a year on its invested capital, and the only | legislation. It singles out corporations and reasonable inference is that they were main-joint-stock companies and selects that part taining the corporation and carrying on its of their intangible property named and dework for the "profit" or gain afforded there- fined in the act as "corporate excess" and by and not for pleasure or charity. By the imposes a special tax thereon at a flat rate terms of the articles of agreement on which established by statute, which tax is paid dithe certificate of incorporation was issued, rectly to the State Treasurer. This expres"the objects for which the company is form- sion "corporate excess" is in our law a new ed and the nature of business to be transact- designation and classification of property, ed by it" expressly include the purchase and but it is in express terms "property," and as holding of shares of capital stock; that is, its name implies, a kind of property peculiar the incorporators at the beginning of their to and belonging only to corporations and enterprise described what the traction com- joint-stock companies or associations. The pany has since done, as the transacting of general classification of corporations liable to business and such business as one of the pur- this tax is effected by the use of the language poses for which the corporation was formed. "every corporation * carrying on But of course their definition of the term business for profit in this state." From this "business" is not decisive of the issue now general classification trust companies, banks, raised. The question for for consideration banking associations, and public service cortherefore, as narrowed, is: Do the acts and porations are excepted for various reasons, activities of the traction company carried on chiefly because they are taxed by other methby it in 1912 in this state constitute the "car- ods, some of them by taxes on their business rying on business" within the meaning of receipts rather than on their property. But the Tax Act of 1912? these exceptions do not affect the purpose of

And first, what is meant by the term "busi- the general classification. The classification ness"?

In Re Alabama & Chattanooga R. R. Co., 9 Blatchf. 390, 397, Fed. Cas. No. 124, Woodruff, J., says:

"In its broadest sense, the term 'business' includes nearly all the affairs in which either an individual or a corporation can be actors. Indulgence in pleasure, participation in domestic enjoyment, and engagement in the offices of merely personal religion, may be exceptions, in the case of an individual. But the employment of means to secure or provide for these would, to him, be business; and, to a corporation, these exceptions can have no application. The conduct of any and all of the affairs of a corporation is business."

In this broad sense it would not seem to accord with the facts to say that the said traction company is not "carrying on business." But the expression is, no doubt, frequently employed with a somewhat restricted meaning, varying in this particular under differing conditions.

In People v. Commissioners of Taxes, 23 N. Y. 242, 244, after defining business thus "The word 'business' embraces everything about which a person can be employed," the court goes on to say:

points out and includes all the corporations, not especially excepted, liable to taxation in this way: If a corporation belongs to the class, it is not material if it shall appear that it has no "corporate excess," as it is the liability to a tax upon "corporate excess" which exempts the owner of shares of its corporate stock from taxation thereon.

By implication, in addition to the special exceptions referred to, all corporations not "carrying on business for profit in the state” escape liability for taxation for "corporate excess." This expression "carrying on business," and the similar one "doing business," have been frequently considered by the courts, and especially in relation to corporate business. It is said that about the time of the adoption of the federal Constitution there were only six corporations doing business in the United States, and that in 1910 nearly 262,500 corporations made returns under the corporation tax law of 1909. Their enormous growth in recent years, not only in number but in magnitude with their widely-extended and far-reaching business interests, with their large parent plants in one state, with their subsidiary plants and branch offices and numerous agents in other states, has been productive of many very important and difficult legal legal questions. Many of these cases have arisen in the attempt to enforce tax acts, particularly questions as to whether a foreign corporation is It is generally understood that the Tax taxable and to what extent when the "carAct of 1912 was the result of a somewhat rying on business" or the "doing business" prolonged investigation and study of the sub- is made the test of taxability. These cases ject of taxation by a commission appointed have often involved the question of double for that purpose and of a consideration of taxation when the business activities of a its recommendations by the General Assem- corporation were maintained in more than bly. Its aim is to effect a more scientific, one state. In many such cases the courts complete, and equitable system of taxation in defining "carrying on business" or "doing in this state than hitherto prevailed. The business" have made a clear distinction beportion of the act now considered is new tween those things which constitute the real

"No conclusion can be arrived at in this case, by following out the precise lexicographical meaning of these terms. The statute is to be interpreted, therefore, by the light to be obtained from its general scope and tenor, from other statutes in pari materia, and from a consideration of the evils and abuses at which it was aimed."

