A statute of a state, requiring a telegraph company to pay a tax
upon its property within the state valued at such a proportion of
the whole value of its capital stock as the length of its lines
within the state bears to the length of all its lines everywhere,
deducting a sum equal to the value of its real estate and machinery
subject to local taxation within the state, is constitutional and
valid notwithstanding that nothing is in terms directed to be
deducted from the valuation either for the value of its franchises
from the United States or for the value of its real estate and
machinery situated and taxed in other states, unless there is
something more showing that the system of taxation adopted is
oppressive and unconstitutional.
The Statute of Indiana of March 6, 1893, c. 171, which directs
the state board of tax commissioners to take as the basis of
valuation of the property within the every telegraph company,
incorporated in Indiana or in any other state the proportion of the
value of its whole capital stock which the length of its lines
within the state bears to the whole length of all its lines, yet,
as construed by the supreme court of the state, makes it the duty
of the tax commissioners to make such
Page 163 U. S. 2
deductions on account of a greater proportional value of the
company's property outside the state, or for any other reason, as
to assess its property within the state at its true cash value,
and, so construed, is constitutional.
This was a bill in equity, filed December 19, 1893, in the
Circuit Court of the County of Marion and State of Indiana by the
Western Union Telegraph Company against Thomas Taggart, the auditor
of that county, and Sterling R. Holt, its treasurer, and against
the auditors and treasurers of other counties of Indiana to
restrain them from apportioning and collecting a tax assessed upon
the plaintiff by the board of tax commissioners of he state under
the statute of Indiana of March 6, 1893, c. 171, the material parts
of which are copied in the margin.
* The principal
allegations of the bill were as follows:
Page 163 U. S. 3
That the plaintiff was, and for many years had been, a
corporation of the State of New York, and
"the owner of a large amount and number of telegraph poles,
lines, wires,
Page 163 U. S. 4
cables, fixtures, instruments, machinery, appliances, apparatus,
and real estate constituting a plant for the transmission and
conveyance of telegraph messages, which said telegraphic plant
extends into and through every state and territory of the United
States, the Dominion of Canada, and under
Page 163 U. S. 5
the Atlantic Ocean to England and to Cuba,"
and that the plaintiff, by reason of rights under contracts with
various persons and corporations in the United States and in other
parts of the world, and under letters patent from the United
States, and valuable franchises granted by the United States, and
by New York and other states of the Union (but not
Page 163 U. S. 6
by Indiana), and by many municipalities in those states, and by
the governments of England and of Cuba, was
"enabled to do a large and profitable business, by and by means
of said telegraphic plant, and not only an amount which would be
equivalent to rent upon said property, in case the same was owned
by another corporation and leased by complainant, but also to make
a profit for complainant in addition to said amount so applicable
as rent of such telegraphic plant."
That the
"portion of said telegraphic plant situated within said State of
Indiana is of the actual cash value of $686,126 -- the said cash
value being ascertained by taking the cost of original
construction, as nearly as the same can be ascertained, and
deducting therefrom a sum partially equal to the depreciation of
the plant -- and could be replaced by an entirely new plant of the
same extent and location, and of far more valuable and lasting
material, for the sum of $1,226,625."
That the pretended statute of March 6, 1893, was not a law of
the State of Indiana (for reasons not insisted on in this Court),
and that on July 11, 1893, the plaintiff, reserving its rights to
contest the validity of that statute, filed with the auditor of the
state a statement and return, as therein required (a copy of which
was annexed, and which included substantially the same objections
as were stated in the bill, and showed that the entire mileage of
the company was 189,576 miles, 6,436 of which were in the State of
Indiana); that it had no real estate, machinery, and appliances in
Indiana subject to local taxation. That the cost of its real estate
in other states was $5,013,326, and the amount of its outstanding
mortgage bonds was $1,211,000.
That the state board of tax commissioners, on August 21, 1893,
made its assessment and valuation of the plaintiff's property in
Indiana, deducting the real estate, structures, machinery, and
apparatus within the state and subject to local taxation at the sum
of $2,297,652, and at the rate of $357 per mile of telegraph
line,
"and, in fixing said valuation upon complainant's said property
in Indiana, acted under and by virtue of the assumed authority of
said pretended statute, approved March 6, 1893, and placed upon
complainant's said
Page 163 U. S. 7
property additional values, beyond the true cash value of
complainant's said property as measured by the cost of replacement
of the same, making reasonable allowances for deterioration by
adding values of complainant's business, property, and goodwill,
both in and outside of Indiana, and franchises granted by the State
of New York, the United States, and foreign countries, and in
witness thereof caused to be entered upon the official record of
said board, required by law to be kept by said board, on said
August 21, 1893, the following statement and certificate:"
" In accordance with the requirements of the act of the General
Assembly of the State of Indiana approved March 6, 1893, the state
board of tax commissioners, after full consideration, does hereby
assess and value telegraph, telephone, palace car, sleeping car,
drawing room car, dining car, express and fast-freight joint-stock
associations, companies, co-partnerships, and corporations
transacting business in the State of Indiana, which assessment and
valuation is as follows, to-wit: Assessment and valuation of
telegraph and telephone companies in the State of Indiana by the
state board of tax commissioners for the year 1893, exclusive of
real estate, structures, machinery, fixtures, and appliances
subject to local taxation within the state."
The first line under that heading was: "Western Union Telegraph
Company. Miles, 6,436. Per mile, $357. Total, $2,297,652."
"That the state board of tax commissioners, during its said
session in the year 1893, did not attempt to specify or describe
the property of complainant falling within the description of real
estate structures, machinery, and appliances subject to local
taxation."
"That, in making said assessment, said state board of tax
commissioners assumed to take as the basis thereof the value of the
entire capital stock of complainant at a valuation per share based
upon the price of the shares of complainant's capital stock dealt
in in the stock exchange market of New York City, dividing such
aggregate value by the total number of miles of telegraph line of
complainant, wherever situated, and both in and outside of Indiana,
and thereby obtaining a pretended valuation per mile of the
telegraph line of complainant,
Page 163 U. S. 8
amounting to the said sum of $357 per mile, which said pretended
valuation per mile said board, acting under the authority of said
pretended statute, imputed to and imposed upon each mile of the
whole number of complainant's telegraph line in Indiana, thereby
imputing to and imposing upon the whole telegraph line of
complainant in Indiana, which is of the length of 6,436 miles, said
pretended valuation of $2,297,652, which said pretended valuation
is grossly excessive and far beyond the true cash value of
complainant's said property in Indiana."
