that the original purchaser asked for more than he was entitled to get. For example, when the plaintiff presented his books at the station to procure tickets for himself and wife in exchange for coupons, it could not be said that he forfeited either of the books, or both, because he asked too much. He was in no different position when he produced the books before the conductor, with the tickets which the Company's agent had given him in exchange for coupons. He was still the original purchaser, and the provision for forfeiture when the mileage book is presented by some one else does not hit the case.

We cannot say that the state court denied a Federal right when it held the Railway Company strictly to its own terms.

Judgment affirmed.

PROVIDENT SAVINGS LIFE ASSURANCE SOCIETY v. COMMONWEALTH OF KENTUCKY.

ERROR TO THE COURT OF APPEALS OF THE STATE OF

KENTUCKY.

No. 328. Argued October 20, 21, 1915. Decided November 15, 1915. The state court, having placed its decision sustaining a tax on the ground that the corporation taxed was doing business within the State, and hence liable under the statute taxing corporations carrying on business, this court need only consider the question of whether the company was so transacting business as to render it subject to the taxing power of the State, and need not consider whether another statute under which the tax might have been levied was unconstitutional as impairing the obligation of the legislative contract under which the corporation entered the State.

Whether acts done by a corporation at the time to which a tax relates are of such a nature as to subject it to the local authority on the ground that such acts can only be done with the permission of the State is a Federal question, and this court has authority to review the decision of the state court in that respect.

The principle that taxation without jurisdiction violates the due

Argument for Plaintiff in Error.

239 U.S.

process provision of the Fourteenth Amendment applies to the assertion of authority on the part of the State to exact a license tax for the privilege of doing acts beyond the sphere of local control. The continuance of insurance contracts on the lives of residents of the State already written by the company does not depend upon the consent of the State, nor has a State the power to treat the mere continuance of the obligations of existing policies of insurance held by residents as the transaction of local business justifying the imposition of a privilege tax in the absence of actual conduct of business within the limits of the State. Equitable Life Assurance Society v. Pennsylvania, 238 U. S. 143, distinguished.

The imposition of taxes on premiums collected on policies on residents of Kentucky in pursuance of the statutes of that State after the company has ceased to do business therein, held, in this case, to be an unconstitutional exercise of power under the due process provision of the Fourteenth Amendment.

160 Kentucky, 16, reversed.

THE facts, which involve the constitutionality of a statute of Kentucky taxing insurance companies on premiums paid outside the State on policies on lives of residents of the State and the determination of what constitutes doing business within the State by an insurance company, are stated in the opinion.

Mr. Wm. Marshall Bullitt, with whom Mr. Charles C. Lockwood, Mr. Keith L. Bullitt, and Mr. Clarence C. Smith were on the brief, for plaintiff in error:

The tax levied by Ky. Stat., § 4226, is a license tax imposed on foreign insurance companies for the privilege of doing business within Kentucky. Northwestern Mut. Life v. James, 138 Kentucky, 48, 52; Southern B. & L. Assn. v. Norman, 98 Kentucky, 294, 298; Fidelity & Casualty Co. v. Louisville, 106 Kentucky, 207, 211; Equitable Life Society v. Pennsylvania, 238 U. S. 143.

Kentucky Stat., § 4226, as construed by the Court of Appeals, violates the "due process" clause of the Fourteenth Amendment, because:

The State cannot tax a license or privilege which it

239 U. S.

Argument for Defendant in Error.

does not grant. Horn Silver Mining Co. v. New York, 143 U. S. 305; New York v. Roberts, 171 U. S. 658, 664; Flint v. Stone Tracy Co., 220 U. S. 107, 164; Louisville Ferry Co. v. Kentucky, 188 U. S. 385, 396; Delaware &c. R. R. v. Pennsylvania, 198 U. S. 341, 358; Union Transit Co. v. Kentucky, 199 U. S. 194, 204; Buck v. Beach, 206 U. S. 392, 400.

The Insurance Company has done nothing, since its withdrawal, which can be construed as "doing business" in Kentucky so as to justify the exaction by that State of a privilege or license tax. Hunter v. Mutual Reserve Ins. Co., 218 U. S. 573; State v. Connecticut Mutual, 106 Tennessee, 258.

The receipt by the Insurance Company of premiums in New York, after its withdrawal from Kentucky, was not by virtue of any privilege or license of Kentucky; and hence neither the premiums so received nor the privilege of receiving them are taxable by Kentucky.