!

state, which satisfied that condition of the but for present purposes it is enough to note statute."

And Vann, J., in his dissenting opinion, said on the question of the corporation's "doing business":

*

that it was undoubtedly organized for the printo do, namely, to acquire the stock of the bankcipal object of doing just what it proceeded rupt, and to lend it money to carry on the operation of brickmaking under certain patents. This, in a few words, is the essential fact of the present controversy, and to state it is equivalent to drawing the conclusion. The Supreme Court of Pennsylvania and the Court of Appeals of the Third Circuit unite in deciding that, when a foreign corporation exercises its charter powers in the state, it is 'doing business' therein, and that it cannot recover upon contracts made in the exercise of such powers, unless it has complied with the provisions of the Pennsylvania statutes concerning registration and other matters."

66*

*

"It was not engaged in business in the state of New Jersey, where it was organized, for the election of directors and officers is not doing business within the meaning of the statute, but simply appointing agents to do business. * Some confusion has arisen from the peculiar nature of its business, which was not that of making, buying, or selling tangible things, or lending money, or rendering services to others, but was the investment of its own capital, caring for the investment, collecting, and dividing the proceeds. Thus it was, so to speak, an incorporated gentleman of leisure. While an individual who simply invests his money and On appeal to the Circuit Court of Appeals, collects the profits is not regarded as a busi- | the court said (172 Fed. 310–313, 97 C. C. A. ness man, there is no escape from the fact that 144, 147): the relator was a business corporation, engaged in business in some state, and as nearly *The proofs show the office of the every business act that it is shown to have ever company was in Reading, Pa. All of its direcdone, aside from some of the purchases of tors, with the exception of a formal Delaware stock, was done in the state of New York, I man, were residents of Pennsylvania. Its ofthink it was doing business in this state with-ficers all resided at Reading, and did their ofin the meaning of the statute." ficial acts there; its books and bank accounts were kept there; its bonds were registered at A material question in Colonial Trust Co. V. Reading, and were payable there; the money Montello Brick Works, 172 Fed. 310, 97 C. C. in question was paid at Reading, and the notes A. 144, was whether the United States Brick executed there. Out of $300,000 of available Company was "doing business" in Pennsyl-000 were thus advanced by it in Pennsylvania funds the Delaware Company had, about $267,vania. The case first appeared in the Dis- to the Montello Brick Works and by that comtrict Court, E. D. Pennsylvania, under the pany used in Pennsylvania in accordance with title "In re Montello Brick Works," 163 Fed. the wishes of the Delaware Company. It will thus appear this company was called into being 621. The certificate of the referee in the to do local Pennsylvania work. It had no purlast-named case states the material facts as pose to exercise its charter power elsewhere follows: than in that state, and it made no effort or pretense so to do. Everything it did was a local act and in fulfillment of the local purpose * * It is clear for which it was created. that all its operations were, as they were at all times intended they should be, a doing of business in Pennsylvania. Judged from the intent of all parties concerned and finding such intent emphasized by every proven act, we are clear that the undoubted purpose of every one concerned was to have this company do business in Pennsylvania.”

