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97-84016-17 

National Tax Association 

Report of tlie Committee 
of tine National Tax... 

Madison, Wis. 
1915 



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TrabiM* Bdound Iranoi^i 18&6-1936* 

National tax association. 

Report of the Committee of the National tax associa- 
tion on double taxation and situs for purposes of taxation, 
and Analysis of cases relating to situs, by Edmund F. 
Trabue, chairman of the Committee on double taxation 
and situs for purposes of taxation Madison, Wis^ Na- 
tional tax association^ 1915. 




31 p. 22i 



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"Reprinted from the Proceedings of the eifl^th as 
National tax association." 

1. Taxation— U. & i. Trabue» Edmund Fluids. 



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3^ 



REPORT OF THE COMMITTEE OF THE 
NATIONAL TAX ASSOCIATION 

ON 

DOUBLE TAXATION AND SITUS FOR 
PURPOSES OF TAXATION 

AND 

ANALYSIS OF CASES RELATING 

TO SITUS 



BY 



EDMUND F. TRABUE 

Chainnan of the Committee <m Doable Taxation and 
SUtas for Parposes of Tajathm 



REPRINTED FROM THE PROCEEDINGS OF THE EIGHTH ANNUAL " 
CONFERENCE OF THE NATIONAL TAX ASSOCIATION 



MADISON. WIS. 
NATIONAL TAX ASSOCIATION 





REPORT OF THE OOMMnTEE OF THE 
NATIONAL TAX ASSOCIATION 

ON 

DOUBLE TAXATION AND SITUS FOR 
PURPOSES OF TAXATION 

AND 

ANALYSIS OF CASES RELATING 

TO SITUS 



BY 

EDMUND F. TRABUE 

Ohfi*™*" of the Committee on Double Taxation and 
SitBB for PocpofleB of Taxation 



REPRINTED FROM THE FROGEENNGS OF THE EIGHTH ANNUAL 
OONFERENCE OF THE NATHWAL TAX ASSOOATION 



MADISON, WIS. 

NATIONAL TAX ASSOCIATION 
1915 



f 



i 
I 

/ 

REPORT OF COMMITTEE ON DOUBLE TAXATION AND 
SnUS FOR PURPOSES OF TAXATION 

Tour oommittee <m ^ ^Double Taxation and Situs for Pur- 
poses of Taxation/' begs leave to report, in part, and to sug- 
gest that the importance of the topic assigned to it is so great, 
and calls for so much detailed study, that the committee may 
well be continued for another year, under instructions to 
report at the next National Tax Conference. 

Of the five members of your committee, two have been un- 
able to participate in its work and therefore they, Messrs. 
Walker and Smith, are not to be considered as subscribing to 
this report. The Chairman, Mr. Trabue, who is unable to be 
present, has prepared an analysis of decisions relating to 
situs. This analysis is annexed hereto in the belief that it 
indicates both the present confused situation, and also the 
difficult problem which is to be studied. 

Much of the confusion existing in the field of taxation in 
this country arises from the existence of our many separate 
state governments, each with its own code of tax laws. Juris- 
diction is ill-defined. Nearly every state is anxious to bring 
the greatest possible number of subjects, and the greatest pos- 
sible amount of property under its taxing jurisdiction. So 
great has been the prossnre in this direction, that legislatures 
have too frequently neglected to observe liie ordinary rules 
of equity and fair play, and the courts have too often given 
judicial sanction to methods of taxation which are not eco- 
nomically justified under our present system of industrial 
and fiscal organization. 

A previous National Tax Conference has heretofore stated 
its conviction that the general property tax in this country 
has proved ineffective, and it has suggested some partial rem- 
edies for this failure. Much r^naim to be done, however, in 
the promulgation of a constructive program, and there w need 
of well considered findings, as to the principles and considera- 

[3] 



tioDs which should prevail in the establishment or modification 
of tax systems in the several states. Your committee is con- 
vinced that it is possible to set forth a program whicli shall 
be sound economically, yet which shall be more than an 
acad^nie disenasion the teachings of wludi eaanot be applied 
to the actually existing conditions. 

In the numerous efforts for tax reform which have been 
made in the American states during the last twenty or twenty- 
five yearc^ at l^t four tendencies can be identified. Namely: 

1. To centralize the assessing authority. This has resulted 
in the establishment of state tax commissions, county boards 
of review, etc. 

2. To establish i^pedal taxes for different classy of prop- 
erty or activity, thus abolishing or modifying in some respects 
the Tinsatisfactory general property tax. 

3. To separate the sources of state and local revenue, and 
provide home rule or local option in taxati<m. 

4. To secure the establishment, in whole or in part, of the 
single tax. 

As to the profit or loss which has resulted from these various 
tendencies, we are not now eoncemed. Our problem is to 
ascertun and set forUi tiie controlling principles as to situs 
of property for purposes of taxation, principles which should 
be adhered to by the several states under whatever form their 
tax systems exist, to Ihe ^d tiiat interstate comity may be 
observed, and equitable and practicable taxation may result 
Your committee has no intention of undertaking to maintain 
that forms of taxation can be uniform in the several states. 
It is too dear to need proof that each state will develop its 
own forms of taxation, and that within limits each ought so to 
do. It need not be concluded that thereby sound economic 
principles must or will be disregarded. 

Concerning the situs of real estate for purposes of taxation, 
there need be no long* discuseoon. By legislative enactment 
and judicial interpretation, the situs of real estate is estab- 
lished at the place of location, and the taxation of real estate, 
as such, is imposed there, and there alone. 

Likewise, no consideration need be given by your committee 
to questions of intrastate situs, to coin a phrase. Such ques- 

£4] 



tions are purely local They have no direct connection with 
int^tate relationships. Undoubtedly, this conference could 

well afford to consider the matter of intrastate situs ; but your 
committee conceives its task to be to treat its topic merely in 
relation to the question of situs in its interstate bearings. 
Therefore we find that, as thus defined, the probl^ before 

us is limited to : 

1. Situs in the taxation of inheritances. 

2. The situs of personal properly for purposes of property 
texation. 

Inherit wu^ Taxation: 

A previous National Tax Conference has heretofore taken 
its stand with regard.to the taxation of inheritances, and it 
has stated the considerations, which, in its judgment ought to 
be controlling. In the main, we are of the opinion that the 
stand thus taken is correct. In only one respect do we find 
that it ought to be mo<yfied. It is to be constantiy borne in 
mind that the taxation of inheritances is not the taxation of 
property. It has been repeatedly decided by the courts that 
the taxation of inheritances is not the taxation of the prop- 
erty itself. The imposition of inheritance taxes finds its 
justification in the recognized power of the sovereign, to con- 
trol or limit the devolution of property. It follows that the 
correct principle underlying the taxation of inheritances is 
expressed by saying titot a given itete should levy its inher- 
itance tax only with reference to such property as devolves 
in accordance with its laws. 

