The opinion of the court was delivered by: FORMAN
The above suits have been brought to recover capital stock taxes paid by the plaintiffs under the several statutes imposing such taxes, and each is presently before the court on the government's motion to dismiss for failure to state a cause of action.
The statutes involved in these actions are Sections 215 and 216 of the National Industrial Recovery Act of 1933, 48 Stat. 207, 208, applicable to the capital stock tax year ending June 30, 1933, Sections 701 and 702 of the Revenue Act of 1934, 26 U.S.C.A. Int.Rev.Acts, pages 787, 789, applicable to the capital stock tax years ending June 30, 1934, and June 30, 1935, and Sections 105 and 106 of the Revenue Act of 1935, 26 U.S.C.A. Int.Rev.Acts, pages 796, 800, applicable to the capital stock tax years ending June 30, 1936, and June 30, 1937. Sections 215 of the National Industrial Recovery Act of 1933, Section 701 of the Revenue Act of 1934 and Section 105 of the Revenue Act of 1935 each imposes a tax for each year ending June 30, 1933, 1934, 1935, 1936, and 1937, respectively, "* * * upon every domestic corporation with respect to carrying on or doing business for any part of such year an excise tax of $1.40 for each $1,000 of the adjusted declared value of its capital stock."
The National Recovery Act of 1933, Section 215(c) (3), provides that the Act should not apply to any "domestic Corporation in respect of the year ending June 30, 1933, if it did not carry on or do business during a part of the period from the date of the enactment of this Act [June 16, 1933] to June 30, 1933, both dates inclusive; * * *."
Each enactment provides that for the first year in respect of which the tax is imposed "the adjusted declared value shall be the value, as declared by the corporation in its first return under this section (which declaration of value cannot be amended), as of the close of its last income-tax taxable year ending at or prior to the close of the year for which the tax is imposed * * *"
As to subsequent years, each enactment provides that the adjusted declared value in the case of a domestic corporation shall be the original declared value plus the cash and fair market value of property paid in for stock or shares, paid-in surplus and contributions to capital (and in the case of the National Industrial Recovery Act, the "earnings and profits" of the corporation), and the net income of the corporation plus certain tax exempt income and minus the value of the property distributed in liquidation to shareholders, distributions of earnings or profits (and in the case of the National Industrial Recovery Act "deficits, whether operating or nonoperating"), and the corporation's loss for income tax purposes.
United States Steel Products Company v. United States of America, Civil No. 432.
American Bridge Company v. United States of America, Civil No. 438.
National Tube Company v. United States of America, Civil No. 439.
Federal Shipbuilding & Dry Dock Company v. United States of America, Civil No. 451.
American Steel & Wire Company of New Jersey v. United States of America, Civil No. 455.
United States Steel Corporation v. United States of America, Civil No. 503.
Carnegie-Illinois Steel Corporation v. United States of America, Civil No. 504.
Universal Exploration Company v. United States of America, Civil No. 587.
The above cases may be considered together. The complaints collectively allege capital stock payments under Section 215, supra, for the year 1933, Section 701, supra, for the years 1934 and 1935, and Section 105, supra, for the year 1936. Each individual complaint alleges that the acts imposing a capital stock tax, and the acts imposing an excess profits tax in relation to the capital stock tax "* * * are unconstitutional and void for the reasons, among others, that said statutes violate the provisions of the Fifth Amendment to the Constitution of the United States to the effect that no person shall be deprived of 'property without due process of law; nor shall private property be taken for public use, without just compensation;' and that said taxes are so arbitrary as to amount to confiscation and are so wanting in basis for classification as to produce gross and patent inequality."
The brief in this group of cases argues:
1. The capital stock tax is wholly unrelated to the actual value of the capital stock, because the declaration, once made, is binding, and for the reason that no standard is prescribed for the determination of such value. Hence, the act is arbitrary, capricious and wanting in classification.
2. For the same reasons the Act makes it possible for taxpayers under identical circumstances to pay different taxes. Hence, even if actual values were intended, the Act is grossly discriminatory and lacking in classification.
3. Since no standards are prescribed for ascertaining values, the taxpayer does not know whether real or fictional values are intended. Hence, the Act is indefinite.
4. The Act unlawfully delegates legislative powers.
5. The adjustment for subsequent years includes the original declaration of values, and the alterations to that value which in themselves are objectionable do not reflect current changes in the taxpayers' status.
Bourne & Company, Ltd., v. United States of America, Civil No. 614.
Diehl Manufacturing Company v. United States of America, Civil No. 615.
Poinsett Lumber & Manufacturing Company v. United States of ...