Hunton v. Commonwealth

Eggleston, J., delivered the opinion of the court. Eppa Hunton, IY, as executor of the estate of Eppa Hun-ton, Jr., deceased, filed his petition in the court below asking relief from three alleged erroneous assessments for State taxes made against Eppa Hunton, Jr., during his lifetime, upon income omitted by him from his tax returns for the years 1928, 1929, and 1930. — 232 — The omitted items of income were dividends upon shares of stock issued by railroad and power companies which Mr. Hunton claimed were exempt from State income taxes. The State Tax Department, taking the view that such dividends were taxable, on December 29, 1931, assessed Mr. Hunton with income taxes in the sum of $572.58 on dividends amounting to $19,086 received in 1927. On July 19, 1932, it assessed him with income taxes amounting to $682.59 on $22,753 of dividends received in 1928, and $735.81 taxes on $24,527 of dividends received in 1929. It is admitted that for each of the four years, 1926-1929, each of the companies from which the dividends were received was assessed with and paid the annual State franchise tax, and other taxes required of it, by sections 176, 177 of the Constitution of Virginia, and sections 216 and 229 of the Tax Code of Virginia (Acts 1928, ch. 45, pp. 145, 159), providing for the taxation of railroads and power companies. The case presented no issues of fact, and the questions of law before the lower court were the same as those here raised by the assignments of error. The trial court decided these in favor of the Commonwealth, upheld the validity of the assessments and entered an order denying the relief prayed for and dismissing the petition. The matter is here for review on a writ of error awarded by one of the justices of this court. The assignments of error challenge the correctness of the judgment of the lower court in the following language: “First: Petitioner contends that, under the provisions of section 177 of the Constitution of Virginia and section 28 of chapter 576 of the Acts of Assembly of 1926, now section 216 of the Tax Code of Virginia, providing for the assessment of franchise tax upon railroad companies, and section 170 of the Constitution and section 36% of chapter 576 of the Acts of Assembly of 1926, now section 229 of the Tax Code, under which franchise tax has been levied upon railroads and other public service corporations, in — 233 — which it is provided that the said franchise tax ‘shall be in lieu of all taxes or license charges whatsoever upon the franchise of such corporation, the shares of stock issued by it and upon all its property * * the income derived from said shares can not be taxed because a tax levied on the income is a tax on the shares, and that a tax on income is a tax on the property or source from which the income is derived, if the source be not subject to tax the income cannot be. “Second: That, as to the assessment sought to be made by the Department of Taxation December 29, 1932, upon income received during the year 1927, and as to the assessment sought to he made by the Department of Taxation July 19, 1932, upon the dividend or income received during the year 1928, the Department of Taxation is without authority to make the same as section 418 of the Tax Code under which the assessments were sought to be made provides for an assessment of omitted taxes ‘for any tax year of the three tax years last past’ and not for four years. That the tax levied December 29, 1931, was upon income received in 1927, and that the levy sought to be made in July, 1932, was upon income received in 1928, in each case was for periods beyond the three tax years last past. “In other words, the Department of Taxation, without authority, has undertaken to assess alleged taxable income beyond the ‘three tax years last past.’ ” The two assignments will be considered in the order named. The pertinent portion of section 170 of the Constitution, which was not affected by the amendment of 1927, is as follows: “The General Assembly may levy a tax on incomes in excess of six hundred dollars per annum; may levy a license tax upon any business which cannot be reached by the ad valorem system; and may impose State franchise taxes, and in imposing a franchise tax may, in its discretion, make the same in lieu of taxes upon other property, in whole or in part, of a transportation, industrial, or com — 234 — mercial corporation. Whenever a franchise tax shall be imposed upon a corporation doing business, in this State, or whenever all the capital, however invested, of a corporation chartered under the laws of the State, shall be taxed, the shares of stock issued by any such corporation shall not be further taxed. * * *” (Italics supplied.) The amendments of 1928 to section 177 of the Constitution are not material on the question