California Co. v. State, No. 18652

Docket NºNo. 18652
Citation348 P.2d 382, 141 Colo. 288
Case DateDecember 21, 1959
CourtSupreme Court of Colorado

Page 382

348 P.2d 382
141 Colo. 288
CALIFORNIA COMPANY, a corporation, Plaintiff in Error,
v.
STATE of Colorado; Robert A. Theobald, as Director of
Revenue of the State of Colorado; Homer F.
Bedford, as Treasurer of the State of
Colorado, Defendants in Error.
No. 18652.
Supreme Court of Colorado, En Banc.
Dec. 21, 1959.

[141 Colo. 290]

Page 384

L. M. Lamar, New Orleans, La., V. P. Cline, Akolt, Turnquist, Shepherd & Dick, Denver, for plaintiff in error.

Duke W. Dunbar, Atty. Gen., Frank E. Hickey, Deputy Atty. Gen., Fred M. Winner, Max D. Melville, Sp. Assts. to Atty. Gen., for defendants in error.

FRANTZ, Justice.

This case involves the constitutional validity of Chapter 131, Colo.Sess.Laws 1953 (C.R.S. '53, 138-1-7), popularly called the 'severance tax,' imposing a graduated tax on gross income 'derived from the production or extraction of crude oil, natural gas, or both crude oil [141 Colo. 291] and natural gas from petroleum deposits located within this state * * *.' Adjudicated invalidation was sought in the trial court without success. There, as here, the Act was challenged on the ground that it contravened by word, and by deed performed pursuant to the word, certain provisions of both the federal and state constitutions. Direction for an accounting before the trial court is also assailed here.

It is said that the Act: (1) denies The California Company due process and equal protection of the law in violation of federal and state constitutional provisions; (2) does not impose an income tax authorized by Section 17, Article X of the state constitution, but, in fact, is incongruous to said section; (3) brings down with it said Section 17, Article X, if sanctioned by the latter, since both would be offensive to the federal due process and equal protection clauses; (4) imposes a property or ad valorem tax in violation of the uniformity provision of Section 3, Article X, and in violation of the ceiling provision of Section 11, Article X of the state constitution; (5) has a defective title; (6) provides for, and has been construed as, operating retroactively in contravention of Section 11, Article II of the state constitution, and (7) is applied in such manner that it puts an unreasonable burden on interstate commerce, thereby infringing the commerce clause of the federal constitution.

The title of the Act thus impugned is 'An Act relating to revenue and taxation, and to amend Chapter 175, Session Laws of Colorado 1937, as amended by all subsequent acts.' Said Chapter 175, Sess. Laws Colo.1937, provided for a graduated income tax. As enacted the 1953 law under present attack added subsection (f) to Section 2 of said Chapter 175, as amended.

Our disposition depends upon the wording, context and interpretation of certain parts of the 1953 Act. Material portions of the assailed Act follow:

'(f) (1). In addition to the tax imposed by subsections (a), (b), (c) and (d) of this section, there shall [141 Colo. 292] be levied, collected and paid for each taxable year ending on and after December 31, 1953, upon that portion of the gross income of every person which is derived from the production or extraction of crude oil, natural gas, or both crude oil and natural gas from petroleum deposits located within this state a tax at the following rates:

"Under $25,000 2%
                "$ 25,000 and under $100,000 3%
                "$100,000 and under $300,000 4%
                "$300,000 and over 5%
                

'For the purposes of this subsection (f) (1), the words 'gross income derived from the production or extration of crude oil, natural gas, or both crude oil and natural gas from petroleum deposits located within this state' means the entire amount realized from the sale or other disposition of all crude oil and natural gas produced or extracted during any taxable year from petroleum deposits located within this state.

'(2) There shall be allowed as a credit against the tax computed in accordance with the provisions of paragraph (1) of this subsection (f) an amount equivalent to

Page 385

the sum of all ad valorem taxes levied, assessed and paid during the taxable year upon crude oil, natural gas, oil and gas leaseholds and leasehold interests, and oil and gas royalties and royalty interests for state, county, municipal, school district and special district purposes, except such ad valorem taxes as may be levied, assessed and paid for such purposes upon equipment and facilities used in drilling for, production of, storage of, and pipeline transportation of crude oil and natural gas. * * *

