Phœnix Iron Co. v. Commonwealth

• Decision Date: 27 May 1868
• Citation: 59 Pa. 104
• Parties: The Ph&#x153;nix Iron Co. <I>versus</I> The Commonwealth.
• Court: Pennsylvania Supreme Court

59 Pa. 104

The Phœnix Iron Co. versus The Commonwealth.

Supreme Court of Pennsylvania.

May 10, 1868.

May 27, 1868.

May 10th 1868.

Before THOMPSON, C. J., STRONG, READ, AGNEW and SHARSWOOD, JJ.

Error to the Court of Common Pleas of Dauphin county; No. 37, to May Term 1868.

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J. B. Townsend and J. C. Kunkel, for plaintiffs in error.—On the question of taxation they referred to the Acts of 1844, 1859 and 1864, supra; June 11th 1840, § 1 Pamph. L. 612; April 2d 1856 (Insurance), § 16, Pamph. L. 215; February 23d 1866, § 1, Pamph. L. 82; April 12th 1867, § 1, Pamph. L. 74, Purd. p. 950, pl. 119, p. 552, pl. 17, p. 1445, pl. 1, p. 1480, pl. 8; Commonwealth v. Wyoming Canal Co., 14 Wright 410; Commonwealth v. Clev., P. & A. Railroad Co., 5 Casey 370; Mintzer v. Montgomery County, 4 P. F. Smith 139; School Directors v. Carlisle Bank, 8 Watts 291; Spangler v. York County, 1 Harris 328; New York & Erie Railroad v. Sabin, 9 Casey 245. On the question of interest: the charge of twelve per cent. is penal, and is not intended to apply to those who in good faith deny their liability, and pursue the course authorized by law to test their liability.

Brewster, Attorney-General, for Commonwealth, referred to the Acts of Assembly cited for the plaintiffs in error, also acts of June 16th 1836 (Iron Companies), § 10, Pamph. L. 802; April 16th 1850 (Banks), § 21, Pamph. L. 487; May 1st 1861 (Free Banks), § 23, Pamph. L. 82, Purd. p. 567, pl. 11, p. 99, pl. 84, p. 82, pl. 23; Lehigh Crane Iron Co. v. Commonwealth, 5 P. F. Smith 448.

The opinion of the court was delivered, May 27th 1868, by AGNEW, J.

The important question in this case is whether a tax upon capital stock, imposed under the Acts of 29th April 1844, Purd. 949, pl. 118, and 12th of April 1859, Purd. 951, pl. 127, is a tax upon dividends, within the meaning of the words "not paying a tax to the state upon dividends under existing laws" contained in the second section of the Act of 30th April 1864, Purd. 1377, pl. 3. The tax on dividends is a well-known mode of raising revenue for the state upon corporations, and was in its origin chiefly confined to banks. The Act of 1st April 1835, Pamph. L. 99, which is but a reiteration of the same mode of taxation, subjected the banks of the Commonwealth to a graduated tax directly upon their dividends, increasing in progression from eight to eleven per cent. In all subsequent charters the same mode of taxation was pursued. The General Banking Act of 16th April 1850, § 21, Purd. 99, pl. 84, and the Act relating to banking companies of 1st May 1861, § 23, Purd. 82, pl. 23, laid the taxes upon dividends in like manner, but increasing the gradation until it arose to a thirty per cent. tax on a twenty-five per cent. dividend. The Act for the incorporation of iron manufacturing companies of 16th June 1836, § 10, Purd. 567, pl. 11, also imposed a tax on dividends of eight per cent. In all instances of a tax upon dividends, it was laid directly upon the dividend itself, without reference to the stock, e. g., on dividends not exceeding six per cent., eight per cent.; exceeding six and not seven, nine per cent., &c. But the Act of 29th April 1844, § 33, charged the tax which it imposes directly upon the capital stock of the corporations of this state. If a company declared a dividend or profit of six per cent. on the capital, the tax was to be measured at the rate of one half mill on each one per cent. of the dividend or profit; but when the corporation failed to make dividends or declared less than six per cent. per annum, then a valuation of the stock itself was to be made and returned, and the tax was to be "a sum equal to three...