here involved. That section is: “Every such railway or canal corporation shall also pay an annual State franchise tax to be prescribed by law, upon the gross receipts hereinafter specified in section 178, for the privilege1 of exercising its franchises in this State, which, with the taxes provided for in section 176, shall be in lieu of all other taxes or license, charges whatever upon the franchise of such corporation, the shares of stock issued by it, or upon its property assessed under section 176; provided, that nothing herein contained shall exempt such corporation from the annual fee required by section 157 of this Constitution, or from assessments for street and other public local improvements authorized by section 170; and, provided, further, that nothing herein contained shall annul or interfere with or prevent any contract or agreement by ordinance between street railway corporations and municipalities, as to compensation for the use of the streets or alleys of such municipalities by such railway corporations.” (Italics supplied.) So far as they are here material, the provisions of both sections 216 and 229 of the Tax Code are the same as those of the corresponding statutes in force for a number of years prior thereto. Section 216 of the Tax Code (Acts 1926, ch. 576, p. 983; Acts 1928, ch. 45, p. 145), after having provided for the taxation of real and personal property (tangible and intangible) of railway and canal corporations, reads: “Every such railway or canal corporation shall pay to the State an annual State franchise tax for each calendar year equal to one and one-half per centum upon the gross — 235 — transportation receipts, hereinafter specified, for the privilege of exercising its franchise in this State, except that every such railway corporation operating an electric railway or railways shall pay to the State an annual State franchise tax equal to one and six-tenths per centum upon the gross transportation receipts, hereinafter specified, for the privilege of exercising its franchise in this State; which, with the taxes hereinbefore provided-for, shall be in lieu of all taxes or license charges whatsoever, upon the franchises of such corporations and the shares of stock issued by them, and upon all their property, as hereinbefore provided; * * *.” (Italics supplied.) Section 229 of the Tax Code (Acts 1926, ch. 576, p. 990; Acts 1928, ch. 45, p. 159), after providing for the taxation of the real and personal property of water, heat, light and power companies, reads in part as follows: “Every corporation coming within the provisions of this and the preceding section shall pay to the State an annual State franchise tax equal to one and one-eighth per centum of its gross receipts, for the privilege of exercising its franchises in this State, which with the taxes hereinbefore provided for, shall be in lieu of all State taxes or license charges whatsoever, upon the franchises of such corporation, and the shares of stock issued by it, and upon all its property as hereinbefore provided; * * *.” (Italics supplied.) The question presented by the first assignment of error is whether the exemption from taxation, under sections 170 and 177 of the Constitution and sections 216 and 229 of the Tax Code, of “shares of stock issued by” railroad and electric power! companies, which have paid franchise taxes in Virginia, exempts from taxation the income or dividends received by the shareholder from such stock. The petitioner contends that a, tax on such dividends is a tax on the shares themselves which is, prohibited by the above constitutional and statutory provisions. The Commonwealth contends that its system of taxation, as embodied in the Constitution and statutes enacted — 236 — pursuant thereto, expressly recognizes the distinction between a direct tax on property itself and a tax on the income derived from such property, and treats property, and income therefrom, as separate subjects of taxation. It argues that the exemption provided for in the above sections of the Constitution and Tax Code is limited to an exemption from taxes directly imposed or levied on “shares of stock” themselves, as one subject of taxation, as distinguished from the dividends or income from such stock, as a separate subject of taxation. In approaching the subject we should keep in mind the distinction between legislative power and legislative policy. Whether the General Assembly has the power, under the Constitution, to enact a particular tax law is a question for the courts. But whether it is a wise policy to do so is a question solely for the lawmaking body and is no concern of the courts. Likewise we should bear in mind' these well-fixed rules of construction: (1) Taxation being the rule and exemption therefrom the exception, constitutional and statutory provisions