Phoenix Iron Co. v. Commonwealth

The opinion of the court was delivered, May 27th 1868, by- Agnew, J. The important question in this case is whether a tax upon capital stock, imposed under the Acts of 29th April 1844, Purd. 949, pi. 118, and 12th of April 1859, Purd. 951, pi. 127, is a tax upon dividends, within the meaning of the words “not paying a tax to the state upon dividends under existing laws” contained in the second section of the Act of 30th April 1864, Purd; 1377, pi. 3. The tax. on dividends is a well-known mode of raising revenue for the state upon corporations, and was in its origin chiefly confined to banks. The Act of- 1st April 1835, Pamph. L. 99, which is but a reiteration of the same mode of taxation, subjected the banks of the Commonwealth-to a graduated tax directly upon their dividends, increasing in progression from eight to eleven per cent. In all subsequent charters the same mode of taxation was pursued. The General Banking Act of 16th April 1850, § 21, Purd. 99, pi. 84, and the Act relating to banking companies of 1st May 1861, § 23, Purd. 82, pi. 23, laid the taxes upon dividends in like manner, hut increasing the gradation until it arose to a thirty per cent, tax on a twenty-five per cent, dividend. The Act for the incorporation of iron manufacturing companies of 16th June 1836¿ § 10, Purd. 567, pl. 11, also imposed a tax on dividends of eight per cent. In all instances of a tax upon dividends, it was laid directly upon the [108] dividend itself, without reference to the stock, e. g., on dividends not exceeding/six per cent., eight per cent.; exceeding six and not seven, nine per cent., &c. But the Act of 29th April 1844, § 33, charged the tax which it imposes directly upon the capital stock of the corporations of this state. If a company declared a dividend or profit of six per cent, on the capital, the tax was to be measured at the rate of one half mill on each one per cent, of the dividend or profit; but when the corporation failed to make dividends or declared less than six per cent, per annum, then a valuation of the stock itself was to be made and returned, and the tax was to be “ a sum equal to three mills on every dollar of the value of the capital stoch thereof so estimated and appraised.” If the corporation had not sufficient funds to pay the tax, the cashier or treasurer was to notify the stockholders to pay the same in proportion to their stock; and on failure, so much of their stock should be sold as was required to pay their proportion. The first section of the Act of 12th April 1859, also imposed the tax on the capital stoch, but changed the Act of 1844 so far as, instead of a valuation of the stock when the dividend fell below six per cent., to require payment of the tax at the rate of a half mill for each one per cent, of dividend made or declared, and provided for the valuation of the stock according to the Act of 1844, only when* the corporation failed to make or declare any dividend. The first proviso in this section itself makes the distinction between the two species of taxes. It declares “ that any institution or company (except banks of issue), now liable for a tax on capital stock, as also upon dividends, shall from henceforth be exempt from any tax upon dividends.” Of course it remained liable to the tax on capital stock. The distinction was still kept up by the Act of 24th of March 1860, Purd. 956, pl. 158, which relieved banks of discount and deposit and savings institutions, which had been placed by the Act of 1859 on the same footing with banks of issue, from the tax on their dividends. The meaning of a tax on dividends was thus well known in the legislation of the state, and therefore when the Act of 30th April 1864, subjected all corporations to a tax on their earnings or income except those paying a tax on dividends, it was clearly not intended to exempt from the new tax those merely paying a tax on their capital stock. It is not alleged that the Phoenix Iron Company pays any tax on dividends as such, further than the tax on capital graduated by their dividends under the Act of 1859, would be so considered. As the tax on capital is not to be so considered, the consequence is that this iron company was properly rated with its earnings or income tax. The rate of interest upon the balance found due for taxes was correctly adjudged by the court below under the provisions of the Act of 9th April 1867, Pamph. L. 58. Binding no error in the record the judgment is affirmed.