DocketNumber: 36102
Citation Numbers: 141 N.W.2d 462, 180 Neb. 90, 1966 Neb. LEXIS 499
Judges: White, Carter, Spencer, Boslaugh, Brower, Smith, McCown
Filed Date: 4/8/1966
Status: Precedential
Modified Date: 10/19/2024
These cases involve the valuation of shares of common stock for intangible tax purposes in Frito-Lay, Inc., a foreign corporation organized under the laws of the State of Texas and not domesticated in Nebraska.
The appellees Robert O. Rehkopf and Merle S. Rehkopf are husband and wife, and each owned in their own right stock in the corporation mentioned in the years 1962 and 1963. The appellee Harry E. Judd owned stock therein in the year 1963. All three are residents of Douglas County, Nebraska. The Rehkopfs filed protests with the appellant Board of Equalization of Douglas County, Nebraska, for each of these years and Judd for the year 1963 alone. In each case the taxpayer’s complaint was dismissed and they appealed to the district court where the three cases were consolidated for trial. In this court they were docketed together as one appeal.
The facts are all established by the pleadings and the stipulations of the parties.
Prior to 1920, the Constitution of Nebraska made no distinction between tangible and intangible property, for the purpose of taxation. See International Harvester Co. v. County of Douglas, 146 Neb. 555, 20 N. W. 2d 620. In 1920, Article VIII, section 1, of the Constitution of Nebraska, was amended to read as follows: “The necessary revenue of the state and its governmental subdivi
Following the 1920 amendment to the Constitution, legislation was enacted which divided intangible property into two general classes with respect to the rate of tax applicable thereto. This legislation, which now appears as sections 77-701, 77-702, and 77-703, R. R. S. •1943, provides generally for a tax at the rate of 2% mills on the dollar of the actual value of money, book accounts, savings accounts, bank deposits, bills of exchange, checks, and drafts, and 4 mills on the dollar of the actual value of all other kinds of intangible property.
Shares of stock have also been classified with respect to the method of computing their value for assessment purposes. Section 77-706, R. S. Supp., 1963, which relates to the valuation of shares of stock in domestic corporations and certain domesticated corporations, provides as follows: “The value of the shares of stock of corporations, organized or domesticated under the laws of this state, shall be determined for the purpose of taxation by deducting from the actual value of the paid-up capital stock, surplus, and undivided profits of such corporation available for stock dividends, the actual value , of the property of the corporation, both intangible and tangible, listed and taxed in this state, the actual value of the property of the corporation outside of this state, the actual value of bonds or other obligations issued by the United States of America of any of its agencies or instrumentalities, ■ or by the State of Nebraska or any
Section 77-722, R. R. S. 1943, which relates to the valuation of shares of stock in foreign corporations, provides as follows: “If any foreign corporation is taxed in this state upon any tangible or intangible property, then the value of its gross shares of stock shall be ascertained by deducting from the actual value of the foreign corporation’s paid-up capital stock, surplus, and undivided profits, the actual value of its property taxed in this state; and thereafter the taxing officials of counties, in which shares of stock of any such foreign corporation may be owned, shall determine, in relation to such net value of the gross shares of stock, the value for assessment and taxation purposes of any such individual shares of stock in the hands of the resident owners.”
Sections 77-706, R. S. Supp., 1963, and 77-722, R. R. S. 1943, both contemplate the valuation of shares of stock upon the basis of book value, less the deductions set out in the respective sections.
The appellant board of equalization contends that shares of common stock in Frito-Lay, Inc., should be valued at $42.62 per share for 1962 and $29.75 per share in 1963, less the value of certain property of the corporation which was taxed in Nebraska during those years. The appellant admits that section 77-722, R. R. S. 1943, is applicable, but contends that the market value of thé stock rather than its book value should be used as the
Where the words of a statute are plain, direct, and unambiguous, no interpretation is needed to ascertain the meaning. Bachus v. Swanson, 179 Neb. 1, 136 N. W. 2d 189.
The district court held that the shares of common stock in Frito-Lay, Inc., should be valued at book value which the record shows was $6.77 per share in 1962 and $8.24 per share in 1963. This is the proper construction of section 77-722, R. R. S. 1943, although it results in the property being valued at a fraction of its actual value or fair market value. This disposes of the issues raised by the appellant’s appeal.