exempting property from taxation should be strictly construed against the exemption and any doubt should be resolved in favor of the State. Com. v. Lynchburg Y. M. C. A., 115 Va. 745, 747, 748, 80 S. E: 589, 50 L. R. A. (N.S.) 1197; Board of Supervisors v. City of Norfolk, 153 Va. 768, 775, 776, 151 S. E. 143; Arcese v. Com., 160 Va. 116, 124, 168 S. E. 465; Bank of Commerce v. Tennessee, 161 U. S. 134, 146, 16 S. Ct. 456, 40 L. Ed. 645. (2) Every reasonable doubt should be resolved in favor of the constitutionality of an act of the legislature. Bourne v. Board of Supervisors, 161 Va. 678, 685, 172 S. E. 245; Carpel v. City of Richmond, 162 Va. 833, 840, 175 S. E. 316. Whether a tax on income from property is, generically speaking, a tax on the property from which the income is derived, is a question about which the authorities are in conflict. 26 R. C. L., p. 142, sec. 116. The petitioner’s view finds support in Pollock v. Farmers’ Loan & Trust — 237 — Co., 157 U. S. 429,15 S. Ct. 673, 39 L. Ed. 759; Id., 158 U. S. 601, 15 S. Ct. 912, 39 L. Ed. 1108, in which the Supreme Court of the United States, in 1895, by a divided court, held unconstitutional a Federal income tax law on the ground, among others, that by levying a tax on rents, derived from real estate and interest received from municipal bonds, the statute, in effect, levied a direct tax on such real estate and bonds, in contravention of article I, section 2, clause 3, of the Constitution of the United States, which requires that “direct taxes” shall be apportioned among the States according to population. For other cases holding that a tax on income is a tax on property from which income is derived, see Eliasberg Bros. Mercantile Co. v. Grimes, 204 Ala. 492, 86 So. 56, 11 A. L. R. 300; Bachrach v. Nelson, 349 Ill. 579, 182 N. E. 909; Tax Commissioner, Trefry v. Putnam, 227 Mass. 522, 116 N. E. 904, L. R. A. 1917F, 806; Culliton v. Chase, 174 Wash. 363, 25 P. (2d) 81. The claim that the Pollock Case is a complete and ultimate authority for holding that a tax on income derived from property is a tax on the property itself is considerably weakened by what Chief Justice White later said in Brushaber v. Union Pacific Railroad Co., 240 U. S. 1, 16, 36 S. Ct. 236, 241, 60 L. Ed. 493, L. R. A. 1917D, 414, Ann. Cas. 1917B, 713, viz., “The conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came Within the class of direct taxes on property, but on the contrary recognized the fact that taxation on income was in its nature an excise * * *.” It is interesting to note that in 1923, the same court, speaking through Mr. Justice Holmes, in Clyde v. Gilchrist, 262 U. S. 94, 43 S. Ct. 501, 67 L. Ed. 883, unanimously upheld a decision of the highest court of New York that the Mortgage Recording Tax Law of that State, which provided that the payment of taxes on the recordation of mortgages should exempt them and the obligations thereby secured from “all taxation,” did not exempt from taxation the income from such mortgages. — 238 — In any event, we think it may be safely said that the great weight of authority is contrary to the view that a tax on income derived from property is a tax on that property itself. An income tax is now generally accepted to he an excise tax. In Black on Income and Other Federal Taxes (4th Ed.) sec. 2, the author says: “A tax on incomes is not a tax on property, and a' tax on property does not embrace income * * *. For the same reason, a tax laid on income is different from a tax laid on the property out of which the income arises.” In Miles v. Department of the Treasury, 207 Ind. ..., 193 N. E. 855, 97 A. L. R. 1474, the highest court of Indiana, in a unanimous decision handed down on January 29, 1935, after reviewing all of the authorities on the subject, including the Pollock Case, decided that a tax on income is not a tax on the property from which the income is derived, but is an excise tax. Speaking of the nature of an income tax, the court said (193 N. E. 855, 861, 97 A. L. R., p. 1483): “We conclude that the tax in question is an excise, levied upon those domiciled in the State, upon the basis of the privilege of domicile, and that the burden may reasonably he measured by the amount of income. We feel that the weight of reason and authority sustains this view.” In In re Opinion of the Justices, 133 Me. 525,178 Atl. 621, 623, decided on March 16,1935, the highest court of Maine, in a unanimous decision, reached the same conclusion. See also, Sims v. Ahrens, 167 Ark. 557, 271 S. W. 720, 730, 735; Featherstone v. Norman, 170 Ga. 370, 153 S. E. 58, 65, 70 A. L. R. 449, 459; Diefendorf v. Gallet, 51 Idaho 619, 10 P. (2d) 307, 313; Reed v. Bjornson, 191 Minn. 254, 253 N. W. 102, 109; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4, 25 A. L. R. 748; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S. W. 