Appellees Brief — Stratton, Secretary of State of the State of Illinois v. St. Louis Southwestern Ry. Co

a ae

where, and also the amount transacted in Illinois, and the

total value of its property wherever located, and the

“ value of that part of it located in Illinois. If the per-

centage derived by dividing the business and property in

Tllinois ‘by the total. business and property of the corpora-

tion is larger than the- percentage on which the original

initial or entrance fee was paid, then an additional initial

or entrance fee is paid covering the excess as shown by

the annual report over the amount estimated at the time

of entrance. This process is repeated each year, so that

, the foreign corporation has at all times paid, after the

first year, for the Rape of doing business in Illinois

an initial fee upon the maximum amount of its issued

capital stock represented by business and property which

it has at any time in its history had in Illinois (Section

101). It receives no ‘refund of this payment in years in

which its business and property diminishes over a preced-

ing more prosperous year. x

In addition to the admission tax of the foreign corpora-

tion, a franchise tax is exacted of it,. covering the -re-

mainder of the first year of its admission (Sec. 129),

based on the proportion of its issued capital stock repre-

sented in Illinois, 4s determined by the estimate stated in

the application, pursuant to section 81.

Having admitted foreign corporation, as a quasi citi-

zen, into the state, the State of Illinois ‘requires both

foreign and domestic to‘ file an annual report; section 102

ed that: . :

—

~ “Bach corporation, including railroads, domestic

arid foreign, * * * ghall make a report in writing

to the Secretary of State between the first day of

February ‘and the first day of March of each year on

the forms to be prescribed and furnished by the Sec-

retary of State. That part of the annual report re-

lating to property and business shall be made 4s for

the calendar year ending December 31st ‘preceding.

* * * Such annual report shall also disclose such —

facts as are necessary to enable the Secretary of

State to ascertain the proportion of its capital stock

represented by business transacted and tangible prop-

erty located in this state and such other information

as may be necessary or appropriate in order to assess -

the annual license fee or franchise tax.”” lida

On the basis of the annual reports filed by foreign and

domestic corporations the Secretary of State of Illinois

is required to determine the proportion of the capital

stock represented by ““business transacted and iat

located”’ in the state.

Section sisititien that:

‘In ascertaining the smeaent: of the issued capital

stock represented by business transacted and prop-

erty located in this state, the sum of the business of

any foreign or domestic corporation transacted in

this state and the total property of such corporation

located within this state shall be divided by the sum

of the total business of the corporation and the total

property of the corporation wherever situated.’’

° ‘ ‘

= .

r a CUPS Ter Psiventer

hina at . . . al oo. a. re a Ol ’

e - a ;

a, | |

Having determined the amount of capital iva of each

ted ‘in Tlli-

nois, the Secretary of State computes their annual fran-

_ foreign and domestic corporation—so represe

chise taxes as is provided by” paragraphs 105 and 107 of

the statute and as set forth in appellant’s brief. This an-—

nual payment is required without consideration of pay-

_ ments made ‘in former years, and even though the cor-

poration had paid a large sum of money in previous years —

under the former act which was declared unconstitutional

(O’Gara Coal Co. v. Emmerson, 326 Ill. 18), it cannot set

off the former payment illegally exacted against the

amount presently due, nor in any other way recover taxes

illegally collected by the State of Illinois as franchise

taxes or initial fee (Montgomery Ward v. Stratton, 342:

Ill: 472). No complaint is raised in this proceeding against

the ‘assessment of the initial fee or additional initial fees, .

or the annual franchise tax if fixed by section 105 at

$135.21. The complaint of the taxpayer in this case is

that Section 107 of the General Corporation Act, taken

in conjunction with the last paragraph of section 105,

provides in effect, that if section 105 does not produce

the tax ‘equal to the schedule set forth in section 107,

then the schedule in seétion 107. shall apply. _

In the instant case the tax under section 105 would be

only $135.21 for the year in question, whereas the tax

under section 107 provides a-minimum of $1,000.00. As

heretofore pointed out the initial or entrance fee is. levied

for the privilege of = business i in a state, and a fran-

a

‘chise tax under section 105, is levied annually on the ex-

ercise of that privilege, and is based and computed upon —

' the amount of the exercise of the privilege. Section 107

| disregards any such measurement, but provides arbitrary |

minimum sums which must be paid and which are based

merely on the size or amount of the issued capital stock ©

of the foreign corporation.

Section 92 provides that the Secretary of State may

revoke the authority of a foreign corporetion to do busi-

ness in the a

“«(2) ‘if oleh corporation is transacting no ry

ness in Illinois and has no ‘tangible eoapety § in this

wake"; :

or on the failure of such a corporation to pay the annual

franchise tax. The statute provided for divers penalties,

against the corporation and its officers, in the event it’.

failed to comply with the statute (Sec. 114).

‘The State of Illinois levied a ounce property tax

. against all of appellee’s property, both. real and personal,

whichis located within its territorial limits, by valuation,

ata uniform rate. The State of Illinois taxes, as personal

property, the shares of appellee’s stock owned by a resi-

dent of Illinois. .

The francaise tax here involved is not in lieu of any of

' these taxes, but is in addition thereto.

FERAL ORNL TL SORT SOLES SIAL OI NET A iad

, —_— Lp

=

CONTENTIONS OF APPELLEE.

Appellee contends, that,-as applied to it, under the facts

pleaded, paragraphs 105 and/or 107 of. the Illinois Cor-

poration Act are void, in that they take from appellee

rights guaranteed to it by the Constitution of the United

“States: e |

1. Unreasonably burdening and directly taxing appel-

lee’s commerce between the states in violation of the

commerce clause of the Constitution of the United States.

2. Taxing appellee’s property and business outside the

State of Illinois, and thereby depriving appellee of its

property without due process, contrary to the Fourteenth

_ Amendment, to the Constitution of the United States.

3. Discriminating against appellee in favor of other

foreign and domestic corporations, thereby denying it the

equal protectién of the laws in violation of the Fourteenth

Amendment to the Constitution of the United States.

~~

SUMMARY OF —

“I. The minimum fee fixed ™ Section 107 of the Gen-

eral Corporation Act of Illinois is not a fee for the privi-

lege of doing business in the state, but is an arinual fran-

chise taxt_an excise—on that peivilege or its exercise.

General Corporation Act, Chap. 32, Secs. 101, 105

and 107.

II. As to appellee, Sections. 105 and/or 107 of the Gen-

eral Corporation Act of Illinois, are void, being a direct,

_ as well as an unreasonable burden upon the interstate

commerce engaged in by appellee, and. also falling upon

appellee’s property outside ,of ‘Ilinois, and thereby bur-

dening interstate commerce and depriving appellee of its

property without due process of law, respectively, con-

trary. to the commerce clause and to the Fourteenth

Amendment of the Constitution of the United States,

Western Union Tel. Co. v. Kansas, 216 a 8. 1;

Ludwig v. Western Union Tel. Co., 216 U. 8. 146;

_ Looney v, Crané Co., 245 U. 8. 178; |

International Paper Co..v. Mass., 246° U. S. 135;

Air-Way Electric Co. v. Day, 266 U.S. 71;

— Packing Co. v. Hinkle, 278 U. S. 460.

After admitting a foreign corporation, a state cannot.

impose an annual excise, measured . by its estate stock,

©

__ noe

-where the sole business, conducted by the corporation

within the state, is in interstate commerce.

Alpha Portland Cimet On, v. Mass., 268 U.-S. 212,

218;

- Ozark Pipe Line Corp: v. - Monier, 266 U. S. 561,

565. :

The annual franchise tax, ipvelved 1 in this appeal, is not

‘the same thing as an incorporation fee exacted of a do-

~ mestic corporation or its complement, an admission or ~

‘‘initial’’ fee exacted by the state from foreign corpora- 7

- tions seeking admittance (there being but one collection ©

of the tax), as to which different rules apply. |

Hanover Ins. Co. v. Harding: (Carr), 272 U.S. 494; |

Roberts & Schaefer Co. v. Emmerson, 271 U. S. 50;

People of State of New York v. auiein 279 U.S.

‘421,

: e

The following authorities cited by appellant are dis-

tinguishable on the foregoing grounds:

General Ry. Signal Co. v. ‘Va., 246 U. g. 500;

Latrobe v. N. Y., 279 U.S. 421.