If the procedure indicated by this expression shall be ad- 
hered to by the American states, moat questions of situs with 
relation to inheritance taxation will have been settled, since 
we find that there is practically no uncertainty as to the juris- 
diction which controls the devolution of property. Real estate 
devolves in accordance with the laws of tiie jurisdiction in 
which it is situated. Personal property devolves in accordance 
with the laws of the domicile of the owner. Taxation of in- 
heritances should be levied acoordii^^y. We find it necessary 
to suggest, tiierefore, that tiie position heretofore taken may 
well be modified in this respect. Even the tangible personal 

[5] 



property of a deceased person should be taxed by no jurisdic- 
tion other than that of his late domidle« We know fall well 
tibat there are members of this conference who find it imx>ossible 
to agree to this position as the underlying and controlling 
factor in inheritance taxation. We offer no challenge to the 
conaeientioiimess of thoise who differ from our contritions. We 
are, nevertheless, convinced that procedure by the American 
states as herein indicated, offers the only possible method for 
the avoidance of multiple taxation of inheritances, and for the 
establisdimait of an administrative system which shall be 
both eqnitable and practicable. The adoption of any other 
procedure presents administrative difficulties for which your 
committee is not able to find any solution. 

We feel constrained to suggest that pmding the adoption 
of these principles by the several states, each sAionld lose no 
time in so modifying its present procedure as to become con- 
sistent with itself. If, and in proportion as a state taxes a non- 
residmt decedent, it shonld ex^pt a resident decedeat havix^ 
property of similar character and location, and vice versa. No 
one here, we submit, will defend a practice whidi undertakes 
to appropriate both ends and the middle. 

Situs of PersoTUtl Property: 

Personal property divides into two main classes, usually re- 
ferred to as ''tangible" and intangible." Tangible personal 
property is either permanentiy located, or it is to a greater or 
less extent itinerant. Concerning the taxable sitns of perma- 
nently located tangible property, there is, or can be, but little 
uncertainty, or difference of opinion. The place of permanent 
location determines and is the sdtns. In tiiis class there is in- 
elnded stocks of merchandise^ live stock, honsehold furniture, 
etc. There are at least tw^o classes of tangible personal prop- 
erty which are not permanently located, the situs of which, 
tiierefore, is in dispute or is nndetermined. We refer to rail- 
road rolling stock, and shix^ and vessels. Interstate comity^ 
in reference to the taxation of these two classes of property, 
can be accomplished by following the decisions already ren- 
dered. According to these decisions rolling stock acquires a 
taxable situs in the jurisdietions traversed by the railway of 

[6] 



the owning eorporation, and the valuea of the rolling stock 
must be apportioned to the several jurisdictions covered by 

the operations of the railway, on some equitable basis of di- 
vision, presumably rail mileage, or track, or car mileage. Such 
an apportionm^t of value is possible without administeative 
diffieully eveai tiiough there are several systems of taxation 
other than ad valorem. The apportionment of gross earnings 
or of aggregate values determined by security values among 
the several states covered by the operations of the railway is» 
in general, proportional to tiie value of the roUing sto<^ in the 
separate jurisdictions which it traverses. 

Ships and vessels are more wandering in nature than are 
railroad cars, and the problem of tiieir situs is therefore more 
difficult There is also less judicial interpretation with ref- 
erence to them, and your committee makes, at this time, no 
other suggestion than that ships and vessels if plying regularly 
in the waters of a given state, tiiere acquire a taxable situs; 
but that ships and vessds which go bade and f ortii from state 
to state, or to foreign points can acquire no taxable situs other 
than the domicile of their owner, and that in such domicile 
taxation of them must be applied. 

So-called intangible p^tsonal property usually exists in one 
of the following forms: 

(a) Promissory notes and ctnnm^rinal piqper. 

(b) Real estate mortgages. 

(c) Stock of moneyed corporations other than banks. 

(d) Stock of banks. 

(e) Bonds of corporations. 

(f) Franchises. 

(g) Bank deposits and cash. 

(h) Bonds issued by govmime&t or a political sub-divisian 

thereof. 

It would be idle to deny that the above are classes of prop- 
erty. Irreq[>eetiye of tiie character and of tiie taxation of the 
other classes of property to which the above are related or 
upon which they depend, they themselves, with certain excep- 
tions below noted, aMord a tax-paying ability, and therefore a 
tax-payii^ duly. 

[7] 



Bonds issued by govenimeat or a sabdivisioii tbereof, the 
proceeds of which are used for some public purpose, ought to 

have no relation to taxation in any form. As instruments of 
government, tliey and their holders are to be exempt. Taxable 
ffltus such bonds, therefore, beeomes a Biatter of no import* 
ance. 

Franchises do not exist apart from the property to which 
they relate, and so far as a franchise has a taxable value its 
situs is in the field of operation of the oorporatiou to which it 
has been assigned. Your committee is convinced that attempts 
to value and tax a franchise as a separate thing have caused 
confusion and inequity in many eases ; that only by consider- 
ing a franchise as a part of the whole pn^rty of the owning 
corporation or as a factor in liie determination of its value cmi 
situs be determined; that when thus considered the problem of 
the situs of a franchise solves itself, since its value will auto- 
matically be apportioned to l^e several taxing jurisdictions in 
accordance with the basis of apportitmrnent in use for the 
property or the values to which the franchise attaches. More- 
over, with the increasing regulation of rates, franchise values 
tend to become a diminishing quantity. We may sometime 
reach that happy day when the terms "franchise" and fran- 
chise values" will have been eliminated from the dictionary of 
taxation, and when taxing ofi&cials, legislatures and courts may 
give their attention to thin^ which are eapaUe of more exact 
definition and of human understanding. 

The injunctions of the Congr^ relating to the taxation of 
national banks have establiidied the place of location of the bank 
as the situs for its taxation. States generally have followed 
this precept in the taxation of other banks. Usually banks are 
taxed in terais of the capital stock. Such taxation, while 
techxiieally the taxation of the personal property of the share 
owner, is nevartheless in eaemce the taxation of the coipora- 
tion. In this partial report we make no furtiier comment than 
to state the bold proposition that situs for the taxation of bank 
stock should be the loeation of the bank, and furth^ (which 
we know will be challenged) that bank siiares ai*e to be dis- 
tinguished from other securities and from credits not only 

[«] 



with relation to their situs but also with relation to the amount 
of taxation which they shall bear. 

From our list of the classes, into one of which intangibles 
fall, there remain for further consideration : 
Promissory notes and commercial paper* 
Real estate mortgi^es. 
Stock of moneyed corporations. 
Bonds of corporations. 
Bank deposits and cash. 

The situs of tii^ classes of property has been tiie subject of 

almost unlimited legislation and litigation. In but few juris- 
dictions has the conception been evolved and the practice es- 
tablished that these classes of property, as such, have no tax* 
able situs. Here again in this tentative or partial report we 
content ourselves with making the simple statement that in 
working for the abolition of excessive multiple taxation and 
for the establishment of a reasonable and practicable interstate 
comity, we must abandon all attempts to ascribe to the above 
classes of personal property an independent situs in which they 
are to bear such taxation as falls upon other classes of prop- 
erty. 

Nevertheless, it is clear to your committee that the possession 
of property of the above mentioned classes indicates a tax- 
paying ability and duty in the owner, and that the domicile 
of the owner thus is the place in which a tax may be levied 
against the owner with refemiee to or because of his ownings 
of property of these classes. Your committee is convinced, 
moreover, that such taxation as is to be imposed upon the 
owner of these intangibles, in order to be equitable and col- 
lectable, must bear a reasonable relation to the income derived 
from the property. The commercial and industrial organ- 
ization of the world is built up on the assumption that a tax 
at the usual rates prevailing in this country cannot be assessed 
upon and collected from credit forms of property. For this 
reason, credits issue and circulate upon about the same basis 
of yield in non-taxing, and in taxing jurisdictions. Neither a 
single American legislature nor all of them, nor even this con- 
ference can enact or resolve tiiemselves away from this fact. 
This fact is more potmt than tax legislation and tax theorizing. 