196, 198; O’Connell v. State Board, 95 Mont. 91, 25 P. (2d) 114; Opinion of the Justices, 77 N. H. 611, 93 Atl. 311, 313; Maxwell v. Kent-Coffey Mfg. Co., 204 N. C. 365, 168 S. E. 397, 400, 90 — 239 — A. L. R. 476, affirmed 291 U. S. 642, 54 S. Ct. 437, 78 L. Ed. 1040; State v. Frear, 148 Wis. 456, 134 N. W. 673, 689, 135 N. W. 164, L. R. A. 1915B, 569, 606, Ann. Cas. 1913A, 1147. But aside from a theoretical discussion of the nature of an income tax, we think an examination of the Virginia Constitution, in the light of its historical background, shows that its builders intended that income derived from property and property itself be treated as separate and distinct subjects of taxation, and that the exemption of “shares of stock,” as one subject of taxation does not exempt the other subject, namely, dividends or income derived from such stock. Article IV of the Constitution of 1850 distinguished between property and income as separate subjects of taxation. Section 22 provided that “all property other than slaves shall be taxed in proportion to its value.” Section 25 provided for “a tax on incomes, salaries and licenses” with the added proviso that “no tax shall be levied on property from which any income so taxed is derived.” This section also prohibited a tax on “capital invested” in any trade or business' on which there was a license tax. The corresponding article X of the Constitution of 1870 likewise provided (section 1) for taxes on “all property * * * in proportion to its value,” license taxes, and a tax on incomes in excess of $600 per year. Section 4 of this article expressly provided that “assessments upon all stock shall be according to the market value thereof.” When the convention of 1902 assembled, having before it the Constitution of 1850 and 1870, it provided in section 168 for the taxation of “all property” at “uniform” rates. Section 170 provided for the taxation of incomes and for the levying of license and franchise taxes. Each of these was treated as a separate subject of taxation. It will be well to observe here that instead of providing for an ad valorem “assessment upon all stock,” as is found in article X, section 4, of the Constitution of 1870, section 170 of the Constitution of 1902 provided for the exemption from taxation of “shares of stock issued by” — 240 — any corporation doing business in this State on which there has been imposed a franchise tax, or whenever all of its capital has been taxed. It is logical to assume that the exemption provided for in section 170 is the ad valorem tax on stock which is dealt with in the corresponding article X, section 4, of the Constitution of 1870. Note should be taken of the fact that neither the Constitution of 1870 nor that of 1902 contains the provision of article IV, section 25, of the Constitution of 1850 which prohibited a tax “on property from which any income so taxed is derived.” This omission is significant in view of the claim of the petitioner. Section 176 of the Constitution, as originally adopted, after providing for the levying of property taxes on the real and personal property of railroads (with certain exceptions), concluded with the proviso that “no tax shall be laid upon the net income of such corporations.” If the framers of this section had considered that a tax upon the net income of a railroad was a tax upon its property within the meaning of the prohibition against “all other taxes” upon that property and “the shares of stock issued by it,” contained in section 177, why was it necessary to insert the proviso against an income tax? Is it not logical to infer that the draftsman of the section did not consider that a tax on income was one of the “other taxes” which was otherwise prohibited? By an amendment, ratified in 1928, the proviso was eliminated from section 176. This was done on the recommendation of the Prentis commission which gave the following reason for the change: “The last proviso in the original section is eliminated as unwise and an improper restriction on the taxing power of the State.” It should be noted that the commission did not say it had concluded that the prohibition against “all other taxes” on the shares of stock” in section 177 made this proviso unnecessary. It gave an entirely different reason for its elimination. Whether the elimination of the proviso gave the Gen — 241 — eral Assembly the power to impose a tax on the net income of railway and canal companies (as argued by the Attorney-General) is a question which is not before us and on which we express no opinion. It seems clear that since the adoption of the Constitution of 1902 the General Assembly has treated the tax on income and the tax on property from which it is derived as separate subjects of taxation. Immediately after the Constitution of 1902 took effect, the