Newark Fire Insurance Co. v. State Board of Tax Appeals

announced an opinion in which the Chief Justice, Me. Justice Butler and Mr. Justice Roberts concurred.

The controversy in No. 449 relates to the jurisdiction of New Jersey to tax the appellant upon the full amount of its capital stock paid in and accumulated surplus. The case is here by appeal under § 23? (a) of the Judicial Code.^[22]

Chapter 236 of the Laws of 1918^[23] is, a general act for the assessment and collection of taxes.' Section 202 subjects all real and personal property within the jurisdiction of New Jersey to taxation annually at its true value. By § 301 the tax on other than tangible personal property is assessed on each inhabitant in the taxing district of his residence on the first day of October in each year. Section 305 deals with domestic corporations as residents of the district in which their chief office is located and renders their personal property taxable in the same manner as that of individuals, except as otherwise provided. Section 307, the most vital in the case, provides:

“Every fire insurance company and every stock insurance company other than life insurance shall be assessed in the taxing district where its office is situate, upon the full amount of its capital stock paid in and accumulated surplus; ... no franchise tax shall be imposed upon any such fire insurance company or other stock insurance company included in this section.”

The Board of Assessment of the City of Newark made 'am assessment, as of October 1, 1934, upon the capital stock paid in and accumulated surplus of the appellant, with deductions for debts and exemptions allowed by law. The assessment was sustained, in succession, by the

Appellant urges error in sustaining the assessment in the face of the conclusion that the tax is a property tax upon intangibles with a business situs in New York, the commercial domicile of the corporation. Such approval, it is claimed, violates the due process clause of the 14th Amendment.

The present tax, as administered, is levied upon an assessment of the full amount of capital stock and sur - plus. It is a tax on the net value of the corporation less allowable deductions, reached by taking liabilities from gross value of assets and subtracting exempt items from

When a state exercises its sovereign power to create a private corporation, that corporation becomes a citizen, and domiciled in the jurisdiction, of its creator.^[9] There it must dwell.^[10] The dominion of the state over its creature is complete.^[11] In accordance with the ordinary recognition of the rule of mobilia sequuntur personam to determine the taxable situs of intangible personalty,^[12] the presumption is that such property is taxable by the state of the corporation’s origin.^[13] This power of New Jersey to tax is made effective by § 307 of the Act of 1918, heretofore quoted. It is the only tax sought by the state from corporations of this type, as the franchise tax, at one time levied,^[14] was repealed by the Act of April 8, 1903.^[15]

Where consideration has been given to the existence of a business situs of intangibles for taxation by a state other than the state of domicile, there has been definite evidence that the intangibles were integral parts of the business conducted. - In so far as the conclusion as to the existence of a business situs for the purpose of taxation, distinct from the domiciliary situs, is the basis for a claim of a federal right,, the duty of inquiring into the

In the Stempel, Bristol, Comptoir National, Metropolitan and Liverpool cases, cited in note 16, supra, the integration of the foreign-owned intangibles with local activities was evident from the continued course of business. The presence or absence of the evidences of the credits from the jurisdiction was immaterial.^[19] The non-resident individuals and corporations carried on continuously a course of lending money .or granting credits within the taxing states. The taxed intangibles grew out of these transactions. They were, in fact, a part of them. In the Wheeling Steel case, the same type of amalgamation occurred. West Virginia sought to tax a Delaware corporation on accounts receivable and bank deposits. The opinion points out, pages 212 and 213, that these choses in action were the indebtedness for or the proceeds of sales confirmed in West Virginia, attributable “to the place where they arise in the course of the business of making contracts of sale.” In First Bank Stock Corp. v. Minnesota, another Delaware corporation was found to have established a commercial domicile for itself and given a business situs to certain of its intangibles. The intangibles in question were stocks of Montana and North Dakota state banks, purchased and held as part of the corporation’s assets in its Minnesota business of holding the shares and managing, through stock ownership, the business of numerous banks, trust companies and other financial institutions of the Ninth Federal Reserve District. As this business was localized in Minnesota, th¿ stocks of these banks were an essential factor of that business and therefore had a taxable situs in Minnesota.

The tax is upon “the full amount of capital stock and surplus” less certain allowed deductions of real estate and exempt securities. The évidence gives no explanation •of the amount or source of the assets making up the amount $3,370,080.66 which balances with the capital stock and surplus less these deductions. The stipulation shows “agreed” figures, $8,107,901.83 presumably of capital and surplus, as shown below.^[20] Agreed deductions are

Universal Insurance Company and Universal Indemnity Insurance Company have appeals involving the same questions. By stipulation these cases were consolidated for review below and appeal here.

There are no significant distinctions between the cases. A management corporation handles these companies at a New York office, where accounts are payable. Seven per cent of the business of Universal Insurance Company originates in New Jersey. The corresponding percentage for the other company is not shown. As in No. 449, the record is silent as to the character, source and use of the securities and credits.

Mr. Justice Frankfurter announced the following opinion, concurred in by Mr. Justice Stone, Mr. Justice Black, and Mr. Justice Douglas.

Wise tax policy is one thing; constitutional prohibition quite another. The task of devising means for distributing the burdens of taxation equitably has always challenged the wisdom of the ■ wisest financial statesmen. Never has this been more true than today when wealth has so largely become the capitalization of expectancies derived from a complicated network of human relations. The adjustment of such relationships, with due regard to the promotion of enterprise and to the fiscal needs of different' governments with which these relations are entwined, is peculiarly a phase of empirical legislation. It belongs to that range of the experimental activities of government^[22] which should not be constrained by rigid

Chapter 236 of the New Jersey Laws of 1918, as applied to the circumstances of these two cases, clearly does not offend the Constitution. In substance, such legislation has heretofore been found free from constitutional infirmity. Cream of Wheat Co. v. Grand Forks, 253 U. S. 325 , affirming 41 N. Dak. 330; 170 N. W. 863 . During all the vicissitudes which the so-called “jurisdiction-to-tax” doctrine has encountered since that case was .decided, the extent of a state’s taxing power over a corporation of its own creation, recognized in the Cream of Wheat case, has neither been. restricted nor impaired. That case has not been cited otherwise than with approval.^[23] Questions affecting the fictional “situs” of intangibles, which received full consideration in Curry v. McCanless, post, p. 357, do not concern the present controversies. Cream of Wheat Co. v. Grand Forks, supra, and the cases that have followed it, afford a wholly adequate basis for affirming the judgments below.