; /

A state may exact an excise of domestic corporations,

measured by the whole unt of the corporation ’s stock ;

—-since the taxing state has granted the original corporate

franchise, including the right to have such amount of

stock. _ Appellee g power to have $36,294,750.00 of issued

v . : f,

vi ; s , ;

il

ales

stock was received from the State of Missouri and not

from the State of Illinois: For this reason, a state may

consistently with the Federal Constitution, exact an an-

nual franchise of domestic corporations, measured by ‘the

whole of the corporation’s capital stock, while it cannot

“exact such a tax, so measured, of foreign corporations. |

Air-Way Electric Co. v. Day; 266 U.S. 7 1;

O’Gara Coal Co. v. Emmerson, 326 Ill. 18.

’ Cases relied on by appellant and distinguishable . on | such

grounds: :

K. C., Ft. Scott & M. R. R. v. Kansas ex rel, Botkin,

240 U. S. 227;

K. C. M. & B. B. R. v. Stiles, 242 U. 8. ‘111;

Roberts & Schaefer Co. v. Emmerson, 271 U.S. 50. -

‘Il. As 7 to appellee, Paragraphs 105 to 107 of the

Illinois Corporation Act deny it the equal protection of

the laws, discriminating against it and-in favor of other.

domestic and foreign corporations having like business hy

and assets in Illinois, but a smaller amount of. issued"

capital stock. |

A state, in levying excises on corporations, cannot con- °

ig sistently, with the equal-protection-of-the-laws clause, dis-

criminate i in any way: ae ~

¢ a) Between Scie corporations fof the same class

$ whicl? it has admitted into the state.

Air-Way Electric Appliance Co. v. Day, 266 U.S.

ee . |

=

Hanover Ins. Co. v. Carr, supra, 272 U. 8. 494,

Op. 510;

O’Gara Coal Co. v. ‘Emmerson, 326 I. 18, at .32.

\

(b) Discriminate in any way against such een and

in favor of domestic corporations.

_- Southern Ry. Co. v. Greene, 216°U. S. 400, 418.

(c) Nor discriminate between domestic corporations.

)

‘Royster Guano Co. v. Virginia, 253 U. 8. 412. -

As applied to appellee, the statute violates the equal

protection clause, because the tax is not limited to that

part of appellee’s capital stock justly apportionable to the

‘ State of Illinois and: because the method of fixing such

tax bears no reasonable relation to the value of the

privilege granted.

Air-Way Electric Appliance Co. v. Day, 266 U.

| S: 71.

Although having power to exclude foreign corporations,

a state cannot limit éntry on condition that such corpora-

__, tions waive any of their constitutional rights.

Looney v. Crane, 245 U. 8. 178, Op. 187-8;

Western Union v. Kansas, 216 U. §, 1, Op. 47-8;

Puliman Co. v. Kansas, 216 U. S. 56, Op. 63-4;

. Hanover Fire Ins. Co. v. Carr, 272 U. S. 494, Op.

Frost v. R. B. Comm., 271 U. 8. 591, at 593-4, 599.

hen

*

e .

‘ ;

mT RT he REIN TL) SIE IWR IE SRS —

Commission.

og

— i |

Appellee’ 8 authority to issue stock or the number of_

shares it may have issued and outstanding does not de-

pend upon the laws of Illinois. Its sole authority in that

respect depends upon the laws of Missouri’ under. which it

was created. :

Air-Way Electric hadley: Co. ‘v. Day, 266 U.

S. 71;.

| Roberts & Schaefer Co. v. Emmerson, 271 U.S. 50;

.O’Gara Doal Co. v. aaiiaeas 326 ‘Ti. 18, at 32.

The Illinois statutes prohibit appellee from acquiring

' other railroad properties without first securing a certificate.

of convenience and necessity from the Zilinois Commerce

Smith-Hurd Statutes 1927, Chap. 111%, Par. 56;

Cahill’ 8 Hl. Rev. Statutes 1927, Chap. —_ Par. 71.

Unider * ite statute, as Lenesieeed by the Illinois courts, ..

~, mo certificate of convenience and necessity can be granted

to an applicant as long as any other utility in the field is

rendering adequate service.

f,

Egyptian ‘Transportation System’ v.. Louisville &

Nashville R. R., 321.1. 580;

Illinois Power & Light Corp. v. Ilinois Commerce

ao, 320 Ill. 427.

St ed Ra a rn es ae a

SALES SOOO OER AY SO SH ON PAO BI pe. Fete yrs i ew FP nee, S

: ee

privilege annually sold by jai State of? Iinois 6 _appel-

lee, of being a corporation and exercising corporate fran-

-chises in Illinois for the year covered by the franchise’.

tax. oe | other words, appellant endeavors to treat this

tax as if it were the incorporation & initia” fee re-

* quired. of a domestic corporation jor the ‘admission fee’? —

of ‘a foreign corporation. In fact, the tax here ittvolved _

- a “franchise tax’—an excise—a tax upon a privi-

lege of being admitted to Wo business in Illinois as a cor-

‘poration. for eighty-eight (88) -years from October 19,

+ 1903; which privilege was sold (granted) to appellee in

_ Forsuch reason and in order that the true nature of this

tax may be, made the more appsrent, we deem a more

detailed explanation of the operation pertinent provisions

of the Corporation Act” (which are set out in a fall: in the

appendix

Se The S

= -troversy

ereto) to be necessary. n

of - Illinois exacts, and, at. the time this con-

Be, exacted, from domestic corporations (Sec:

96) an ‘‘initial”’ (incorporation) fee, but-once paid on its

stock as issued (no fee being paid on authorized but

unissued stock), and also an annual franchise tax for the

‘ remainder of the first year (Sec. 129) and yearly there-

-after (Secs. 105-107 as

oe

Section 80 ) provides that every foreign « corporation shall

.“‘before. it transacts any. business or maintains an office

in this state, procure a certificate of authority therefor

7 the onal of State. vail

a ee |

- Section 81 provides the form of such application in the

” manner of a questionnaire - covering information, from

. which the Secretary of State may: compute: the proportion

of its capital stock which will be represented in Illinois

during the remainder of the first calendar. year of its ad-

_ Mission by the corporation’s estimate of its business to be

done within and property. to be brought into the state dur-

ing that period; and by a ‘like estimate. of its business and

property i in all-states during the same period.

‘ Section 101 provides for an admission fee. (the, comple-

ment. of the ‘‘initial’’ or incorporation fee charged do-

mestic corporations by section 96), requiring a foreign

corporation to pay for a ‘‘certificate of authority to do

‘business in Illinois, the same fées provided by this to be

paid by a similar corporation incorporated under the laws

of this state. * * * All such fees shall be based upon -

the proportion of its issued capital gL ck represented by

* business. transacted and property located in Il. ‘nois.’’

The first payment on the initial or entrance fee is made_

before the corporation has’ done any business in Illinois,

and it therefore makes an estimate of the amount of busi-

ness and property it will have in Illinois and the amount

of business and property everywhere, and from. the pro-

portion of these is determined the. proportion of capital

| stock on which it will pay the original initial or entrance

fee. In February of each year thereafter the foreign cor-

‘poration makes a _Teport sh@wing the actual amount of

business in dollars and cents which it transacted np

ARaCMEE T.

N ATURE OF THE TAX.

ee The minimum ‘tax. fixed by the Illinois statute ‘is not

‘ a fee required: to be paid by appellant to the State of

. Illinois’ in excliange for the privilege of ddmission- into

the State and doing ‘business therein, but is an annual

excise tax laid on such privilege.

In the- statement ‘we directed attention to the fact that

" appellant’s brief treats the tax here involved as a con-

. sideration required to be paid by appellee for the privilege

of doifg. business in the State of Illinois. In-truth and in.

Pee nothing ‘could be further from the-fact. In

1903 appellee purchased from. the State of Illinois the

os privilege of doing business in the state for. a period of

: eighty-eight years, which will expire in the year 1991.

_ It may be said that. the’ purchase at that time was limited

to the bringing within the state of up to $50, 000.00 of its

authorized capital: If so, then since that date it has pur-

chased from the State of Illinois ‘the right or privilege

of bringing into the state up to $5,500,000.00 of its au-

dee thorized capital.or (if the issued capital be apportioned)

-* $1,533,324, 43 of its issued capital. ;

Inasmuch as the State’ has sold the privilege of ‘doing a

oe corporate business. in THinois: to appellee, for a consider-

7 ation, it cannot now exact additional compensation for

that \Privilege.