General Assembly met in extra session to adjust the statute law to the changes in the organic law. The enacting clause of the tax bill (Acts of 1902-3-4, Ex. Sess., ch. 148, p. 155) provided for the levying of taxes “on persons, property, and incomes” as separate subjects of taxation. The bill specifically provided for an ad valorem tax on “shares of stock,” as a subject of taxation, excepting, however, the “stock of companies all of whose capital is taxed by the State of Virginia, or which pay a franchise tax” to this State. Section 8, subd. 8. It likewise provided for the. taxation of income and defined it as “all other gains and profits from any source whatsoever.” Section 10, subd. 5 [now Tax Code, section 24]. Certainly this language is broad enough to embrace dividends. No exemption was provided for the income on the shares mentioned in section 170. So we see that at once the legislature applied and restricted the exemption in sections 170 and 177 to a property tax on shares of stock. We shall not stop here to review in detail the several acts passed in the intervening years from 1904 to 1928. Suffice it to say that an examination of each will show the same distinction between property and income as separate subjects of taxation. Beginning as early as 1915 (Acts 1915, Ex. Sess., ch. 81, :p. 113), “income” is specifically defined as including “all dividends.” The ad valorem property tax on shares of stock was continued until 1928 when it was dropped as a matter of legislative policy. — 242 — In 1915 (Acts 1915, Ex. Sess., ch. 70, p. 100) shares of stock in corporations which had paid this State a franchise tax were exempted from the property tax. Beginning in 1918 (Acts 1918, ch. 219, p. 395), and continuing to the present time (Tax Code, sec. 25, sub-sec. 1), the taxpayer was allowed, in arriving at his net income, to deduct dividends from stocks in corporations which had been assessed with income taxes by this State. Thus we think it clearly appears that from the time the Constitution of 1902 became effective down to the present time the General Assembly considered that it had the power to tax “all dividends,” including those from public service corporations, and that the exemption from taxation of the “shares of stock” in sections 170 and 177 of the Constitution refers to an exemption from property taxes and not to an exemption from taxation on the income or dividends received from such shares. It is stated in the brief of the Attorney-General, and not denied by the petitioner, that from 1919 to the present time the State tax officials have been assessing and collecting income taxes on dividends derived from public service corporations. This practical construction given to the laws by public officials is entitled to, and has, great weight with us. City of Norfolk v. Bell, 149 Va. 772, 780, 781, 141 S. E. 844; South East Public Service Corp. v. Com., 165 Va. 116, 181 S. E. 448, 452. The General Assembly of 1926 (Acts 1926, ch. 481, p. 797) provided for the creation of a commission to “study the Constitution of Virginia and propose in detail such revision of the same as it may be of opinion will be for the best interests of the Commonwealth * * *.” This commission, headed by Hon. Robert R. Prentis, then president of this court, must have been familiar with the statutory construction of the Constitution which we have reviewed and the established administrative practice whereby dividends on stocks of public service corporations paying franchise taxes in Virginia were subject to an income tax. If the commission had thought that there — 243 — was any conflict between the existing practice and the existing law, surely it would have recommended that such be cured by an appropriate amendment or amendments to the Constitution. And yet it made no such recommendation. Furthermore, we think that a reading of the Virginia income tax law itself shows that it is not a tax upon property from which the income is derived, but is an excise tax. Section 38 of the Tax Code (Acts 1926, ch. 576, p. 960, sec. 9, subsec. 2; Acts 1928, ch. 45, p. 50) provides that “a tax is hereby annually levied for each taxable year upon every resident individual of this State, upon and with respect to his entire net income as herein defined.” The tax is not levied on property but on the “individual * * * upon and with respect to his entire net income * * *.” It is levied on the taxpayer in proportion to his net income, not in proportion to his property. Again, the tax is levied with respect to his income derived from all sources. Whether he pays any tax, and the amount thereof, depends both on the amount of his gross income from all sources and on the exemptions and deductions which fit his particular case. In Atlantic, etc., Ry. Co. v. Southern Ry. Co., 149 Va. 701, 706, 141 S. E. 770, 772, Mr. Justice Holt, speaking for this court, said: “The tax so levied ‘is not similar to other forms of taxation, since it is not imposed upon property or business but upon the proceeds arising therefrom. Black on Income and Other Federal Taxes, sec. 1. An income tax is an assessment upon the income of the person and not upon any particular property from which that income is derived.’ ” This language is quoted with approval by Chief Justice Campbell in the recent case of Com. v. Hannaford, 159 Va. 84, 88, 165 S. E. 512. When a dividend is paid it becomes separated from the stock and becomes a subject of taxation, different from the property from which it was derived, just as growing timber, when cut, loses its nature as real estate and becomes personal property. — 244 — No one doubts that when dividends have been received by a stockholder and deposited by him in bank, they become money in the hands of the taxpayer and subject to be taxed as such. We think the fundamental weakness in petitioner’s case is his theory that any tax which affects property in any way, directly or indirectly, is a tax on that property. This argument is not sound and has been expressly repudiated by this court. In Com. v. Carter, 126 Va. 469, 102 S. E. 58, and in Cornett’s Ex’rs v. Com., 127 Va. 640,105 S. E. 230, we held that an inheritance tax is not a tax upon the property transferred from the estate of the decedent to the beneficiary, but a privilege tax. And yet it certainly affects the property transferred. In Com. v. Bibee Grocery Co., 153 Va. 935, 151 S. E. 293, we held that a license tax was not a tax on property. How could it be claimed that it does not affect the property which is used in the business ? In Com. v. Werth, 116 Va. 604, 609, 82 S. E. 695, Ann. Cas. 1916D, 1263, we held that a license tax, though graduated according to the amount of income, was not an income tax, i. e., a tax on the income affected. The owner of an automobile in Virginia pays a tax for the privilege of operating his car. In a sense this tax affects the car, but it is universally conceded that this is a license or privilege tax and not a tax on the property concerned, to-wit, the automobile. And so we think, in the final analysis, that the income tax here under review is an excise tax and not a tax on the property from which it is derived. Atlantic, etc., Ry. Co. v. Southern Ry. Co., 149 Va. 701, 706, 141 S. E. 770; Com. v. Hannaford, 159 Va. 84, 88, 165 S. E. 512; Black on Income and Other Federal Taxes (4th Ed.), sec. 2; 26 R. C. L., p. 142, sec. 116. Section 168 of the Constitution provides that “all taxes * * * shall be uniform * * *.” In Bradley & Co. v. Richmond, 110 Va. 521, 525, 66 S. E. 872, 874, we said: “The — 245 — provisions in the Constitution requiring equality and uniformity of taxation apply only to a direct tax on property, and not to license taxes, which do not admit of a tax strictly equal and uniform in the sense contended for. Helfrick’s Case, 29 Graft. [70 Va.] 844. When sections 168 and 170 of the Constitution are read together, it is clear that it was not intended to include a license upon a business in any of the provisions speaking of taxes on property.” This principle was reaffirmed by us in Com. v. Bibee Grocery Co., 153 Va. 935, 938,151 S. E. 293, in which Chief Justice Campbell spoke for the court. If, construing sections 168 and 170 together, we said that “all taxes” meant “all direct taxes on property” to the exclusion of license taxes, then it is equally true that “all other taxes” in section 177 can likewise be construed to mean “all other direct taxes on property” to the exclusion of income taxes. Our conclusion is that shares of stock and income therefrom are two separate and distinct subjects of taxation within the meaning of the Constitution (State v.Frear, 148 Wis. 456, 134 N. W. 673, 689, 135 N. W. 164, L. R. A. 1915R, 569, 606, Ann. Cas. 1913A, 1147; Cooley on Taxation (4th Ed.) p. 3479), and that the exemption from taxation of the “shares of stock” mentioned in sections 170 and 177 of the Constitution and in sections 216 and 229 of the Tax Code, here under review, does not exempt from taxation the income derived from such “shares of stock.” The plaintiff in error next contends that the assessment on December 29, 1931, with respect to the 1927 income, and the assessment on July 19, 1932, with respect to the 1928 income came too late. The determination of the correctness of this contention depends upon the meaning of section 418 of the Tax Code, which provides, in part, as follows: “If any person, * * * shall have hitherto failed or shall hereafter fail for any tax year of the three tax years last past, to make a proper return of his, * * * income, or to — 246 — have the same assessed for taxation, or to pay the proper taxes thereon within the time