State v. J. C. Maguire Const. Co.

• Decision Date: 07 May 1942
• Docket Number: 8206.
• Citation: 125 P.2d 433,113 Mont. 324
• Parties: STATE v. J. C. MAGUIRE CONST. CO. et al.
• Court: Montana Supreme Court

125 P.2d 433

113 Mont. 324

STATE v. J. C. MAGUIRE CONST. CO. et al.

No. 8206.

Supreme Court of Montana

May 7, 1942

Rehearing Denied May 15, 1942.

Appeal from District Court, First Judicial District, Lewis and Clark County; Geo. W. Padbury, Jr., Judge.

Action by the State of Montana against the J. C. Maguire Construction Company, a dissolved corporation, and J. C Maguire, Constance H. Maguire and A. L. Maguire, as trustees thereof, to recover excise tax. From a judgment in favor of the state, the defendants appeal.

Judgment reversed.

MORRIS J., dissenting.

R. F Gaines, of Butte, for appellants.

John W Bonner and I. W. Choate, both of Helena, for respondent.

ANDERSON Justice.

The question presented for determination by this appeal is whether a corporation which, after paying its corporation license tax within the given year, computed upon the preceding year's income, has become dissolved within that year and has ceased altogether to transact business, can be subjected to an excise tax computed on its business operations during such year, under the provisions of the Montana statutes relating to excise taxes.

The judgment appealed from was rendered on motion for judgment on the pleadings, and the facts of the case, which are not in dispute, are as follows: J. C. Maguire Construction Company, the appellant, was a Delaware corporation which qualified to do business in the state of Montana and commenced doing business here in April, 1934. It continued doing business in the state until December 6, 1937, when the corporation was dissolved. The business was conducted at a profit with a substantial net income each year. The corporation paid the Montana corporation franchise tax in 1935, 1936 and 1937, computed each year upon the net income from its business transacted in the state during the preceding year. After its discontinuance of business the state of Montana demanded that it pay a corporation tax computed upon the business transacted between January 1, 1937, and December 6, 1937, the date of cessation of business. The corporation refused to make this payment, contending that the tax already paid in 1937, computed upon its net income from the business transacted in 1936, constituted the corporation franchise tax for 1937, which having been paid, its obligation to the state under the franchise tax law had been fully met. The state contends that the tax payment made in 1937, computed upon the corporation's 1936 income was a 1936 tax and did not cover the year 1937, and that for the period from January 1, 1937, to December 6, 1937, the corporation still owed a tax to be computed upon the net income derived from its business transacted in the state during that period.

The authority for the imposition of such tax is found in section 1, Article XII, of the Montana Constitution which says that the legislative assembly shall provide the necessary revenue for the support and maintenance of the state by taxation of property and that "the legislative assembly may also impose a license tax, both upon persons and upon corporations doing business in the state." The first enactment of a law for the imposition of a general corporation franchise tax was in 1917, Chapter 79 of the laws enacted by the legislative assembly and which went into effect on March 3 of that year. There have been amendments which have changed the rate of the tax, with additional provisions for administration of the law and the enforcement of collection. There has been no amendment which has changed the purpose of the law since the original enactment in 1917. The law in codified form is embodied in Chapter 205 of the Revised Codes of 1935. There was a later amendment in 1937, increasing the rate of computation to 3% upon the net income.

The law, as originally enacted, was construed by this court in the case of Equitable Life Assurance Co. v. Hart, 55 Mont. 76, 173 P. 1062, as a revenue measure imposing an excise tax upon the privilege of doing business in the state in a corporate capacity. Reference is therein made to the earlier case of Northwestern Mutual Life Ins. Co. v. Lewis and Clark County, 28 Mont. 484, 72 P. 982, 98 Am.St.Rep. 572, wherein a similar law, applicable only to insurance companies, was considered and construed as a revenue measure imposing a tax upon the privilege of carrying on business as distinguished from a license fee exacted upon the granting of such privilege. The Flint case, decided by the United States Supreme Court, Flint v. Stone Tracy Co., 220 U.S. 107, 31 S.Ct. 342, 55 L.Ed. 389, Ann.Cas.1912B, 1312, is therein also referred to as placing the same construction upon a similar enactment by Congress.

