ance tax nulled by the courts, a constitutional amendment permitting Inheritthe taxation of inheritances was proposed, and adopted by the people, and in 1897 the Legislature put forth its second inheritance tax law; but this was held not to conform to the provisions of the amendment. A third effort was made by the Legislature last year. The result is a tax of 1% on direct and 5% on collateral inheritances, with an exemption of $5000 in either case [Minn. '01 ch. 255]. The only vulnerable point which a casual examination of this new law reveals is the apparent application of the tax to the whole inheritance in the case of collateral heirs, instead of only to the excess above the exemption. Judging from the state Supreme Court's decision on the law of 1897, this may invalidate the new collateral inheritance tax and leave Minnesota with a tax on direct heirs only. It is the fashion now to tax both direct and collateral inheritances; but Arkansas adopted last year a tax of the oldfashioned kind-5% on collateral heirs alone ['01 ch. 156]. The adoption of inheritance taxes by these 7 states means that more than one half the states in the Union now employ this form of taxation. During 1901 Maine and Massachusetts emphasized their reliance upon their collateral inheritance taxes, the former [Me. '01 ch. 225] by increasing the rate from 2 to 4%, and the latter [Mass. '01 ch. 297] by repealing the exemption of $10,000. Alabama has a section in her new constitution [219] permitting a collateral inheritance tax of not exceeding 214. It is rather surprising that the taxation of inheritances by the states should have made such rapid headway with the heavy national inheritance tax still on the statute books. The natural prediction that the national tax would interfere with the development of state inheritance taxes does not seem to be borne out by a comparison of the legislation of 1901 with that of previous years. The question naturally arises, therefore, whether it was necessary to repeal the national tax in order that the states might have this source of revenue to themselves. Taxation of business corpora tions TAXATION OF BUSINESS CORPORATIONS.1 JOHN HENRY HAMMOND LL. B. 30 BROAD ST. NEW YORK The legislation for the year 1901 affecting the taxation of business corporations tended generally toward an increase in the amount of the incorporation and license fees and annual state taxes imposed upon domestic and foreign corporations. The policy of some of the states to invite the formation of corporations was shown in New York by the reduction of the incorporation fees from one eighth to one twentieth of 1% of the authorized capital stock ['01 ch. 448]. West Virginia ['01 ch. 35] on the other hand required nonresident domestic corporations to pay much heavier annual taxes than either domestic or foreign resident corporations; which will discourage the formation of corporations in that state intending to carry on business elsewhere. The hostility usually shown foreign corporations was displayed in Colorado ['01 ch. 94] which imposed license fees upon foreign corporations 50% greater than the incorporation fees of domestic corporations. The increasing size of the capital of corporations has affected legislation in several instances; in Utah ['01 ch. 81] the maximum charge for incorporating was repealed and the fee is based upon the amount of authorized capital stock; in Wisconsin ['01 ch. 238] the fee for filing a certificate of increase of stock has been doubled, and in several of the states fees and taxes based upon the amount of capital have taken the place of a small fee, imposed regardless of the amount of capital. To induce manufacturing New York provided that a corporation shall not be exempted from the payment of the annual franchise or business taxes unless at least 40% of its capital is invested and employed in manufacturing within the state. In Delaware ['01 ch. 17] manufacturing corporations are required to take out an annual license and to pay a fee based upon the value of the real and personal estate used in manufacturing in that state; formerly this fee was based upon the value of the goods manufactured. Colorado provided that in determining See also Comparative Summary and Index, 1901, no. 1678-725. business tions the taxable value of a corporation's property, the value of the Taxation of stock and bonds is to be considered, the business is to be corporavalued as a unit and franchises and intangible property are to be included in the assessment. Several of the states for the first time imposed state fees and taxes and required the filing of reports showing the capital and general condition of the corporation; in some instances these taxes are based upon the capital employed within the state, in others upon the amount of authorized capital stock. No general rule prevails and the legislation seems quite as haphazard as in the past. This legislation for the year 1901 may be summarized as follows: Organization fee of domestic corporations. In Colorado ['01 ch.52] the incorporation fee has been increased from $10 to $20 for corporations with a capital of $50,000 or less; if the authorized capital exceeds that amount the fee has been increased from 15c to 20c for each additional $1000. In Kansas ['01 ch.125] the fee for each $1,000,000 of authorized capital in excess of $500,000 has been increased from $100 to $200. In New York ['01 ch.448] the fee has been reduced from one eighth to one twentieth of 1% of