required by law, * * * the department of taxation, * * * shall ascertain the amount of such * * * income * * * which should have been assessed, and shall assess the taxes prescribed by law thereon for the year or years so omitted, * * *.” (Italics supplied.) The plaintiff in error argues that the assessment made on December 29,1931, with respect to the income received during the calendar year 1927, was an assessment for the “tax year” 1927, was after “the three tax years last past,” to-wit: 1930, 1929 and 1928, and came too late. The same argument is made with reference to the assessment on July 19,1932, with respect to the income received during the calendar year 1928. This assessment, he says, was for the “tax year” 1928, was after “the three tax years last past,” to-wit: 1931,1930, and 1929, and likewise came too late. The Commonwealth contends that the “tax year” means the year in which the assessment is made, as distinguished from the “taxable year,” which means the year in which the income is received; that while the tax assessed in 1928 is “with respect to,” i. e., based upon, the 1927 income, it is levied not for the tax year 1927, but for the tax year 1928; that “the three tax years last past” were 1931, 1930, and 1929, and that, therefore, the assessment in December, 1931, was within the limit prescribed. The same argument is made with reference tn the July, 1932, assessment with respect to the 1928 income. We think the position of the Commonwealth is well taken. As we pointed out in considering the first assignment of error, the income tax is an excise tax levied “upon every resident individual of this State, upon and with respect to his entire net income * * (Tax Code, section 38.) The tax assessed in 1928, while measured by, i. e., “with respect to,” the 1927 income, is, nevertheless, a tax for year 1928 and not for year 1927. “Incomes are taxed, not in the year such income is received, but in the — 247 — succeeding year.” Anderson Bros. v. Com., 138 Va. 18, 20, 120 S. E. 860; 61 C. J., p. 1581. Furthermore, the Tax Code itself, we think, recognizes the distinction between “tax year” and “taxable year” contended for by the Commonweálth. Section 424 is as follows: “Tax Year. Except where otherwise specifically provided, the tax year shall begin on the first day of January of each year and shall end on the thirty-first day of December of each year and all assessments shall he made as of the first day of January of each year.” Here clearly “tax year” refers to the year in which the assessments are made. Section 23 of the Tax Code defines “taxable year” as “the calendar year or the fiscal year ending during such calendar year upon the basis of which the net income is computed under this chapter.” It is plain that the words “taxable year” as here used, mean the year during which the income is received, that is the general accounting period (Bankers’ Trust Co. v. Bowers [C. C. A. 2], 295 Fed. 89, 92, 31 A. L. R. 922), as distinguished from the “tax year” when the assessment is made. We, therefore, conclude and hold that the expression “tax year,” as used in section 418 of the Tax Code, means the year in which the assessment is made “with respect to,” that is, based upon, the income received during the preceding year; that since the income received in the “taxable year” 1927 was first assessable in the “tax year” 1928, the assessment made on December 29, 1931, for income omitted from the 1928 assessment, was within “the three tax years last past;” and that the same is true of the July, 1932, assessment with respect to the 1928 income. On the whole our conclusion is that the judgment of the lower court is right and should be affirmed. Affirmed. Footnotes [8] Brown v. Maryland (1827), 12 Wheat. 419, 6 L. Ed. 678; Weston v. Charleston (1829), 2 Pet. 449, 7 L. Ed. 481; Dobbins v. Erie County, 16 Pet. 435, 10 L. Ed. 1022; Philadelphia, etc. S. S. Co. v. Pennsylvania (1887), 122 U. S. 326, 7 S. Ct. 1118, 30 L. Ed. 1200; Pollock v. Farmers’ Loan & Trust Co. (1895), 157 U. S. 429, 15 S. Ct. 673, 39 L. Ed. 759; Evans v. Gore (1920), 253 U. S. 245, 40 S. Ct. 550, 64 L. Ed. 887, 11 A. L. R. 519; Gillespie v. Oklahoma (1922), 257 U. S. 501, 42 S. Ct. 171, 66 L. Ed. 338; Mutual Life Ins. Co. v. State of Wisconsin, 276, U. S. 602, 48 S. Ct. 323, 72 L. Ed. 726; National Life Ins. Co. v. U. S., 277 U. S. 508, 48 S. Ct. 591, 72 L. Ed. 968; Miller v. City of Milwaukee, 272 U. S. 713, 47 S. Ct. 280, 71 L. Ed. 487; Macallen Company v. Massachusetts, 279 U. S. 620, 49 S. Ct. 432, 73 L. Ed. 874, 65 A. L. R. 866; Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 52 S. Ct. 443, 76 L. Ed. 815; Willcuts v. Bunn, 282 U. S. 216, 51 S. Ct. 125, 75 L. Ed. 304, 71 A. L. R. 1260; Bachrach v. Nelson, 349 Ill. 579, 182 N. E. 909; Eliasberg Bros. Merc. Co. v. Grimes, 204 Ala. 492, 86 