If this company paid a tax based on its net income only, the computation would be as follows:

96,000 45

20,000 X- Х (42%) = $180.
480,000 1000

which is less than one mill upon each dollar of the apportionment of the face value of its issued capital stock, apportioned as above stated, as will be seen by the following computation, in which the apportionment is based on the monthly average of "real and tangible personal property" in this State as compared with the total "real and tangible personal property" as shown in the report.

1,000,000.001 (one mill)

75,000

300,000

= $250.

Since $250 is greater than $180, and since the tax can be no less than $250 under the rule laid down in the statute above quoted, this would be the amount payable under Article 9-a as amended.

In U. S. Glue Co. v. Town of Oak Creek, decided by the U. S. Supreme Court June 3d, 1918, and affirming 161 Wisconsin 211, the Supreme Court of the United States has just passed upon a method of apportionment analogous to that printed in the foregoing pages. While the direct question before the court in this case was the right to tax a corporation engaged in interstate commerce, under a general Income Tax Law, for a portion of its business transacted within the state, the method of apportionment under the Wisconsin statute was before the court and we may conclude that it came within its approval in the judgment of affirmance.

The method of apportionment as set forth in the opinion of the court, is referred to as follows:

"In order to determine what part of the income of a corporation engaged in business within and without the State (other than that derived from rentals, stocks, bonds, securities, etc.), is to be taxed as derived from business transacted and property located within the State, reference is had to a formula prescribed by another statute

(see 1770b, subs. 7, par. [e] of Wisconsin Stats.) for apportioning the capital stock of foreign corporations, under which the gross business in dollars of the corporation in the State, added to the value in dollars of its property in the State, is made the numerator of a fraction of which the denominator consists of total gross business in dollars of the corporation both within and without the State, added to the value in dollars of its property within and without the State. The resulting fraction is taken by the income tax law as representing the proportion of the income which is deemed to be derived from business transacted and property located within the State. This formula was applied in apportioning plaintiff's net 'business income' for the year 1911, and upon the portion thus attributed to the State, plus the income from rentals, stocks, bonds, etc., the tax in question was levied."

General instructions for making reports.

An officer having knowledge of the facts, preferably the chief fiscal officer of the company, may make a report under Article 9-a. Section 213 requires that the report shall be verified by the President, Vice-President, Secretary or Treasurer; it is not necessary that two officers verify the return; verification by one officer is sufficient.

Receivers, trustees in bankruptcy and assignees, under the federal income tax law must make returns and pay taxes for corporations whose property they are operating, and it would seem that they should also make a report under Article 9-a of the Tax Law. That there is some warrant for such action in connection with the State Tax, see Central Trust Co. v. N. Y. C. and H. R. R. Co., 110 N. Y. 250.

Under the form of report required by the amendment of 1918, the amount of issued capital stock is called for, evidently, for the purpose of computing the minimum tax where no income is earned and where the company would otherwise not be taxable. The 1919 form of report also calls for the amount of authorized capital stock as an administrative regulation. Issued and authorized stock had often been returned indiscriminately.

The purpose of ascertaining the amount of indebtedness as called for in the State tax form, is not clear. This is another

administrative regulation. This information is required by the Connecticut Law taxing miscellaneous corporations on their income. (Part IV, Chap. 292, Public Acts of 1915 of Connecticut, as amended by Chap. 298, Public Acts of 1917.) It is also required by the Wisconsin Income Tax Law. (Chap. 650, Laws of 1911, as amended.) The Connecticut Law accepts the income return made to the United States Treasury Department as a basis of taxation, but it also calls for facts on which to base an assessment on substantially similar lines. The Wisconsin Statute, which is a general Income Tax Law, makes its own assessment on independent lines, irrespective of the report to the Treasury Department. Since the amendment of 1918, the New York Statute permits the corporation to return its own income if it contends that the amount determined by the United States Treasury Department be not correct. This does not mean that the net income is to be determined de novo, but that there may be a re-computation in case of error.