"That said state board of tax commissioners, in reaching said
valuation of complainant's said property in Indiana, did not
consider and assess the value of the property of complainant
situated in Indiana otherwise than by pursuing the requirements of
said pretended statute."
"That neither on April 1, 1893, nor at any time prior or
subsequent thereto was there any market value for all the shares of
the capital stock of complainant. That the whole number of shares
was 948,200, of the par value of $100 each. That the number of
shares sold or speculated in on April 1, 1893, on the New York
stock exchange, was 1,168 shares at the average price of $94.50,
and only a part of those was actually delivered, and that the price
so obtained did not fairly represent the actual value of the
plaintiff's property."
"That any price at which any or all shares of complainant might
be sold, by any holder or holders thereof, whether such price be
calculated upon any market value or upon actual value includes,
amongst other things, a consideration of franchises of great value
owned or exercised by complainant, granted by the State of New
York, by the United States, by Canada, by Great Britain, by Cuba,
and by other states, countries, and municipalities; a consideration
of complainant's goodwill, its past earnings from every source, its
probable future earnings from every source, the business ability,
enterprise, and skill of the present managers of complainant's
business, the probable continuance of business ability, enterprise,
and skill in the future management of complainant's business, the
contract and other relations of complainant to powerful
Page 163 U. S. 9
railroad, telephone, and cable companies; a consideration of the
real estate of complainant situated in the City of New York, which
is of great value, to-wit, of the value of $3,500,000, and in the
City of Chicago, which is of great value, to-wit, of the value of
$1,700,000, and of the real estate of complainant, of great value,
situated in many other states and countries, none of which is
situated in the State of Indiana, as well as the consideration of
the actual value of all complainant's telegraph lines, poles,
wires, cables, conduits, instruments, appliances, and office
furniture, including that which is situated in Indiana and taxable
by the State of Indiana."
"That, in estimating such market or actual value of the shares
of the stock of complainant, the values of said intangible
franchises, rights, contracts, earnings, business, business
ability, enterprise, skill, and management and goodwill, and of all
said real and personal estate of complainant, are blended so as to
render it impossible to separate and distinguish the portions of
value applicable to any or each of said elements of value of said
shares."
That the plaintiff was the owner of many thousand miles of
telegraph in the States of Massachusetts, New York, Pennsylvania
and New Jersey, and in other densely populated portions of the
United States, of the cost and value of $2,500 per mile, on the
average, and requiring great expenditures for the maintenance
thereof; of many thousand miles of cable under the high seas, of
the cost and value of $3,500 per mile, on the average, and of many
thousands of miles of lines of telegraph in uninhabited, or
sparsely inhabited portions of the United States and Mexico which,
by reason of the great cost of transportation of material and cost
of maintenance, were of great cost and value. That all the
plaintiff's lines in the State of Indiana, by reason of the
proximity to supplies of material and the very cheap
transportation, were of minimum value as compared with the
plaintiff's lines situated elsewhere, and that by reason of these
facts, the average mile of the telegraph line of the plaintiff
within Indiana was of the value of forty percent of the value of
the average mile of the whole line situated outside of the State of
Indiana, reckoning such
Page 163 U. S. 10
value upon the cost of construction and maintenance, and making
allowance for deterioration.
That sixty-six percent of the plaintiff's whole business in
transmitting telegraphic messages, and sixty percent of its
business in the State of Indiana, was interstate and international
business, and that the average net earnings of a mile of the line
in the State of Indiana amounted to only sixty percent of the net
earnings of the average mile of its line outside of the state.
That the plaintiff duly accepted the provisions of the Act of
Congress of July 24, 1866, c. 230, now sections 5263-5269 of the
Revised Statutes, that all the telegraph lines owned or operated by
the plaintiff in Indiana were constructed upon railroads, streets,
and other post roads of the United States, and thereby the
plaintiff was an agent of the government of the United States in
the transmission of intelligence by electricity, and that the
statute of Indiana of March 6, 1893, and the assessment and
valuation of the plaintiff's property under that statute, rendered
its property in Indiana substantially valueless and prevented it
from performing its obligations to the United States.
That much of the plaintiff's capital stock, to the amount of
$7,633,230,
"is invested in and represented by the capital stock and bonds
of other telegraph and telephone corporations, whose telegraph or
telephone plants are leased to or operated by complainant, which
said telegraph and telephone corporations possess no property in
the State of Indiana, and do not own or use any franchise granted
by the State of Indiana, and are wholly situated outside of the
State of Indiana."
"That the attempted and pretended valuation of complainant's
said property by said state board of tax commissioners, in manner
aforesaid, upon the value of complainant's shares of stock, whether
said board pretended to value said property upon a basis which
included the consideration or estimation of market value or actual
value of the shares of stock of complainant, necessarily includes,
and does in fact include, values which are no part of the true cash
value of the property of complainant in Indiana, but are imputed
and fictitious values,
Page 163 U. S. 11
distributed to complainant's said property in Indiana as
portions of the value of the business, business ability,
enterprise, and skill of complainant, of the real and personal
estate owned and leased by complainant, and outside of the State of
Indiana, and of complainant's franchises granted by states other
than Indiana, and municipalities outside of Indiana, and by the
United States, and by foreign states and nations, and of the
contract relations and other relations existing between complainant
and other corporations, all of which said property, things in
action, and other things and matters of value are beyond the
jurisdiction of the State of Indiana, whether for the purpose of
taxation, or for any other purpose."
That the auditor of the state, on September 15, 1893, certified
the valuation aforesaid to the auditors of the counties through
which the plaintiff's telegraph lines extended, and that the county
auditors were engaged in apportioning and distributing the same
among the townships, and were preparing to deliver tax duplicates
to the county treasurers, to the end that they might collect the
tax from the plaintiff.
That the statute of 1893, c. 171, was contrary to the
Constitution of Indiana in various particulars pointed out (but not
now relied on), and that this statute, and the assessment and
valuation of the plaintiff's property by the state board of tax
commissioners in compliance with its provisions, levied a tax upon
interstate and international commerce in violation of Article I,
Section 8, of the Constitution of the United States and deprived
the plaintiff of its property without due process of law and denied
it the equal protection of the laws, in violation of the Fourteenth
Amendment to the Constitution.