the authorized capital. In South Carolina ['01 ch.399] the fees have been greatly increased over former years although still comparatively small. The law of 1901 prescribes 1 mill for each dollar of authorized capital up to $100,000, one half of 1 mill for each dollar exceeding $100,000 up to $1,000,000, and one fourth of 1 mill for each dollar exceeding $1,000,000. In Utah ['01 ch.60] the fee is 25c for each $1000 of authorized capital; formerly the maximum charge was $2500. License fee of foreign corporations. By a license fee is meant the charge for permitting a foreign corporation to carry on business within the state. In Colorado ['01 ch.52 §4] this fee was increased to $30 for the first $50,000 or less of authorized capital and 30c for each $1000 over that amount if the capital exceeds $50,000; this is much greater than the incorporation fee of a domestic corporation. In Indiana ['01 ch. 265 §2] foreign cor⚫porations must file a report and pay the same fees and taxes as domestic corporations, upon the proportion of capital repre business Taxation of sented by property situated and business done in Indiana. In corpora- Kansas ['01 ch.125] the fee was made $200 for each $1,000,000 tions of capital over $500,000, which is double the former rate and the same as the incorporation fee of a domestic corporation. In New York ['01 ch.558, §1] the exemption from the payment of a license fee extended to foreign manufacturing corporations was withdrawn and such corporations are apparently subject to a fee of one eighth of 1% of the capital employed within that state during the first year business is carried on there. In Pennsylvania ['01 ch. 121] foreign corporations whose principal offices or places of business are in that state, or which have any part of their capital wholly employed there, must file an annual report and pay a bonus of one third of 1% upon the amount of capital so employed and a like bonus upon any increase of capital so employed. In Utah the fees are the same as for domestic corporations and the maximum charge of $2500 was repealed '01 ch. 60]. In Wisconsin ['01 ch. 399] foreign corporations have been required to file a verified annual report showing the proportion of capital represented by property situated and business done within that state and to pay upon the proportion of capital so employed $1 for each $1000 of capital in excess of $25,000, and a fee of $1 per $1000 upon any increase of stock by amendment. Annual franchise tax on domestic corporations. In Delaware ['01 ch. 16] the taxes upon corporations incorporated after the law took effect are to be based upon the amount of capital " actually paid in" instead of upon the amount of stock issued and outstanding, as was formerly the case.. Corporations engaged in manufacturing are ['01 ch. 17], like individuals, required to pay an annual license tax of one twentieth of 1% on the value of the real and personal estate used in manufacturing up to $3,000,000, one fortieth of 1% upon the value of such property between $3,000,000 and $5,000,000, and $30 per annum for each $1,000,000 or part thereof exceeding $5,000,000. The former tax was one tenth of 1% upon the value of the goods manufactured. In Maine ['01 ch. 229] domestic corporations have been required to file an annual report and to pay an annual tax upon their authorized capital of $5 if such capital does not of public corpora tions exceed $50,000, up to $50 if the capital does not exceed $1,000,000, Taxation and $25 for each additional $1,000,000 or part thereof. In West service Virginia ['01 ch. 35 § 34] resident domestic corporations, that is, those having their principal place of business in the state, are taxed $10 if the authorized capital is not more than $10,000, and in varying amounts if their capital exceeds that sum. If the capital exceeds $1,000,000, the tax is $70 on the first $1,000,000 and $10 additional on each succeeding $1,000,000 or part thereof. For nonresident domestic corporations the tax is much greater ['01 ch. 35 § 35], being $20 if the authorized capital does not exceed $25,000 and in varying amounts if the capital exceeds that sum. If the capital is over $4,000,000 the tax is $1010 and $50 additional for each $1,000,000 or part thereof over $4,000,000. Annual business tax on foreign corporations. In West Virginia ['01 ch. 35 § 38] foreign corporations doing business there are required to file an annual report; if the assessed value of their property owned and used in their business in West Virginia amounts to $5000 or more, they are entitled to pay the same taxes as resident domestic corporations, according to the proportion of capital represented by property owned and used in the state, but no such corporations shall pay less than $100. TAXATION OF PUBLIC SERVICE CORPORATIONS1 ROBERT H. WHITTEN The most important movement in the taxation of public service corporations is the substitution of taxation at actual value as determined by a state board for various kinds of specific taxes. This movement has been gaining steadily during the past 10 years though every step has been hotly contested. In Michigan "equal taxation," as it is called, has this year triumphed after a long and interesting struggle. As early as 1879 [ch. 77] an act was passed providing for the assessment of telegraph companies by a state board at their actual value at the average rate of state and local taxation, and in 1881 See also Comparative Summary and Index, 1901, no. 1726 52. |