[9] 



Both of the latter must reasonably confom themselves to it. 
The taxation to be imposed upon the owner of peracmal prop- 
erty of the elasE^ whieh we are now considering as a personal 
tax at his domicile should, as we have already said, bear a 
reasonable relation to the income produced by the property. 
Such tax may be assessed in terms of income or at a low flat 
rate which shall in fact absorb a reasonable portion of the 
income. A third way we are unable to discover. As to which 
of the two shall be adopted in any state, this ecmferenee has 
no coneeni, and your committee has no opinion. 

The above outline is submitted in the full appreciation that 
it is but an outline; that in many details it is silent; that in 
some respects it violates tenets of taxation which have obtained 
for gaieratiima; that in parts it is bound to be challenged. 

In broad terms we may say that we aim at a formula, the 
controlling factors in which shall be: 

First: Inheritance taxes must be levied by a given state 
only with reference to such property as devolves in accordance 
with its laws. 

Second: Real estate and tangibles can have but one situs, 
namely, the place or places of location. 

Third: Intangible as rach have no tmcable sitas but should 
subject their owner at his domicile to taxation reasonably pro- 
portional to the income he derives. 

We submit that if the American states shall conform to this 
oonc^tion of sitos^ much so-called and objectionable double 
tiucation will disappear. We are unable to suggest any other 
plan, the adoption of which will so simplify our interstate 
tax relations and so equitably place tax burdens upon property 
and perscms. Too much meanin^ess disciussion has already 
taken place relating to the iniquities of double taxation. Not 
all so-called double taxation ought to be abolished. The effort 
must be to have all taxation reasonable. If it shall become 
this, there will be none to fear the word ' ' double. ' ' Consider- 
able progress has already been made by various states in the 
general direction indicated by these findings. It appears 
reasonable to expect that a continued development in the same 
direetiffli is to follow. Of course, complete realization is not 
to be expected at once if at all, but your committee believes 

[10] 



that a statement of the principles to be striven for will promote 
none but good results and will perhaps assist some states to 
^part at once from mxne of tiieir indefensible practices. 

Edmund F. Trabue, Chairman, 
Chas. a. Andrews. 
John E. BBiNDunr. 

Note. — Mr. Trabue is not in exact accord with all the doetrines of tiie 
report, but is in accord with almost aU, and eoneara in its reeonuneadft- 
tions. His points of diff^wee are prindpally diowa in tte aaafysis of 
HvthoritioB appended. 



till 



ANALYSIS OF CASES RELATING TO SITUS 
Edmund F. Trabue 

Chairman Committee on Double Taxation and Situs for Purposes of 

Taxation, Louisville, Kentucky 

The question of sitvs is of great diflSculty, both because of 
inherent perplexity and of general misconception of the prin- 
ciples involved. It becomes then necessary to consider as well 
what m praetieable as what is sound theoretically. Also^ situs 
presents a question of constitutional, or private international, 
law. 

A state can tax only that which is theoretically within its 
territory; Lou. etc. Ferry Co. vs. Kentucky, 188 U. S. 385; 
Del L. & W. B. B. vs. Penn., 198 U. S. 341 ; U. B. Tram. Go. 
vs. Kentucky, 199 U. S. 194. In the Ferry case, the question 
A^ as declared one of Due Process, but in the Transit Co. case, 
Hkdmes, J., (199 U. S. 211) said, although concurring in the 
result, **but I hardly understand how it (result) can be de- 
duced from the 14th amendment." Probably the question is 
one of private international law rather than one of due process, 
but the result is the same. Because of the constitutional (or 
private international) question, it would seem to follow that 
property can have but one situs, and that the domicile of those 
interested therein cannot be rightfully regarded as controlling 
on the question of situs^ likewise, inasmuch as taxes are 
payable out of income, the situs of the property and not the 
domicile of the owner ought to fix the situs for taxation. 

Property, as such, should be taxed only once. If taxable 
twiee, it might with equal propriely be taxed an unlimited 
number of times. All manifold taxation is consequently de- 
structive of equality, and without equality taxation becomes 
arbitrary exaction or spoliation. 

It has been long agreed that reid estate is taxable solely in 
the place of location ; and it is now settied that tangible per- 

[12] 



scmal property is so taxable. The remaining difficulty is with 
r^erence to intangible personalty. 

(a) If the principal opinion in Wheeler vs. Sohmer, 233 U. 
S. 434, 439, were supi>orted by a majority of the judges, nego- 
tiable seeurities, such as bonds, bills of exchange and the like, 
would be taxable where located, as are lands and tangible per- 
sonalty, for the principal opinion declares, (p.439), ''But 
. . . bills and notes, wliatever they may be called, come 
very near to identification with tiie contract that tiiey embody. 
An endorsement of the paper carries the contract to the en- 
dorser. An endorsement in blank passes the debt from hand 
to hand, so that whoever has the paper has the debt. ... It 
is not primitive tradition alone that gives tiieir peculiarities to 
bonds, but a tradition laid hold of, modified, and adapted to 
the convenience and understanding of business men. The 
same convenience and understanding apply to bills and notes, 
as no one would doubt in the ease of bank notes, which tech- 
nically do not differ from others.'' 

It would seem to follow logically from the enunciation just 
quoted that the situs of all securities passing by delivery, or 
delivery after endorsement, would be the place of their actual 
location and no longer that of the domicile of their owner; but 
such opinion is simply the language of ^Ir. Justice Holmes, 
concurred in by only three of this colleagues, and is repudiated 
by five justices of tiie court 

It is, therefore, probably still open to legislation to locate 
the situs of such securities at the domicile of the owner, or at 
the place where the securities originate when they are the 
product of a definitely located business. 

See, also, Buck vs. Beach, 206 U. S. 392, and the elaborate 
concurring opinion of Mr. Justice McKenna, in Wheeler vs. 
^ohmer, (233 U. S. 441), and cases there reviewed. 

(c) littie difficulty exists over situs as to credits, open ac- 
counts, bills receivable, etc., not having already taken the form 
of obligations deliverable, or deliverable after endorsement. 
Assuming these to be property, they would seem to be the 
property of the owner, and having no snbstanee which could 
give an actual location, but being unsubstantial or ideal, they 
have for convenience or necessity taken the owner's domicile 

[13] 



as a siius. Such siiw, however, appears to rest upon grounds 
less substantial than those locating the situs of tangible prop- 
erty, because they are not protected by government, i. e., not 
by government police. True they are assured by judicial pro- 
ceeding but so are bonds and notes negotiable* Having, th^ 
no aetnal location but one based upon construction or fiction, 
their situs may yield to conditions. Accordingly, although 
accounts or credits would have their situs, generally, at the 
owner's domicile they might obtain a situs accruing from an 
established business; JV^. O. vs. Stem pel, 175 U. S. 309; Bristol 
vs. Washington Co., 177 U. S. 133 ; Board vs. Comptoir etc, Co., 
191 U. S, 388; Met. L. I. Co. vs. N. 0., 205 U. S. 395. It would 
therefore seem to follow that, where strictly intangible or 
ideal property gains a situs distinct and different from the 
place of the owner's domicile, it cannot be taxed elsewhere than 
in such situs, and that to tax it elsewhere offends the constitu- 
tion. In Cam. vs. West India etc. Co., 138 Ky. 828, (129 S. 
W. 301), the owner's domicile was Kentncky, bnt the business 
out of which the credits grew was transacted in Cuba and 
Porto Edco. Its money was earned and left there, and its 
accounts dne and payaUe th^. The county conrt (^e initial 
assessor) held the accounts taxable, bnt the cash non-taxable, 
upon appeal to the circuit court both were held non-taxable, 
which was affirmed. The question determined was the un- 
oonstitntionality of See. 4020, Ky. St, taxing the personal 
estate of Kentucky corporations, whether in or out of the state^ 
including intangible property. The court said that (p. 829) 
*'if the statute is constitutional, the property is taxable here," 
and cited the B. Case, 199 U. S. 194, to prove the statute 
unconstitutional. 