4

=.

~

- The State may, however, tax the.extraordinary privile

and franchise which it has given. The tax here involved

is an excise. | It is ‘a tax on the exercise of the extraerdi-

nary privilege heretofore granted appellee, of: being ad-

mitted into Illinois. . Initial fees required of domestic

corporations and the admission fees required of foreign

corporations, ‘constitute the price paid to, the State of

_ illinois by such corporations in exchange for their corpo-

rate existence and powers. The excises required by Sec-

. tions 105 and 107 of the General Corporation Act of Ili-

nois are purely revenue-produing measures—a ‘franchise

tax upon the exercise by appellee and other corporations |

of a franchise and contract right previously granted. That -

the annual minimum franchise tax herein claimed to be

unconstitutional is not. attempted to be levied for the

privilege or authority to do business in Illinois is made

quite obvious by the language of section 101, which fixes .

the fee for that privilege. Said section, i in part, reads as:

“follows: ;

‘‘Kach foreign corporation for -pecuniary profits,

'* * * in addition to the’ annual franchise fees of

taxes hereinafter provided, shall pay to the Secretary

of State for its certificate of authority to do business

in Illinois, the same fees provided by this act to be

_ paid by similar corporations incorporated under the

= laws of this State.’’

é

The privilege 80 granted, when once paid for, continues

“until the corporation voluntarily withdraws from the

<a

_

_ State as provided in the act, or is stented to withdraw

by action of the Attorney-General in a proper proceeding

in court. Section 126 of the act requires the Secretary of

* State on or before the 15th of November of each year, to

send to the Attorney-General a list of corporations de-

f linquent in filing an annual report or in paying annual

franchise taxes. The Attorney-General is: commanded by

said section to institute proceedings against such corpo-

rations thereafter, for the revocation of their charter or

license, and provides for the stay of such proceedings if

. the corporation presents a report and pays the fees, taxes

- and penalties due. : we |

' On wiajecion the state may dom what it pleases for —

the granting of the right, the franchise to be a corpora-

tion in the: atate, so long as it does not attempt to require

the waiver of any constitutional owe or discriminate

ee between applicants.

But, ence admitted, the state has no such broad pewer

AS regards the levying of excise taxes on the ieee

granted by it.

“In subjecting a law of the state which imposes a

charge upon foreign corporations to the test whether

such a charge violates the equal-protection clause of .

the Fourteenth Amendment, a line has-to be drawn

between the burden imposed by the state for the

license or privilege to do business in the state and

the tax burden which, having secured the right ta do

buéiness, the foreign corporation must share with all

the corporations and other taxpayers of the state.

>

smasiennansiinmemnnninnememasneanimmsmenmnsamnenmmemeseenane ; a -

—

With respect to the admission fee, so to speak, which |

the foreign corporation must pay to become a quasi

citizen of the state and entitled ‘to equal privileges

with citizens of the state, the measure of the burden

is in the discretion of the state and any inequality, as

between the foreign corporation and the domestic

= corporation in that regard, does not come within the

inhibition of the Fourteenth Amendment, but, after

its admission, the foreign Corporation stands equal

_ and is to be classified with domestic corporations of

the same kind.”’ ie |

Hanover v. Harding (Carr), 272 U. S. 494, Op.

510-511. : | 2

_ The franchise tax involved in this appeal is therefore -

a mueh different thing than the incorporation fee exacted

of a domestic corporation or its complement, an admis--

sion or ‘‘initial’? fee exacted by the state of foreign cor-

porations seeking admittance (there~being but one collec:

tion of the tax), as to which different rules apply, as in

New York v. Latrobe, 279 U. S. 421; |

Roberts & Schaefer Co. v. Emmerson, 271: U. 8S. 50.

_ THE QUESTIONS INVOLVED IN THIS CASE.

We say, therefore, the question is not (as stated by |

appellant, Brief, p. 12) whether e

‘‘the State may require & corporation organized or

- admitted to do business in the state, to pay a mini:

mum fee or franchise tax, as provided in sections 105.

‘

» a owest ey RICE

pa 5 Saat 7 PIE Far i Lt : ?

. z - °

ie

and 107, for granting it the privilege of doing busi-

ness in the state during the next year, although it

may not have actually exercised its franchise in. the

state the preceding year to a sufficient extent to pro-.

duce such an amount of tax at the rate specified in

section 105.’’

—20— °

Actually, the questions involved in this case are:

| 1. May the gross amount of the issued capital stock of

| a foreign corporation, consistently with the éommerce and

due-process clauses of the Constitution, be made. the .

measure of an annual excise exacted by the state, of a

‘ foreign corporation, ‘before that time admitted into the

. state, irrespectiye of the amount of the capital stock of

such corporation actually represented in the state—par-

ticularly. where only a portion of the corporation’s stock

has been admitted into the state? |

2. May a state, consistently with the equal-protection

clause of the Constitution, exact an annual excise from a

foreign corporation which it - had previously admitted,

' basing said tax as to one corpor ‘ation on: ‘its total issued

’ stock, irrespective of the amount of said stock represented

| in the state, and as to: other corporations, both foreign

and domestic, based on the proportion of their stock rep-

‘resented by property and business in the state, and re-

sulting 1 im the one corporation paying a larger tax on each

dollar of its, capital stock represented in the state than is

paid on each dollar of the capital stock (represented in

the state) of such other corporations . .

—21—

3. Does a state statute exacting an annua) excise of for-

eign corporations, measured and graduated according to

the gross amount: of-the issued capital stock of such cor-

poration and without regard to the amount thereof nepre- -

sented in the taxing state, consistently with the equal-

_ protection clause, require like fees for equal privilege held

by all foreign corporations under the same tircumstances?

| °

‘The tax here involved is, as to appellee, void, inasmuch

_ as it burdens interstate commerce and deprives appellant

of property without. due process of Jew.

On this point we wish to assert our faith in the correct-_

ness of the determination of this cause by the Statutory —

Court. We respectfully insist, as we did before that

Court, that the case of Cudahy’ Packing Company 5

Hinkle, Secretary of State, et al., sai U.S. 460, is directly

' in point and controls.

The theory and Pinendhtoaniniii basis of the Illinois ‘tink.

chise Tax Statutes is to require each corporation to pay _

an annual franchise tax of 5 cents per $100.00 on that part

' of its issued capital stock represented by oni owned

-¢ and business done in Illinois.

The scale of minimums sét forth in section 107, on its

face, applies. only to corporations without either ‘capital,

assets or business in Illinois. It is made applicable to

| appellee by reason of the proviso of section 105.- The

. :

— ye piters , y Srna Lee Fee By ARIES LOL REIN LIES 50S PY ESE a a ee ee i

Vite - .

‘

=

actual effect ‘of the statute, as appellee seeks to apply it

- in this case, is that, having determined the franchise tax

which appellee should pay upon that portion of its capital -

stock represented by property and business in Illinois .

| ($135.21), and having found that the tax as so determined

was small in amount, the State of Tllinois arbitrarily fixes

an annual tax in a larger amount ($1,000.00). If $135.21

represents the tax.on that portion of appellee’s capital

represented by property and business in Illinois, then

when the State of Illinois arbitrarily demands an addi-

tional $864.79, such additional tax, if paid, necessarily

falls on that part of appellee’s ¢apital stock which is rep-

resented by property and business without the State of

Illinois. ;

The effect of the commerce clause was first considered

with reference to a franchise tax in the case of Western

Union Tel. Co. v. Kansas, 216 U. S. 1, 30 Sup. Ct. 190.

. This.Court specifically held void, as being in violation of

the commerce clause, a Kansas statute requiring foreign |

corporations (before that time admiitted to intrastate

business) to pay as a franchise tax a fixed (one-tenth of

‘one percent) percent . of their authorized capitals. The

Court reasoned that as thé whole of the capital stock rep-

resented the whole of the corporation’s property and busi-

ness; and, as only a part of the corporation’s capital,

property and business was-in Kansas, ‘the tax on all of its

capital stock was, of necessity, @ tax on all of itsproperty

and all of its business, which included its interstate usi-

° a ee

— Se

“ness and property in other states. By reason whereo%’ the

tax was in part a direct burden, a direct tax, on the corpo-

ation’s business in interstate commerce, and therefore. |

void. It is only w here the burden is indirect or incidental’

that the commercé clause would not be ial ieseti unless’ the

burden be unreasonable. — |

Here, as in the Western Union a case, the: tax is a

direct burden on the interstate commerce ‘conducted: by — -

appellee, because one ~ hundred thirty-five and 21/100"

($135.21) dollars is the tax which would be due from ap-

pellee on the proportion of its capital stock represented ‘by _

property owned: ‘and business done in Illinois. The bal-

ance of its capital stock is represented by ‘property and

~ business in other. states. The appellant demands eight

hundred sixty-four and 79/100 ($864.79) dollars addi-

tional. If paid, then, of necessity, it is a tax and a direct

‘ burden: upon all of appellee’s property and business, ‘in-

cluding appellee’s property in other states, its nadie:

commerce, and it is void.

