Atlantic Coast Line Railroad v. Maxwell

CoNNOR, J. The contention of the plaintiff that the sum of money which the plaintiff received from the United States Government during the year 1931, for transporting- the mail during said year under the direction of the Postmaster General, was exempt from taxation as income for said year by the State of North Carolina, under the provisions of subsection 2 (e) of section 317 of chapter 427, Public Laws of North Carolina, 1931, cannot be sustained. There is no error in the judgment of the Superior Court in this action overruling this contention. The provisions of subsection 2 (e) of section 317 of Chapter 427, Public Laws of North Carolina, 1931, are applicable to individuals whose taxable incomes are ascertained by deducting from their gross incomes as defined in subsection 1 of said section, the items mentioned in subsection 2. These provisions are not applicable to corporations, either domestic or foreign. This is manifest not only from the language used in sectiou 317, but also from the provisions of Article IY, of chapter 427, Public Laws of North Carolina, 1931, which includes section 317, and is known as the Income Tax Act of 1931. Provision is made in the act for ascertaining the taxable incomes of corporations as distinguished from the taxable incomes of individuals. The basis for ascertaining the net income of corporations engaged in the business of operating railroads, as common carriers, is fully set out in section 312. The provisions of this section are valid. It was so decided by the Supreme Court of the United States in Atlantic Coast Line Railroad Company v. Doughton, 262 U. S., 411, 67 L. Ed., 1051. Nor can the contention of the plaintiff that, in transporting the mails under the direction of the Postmaster General during the year 1931, the plaintiff was a public agent of the United States Government, and as such was performing a governmental function, and that for this reason the compensation which the plaintiff received from the United States Government for transporting the mail was not subject to taxation as income by the State of North Carolina, be sustained. There is no error in the judgment of the Superior Court in this action overruling this contention. The principle on which the plaintiff relies in support of its contention is well settled, and is essential to the preservation of an indestructible union of indestructible States. It is not controverted by the defendant in this action. This principle, however, is not applicable to the plaintiff. The plaintiff is not an instrumentality of the Government of the United States, created by said Government to perform a governmental *751 function. It is a corporation created by the State of Virginia, and engaged in the business of a common carrier in the State of North Carolina and' elsewhere. Its relation to the Government of the United States with respect to the transportation of the mail is that of an independent contractor. Its income derived from compensation for carrying the mail is subject to taxation by the State of North Carolina. Such taxation does not interfere with and is not a burden on the United States Government in performing its governmental function with respect to the mails, and therefore does not contravene the principle on which McCullock v. Maryland, 4 Wheat., 316, 4 L. Ed., 579, was decided. In Metcalf v. Mitchell, 269 U. S., 513, 70 L. Ed., 585, it is said: “Just what instrumentalities of either a State or the Federal Government are exempt from taxation by the other cannot be stated in terms of universal application.” It is sufficient to say that we find no evidence in the record in this appeal from which it could be held that the plaintiff is an instrumentality of the Federal Government within the principle relied on by the plaintiff. The judgment is Affirmed.