People Ex Rel. Vandervoort R. Co. v. . Glynn

This is a certiorari proceeding to review the action of the state comptroller in assessing a franchise tax upon the relator for the year ending October 31, 1906, under section 182 of the Tax Law (Laws of 1901, chap. 558, as amended by Laws of 1906, chap. 474).

To render a corporation liable to the imposition of a franchise tax under that section it must be doing business or exercising its corporate franchise in this state and must have capital stock employed within the state during the year for which the tax is assessed. It is contended in behalf of the appellant that it was not shown to be doing business in New York and that its capital stock was not employed here but was merely invested, and hence that it was not liable to a franchise tax under the authority ofPeople ex rel. Fort George Realty Co. v. Miller (179 N.Y. 49).

The record does not support the position of the appellant in either respect. (1) The relator is doing business in this state. This fact appears first from the statement in its own petition that it began business in the state of New York on March 9, 1906; and, secondly, from its own declaration in its report to the comptroller that its principal place of business is No. 84 Broadway, Brooklyn, New York. The fact further appears from its certificate of incorporation declaring its purpose to be "the buying and acquiring of a certain tract of real estate in the Borough of Brooklyn, State of New York." (2) The capital stock of the relator is employed rather than invested. It is being used for the precise purpose specified in the certificate of incorporation. The relator purchased from four owners in common the real estate which it was organized to acquire and issued stock amounting $187,000 to the vendors in payment therefor. This property, which borders upon Newtown creek, is occupied by persons to whom it has been leased for coal, brick and lumber yards and the relator derives therefrom rentals aggregating $17,300 per annum. These rentals, after deducting the compensation of a watchman and secretary, are used in paying dividends. The capital stock has been applied to the very use contemplated by the incorporators as the object of the organization. If this is not the employment of the capital stock, then it is impossible to conceive how the capital stock of such a corporation can ever be regarded as being employed at all. The case is not substantially different from People ex rel. Wall Hanover St. Realty Co. v. Miller (181 N.Y. 328). (3) It is contended that this view makes section 182 of the Tax Law unconstitutional, inasmuch as the relator is in the same class as was the Fort George Realty Company, which was held not to be liable to taxation under that section. This point is sufficiently disposed of by saying that we think there is a radical difference between the facts in the case of the Fort George Realty Company and the facts here. If it were true, however, that a statute of this character did render one corporation liable while relieving another from liability, it would not follow that the enactment was unconstitutional. The statute does not impose a property tax, but merely exacts a payment for the privilege of exercising corporate powers within the state. "The granting of such right or privilege rests entirely in the discretion of the State, and, of course, when granted, may be accompanied with such conditions as its legislature may judge most befitting to its interests and policy." (Home Ins. Co. v. New York,134 U.S. 594, 600.) The legislature is not bound to impose the same conditions upon all corporations for the privilege of doing business in New York. It may grant or withhold the privilege in the case of each corporation as it sees fit. The rules relating to the taxation of property do not apply.

The order of the Appellate Division should be affirmed, with costs.

CULLEN, Ch. J., HAIGHT, VANN, WERNER, HISCOCK and CHASE, JJ., concur.

Order affirmed.