The court, arguendo, (p. 830) cited Com. vs. Dim & Co., 126 
Ky. 108; 102 S. W. 859; 10 L. R. A., N. S., 920; as holding 
that money and aeconnts aeeumnlated from business transacted 
in Kentncky were taxable there although the owners were 
non-residents, saying that such property was not temporarily 
in the state, but established there, and that "its business re- 
ceived the same protection as the business of the oii^xm nnder 
the laws of the state, and should be (M>mpelled to share equally 
the burden. The obligation to pay taxes for the support of the 

[U3 



govemm^t arises from the fact tibat it is nnder the protection 

of the government." Again, the court quoted from Higgins 
vs. Com., 126 Ky. 211; 103 S. W. 306, Where notes iiad been 
held taxable, although belonging to a non-resident because in 
the hands of a resident fidndaxy for invertmeat and rdnvest- 
ment," (138 Ky. 831), '*and it is generally recognized that 
tangible personal property has an actual situs at the place 
where it is located without respect to the domicile of the owner, 
whereas tihe s&us of intangible personal property for purposes 
of taxation depends altogether on legislative enactment, or 
judicial construction. , . . For many purposes the domicile 
of the owner is deemed the situs of his personal property, but 
tiiis is only a fiction frran motives of ocmv^^ee^ and is not 
of universal application, but yields to the actual situs of the 
property when justice requires that it should, and is not al- 
lowed to be a controlliiig feature in maimers of taxation. " The 
court eondnded (p. 834), ^^If it (the intamgible property) 
could be taxed there (Cuba and Porto Rico) and elsewhere, it 
would be twice taxed. It cannot be taxed here unless within 
the jurisdiction of the state under the rq>eated decisions of 
thfe United States Supreme Conrt No practical durtmction 
can be drawn between the money of the company in its ofSee in 
Cuba or that deposited in a bank there, or that due on its 
books for its product which has been sold and not paid for. It 
is all emj^yed in 1b& bomness in Cuba or Porto iUoo« It has 
its situs there. It has no situs in Kentucky. 

Note that the statute under review in the Kentucky cases 
(Sec. 4020) expressly provided for taxing the property in 
question; in the West India case it was hdd nneonstitiitional 
because the situs was determined not to be in Kentucky, and 
the Court's decision was predicated upon its construction of 
the cases decided by the United States Supreme Court. Situs 
is thus made by the eourt a qnertum of constitational law. 
Also, the decision that the intangible property of the corpora- 
tion cannot be taxed in Kentucky, the domicile of the owner,, 
demonstrates that it can be taxed only where the business is 
carried on and the property has aaeraed, fw, if k could be 
taxed elsewhere, it would certainly be taxable at the owner's 
domicile, i. e., in Kentucky. This decision therefore implies 

[Iff] 



itm negation of tiie existence of more than one situs. Con- 
sequently, if it be sound upon pronciple, no legislation can con- 
stitutionally create another sitiLS nor tax property elsewhere 
than at its legal siti^ 

The principle of the decision seems to ns sonnd, hut it has 
not always been adhered to in the decisions of the courts. This 
would appear in considering; the taxation against the stock- 
holder of capital stock of corporations. 

In the later case of HiUman L. & L. Co. vs. Com., 148 Ky. 
331, S. W., the land company transacted a losing business, and 
its money sent from its home office in I\iissouri to defray ex- 
penses in Kentucky was held non-taxable in Kentucky^ al- 
though moneys collected there had been sent to Missouri, it 
being ruled that the money sent for expenses was temporarily 
in Kentucky, and not a part of the profits of the business. The 
conrt cfurefolly excluded the inference that the case would have 
been similarly dedded had the mon^ in qnec^on hem a part 
of the profits of the business ; and in reaching its decision the 
court reviewed and reafdrmed its previous decisions, and ex- 
pressed approval of the supreme conrt cases hereinbefore men- 
tioned, and of Liv. & Lon. etc. Co. vs. Board, 221 U. S- 346. 

In Com. vs. Prudential Life Ins. Co., 149 Ky. 380, 149 S. W. 
836, the proceeding was by a back tax collector to tax cash on 
hand and cash on deposit The defendant was a foreign cor- 
poration. The statute provided for taxing all p^igonal prop- 
erty within the state whether owned by citizens or non-resi- 
dents. It was held that premiums collected in Kentucky, and 
on hand, or deposited in bank awaiting remittance to another 
state in usual course of business, had no such situs within Hie 
state as to be taxable there; but that where the money arises 
from a business transacted by an agent or fiduciary within the 
state by loaning it, investing it, collecting interest on it, and 
the like, or when it is l^e aceunmlalion or income from a busi- 
ness done in the state, or has been permanently placed on de- 
posit, it is taxable. The Court said concerning the instant 
ease and HiUman L. & C. Co. vs. Com., (p. 386), ''In neither 
ease did ^e owner by Ms conduct in relation to it^ (money) , or 
his manner of doing business with it, giv^ it what may be 
termed a permanent situs in Kentucky." 



The discriminating feature in the Hillman and the Pruden- 
tial cases was the temporary or transitory condition of the 

money. 

See, also, Com. ex. rel. vs. Ky. Dist. & W. H. Co., 143 Ky. 
314, 136 S. W. 1032. Here it was held that the storage ae* 
cruing upon whiskey in Kentucky warehouses of a New Jersey 
corporation, having an office in Kentucky for transaction of 
its Kentucky business, is taxable in Kentucky, the storage 
arudng ont of business done in Kentucky. 

See, also, In Be Enston, 114 N. Y. 170, 181; 3 L. R. A. 464. 
In Re Branson, 150 N. Y. 1, 34 L. K A. 238; 55 Am. St. Rep. 
632; and Lockwood vs. U. S. Steel Corp. 103 N. E. ilep. 697. 