The principle of the case of Western Union Co. v. Kan-

sas, 216 U. S. 1, was followed in the cases of Pullman Co.

v. Kansas, 216 U. 8. 56; Ludwig v. Western Union Tel. Co.,

216 U. 8. 146; A. T. & S. F. Ry. v. O'Connor, 293 U. 8. 280.

Then came the decisions upon which appellant most |

' strongly relies.

In Baltic Ming. Co. v. Mass., 231 U. S. 68, the Court sus-

tained a statute levying an annual excise of one-fiftieth of

1 per cent on | the authorized stock of foreign corporations |

— 24—

doing business in Massachusetts; said tax, however, being |

limited to a maximum of $2, 000-00: :

In Cheney Bros. v. Mass., 246 U. S. 147, the Court again

‘sustained the same statute in a case. which arose under

practically the same circumstances, the decision being éx-

pressly on the authority of the Baltic Ming. Co. case.

In, the cases of: K. C,; Ft. Scott & M. R. BR. v. Botkin

(Kansas), 240 U. 8. 227; K: C. M. & B. R. R. v. Stiles, 242

U. S. 111, this Court sustained a statute levying an annual

excise measured by the entire stock of domestic corpora-

tions, as to which, as heretofore pointed out, a different

* rule exists. isha.

"A state which creates-a domestic corporation, giving it

the power. to be a corporation and to have a capital stock

. of a certain amount, may properly Ievy an excise measured *

by the entire amount of the stock of a domestic corpora-

tion. As to foreign corporations admitted in such a state,

the rule is different, and the cases relied on are clearly

- distinguished. ee

This. point ° was caine i in the case of Raborte: Schae-

fer Company v. Emmerson, 271 U. S. 50, in which the

Court, after. discussing the Air-Way Electric Appliance

Company case, said: _ |

‘‘We cannnot. say that a state may not impose a

franchise tax on a domestic corporation, measured by

its authorized capital stock” (citing the warned and

the Stiles cases) — oy. .

— oe

’ In the case of K. C. Ft. Scott & M. R. R. v. Botkin .

"ila 240 U. 8. 227, at 230, the difference was indi-

cated, the Court saying:

‘Examining the statute in the present case, we see.

- no reason to doubt the accuracy of the. -description of |

the tax by the state court. We take it to be simply a

_ tax on the privilege of being a cofporation—on the

. -* primary corporate franchise granted by the. state.

The authority of the state to tax this privilege or

franchise has always been recognized, and it Is well

settled that a tax of this sort is not necessarily ren-

_. dered invalid because it is measured by capital stock’

_ which, in part, may represent. property not subject to

the. state’s taxing — (Op. 232).

The question was next considered in the case of Looney

v. Crane Co., 245 U. 8. 178. A statute of the State of

Texas required foreign corporations to pay permit and

franchise taxes, graduated according to their authorized‘

capital stock. This statute was held to violate the com-"

merce and the due-process clauses of the Constitution of

the United States. The cases of Baltic Min. Co.,. Botkin

and Stiles, just referred to, were urged as duthority on

which the Texas statute should be sustained. In referring

to the Western Union cases, the Court said. that their

: ‘‘dominancy”? (Op. 188) was plainly shown. Referring to ;

' the decisions there and here relied upon by the ae :

states, the Court said: |

_

‘ , . .

. . ch . - ‘ : , ; .

—_— Rage © aprenden ae seaaleyy ong Hyer he LORRIREIE ON POE RE Say) Do . eC ee Ce en

— c om = - ‘ ,

—

“Tt follows, therefore, that the eases which the argu-

ment relies upon do not in any manner qualify the

general aan expounded in the previous cases |

‘upon whic have rested our conclusion, since the

later cases rested upon particular provisions in each

__ particular case, which, it was held, caused the general

and. recognized. rule not to. be applicable’’ (Op. 190).

After the decision of the Baltic Min. Co. case, the Mas-

sachusetts Legislature removed the maximum limit of

franchige taxes. Otherwise the statute remained the same,

and in International Paper Co. v. Mass., 245 U. S..135, this

statute, ‘with the maximum limit removed, was held to |

violate the commerce and the due-process clauses.

- The cases of Ozark Pipe Line v. Monier, 266 U. 8. 515, .

. Alpha Portland Cement Co. v. Mass., 268.U. S. 203, in-

volved annual franchise taxes. sought to be imposed on

foreign corporations which had been admitted into the

taxing state, had property therein, but did only an inter-

state business. It was held that any franchise tax imposed

on such corporations, necessarily fell upon all capital stock

of such corporations: and burdened the interstate com-

merce in which they were engaged. It was urged that the

Baltic, case was authority for the proposi: ion that a tax

‘ which fell on interstate commerce would not be held in-

valid unless it was of a substantial amount. In regard to

this, the Court said:

“The amount demanded is unimportant when there

is no legitimtate basis for the tax. So far as the-lan-

. —

a 27 om

guage of Baltic Min. Co. v.. Massachusetts, 231 U. g.

68, 87, 58 L. ed. 127, 134, 34 Sup. Ct. Rep. 15, tends to

support a different view, it conflicts with conclusion

reached in later opinions, and i 1s now definitely disap-

proved.”’

Alpha Portland Cement Co. i 268 U. 8. |

% . 203, op. 218. | *

In these cases, the corporations retained and maintained

their right to do business (just as appellee did in Iinois)

in the state—which granted the privilege of doing a local

business. If a franchise tax cannot be imposed where the |

foreign corporation, after admittance; does no local’ busi-

ness, it necessarily follows, that if such a corporation does

a small amount of local business, a franchise tax, out

of proportion to swch business, and not in a fair manner,

measured by a. cannot be exacted, without burdening

commerce and property beyond the state.

The case of Air-Way Electric Appliance Co. v. Day, 266 -

U. S. 71, involved: franchise tax based on the portion of

_ the authorized stock of a foreign corporation (only a part

of which was issued), }epresented by property owned and

business done in the taxing state. -_It was held that the

tax in so far.as it was based on the authorized but unis-

sued stock, of necessity, fell on issued stock which ‘Tepre-

sented commerce -between the states carried on by the cor-

poration.

. “As some of the outstanding shares are represented

by plaintiff’s interstate business the application of the

*,

:

. a peepemeunes

siataiiatiamehdarks | ta 7 oa citeale are an haiees aie aetna ieee anieeeiaeal eens

) 2 | : "Leg

rate to all the shares,.or to a number greater than ‘the.

total outstanding, necessarily amounts to a tax and —

direct burden upon all the property and business, in-

cluding the interstate commerce, of the plaintiff, (In-

ternational Paper Co. v. Massachusetts, supra, 142).

We hold that the act violates the _— clause.”’’

oe : Air-Way Electric Appliance Vince. v. ‘Day, Op. 226

: U. 8. 71.

¢

The actual effect of Sections 105-107 of the Illinois

. statute is the same as the actual effect of the Ohio statute.

The body of section 105 fixes a tax on the basis of prop-

erty owned and business done in Illinois. The proviso of -

section 105 singles out a class of corporations (including

appellee) and after making allowance for the franchise’ -

tax as capital measured by the property and business in

Hlinois, it places an additional burden and tax on them—

the scale of minimums provided by section 107. This addi-.

tional burden and tax must, in part, fall on and directly

burden appellee’s commerce between’ the states.

