in Georgia, as defined in § 92-3113: Provided, that the amount of the tax shall not be less than would be produced by applying a rate of two percent to a base consisting of the entire net income, as defined in this Title, plus all salaries and other compensation paid to all elected and appointed officers, and to the stockholder owning in excess of five percent of the issued capital stock of the corporation or a relative per centum of the capital stock of any other corporation owning or holding the capital stock of such corporation, and after deducting from such base $10,000 and the deficit, if any; such tax shall be assessed upon the base provided by this section which will produce the greater tax."
In Mayor c. of Savannah v. Hartridge,
Since the railroad here plants its resistance to the tax sought to be collected squarely upon the charter provision of its lessor, and the contention that to apply the income tax law would offend the contract clause of the Federal Constitution, article 1, section 10 (Code, § 1-134), which prohibits a State from enacting a law that impairs the obligation of a contract, the decisions of the United States Supreme Court on this question are controlling and must be followed by the Supreme Court of Georgia. Without here entering upon an extended, and in so far as this case is concerned, useless discussion of the various decisions of that court in cases somewhat similar to the case now before us, we may rest our decision upon the decision of that court in Halev. State Board,
In arriving at our decision, here holding a lessee of the railroad subject, under the income tax statute of the State, to the payment of the tax here claimed, we have not been unmindful of, but have given full consideration to, the previous decisions of this court and the Federal courts. We have not overlooked the fact that the Supreme Court in Wright v. Georgia R. Banking Co.,
Judgment reversed, with direction. Bell, Chief Justice,Jenkins, Presiding Justice, Duckworth, Atkinson, and Wyatt,Justices, and Judges Knox and Crow, concur. Head and Candler,Justices, disqualified.