The Liv. 4& Lon. ^c, ease involved the powar of a state to 
tax premiums on insurance due by resid^ts to a non-resident 
company, which had been extended but not evidenced by 
written instrument, and the constitutionality of a state statute 
taxing them. The insurance company cmed to eancel the assess- 
ment, and was defeated. The statute provided for assesdng 
cash, open accounts, credits, etc., etc., expressing the intent 
that no non-resident should transact business in the state 
without paying a tax corresponding to that exacted of its own 
citizens, and the state court construed the act as designed to 
do away with discrimination theretofore existing against resi- 
dents. The court declared (p. 353) ''The indebtedness had its 
origin in the course of busluess transacted by the foreign cor- 
poration in Louisiana under the laws of that state. ... In 
both cases (notes given for loans on policies and notes given 
for premiums) the obligations to pay would represent returns 
to the corporations ui>on business conducted witMn the state ; 
. . . Nor would the power to tax depwd on the presence of 
the notes within the state. (Citing 205 U. S. 395; 177 U. S. 
133.) The notes, in these cases, (cases cited) had been removed 
to the creditor's home; and, despite this removal, they were 
attributed to the place of origiu^ . . . The 'checks' " in 
Board of Assessors vs. Comptoir National, supra, were only 
memoranda of indebtedness or vouchers." Further, the court 
said; (p. 354) "When it is said that intangible property, such 
as credits on op^ aceonnt, have their situs at Ihe creditor's 
domicile, the metaphor does not aid. Being incorporeal, they 

tl7] 



can have no actual situs. But they constitute property; as 
sueh they must be r^arded as taxable, and the question is one 

of jurisdiction." 

*'The legal fiction, expressed in the maxim Mobilia sequuu- 
tur personam, yields to the fact of actual control elsewhere. 
And in the ease of credits, though intangible, arising as did 
those in the present instance, the control adequate to confer 
jurisdiction may be found in the sovereignty of the debtor's 
domicile. The debt, of course, is not property in tiie hands 
of the debtor; but it is an obligation of the debtor and is of 
value to the creditor because he may be compelled to pay ; and 
power over the debtor at his domicile is control of the ordinary 
means of enforcement. Blackstone vs. Miller, 188 U. S. 205, 
206. Tested by the eriteria afforded by the authorities we have 
cited, Louisiana must be deemed to have had jurisdiction to 
impose the tax. The credits would have had no existence save 
for the permission of Louisiana ; they issued from the business 
transacted under her sanction within her borders; the sums 
were payable by persons domiciled wiHiin the state, and there 
the rights of the creditor were to be enforced. If locality, in 
the sense of subjection to sovereign power, could be attributed 
to these credits, th^ could be localized there;. If, as property, 
they coxdd be deemed to be taxable at all, they could be taxed 
there.'' 

This decision is simply an exposition of the principle of the 
Kentucky case of We^ India etc. Co. vs. Cam., but the opinion 
in it undertakes an exposition of the principle beyond that 
offered in the Kentucky case. It attributes the jurisdiction 
to tile soY^ignty of tiie debtw's domicile, which causes an- 
other complication. If the court had said only that the per- 
misiuon of Louisiana to transact the business (^ered tiiat gov- 
^nm^t protection which served as the compensation for the 
power to tax, the declaration would hav(i been satisfactory, 
but, when the court said ' ' power over the debtor at his dcmiicile 
is control of ordinary means of enforcement/* the court 
seemed to justify the power to tax in any state having the 
right to enforce the payment of the debt; and, as such an 
action is trancdtory, it may exist in any state, and, tiierefore, 

£18] 



in divers states, alf ording sundry jurisdictions to tax the same 
propertgr, a doctrine appearing to us highly objectionable. 

To us, it seems a sound principle tiiat the power to tax 
credits is in the sovereignty which protects the business out 
of wliich they accrue where such business is permanently lo- 
cated, and it was uxmeeessary to decide more in the Liv. & 
Lon. Go. case. The diss^t of MeKenna, J., in the Wheeler 
case, shows that power to tax was in the previous cases placed 
upon the principle that the situs depended upon transaction 
of business within the taxing state. The remart: in Liv. & 
Lon. etc. Co. case that ''power over the debtor at his domicile 
is control of the ordinary means of enforcement" suggests the 
decisions in C. B. I. & P. By. vs. Sturm, IT-l U. S. 710, where 
jurisdiction to garnish was held to exist at the dd>tor's domi- 
cile, a doctrine apparently enforced in Herbert vs. Bicknell, 
U. S. 70, but in the Sturm case the assertion of jurisdic- 
tion was coupled with the declaration that the jurisdiction 
was asserted through necessity, ''and it cannot be evaded by 
the insistence upon fieti(ms or refinements about situs or the 
rights of the creditor. Of course, the debt is the property of 
the creditor, and because it is, the law seeks to subject it, as 
it does other property, to tiie payment of his creditors," (p. 
716) . The opinion in ihe Sturm case seems to us, therefore, to 
impair, if not invalidate, as to taxation, the declaration that 
power over the debtor at his domicile is control of the ordi- 
nary means of eaEiforeement" The Sturm ease affirmed juri&^ 
diction to garnish and no jurisdiction to tax, nor the exist^ee 
of situs to tax, per contra, the court declared the jurisdiction 
to garnish irrespective of questions of situs to tax. The cas^ 
tharefor^ cannot be an authority on situs to tax. 

Blackstone vs. MiUer, 188 U. S. 205, 206> cited in the Liv. 
& Lon. Co. case, is an inheritance tax case. In that case the 
right of the New York authorities to impose and enforce an 
inheritance tax upon money in bank in New York bdonging 
to a non-resident, domiciled at the time of his death in Illinote, 
notwithstanding the entire inheritance had been taxed in 
Illinois, was adjudicated. The gist of the decision was tliat 
New York State had the ri^t to tax beeanse the enforcrai^t 
of the eoUeetion of a debt was depmdent up<m its courts. Also, 

[19] 



the United States sapreme oourt ree(^mzed the right of Ulin- 
(HS, as well as of New York, to tax the money ; saying (p. 204) : 
"To come closer to the point, no one doubts that succession 
to a tangible chattel may be taxed wherever the property is 
found, and none the less that the law of the situs accepts its 
mles of succession from the law of the domicil, or that by the 
law of the domicil the chattel is part of a universitas and is 
taken into account again in the succession tax there," (citing 
authorities). 

•'No doubt this power on the part of two states to tax on 
different and more or less inconsistent principles, leads to some 
hardship. It may be regretted, also, that one and the same 
state should be seen taxiog on tiie one hand according to the 
fact of power, and <m the other, at the same time, according 
to the fiction that, in successions after death, mobilia scquiintur 
personam and domicile governs the whole. But these incon- 
sistencies infringe no rule of cimstitutional law. Coe vs. Errol, 
116 U. S. 517, 524; Knowltan vs. Moore, 178 U. S. 41. 

"The question then is narrowed to whether a distinction is 
to be taken between tangible chattels and the deposit in this 
case. ... If the transfer of the deposit necessarily depends 
upon and involves the law of New York for its exercise, or, 
in other words, if the transfer is subject to the power of the 
state of New York, then New York may subject the transfer 
to a tax," (citing United States vs. Perkins, 163 U. S. 625, 
628, 629 ; McCuUoeh vs. Maryland, 4 Wheat. 316, 429. ) ' * But 
it is plain that the transfer does depend upon the law of New 
York, not because of any theoretical speculation concerning 
the whereabouts of the debt, but because of the practical fact 
of its power ov«> the person of the debtor. The principle has 
been recognized by this court with regard to garnishments of 
a domestic debtor of an absent defendant." (Citing Sturm 
case, 174 U. S. 710, etc.) "What gives the debt validity? 
Nothing but the fact that the law of the place where the debtor 
is will make him pay." Again, the court says, (p. 206), that 
the cases of tangible and intangible chattels are alike. 

