CHAPTER II.

THE ORGANIZATION TAX TO BE PAID BY DOMESTIC CORPORA

TIONS.

Defined. The organization or incorporation tax is the charge to be paid by every domestic stock corporation except banking, building, mutual loan, accumulative and co-operative associations, and is paid for the privilege of receiving its charter or exercising its corporate franchise in the state.

The basis of the tax.-The basis of the tax is the authorized capital stock. In this respect, it differs from the license tax or initial tax paid by a foreign corporation for the privilege of coming into the state to do business, which is based on that part of its issued capital stock represented by the proportion which the property or assets in the state bear to its entire property

or assets.

Rate of tax. The rate or amount of the tax is one-twentieth of one per cent. on the authorized amount of capital stock, but in no case shall this tax be less than five dollars. Prior to 1901, the rate for the organization tax was the same as for the license tax to be paid by a foreign corporation on coming into the state to do business, viz., one-eighth of one per cent. The Comptroller's Report of 1900 recommended a reduction of the organization tax, and by Chapter 448, Laws of 1901, it was reduced to one-twentieth of one per cent., the present rate.

In many states the rate paid by domestic and foreign corporations is the same, but there is no unconstitutionality in imposing a different rate on foreign corporations coming into the state. Horn Silver Mining Co. v. N. Y., 143 U. S. 305.

When the organization tax is payable, how paid, and to whom. The organization tax is payable at the time the certificate of incorporation is filed with the secretary of state. A check for the amount of the tax should be sent to the state treasurer, and the receipt for the same should be annexed to the certified copy certificate of incorporation or duplicate of original when filed in the office of the clerk of the county in which the principal office is situated.

The present statute reads as follows:

Organization tax.- Every stock corporation incorporated under any law of this state shall pay to the state treasurer a tax of one-twentieth of one per centum upon the amount of capital stock which the corporation is authorized to have and a like tax upon any subsequent increase. Provided, that in no case shall such tax be less than five dollars. Such tax shall be due and payable upon the incorporation of such corporation or upon the increase of its capital stock. Except in the case of a railroad corporation, neither the secretary of state nor county clerk shall file any certificate of incorporation or article of association, or give any certificate to any such corporation or association until he is furnished a receipt for such tax from the state treasurer, and no stock corporation shall have or exercise any corporate franchise or powers, or carry on business in this state until such tax shall have been paid. And in case of a decrease of capital stock, upon which the tax required by law has been paid, and a subsequent increase thereof, a tax shall be paid only upon so much of such increase as exceeds the amount of capital stock upon which a tax has been before paid. In case of the consolidation of existing corporations into a corporation, such new corporation shall be required to pay the tax hereinbefore provided for only upon the amount of its capital stock in excess of the aggregate amount of capital stock of said corporations. This section shall not apply to state and national banks or to building, mutual loan, accumulating fund and co-operative associations. A railroad corporation need not pay such tax at the time of filing its certificate of incorporation, but shall pay the same before the public service commission shall grant a certificate, as required by the railroad law, authorizing the construction of the road as proposed in its articles of association, and such certificate shall not be granted by the public service commission until it is furnished with a receipt for such tax from the state treasurer. If the board of railroad commissioners

or public service commission shall have heretofore granted, or the public service commission shall hereafter grant, such certificate and upon an appeal from the determination of such board of railroad commissioners or public service commission, such certificate has been or may hereafter be denied the comptroller shall refund the amount of tax so paid to the railroad corporation or corporations by which such tax was paid, upon proof of payment being presented and appropriation being made therefor. (Sec. 180, former sec. 180, Tax Law, as amended by ch. 369, L. 1897, ch. 448, L. 1901, ch. 524, L. 1906, ch. 472, L. 1910 and ch. 91, L. 1911.)

Source: Ch. 143, L. 1886, as amended by ch. 668, L. 1892.

