cent. of its capital stock shall also be assessed at its actual value, and in the same manner. If, however, there are no surplus profits, or if the surplus does not exceed 10 per cent. of the capital stock, there is nothing to assess as surplus, and nothing from which the 10 per cent. of the capital can be deducted." 259

From the value of the capital stock, thus ascertained, the assessed value of the real estate is to be deducted. This real estate does not include a franchise of the corporation.260 The value to be deducted is the assessed value, even though the real estate be situated abroad, if there is an assessed value; 261 though of course if the real estate was not assessed at its situs some other method would have to be taken of finding its value, as for instance its cost.262

Though the assessed value of the real estate is the value to be subtracted, the assessors are not confined to that value in assessing the whole value of the capital stock. The real estate as an item of the capital stock should be valued by them at its real value, whatever that may be. If that be greater than the assessed value, so that after the subtraction an amount is left which really exceeds that portion of the capital stock made up of personalty, the excess is counterbalanced by the undervaluation of the real estate for separate taxation.263

8544. New York: State tax.

State taxation is imposed by the following provisions: "Every corporation, joint stock company or association incorporated, organized or formed under, by or pursuant to law in this state, shall pay to the state treasurer annually, an annual tax to be computed upon the basis of the amount of

259 P. v. Barker, 165 N. Y. 305, 59 N. E. 137.

260 P. v. Comrs., 104 N. Y. 240, 10 N. E. 437. 281 P. v. Coleman, 115 N. Y. 178, 21 N. E. 1056. 262 P. v. Comrs., 104 N. Y. 240, 10 N. E. 437. 203 P. v. Barker, 144 N. Y. 94, 39 N. E. 13.

its capital stock employed within this state and upon each dollar of such amount, at the rate of one-quarter of a mill for each one per centum of dividends made and declared upon its capital stock during each year ending with the thirty-first day of October, if the dividends amount to six or more than six per centum upon the par value of such capital stock. If such dividend or dividends amount to less than six per centum on the par value of the capital stock, the tax shall be at the rate of one and one-half mills upon such portion of the capital stock at par as the amount of capital employed within this state bears to the entire capital of the corporation. If no dividend is made or declared, the tax shall be at the rate of one and one-half mills upon each dollar of the appraised capital employed within this state. If such corporation, joint stock company or association shall have more than one kind of capital stock, and upon one of such kinds of stock a dividend or dividends amounting to six, or more than six per centum, upon the par value thereof, has been made or declared, and upon the other no dividend has been made or declared, or the dividend or dividends made or declared thereon amount to less than six per centum upon the par value thereof, then the tax shall be at the rate of one-quarter of a mill for each one per centum of dividends made or declared upon the capital stock upon the par value of which the dividend or dividends made or declared amount to six or more than six per centum, and in addition thereto a tax shall be charged at the rate of one and one-half mills upon every dollar of the valuation made in accordance with the provisions of this act of the capital stock upon which no dividend was made or declared, or upon the par value of which the dividend or dividends made or declared did not amount to six per centum.264 Every corporation, joint stock company or association organized, incorporated or formed under the laws of any other state or country, shall pay a like tax for the privilege of exercising its corporate

264 By 1901, ch. 558, street surface and elevated railroads and steam railroads were taxed at a lower rate.

franchises or carrying on its business in such corporate or organized capacity in this state, to be computed upon the basis of the capital employed by it within this state." 265

"In case no dividend has been declared, by a corporation, association or joint stock company liable to pay a tax under section one hundred and eighty-two of this chapter, the treasurer or secretary of the company shall, under oath, between the first and fifteenth day of November in each year, estimate and appraise the capital stock of such company upon which no dividend has been declared, or upon which the dividend amounted to less than six per centum at its actual value in cash, not less, however, than the average price which said stock sold for during said year, and shall forward the same to the comptroller with the report provided for in the last section. If the comptroller is not satisfied with the valuation so made and returned he is authorized and empowered to make a valuation thereof, and settle an account upon the valuation so made by him, and the taxes, penalties and interest to be paid by the state." 266

The tax hereby created is a franchise tax.267 The value of the stock, where there are no dividends declared, is the actual value as measured by the market value of the shares.268

The State tax is not a tax on property, but on a privilege; when laid upon a domestic corporation it is a tax upon the privilege of acting as a corporation;269 when laid upon a foreign corporation it is a tax upon the privilege of doing business within the State.270 It is neither a tax upon the property employed in business nor upon the property acquired by the business. It is in this respect entirely different from the local tax on the capital stock as property. The fact that a portion of the capital of the corporation is invested in non-taxable 265 N. Y. 1896, ch. 908, § 182.