The New York Law makes no specific requirements for any method of bookkeeping for ascertaining the net income, and it is to be assumed that, as in the case of the Wisconsin Income Tax Law and also under the Federal Statute, any method of bookkeeping which fairly attains the result, will be acceptable.

Under the United States Treasury decision, Article 183, Regulation 33 of January 5th, 1914, it is held that "the books of a corporation are assumed to reflect the facts as to its earnings, income, etc. Hence they will be taken as the best guide in determining the net income upon which the tax imposed by this act is calculated. Except as the same may be modified by the provisions of the law, wherein certain deductions are limited, the net income disclosed by the books and verified by the annual balance sheet, or the annual report to stockholders, should be the same as that returned for taxation."

The nature of the business and how transacted, should be stated with some particularity in the report, as the question may arise as to whether the company may segregate its assets in and out of the State.

Under item 13 of the report, calling for the locality where the company maintains a store, warehouse or factory as a place of business, the corporation may state any regular office or permanent agency established by it outside of the State.

The fact that a corporation did no business or received no income during the year in question, does not relieve it from making a return. Every question should be answered. If there is no amount or no information to be given opposite a question, the word "none" should be written in.

If the entire business of a corporation is not transacted within the State, to entitle it to an apportionment of income, and a segregation of assets, it must maintain a definitely organized branch establishment. The mere sale of goods, wares and merchandise without the State, does not entitle it to a segregation of assets or property or accounts receivable for such property as located outside of the State.

Determining factors are whether the company maintains a store, warehouse, office, factory or salesroom in another State. Has it received a license to do business in any other State? Can it show possession of goods subject to local taxation in other States, or any other facts tending to establish a permanent business without the State?

The consent by a corporation to a tax on its entire income, should only be executed where the corporation's entire income is due to property located, and business transacted, within the State. Many corporations have executed this consent and placed themselves in the class of corporations whose entire property is located within the State, which may lead to unnecessary explanation for future assessments.

Corporations transacting business, and owning tangible property, within and without the State, and having no net income, but subject to a minimum tax of one mill (.001) on the face value of their issued capital stock, should not execute the consent but should fill out the statement of segregation of assets in order that such minimum tax may be determined as provided in paragraph 6, Section 214. Such corporations having a net income but

less than the minimum tax of one mill (.001) on the face value of its issued capital stock, should for the same reason, not sign the consent but fill out the segregation statement.

How to ascertain average monthly values.

Under the State Tax Law, as it existed prior to 1917, the method for averaging capital employed in the State, was to take it for the entire period under consideration, and divide it by the number of days in that period. People ex rel. B. R. T. Co. v. Morgan, 57 App. Div. 335, affirmed 168 N. Y. 672; People ex rel. Mutual Trust Co. v. Miller, 177 N. Y. 51; People ex rel. Rees' Sons v. Miller, 90 App. Div. 591; People ex rel. Cohn & Co. v. Miller, 94 App. Div. 564. This rule might be applied to each month, and the aggregate for the twelve months so averaged then divided by twelve.

Under the United States Treasury Department regulations, invested capital for a taxable year (or where the tax is computed upon the basis of a period less than a year, for such period) is the average invested capital for the year or period averaged monthly according to the following rules:

(a) Add the capital for each of the several months during which no change occurs, and the average capital [ascertained as provided in subdivision (b)] for each month in which a change occurs and divide the total by the number of months in the year or period.

(b) To ascertain the capital for any month in which a change occurs multiply the capital as of the first day of the month by the number of days it remains constant and the capital after each change by the number of days (including the day on which the change occurs) during which it remains constant, add the products, and divide the sum by the number of days in the month.

Under the heading "Segregation of Assets," item "(a) average monthly value of bills and accounts receivable for personal property manufactured by it," may include accounts for personal property manufactured by a corporation and then shipped to a branch outside of the State, sold and delivered from this branch.