Fernwood Lumber Co. v. Mississippi State Tax Commission

• Citation: 167 Miss. 273,149 So. 727
• Decision Date: 25 September 1933
• Docket Number: 30655
• Court: United States State Supreme Court of Mississippi
• Parties: FERNWOOD LUMBER CO. v. MISSISSIPPI STATE TAX COMMISSION et al

149 So. 727

167 Miss. 273

FERNWOOD LUMBER CO. v. MISSISSIPPI STATE TAX COMMISSION et al

No. 30655

Supreme Court of Mississippi

September 25, 1933

Division A

1 TAXATION. Provision of 1924 income tax statute that, in computing net "income" on timber acquired before effective date of 1912 statute, fair market value on such date should be taken in lieu of cost, held not to violate constitutional provision respecting taxation of "property" (Laws 1924, ch. 132, section 12, par. 9; Laws 1912, ch. 101; Const, 1890, section 112)..

This was so as against contention that increase in value of property was not "income," but merely increase in value of owner's capital, and as against contention that increase in value of property accruing prior to date on which it became subject to income tax thereon is "property" within meaning of Constitution 1890 section 112, and cannot be subjected to taxation thereafter as income, but only as property under general revenue laws; the latter contention ignoring fact that Laws 1924, chapter 132, section 12, paragraph 9, the provision attacked by taxpayer, did not cease to tax increase in value of property that accrued prior to date at which it was first made subject to income taxes thereon by Laws 1912 chapter 101.

2 TAXATION.

Income derived from property is taxable as such, and taxation thereof does not violate constitutional provision respecting taxation of "property" (Laws 1924, chapter 132; Constitution 1890, section 12).

3. TAXATION.

Increase in value of property, accruing over period of years, may be taxed as "income" of year in which it is converted into money or other property (Laws 1924, chapter 132).

4. TAXATION.

That profit or gain is evidenced by something which is property taxable as such does not render it exempt from taxation as "income" (Laws 1924, chapter 132).

5. TAXATION.

1924 income tax statute held but amendment and continuation of 1912 statute (Laws 1912, chapter 101; Laws 1924, chapter 132).

6. CONSTITUTIONAL LAW. Taxation.

That 1924 income tax statute in directing computation of net income on timber acquired before effective date of 1912 statute, provided fair market value on such date should be taken in lieu of cost, held not to violate constitutional equality clauses, though 1912 statute allegedly permitted taxpayer to be sole judge of value of property, while 1924 statute required computation on actual value (Laws 1924, chapter 132, section 12, par. 9; Laws 1912, chapter 101, Constitution 1890, section 112; Constitution U.S. Amendment 14, section 1).

HON. V. J. STRICKEK, Chancellor.

APPEAL from the chancery court of Hinds county HON. V. J. STRICKER, Chancellor.

Action by the Fernwood Lumber Company against the Mississippi State Tax Commission and others. From an adverse judgment, plaintiff appeals. Affirmed.

Affirmed.

Green, Green & Jackson, of Jackson, for appellant.

Section 6, subdivision 2, contravenes section 112 Mississippi Constitution, in this, that the timber utilized by appellant in manufacturing the lumber sold had a value as property when the income tax act of 1924 was passed of ten dollars per thousand feet, and the attempt to retroactively make operative the value as at March 16, 1912, is unconstitutional.

Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891; Thompson v. McLeod, 112 Miss. 383, 73 So. 193; Sheip Co. v. Amos, 130 So. 699, 705; Jackson v. McPherson, 162 Miss. 164, 138 So. 604, 606; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4; State ex rel. Bundy v. Nygaard, L. R. A. 1917E (Wis.), 563, at 565; Alderman v. Wells, 27 L. R. A. (N. S.) 864; State ex rel. Bolens v. Frear, L. R. A. 1915B, 569; Doyle v. Mitchell Bros. Co. post, 568; McLaughlin v. Alliance Ins. Co., 286 U.S. 250, 76 L.Ed. 1086; Chicago, etc., R. R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Note 70, A. L. R. 468; Featherstone v. Norman (Ga.), 70 A. L. R. 449; Bachrach v. Nelson (Ill.), 182 N.E. 909, at 914; Norman v. Bradley, 160 S.E. 413, 416; Smart v. Wisconsin Tax Commission, 237 N.W. 114, at 115; Norris v. Cary, 237 N.W. 113; Norris v. Cary (Wis.), 238 N.W. 415; Falk v. Ross (Wis.), 230 N.W. 64, Syl. 3; Sims v. Ahrens (Ark.), 271 S.W. 720, Syl. 1; In re Opinion of the Justices, 165 N.E. 900; Cooley on Taxation, sections 15, 743; Redfield v. Fisher (Ore.), 292 P. 813, at 817; Gulf & Ship Island Railroad Co. v. Adams, 90 Miss. 559, 45 So. 91; Gulf Refining Co. v. Cleveland Trust Co., 108 So. 158; State v. G. M. & N. R. R., 104 So. 689, 138 Miss. 70; Brushaber v. Union Pac. R. R. Co., 240 U.S. 1, 60 L.Ed. 493; Eisner v. Macomber, 252 U.S. 205, 64 L.Ed. 528; Peck v. Lowe, 247 U.S. 172, 62 L.Ed. 1051; Southern Pacific Co. v. Lowe, 247 U.S. 334, 62. L.Ed. 1147; Lynch v. Hornby, 247 U.S. 343, 62 L.Ed. 1151; Evans v. Gore, 253 U.S. 261, 64 L.Ed. 896; State taxation, Eliasberg Bros. v. Grimes, 86 So. 56; In re Opinion of the Justices, 120 Mass. 613; State v. Pinder, 108 A. 43.

