Since the tax on the value of the capital stock is a tax on a privilege, not on property, it is not obnoxious to the provisions of the Massachusetts constitution which require all taxes on property to be proportional; nor for the same reason is it necessary to deduct from the value of the stock the value of non-taxable government bonds held by the corporation.158 For the same reason it is not necessary that the amount deducted from the value of the stock as the value of real estate of the corporation and the amount for which such real estate is assessed locally should be the same.159

On the other hand, since the tax is laid upon the privilege of acting as a corporation, it cannot be laid after the corporation has ceased to have that right, as where the corporation has been enjoined from doing business and a receiver appointed. 160 But the corporation cannot escape the tax by failing to file a certificate, without which it is forbidden to carry on business. "The franchise which subjects the corporation to taxation is the right to do business legally by complying with the laws. . . . Nothing short of the loss of the franchise as a power that may be exercised, if the corporation chooses to comply with the law, can leave it free from liability to taxation under the statute." 161

No local tax can be imposed upon a domestic corporation in Massachusetts for its personal property or income.1

§ 532. Michigan.

162

There is no franchise tax. Corporations are taxed upon their real estate, and their remaining property is taxed together as capital stock; except corporations formed under the

158 Com. v. Hamilton Mfg. Co., 12 All. (Mass.) 298.

159 Tremont & Suffolk Mills v. Lowell, 178 Mass. 469, 59 N. E. 1007. 160 Com. v. Lancaster Savings Bank, 123 Mass. 493.

161 Attorney Gen. v. Massachusetts P. L. Gas Co., 179 Mass. 15, 60 N. E. 389.

162 Boston W. P. Co. v. Boston, 9 Met. (Mass.) 199; Fall River v. Comrs., 125 Mass. 567.

Act of 1903, which pay taxes on their real and personal property like individuals.

"All corporations formed or existing under this act shall be liable to be assessed for all real and personal estate held by them in this State, at its true value, and shall pay thereon a tax for township, village, city, county, and State purposes, the same as other real and personal estate, and such tax shall be assessed, collected, and paid in the same manner as other taxes on real and personal estate are required to be assessed, collected, and paid: Provided, Nothing herein contained shall authorize the taxing of the capital stock of such corporation as such capital stock." 163

Other ordinary corporations are taxed according to the following act:

"The officers of any corporation shall make out and deliver to the assessor a sworn statement, including the amount of capital stock authorized and paid in, the number and market or actual value of the shares, the cash value of its personal property, the amount of its bona fide indebtedness (not for current expenses, or any contracted for purchase or improvement of its property) and the value of its real estate. The value of the real estate shall be deducted from the cash value of the shares, and the balance, if any, assessed as the cash value of the personal estate. The amount of indebtedness shall be deducted from the cash value of its personal property, and the balance, if any, assessed as personal." 164

The property is to be taxed where the office is located according to the articles; or if there is more than one office, where the corporation transacts its principal business. If there is no principal office within the State, the property shall be assessed where the corporation or its agent transacts busi

ness.

165

"The property of corporations paying specific taxes shall

163 Mich. 1903, Act 232, § 31.

164 Mich. 1893, Act 6, § 19.

165 Mich. 1903, Act 235.

be exempt as to the property covered by such taxation, except when otherwise provided by law. All other property of such corporation shall be taxed under this act." 166

§ 533. Minnesota.

There is no franchise tax. Property is taxed for State and local purposes; the rate for State purposes is fixed by the legislature, but the whole tax is collected locally.16

All real and personal property in the State is taxable.168 The capital stock and franchises of corporations are listed and taxed at the principal place of business of the corporation; or if there is no principal office within the State, then at the place within the State where the corporation transacts business.169 No shares of stock are taxed when the corporation which issues the stock is taxed on its capital and property in the State. 170 All property shall be assessed at its full value.171

"Personal property shall, for the purposes of taxation, be construed to include . all public stocks and securities, all stock in turnpikes, railroads, canals, and other corporations (except national banks) out of the State, owned by inhabitants of this State; all personal estate of moneyed corporations, whether the owners thereof reside in or out of this State; . . . all shares of stock in any bank organized or that may be organized under any law of the United States, or of this State;

. . and all such improvements upon lands the title to which is still vested in any railroad company or any other corporation whose property is not subject to the same mode and rule of taxation as other property." 172 This applies to foreign as well as domestic corporations.

168 Ibid.

167 Minn. Stat. § 1557.

168 Ibid. § 1508.

169 Minn. 1902, ch. 4, § 1.

170 Minn. Stat. § 1523.

171 Ibid. § 1536.

172 Ibid. § 1510.

The corporation is to make a sworn statement, setting forth the amount of capital stock authorized and paid up, the number and the market or actual value of the shares, the total indebtedness (except for current expenses), and the value of its real and personal property. The value of its property and the amount of its indebtedness are subtracted from the total value of its shares, and the remainder, if any, is listed as "bonds and stocks." The real and personal property is listed the same as that of individuals; 173 and this means the tangible property only.

"The method there provided for is the very common and most equitable and efficient one, of reaching the franchises and other intangible property for purposes of taxation through the capital stock. The 'capital stock' (using the term in the sense in which it is evidently used in this section) is, as has been said, 'a business photograph of all the corporate possessions and possibilities,' and represents its business opportunities and capacities as well as its tangible assets. They enter into, and go to make up, the value of the stock. It is well settled that these franchises, although neither visible nor tangible, are property which may be taxed the same as any other property. Hence a very common method of taxing corporations and stock companies is to list and assess all their tangible property, real and personal, the same as the like property of other persons is listed and assessed, and also list and assess the capital stock at its actual or market value, less the value of its tangible real and personal property otherwise specifically listed and assessed, This system reaches every element of property value owned by the corporation, and at the same time avoids double taxation. This is clearly the scheme of taxation contemplated and provided for by section 1530, with one exception, which will be considered hereafter. It is evident, in view of the entire scheme, that the value of the personal property in the seventh item, which is to be specifically listed and assessed, and de

173 Ibid. § 1530.

ducted from the market or actual value of the shares of stock, refers solely to tangible personal property, and does not include franchises. It would be wholly unreasonable to assume that the legislature would adopt the scheme of reaching the franchises and other intangible property of a corporation through the taxation of its capital stock, and at the same time turn around and specifically tax as a separate item of personal property, and deduct from the value of the stock, the very intangible property which they were endeavoring to reach through the taxation of the stock." 174

But the provision for deducting the indebtedness was held to be unconstitutional as creating inequality of taxation. "Such a provision is in direct conflict with the constitutional requirement that all taxes shall be as nearly equal as may be, and that all property on which taxes are to be levied shall have a cash valuation, and be equalized and uniform throughout the state. The indebtedness presumably affects the value of the stock as directly as do the assets of the corporation. The former depreciates, while the latter appreciates, its value. The practical effect of this provision is to allow a double deduction of the amount of the corporate indebtedness. .

"The evident intention was to reach for taxation the franchises and other intangible property of these corporations and associations as effectually and completely as possible. This the legislature thought could be best accomplished by listing and assessing the value of the stock, which, as already suggested, represents every element of property value, tangible and intangible, owned by corporations or associations; but, in enumerating the deductions to be made, they erroneously included their indebtedness, presumably because they failed. to perceive that this had already entered into, and gone to fix, the value of the stock, or that such a deduction would necessarily result in inequality of taxation. But, with this deduction omitted, what remains will effect the full and fair taxation 174 Mitchell, J., in State v. Duluth Gas & Water Co., 76 Minn. 96, 78 N. W. 1032.