The defendants demurred generally to the bill. The court
sustained the demurrer and, the plaintiff declining to amend its
bill, entered final judgment for the defendants. The plaintiff
appealed to the Supreme Court of Indiana, which affirmed the
judgment. 141 Ind. 281. The plaintiff thereupon sued out this writ
of error.
Page 163 U. S. 14
MR. JUSTICE GRAY, after stating the case, delivered the opinion
of the Court.
It is not and cannot be doubted that each state of the Union may
tax all property, real and personal, within its borders belonging
to persons or corporations, although employed in interstate or
foreign commerce, provided the rights and powers of the national
government are not interfered with.
Delaware
Railroad Tax Case, 18 Wall. 206,
85 U. S. 232;
Western Union Tel. Co. v. Texas, 105 U.
S. 460, 105 U. S. 464;
Western Union Tel. Co. v. Massachusetts, 125 U.
S. 530;
Marye v. Baltimore & Ohio Railroad,
127 U. S. 117,
127 U. S.
123-124;
Leloup v. Port of Mobile, 127 U.
S. 640,
127 U. S. 649;
Pullman's Co. v. Pennsylvania, 141 U. S.
18;
Cleveland &c. Railway v. Backus,
154 U. S. 439,
154 U. S.
445.
The principal grounds upon which the plaintiff contends that the
statute of Indiana of March 6, 1893, c. 171, is unconstitutional,
and the valuation and assessment of the plaintiff's property under
it invalid, are that they necessarily included a taxation of
franchises granted to the plaintiff by the United States, as well
as of the plaintiff's property outside of the State of Indiana,
neither of which was subject to taxation in that state, and also,
by taking the market value of shares of the plaintiff's stock, in
fixing the valuation of the entire property
Page 163 U. S. 15
of the plaintiff, and by apportioning that valuation according
to the proportion thereof within the State of Indiana, of all the
plaintiff's telegraph lines everywhere, adopted an arbitrary rule
and imposed an unlawful burden upon interstate commerce.
But in each of these respects, the case presented by this record
appears to us to be governed by previous decisions of this Court.
The argument for the plaintiff in error, in effect if not in
express words, invites the court to modify or to overrule those
decisions. It becomes important, therefore, to state somewhat fully
the scope and extent of those decisions, the reasons on which they
proceeded, and the provisions of the statutes thereby
construed.
The statutes of Massachusetts, the constitutionality of which
was attacked by the present plaintiff and upheld by this Court in
the two cases of
Western Union Tel. Co. v. Massachusetts,
125 U. S. 530, and
141 U. S. 141 U.S.
40, were undistinguishable in any material respect from the statute
of Indiana now before us, and may, as suggested at the bar, have
been the model upon which this statute was framed.
The material provisions of those statutes of Massachusetts were
as follows: every corporation chartered or organized in
Massachusetts or elsewhere and owning a telegraph line in
Massachusetts was required to return annually to the tax
commissioner of the state a statement of the amount of its capital
stock, the part value and market value of its shares, the locality
and value of its real estate and machinery subject to local
taxation within the state, the whole length of its lines, and the
length of so much of its lines as was within the state. The tax
commissioner was required to ascertain the true market value of its
shares and to estimate the fair cash valuation of all the shares
constituting its capital stock, and the corporation was required to
pay annually "a tax upon its corporate franchise at a valuation
thereof equal to the aggregate value of the shares in its capital
stock" as so determined by the tax commissioner, deducting,
however, from that valuation such proportion thereof as was
proportional to the length of that part of its line lying without
the state, and also an
Page 163 U. S. 16
amount equal to the value, as determined by the tax
commissioner, of its real estate and machinery within the state and
subject to local taxation therein. Mass.Pub.Stat. c. 13,
§§ 38-40, 42.
In the first of the Massachusetts cases, Mr. Justice Miller,
delivering the opinion of the Court, said that "the main ground on
which the telegraph company resisted the payment of the tax alleged
to be due" was that it was a violation of the rights conferred upon
the company by the provisions (which had been accepted by the
company) of the Act of Congress of July 24, 1866, c. 230, reenacted
in section 5263 of the Revised Statutes, by which it was enacted
that any telegraph company organized under the laws of any state
should
"have the right to construct, maintain and operate lines of
telegraph through and over any portion of the public domain of the
United States over and along any of the military or post roads of
the United States . . . and over, under, or across the navigable
streams or waters of the United States."
14 Stat. 221; Rev.Stat. § 5263. The argument then made by
counsel, and the decision of the court upon this point are shown by
the following passages in the opinion:
"The argument is very much pressed that it is a tax upon the
franchise of the company, which franchise, being derived from the
United States by virtue of the statute above recited, cannot be
taxed by a state, and counsel for appellant occasionally speak of
the tax authorized by the law of Massachusetts upon this as well as
all other corporations doing business within its territory, whether
organized under its laws or not, as a tax upon their franchises.
But by whatever name it may be called, as described in the laws of
Massachusetts, it is essentially an exercise upon the capital of
the corporation. The laws of that commonwealth attempt to ascertain
the just amount which any corporation engaged in business within
its limits shall pay as a contribution to the support of its
government upon the amount and value of the capital so employed by
it therein."
125 U.S.
125 U. S.
546-547.
"While the state could not interfere by any specific statute to
prevent a corporation from placing its lines along these post
Page 163 U. S. 17
roads or stop the use of them after they were placed there,
nevertheless the company, receiving the benefit of the laws of the
state for the protection of its property and its rights, is liable
to be taxed upon its real or personal property as any other person
would be. It never could have been intended by the Congress of the
United States, in conferring upon a corporation of one state the
authority to enter the territory of any other state and erect its
poles and lines the therein, to establish the proposition that such
a company owned no obedience to the laws of the state into which it
thus entered, and was under no obligation to pay its fair
proportion of the taxes necessary to its support."
125 U.S.
125 U. S.
548.
"The tax in the present case, though nominally upon the shares
of the capital stock of the company, is in effect a tax upon that
organization on account of property owned and used by it in the
State of Massachusetts, and the proportion of the length of its
lines in that state to their entire length throughout the whole
country is made the basis for ascertaining the value of that
property. We do not think that such a tax is forbidden by the
acceptance on the part of the telegraph company of the rights
conferred by section 5263 of the Revised Statutes or by the
commerce clause of the Constitution."