So. 56, 11 A. L. R. 300; Hattiesburg Gro. Co. v. Robertson, 126 Miss. 34, 88 So. 4, 25 A. L. R. 748; Tax Commissioner v. Putnam, 227 Mass. 522, 116 N. E. 904, L. R. A. 1917F, 806. [9] Com. v. Worth, 116 Va. 604, 82 S. E. 695, 696, Ann. Cas. 1916D, 1263, in which the court, holding that the imposition of both a license tax and an income tax upon a lawyer was not such double taxation as is prohibited: by the Constitution of Virginia of 1902, said: “The subject matter of schedule D is ‘income,’ and not the sources from which it is derived.” Atlantic & Danville Ry. Co. v. Southern Ry. Co., 149 Va. 701, 141 S. E. 770, 772, in which the court, in passing upon whether the lessee company had contracted to pay the Federal income tax imposed upon the lessor company, said: “The tax so levied [Federal income tax] ‘is not similar to other forms of taxation, since it is not imposed upon property or business but upon the proceeds arising therefrom. Black on Income and Other Federal Taxes, section 1. An income tax is an assessment upon the income of the person and not upon any particular property from which that income is derived.’ Young v. Illinois Athletic Club, 310 Ill. 75, 141 N. E. 369, 30 A. L. R. 985.” Com. v. Hannaford, 159 Va. 84, 165 S. E. 512, in which, upon the authority of Fox Film Corp. v. Doyal, 286 U. S. 123, 52 S. Ct. 546, 76 L. Ed. 1010 (which overruled Long v. Rockwood, 277 U. S. 142, 48 S. Ct. 463, 72 L. Ed. 824), the court held: A patent right is not such an instrumentality of the Federal government as to be exempt from State taxation, and, therefore, the proceeds! of a sale thereof are Subject to the State income tax. Iri passing it quoted the language above given from Atlantic & D. Ry. Co. v. So. Ry. Co. Sims v. Ahrens, 167 Ark. 557, 271 S. W. 720, 731, in which the court quotes from section 1 of Black on Income and Other Federal Taxes as follows: “A tax on income is not a tax on property, and a tax on property does not embrace incomes. * * * For the same reason a tax laid on income is different from a tax laid on the property out of which the income arises.” Featherstone v. Norman, 170 Ga. 370, 153 S. E. 58, 59, 70 A. L. R. 449, in which the court held: “A tax on income is not a tax upon property” under our Constitution. Young v. Illinois Ath. Club, 310 Ill. 75, 1411 N. E. 369, 30 A. L. R. 985, from which the Commonwealth quotes the language made from it in Atlantic & D. Ry. Co. v. Southern Ry. Co., quoted supra. Hattiesburg Gro. Co. v. Robertson, 126 Miss. 34, 88 So. 4, 5, 25 A. L. R. 748, in which th court said: “The section [section 112 of the Consti — 260 — tution of 1890] contains no language even remotely indicating that its purpose is to withdraw from the legislature the power to tax any species of property or any of the activities of persons who enjoy the protection of the State’s laws, but such would be its effect if a tax on the income derived from property should be held to be necessarily a tax on the property from which the income was derived.” Opinion, of the Justices, 77 N. H. 611, 615, 93 Atl. 311, 313, from which this statement is quoted: “An income tax is generally understood to be a tax at an arbitrary rate—an excise tax. It has even been held not to be a property tax.” Maxwell v. Kent-Coffey Mfg. Co., 204 N. C. 365, 168 S. E. 397, 400, 90 A. L. R. 476, in which it was held: “The tax on income, imposed by the revenue acts of this State, is not a tax on property, within the meaning of the requirement of Constitution, art: 5, section 3, that property shall be taxed according to its true value in money.” State v. Frear, 148 Wis. 456, 134 N. W. 673, 689, 135 N. W. 164, L. R. A. 1915B, 569, 606, Ann. Cas. 1913A, 1147, writ of error dismissed 231 TJ. S. 616, 34 S. Ct. 272, 58 L. Ed. 400; from which the Commonwealth quotes as follows: “The inapplicability of the rule of the Pollock Case [157 U. S. 429, 15 S. Ct. 673, 39 L. Ed. 759] to the case here presented seems so plain as to require little comment. There can be no doubt of the proposition that income taxation of a progressive character, in addition to taxation of property, is directly authorized by the Constitution of Wisconsin as amended in 1908. Words could hardly be plainer to express that idea than the words used. From them it clearly appears that taxation of property and taxation of incomes are recognized as two separate and distinct things in the State Constitution. Both may be levied, and lawfully levied, because the Constitution says so. However philosophical the argument may be that taxation of rents received from property is in effect taxation of the property itself, the people of Wisconsin have said that ‘property’ means one thing, and ‘income’ means another; in other words, that income taxation is not property taxation as the words are used in the Constitution of Wisconsin.”