Southern Pac. Co. v. State Corp.. Comm'n of N.M..
| Decision Date | 08 September 1937 |
| Docket Number | No. 4213.,4213. |
| Citation | 72 P.2d 15,41 N.M. 556 |
| Parties | SOUTHERN PAC. CO.v.STATE CORPORATION COMMISSION OF NEW MEXICO. |
| Court | New Mexico Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Santa Fé County; M. A. Otero, Jr., Judge.
Certiorari by the Southern Pacific Company against the State Corporation Commission of the State of New Mexico. Writ granted, and defendant appeals.
Reversed and remanded, with instructions.
“Business in the state,” as used in statute imposing an annual franchise tax on corporations, did not refer to business across state lines, but referred to that transacted wholly within the state. Laws 1935, c. 116, § 4(8).
Frank H. Patton, Atty. Gen., and J. R. Modrall, Asst. Atty. Gen., for appellant.
E. R. Wright, of Santa Fé, and Del W. Harrington, of El Paso, Tex., for appellee.
The questions are: Is the manner of laying a franchise tax upon that portion of the appellee's capital stock represented by railway property and business in New Mexico illegal? Has such taxation been so applied to appellee as to deprive it of constitutional rights? And does the act under which the tax was laid violate certain prohibitions of the Constitution of the United States?
The tax was assessed and levied by the State Corporation Commission by virtue of chapter 116, N.M.L.1935; sections 2, 4, and 6 of which are as follows:
“(5) The amount of authorized capital stock; the amount of capital stock subscribed; the amount thereof issued and outstanding and the amount of capital stock paid up. ***
“(7) The value of the property owned and used by the corporation in this State and where situated; and the value of the property owned and used outside of this state and where situated.
“(8) The total gross receipts derived from its property and business both within and without this state during the last preceding year. ***
“From such report or such other information as it may be able to procure, the Commission shall prior to the fifteenth day of April of each year, determine the proportion of the authorized and issued capital stock of such corporation represented by its property and business in this State and shall assess the amount of the annual state franchise tax to be paid by each such corporation, at the rate of One ($1.00) Dollar for each one thousand dollars, or fraction thereof, of the par value of that proportion of its issued capital stock, represented by its property and business in this State, as determined by the Commission, and which tax shall attach as of January 1st of the year in which assessed.”
The proportion of the capital stock of the appellee, as a basis for taxation, was determined by the following formula: To the total value of appellee's property within and without the State of New Mexico was added the total gross receipts from its business for the year of 1934. In like manner to the value of its property in New Mexico was added the gross receipts from intrastate traffic of the corporation's business in New Mexico. The latter amount is .0218 per cent. of the former; and that per cent. of the total capital stock of the corporation was determined to be subject to the tax as “the par value of that proportion of its authorized and issued capital stock represented by its property and business in this state.”
Domestic corporations, by other provisions of the act, are subjected to the same tax, so there is no claim of discrimination against appellee.
[1] The words “property and business in this state,” as used in section 2 of the act, are construed by the State Corporation Commission to mean all property of appellee in New Mexico not used exclusively in interstate business, plus the total gross receipts from intrastate business therein; the sum of which represents the authorized and issued capital stock allocated to such corporation's property and business in New Mexico as a basis for the tax. This seems to be the legislative intent.
[2] The nature of the tax as expressed in the title is as follows: “An Act to Levy an Annual Franchise Tax on Domestic and Foreign Corporations for Profit Doing Business in This State, for the Privilege of Carrying on, doing Business, or the Continuance of its Charter Within This State.” The parties agree that it is an excise or franchise tax, and that the title correctly describes it. The property of the corporation is not taxed, neither is its capital stock. Values of property and gross receipts are used as factors to determine the number of shares of the corporate stock that measures the tax “for the privilege of carrying on, doing business, or the continuance of its charter within the State” but are not subjects of the tax.
[3] Certain contentions of appellee, with reference to the construction of the statute and constitutionality of the tax may be here disposed of. It is stated in appellee's brief: “While the New Mexico statute limits the ‘property’ to that owned in the state in the process of determining the tax, it places no limitation upon the business transacted within the state, and, therefore, leaves the Commission free to include interstate as well as intrastate business in its process of determining the proportions of the capital stock to be allocated tO the state of New Mexico for the purpose of fixing the amount of the tax.”
“Business in this state” means just that. It does not mean business across state lines, but that transacted wholly within the state. It cannot be assumed, except for compelling reasons that we do not find to exist, that the Legislature intended a meaning that would render the act unconstitutional. Green v. Frazier, 253 U.S. 233, 40 S.Ct. 499, 64 L.Ed. 878. Appellee takes an inconsistent position later, and agrees with our construction in asserting a proposition that would render its tax nominal in amount. It states in its brief:
“*** The legislative intention in the use of the term ‘property and business in this state’ as a measure of the taxable capital stock, is disclosed in the provisions of said section 4 of the act, which undertakes to prescribe the information which shall be shown by the corporation's return for the purpose of calculation of the tax. *** Paragraph 8, however, of the section appears to be the key to the construction of the material tax provisions of the Act, in providing that ‘the total gross receipts derived from its property and business, both within and without this state during the last preceding year’ shall be reported and used as a basis for calculating the tax. ***
“The total gross receipts derived from property and business within the state and the total gross receipts derived from property and business without the state, required to be reported by paragraph 8, would give the factors for a calculation of the total gross receipts derived from all property and business of the taxpayer, and the percentage of the intrastate revenues to the whole revenues would be simply a matter of calculation.”
Appellee seems thus to conclude that “business within the state” has reference to intrastate business; to which we agree. But the words “property and business in this state” cannot be limited to business alone; it would contradict the plain wording of the statute, and we need not discuss it further than to state our disagreement. The word “property” speaks for itself, and as the statute specifically excludes as a factor for determining the tax all property of any foreign corporation situated without the state and that used exclusively in interstate commerce, there remains all property of such corporation within the state not so used; which includes property used for both interstate and intrastate business, as well as that used exclusively for intrastate business, the value of which is to be used as one of the factors in determining that proportion of the authorized and issued capital stock of a foreign corporation represented by its property and business in this state.
[4] Appellee states: “New Mexico cannot impose property taxation and then impose a franchise tax measured by the value of the same property without clearly imposing a double ad valorem tax.” But the trouble is the Supreme Court of the United States, which has the last word on this very question, has expressed its disagreement with appellee's views.
In Western Cartridge Co. v. Emmerson, 281 U.S. 511, 50 S.Ct. 383, 384, 74 L.Ed. 1004, a statute of Illinois (Smith-Hurd Ill. Stats. c. 32, § 157. 131 note) was held valid, which is as follows: “Each corporation for profit, *** except insurance companies, *** organized under the laws of this State or admitted to do business in this State, *** shall pay an annual license fee or franchise...
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