The appellee taxpayers cross-appealed from the judgment of the district court. They contend that shares of stock in corporations constitute a single class of property; that the Legislature is without power to classify the stock of foreign corporations separately for valuation for taxation; and that such classification is arbitrary, unreasonable, and an unconstitutional discrimination.
An examination of section 77-706, R. S. Supp., 1963, at once discloses that the deductions there authorized to be made from the actual value of the paid-up capital stock, surplus, and undivided profits available for stock dividends greatly exceed those permitted to foreign corporations under section 77-722, R. R. S. 1943. It is shown in the record that the evaluation of shares in domestic and domesticated corporations under section 77-706, R. S. Supp., 1963, results in a zero value in most instances. Of the 1,932 domestic and domesticated corporations which filed an information return or schedule with the county assessor of Douglas County, Nebraska, upon a form' authorized by the Tax Commissioner known as “Form 4,”. 1,786 had a zero value for tax- purposes and
The question presented by the cross-appeal is whether it is within the power of the Legislature to classify the stock of a foreign corporation in the hands of a stockholder separately and apart from other capital stock.
The tax imposed upon the shares of stock is a property tax upon the owner of the shares and not a tax upon the corporation. Nemaha County Bank v. County Board, 103 Neb. 53, 170 N. W. 500; Peters Trust Co. v. Douglas County, 106 Neb. 877, 184 N. W. 812; Moeller, McPherrin & Judd v. Smith, 127 Neb. 424, 255 N. W. 551. The property of the corporation which is in Nebraska, both tangible and intangible, is taxed to the corporation. The shares of stock in the corporation, which are the property of the shareholders, are taxed to them. A domestic or domesticated corporation is the agent for its stockholders for the purpose of payment of any tax which may be due upon its shares of stock. Peter Kiewit Sons’ Co. v. County of Douglas, 161 Neb. 93, 72 N. W. 2d 415.
Article VIII, section 1, of the Constitution of Nebraska, already quoted, after providing for taxes to be levied by valuation uniformly and proportionately on all tangible property and franchises, provides: “* * * and taxes uniform as to class may be levied by valuation upon all other property.” This court has said many times the Legislature may make a reasonable classification of persons, corporations, and property for purposes of legislation concerning them, but the classification must rest upon real differences in situations and circumstances surrounding the members of the class, relative to the
The trial court found the provisions of section 77-722, R. R. S. 1943, did not violate the Constitution of this state or of the United States. Its opinion indicates it based its judgment in this respect on the decision of this court in Bute v. Hamilton County, 113 Neb. 230, 202 N. W. 616. The Bute case was decided in 1925 prior to the enactment of what is now section 77-722, R. R. S. 1943. At that time the statute did not prescribe a method for the valuation of shares of stock in a foreign corporation. What is now section 77-201, R. S. Supp., 1963, then appeared as section 5820, Comp. St. 1922, and provided: “All property in this state, not expressly exempt therefrom, shall be subject to taxation, and shall be valued and assessed at its actual value. ‘Actual value,’ as used in this act, shall mean its value in the market in the ordinary course of trade.” The Bute case held that shares of stock in a foreign corporation should be valued in accordance with section 5820, Comp. St. 1922; and that section 5884, Comp. St. 1922, which as amended now appears as section 77-706, R. S. Supp., 1963, was not applicable to shares of stock in a foreign corporation. The opinion states: “The Constitution, as it stood before the amendment of 1920, of itself supplied the classification of property for taxation purposes; the amendment vests this power in the legislature. The classifying of stock in foreign corporations different from that in domestic corporations, for assessment, does not contravene the constitutional provision for uniformity. In this conclusion we are supported by Gaar, Scott & Co. v. Shannon, 52 Tex. Civ. App. 634; Ducat v. City of Chicago, 48 Ill. 172; Hughes v. City of Cairo, 92 Ill. 339; Bacon v. Board of State Tax Commissioners,
“Appellee urges that appellant abandoned his contention of double taxation on this appeal, relied upon in the lower court, because the stock in question has been assessed in West Virginia. Whether he did nor not, the contention is without merit. Dwight v. Mayor and Aldermen of City of Boston, 94 Mass. 316; Bradley v. Bauder, 36 Ohio St. 28; Judy v. Beckwith, 137 Ia. 24.”