That the question of situs is a federal question is shown by 
the supreme courts taking jurisdietion of a writ of error to 
state court ; see the cases cited supra. That the situs existing 

1203 



in one state excludes tiie power of another to tax appears from 

the decision in the Kentucky case of the West India etc. Co. ; 
but what becomes of the statement of the supreme court that 
two states may have jurisdietion to taxt We submit that this 
statement is ill-advised and unfounded. This appears by re- 
view of the cases cited in its support. 

In Blackstotis vs. Miller, the ratio decidendi was that New 
Toik had the sUus of the deposit, because recourse to its courts 
for recovery was essential. No question of Illinois' right to 
tax was involved. It was unnecessary to pass upon the Illinois 
right, so conmient upon it was obiter. It sufficed to decide 
that previous taxation in Illinois did not destroy New Toil's 
right, if the latter ^sted. 

Again, for the court's assertion that ''these inconsistencies 
infringe no rule of constitutional law, ' ' it cites Coe vs. Errol, 
and Knowltan vs. Moore, as said supra, and in Coe vs. Errol, 
the property taxed was logs, and all that was decided was, (p, 
524) ^*If the owner of personal property Avithin a state resides 
in another state which taxes him for that property as part of 
his general estate attached to his person, this action of the 
latter state does not in tiie least affect the right of the state in 
which the property is situated to tax it also. ' ' That this fails 
to sustain the assertion in Blackstone vs. Miller must be ob- 
vious, for the right of the state of the owner's domicile to tax 
the logs was not considered, but the ass^on in Coe vs. Errol 
was simply that the act of the domiciliary state could not 
affect the right of the state of location. Undoubtedly, this 
would be true. The contrary would permit the domiciliary 
state to determine the question r^ardless of the rights of the 
state of the property's location. Blackstone vs. MiUcr is, 
therefore, not supported by Coe vs. Errol in the declaration 
quoted. 

Indeed, exactly the reverse of the doctrine as qudted from 
Blackstone vs. Miller is established in the U. R. Transit case, 
199 U. S. 194, for it was there held that the state of the own- 
er's domicile could not tax the cars which had actual situs 
dsewhere. To cite Coe vs. Errol, th^fore, as authority to 
the proposition that tangible property could be taxed both at 
the owner's domicile and the place of its location, is inde- 

[21] 



fensible in view of the principle adjudicated in the TJ. B. T. 
case, (199 U. S. 194). 

We have, therefore, the decisions in the U. E. Transit case 
and the West India OU Co. case holding exactly the reverse of 
the doctrine dedneed from Blackstone vs. Miller, and the court 
in the latter case treated the deposit as it would have treated 
a tangible chattel for the purposes of the ease 's decision. 

In Knowlton vs. Moore, 178 U. S. 41, 56, the duplicate taxes 
or taxation by two sovereignties under consideration were 
taxes by the state and by the United States ; the question was 
therefore radically different from that of taxation by two 
different states. The f eda^ right to tax did not show situs 
in a state different from tiie state which also taxed. 

With great diffidence, therefore, we take issue with the state- 
ment quoted supra from Blackstone vs. MiUer; and we think 
that two states cannot enjoy the situs to tax. 

We find then that realty and tangible personalty are taxable 
where located and not otherwise, and that bonds, bills of ex- 
change, and other securities, passing by delivery or delivery 
after endorsement, credits^ oi>en acconnts, and bills receivable, 
existing withont evidence in writing, and consequently un- 
substantial and ideal, may be declared taxable at the domicile 
of the owner, or may acquire a situs at the place of their origin, 
when they arise out of transactimis connected with a perma- 
nently located business, and in sach cases as Blackstone vs. 
Miller we are informed that the same rule locates a mere debt 
unconnected with any business, because the debt is uncollect- 
ible without recourse to the courts of the state of the debtor's 
domicile. How far the rule last mentioned would be pushed 
if the debtor were caught and sued in several states and each 
daimed the right to tax upon the ground that aid of its courts 
had been invoked to collect the debt, quaere. 

Assuming, however, that the debtor's domicile locates the 
situs of the debt for taxation because the courts of the state of 
such domicile must, or ordinarily would, be called upon to en- 
force the debt^ it does not fcdlow that the state of the creditor's 
domicile or any other state could also daim the situs of the 
debt for purposes of taxation; sed contra, such other states 

£22] 



would seem upon the authority of the Z7. B. Trans, case and 
West Indian Oil case to have no such right. 

In the U. B. Trans, case tangible property, freight cars, 
were involved, and in the West Indian OU case intangible 
property, or credits, accounts^ etc., were involved, and Ike 
conclusions of the courts were the same. 

Again, the opportunity and obligation of governmental pro- 
tection suggests the ri^ht of taxation as to material property 
within the taxii^ territory, but tiie mere obligation to enforce 
recovery rests equally upon divers states. Nevertheless, as 
between the state of the debtor's domicile and that of the 
creditor's, it is difficult to give preference to the latter except 
for convenience. 

Frankfort vs. Ill Life Ins. Co., 129 Ky. 825, following Com. 
vs, iV. 17, Mut. Life Ins. Co,, 107 S. W. 233, and distinguishing 
the Higgins and Dun & Go. cases is interesting hera It was 
there hdd tiiat securities wrongfully hdd by the state treas- 
urer, owned by a life insurance company, were not taxable 
in Kentucky. 

In this connection cases on taxation of mortgages in tiie 
state of tiie mortgaged property's location are pertinent. In 

Frankort vs. Fidelity Trust etc. Co., Ill Ky. 667, 64 S. W. 
470, it was held that neither the interest of non-resident bond- 
holders nor resident trustees of deed of trust was taxable upon 
Hie value of tiie mortgage upon real estate in Kentui^, al- 
though the court recognized Kentucky's right to tax it, if the 
legislature decided to do so, saying (p. 678) : "And until the 
legislature haa by a statute given a sUus to mortgages owned 
by non-residents as property within the state, there is no 
occasion for the courts to depart from the long-recc^nized rule 
in this state to tax mortgaged real estate to the mortgagor, and 
the mortgage itself, when owned and controlled by a non- 
resident of the state, as personal property, to be taxed, like 
Other ehoses in action, at the domieile of the creditor/' 

The court had reviewed divers cases, including 8av. etc. Co. 
vs. Multnomah Co., 169 U. S. 422, distinguishing it upon the 
g^ronnd that the Or^n statute there involved expressly taxed 
the mortgage interest to the mortgagee in Oregon. 

£23] 



A similar principle was expounded in Com. vs. N. W. Muf. 
Life Ins. Co. of Wis., 107 S. W. Eep. 233, (32 U. 796), 
where a back tax colleetor attempted to list in Kentaeky notes 
due from citizens of Kentucky, and secured by mortgage on 
Kentucky land to a foreign Insurance Company 

Distinguishing previons decisdons, the court said that it was 
not daimed that Hie money of the company was sent to Ken- 
tucky to be lent out, nor that the company ever had the money 
in Kentucky; but that it merely loaned money to Kentucky 
citizens, who gave notes and mortgage securing them; the 
papers being kept at the company ^s Kentudcy office, ^'presom* 
ably for purposes of collection when due." 