"The United States Brick Company was incorporated in Delaware. * **The United States Brick Company was composed almost entirely of residents of Berks and surrounding counties in Pennsylvania, and the greater part of its stock was held by these persons. It has an office in Wilmington, Del., which it used, together with a large number of other Delaware corporations, only for the purpose of holding annual meetings of stockholders. Under its charter it purchased nearly all of the stock of the Montello Brick Works, bankrupt, and a controlling interest in the stock of several other corporations in Pennsylvania and New York. This was practically all of its corporate purposes that it exercised either in this state or in any other, unless loans of money, to be referred to later, were an exercise of its corporate objects and purposes. *** Its meetings of directors were held in Philadelphia and Reading at the offices of the Montello Brick Works, the offices of the bankrupt. Its books were in the custody of its executive officers and clerks at said offices in Reading, Pa., and all the clerical work on these books was done there. It deposited its moneys in the First National and Penn National Banks and the Colonial Trust Company, all Reading banks. *** I find, in short, that, excepting the incorporation of the United States Brick Company, and the signing of the deed of trust by the company at Wilmington, Del., nearly all the things that the United States Brick Company did were done in Pennsylvania, and these things no more than have been hereinbefore found. I do not find that the United States Brick Company did anything in Pennsylvania, excepting to obtain and exercise control of certain Pennsylvania corporations, including the bankrupt, and to lend money to the corporation whose stock it owned largely or in part." McPherson, J., in deciding the case said: "*** The brick company has an omnibus charter, under which it can do many things;

These cases throw light on the two points whether a corporation is "carrying on business" or "doing business," and, if so, whether it is doing so in a foreign state.

See, also, the Pennsylvania Co. for Insurance on Lives v. Bauerle, 143 Ill. 459, 33 N. E. 166; Farmers' Loan & Trust Co. v. Lake St. El. R. Co., 173 Ill. 439, 456, 51 N. E. 55, and R. I. Hospital Trust Co. v. Tax Assessors, 25 R. I. 355, 359, 55 Atl. 877.

Under the caption Flint v. Stone Tracy Co., 220 U. S. 107, 31 Sup. Ct. 342, 55 L. Ed. 389. Ann. Cas. 1912B, 1312, known as the Corporation Tax Cases, because 15 such cases were heard together and decided by one opinion, the court very fully considered the question of what constitutes "carrying on business" or "doing of business" under the "corporation tax" law of the United States, approved August 5, 1909) (Act Aug. 5, 1909, c. 6, § 38, 36 Stat. 112 [U. S. Comp. St. Supp. 1911, p. 946]). As is well known, this act imposes an excise tax. The purpose of the act is thus referred to on page 145 of 220 U. S., on page 347 of 31 Sup. Ct. (55 L. Ed. 389, Ann. Cas. 1912B, 1312):

And on page 150 of 220 U. S., on page 348 of 31 Sup. Ct. (55 L. Ed. 389; Ann. Cas. 1912B, 1312):

'Busi

"It is therefore apparent, giving all the words I and dispose of the same. The Clark Iron Comof the statute effect, that the tax is imposed, pany was organized under the laws of Minnenot upon the franchises of the corporations ir- sota, owns and leases ore lands for the purrespective of their use in business, nor upon the pose of carrying on mining operations, and reproperty of the corporation, but upon the do-ceives a royalty depending upon the quantity of ing of corporate or insurance business." ore mined. The Boston Wharf Company is operating under a charter authorizing it to acquire lands and flats, with their privileges and appurtenances, and to lease, manage, and improve its property in whatever manner shall "Within the category of indirect taxation, be deemed expedient by it, and to receive dockas we shall have further occasion to show, is age and wharfage for vessels laid at its What we have said as to the character embraced a tax upon business done in a corpo- of the corporation tax as an excise disposes rate capacity, which is the subject-matter of of the contention that it is direct, and therethe tax imposed in the act under consideration. fore requiring apportionment by the ConstituThe Pollock Case construed the tax there lev- tion. It remains to consider whether these ied as direct, because it was imposed upon corporations are engaged in business. property simply because of its ownership. In ness' is a very comprehensive term and embracthe present case the tax is not payable unlessness' there be a carrying on or doing of business in es everything about which a person can be emthe designated capacity, and this is made the ployed. Black's Law Dict. 158, citing People v. the designated capacity, and this is made the Commissioners of Taxes, 23 N. Y. 242, 244. occasion for the tax, measured by the standard That which occupies the time, attention and prescribed. The difference between the acts is not merely nominal, but rests upon substan- labor of men for the purpose of a livelihood or tial differences between the mere ownership of 273. We think it is clear that corporations orprofit.' Bouvier's Law Dictionary, vol. 1, p. property and the actual doing of business in a ganized for the purpose of doing business, and certain way." actually engaged in such activities as leasing property, collecting rents, managing office buildings, making investments of profits, or leasing ore lands and collecting royalties, managing wharves, dividing profits, and in some cases investing the surplus, are engaged in business within the meaning of this statute, and in the capacity necessary to make such organizations subject to the law."