If the State of Illinois 2ad levied a tax based on the

| authorized stock. of appellee (a part of which is unissued), ~

| it’ would be void. If the tax was based on any part (but _

not all) of the ‘authorized but unissued stock, we do not

believe the Court would have any hesitancy in declaring °

it to be void. Here, the tax is based, first, upon appellee’s

issued stock represented in Illinois, and then an additional :

amount is arbitrarily added thereto. There ‘is no differ- |

ence, in substance, between the’decided cases and. _

\ ‘

ae — 29 —

The Court last considered this. question in the case of

Cudahy Packing Co. v. Hinkle, 278 U.S. ‘460. A statute’

of the State of Washington, requiring local and foreign |

corporations to pay an annual tax, graduated and scaled

according to their authorized capital stocks, was héld void .

as being: in violation of the commerce and due- “process »

clauses. a, .

- Appellant dlatingaishse the — case on the grounds

that the tax was measured by authorized; rather than is-—

sued, stock. This particular difference would seem to be

pertinent only in connection with questions: involving: the

equal-protection clause, which,’ in that case, the Court

found unnecessary to consider. ‘In deciding the questions

involving ‘the commerce and due-process clauses, if the

Court had in ‘mind that the basing of the tax on author-

‘ized, rather than issued, stock was of any consequence, no

mention was made of such fact.

-It might be observed that the Illinois act has no maxi- :

mum limit, and the minimum of taxes charged against

appellee for: the year in question is $1,000. The paid-in

capital stock of the Cudahy Company: was $29,800,000—the |

paid-in capital stock of appellee company is $36,249,750. |

Under the Illinois statute, if applied to the Cudahy Com-

' pany, under, the facts of that case, it would have been re-

quired to pay $1,000 minimum franchise tax the same as

appellee company. Under the Washington statute it was

required to pay only $580. The value of the Cudahy

Company’s property in the State of | Washington was

.

4 : ' — . — none Nae RRO ERS . .

iter teense Has cov. Sa Nee Metis meng aan simeniaie

| —

. $40,000—the value of the appellee corporation’s property

in Illinois is $801,196. The Cudahy Company could not

remove its property from Washington without intarfer-

ing with the conduct . of its interstate business, and .

neither can the appellee remove its property from Illinois.

without like interference. Both must submit to a confisca-

tion of that property by the abandonment of their right to

-do business as interstate agencies in the respective states.

The amount of the confiscation in the Cudahy case is about

: one-twentieth of the amount in the appellee corporation

case. The gross receipts of the Cudahy. Corporation in’

the State ‘of ‘Washington for the year in question was

$1, 313,275.’ The gross receipt in the appellee corporation

case in the State of Lilinois for the year in question is

$2,868.36, or less than one ‘six-hundredth of the amount

of the gross receipts of the Cudahy Corporation. If the

payment by the Cudahy Corporation of $580 as a fran-—

chise tax out of*the gross receipts of $1,313,275 and the ©

abandonment of $40,000 worth of property used in inter-

state commerce imposed a burden upon its interstate com-

merce, or a tax upon its property in other. states, then

a fortiori the payment by the appellee corporation of

$1, 000 out of the gross receipts of $2,868.36 and the aban-

es donment by it of $801,196 used by it in the conduct of its

interstate business constitutes a burden upon its interstate

commerce and must constitute a tax on its property in

other states. |

If we consider and compare the ® purposes of the Cudahy

ome Ol am

; ; Corporation and that of the appellee corporation, it is ob-

vious that the case at bar is a much stronger case from —

that point of view also. The Cudahy Corporation was en-:

_. gaged in selling ‘and marketing meat products. The ap-

pellee corporation is a railroad engaged in carrying traf-

fic, principally between the states. Appellee corporation —

- moust accept freight offered it because it is.a public car- .

‘rier; the Cudahy sienna could buy and 1 sell to whom

it chose. | |

[A railroad corporation g interstate commerce is much

more interwoven with its intrastate commerce than is that

of a mercantile company. " Cudahy: Corporation did six

one-thousandths of its total business in Washington. Th2

appellee corporation does about eight one-thousandths of

its business in Illinois.

We respectfully submit that the decision | im the Cudahy

case is controlling in the current case; that the scale of

minimums of Section 107 of the Illinois Act is entirely

similar in its form and. effect to that of the Washington

act and is much more. onerous from a monetary point of

view. | . |

In this comparison we have entirely disregarded the

other factor. in the Cudahy case, namely, the initial or

entrance fee. The appellee corporation has already paid

- this fee in Illinois and no question is’ here raised concern-

. ing it. The Cudahy. Company was relieved from the obli-.

gation of paying that fee because the statute imposing it

was drawn upon the same lines and upon the same basis

nee ° nati , °

~~there represented during the previous year. Past ex-

on the ded tee required. The State of Illinois, by the

scale of minimums of Sec. 107 has disregarded all the

“restrictions imposed upon it by the Federal Constitution..

and such scale is void for the same reasons as the statute

involved in the Western Union v. Kansas, the Looney v.

Crane, the International Paper Company, Air-Way Co. v.

Day and Cudahy Packing Co. v. Hinkle cases was un-

constitutional and void. raid

It is argued (presumably because appellee has a large

issued capital stock) that it may be assumed that appellee ‘

will bring more of its capital into the state than had been ~~

_-perience does not warrant such an assumption. Further-

more, appellee, being a public utility, cannot, under the

Transportation Act or the Illinois Commerce Act, extend

its lines in Hlinois, thereby bringing more of its property

- and business into the state, without first securing a certifi--

cate of convenience and necessity. Neither can it. discon-

tinue its railroad operations in Illinois without such a

certificate. Under the decided - cases in Illinois, even

though appellee applied for a certificate of convenience

‘and necessity, it would not be entitled to receive the

_ same as long.as any other, utility was rendering adequate .

service in the field it proposed to serve. (See cases cited

in brief.) Yet appellant urges the State of Illinois has

the right to assume that -appellee-will, in any ensuing

year, bring into the state enough of its property and busi-

ness to warrant a tax levied according to the scale of

minimums of sectien 107. = |

—33—

™s

™.

Appellant relies mainly on the case of General Railway

Signal Co. v. Virginia, ‘246 U. S. 500, which involved the

legality of an “admission” fee, rather than a franchise tax,

: “against which the only contention made was that it un-

reasonably burdened interstate commerce. The differ-_

ence has heretofore been’ pointed out. hat such differ- ,

ence exists is evidenced by the language of the Court in

the case of Hanover Ins. Co. v. Harding, 272 U. S. 494,

heretofore quoted, and in the case of New York v. La-

trobe, 279 U. S.421, wherein the Court said:

“The tax, denominated a ‘license fee, is paid but

ence, purports to be imposed on the corporation ‘for -

the privilege of exercising its corporate franchises

or carrying on its business in such corporate or or-

ganized capacity in this state,’ and the obligation to

pay it is made a prerequisite to obtaining a certificate

- of authority from the state and to the continuance of

business there (People ex rel. D. W. Griffith v. Lough-

man, 249 N. Y. 369, 164 N. E. 253). But the foreign -

| corporation is permitted to transact business and

. make valid contracts within the state prior to pay-

ment of the tax, which of necessity cannot be com-

puted or paid until after the’ first year has. elapsed.

The tax is evidently the complement of the organiza-

tion fee, computed in like fashion on the authorized

capital stock of domestic corporations by Chapter

143 of the Laws of 1886” (Op. 423).

The State of Virginia did not exact any annual fran- -

chise or license fees. The admission fee considered by the .

~ Court was due at the time the corporation was admitted '

to, or did business i in, the state.

;

t ° _ nt riews Sy erietgantecymenenal

Rie... ts se asranna clean ’ SRE TI

( , —— 84 —

a In its opinion the Court stated that the case was. “on

'. the border line” (Op. 511).

sca: IHL.

a”

The tax iin Savetved is, as to appellee, void, inasmuch .

as the tax and the statute, pursuant to which it is laid,

discriminates against appellee and in favor of other cor-

‘porations, both foreign and domestic, in violation of the

Equal Protection Clauge. es

Sections 105-107 of the General Cimpenation Act of Tlli-

nois, on the face as well as in the present application :

thereof, act to deprive appellee of the equal protection of

the laws. Appellee is discriminated against, as compared

to other corporations, both foreign and domestic, who pay .

franchise taxes on the basis of 5 cents of each $100.00 on

that portion of their capital stock represented by property -

and business in Illinois. ; _

In the consideration of this question we urge that the _

. Court keep in mind that, so far as the State of Illinois is

concerned, appellee has never asked that more than

$1,533,324.23 of its issued capital stock’ be admitted. It

has never asked the State of Illinois for authority to

bring more than ‘that amount of its assets and business

represented by that amount of its issued capital into the

state. So far as the State of Illinois is concerned, it is

quasi Illinois corporation, with an issued capital of that -

amount, of which $270,420.00 was represented by property 7

and business in the state during the period which is the.