*^That the situs of such personal property as choses in 
actions may be fixed by statute at a different place than the 
residence or parson of its owner, is clear^ sustainable. But 
in the absence of legislative action, the legal fiction mohilia 
sequuntur personam prevails. ... (p. 798), Until the 
situs of such personal property is changed so as it may be 
l^ally within this state, it is not here for the purposes of tax- 
ation. The situs of such movable personal property as choses 
in action is, and, at the time of the adoption of the constitu- 
tion, was idmtical with that of the person of the owner. It 
was not property ' ''within this state" ' under the law, and 
until the law changes the situs^ as it may do by legislative 
enactment, it continues to be property not within this state. 
Whether the legislature should make the change is a question 
of governmental policy," etc. 

In 8iw. 8oc. vs. Mtdtnomah Co., supra, an Oregon statute 
taxing in the county where the land lay, the non-resident 
mortgagee's interest therein was held not to conflict with the 
14th amendment. 

The statute (p. 424) authorized deduction from the mort- 
gagor's assessment of the amount of the mortgage debt, and 
did not ''provide for both taxing to the mortgagee the money 
secured by the mortgage^ and also taxing to the mortgagor the 
whole mortgaged property." 

Again, (p. 425) ''the personal obligation of the mortgagor 
to the mortgagee was not taxed at all. The mortgage and the 
debt secured thereby are taxed, as real estate, to the mortgagee 

[24] 



, . . and only so far as they represent an interest in the 
real estate mortgaged." 
It se^os dear, th^:^r^ that tibe interest of 1^ mortgagee 

in the mortgaged land as a security for his debt is but an in- 
terest in the land, and that the state where the land lies may 
tax it just as it may tax any otiier interest in land whether 
fee simple, particular estate remBmdeat or reveisian. Also^ 
it is usual to tax the land to the mortgagor and the debt to 
the creditor, and at the latter domicile, when not located 
elsewhere by circumstances hereinbefore discussed. The so- 
ealled change of ^itm by l6gudati<»i, tberafore, must not be 
understood to mean anything more than that the legislature 
may tax to a non-resident mortgagee the interest which he has 
by reason of his mortgage in land where it is located. Whether 
or not the state wim^ ibe land lies may tax the debt at aU, is 
not decided in the cases cited. Legislation, therefore, taxing 
the mortgagee's interest does not change the situs of the debt. 
The taxation was denied in the J^entud^ cases, and, where 
it was reeognized in the Supreme Court ease, tiie amount, or 
value, of the mortgage was deducted, as is above indicated, 
from the amount assessed to the mortgagor. It does not, there- 
fore, even appear what would be decided if the state where 
the land lies assessed the land to the mortg^^r, and the vmct- 
gagee's interest tiierein to tiie mortgagee. 

Akin to taxation of credits is the taxation against the share- 
holder of the capital stock of corporations. The principle 
is not identical in botih cases, for the ownerriiip of stock is 
essentially the ownership of Hie corporation's assets, although 
artifically assuming a different form. 

The theories of the courts on taxing capital stock are con- 
fiidii^. Also, the tiieories of some states . are based upon an 
ineomdstency, e. g., some states tax against the stod^oldw fhe 
value of his stock in the corporations of another state but ex- 
empt the stock in corporations of the home state. Such stock 
IS taxed upon the anumption that it constitutes '^property," 
and that all property'' within the state is required by the 
constitution to be taxed unless specifically exempted; see 
Ky. St. Const. Sec. 170, If, however, stock be ''property," 
tbm it must be taxable wh^;h^ in a Pmk&k or a heme oor- 

[25] 



poratioiiy for the stoek is as distmet from the corporation's 

property in one case as in the other. The taxation, therefore, 
of stock in a foreign corporation, while exempting the stock 
in a home corporation, is an unconscionable spoliation based 
solely npon might. The discussion by the courts of the sabje^ 
is illnstrated by Cam. vs. Walsh's Trustee, 133 Ky. 103, 111 ; 
Com, vs. Peebles, 134 Ky, 121 ; Com, vs. Lou. Gas Co., 135 Ky. 
324 ; Com. vs. Ledman, 127 I^. 603, 106 S. W. 247 ; Sturges 
vs. Carter, 114 U. S. 51L 

In the Ledman case the Traction Co. had no property except 
the stock of the Railway Company, and the latter paid taxes 
on all its property, and it was held that the stockholder of the 
traction company was exempt under Ey. Stat 4088, ecempting 
stockholders where the corporation itself pays taxes npon its 
property. The decision was that, the traction company hav- 
ing no property independently of the railway's property, its 
stockholders w^ not assessable, all the corporate 'property 
being assessed md the taxes paid. 

In the Peebles case it was held that stock in a foreign cor- 
poration might be taxed in Kentucky; also, that, where the 
sfeo^ was held by an exeeator of the stockholder, the situs for 
taxation was the place where the execntor was appointed and 
not where he happened to be, nor where he kept the certificates 
of stock. See, also, Com. vs. Lou. Gas Co., supra. 

In the Walsh case the decision was first in favor of taxing 
tile stoek in hands of the stockholder, but the decision was 
afterward withdrawn. The stockholder held stock in the W. 
V. Tel, Co., which paid to Kentucky a franchise tax upon 
$1,000,000.00 exactly 1% of its total capital The question 
was whether or not the stockholder was exempt because the 
corporation paid a franchise tax, Sec. 4088 providing for the 
exemption of stockholders where the corporation paid a tax 
on its franchise. The gist of &e dedmon first made was that 
1% of its property was a negligible quantity, a proposition 
asserted upon authority of the case of Sturges vs. Carter, 
supra; but this decision was withdrawn, and it was held that 
the stockholder was exmpt nnder the statute because the cor- 
poration paid a franchise tax in Kentucky upon its property 
in Kentucky. It must be admitted that the decision first made 

[26] 



and afterward withdrawn in the Walsh case was supported 
by Sturges vs. Carter, (sec. 114 U. S. 521), but it would prob- 
ably be of little value to review this old case. 

A prominent instance of taxation of both the corporate 
property and the shares in the hands of its stockholders is the 
ease of a national bank: Van AUm vs. Assessors, 3 Wall. 573, 
583. The court said, "but, in addition to this view, the tax 
on the shares is not a tax on the capital of the bank/' 

In Farrington vs. Tenn., 95 U- S. 679, 687, cited in Sturges 
case, it was esqpressly dedared oonceming a state bank, ''the 
capital and the shares may both be taxed, and it is not double 
taxation/' 

If taxed, the aiiares may be taxed at the shareholder's 
domicile or at the corporation's domicile. Both have be^ 
done. Nevertheless, they should be given a definite situs. 
They do not exist in two different states. Convenience sug- 
gests the corporation's domicile. Also, adopting the latter 
insures taxiii^ all the scares, instead of only such as can be 
caught. Undoubtedly, too, the taxation of the shares at the 
domicile of the corporation, where its own property is taxed, 
emphasizes the existence of double taxation^ and the propriety 
of discontinuix^ the taxati<m of shares. 

Inheritaaice Taxes 

Inheritance taxes dand upon a different footing from prop- 
erty taxes. They are levied not upon own^reMp of property, 

but upon its succession. 

