(1) Corporations paying dividends of six per cent. or more, which are taxed at the rate of one-quarter of a mill for each per cent. of dividend declared on the par value of the capital stock, without reference to the market price of the stock or the value of the assets. There is no change here from the law prior to the amendment of 1906.

(2) Corporations paying no dividend, which are taxed at the rate of three-quarters of a mill on the appraised value of the capital stock. There is no minimum valuation here, and under the appraisement provided by section 193 (formerly 190), the tax may be nominal.

(3) Corporations paying dividends of less than six per cent., which are subdivided into two classes:

(a) Corporations paying dividends of less than six per cent., whose assets exceed the liabilities by an amount equal to or greater than the capital stock, or in which the average price of the stock sold during the year was par or over, and not included in the classification provided for in subdivision (b) infra, of corporations paying at the three-quarter mill rate. In either case, the capital stock is taxed at the rate of one and one-half mills on the appraised value, but such appraised value shall not be

less than the par value of the stock or

less than the difference between the assets and
liabilities, or

less than the average price at which the stock
sold during the year.

The minimum valuation here is the par value of the stock.

(b) The second subdivision of corporations paying dividends of less than six per cent., is that class of corporations in which the average price of the stock sold during the year was less than par, or whose assets do not exceed the liabilities exclusive of capital stock. In either case, the tax to be paid is three-quarters

of a mill on the appraised value of the capital stock. There is no minimum valuation in this class, and under the appraisement provided for by section 193 (formerly section 190) the tax may be nominal. It may have been intended by

the framers of the amendment of 1906 to take into account a minimum valuation of par for this class of corporations, but the statute did not clearly express it, and after the amendment of section 193 (formerly section 190), it was decided by a divided court of four to three in People ex rel. N. Y. Mail & Transportation Co. v. Gaus, 198 N. Y. 250, that the valuation referred to in this part of section 182 by the words "each dollar of the amount of capital stock employed in this state" was the appraised valuation provided by section 193 (formerly 190).

(4) There is yet another group or class of corporations, consisting of all corporations not taxable under the preceding classifications. An example of this class would be corporations paying dividends of less than six per cent., where there was no stock sold during the year, and hence no market price, and where the assets exceed the liabilities, but not by an amount equal to or greater than the capital stock. This class is taxable at the rate of one and one-half mills on the actual (or appraised) value of the capital stock. This group was added by the drag-net clause of the amendment of 1907.

Ambiguity as to rate decided in taxpayer's favor.-If a corporation, paying dividends of less than six per cent. falls under one alternative subdivision, in the second paragraph of section 182, requiring it to pay the rate of three-quarters of a mill, and also an alternative subdivision of the third paragraph or class of section 182, providing for the rate of one and one-half mills, the practice in the state comptroller's office has been to assess the tax at the higher rate. For example, if the average market price of the stock of such a corporation is below par, but the assets exceed the liabilities by more than the

capital stock, it comes at the same time under an alternative subdivision of the second class, paying the three-quarters mill rate, and also of the third class paying the one and one-half mill rate. The legality of this practice has been open to question on the general theory that revenue laws should be strictly construed, and that any ambiguity in the Tax Law should be reserved in favor of the public. Brown v. Commonwealth, 98 Va. 366; San Francisco F. L. Co. v. Banbury, 106 Cal. 129; Cooley on Taxation, 3rd Ed. 459.

In a recent case, People ex rel. American Bank Note Co. v. Sohmer, 157 App. Div. 1, decided in May, 1913, this question was raised, and the court held that since the reading of the statute disclosed an inconsistency under the general principles of interpretation, the taxpayer was entitled to the most favorable reading, and that the common stock of the corporation should therefore be taxed at the three-quarter mill rate. This decision is in line with the opinion in People ex rel. N. Y. Mail & N. T. Co. v. Gaus, 198 N. Y. 255, interpreting another phase of the same statute, and holding that "the benefit of the doubt and uncertainty as to the meaning of the statute must be given to the relator and not to the state."

Measure of the amount of capital stock employed in the state and method of computing franchise tax in any given case. The amount of the franchise tax to be paid under section 182 of the Tax Law in any given case depends upon the following facts:

In the case of all corporations having property or assets within and without the state, it depends upon the proportionate amount of gross assets or capital employed within the state.

In the case of corporations paying dividends of six per cent. or more, it depends upon the amount of issued capital stock at par employed within the state and the rate of dividend. The

method of determining the amount of issued stock employed within the state is set forth in the first paragraph of section 182.

upon

In the case of corporations paying no dividend, it depends the actual value of the amount of capital stock, which, as we have seen, may be nominal, and the tax may be nothing. So also in the case of corporations paying dividends of less than six per cent., whose assets do not exceed the liabilities, or whose average market price is below par. In this case, too, the tax may be nominal.

In the case of corporations paying dividends of less than six per cent., whose assets exceed the liabilities by an amount equal to or greater than the capital stock, or whose average market price is above par (and not coming under the three-quarter mill rate supra), it depends upon the value of the net assets, the market price of the stock and the par value of the capital stock whichever of these values is highest. The minimum appraisement is here the par value of the capital stock.

If all the corporation's assets are in the state, the amount of the capital stock employed in the state will equal the issued capital stock. The value of the capital stock in this instance and the rate at which the franchise tax is computed will depend upon the conditions set forth in the illustrations hereinafter mentioned.

If only a part of the corporation's assets is within the state. and the remainder without the state, the amount of capital stock employed within the state shall be such a portion of the issued stock as the gross assets employed in any business within the state bear to the gross assets wherever employed in business. The value of the capital stock in this instance, and the rate at which the franchise tax is to be computed will depend upon conditions hereinafter enumerated.

ILLUSTRATIONS

Corporations paying dividends of 6% or more; rate 1⁄4 of a mill for each 1% of dividend, at par.-If a corporation whose entire capital stock of $100,000 is invested in this state, paid a dividend of eight per cent., it would be subject to a franchise tax under section 182 of the Tax Law of one-fourth of a mill for each one per cent. of dividend, or two mills on $100,000, of capital stock, viz., $200. Under section 182 this rate is on the par value of the issued capital stock without regard to the market price or to the actual value of the assets.

If the corporation's capital is $100,000, all of which is issued, and it is engaged in business within this state and also without the state, and if the gross assets within the state are $120,000 and its gross assets without the state are $30,000, the proportion of capital stock within the state subject to taxation under section 182 of the Tax Law would be 120,000/150,000, or four-fifths of $100,000 $80,000. If the dividend declared on the capital stock was eight per cent., the tax under section 182 would be at the rate of one-fourth of a mill for each per cent of dividend or two mills on $80,000, viz., $160.

Corporations paying no dividend. Rate 3/4 mill at appraised value. If we take the case of the corporation mentioned with $100,000 of capital, but paying no dividend, it would be subject to a franchise tax at the rate of three-fourths of a mill on the appraised value of the capital stock employed within the state at its actual or appraised value under sections 182 and 193 (formerly 190), of the Tax Law. There is no minimum valuation here and under the appraisement provided for by section 193, the tax may be nominal; for instance, if the gross assets are $150,000 and the liabilities $90,000, making the net assets $60,000, and the average market price of the stock $80, the tax to be paid would be appraised at a valuation of $80