'From and after May 1, 1953 every producer, which term is hereby defined to mean every person producing or extracting crude oil, natural gas, or both crude oil and natural gas from petroleum deposits located within this state, or every first purchaser of crude oil, natural gas, or both crude oil and natural gas produced or extracted[141 Colo. 293] from petroleum deposits located within this state, as the case may be, shall withhold from every royalty payment made to any person claiming or having an interest in any oil or natural gas so produced, except from royalty payments made to the United States of America or the State of Colorado, an amount equal to 3% of such royalty payment, and shall pay to the Department of Revenue, on or before the fifteenth day of October, 1953 the aggregate amount of all such withholdings made during the months of May, June, July, August and September of 1953, and shall on or before the fifteenth day of January, April, July and October in each year thereafter pay to the Department of Revenue the aggregate of all such withholdings made during the three preceding months, and shall upon the dates aforesaid file reports covering such withholdings upon forms to be prescribed by the Director of Revenue; provide, however, that nothing contained herein shall be so construed as to reduce the tax imposed by subsection (f)(1) hereof.

'Every person making a return as required in subsection (f)(3) hereof may take credit for the amount withheld by the producer or the first purchaser against the tax shown to be due upon such return, and any overpayment shown on such return shall be refunded to the taxpayer.

'Section 2. The tax hereby imposed is declared to be a special classified and limited tax in accordance with the provisions of Section 17 of Article X of the constitution of the State of Colorado.'

Is the state tax upon such gross income at progressive rates constitutionally valid? In broad outline, this appears to be one of the basic questions which we must resolve. And if such tax is valid, does it so burden interstate commerce in manner and amount that we must annul it? Since proper resolutions of these questions depend in great measure upon the kind of tax with which [141 Colo. 294] we are dealing, it becomes necessary initially to determine the nature of the tax.

That the problem of the nature of the tax has vexed the courts is borne out by the diversity of views appearing in the decisions. 'This has been, and still is, a very troublesome problem for the courts; and the conclusions reached are by no means consistent, even with the same court.' Constitutional Limitations On Progressive Taxation of Gross Income, by Robert C. Brown, 22 Iowa L.Rev. 246.

Originally the Supreme Court of the United States held that a federal tax on income derived from real property was tantamount to a tax on the property, and therefore, ran afoul of the constitutional provision that direct taxes shall conform to the rule of apportionment. At the same time the decision engendered dubiety as to the nature of a tax on the receipts obtained from personal property. Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759. On rehearing it was determined that federal taxation upon income from real and personal property was a direct tax on the property itself. Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108.

Although the effect of these decisions has been overcome by the Sixteenth Amendment, adopted in 1913, which enabled Congress 'to lay and collect taxes on incomes, from whatever source derived, without apportionment

Page 386

among the several States, and without regard to any census or enumeration,' their impact on the law relating to income taxes has been great indeed.

Following these decisions the federal courts, for some time, and some state courts held income taxes to be property taxes, either on the theory that a tax on income earned from property is a tax on the property itself or that income itself is a form of property and a tax thereon makes it a property tax. Typical cases so holding are Eliasberg Bros. Mercantile Co. v. Grimes, 204 Ala. 492, 83 So. 56, 11 A.L.R. 300; Bachrach v. Nelson, 349 Ill. 579, 182 [141 Colo. 295] N.E. 909; Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523, 130 N.E. 99; Opinion of the Justices, 95 N.H. 537, 64 A.2d 320; Kelley v. Kalodner, 320 Pa. 180, 181 A. 598; Power, Inc. v. Huntley, 39 Wash.2d 191, 235 P.2d 173. Massachusetts and Washington have adhered to this view consistently, Washington because of a constitutional provision.

Other courts have held only that such an exaction is not a tax on property. Featherstone v. Norman, 170 Ga. 370, 153 S.E. 58, 70 A.L.R. 449; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; State ex rel. Maxwell v. Kent-Coffey Mfg. Co., 204 N.C. 365, 168 S.E. 397, 90 A.L.R. 476 (affirmed 291 U.S. 642, 54 S.Ct. 437, 78 L.Ed. 1040); Welch v. Henry, 223 Wis. 319, 271 N.W. 68, 109 A.L.R. 508. Perhaps this negative approach--that an income tax is not a property tax--was a prompted by the same thought that was imparted by the Supreme Court of Arkansas in the case of Stanley v. Gates, 179 Ark. 886, 19 S.W.2d 1000, 1002;

' * * * and we deliberately adopted the view that it was not a property tax. If it is not a property tax, it does not make any difference what name it is called. Whether it is called an excise tax, or a tax in the...