In all later decisions of this court wherein this tax has been under consideration or has been referred to in any way it has been spoken of as a franchise tax, or license tax, an excise upon the privilege of doing business in the state in a corporate capacity. Cottonwood Coal Company v. Junod, 73 Mont. 392, at page 398, 236 P. 1080; East Helena State Bank v. Rogers, 73 Mont. 210, at page 213, 236 P. 1090; O'Connell v. State Board of Equalization, 95 Mont. 91, at page 118, 25 P.2d 114. It has been clearly distinguished from the license fees exacted upon the grant of privilege and from taxes imposed upon income or property. With the history of judicial interpretation of the act as we have it thus harmonized with other tax measures, and the administration of the law in accordance therewith, the question of the character of the tax is so well settled as to leave no room for doubt or speculation.

The original Act, Chapter 79, Laws of 1917, provides that: "Every corporation except as hereinafter provided organized and existing under the laws of the State of Montana and engaged in business therein, shall annually pay to the State Treasurer, as a license fee for carrying on business in said State of Montana, one per centum upon the total net income received by such corporation in the preceding fiscal year from all sources within the State of Montana, *** and every corporation except as hereinafter provided, organized and existing under the laws of any other state or country, or the United States, and engaged in business in the State of Montana, shall annually pay for the exclusive use and benefit of the State of Montana a license fee for carrying on its business in the State of Montana of one per centum upon the total net income received by such corporation in the preceding fiscal year from all sources within the State of Montana, ***." section 1, and further provides that: "The license fee shall be computed upon the total net income of the corporation received within each preceding calendar year ending December 31st, ***" or other fiscal year. Section 4. And it further provides that: "Every corporation, subject to the license fee herein imposed, shall for the year ending on the 31st day of December, or for its fiscal year selected under the provisions hereof, in each year hereafter, beginning with the year 1917, render a true and accurate return of its annual net income in the manner and form to be prescribed by the State Treasurer with the approval of the State Board of Equalization and containing such facts, data and information as are appropriate and in the opinion of the State Treasurer necessary to determine the correctness of the net income returned and to carry out the provisions of this Act. For the purpose of fixing the license fee to be paid for the year 1917 every corporation subject to the license fee herein imposed shall make the required return as to its annual net income for the year 1916 on or before the first day of May, 1917. The return *** shall be filed with the State Treasurer on or before the first day of March in each year except the year 1917, when it shall be filed on or before the first day of May. ***" Section 4. "All assessments shall be made by the State Treasurer and the several corporations shall be notified of the amounts for which they are respectively liable on or before the first day of June of each successive year and said assessments shall be paid on or before the 15th day of June, provided that every corporation computing its license fee upon the income of the fiscal year which it may designate in the manner hereinbefore provided shall pay the fee due under its assessment within thirty days after the date upon which it is required to file its list or return of income for assessment." Section 5.

The controversy here is as to the period of business activity covered by the tax required to be paid in each year. The language of the Act is clear and there can be no question of what was intended by the legislature. It provides that every corporation shall annually pay a license fee for carrying on business in the state, the amount of which is determined by taking a percentage of the preceding year's income as the measure. Special provision is made for collection of the tax "for the year 1917," the year of the enactment of the law, and a return of the corporation's annual net income for the year 1916 is required to be made as the basis for determination of the amount. And then it is provided that in each succeeding year thereafter the tax to be paid for the year shall be computed upon the preceding year's net income. Thus we see that the legislature has fixed a basis for determination of the amount, with a formula to be followed in the computation and assessment of the tax, in language commanding that it shall be so done. The language is so clear and so specific that there can be no misunderstanding of its meaning. The result is that every corporation, domestic or foreign, doing business in the state is required each year to pay a tax for the privilege of doing business that year, the amount of which...