And on page 151 of 220 U. S., on page 349 of 31 Sup. Ct. (55 L. Ed. 389, Ann. Cas. 1912B, 1312), it says:

"The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i. e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. * If business is not done in the manner described in the statute, no tax is payable."

Several real estate corporations claimed exemption from the tax. As to them, this is said:

We believe that these cases sufficiently indicate the proper construction of the words "carrying on business" which should be followed in the case at bar. As already stated, the traction company's acts and activities in 1912 were practically all performed in Rhode Island and they were done for profit. Do these acts and activities constitute "carrying "It is especially objected that certain of the on business"? We think they do. They concorporations whose stockholders challenge the stitute the exercise of one of the functions validity of the tax, are so-called real estate companies, whose business is principally the which the corporation was expressly created holding and management of real estate. These to perform. That, as we have found, is the cases are No. 415, Cedar Street Company v. test of "doing business." These activities Park Realty Company; No. 431, Percy H. Brundage v. Broadway Realty Company; No. were not collateral and incidental to a busi443, Phillips v. Fifty Associates; No. 446, Mit- ness conducted elsewhere. On the contrary, chell v. Clark Iron Company; No. 412, Wil- what the corporation has done in this state is liam H. Miner v. Corn Exchange Bank; and No. 457, Cook v. Boston Wharf Company. In the only business it has undertaken anyNo. 412, Miner v. Corn Exchange Bank, the where. It is not important that its business bank occupies a building in part and rents a activities are small so long as the business large part to tenants. Of the realty compa is what the corporation was created for and nies, the Park Realty Company was organized to 'work, develop, sell, convey, mortgage or what it is expressly authorized to conduct. otherwise dispose of real estate; to lease, ex- To find otherwise would be equivalent to change, hire or otherwise acquire property; to saying that an investment or holding comerect, alter or improve buildings; to conduct, operate, manage or lease hotels, apartment hous-pany, expressly created as such, when exes, etc.; to make and carry out contracts in the ercising that function, is not doing business. manner specified concerning buildings; * * *That would be contrary to the authority of and generally to deal in, sell, lease, exchange the foregoing decisions. It would also be or otherwise deal with lands, buildings and other property, real or personal,' etc. At the time contrary to the provision of the tax act itthe bill was filed the business of the company self which in paragraph 2 of section 11 prorelated to the Hotel Leonori, and the bill aver- vides the method of ascertaining the "corpored that it was engaged in no other business except the management and leasing of that ho- rate excess of corporations deriving their tel. The Broadway Realty Company was form- profits principally from the holding or sale ed for the purpose of owning, holding, and of intangible property," clearly indicating managing real estate. It owns an office build- that corporations of this character were to ing and certain securities. The office building is let to tenants, to whom light and heat are be included as "carrying on business for furnished, and for whom janitor and similar profit." service are performed. The Fifty Associates are operating under a charter to own real estate with power to build, improve, alter, pull down, and rebuild, and to manage, exchange,

But certain cases have been cited by the defendants as being contrary to the view above announced, and we will consider them