To continue reading

Request your trial
21 practice notes
  • People v. District Court, No. 91SA329
    • United States
    • Colorado Supreme Court of Colorado
    • June 29, 1992
    ...its effect on vested rights. Continental Title Co. v. District Court, 645 P.2d 1310, 1314-15 (Colo.1982); California Co. v. Colorado, 141 Colo. 288, 320, 348 P.2d 382, 399 (1959). As the civil parallel of the ex post facto limitation on criminal laws, a retrospective law is one which abroga......
  • Dooley v. City of Detroit, Nos. 53
    • United States
    • Supreme Court of Michigan
    • May 9, 1963
    ...S.Ct. 499, 95 L.Ed. 667; Canary v. Oklahoma Tax Commission (1956), 295 P.2d 281 (Okl.); California Company v. State of Colorado (1959), 141 Colo. 288, 348 P.2d 382; and Central Lincoln People's Utility District v. Stewart (1960), 221 Or. 398, 351 P.2d In this state we have never before reac......
  • Title, Ballot Title and Submission Clause, and Summary for 1999-2000 No. 25, In re, No. 98SA388
    • United States
    • Colorado Supreme Court of Colorado
    • February 22, 1999
    ...title to describe the contents of the bill. See, e.g., Goldberg v. Musim, 162 Colo. 461, 427 P.2d 698 (1967); California Co. v. State, 141 Colo. 288, 348 P.2d 382 (1959); Gordon v. Wheatridge Water Dist., 107 Colo. 128, 109 P.2d 899 (1941); Titus v. Titus, 96 Colo. 191, 41 P.2d 244 (1935); ......
  • Belle Bonfils Memorial Blood Center v. District Court In and For City and County of Denver, No. 88SA45
    • United States
    • Colorado Supreme Court of Colorado
    • October 17, 1988
    ...which would reflect an intent to overcome this presumption. People v. Holland, 708 P.2d 119 (Colo.1985); California Co. v. State, 141 Colo. 288, 348 P.2d 382 (1959), appeal dismissed, 364 U.S. 285, 81 S.Ct. 42, 5 L.Ed.2d 37 (1960). The donor whose blood contaminated K.W. with the AIDS antib......
  • Request a trial to view additional results
21 cases
  • People v. District Court, No. 91SA329
    • United States
    • Colorado Supreme Court of Colorado
    • June 29, 1992
    ...its effect on vested rights. Continental Title Co. v. District Court, 645 P.2d 1310, 1314-15 (Colo.1982); California Co. v. Colorado, 141 Colo. 288, 320, 348 P.2d 382, 399 (1959). As the civil parallel of the ex post facto limitation on criminal laws, a retrospective law is one which abroga......
  • Dooley v. City of Detroit, Nos. 53
    • United States
    • Supreme Court of Michigan
    • May 9, 1963
    ...S.Ct. 499, 95 L.Ed. 667; Canary v. Oklahoma Tax Commission (1956), 295 P.2d 281 (Okl.); California Company v. State of Colorado (1959), 141 Colo. 288, 348 P.2d 382; and Central Lincoln People's Utility District v. Stewart (1960), 221 Or. 398, 351 P.2d In this state we have never before reac......
  • Title, Ballot Title and Submission Clause, and Summary for 1999-2000 No. 25, In re, No. 98SA388
    • United States
    • Colorado Supreme Court of Colorado
    • February 22, 1999
    ...title to describe the contents of the bill. See, e.g., Goldberg v. Musim, 162 Colo. 461, 427 P.2d 698 (1967); California Co. v. State, 141 Colo. 288, 348 P.2d 382 (1959); Gordon v. Wheatridge Water Dist., 107 Colo. 128, 109 P.2d 899 (1941); Titus v. Titus, 96 Colo. 191, 41 P.2d 244 (1935); ......
  • Belle Bonfils Memorial Blood Center v. District Court In and For City and County of Denver, No. 88SA45
    • United States
    • Colorado Supreme Court of Colorado
    • October 17, 1988
    ...which would reflect an intent to overcome this presumption. People v. Holland, 708 P.2d 119 (Colo.1985); California Co. v. State, 141 Colo. 288, 348 P.2d 382 (1959), appeal dismissed, 364 U.S. 285, 81 S.Ct. 42, 5 L.Ed.2d 37 (1960). The donor whose blood contaminated K.W. with the AIDS antib......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT