"It
is hereby mutually agreed between petitioner, First Security
Corporation of Ogden, a corporation, and the State Tax
Commission, that for the purpose of trying the case upon the
petition for redetermination of deficiency, heretofore filed
herein by petitioner, the following shall be considered as
the facts and all of the facts, subject to any legal
objections, which shall be considered by the State Tax
Commission, and upon which it shall render its decision and
judgment.
"(a) The said corporation was organized in 1928 under
the laws of the State of Delaware primarily for the purpose
of acquiring by stock ownership the control of banking and
other corporations, and holding the stocks therein for the
purpose of controlling the management of affairs of such
other corporations.
"(b) Immediately thereafter it qualified to do
business in the State of Utah, and thence hitherto has been
so qualified. During all of the years 1931, 1932, 1933, 1934
and 1935, the sole business of said corporation, except as
hereinafter stated in paragraphs (d) and (e) consisted of
holding stock of such corporations for the purposes stated.
During that period it owned stock in, and exercised such
control of, the following named corporations, all of which
made returns under the Utah Franchise Tax Law: [Here follows
a list of fourteen banking corporations.]
"From
time to time after its organization, the taxpayer acquired
the control of various banks in the state of Idaho until in
September, 1933, it controlled the following named banks:
[Here follows a list of sixteen Idaho banking corporations.]
"In
October, 1933, First Security Bank
of Boise and First Security Bank of Pocatello were merged
into Anderson Bros. Bank, and the latter changed its name to
First Security Bank of Idaho, and its principal place of
business to Boise. Immediately thereafter it purchased all of
the assets and good will of all of the other Idaho banks
hereinbefore named. The taxpayer has continued to control the
said bank which now is engaged in a branch banking business
in the state of Idaho.
"Prior
to the merger above mentioned, Franklin Investment Company
was a subsidiary of First Security Bank of Preston, Capital
Investment Company was a subsidiary of First Security Bank of
Boise, and Security Investment Company was a subsidiary of
First Security Bank of Pocatello. Each was used as a
liquidating company for its parent. In the month of October,
1933, the taxpayer acquired all of the capital stock of
Franklin Investment Company, and thereafter the Franklin
Investment Company acquired all of the assets and business of
the Capital Investment Company and the Security Investment
Company.
"During
a part of the period in question the taxpayer owned the
control of First Security Bank of Rock Springs and First
Security Bank of South Superior, both of which were organized
under the laws of Wyoming. In the year 1934 the First
Security Bank of Rock Springs purchased the assets and
assumed the liabilities of First Security Bank of South
Superior.
"At
no time has any of the above mentioned corporations organized
under the laws of Idaho or under the laws of Wyoming
transacted any business within the State of Utah, or made any
report under the Utah Franchise Tax law, except Western
Investment Company, hereinbefore referred to.
"(c) A copy of the articles of incorporation
and of the by-laws of the taxpayer, as originally adopted, is
attached to the petition filed herein, and is made a part
hereof. The articles have been amended, but the amendment
dealt only with the capital structure, and did not affect the
powers and purposes of the corporation. The amendment to the
by-laws dealt only with the time of holding the annual
meetings of the stockholders.
"(d)
While its powers are very broad, it confined its business,
during the period in question (unless the facts hereinafter
stated require a different conclusion), exclusively to
holding stocks of other corporations and controlling the
management of affairs of such corporations. It did not carry
on or undertake any business, undertaking, transaction or
operation commonly carried on or undertaken by capitalists,
promoters, financiers, contractors, merchants, commercial men
or agents, nor did it carry on or undertake any investment or
insurance business, or any other business of any kind, unless
the transactions hereinafter set out are such. In the year
1933, in order to comply with the 'Banking Act of
1933,' it purchased securities of the character required
by that act, for the aggregate amount of $ 4,465.00, and it
still holds such securities, and must purchase and hold
others. In March, 1935, it purchased from First Security
Company, one of its wholly owned subsidiaries, three hundred
nine (309) shares of preferred stock of The Amalgamated Sugar
Company paying the market price therefor. In December of the
same year it sold all of the shares through a local broker at
market price. In the same month the First Security Company
bought on the market substantially the same number of shares
at the market price. On several occasions it has sold stock
in its subsidiaries in order to qualify the vendees as
directors, and it carries them on open account for the
purchase price.
"It
has also been named in a master group insurance policy as the
parent corporation of its various subsidiaries, a procedure
which was necessary to enable the employees of such
subsidiaries to obtain group insurance. The taxpayer has paid
none of the premiums and the First Security Company, one of
its subsidiaries, has acted as the collector and disburser of
the premiums.
"In
November, 1935, the taxpayer cancelled the appointment of two
corporations doing business in San Francisco, California, as
its Transfer Agent and Registrar of stock transfers, and at
the same time it appointed the First Security Trust Company,
a corporation of Salt Lake City, as the Transfer Agent, and
The First National Bank of Salt Lake City as its Registrar.
In December, 1935, it declared a dividend which was disbursed
entirely by the First Security Trust Company.
"Annually it causes its accounts to be audited
by certified public accountants and
its president makes an annual report to its stockholders. It
keeps its financial books and records at Ogden, Utah.
"(e)
The stock certificates owned by it and issued by such other
corporations, with the exception of occasional temporary
presence here, were kept without the State of Utah during all
of said time, and are now so kept. With the exception of a
small cash working fund formerly kept on deposit in Utah, all
available moneys are and were held by it in banks without
this State. All other stocks owned by it during such period
were issued by corporations organized under the laws of
foreign states, none of which corporations did any business
in Utah, and none of which made returns under the act. None
of the certificates of stock issued by said corporations and
owned by the taxpayer were kept in Utah during the period in
question.
"(f)
Except as above stated, it owned, during the period in
question, no real or personal property within the State of
Utah, and maintains no clerks, or other paid employees,
therein. Its sole activities in Utah consisted in holding
stockholders' meetings, at which reports were presented,
and directors elected, and directors' meetings at which
matters connected with the control of the management of
affairs of its subsidiaries were considered.
"(g)
During the same period of time there was at least one
corporation doing business in the State of Utah of the same
kind as that done by the petitioner, but which corporation
owned no stock issued by any foreign corporation. Such
corporation has been accorded by the State Tax...