^ ' Taxes of this general character are universally deemed to 
relate not to property, co nomine, but to its passage by will or 
by descent in cases of intestacy as distinguished from taxes 

imposed upon property, real or personal as such, because of 
its ownership and position." Knowlton vs. Moore, 178 U. S. 
41,47, 

The theory of inheritance taxation is that it is not fettered 
by the constitutional limitations imposed upon the taxation 
of the property of an individual, but that the state has abso- 
lute dominion over Hxe property of a deeed^t and over its 
devolution, and may impose such tax as it may please before 

[27] 



p^nrmittmg the deeedeat's property to pai^ to living persons, 
and may designate the persons to take. 

Whether or not the doctrine be sound upon which inherit- 
ance taxes are imposed unlimited by the constitutional restric- 
tions upon gaieral taxation, quaere. Black vs. State, 113 Wis. 
206, 216, 218, 224, 228; 89 N. W. iElep. 526; Nunnemacher vs. 
State, 129 Wis. 190; 108 N. W. Rep. 62 718. It is not clear 
that because a state may regulate the devolution of a deced- 
ent's property it may confiscate it. Sueh r^iilation is a gov- 
ernmental necessity, and is based upon a principle akin to the 
police power. The. right to r^ulate is certainly not the right 
to coniiscate. 

AsBoming, however, tiiat the nght to tax inheritances be 
virtually unlimited, such riglit seems properly confined to the 

state having the authority to direct the devolution of title, for 
it is such state that possesses the omnipotence which is tlie 
basis of the right to tax. We have seen, thou§^ from Black- 
stone vs. Miller that the right to tax is recognized as existing 
in other states as well, although such other states look to the 
state directing the devolution for the terms of devolution. The 
adjudieatum of the existence in such other states of the right 
to tax also seems to stand upon some theory of situs, or actual 
presence of the property in the latter states, but there appears 
no basis for such theory for only one state can possess the 
power of devolution upon which the right to tax inheritances 
is based. Clearly, therefore, we think, legislation ought to 
limit the right of taxation, and limit it to the state of devolu- 
tion of title, and not permit any state which may have no right 
to tax, except that it has the opportunity to exercise its might 
irrespective of right, to impose an inheritance tax. Nor should 
the necessity of resort to the laws of another state to recover 
property there constitute the basis of a right in such state to 
tax an inheritance. Such right of resort to courts is a right 
generally accorded by states tibrough comity to citizens of 
other states, and such right is generally reciprocated, and is 
not in other instances regarded a^ any basis for taxation nor 
as establishing a for taxation, even if ritus in any sense 
were applicable to inheritance taxes. It ought not, therefore, 

£28] 



to be held that more than one state had the right to tax in- 
heritances. 

The devolution of property must be, and is, controlled by 
a single state. Gen^dly personal property devolves aeeord* 
ing to the law of the owner^s domicile, but real property ac- 
cording to that of its location. If, therefore, the state's right 
to tax inheritances, or the transmission of inheritances, de- 
pends upon its right to direct the devolution of the prop^i^i 
only one state can have such right to tax. If the state of land's 
locality has the right to direct its devolution, such state may 
tax, and no other state has or should have the right to tax. 
likewise, if the devolutimi of personal property be according 
to the law of the state of the domicile, such state only should 
have the right to tax. It seems inconceivable that two states 
should have the right to tax personalty, and only one the right 
to tax realty. The whole domain of controversy se^tns, there* 
fore, to hinge upon the question of situs and pwperty, like a 
person, can have but one situs. 

Of course, taxation by a state is no bar to federal taxation, 
both governments having concurrent* and neither having ex- 
elusive, dominion or jurisdiclion. 

BaUroad BolUng Stock 

The taxation of railway rolling stock is now pretty well 
settled, and probably contoctty so settled. Such movables 

roam over the United States, and the only practicable way to 
reach them is to apportion them according to some unit, such 
as milea^. Suqh apportionment is upheld upon the theory 
tiiat the proportion determined is actually in the particulair 
state levying the tax, thereby instituting a computation by 
approximation. 

Soiling stock, although not stationary in any place, is, 
nevertheless, not toxable at tJie owner's domidle, wh^ it never 

reaches such domicile, but is permanently absent therefrom. 
U7iion B. T. Co. vs. Ky,, 199 U. S. 194. 

Where such rollii^ stock is owned by a railroad company, 
it is treated as pMt of the plant composed of the railroad to 
widch it is attached and its rolling stock. Where such rail- 
road extends through more than one state it becomes necessary 



to apportaoB it among the states, and, inasmtieh as it is im- 
practicable to locate any part of the rollmg stock in any of 
the states, the apportionment is made according to approxi- 
mation, more or less arbitrary, and based upon mileage of the 
railroad in a state 

Fargo vs. Hart, 193 U. S. 490, 496, 500; Union T. Co. vs. 
Krj., 199 U. S. 194, 206; State Railroad Tax Cases, 92 U. S. 
575, 698; PuUman etc. vs. Penn., 141, U. S. 18; Pitts, etc. By. 
vs. Backus, 154 U. S. 421, 430 ; Adams Exp. Co. vs. Ohio, 165 
U. S. 194; 166 U. S. 185; Am. Bef. T. Co, vs. Hall, 174 U. S. 
70, 78 ; etc. 

This approximation, although somewhat actually arbitrary, 
is, nevartlieless, theoretieally based upon the presumption that 

the rolling stock is actually located in each state in proportion 
to the mileage of its owner in such state. Rolling stock in one 
state is, therefore, theoretically, not taxed in another; cases 
dted, mpra, sed. vide, N. Y. C. B. B. Co. vs. MiUer, 202 U. S. 

584. 

Cases cited supra. 

"Where the owner has no railroad, to which the rolling stock 
can attach and compose together mth it a plant as a unit, 
other methods of taxing it are adopted. Am. Bef. Co. vs. HaU, 

174 U. S. 70 ; Union etc. Co. vs. Lynch, 177 U. S. 149, 

Taxation of Ships 

The taxation of ships has be^ comparatively recently elab- 
orately discussed in Old Dom. 8. 8. Co. vs. Virginia, 198 
S. 299 ; Ayer & Lord Tie Co. vs. Kentucky, 202 U. S. 409, and 
Sou. Pac. Co. vs. Kentucky, 222 U. S. 63. 

The gist of the dedsions in these eases was that the vessels 
were taxable in the state of the domicile of the owner, except 
where they had acquired a permanent situs in some other 
state by reason of tiieir permanent, or continual use there. In 
fhe Old Damimon case, the vessels had acquired such a situs 
wholly within a state, but in the other two cases they had not 
These decisions are really based upon the same principle as 
Ufi4an jB. T. Co. vs. Ky., because they distinguish between the 
nature of railroad rolling stoek and that of vessels, the former 
being confined to well defined lines of rails, while the latter 

[30] 



roam all over the seas without definite course, and making 
port only as an ineident to the voyage. The principle, may, 
therefore, be said to be established that vessels take the situs 

of the domicile of the owner with the exception just noted. 

Again, the principle thus expounded is really in accord 
with that generally based np<»L the fieti^m mabUM sequuntwr 
personam, because the situs thus acquired by relation to the 
owner's domicile is established through necessity, there being 
no permanent location of the vessels elsewhere so as to obtain 
another situs. 

It thus appears that although siius generally involves a 

question of constitutional, or private international law, never- 
theless there is room for valuable work through legislation in 
the solution of the vexed questions which now perplex the 
courts, grievoody disturb budness, and often woric wicked in- 
justice. 

Edmund F. Tbabue. 



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