:

;

,

<a

basis for the tax sii involved. ‘The State of Minois did

- not. authorize appellee to have an issued capital stock in

the amount of $36,294 ,50.00. We can conceive of no basis

| reasonably connecting appellee’ s stock, which has ‘Never

been admitted to Illinois or used in Illinois, with a fran-

chise tax imposed by the State of Illinois. There is no

more connection between such stock and the taxable value

_.of appellee ’s franchise to do business in Illinois than there

is between appellee’s authorized stock and the taxable

> value of its franchise to do business in Illinois. The'same

| reasoning which compelled the Court to hold that the: Ohio

franchise tax measured in part by the authorized but un-

issued capital stock of the Air-Way Electric Appliance |

Company’ to be void, necessitates a similar holding in

this case, |

Appellant says that the amount of mend stock bears a

fair relation to value of the annual franchise to do busi-

ness. Assuming this to be so, nevertheless the ratio of

property owned and business annually done bears a more

true relation to the value of the franchise, and the state

_ discriminates against appellee by. taxing some corpora-

_ tions on one basis (the one having a real direct and more

true relation to the value of the: privilege) and taxing ap-

nellee a proportionately’ greater amount on a more re-

mote, arbitrary and less true basis.

On its face, therefore, the statute is discriminatory, a

first, because it bases the tax on a large part of appellee’s

stock which was not and had never been représented in

i

t° ,

— 36—

9

Illinois; and, secondly, because it fixed two ‘‘bases’’ for a

franchise tax, which, -when applied, assess taxes in dif-

ferent amounts, acting more favorably towards some cor-

- porations and less. favorably towards ‘others, including

appellee. |

We say, to justify this stetute, ap,ellee must be in re-

ceipt from the State of Illinois’ of some actual: and sub-

stantial privilege or advantage which other corporations,

foreign and domestic, paying less, or proportionately less,

do not receive. No such benefit can be — by ap-

pellant.

Appellee’ s right to -be a corporation with authority to

issue a certain amount of capital stock, to engage in a

certain business, and its invested powers, are all granted,

to it by Missouri, the state of its incorporation.

The sole right, which appellee seeks from or receixes

from the State of Illinois is to enter that state and do a

‘local business, = ,

In its application, as well as on its face, the Illinois

statute discriminates against appellee; $270,423.00 of ap-

pellee’s issued capital stock is represented by property

and business in Illinois. On this amount of issued capital

stock the ordinary corporation would’ be required to pay

. an annual franchise tax of $135.21.- A tax of $1, 000. 00 is

claimed by the State of Illinois. A corporation with an .

issued capital stock of $270,423.00, having all of its prop-

erty and business in Illinois, would pay only $135.21. A

corporation with a total issued. capital stock of $1,533,- .

°o

t .

SRNR RROD meer omer agence sm coy «Pape aces eye RG

ae

324.23 (the largest amount of appellee’s issued capital,

, which, during any year, was represented in Illinois), and

. with $270,423.00 of : that capital represented in Illinois,

' * would pay but $135.21. A corporation, either foreign or

domestic, must have had’ $2,000,000.00 of its issued stock

represented in Dlinois before its tax’ would be $1,000.00,

"under section 105, Such corporations having ‘ similar

amounts of their capital in Illinois—exercising the same

taxable privileges as appellée—would pay only one-seventh

of the tax which is demanded of appellee.

In the Air-Way Electric case this Court said:

“The fee determined by the lower court, as well as

that fixed by the state officers, is arbitrary. With-

out holding that such a charge must be measured by

the value of the privilege for which it is imposed, it.

may be said that some relation to.such value is a rea-

sonable requirement’? (Op., p. 83). :

Air-Way Electric Appliance Co.. v. Day, 266 U.

8. 71. |

The tax is ‘‘not limited to the part of the capital. stock

justly apportioned to the taxing state.”’ 7

International Shoe Co. v. Shartel, 279 U. S. r

As applied to appelle “nd weighted by such a test,’

‘ sections 105-107 of the l «.. 4 statute require appellee to

pay a franchise tax which has no fair and reasonable rela-

tion to the value of the privilege granted, and the tax is

PCED OS One aN

—

its principal office or place of business without this state,

and the location of the proposed principal office or place

of business in this state;

(b) The names of the states in which it has equities

to do business under the corporation laws thereof;

(¢). The character of business which it intends to carry

on in this state;

(d) An itemized estimate of the amount of tangible

property to be employed by it in the state during the first

year next after the date on which it shall be licensed and

begin to do business in this state; |

(e) An estimate of the total amount of the capital to be

employed by it in this state and an estimate of the total

amount of capital to be employed by it elsewhere one

such year, itemized as follows:

(1) The value of patent rights, licenses,

franchises, trade-marks, secret proc-

esses, copyrights and good will..... ain-eKikees

(2) Contracts or choses in action........ eae aewad

(3)eMerchandise, raw materials and goods

in process of manufacture...........$.........

(4) Book accounts and notes............. ©. oe seation

(5) Machinery and real estate............$.0.....--

? (6) Stock in other pao and se-

SE conde cen daediiie citi sek eer essces

(7) Furniture, fixtures, stationery and like

articles 0.2.0... . cece cece c ene cecoeee Dowco cceve

OO Ta Bh Ie ooo nce s core once csneo Mno ct es ome

(9) Kinds and amount of other personality ©

(personalty) Pe hebweubiedeie :

-

wait aoe

gp.

2. :

(f) An estimate of the annual business to be transacted

by the corporaticn everywhere;

(g) An estimate of fhe annual business to be transacted °

at or from places of business in Illinois;

(h) The name and address of some person onceiinesitiie

residing in this state, upon whom, as the resident agent of

the corporation until his successor shall have been ap-

pointed, service of legal process may be had, and the

names and addresses of the .officers and directors;

(i) Such other information touching the property and

business of the sie ene as 3s the Secretary of State ie

‘requi re;

In the case of telegraph, telephone, bie sadinenid or

pipe line corporations, in addition to the itemized estimate

- of the total amount of capital to be ‘employed in this state,

there shall be given the total lengthof such telephone, |

telegraph, cable, railroad or pipe line, and the length of

the line located in this state and the total value of such

line-and the value of — line in this state.

See. 92. Saturation of Certificate of Authority to Do

Business—Grounds.—The certificate of authority of-a for-.

eign corporation, subject to the provisions of this act, may

be revoked by the Secretary of State:

(1) Upon failure of an officer, director or manager, to

whom interrogatories are propounded, to answer the same -

- fully and to file such answer in the office of the Secretary

of State within thirty days after the mailing of the same;

(2) If such corporation is transacting no business in

Illinois and-has no tangible property in this state;

(3) If the answer to interrogatories propounded -by the

—

‘Secretary of State discloses, or if the fact is otherwise

ascertained, that the proportion of the capital stock of

such corporation represented in this state is greater than

the amount theretofore paid upon by such corporation and

the deficiency in such fees is not paid within thirty days “

of the receipt, of a notice sent by mail to the president and

secretary; or to the statutory agent of such corporation of .

record in this state, or’to the attorney filing the interroga- |.

tories for such corporation, or is not paid within such ex-

' tension’ of time as may be granted by the Secretary of

‘State; : . .

(4) Upon failure of: such corporation to keep on file in ——-4

the office of the Secretary of State duly authenticated

copies of each instrument amending its charter;

(5). Upon failure of such foréign corporation to appoint

and maintain an agent in ihis state upon whom service of

legal process may be had; ;

(6) Upon failure, neglect or refusal to file an. annual

report as required by this act, or upon failure, neglect or

refusal to pay the franchise tax assessed against it on or

’ before the thirty-first day of July of the year in which such

franchise tax becomes due and payable;

(7. Upon failure, neglect or refusal to file a certificate

of issuance-of stock and the payment of the fees required

Z by this act.

As emnntted by L. 1997, p. 354, approved and in

force May 12, 1927.