Tax on re-organization of corporations.-No organization tax is due on the re-organization of a manufacturing corporation under the Business Corporation Law. Matter of Consol. Kansas City Smelting Co., 13 App. Div. 50 (1897). But where railroad corporation property and franchises have been foreclosed and sold, and a new corporation formed under a re-organization act (Chapter 430, of Laws of 1874, as amended), an organization tax is payable. People ex rel. Schurz v. Cook; same v. Mertens, 110 N. Y. 443. The law imposing this tax does not impair the obligation of contracts. Ibid.

Consolidated corporations.—Before the amendment of 1892 (Chapter 668, Laws of 1892), consolidated corporations were required to pay the organization tax. After this amendment no tax was required from a consolidated corporation except upon the excess stock.

Organization tax payable by corporations with shares without designated monetary value. The organization tax payable under section one hundred and eighty of the tax law by any corporation issuing such shares without designated monetary value shall be at the rate of five cents on each such share which the corporation is authorized to issue, and a like tax upon any subsequent increase thereof. (Chap. 351, L. 1912.)

CHAPTER III.

LICENSE TAX; FOREIGN CORPORATIONS.

License tax defined.-The license tax is the fee or tax paid by a foreign corporation for the privilege of exercising its corporate franchise, or for carrying on its business, in its corporate or organized capacity within the state.

History. This tax corresponds very closely to the organization tax to be paid by domestic corporations for the privilege of receiving its charter, or exercising its corporate franchise in the state. The organization tax, or tax on incorporation of domestic corporations, has existed in this state since 1886, but it was not until 1895 that a foreign corporation was required to pay any fee or tax for the privilege of exercising its corporate franchise in the state. The comptroller of the state, in his report for the year 1895, in order to bring within the jurisdiction of the state certain corporations organized under the laws of other states, but practically domestic, as far as their business was concerned, recommended that foreign corporations be taxed on the basis of the capital stock employed in the state. By Chapter 240 of the Laws of 1895, a foreign corporation was required to pay a license fee or a tax of one-eighth of one per centum "for the privilege of exercising its corporate franchise or carrying on its business in such corporate or organized capacity in the state . . computed upon the basis of the amount of its capital stock employed within the state" during the first year. This has practically remained the law to this date. The amendment of 1901 included manufacturing corporations, and the amendment of 1906 changed the method of computing the amount of capital stock employed within the state.

The present law reads as follows:

License tax on foreign corporations.- Every foreign corporation, except banking corporations, fire, marine, casualty and life insurance companies, co-operative fraternal insurance companies, and building and loan associations, authorized to do business under the general corporation law, shall pay to the state treasurer, for the use of the state, a license fee of one-eighth of one per centum for the privilege of exercising its corporate franchises or carrying on its business in such corporate or organized capacity in this state, to be computed upon the basis of the capital stock employed by it within this state, during the first year of carrying on its business in this state; and if any year thereafter any such corporation shall employ an increased amount of its capital stock within this state, the same license fee shall be due and payable upon any such increase. The measure of the amount of capital stock employed in this state shall be such a portion of the is sued capital stock as the gross assets employed in any business within this state bear to the gross assets wherever employed in business. For purposes of taxation, the capital of a corporation invested in the stock of another corporation shall be deemed to be assets located where the physical property represented by such stock is located. The amount of capital upon which such taxes shall be paid shall be fixed by the comptroller, who shall have the same authority to examine the books and records in this state of such foreign corporations, and the employees thereof, and the same power to issue his warrant for the collection of such taxes as he now has with regard to domestic corporations. No action shall be maintained or recovery had in any of the courts in this state by such foreign corporation after thirteen months from the time of beginning such business within the state, without obtaining a receipt from the comptroller for the payment of the license fee upon the capital stock employed by it within this state during the first year of carrying on its business in this state. (Former sec. 181, Tax Law, as amended by L. 1910, ch. 340.)

Source: Ch. 240, L. 1895, without change of substance.

When the license tax should be paid. The tax should be paid at any time between the twelfth and thirteenth month after the corporation has commenced to do business in the state. People ex rel. Dutilh-Smith Co. v. Miller, 90 App. Div. 545 (1904).

Change in computing amount of capital stock. While the basis of the tax remains the same as in the past, viz., "Capital