125 U.S.
125 U. S. 552.
See also Reagan v. Mercantile Trust Co., 154 U.
S. 413,
154 U. S.
416-417;
Central Pacific Railroad v.
California, 162 U. S. 91,
162 U. S.
123.
It was further argued in that case that the tax was excessive
and invalid because, in ascertaining the whole valuation of the
stock, no deduction was made on account of the value of real estate
and machinery situated, and subject to local taxation, outside of
the State of Massachusetts, although it appeared that the company
owned lands and buildings outside of the state, the cost of which
was more than $3,000,000, and upon which it had been assessed and
had paid taxes of more than $48,000. 125 U.S.
125 U. S. 542,
544 [argument of counsel -- omitted],
125 U. S.
552.
The Court, notwithstanding, declared that it did not feel called
upon to defend all the items and rules by which the authorities of
the state arrived at the taxable value on which its ratio of
percentage of taxation should be assessed, or to
Page 163 U. S. 18
hold the tax void because the court might have adopted a
different system had it been called upon to accomplish the same
result, and decided that the rule adopted to ascertain the amount
of the value of the capital engaged in business within the
boundaries of the state, on which the tax should be assessed, was
not an unfair or an unjust one, and that the details of the method
by which this was determined did not exceed the fair range of
legislative discretion. 125 U.S.
125 U. S.
553.
The same views were affirmed in the second case between the same
parties. 141 U.S.
141 U. S.
44-45.
Those decisions clearly establish that a statute of a state
requiring a telegraph company to pay a tax upon its property within
the state, valued at such a proportion of the whole value of its
capital stock as the length of its lines within the state bears to
the length of all its lines everywhere, deducting a sum equal to
the value of its real estate and machinery subject to local
taxation within the state, is constitutional and valid
notwithstanding that nothing is in terms directed to be deducted
from the valuation either for the value of its franchises from the
United States or for the value of its real estate and machinery
situated and taxed in other states, unless there is something more
showing that the system of taxation adopted is oppressive and
unconstitutional.
We are then brought to a consideration of the statutes of
Indiana, as construed by the supreme court of the state and by this
Court.
The Statute of Indiana of March 6, 1891, c. 91, repealed
previous laws and established a comprehensive and complete system
of taxation. By § 3, all property within the jurisdiction of
the state not expressly exempted was declared to be subject to
taxation, and by subsequent sections the property of all
corporations owning or operating railroads within the state was
classified for the purposes of taxation as follows:
By § 78, the
"right of way, including the superstructure, main, side or
second track, and turnouts, turntables, telegraph poles, wires,
instruments and other appurtenances, and the stations and
improvements of the railroad company on such right of way"
(excepting machinery, fixtures, and stationary
Page 163 U. S. 19
engines), were considered real estate and denominated "railroad
track." By § 79, the value of such "railroad track" was taxed
in the several counties, townships, cities, and towns in the
proportion that the length of the main track therein bore to the
whole length of the road in the state, except that the value of the
side or second track and of all turnouts, stationhouses, and other
buildings belonging to the railroad was taxed in the county,
township, city, or town in which they were situated. By § 80,
the movable property belonging to a railroad company was
denominated "rolling stock," and considered personal property, and
was taxed in the several counties, townships, cities, and towns in
the proportion that the main track used or operated therein bore to
the length of the main track used or operated by the corporation,
whether owned by it or not. By § 81, all other personal
property, including machinery, fixtures, stationary engines, tools,
and materials for repairs, was taxed in the county, township, city,
or town in which it was on the first day of April in each year. And
by § 82, all real estate of any railroad company other than
that denominated "railroad track," with all improvements thereon,
was taxed in the county, township, city, or town where it was
situated.
Each railroad corporation was required by § 83 to return
annually to the county auditor an inventory of all these kinds of
property, except "railroad track," and by § 85 to return to
the auditor of the state, to be laid before the state board of tax
commissioners, a statement showing, among other things --
"First, the property denominated 'railroad track,' giving the
length of the main and side or second tracks and turnouts, and
showing the proportions in each county and township, and the total
in the state; second, the rolling stock, whether owned or hired,
giving the length of the main track in each county, and the entire
length of the road in this state,"
and also the amount of its capital stock and the market value
or, if no market value, the actual value, of its shares, the total
amount of its indebtedness, except for current expenses, and the
total listed valuation of all its tangible property in the
state.
Page 163 U. S. 20
By §§ 129, 137, the state board of tax commissioners
was declared not to be bound by these returns, and was required
to
"appraise and assess all property at its true cash value, as
defined by this act, according to their best knowledge and judgment
and so as to equalize the assessment of property throughout the
state,"
and to "assess the railroad property denominated in this act as
railroad track' and `rolling stock' at its true cash value,"
and was authorized to examine persons and papers. And by §
130, each member of the board was required to declare, as part of
his oath of office, that he would "in no case assess any property
at more or less than its true cash value."
This Court at the last term, in several cases affirming
judgments of the Supreme Court of Indiana, held that the statute of
1891 did not, in the case of a railroad partly in that state and
partly in another, require that the value of the part in Indiana
should be determined absolutely by dividing the whole value upon a
mileage basis, but only that the total amount of stock and
indebtedness should be taken into consideration in ascertaining the
value, and that the statute was constitutional.
Pittsburgh
&c. Railway v. Backus, 154 U. S. 421,
154 U. S. 430,
154 U. S. 435,
and 133 Ind. 625;
Indianapolis & Vincennes Railroad v.
Backus, 154 U. S. 438,
and 133 Ind. 609;
Cleveland &c. Railway v. Backus,
154 U. S. 439, and
133 Ind. 513.
In those cases, the objections to the constitutionality of that
statute were answered by this Court, speaking by MR. JUSTICE
Brewer, as follows:
"It is not to be assumed that a state contemplates the taxation
of any property outside its territorial limits, or that its
statutes are intended to operate otherwise than upon persons and
property within the state. It is not necessary that every section
of a tax act should in terms declare the scope of its territorial
operation. Before any statute will be held to intend to reach
outside property, the language expressing such intention must be
clear."
154 U.S.
154 U. S.
428.
"It is obvious that the intent of this act was simply to reach
the property of the railroad within the state. . . . No intent
to
Page 163 U. S. 21
the contrary can be deduced from the provision requiring the
corporation to file a statement of its total stock and
indebtedness, for that is one item of testimony fairly to be
considered in determining the value of that portion of the property
within the state. The stock and the indebtedness represent the
property. As said by Mr. Justice Miller in
State Railroad Tax
Cases, 92 U. S. 575,
92 U. S.
605,"
"When you have ascertained the current cash value of the whole
funded debt, and the current cash value of the entire number of
shares, you have, by the action of those who, above all others, can
best estimate it, ascertained the true value of the road, all its
property, its capital stock, and its franchises, for these are all
represented by the value of its bonded debt and of the shares of
its capital stock."
154 U.S.
154 U. S.
428-429.
"It is not stated in this statute that when the value of a road
running in two states is ascertained, the value of that within the
State of Indiana shall be determined absolutely by dividing the
gross value upon a mileage basis, but only that the total amount of
stock and indebtedness shall be presented for consideration by the
state board. Nevertheless it is ordinarily true that when a
railroad consists of a single continuous line, the value of one
part is fairly estimated by taking that part of the value of the
entire road which is measured by the proportion of the length of
the particular part to that of the whole road. This mode of
division has been recognized by this Court several times as
eminently fair."
154 U.S.
154 U. S.
430-431.
In support of the last statement were cited
State Railroad
Tax Cases, 92 U. S. 608,
92 U. S. 611;
Delaware Railroad Tax
Case, 18 Wall. 206;
Erie
Railway v. Pennsylvania, 21 Wall. 492;
Western
Union Telegraph Co. v. Massachusetts, 125 U.
S. 530;
Pullman's Palace Car Co. v.
Pennsylvania, 141 U. S. 18;
Maine v. Grand Trunk Railway, 142 U.
S. 217;
Charlotte &c. Railroad v. Gibbes,
142 U. S. 386;
Columbus Southern Railway v. Wright, 151 U.
S. 470.
"The true value of a line of railroad is something more than an
aggregation of the values of separate parts of it, operated
separately. It is the aggregate of those values, plus
Page 163 U. S. 22
that arising from a connected operation of the whole, and each
part of the road contributes, not merely the value arising from its
independent operation, but its mileage proportion of that flowing
from a continuous and connected operation of the whole. This is no
denial of the mathematical proposition that the whole is equal to
the sum of all its parts, because there is a value created by and
resulting from the combined operation of all its parts as one
continuous line."
154 U.S.
154 U. S.
444.
"Now when a road runs into two states, each state is entitled to
consider as within its territorial jurisdiction, and subject to the
burdens of its taxes, what may perhaps not inaccurately be
described as the proportionate share of the value flowing from the
operation of the entire mileage as a single, continuous road. It is
not bound to enter upon a disintegration of values, and attempt to
extract from the total value of the entire property that which
would exist if the miles of road within the state were operated
separately. Take the case of a railroad running from Columbus,
Ohio, to Indianapolis, Indiana. Whatever of value there may be
resulting from the continuous operation of that road is partly
attributable to the portion of the road in Indiana and partly to
that in Ohio, and each state has an equal right to reach after a
just proportion of that value, and subject it to its taxing
processes. The question is how can equity be secured between the
states, and to that a division of the value of the entire property
upon the mileage basis is the legitimate answer. Taking a mileage
share of that in Indiana is not taxing property outside of the
state."
154 U.S. 4
154 U. S.
44-445.
"The rule of property taxation is that the value of the property
is the basis of taxation. It does not mean a tax upon the earnings
which the property makes, nor for the privilege of using the
property, but rests solely upon the value. But the value of
property results from the use to which it is put, and varies with
the profitableness of that use, present and prospective, actual and
anticipated. There is no pecuniary value outside of that which
results from such use. The amount and profitable character of such
use determines the value, and if property is taxed at its actual
cash value, it is
Page 163 U. S. 23
taxed upon something which is created by the uses to which it is
put. In the nature of things, it is practically impossible -- at
least in respect to railroad property -- to divide its value and
determine how much is caused by one use to which it is put and how
much by another. Take the case before us; it is impossible to
disintegrate the value of that portion of the road within Indiana
and determine how much of that value springs from its use in doing
interstate business, and how much from its use in doing business
wholly within the state. An attempt to do so would be entering upon
a mere field of uncertainty and speculation. And because of this
fact it is something which an assessing board is not required to
attempt."
154 U.S.
154 U. S.
445-446.
"It is enough for the state that it finds within its borders
property which is of a certain value. What has caused that value is
immaterial. It is protected by state laws, and the rule of all
property taxation is the rule of value, and by that rule property
engaged in interstate commerce is controlled, the same as property
engaged in commerce within the state. Neither is this an attempt to
do by indirection what cannot be done directly -- that is, to cast
a burden on interstate commerce. It comes rather within that large
class of state action, like certain police restraints, which, while
indirectly affecting, cannot be considered as a regulation of,
interstate commerce or a direct burden upon its free exercise."
154 U.S.
154 U. S.
446-447.
"It is true, there may be exceptional cases, . . . as, for
instance where the terminal facilities in some large city are of
enormous value, and so give to a mile or two in such city a value
out of all proportion to any similar distance elsewhere along the
line of the road, or where in certain localities the company is
engaged in a particular kind of business requiring for sole use in
such localities an extra amount of rolling stock. If testimony to
this effect was presented by the company to the state board, it
must be assumed in the absence of anything to the contrary that
such board, in making the assessment of track and rolling stock
within the state, took into account the peculiar and large value of
such facilities and such extra rolling stock."
154 U.S.
154 U. S.
431.
Page 163 U. S. 24
This Court further held that the question of the cash valuation
of the company's property was a question of fact the determination
of which was committed to the state board of tax commissioners, and
that the decision of the board could not be overthrown by evidence
going only to show that the fact was otherwise than as so found and
determined. 154 U.S.
154 U. S.
434-435.
By § 69 of the statute of Indiana of 1891, telegraph
companies incorporated under the laws of any other state, besides
being taxable upon their tangible property in Indiana in the same
manner as other tangible property was taxed, were required to make
annual returns of their receipts from business in the state,
including the proportion of gross receipts for business done in
connection with the lines of other companies, and to pay a tax of
one percent on such receipts.
The supplemental and amendatory statute of March 6, 1893, c.
171, now in question, repealed that section of the statute of 1891
and substituted provisions very like those of the statutes of
Massachusetts, above considered, for the taxation of the telegraph
property, and not essentially different from those of the statute
of Indiana of 1891 for the assessment of railroad property, except
in being more favorable to the company by expressly providing for a
deduction of the value of real property outside the state from the
total valuation.
By § 1 of the statute of 1893, every telegraph company,
whether incorporated under the laws of Indiana or of any other
state, engaged in telegraph business in Indiana was required to
return annually to the auditor of the state a statement of its
whole capital stock; the par value of its shares; their market
value, or, if they had no market value, the actual value thereof;
its principal place of business; its real estate, machinery, and
appliances subject to local taxation in each county and township
within the state; its real estate outside the state, and not
directly used in the conduct of its business, and the sums at which
such real estate was assessed for local taxation; the mortgages
upon the whole or any part of its property; the whole length of all
its lines; the length of its lines outside the State of Indiana,
and the length of its
Page 163 U. S. 25
lines in each county and township within the state. By
§§ 6, 7, the state board of tax commissioners,
"after examining such statements, and after ascertaining the
value of such properties therefrom, and from such other information
as they may have or obtain,"
and requiring books and papers to be produced, and witnesses to
be examined "in case they shall deem it necessary to enable them to
ascertain the true cash value of such property," were required to
value and assess the property of each company by ascertaining the
true cash value of its entire property, for that purpose taking the
aggregate value of its shares, if they had a market value, or, if
they had none, the actual value thereof, or of the capital of the
company; then, for the purpose of ascertaining the true cash value
of the property within the state (first ascertaining and deducting
the assessed value for taxation, in the localities where the same
was situated, of its real estate outside the state, and not
specifically sued in its general business), taking the proportion
of the whole aggregate value of its property, as above ascertained,
which the length of its lines within the state bore to the total
length of its lines, and deducting therefrom the assessed value for
taxation of real estate, machinery, and appliances within the state
and subject to local taxation in the counties and townships.
The Supreme Court of Indiana considered the present case to be
governed by the decisions of this Court in the cases of
Railroad Companies v. Backus, above cited, and after
referring to some of the passages above quoted from those
decisions, added:
"All that is thus forcibly and convincingly said as to the
taxation of interstate railroad property is equally applicable to
the taxation of interstate telegraph property. It is not easy to
see how one mile of appellant's telegraph line connecting Chicago
with New York could be of less value than any other mile of the
same line. Cut out one mile, even though it be through a swamp or
under a lake, and the value of the whole line is practically
destroyed. The property is a unit, valuable as a whole and by
reason of its several connections and not by virtue of any part
taken by itself. No way, therefore, by which the value of the lines
in this state
Page 163 U. S. 26
can be determined, seems so just and equitable as to take that
proportion of the whole value which the mileage in this state bears
to the whole mileage."
141 Ind. 294, 295.
In that court, as now in this, the telegraph company insisted
that the statute of 1893, in applying the mileage basis of
valuation to the lines of telegraph, compelled the state board of
tax commissioners to add large outside values to the values of the
Indiana portions of the lines, because the parts of the company's
property outside the state were proportionately of greater value
than the parts within the state, to which that court answered:
"The act, it is true, provides a method of valuation -- the
mileage method -- as a basis for the taxation of certain property
within the State of Indiana. But this is simply a means for
determining the true cash value of the property within the state,
and if in the case of appellant's property or in any other case it
is shown to the board or is discovered by them that still further
deductions should be made on account of larger proportional values
outside of the state or for any other reason, then the board must
make such deductions, so that finally only the property within the
State of Indiana shall be assessed, and that at its true cash
value."
141 Ind. 297.
The state court distinctly held that the statute of 1893, being
supplementary to and amendatory of the statute of 1891, must be
construed in connection therewith and be treated as part of one and
the same general tax act; that the duties and powers of the state
board of tax commissioners, as defined and prescribed in the
statute of 1891, were not abridged or changed in any respect by the
statute of 1893, and therefore, interpreting the statute of 1893 in
the light of the provisions of the statute of 1891, which have been
cited above, concluded
"that in the act of 1893, the legislature provided the mileage
method as the basis for the assessment of telegraph and other like
property, both as to lines situated partly within and partly
without this state and also as to lines running through several
counties or other subdivisions of the state, but that it was not
the intention of the legislature, nor is it the meaning of that
act, that any property
Page 163 U. S. 27
outside of the state should be assessed by importation of values
or otherwise, or that any property should be assessed at more or
less than its true cash value. Construing the acts of 1891 and 1893
together, it will therefore be presumed, in the absence of evidence
to the contrary, that the state board has deducted from the total
valuation of all interstate property such values, if any, of
extrastate property as will leave the remaining property, within
and without the state, as near as may be of equal proportional
value. . . . The act of 1893 provides generally for a mode of
ascertaining the true cash value of that part of interstate
telegraph and other property which is within the State of Indiana,
to-wit, the mileage method. But should there be particular cases
where that method must be modified in order to reach the necessary
result, namely, the true cash value of such part of the property as
is within the jurisdiction of the state, the law of 1893 itself
supplies the means of doing so."
141 Ind. 285, 297-300.
The statute of Indiana of 1893 regarding telegraph companies,
therefore, as construed and applied by the supreme court of the
state, like the statute of 1891 regarding railroad companies, while
it takes as the basis of valuation of the company's property within
the state the proportion of the value of its whole capital stock
which the length of its lines within the state bears to the whole
length of all its lines, makes it the duty of the state board of
tax commissioners to make such deductions, on account of a greater
proportional value of the company's property outside the state, or
for any other reason, as to assess its property within the state at
its true cash value only, and is therefore governed by the same
considerations upon which the provisions of the statute of 1891 for
taxing railroad companies were held to be constitutional by the
decisions of this Court in the
Indiana Railroad Cases,
above cited.
The bill in the present case was filed before those decisions
were rendered, and is so drawn as to make it somewhat difficult to
distinguish matters of fact, alleged with such clearness and
precision as to be admitted by the demurrer, from the
Page 163 U. S. 28
argumentative statements and the conclusions of law which are
freely scattered throughout the bill.