Sections 112, 181 and 143 of the Constitution of Mississippi require that an assessment by the assessor is a prerequisite to the taxation of property.

State v. Adler, 68 Miss. 487, 9 So. 640; Thibedeaux v. State, 69 Miss. 683, 13 So. 352; State Revenue Agent v. Tonella, 70 Miss. 701, 14 So. 17.

The assessor cannot be legislatively controlled in the fixation of the value of property to be taxed.

Hawkins v. Mangum, 78 Miss. 97, 28 So. 872; Adams v. Kuykendall, 75 Miss. 701, 23 So. 385.

Legislatively fixing the amount of taxes on gross receipts violates section 118.

Chicago, etc., R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Reed Bros. v. Board of Supervisors of Lee County, 126 Miss. 162, 88 So. 504.

This is a violation of the equal protection clause of the Federal constitution.

Magnolia Bank v. Pike County, 11. Miss. 857, 72 So. 697; First National Bank v. Harrison County, 157 Miss. 197, 127 So. 696; Keokuk & Hamilton Bridge Co. v. Salm, 258 U.S. 122, 66 L.Ed. 496; Sunday Lake Iron Co. v. Town of Wakefield, 247 U.S. 350, 62 L.Ed. 1154; Raymond v. Chicago Union Traction Co., 207 U.S. 20, 52 L.Ed. 78; Knox v. Southern Paper Co., 143 Miss. 870, 108 So. 288, 290; Teche Lines v. Board of Supervisors, 142 So. 24, 28; Glenn v. Doyal, 285 U.S. 526, 76 L.Ed. 923; Hattiesburg Grocery Case, 126 Miss. 34, 88 So. 4; Enochs v. State, 91 So. 20, 128 Miss. 361; Rockefeller v. U.S., 257 U.S. 176, 66 L.Ed. 186; Walsh, Collector, v. Brewster, 255 U.S. 536.

No man should be denied the equal protection of the law.

Cumberland Coal Co. v. Board of Revision, 284 U.S. 23, 76 L.Ed. 146; Taylor v. Louisville, etc., Railroad Co., 88 F. 350; Greene v. Louisville, etc., Co., 244 U.S. 517, 61 L.Ed. 1289; Louisville & Nashville R. Co. v. Greene, 244 U.S. 522, 61 L.Ed. 1291; Illinois Central R. Co. v. Greene, 244 U.S. 555, 61 L.Ed. 1309; United States v. Osage County, 251 U.S. 133, 64 L.Ed. 187.

Here appellant makes a hundred per cent return of income, and it is demanded that it pay upon this basis, while the law which makes this exaction of it legislatively adopted as the admeasurement of who should pay, and what should be paid, the individual opinion of each prospective taxpayer.

Raymond v. Chicago Union Traction Co., 207 U.S. 20, 52 L.Ed. 78, 87.

The returns of the appellant to the state tax commission appear as Exhibit 2 to the record. That at issue is: Under the Constitution, section 112, may this appreciation through unearned increment prior to 1924, be taxed as income when it had consistently been taxed by the state under section 112 as property?

Appellant does not in this aspect complain of an alleged discrimination, but does complain that the timber having become through appreciation property by reason of appellant's ownership, the legislature may not retroactively convert such appreciation, existent as property, back into income so that in virtue of its alleged being that which it is not, it may be taxed contrary to the provision of section 112, which is the fundamental law.

Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891; Thompson v. McLeod, 112 Miss. 383, 73 So. 193; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4; State ex rel. Bundy v. Nygaard, L. R. A. 1917E (Wis.), 563, 565; Smart v. Wisconsin Tax Commission (Wis.), 237 N.W. 115; Redfield v. Fisher (Ore.), 292 P. 813, 73 A. L. R. 738; Sims v. Ahrens (Ark.), 271 S.W. 720; Hixon v. School Dist. (Ark.), 60 S.W.2d 1027.

Appellant has not, with reference, argued that the Income Tax Act of 1924 is unconstitutional, recognizing that thereasto Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4, 126 Miss. 655, 89 So. 369, and Knox v. G. M. & N. Co., 138 Miss. 70, 104 So. 689, are conclusive, but having admitted the general validity thereof, that which we attack is the inability of the legislature to make income out of property while section 112 of the Constitution stands.

Hixon v. School District (Ark.), 60 S.W.2d 1027.

E. R. Holmes, Jr., Assistant Attorney-General, for appellees.

This court, in the case of Hattiesburg Grocery Company v. Robertson, 126 Miss. 34, held that the Income Tax Act did not violate section 112 of our Constitution, and the case of Knox v. Gulf, M. & N. R. R. Company, 138 Miss. 70, reiterated the opinion that our Income Tax Law was not violative of section 112 of the state Constitution, and went further, specifically holding that the equality clauses of the state and federal constitutions were complied with by the provisions of our income tax statute.

The provision complained of benefits appellant in case at bar.

The right to question the constitutionality of the Income Tax Act, or any provision thereof, must be bottomed on defendant's own situation, and here the provision complained of, necessarily operates in appellant's favor for without it, the deduction allowable,...