Opinion
No. 34242
Decided April 27, 1955.
Taxation — Domestic corporation for profit — Franchise — Tax base — Value of federal securities owned by corporation not deducted.
APPEAL from the Board of Tax Appeals.
Appellant, The Raymond Bag Company, an Ohio corporation for profit and engaged in manufacturing paper shipping sacks, filed with the Tax Commissioner applications for certificates of abatement for alleged overpayments of franchise taxes for the years 1947 through 1951, claiming such overpayments resulted from assessments on federal securities owned by it and improperly required to be incorporated in its franchise tax base.
An order of the Tax Commissioner denying the applications was affirmed by the Board of Tax Appeals.
An appeal from the decision of that board brings the cause to this court for review.
Messrs. Turner, Wells Courson and Mr. Paul H. Granzow, for appellant.
Mr. C. William O'Neill, attorney general, and Mr. Jack H. Bertsch, for appellee.
Appellant contends that the Ohio franchise tax statutes, Section 5495 et seq., General Code (Section 5733.01 et seq., Revised Code), as construed and applied herein by the commissioner, impose a direct tax upon United States securities and interest thereon contrary to Section 742, Title 31, U.S. Code, and Section 8, Article I of the United States Constitution.
the judgment of this court in the case of Fifth Third Union Trust Co. v. Peck, Tax Commr., 161 Ohio St. 169, 118 N.E.2d 398, is dispositive of the issues here presented. The decision of the Board of Tax Appeals is affirmed on authority of that case.
Decision affirmed.
WEYGANDT, C.J., MATTHIAS, HART, ZIMMERMAN, BELL and TAFT, JJ., concur.
I am the writer of the opinion in the case of Wrenn Paper Co. v. Glander, Tax Commr., 156 Ohio St. 583, 103 N.E.2d 756, holding that, in determining the franchise tax on an Ohio corporation for profit, pursuant to the provisions of Section 5495 et seq., General Code, federal securities owned by such corporation could not be included in the tax base because in legal effect such inclusion resulted in an illegal tax on such securities. That case was overruled by this court in the case of Fifth Third Union Trust Co. v. Peck, Tax Commr., 161 Ohio St. 169, 118 N.E.2d 398. I dissented in the latter case, basing my dissent on the interpretation of ambiguous provisions of Sections 5328-1 and 5328-2, General Code, directing the manner in which the Tax Commissioner shall determine the franchise tax base.
Having given this matter further thought and consideration, I have reached the conclusion that the Fifth Third Union Trust Co. case adopts the better rule which has received persuasive judicial sanction. In the first place, the rule adopted in that case avoids an unjust discrimination in the corporate franchise tax as between corporations, whose assets represented by its shares of stock are invested in federal securities, and those corporations, whose assets are not so invested. See Western Union Telegraph Co. v. City of Omaha, 73 Neb. 527, 103 N.W. 84.
Also persuasive to me is the position taken by the federal Supreme Court in the case of Schuylkill Trust Co. v. Pennsylvania, 296 U.S. 113, 80 L. Ed., 91, 56 S. Ct., 31, in which the court held, in effect, that a state tax upon corporate shares as such, as distinguished from a tax upon the assets constituting the value of the shares, is not objectionable as a tax upon securities of the United States or its instrumentalities owned by the corporation.
The tax involved in that case was one levied on the value of the shares of a corporation, which included tax exempt federal securities and was therefore held invalid; but the court at the same time distinguished such a tax from one on the shares as such. See Cleveland Trust Co. v. Lander, 184 U.S. 111, 46 L. Ed., 456, 22 S. Ct., 394; Des Moines National Bank v. Fairweather, Mayor, 263 U.S. 103, 68 L. Ed., 191, 44 S. Ct., 234. Here the tax is on the franchise and not on the property of the corporation, or even upon the value of the shares of the corporation.