266 Ibid. § 190.

267 Peo. v. Albany Ins. Co., 92 N. Y. 458.

268 Peo. V.

Morgan, 47 App. Div. 126, 62 N. Y. S. 191.

269 P. v. Home Ins. Co., 92 N. Y. 328.

270 P. v. Equitable Trust Co., 96 N. Y. 387.

[Chap. XXII. property, such as government bonds, is therefore immaterial; the tax, not being laid upon the bonds, is valid to the full extent. 271 For the same reason the tax is valid though the business of the corporation is foreign or interstate commerce, whether the corporation is foreign or domestic.272

This distinction appears to have been lost sight of in a case where the court, on the analogy of the decisions holding that a corporation cannot be taxed locally on patent rights, held that the value of copyrights owned by the corporation must be deducted from the value of the capital stock before imposing the State tax.273 The case would seem to have been wrongly decided on this point, and to be quite inconsistent with the cases already cited.

When no dividend or dividends less than six per cent. are paid, the basis of the tax is the value of the stock. This value, in spite of the language in section 182 of the act, is to be taken as provided in section 190 as the actual, not the par value of the stock.274 The income is in that case unimportant, except for its bearing on the value of the stock.275 The stock is the capital of the corporation, not the share stock of individual members.276

In this valuation the good will and franchises of the corporation are included,277 this again being different from the rule which applies to local taxation. "The actual value of the capital stock of such a corporation is the value of its assets,

271 P. v. Home Ins. Co., 92 N. Y. 328, affirmed on an appeal in which the constitutionality of the tax was brought in question: Home Ins. Co. v. New York 134 U. S. 594, 33 L. ed. 1025.

272 P. v. Roberts, 158 N. Y. 162, 52 N. E. 1102; P. v. Roberts, 158 N. Y. 168, 52 N. E. 1104. And see P. v. Wemple, 131 N. Y. 1, 33 N. E. 720; Wemple, 131 N. Y. 64, 29 N. E. 1002, 27 A. S. R. 542.

P. v.

273 P. v. Roberts, 159 N. Y. 70, 53 N. E. 685, 45 L. R. A. 126.

274 P. v. Roberts, 154 N. Y. 101, 47 N. E. 980; P. v. Roberts, 168 N. Y. 14, 60 N. E. 1043; P. v. Knight, 173 N. Y. 255, 65 N. E. 1102; P. v. Morgan, 47 App. Div. 126, 62 N. Y. S. 191.

275 P. v. Roberts, 91 Hun, 146, 36 N. Y. S. 277.

276 People v. Morgan, 178 N. Y. 433, 70 N. E. 967.

277 P. v. Roberts, 154 N. Y. 101, 47 N. E. 980.

after deducting its liabilities, and adding to the sum then remaining the value of the good will of the business, including its right to conduct it under its franchise." 278

When no dividend of six per cent. or over is paid, it is necessary to determine the proportion of the capital stock employed in business within the State; if no part of the capital is employed within the State, even a domestic corporation not paying the dividends mentioned, is not liable to the franchise tax.279 The amount of capital to be taken as employed in business during the year is the average amount so employed, not the greatest amount.280

Capital employed in business is to be distinguished from surplus invested, but not used in the actual business of the company. Thus an investment of a mining corporation's profits, accumulated by passing dividends, in stock of a railroad to facilitate working the mines, is not to be considered as capital, for the purpose of taxation.281 And so real estate within the State, purchased as an investment with the surplus earnings of the corporation, and not occupied by it for business purposes, is not capital employed in the business.282 "Capital, to be employed within this State, must be actively employed, and a nominal employment or an investment of the same was not intended by the statute." And the same is true of an investment in city bonds bearing interest. "We see no distinction between an investment in real estate paying a general and local tax and an investment in non-taxable municipal bonds. The tax law in no way refers to the kind of property in which the capital of the corporation is to be employed. If the capital is employed within this state, it must be included in the basis of computation. If it is not employed within this state, it must not be included in the 278 Martin, J., in P. v. Roberts, supra.

279 P. v. Campbell, 66 Hun, 146, 21 N. Y. S. 7.

280 P. v. Morgan, 57 App. Div. 335, 68 N. Y. S. 21.

281 P. v. Roberts, 156 N. Y. 585, 51 N. E. 293.

282 P. v. Wemple, 150 N. Y. 46, 44 N. E. 787; P. v. Roberts, 66 App. Div. 157, 72 N. Y. S. 950.