Diamond Match Co. v. State Tax Comm'n, 7.

Citation200 A. 365
Decision Date29 June 1938
Docket NumberNo. 7.,7.
PartiesDIAMOND MATCH CO. v. STATE TAX COMMISSION.
CourtCourt of Appeals of Maryland
200 A. 365

DIAMOND MATCH CO.
v.
STATE TAX COMMISSION.

No. 7.

Court of Appeals of Maryland.

June 29, 1938.


200 A. 366

Appeal from Circuit Court of Baltimore City; Samuel K. Dennis, Judge.

Action by the State Tax Commission of Maryland against the Diamond Match Company, a Delaware corporation, transferee and liquidating agent, on behalf of itself, and the Diamond Match Company, a dissolved Maryland corporation, to recover a special franchise tax. From an order subjecting the defendant to the tax, the defendant appeals.

Order affirmed.

Argued before BOND, C. J., and URNER, OFFUTT, PARKE, SLOAN, MITCHELL, SHEHAN, and JOHNSON, JJ.

Wm. Pepper Constable and John D. Alexander, both of Baltimore, for appellant. William L. Henderson, Asst. Atty. Gen. (Herbert R. O'Conor, Atty. Gen., on the brief), for appellee.

PARKE, Judge.

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The appeal in this case is from the judgment of the Circuit Court of Baltimore City holding that the Diamond Match Company, a business corporation, which had for some prior years been incorporated under the laws of the State of Maryland but which had been duly dissolved on March 31, 1936, is subject to a special franchise tax under the provisions of chapter 10 of the Acts of 1936, Sp.Sess., which later became operative on April 4, 1936.

The Diamond Match Company, a domestic ordinary business corporation, was incorporated on May 7, 1930, under the laws of the State of Maryland. The office and manufacturing operations of the corporation were in the State of New York, and its only property in the State of Maryland was its merchandise and stock in trade of the yearly average value of $31,112. The aggregate capital stock on which the franchise tax is calculated was $25,000,000. The regular franchise tax on this amount is $900, and an assessment was so entered on April 16, 1936. The company does not dispute that it owes this tax, as the company was in existence on January 1, 1936. On June 30, 1936, a special or additional franchise tax of $1,800 for the year 1936 was assessed against the corporation under the provisions of Chapter 10 of the Acts of 1936, § 4, to be known as sec. 139A of Art. 81 of the Code. Thus the company, a Maryland corporation, was in being, with capital stock, and doing business in Maryland on January 1, 1936. By regular proceedings and in good faith, proceedings were begun on January 23, 1936, for the purpose of obtaining a legal dissolution of the corporation. Without any regard to the tax now in controversy, the proceedings were regularly carried forward to a dissolution of the corporation on March 31, 1936.

At a special session of the General Assembly of Maryland which began on March 4, 1936, and ended on April 2, 1936, a special franchise tax was imposed by Chapter 10 of the Acts of the Special Session of 1936, and this Act became effective on April 4, 1936, as an emergency measure. On June 30, 1936, the company was assessed a special franchise tax in the amount of $1,800. The company resisted this assessment on the ground that, by reason of its dissolution before the passage of the statute the company was not liable. The legality of the assessment thus imposed

200 A. 367

depends upon whether the legislation in question is retroactive; and, if such be the construction, is the Act unconstitutional because in violation of the due process clauses of the Maryland and Federal Constitutions.

The portion of the enactment which is involved in this controversy is in these words:

"139A. Every domestic corporation having capital stock and doing business in this State on the first day of January, 1936, * * * shall pay to the State Treasurer, for the use of the State, a special tax for the year 1936, for its franchise to be a corporation (in addition to the franchise tax imposed by Section 136 of this Article, and any other tax imposed by law), at the following rates, that is to say:

"On the amount of its capital stock issued, outstanding and/or subscribed for, on the first day of January, 1936: * * *

"Every domestic corporation having capital stock and doing business in this State on the first day of January, 1936, which had no part of its capital stock issued, subscribed for or outstanding on the first day of January, 1936, shall pay for such franchise an additional tax of twenty dollars. * * *

"The State Tax Commission, on or before the fifteenth day of May, 1936, shall ascertain and certify the amount of each such tax to the State Comptroller, who shall forthwith transmit to the corporations subject to the tax hereby imposed a bill for the amount of the special franchise tax hereby imposed, and such tax shall be payable to the Treasurer without interest at any time on or before the fifteenth day of June, 1936, provided the bill is mailed on or before May 15, 1936, and if the bill shall not be mailed after the fifteenth day of May, 1936, the same shall be payable without interest at any time within thirty days after the mailing of such bill."

In the passage of this enactment, the General Assembly acted under the pressure of an emergency which demanded the procuring of funds for relief of the needy. The special franchise tax was levied for the single calendar year of 1936, and not for any succeeding year. Its enactment was not for the purpose of the inauguration of a continuing change in the system or rate of taxation, but was designed to be a temporary measure to meet immediate financial obligations. The special tax ended by its imposed limitations and was not revived in the legislation of 1937 for any purposes. It is apparent that to compute the probable net yield of this single levy of a special emergency franchise tax a certain day preceding the enactment was necessary to be taken to ascertain the domestic corporations then in operation, so that thereby the subjects of taxation and the basis might be known to guide the legislators in fixing the rate to produce the required sum thus to be raised.

The considerations mentioned are of material significance in the ascertainment of the legislative purpose. In its approach to this question, the Court will keep in mind the rule that tax laws are to be given effect with due regard to the public necessities subserved1, but will, nevertheless, not give a retroactive effect to the terms employed2, unless that is the clear and imperative legislative intent3. Should, however, the legislative intent to give a retroactive operation to its provisions be made manifest beyond any controversy there is no occasion for the aid of...

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