The bill alleges that the state board of tax commissioners, in
fixing the valuation of the plaintiff's property in Indiana
(deducting the value of real estate, machinery, and fixtures
subject to local taxation within the state) at the sum of
$2,297,652, and at the rate of $357 per mile of telegraph line,
placed upon that property, beyond its true cash value, as measured
by the cost of replacing the same, making reasonable allowances for
deterioration, additional values of the plaintiff's business,
property, and goodwill, both in and out of the state, and
franchises granted by the United States, by the State of New York,
and by foreign countries. This allegation is made by way of
preliminary and inducement to the concluding statement of the
paragraph that, "in witness thereof," the tax commissioners entered
upon their record a certificate and statement, which is set forth
and which has no tendency to prove anything of the kind, but merely
shows an assessment and valuation made by the state board of tax
commissioners "after full consideration," and "in accordance with
the act of the General Assembly of the State of Indiana approved
March 6, 1893." Moreover, the cost of the property, or of its
replacement, is by no means a true measure of its value. The bill,
while it elsewhere states the value of the plaintiff's real estate
in other states, and of its stocks and bonds of other companies,
nowhere undertakes to fix the value of its franchises from the
United States, the State of New York, and foreign countries, and
the tax commissioners, by the authorities already cited, had the
right and the duty, in estimating the value of the plaintiff's
property in Indiana, to take into consideration those franchises
and the other elements mentioned in this paragraph of the bill.
The bill further alleges that the state board of tax
commissioners did not attempt to specify or describe the
plaintiff's real estate, machinery, and appliances subject to local
taxation. But the statute did not require of them any such
specification or description, nor does the plaintiff appear to have
requested them or to have done anything towards assisting them to
do so.
Page 163 U. S. 29
The bill then alleges that the commissioners took as a basis of
their assessment the value of the plaintiff's entire capital stock,
estimating the value of the shares according to the price of such
shares in the stock exchange market in New York City, and dividing
such aggregate value by the total number of miles of the
plaintiff's telegraph lines, wherever situated, and thereby
obtaining a pretended valuation of $357 per mile of its telegraph
line in Indiana, which was "grossly excessive, and far beyond the
true cash value of complainant's said property in Indiana." But the
bill immediately proceeds to allege that
"said state board of tax commissioners, in reaching said
valuation of complainant's said property in Indiana, did not
consider and assess the value of the property of complainant
situated in Indiana otherwise than by pursuing the requirements of
said pretended statute."
And the facts stated elsewhere in the bill demonstrate that the
commissioners did not obtain their valuation by merely applying the
rule stated in this paragraph. Had they done so, the result would
have been that the whole number of shares of stock, being 948,200
at $94.50 a share, would have been $89,594,900, which, divided by
189,576, the whole number of miles of all the plaintiff's lines,
would give a value per mile of upwards of $472, or nearly one-third
more than the valuation adopted.
The bill further alleges that there was no market value for all
the shares of the plaintiff's stock; that the price obtained for a
very few shares in the New York Stock Exchange did not fairly
represent the actual value of the plaintiff's property, and that
any price at which any shares might be sold by holders thereof,
whether calculated upon any market value or upon actual value,
included a consideration of the plaintiff's franchises, its
contracts with other companies, its actual past and probable future
earnings from many sources, skill and enterprise of its managers,
and all its real and personal estate in Indiana or elsewhere,
including real estate of great value in other states, all which
were
"blended so as to render it impossible to separate and
disintegrate the portions of value applicable to any and each of
said elements of value of said
Page 163 U. S. 30
shares."
This is hardly more than an argument to show the difficulty of
ascertaining the cash value of the plaintiff's property in the
State of Indiana. It certainly has no tendency to show that the tax
commissioners did not, as they were required to do by the statute,
as since construed by the supreme court of the state, assess the
plaintiff's property in Indiana at its true cash value according to
their best knowledge and judgment and after making all proper
deductions on account of larger proportional values of its property
and business outside the state, or for any other reason.
The remaining allegations of the bill are either repetitions or
amplifications of those already considered or are averments of
conclusions of law. The allegation that
"the attempted and pretended valuation of complainant's said
property by said state board of tax commissioners in manner
aforesaid . . . necessarily includes, and does in fact include,
values which are no part of the true cash value of the property of
complainant in Indiana,"
is not equivalent to an assertion that the decision of the tax
commissioners upon the question of fact committed by the statute to
their determination was erroneous. As said by this Court in
Pittsburgh &c. Railway v. Backus, above cited,
"Whenever a question of fact is thus submitted to the
determination of a special tribunal, its decision creates something
more than a mere presumption of fact, and, if such determination
comes into inquiry before the courts, it cannot be overthrown by
evidence going only to show that the fact was otherwise than as so
found and determined."
154 U.S.
154 U. S.
434-435.
Judgment affirmed.
*
"An act supplementary to and amendatory of an act entitled 'An
act concerning taxation, repealing all laws in conflict therewith,
and declaring an emergency,' approved March 6, 1891, and providing
for the taxation of telegraph, telephone, palace car, sleeping car,
drawing-room car, dining car, express and fast freight, joint stock
associations, companies, copartnerships and corporations
transacting business in the State of Indiana, repealing sections
68, 69, 70 and 71 of said act, and all laws in conflict therewith,
and declaring an emergency."
"SEC 1. Any joint stock association, company, copartnership or
corporation, whether incorporated under the laws of this state or
of any other state or of any foreign nation, engaged in
transmitting to, from, through, in, or across the State of Indiana
telegraphic messages shall be deemed and held to be a telegraph
company, and every such telegraph company shall annually, between
the first day of April and the first day of June, make out and
deliver to the auditor of state a statement, verified by the oath
of the officer or agent of such company making such statement, with
reference to the first day of April next preceding, showing:"
"First. The total capital stock of such association, company,
copartnership, or corporation."
"Second. The number of shares of capital stock issued and
outstanding, and the par or face value of each share."
"Third. Its principal place of business."
"Fourth. The market value of said shares of stock on the first
day of April next preceding, and if such shares have no market
value, then the actual value thereof."
"Fifth. The real estate, structures, machinery, fixtures and
appliances owned by said association, company, copartnership or
corporation, and subject to local taxation within the state, and
the location and assessed value thereof in each county or township
where the same is assessed for local taxation."