Sec. 94, Unlicensed Foreign Corporation Doing Business

in State—Actions and Suits by—Penalties—Recovery.—No

foreign corporation doing business in this state without 4 -

Pd > os co ce

SSA Nee ERED aks ea RENE recor f ae Tee oe bes, , e RR,

—

license shall be permitted to maintain-any suit at law or

in equity in any of the courts of this state upon any de-

mand, whether arising out of contract or tort; and all such

corporations shall be liable by reason theron to a penalty

therefor of not less than two hundred and fifty dollars nor

more than one thousand dollars, to’ be recovered in any

court of competent jurisdiction, in a civil action to be be-

, gun and prosecuted by the Attorney-General.

Sec. 96. Incorporation Fee—Increase of Capital—No. o-par-

value Stock, Basis of Fee—Public Utility Corporations.—

The Secretary of State shall. charge and collect an ‘initial

fee of one-twentieth of one percentum upon the amount

of the capital stock which the corporation, has issued or -

_ it proposes to issue at once, but in no case shall such fee

be less than twenty dollars, and a like fee of one-twentieth

-of one percentum upon filing a certificate of any’ subse-

quent issue or increase of capital stock and, in addition

thereto, the same fee as that required for filing other cer-

tificates of amendment. . In the ¢vent that the corporation .

_ has capital stock of no-par value, its shares, for the pur-

‘pose of fixing the fee, shall be taken and considered at the

amount of the consideration received or to be received

by such corporation for such shares. Each public utility

corporation, including. railroads, shall pay to the Secre-

_. tary of State the,same fees as are required to be paid for

incorporation by other corporations organized for pe-

cuniary profit.

_ As amended by L. 1997, -p. 354, approved and in

force May 12, 1927.

Sec. 101. Foreign Corporations—Fees for Certificate of .

Authority—On Increase of Stock—On Extensions, Consoli- |

dations, — Amendu.2 onts—Basis of Fees—Where

ate

Capital Stock Without Par Value—Each foreign corpora-

tion for pecuniary profit, other than an insurance company

or building and loan cdmpany, in addition to the annual

franchise fees and taxes hereinafter provided, shall pay to,

the Secretary of State for its certificate of authority to do

business ‘in Illinois, the’ same fees provided by this act to

be paid by_a similar corporation incorporated under the

laws of this state. Each foreign corporationy heretofore

- or hereafter admitted to do business in this state, shall

also pay for increases in the amount of capital stock fep-

resented in Illinois, for extensions of existence, consolida-

tions, mergers and for filing amendments the same fees

- required to be-paid by corporations organized under the

laws of this state. All such fees shall be based upon the

proportion, of its issued capital stock represented by busi-

- ness transacted and property located in Illinois. When-

ever it shall appear that the amount of capital stock rep-

resented in‘ Illinois is greater than the amount theretofore

paid upon by any foreign corporation, such corporation,

before it shall continue to transact business in Illinois,

shall pay to the Secretary of State upon such excess the

same fees that a domestic corporation must pay upon an

- increase in capital stock equal to the amount of such ex-

’

i oe

, oo

If a foreign corporation has a capital stock of no-par-

value, its shares, for the purpose of estimating the amount

of fees and taxes to be paid. hereunder, shall be taken

and considered at the amount of the consideration re- -

ceived or to be received by such — for such

shares.

As amended by L. 1927, p. 354, —_— and .in

. force May 12, 1927.

45-0 aes

Sec. 102. Annual Reporte—What Gupte Re-

quired to Make—-Time for Making—Contents—Vcrification

—Publication \of List of Reporting’ Corporations—Copy

to Recorder of Deeds.-—Each corporation, including rail-

roads, domestic and foreign, other than homestead associa-

tions, building and loan association[s], banks, religious

corporations, insurance companies, and corporations not

for pecuniary profit, shall make a report in writing to the

Secretary of State between the first day of February and

the first day of March of each year on forms té be pre-

scribed and furnished by the Secretary of State. That

part of the annual report relating to property and busi-

_ ness shall be made as for the calendar year ending De-

cemiber thirty-first preceding (except in case the corpora-

tion keeps its accounts on the basis of a fiscal year not

identically with the calendar year it shall make report for -

the fiscal year next preceding February first of the year

in which such report is made. ‘The other information re-

quired in such report shall be given as of the date of exe-

cution of such report. In case the corporation has not been

in existence a year it shall furnish the Secretary of State

the information required for the period since it was incor-

porated or admitted. Such report shall give the address _

of the corporation, officers and directors in this state by

‘street and number. Such annual report shall also disclose

such facts as are necessary to enable the Secretary of

State to ascertain the proportion of its capital stock repre-

sented by business transacted and tangible ‘property lo-

. cated in this state, and suchyother information as may be

necessary or appropriate in order to assess the annual

license fee or franchise tax. Such report shall be verified

by the oath of the president, vice-president, secretary, as-

sistant secretary: or treasurer of the corporation, but in

om

case the corporation is in the hands of an assignee, receiver

or trustee, then such report shall be signed and verified by :

such assignee, receiver or trustee.

The Secretary of State shall, on or before the 15th day

of January of each year, forward to each corporation of

record in his office a copy of the forms to be used in mak-

ing the report specified in this act, ‘but the failure.to send

_or to receive such forms shall not relieve the corporation

from the duty of making such report.

The Secretary of State shall publish on or before Sep-

- tember first of each year a list of corporations filing an

annual report in accordance with the provisions of this

act, with the names and addresses of the president and.

secretary of domestic corporations or the agent for service

of legal process of fo oreign corporations, and shall furnish

a copy thereof to each Recorder of — |

See. 105. Annual License Fee or Franchise Tax—Amount |

—Minimum—No-Par-Value Stock.—Each corporation for

profit, including railroads, except insurance companies,

heretofore or hereafter organized under the laws of this

state or admitted to do business in this state, and required.

by the act to make an annual report, shall pay an annual ~

license fee or franchise: tax to the Secretary of State of

five cents on eaeh one hundred dollars of the proportion

of its issued capital stock, or amount to be issu@th at once,

represented by business transacted and property located

in this state, but in no eyent shall -the amount of such

‘license fee or franchise tax be less than that required by

this act of corporations having n no property or business in

this state.

In the event that the corporation has stock of no-par

value, its shares, for the purpose of fixing = om shall

4 om hT me

be taken and considered at the’ amount of the considera-

tion received or to be received by such corporation for such

shares.

As amended, L. 1927, p. 354, approved and in force

May 12, 1927.

The 1927 ‘amendment — an emergency clause, as

follows:

Sec. 2. Whereas, the Supreme Court of this state

has‘held that certain sections of the General Corpora-

tion Act, which based the fees on the authorized capi-

tal stock, are unconstitutional as to foreign corpora-

tions;

Whereas, under the decision of the Supreme Court

the Secretary of State will not be able to collect the

fees from corporations to which the state is entitled

and, further, that all of the annual franchise. tax -

provisions of said- act are in danger of being invali-

dated unless said sections are amended, and,

_ Whereas, the Secretary of State is, under the pro-

visions of section 112 of the aforesaid act, obliged to

mail notice between the first day of February and

the fifteenth day of May, in writing, to. each corpora-

tion against which a franchise tax or fee is assessed,

notifying such corporation of the amount of franchise

tax or fee assessed against it for the year next ensu-

ing, commencing ‘on July first, and,

Whereas, unless this act becomes effective on or

before May fifteenth the state will lose the fees from

corporations to which the state is justly entitled;

Therefore, an emergency exists and this act shall

—_

take effect and be in full force from and after its

' passage.

L. 1927, pp. 359-60.

Sec. 106. Ascertainment of License Fee or Franchise

Tax in Case of Corporations Generally.—In ascertaining

the amount of the issued capital stock represented by busi-

ness transacted and property located in this state, the sum

of the business of any foreign or domestic oration

_ transacted in this state and the total property of such

corporation located within this state shall be divided by

the sum of the total business of the corporation and the

total property of the corporation wherever situated.

As amended by L. 1927, p. 354, “4ipproved and in

force May 12, 1927.

See. 107. ——Basis in Case of Corporation Without

Property in State and Doing No Business in State—Where _

Stock of No-par Value.—In case it appears from the an- -

‘nual report that. the corporation has no property located

in this state, and is transacting no business in this state,

the following fees shall be paid annually to the Secretary

of State as an annual franchise tax: All such corpora-

tions having issued .capital stock of $50,000 or less shall

pay an annual fee of $10; corporations having issued capi-

‘tal stock of more than $50,000, but not exceeding $200,000,

shall pay an annual fee of $15; corporations having issued

capital stock of. more than $200,000, but not exceeding

$500,000, shall pay an annual fee of $20; corporations

having issued capital, stock of more than $500,000, but not

exceeding $1,000,000, shall pay a fee of $50; corporations

having: issued capital stock of more than $1,000,000, but

not exceeding $10,000,000, shall pay a fee of $200; cor- _—

. e . :

a e c

. - “

, .

