People ex rel. Mut. Trust Co. of Westchester Cnty. v. Miller

• Decision Date: 18 December 1903
• Citation: 177 N.Y. 51,69 N.E. 124
• Parties: PEOPLE ex rel. MUTUAL TRUST CO. OF WESTCHESTER COUNTY v. MILLER, Comptroller.
• Court: New York Court of Appeals Court of Appeals

177 N.Y. 51

69 N.E. 124

PEOPLE ex rel. MUTUAL TRUST CO. OF WESTCHESTER COUNTY

v.MILLER, Comptroller.

Court of Appeals of New York.

Dec. 18, 1903.

Appeal from Supreme Court, Appellate Division, Third Department.

Certiorari by the people, on the relation of the Mutual Trust Company of Westchester County, to Nathan L. Miller, comptroller of the state of New York. From an order of the Appellate Division (83 N. Y. Supp. 185) affirming the determination of the defendant to refuse to revise a tax against the relator for the year ending June 30, 1901, relator appeals. Reversed.

Bartlett, J., dissenting.

Herbert Parsons, for appellant.

John Cunneen, Atty. Gen. (William H. Wood, of counsel), for respondent.

VANN, J.

The relator, a trust company with the powers which its name implies, was organized on the 6th of June, 1901, and began to do business on the 24th of that month. Its capital was $300,000; its surplus, paid in with the capital, was $60,000; and it had no undivided profits when the question presented by this appeal arose. On the 30th of August, 1901, the Comptroller imposed a tax of $3,600 upon its capital and surplus, amounting to $360,000, which he declared was ‘for tax on franchise or business based on capital stock, surplus and undivided profits, per chapter 132, p. 316, Laws 1901, as amended by chapter 535, p. 1319, Laws 1901, for year ending June 30, 1901.’ The relator, after paying the tax under protest, applied to the Comptroller for a revision and readjustment, but the application was denied. A writ of certiorari, issued for a review of such determination, resulted in an order of the Appellate Division confirming it in all respects. From that order the relator appealed to this court.

The statute under which the Comptroller proceeded provides that ‘every trust company incorporated, organized or formed under, by or pursuant to a law of this state, * * * shall pay to the state annually for the privilege of exercising its corporate franchise or carrying on its business in such corporate or organized capacity, an annual tax which shall be equal to one per centum on the amount of its capital stock, surplus, and undivided profits. * * *’ Tax Law, § 187a (Laws 1901, pp. 316, 1320, cc. 132, 535).

Every company liable to pay a tax under this section is required to make a written report to the Comptroller, on or before August 1st in each year, ‘of its condition at the close of business on June thirtieth preceding, separately stating the amount of its capital stock, the amount of its surplus, and the amount of its undivided profits, and containing such other data, information or matter as the Comptroller may require.’ Upon the basis of this report, or if no report is made, or the one made is unsatisfactory, upon the facts discovered by the Comptroller through an examination which the statute authorizes, it is his duty to ‘order and state an account for the tax due the state,’ and to notify the corporation interested, which is required to pay the tax thus fixed on or before the 1st of September in each year, with a penalty of 5 per cent. for nonpayment within 30 days after it becomes due, and 1 per cent. for each month thereafter. At any time within one year after notice of the imposition of the tax, the Comptroller may revise his action, correct any error, and, if the tax has been paid, make the proper adjustment. The action of the Comptroller may be reviewed by certiorari, provided the amount of the tax is first deposited with the Treasurer of the state. Id. §§ 195-197 (Laws 1896, pp. 864, 865, c. 908).

The relator claims, among other things, that, as it had carried on business but six days before the fiscal year expired, the tax should be apportioned according to the period during which it exercised its corporate franchise. The Comptroller claims that a fraction of the year cannot be considered in imposing the tax, and that the exercise by the relator of its corporate franchise for any part of the year subjects it to a tax the same in amount as if it had been engaged in business during the entire year.

The tax under consideration is not imposed upon property, but upon a privilege. It is not imposed upon the privilege of becoming a corporation, for that would be an organization tax, payable but once for the entire period of corporate existence. It is imposed ‘for the privilege of exercising’ the corporate franchise, and is measured by the value of the investment made and used in carrying on the corporate business. It is an ‘annual’ tax, imposed ‘annually,’ as the statute expressly provides, for the privilege of exercising, not of possessing, a corporate franchise. This privilege was used by the relator for only 6 days during the fiscal year in question. It could not exercise its franchise for the entire year, because the state did not bring it into existence until the year had nearly expired. The consideration for the tax is the privilege of carrying on business, yet the relator, according to the requirement of the Comptroller, was compelled to pay for a privilege that it did not have and could not exercise during the greater part of the period for which the tax was laid. It used the privilege for only 6 days, but it is taxed for using it 365 days, during 359 of which it did not business and enjoyed no privilege. An annual tax is a tax reckoned by the year, the same as annual rent or annual interest. An ‘annual’ tax imposed ‘annually’ means a tax that is imposed once a year, computed by the year. If a trust company does not commence business until 6 days before the fiscal year ends, or if it ceases to do business 6 days after the year begins, the tax for doing business by the year requires apportionment. While the Legislature did not so provide in express terms, it is a fair and reasonable implication from the words used that such was its intention. When, by section 182 of the tax law, it imposed an annual tax, payable annually, upon every corporation of a certain class, to be computed upon the basis of the amount of its capital stock ‘employed within the state’ during the year, it did not say expressly that the assessment should be determined by the average amount of capital so employed, but we held that this was what was necessarily meant. People ex rel. Brooklyn Rapid Transit Co. v. Morgan, 57 App. Div. 335,68 N. Y. Supp. 21,168 N. Y. 672, 61 N. E. 1132. Adopting the opinion below, we said: ‘This is not a tax upon property, but a tax upon the business done. It is an annual tax to be measured by an annual business done, or, in other words, by the appraised value of capital employed during an entire year. The capital must have been employed, or else there is no tax. It must have been employed within the state. All the data going to fix the amount of the tax must be past transactions. Time of employment and amount employed are essential data to fix the amount of an annual tax upon a business with any degree of fairness. * * *’

Section 187a does not fix the date when the capital stock, surplus, and undivided profits shall be taken, although they are variable quantities, of which an average can be made for the year, the same as an average of the capital stock employed by the year was used in the Case...