"Sixth. The specific real estate, together with the permanent
improvements thereon, owned by such association, company,
copartnership, or corporation situate outside the State of Indiana
and not directly used in the conduct of the business, with a
specific description of each such piece, where located, the purpose
for which the same is used, and the sum at which the same is
assessed for taxation in the locality where situated."
"Seventh. All mortgages upon the whole or any part of its
property, together with the dates and amount thereof."
"Eighth. (
a) The total length of the lines of said
association or company."
"(
b) The total length of so much of their lines as is
outside the State of Indiana."
"(
c) The length of the lines within each of the
counties and townships within the State of Indiana."
"SEC. 5. Upon the filing of such statements, the auditor of
state shall examine them, and each of them, and if he shall deem
the same insufficient, or in case he shall deem that other
information is requisite, he shall require such officer to make
such other and further statements as said auditor of state may call
for. In case of the failure or refusal of any association, company,
copartnership, or corporation to make out and deliver to the
auditor of state any statement or statements required by this act,
such association, company, copartnership, or corporation shall
forfeit and pay to the State of Indiana one hundred dollars for
each additional day such report is delayed beyond the first day of
June, to be sued and recovered in any proper form of action, in the
name of the State of Indiana, on the relation of the auditor of
state, and such penalty, when collected, shall be paid into the
general fund of the state."
"SEC. 6. Upon the meeting of the state board of tax
commissioners for the purpose of assessing railroad and other
property, said auditor of state shall lay such statements, with
such information as may have been furnished him, before said board
of tax commissioners, who shall thereupon value and assess the
property of each association, company, copartnership, or
corporation in the manner hereinafter set forth, after examining
such statements and after ascertaining the value of such properties
therefrom and from such other information as they may have or
obtain. For that purpose, they may require the agents or officers
of said association, company, copartnership, or corporation to
appear before them with such books, papers, or statements as they
may require or they may require additional statements to be made to
them, and may compel the attendance of witnesses in case they shall
deem it necessary to enable them to ascertain the true cash value
of such property."
"SEC. 7. Said state board of tax commissioners shall first
ascertain the true cash value of the entire property owned by said
association, company, copartnership, or corporation from said
statements or otherwise, for that purpose taking the aggregate
value of all the shares of capital stock, in case said shares have
a market value, and in case they have none, taking the actual value
thereof or of the capital of said association, company,
copartnership, or corporation in whatever manner the same is
divided, in case no shares of capital stock have been issued,
provided, however, that in case the whole or any portion
of the property of such association, company, copartnership, or
corporation shall be encumbered by a mortgage or mortgages, such
board shall ascertain the true cash value of such property by
adding to the market value of the aggregate shares of stock, or to
the value of the capital, in case there shall be no such shares,
the aggregate amounts of such mortgage or mortgages, and the result
shall be deemed and treated as the true cash value of the property
of such association, company, copartnership, or corporation. Such
board of tax commissioners shall, for the purpose of ascertaining
the true cash value of the property within the State of Indiana,
next ascertain from such statements or otherwise, the assessed
value for taxation, in the localities where the same is situated,
of the several pieces of real estate situate without the State of
Indiana and not specifically used in the general business of such
associations, companies, copartnerships or corporations, which said
assessed values for taxation shall be by said board deducted from
the gross value of the property as above ascertained. Said state
board of tax commissioners shall next ascertain and assess the true
cash value of the property of such associations, companies,
copartnerships or corporations within the State of Indiana, by
taking the proportion of the whole aggregate value of said
associations, companies, copartnerships or corporations, as above
ascertained, after deducting the assessed value of such real estate
without the state, which the length of the lines of said
associations, companies, copartnerships, or corporations in the
case of telegraph and telephone companies within the State of
Indiana, bears to the total length of the lines thereof, and in the
case of palace, drawing-room, sleeping, dining or chair car
companies, the proportion shall be the proportion of such aggregate
value, after such deductions, which the length of the lines within
the state, over which said cars are run, bears to the length of the
whole lines over which said cars are run, and in the case of
express companies, the proportion shall be the proportion of the
whole aggregate value, after such deductions, which the length of
the lines or routes within the State of Indiana, bears to the whole
length of the lines or routes of such associations, companies,
copartnerships, or corporations, and such amount so ascertained
shall be deemed and held as the entire value of the property of
said associations, companies, copartnerships, or corporations
within the State of Indiana. From the entire value of the property
within the state, so ascertained, there shall be deducted, by said
board, the assessed value for taxation of all the real estate,
structures, machinery, and appliances within the state and subject
to local taxation in the counties and townships as hereinbefore
described in item No. 5 of sections 1, 2, 3 and 4 of this act, and
the residue of such value so ascertained, after deducting therefrom
the assessed value of such local properties, shall be, by said
board, assessed to said association."
"SEC. 8. Said state board of tax commissioners shall thereupon
ascertain the value per mile of the property within the state by
dividing the total value, as above ascertained, after deducting the
specific properties locally assessed within the state, by the
number of miles within the state, and the result shall be deemed
and held as the value per mile of the property of such association,
company, copartnership, or corporation within the State of
Indiana."
"SEC. 9. Said state board of tax commissioners shall thereupon,
for the purpose of determining what amount shall be assessed by it
to said association, company, copartnership, or corporation in each
county in the state through, across, into, or over which the line
of said association, company, copartnership, or corporation
extends, multiply the value per mile, as above ascertained by the
number of miles in each of such counties, as reported in said
statements or as otherwise ascertained, and the result thereof
shall be, by said board, certified to the auditor of state, who
shall thereupon certify the same to the auditors, respectively, of
the several counties through, into, over or across which the lines
or routes of said association, company, copartnership, or
corporation extend, and such auditors shall apportion the amount
certified for their counties, respectively, among the several
townships into, through, over or across which such lines or routes
extend, in proportion to the length of the lines in such
townships."
"SEC. 10. To enable said county auditors to properly apportion
the assessments between the several townships, they are authorized
to require the agent of said association or company to report to
them, respectively, under oath, the length of the lines in each
township, and the auditor shall thereupon add to the value so
apportioned the assessed valuation of the real estate, structures,
machinery, fixtures and appliances situated in any township, and
extend the taxes thereon upon the duplicates as in other
cases."