The Bute case has. neither been overruled nor modified and has been the rule of law stated by this court for 40 years. Within less than a month after the decision of this court in the cited case the Legislature enacted Laws 1925, chapter 173, page 454, with the emergency clause, providing for filing of statements by foreign corporations and prescribing the method of ascertaining the value of the stock of such corporations. The statute so enacted has been subsequently amended and, as amended, presently appears as sections 77-721, R. S. Supp., 1963, and 77-722, R. R. S. 1943. It is apparent the Legislature of this state has relied, during the entire period, on the decision of this court as to the constitutionality of such legislation.
It is now suggested that the Bute case was wrongly decided and appellees contend that there was and is no reasonable basis for the classification of the shares of stock of foreign corporations differently than those of a domestic or domesticated one. It is claimed that no real difference in the situation and circumstances of the property or the owners thereof exist which render the separate classification appropriate.
There are, however, cases from many jurisdictions which have adopted the same rule as to classification enunciated in the Bute case. Some of them have spelled out the reasons therefor at considerable length. In the case of Georgia Railroad & Banking Co. v. Wright, 125 Ga. 589, 54 S. E. 52, the Supreme Court of Georgia had under consideration very similar statutes involving
“It may be that double taxation results so far as those
“A shareholder in a domestic corporation whose property is taxed in the hands of the corporation by the State is not in the same class with the shareholder in a foreign corporation whose property is not taxed and can not be taxed by the taxing authority of the State. Therefore a tax law levying a tax upon the market value of shares in foreign corporations held by citizens of this State, and not levying such a tax upon shares of stock ip a corporation in this State where the corporation has-paid the full amount of tax upon it's property, does not violate the rule of uniformity in our own constitution; nor does it violate that provision in the State constitution which says that protection to property shall be impartial and complete; nor does it violate that provision in the fourteenth amendment to the constitution of the ■United States which declares that no State shall deny to any person within its jurisdiction the equal protection
The same reasoning is set forth and the same conclusions reached in State v. Nelson, 107 Minn. 319, 119 N. W. 1058; Judy v. Beckwith, 137 Iowa 24, 114 N. W. 565, 15 L. R. A. N. S. 142, 15 Ann. Cas. 890; and Bacon v. Board of State Tax Commissioners, 126 Mich. 22, 85 N. W. 307, 60 L. R. A. 321, 86 Am. S. R. 524. In the latter case the court said: “The State has said, in effect, to its citizens, Tf you invest your property in corporations, you shall be taxed upon the shares, except where the property of the corporation is taxed to the corporation by this State.’ We may doubt the abstract justice of this; but we believe the State has the power to' tax the shares of residents in foreign corporations, and that this power is not affected by the action of another State in imposing taxes upon the corporations. Michigan owes much to the investment of foreign money in her corporations which she taxes, and it is probably to her interest that moneys so invested be not taxed again elsewhere: but she is powerless to prevent it, though it goes without saying that the property, in effect, is taxed twice. There are the questions of policy and abstract justice involved, both protesting against double taxation; but the legislatures of the States are judges of both policy and propriety, so long as the constitutions have not forbidden it, and the weight of authority supports the claim that, in the absence of clear and express prohibition, they have not.”
In Kidd v. Alabama, 188 U. S. 730, 23 S. Ct. 401, 47 L. Ed. 669, it was held that a statute of Alabama taxing stocks of railroads incorporated in other states held by citizens of Alabama is not unconstitutional under the Fourteenth Amendment to the Constitution of the United
■ In 84 C. J. S., Taxation, § 36, p. 120, it is stated: “The power to classify for tax purposes is primarily in
Here the court is not concerned with the justice, wisdom, or appropriateness of the statute before us. That is the prerogative of the Legislature and not the office of the court. We are asked to overrule Bute v. Hamilton County, supra, decided by this court more than 40 years ago, on the basis of which decision the Legislature of this state has acted and relied upon during that period. Moreover, we are urged to do so although that case is in agreement with the decisions of the courts of last resort in most of the other states, which have had the question before them, and of those of the United States.
The appellees in their brief on cross-appeal call our attention to certain cases of this court where other and different statutes classifying property for taxation were declared to have violated the constitutional requirement of uniformity as to class. These statutes and the classifications contained therein are not before us. They do not relate to the separate classification of the stock of foreign corporations and the stock of domestic or domesticated corporations. The case of Bute v. Hamilton County, supra, does and in so doing agrees with the
We conclude that the errors assigned by the cross-appellants cannot be sustained. It follows that the judgment of the trial court should be and is affirmed.
Affirmed.