The Company cannot be taxed for the act of the policy holders. Almy v. California, 24 How. 169; Fairbank v. United States, 118 U. S. 283, 292; Allgeyer v. Louisiana, 165 U. S. 578, 591.

The Company's act was in New York, not Kentucky. Prewitt v. Security Mutual, 119 Kentucky, 321; Bedford v. Eastern B. & L. Assn., 181 U. S. 227; People v. Miller, 179 N. Y. 227; State v. Conn. Mut. Life, 106 Tennessee, 258.

The bare legal liability to Kentucky policy holders is not taxable by that State. N. Y. Life v. Deer Lodge County, 231 U. S. 495, 508; Allgeyer v. Louisiana, 165 U. S. 578, 588; N. Y. Life Ins. Co. v. Head, 234 U. S. 149, 161.

Equitable Life Society v. Pennsylvania, 238 U. S. 143, can be distinguished and is relied on.

Mr. John A. Judy, with whom Mr. James Garnett, Attorney General of the State of Kentucky, was on the brief, for defendant in error:

This action is not brought under § 4230a and said section has never been relied upon by the defendant in error.

The State of Kentucky is simply attempting to force the plaintiff in error to comply with a contract made at the time the plaintiff in error entered the State of Kentucky.

A State has the absolute right to prescribe the terms upon which a foreign corporation shall engage in business in that State. Paul v. Virginia, 8 Wall. 168; Ducat v. Chicago, 10 Wall. 410; Fire Association v. New York, 119 U. S. 110; Hooper v. California, 155 U. S. 648; People &c. v. Roberts, 171 U. S. 658; Equitable Life Society v. Pennsylvania, 238 U. S. 143.

After an insurance company has applied for and been granted permission to insure the lives of citizens of a State and has agreed to pay the tax for such privilege, it cannot avoid that tax by attempting to withdraw from the State and cease writing new business. Equitable Life Society v. Pennsylvania, 238 U. S. 143.

N. Y. Life Ins. Co. v. Head, 234 U. S. 149; Allgeyer v. Louisiana, 165 U. S. 578, do not apply to this case.

So far as the State of Kentucky is concerned, the Provident Savings Life Assurance Society is doing business in Kentucky as long as it has insured the lives of citizens of Kentucky under policies written while it was authorized to do business in Kentucky. Conn. Mut. Life Ins. Co. v. Spratley, 172 U. S. 603; Mutual Reserve Assn. v. Phelps, 190 U. S. 157.

There is nothing in this case other than the construction of a Statute of Kentucky, and the highest court of that State in construing it as it has, has not in any way infringed upon any rights under the Constitution of the United States.

MR. JUSTICE HUGHES delivered the opinion of the court.

The Provident Savings Life Assurance Society, a New York corporation, transacted business in Kentucky prior

to January 1, 1907, and paid the annual license tax of two per cent. on premiums. Kentucky Statutes, § 4226. This suit was brought by the Commonwealth to recover the tax on premiums received in the years 1907 to 1911, inclusive. The Company answered, denying liability upon the ground that on January 1, 1907, it had entirely ceased to do business in Kentucky and that all premiums received after that date on policies previously issued in Kentucky were received in New York.

Prior to the amendments made in the year 1906, § 4226 of the Kentucky Statutes provided as follows:

"SEC. 4226. Every life insurance company, other than fraternal assessment life insurance companies, not organized under the laws of this State, but doing business therein, shall on the first day of July in each year, or thirty days thereafter, return to the Auditor of Public Accounts for deposit in the Insurance Department, a statement under oath of all premiums receipted for on the face of the policy for original insurance and all renewal premiums received in cash or otherwise in this State, or out of this State, on business done in this State during the year ending the 30th of June last preceding, or since the last returns were made and shall at the same time pay into the State Treasury a tax of two dollars upon each one hundred dollars of said premiums as ascertained." Kentucky

Statutes, ed. 1903.

(See

This section was amended in 1906 by making the fiscal year to end on December thirty-first instead of June thirtieth, by prohibiting deductions for dividends, and by amplifying the description of premium receipts. Mutual Benefit Life Insurance Co. v. Commonwealth, 128 Kentucky, 174; Northwestern Mutual Life Insurance Co. v. James, 138 Kentucky, 48.) The amended section was as follows:

"SEC. 4226. Every life insurance company, other than fraternal assessment life insurance companies, not or