7 N.Y.2d 454 | NY | 1960
Lead Opinion
On this appeal from an order unanimously confirming a partial final determination by which respondent imposed upon United States Steel Corporation an assessment for a business tax deficiency for the years 1948, 1949 and 1950, in the principal amount of $176,767.28 plus penalties and interest totaling $144,388.62, the narrow question for decision is whether the prevailing ‘ ‘ financial business ” rate was the proper rate to use.
United States Steel is a New Jersey Corporation licensed to do business in New York and having its principal office at 71 Broadway, Ngav York City. During the tax years involved, it concededly functioned as a holding company, doing no other business than that of holding the stock of subsidiary operating
The deficiency assessment was made on an allocation to New York City of 12%% of the gross income received, and at the “financial business” rate of two fifths of 1%. The parties stipulated below that, had respondent elected to treat United States Steel as a “general business ”, and to apply the then prevailing “ general business ” rate of one fifth of 1% to “ gross receipts ”, without allocation, the principal tax would have amounted to $808,379.91. But, apart from its contention that it is entitled to be treated as a “ general business,’’ United States Steel has never conceded that the tax could have been imposed upon the basis of the entire gross receipts, without regard to apportionment.
Section 24-a of th% New York State General City Law (art. 2-B, General Business an! Financial Tax Authorization) authorizes the local legislators oi any city with a population of over one million or more to adopt or amend local laws “imposing in any such city a tax upon persons carrying on or exercising for gain or profit within such city, any trade, business, profession, vocation or commercial activity * * * or making sales within such city” at a rate “not to exceed one-fifth of o.ne per centum * * * and upon persons carrying on * * * any ‘ financial business ’ ” at a rate “ not to exceed two-fifths of one per centum ”.
A ‘ ‘ financial business ’ ’ is defined as including certain named categories of activities, to wit: “ 2. ‘ Financial Business. The services and transactions of private banks, private bankers, dealers and brokers in money, credits, commercial paper, bonds, notes, securities -and stocks, monetary metals, factors, and commission merchants ” (General City Law, § 24-a .[§§ 1, 2] ).
It is clear that holding companies are not included in the definition of “financial business ” contained in section 24-a, and that this omission indicates a legislative intent to preclude the City of New York from taxing the gross income of a holding company at the “ financial business ” rate.
In New York, the State Legislature has the exclusive power to tax, including the power to determine the class of persons to he taxed (N. Y. Const., art. Ill, § 1; Genet v. City of Brooklyn, 99 N. Y. 296; Gautier v. Ditmar, 204 N. Y. 20), which it may delegate to its municipal subdivisions, including the City of New York. But any taxes imposed by the latter must be within the expressed limitations (County Securities v. Seacord, 278 N. Y. 34) and, unless authorized, a tax so levied is constitutionally invalid (Matter of Long Is. R. R. Co. v. Hylan, 240 N. Y. 199). It is equally well settled that the Legislature may classify property for tax purposes in any manner it deems proper (People ex rel. Hudson Riv. Day Line v. Franck, 257 N. Y. 69). Its power in that regard is not without limitation, for the classification must have some reasonable basis (People ex rel. Farrington v. Mensching, 187 N. Y. 8). In this instance the State Legislature expressly stated that the classification ‘ ‘ shall mean or include” a list of named special classes of business (General City Law, art. 2-B, § 24-a [§§ 1, 2]), thereby evidencing an intention to restrict the application of the tax to the categories listed (Jackson v. Citizens Cas. Co. of N. Y., 277 N. Y. 385) and to exclude any business activity not so included. So viewed, the classification “ financial business ” in the State Enabling Act indicates an intention to preclude the city from classifying this taxpayer as a “ financial business ”.
If there is any doubt that the Legislature so intended to exclude holding companies as “ financial business ”, and we think there is none, the history of the Enabling Act points to the
In the light of this historic background, the State Legislature clearly never intended to give the city authority to include holding companies in the definition of “financial business”. Thus the Comptroller assessed the deficiency tax without authority.
Respondent contends that, even if his classification was improper, his determination should nonetheless stand because the amount of tax imposed is less than what would have been imposed had United States Steel been classified as a general business. This premise, viz., that the general business tax would
The order appealed from should be reversed and the determination of the Comptroller annulled, with costs in this court and in the Appellate Division, and the matter remitted to the Comptroller for further proceedings not inconsistent with this opinion.
Dissenting Opinion
(dissenting). The question is not whether the Comptroller erred in calling appellant a 1 ‘ financial business ” for taxing purposes. The sole question for decision is whether appellant owes, to New York City, “ General Business and Financial Taxes ” in at least the amount assessed against it by the Comptroller (Lewis v. Reynolds, 284 U. S. 281, 283). The character and extent of appellant’s New York City activities are fully described in the record before us. That record makes it completely clear that the taxes as assessed are valid and owed.
The “ General Business and Financial Tax” authorized by the State (General City Law, § 24-a) and imposed by the city (Administrative Code of City of New York, ch. 46) is one tax, not two. The only difference between the taxation of “financial ’ ’ businesses and the taxation of other covered activities is that the city may levy against the former a tax up to two-fifths of 1% of gross income while the tax against the latter may not exceed one fifth of 1% of gross receipts. In other words, there are two separate maxima as to two kinds of businesses, not two kinds of tax. If the Comptroller, describing appellant as a financial business, had sent it tax bills computed at the rate of two fifths of 1% on its whole receipts, he would have acted illegally since the State law did not permit inclusion of holding companies like appellant in the list of “ financial businesses ”. But the Comptroller was, by State enabling law and city local law, empowered to tax any locally conducted business, whether “financial” or other kind, up to one fifth of 1% on its gross takings. The taxes here contested by appellant were figured at a rate much lower than that — two fifths of 1% of 12%%, that is, one twentieth of 1% on appellant’s gross receipts. Since that was well below the authorized tax on “ general busi
Appellant’s transactions were all carried on in New York City so there is no problem of allocation as between intrastate and interstate commerce. The Comptroller’s power to use, as to local New York City businesses, allocation formulae producing less than the maximum allowable tax has been upheld by this court (Olive Coat Co. v. City of New York, 283 N. Y. 733; Berkshire Fine Spinning Associates v. City of New York, 5 N Y 2d 347, 358, 359, appeal dismissed 361 U. S. 3; see Matter of New Yorker Mag. v. Gerosa, 3 N Y 2d 362, 369, appeal dismissed 356 U. S. 339).
We have often reminded ourselves that it is our duty “to ascertain and declare the whole law upon the undisputed facts ” spread before us (Oneida Bank v. Ontario Bank, 21 N. Y. 490, 504; Rentways v. O’Neill Milk & Cream Co., 308 N. Y. 342, 349; People v. Duell, 1 N Y 2d 132, 134; Cahill v. Regan, 5 N Y 2d 292, 298). We should perform that duty here.
The order should be affirmed, with costs.
Judges Fuld, Froessel, Van Voorhis and Foster concur with Judge Dye; Chief Judge Desmond dissents in an opinion in which Judge Burke concurs.
Order reversed, etc.