, aS

LET ON IL IO, BIEL NINETY NSLS TOL ELE GAMING EINE ty NARA eT ob SAAN Ry Mtl Meg —

*? > . ” " “ »

ad ° a .

:

“ % :

— na Poem ag mtacmaranmrer nace MFR 69 Re RN aR

. 4 *.

.

—

porations having issued capital stock of more than .

$10,000,000, but not exceeding $20,000,000, shall pay a fee |

of $500; and all corporations haying issued capital stock:

in excess of $20,000,000 shall pay an.annual fee of $1,000.

In the event that. the: corporation has stock of no-par

_ value, its shares, for the purpose of fixing such fee, shall

be taken and. considered at the amount of the considera-

tion received or to be received by such corporation for: .

such shares..

. As amended m L. 1927, p. 354, approved and in

force May 12; 1927. © oa *

Sec. 108. When Franchis® Tax Payable—The franchise

tax herein. provided to be paid shall be. due and payable

on the first day of July of each year and shall be the

franchise tax for the year commencing: on the first day of

July in which it is due and ending on the thirtieth day of

June next thereafter.

Sec. 109. Assessment of Tax From Annual Report—Cor-

porations Organized Between January 15 and March- 1.—

The Secretary of State shall, from the annual report filed,

assess a tax at the rates herein prescribed against each

- corporation required herein to maké an annual Teport.

The Secretary of State shall, from the best available in- ~

- formation, also assess such tax on all corporations organ- <

ized or ‘admitted between the fifteenth day of January ang

the first day of March.

Sec. 112, Notice of Amount of Franchise Tax—Contents

—Failure to Receive.—Between the first day of February

and the fifteenth day of June, of each year, the Secretary

of State shall mail a notice in writing to each corpora-

¢ ; c

|. acs 4% Dice

not limited to that part of appellee’ 8 — justly ial

-. tioned to Illinois, eer

_ For-the foregoing reasons appellee respectfully insists

that ‘the decree of the Statutory District Court for the |

Southern District ‘of Illinois shuld be affirmed.

« F . ‘.

Respectfully submitted,

a

J. RB. TURNEY,

JOSIAH WHITNEL,

Attorneys for Appellee.

CARTER, JONES & TURNEY,

HL L. BROWNING, ,

nse Of Counsel. -

- —39—

APPENDIX.

- All referénces are to -

Chapter 32, Cahill’s Revised»: Statates: 1997;

Chapter 32, Smith-Hurd Revised Statutes 1927.

Section numbers are identical in both volumes,

a

Bee. 80. “Certificate of: Authority to Do Businegs—Re-

quirement as to payment of Capital Stock.—Each foreign

corporation organized for pecuniary: profit (except bank-.

_ ing, insurance, building- -and loan and surety companies),

not now licensed to do business in this state, shall, before

it transacts any business or maintains an office in this state, .

procure a certificate of authority therefor from.the Secre-

tary of State. No certificate shall issue to, any foreign cot-

‘poration authorizing itto transact business in this state-

until the same amount is paid on each share of stock issued

or to be issued as is required of like eaperenee organ-

ized under the laws of this state.

As amended by L. 1927, p. a approved and in °

force May 12, i927.

: a 81. Filing Applicatior With Sieceetary of State—

Contents pool foreign corporation desiring a certificate of :

authority hereunder shall file i in the nen of the Secretary

-of State:

(1) A copy of its dente daly authenticated by ‘the

proper officer of the state or country where it 3 is incor-. |

porated; t+

(2) A statement verified by its president and secretary

or other officer setting forth:

» (a) The name of such corporation and the location of

ws 3

Bee. ee . ozs

ee

respect to executions issued against property upon judg-

ments of courts of record, ang shall be entitled to the same

. fees for the execution of the warrant, to be collected in the

same manner. After proceeding in the manner preseribed, .

the Sheriff shall make the proper and necessary notations,

_ of the amounts collected, upon the warrant and promptly

return it to the Seéretary of State within ninety days from —

the date of issuance thereof, with the amount of franchise

tax and penalties collected by him, if any. ©

See. 126. Corporations Delinquent in Payment of Tax or

Failing to File Report—Certifying to Attorney-General—

Duty of. Attorney- General—Certificate . as Evidence—Pay-

ment of Fees or Filing. of Report Before Institution of

Suit.—On or before the fifteenth day of November of each

year the Secretary of State-shall certify to the Attorney-

- General the names of all corporations that have neglected

to pay the franchise taxes or have neglected to file the -

-.. annual report in accordance with the provisions of this act,

together with all facts in relation thereto, and it is hereby .

made the duty of the Attorney-General at the earliest prac-

ticable moment, in the name of the People of the State of

- Tilinois, to institute proceedings for the dissolution of such

corporation for failure to pay such fees, or for tlie aban-

donment and nonuser of charter. The certificate from the

Secretary of State to the Attorney-General shall he taken

and received in all courts and places as prima facie evi-

dence of the faets therein stated. At any time prior to

the: institution of suit and upon filing an affidavit that the

corporation has been continuously in active business and.

- filing of a report-in the form of an-annual report required -

by. this act, and upon the payment of all fees, taxes and

penalties due, the Secretary of State shall certify to the

2

; . — §3—

Attorney-General of the filing of the report and the pay-

ment of. the fees, oars ‘and penalties due.

Sec. 128. Payment: of Franchise Tax and Foes as Con--

dition to Doing Business or Maintaining Suits.—No.cor-

poration required to pay a franchise tax or fee under the

laws of thig state shall transact any business in this state

or maintain any action at law or suit in equity unless such

corporation shall have paid such franchise. tax, or such

fees and penalties when the same become due and payable

. until. such. franchise taxes, fees and penalties have been —

paid in full. ~

— 129. Annual .Franchise. Taxes.—In addition to all

other. fees required by law to be paid, the Secretary. of

State shall collect in advance from corporations subject. to

a franchise tax, annual franchise taxes as follows:

(1) If a corporation.is organized, or admitted to do busi-

ness in this state, or its capital. stock. issued or. increased;

(a) Between July first of any year (after the year 1919) —

and September thirtieth ofthe same year a franehise tax

equal. to the full! amount: of the annual franchise tax; .

(b). Between Oétober first of any year (after the year

_ 1919) and December thirty-first of the same year a fran-

chise tax equal to three-fourths of the annual franchise.

i. ie

(c) a January first of any year and the last se

of February of the same year, a franchise tax equal, to

one-half of the annual franchise tax; .

(d) Between March first of any year and June thirtieth

‘of the same year, a franchise tax equal to one and one-third

of the annual franchise tax.

a” ae

The franchise tax required by paragraphs ‘‘a,’’ ‘‘b’’

and ‘‘c’’ shall be for authority of the corporation to carry _

on its corporate business until the thirtieth day of June

| following the date of payment of such tax. The franchise .

tax required by paragraph ‘‘d’’ of existing corporations

.. inereasing their capital stock shall be for authority of the ©

corporation to employ its increased capifalization in this

state until the thirtieth day of the second June following,

but such corporation shall still be liable to pay its annual

franchise tax upon its old capital: stock in July following

in the same manner as required of other corporations not .

increasing their capital stock. The fees required in this

section shall be based upon the percentum of- issued capital

stock as evidenced by latest annual report required to be -

filed under the provisions of this act, if any.

The word ‘‘between,’’ as used in. this section, shall in- -

clude both dates specified.

As amended by L. 1927, p. 354, a and in ~-

force May 12, 1927. | |

Sec. 130. ——In Addition to Other Licenses or Taxes,

—The annual franchise taxes imposed by this act shall be

in addition to any specific licenses or taxes imposed by law

upon such corporation for the privilege of carrying on its

business, or upon its franchise or property.

.

. +

.

. .

.

-

.

° . e .

>

.

- .

.

‘

.

e ‘

-

.

e .

Neo

’ : s Py

.

. “

- .

° .

’

‘

.

.

° . ‘

. ” wae ae « . °