In re Indian Territory Illuminating Oil Co.
| Decision Date | 09 June 1914 |
| Docket Number | 3240. |
| Parties | IN RE INDIAN TERRITORY ILLUMINATING OIL CO. |
| Court | Oklahoma Supreme Court |
Rehearing Denied Sept. 8, 1914.
Syllabus by the Court.
The power to tax is legislative, and there must be distinct authority of law for every levy upon the people under that power.
Property itself is a creature of law, and the discretion to select subjects of taxation rests solely with the Legislature.
Where the Legislature has omitted to provide for the assessment of certain kinds of property, it is not within the province or power of the court to make such assessments. No property can be assessed until the Legislature has made proper provision for this purpose.
The Legislature of this state has not selected oil and gas leases, as such, as subjects of taxation.
The Legislature has not provided for a severance of the various interests which may be held in real property for purposes of taxation.
By virtue of sections 7304 and 7307, Rev. Laws 1910, "real property," which, for the purpose of taxation, means "the land itself, and all buildings, structures and improvements or other fixtures of whatsoever kind thereon and all rights and privileges thereto belonging or in any wise appertaining, and all mines, minerals, quarries and trees on or under the same," must be listed and assessed in the name of the owner of the land.
Oil and gas, while lying in the strata of earth from which they are produced, must be taxed as real property to the owner of the land, if the land is taxable, under which for the time being they may lie.
Corporations incorporated under the laws of a sister state, doing business in this state, are taxable the same as domestic corporations.
A corporation for gain, incorporated under the laws of a sister state, doing business in this state, is not exempt from state taxation, either in its corporate person or its property because the federal government finds it convenient or profitable to deal with it in carrying out its policy toward the Osage Tribe of Indians.
It is a cardinal rule that, whatever property is worth for the purposes of income and sale, it is also worth for purpose of taxation.
Evidence examined, and held, sufficient to support the findings of the referee on the question of value.
Additional Syllabus by Editorial Staff.
The word "stock," as used in a statute authorizing taxation of the stock of a corporation, means, not only stock subscriptions, but the actual tangible property of the corporation.
Appeal from State Board of Equalization; R. M. Campbell, Referee.
In the matter of the assessment of the Indian Territory Illuminating Oil Company. From the report of the referee, to whom the cause was referred by the Supreme Court, the oil company appeals. Affirmed.
Brennan Kane & Michaelson and Hayes McCoy, all of Bartlesville, for petitioner.
Charles West, Atty. Gen., and W. C. Reeves, Asst. Atty. Gen., for the State.
C. B. Ames and Stuart, Cruce & Gilbert, all of Oklahoma City, Preston C. West, of Muskogee, Gilbert & Bond, of Duncan, and Dillard & Blake, James B. Diggs, and Henry McGraw, all of Tulsa, amici curiæ.
This is an appeal from the action of the State Board of Equalization in assessing the property of the Indian Territory Illuminating Oil Company for purposes of taxation. The return made by the company showed the valuation of its physical property for the purposes of taxation to be $53,835.10. The State Board of Equalization found the value of its property for purposes of taxation to be $538,350. In this court the cause was referred to a referee, with directions to make findings of fact and conclusions of law. The referee found, in effect, that the Indian Territory Illuminating Oil Company is a corporation, organized under and by virtue of the laws of the state of New Jersey, with a capital stock of $3,500,000; that on the 16th day of March, 1896, the Osage Nation of Indians in Oklahoma Territory entered into a contract with one Edwin B. Foster, by the terms of which said Edwin B. Foster had a blanket lease upon the lands in Oklahoma Territory known as the Osage Indian Reservation, for the sole purpose of prospecting and drilling wells and mining and producing petroleum and natural gas only; that this lease covered a period of 10 years from its date, and was approved by the Secretary of the Interior; that subsequent to the above date, said lease was extended, as to 680,000 acres of said reservation, for a period of 10 years from the date of its original expiration, and by the terms of said extension said lease will expire on the 16th day of March, 1916; that prior to the extension of said lease the same had been assigned to the Indian Territory Illuminating Oil Company; that the oil company has subleased to something more than 100 persons and corporations most of the lands covered by said lease contract, as extended on March 3, 1905, and oil operations on said lands have been and are being conducted largely by such sublessees; that a small portion of the tract, the amount of which does not appear from the evidence, is operated by the parent company direct; that said company has been, and is, primarily engaged in the business of oil production in the territory covered by said lease with the Osage Indians, and has conducted its operations in the gas business as an incident to the development of the oil territory and the production of oil, and, to some extent, as a matter of accommodation to the citizens of Bigheart and Avant, and other persons residing along its pipe lines; that all the property owned by said company is located in Osage and Washington counties, Okl., and all its business operations are conducted in said state; that the total valuation of said company's stock on the 1st day of February, 1911, was $500,000.00.
After making several proper deductions from the above sum, the referee finds that the total valuation of the Indian Territory Illuminating Oil Company's property of every kind, located in Oklahoma, over and above the amount locally assessed, was $447,169.98 on February 1, 1911; and concludes that said company is liable for taxation by the state of Oklahoma for the full value of its property, and that it is not exempt from taxation upon the theory that it is a federal agent, or that it holds a franchise from the federal government.
The exceptions to the report of the referee filed by the oil company raise the following questions: (1) Was the evidence taken before the referee sufficient to sustain his finding that the appellant is a public service corporation? (2) whether section 21, article 10, Williams' Constitution makes it the duty of the State Board of Equalization to assess all the property of public service corporations, including property not used in the public service, as well as that used in the public service; (3) whether the evidence taken before the referee is sufficient to sustain his finding as to the value of appellant's taxable property; (4) whether an oil and gas mining lease which grants to the lessee the right and privilege to go upon the lands of another for the purpose of exploring for oil and gas, and to produce oil and gas and transport the same from the leased premises, in consideration of the payment as royalty to the lessor of a part of the oil and gas discovered, and a stipulated price for each well producing oil and gas, is taxable; (5) to what extent is the appellant entitled to exemption from taxation on account of being a federal agency?
In a former opinion it was held:
As the petition for rehearing filed herein does not seriously question the soundness of the first two holdings, we will assume that they are correct, and will proceed to examine the remaining propositions.
It is well settled that the power to tax is legislative, and there must be distinct authority of law for every levy upon the people under that power. 1 Cooley on Taxation, 546. Recognizing the general nature of the power, the Constitution of the state ordains (section 2, art. 10, Williams' Const.) that:
"The Legislature shall provide by law for an annual tax sufficient with other resources, to defray estimated ordinary expenses of the state for each year."
And section 8 of the same chapter provides that:
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