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United States Steel Corp. v. Director

Decided: December 3, 1962.


For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Weintraub, C.J.


[38 NJ Page 535] Here involved are deficiency assessments levied under the Corporation Business Tax Act (1945) (L. 1945, c. 162; N.J.S.A. 54:10A-1 et seq.). One relates

to United States Steel Company (herein Steel Company) for the calendar year 1952, and the other to United States Steel Corporation (herein Steel Corporation) for the calendar year 1953. Both are domestic corporations. The Division of Tax Appeals sustained the assessments. We certified the ensuing appeals before the Appellate Division acted upon them.

The Corporation Business Tax Act (1945) was amended quite extensively by L. 1958, c. 63. We are concerned with the statute as it existed in 1952 and 1953. Hence our references will be directly to the 1945 act and pertinent amendments of it.

The case revolves about corporate mergers which followed a decision by Steel Corporation to take over the operations of its subsidiaries. The first step was a merger as of the end of 1951 of 18 subsidiaries into Steel Company, also a subsidiary. The second step, as of the end of 1952, was a merger of Steel Company into Steel Corporation.

For the years here involved, the Corporation Business Tax Act (1945) provided for a franchise tax for each privilege year "measured by the taxpayer's net worth as of the close of the calendar year or of its fiscal year next preceding the privilege year" (§ 15).

Hence the tax upon Steel Company for the privilege year 1952 was based upon its net worth as of December 31, 1951, the last day of the base year. It was sometime on that day that the agreements for merger into Steel Company were filed with the Secretary of State. The Director contends it was upon such filing that the merger agreements became the "act of merger" under our corporation law, R.S. 14:12-3.

Although seven of the subsidiaries thereby merged into Steel Company had been incorporated or authorized to do business in New Jersey, no returns were filed for them for the privilege year 1952, the parent, Steel Corporation, taking the position that they expired at some moment before the beginning of 1952. On the other hand, Steel Company's return for the privilege year 1952 did not reflect the additional net worth resulting from the mergers, and this upon

the thesis that the mergers had not occurred in the base year 1951.

The Director of Taxation held the mergers had to occur either in 1951 or 1952, and the parent company having denied the mergers occurred in 1952 as evidenced by the failure to file on behalf of the seven subsidiaries for 1952, the Director deemed the mergers to have occurred on December 31, 1951, as the underlying events themselves revealed. Accordingly he redetermined the net worth of Steel Company for 1952 on the postmerger basis.

With respect to the final step, the merger of Steel Company into Steel Corporation, the certificate of ownership and copy of the resolution to merge bore the stamp of the Secretary of State showing filing on "Dec. 31, 1952," with a notation in ink "12 P.M." The Director contends the merger became effective upon such filing under our corporation law, N.J.S.A. 14:12-10.

Upon the thesis that Steel Company was nonexistent at any time in 1953, no report was filed for it for 1953. On the other hand, Steel Corporation filed for 1953 on a premerger basis, the thesis being that the merger had not occurred in 1952. The Director, again accepting the decision of Steel Corporation that Steel Company was nonexistent on January 1, 1953, made the deficiency assessment against Steel Corporation on the basis of the postmerger net worth, i.e., on the premise that it absorbed Steel Company on December 31, 1952.


The taxpayer asks us to hold that mergers may be accomplished at a moment which is neither a part of one year nor a part of the ensuing year, urging that business utility demands that result. It refers to monumental problems which would confront corporations so situated if mergers must become effective on either December 31 or January 1. The showing is impressive. Indeed, we may assume that a merger may be made effective precisely at year-end for sundry

purposes. But the issue before us is whether that proposition can be accepted for the purposes of the tax statute in question. We think it cannot, for reasons we shall presently state.

And we add that the solution of the problem is not advanced by the rule that for the purpose of the computation of time, the day of the initiating event is excluded. State v. Rhodes, 11 N.J. 515, 522 (1953); McCulloch v. Hopper, 47 N.J.L. 189 (Sup. Ct. 1885). That rule was devised for its utility in fixing the outer limit of the period in which a response must be made to the initiating event. It quite obviously is of no help in determining the day upon which a given event in fact occurred. For example, if a tender had to be made upon a specific day, it would hardly do to say a tender in fact made on that day was too late because the law ignores the day upon which the event occurred. Indeed, the taxpayers do not ask that we conclude the mergers occurred on January 1. Rather they ask that we find the mergers occurred on neither of those days. That result cannot be reached upon any rule for the computation of time.

And with respect to the merger of Steel Company into Steel Corporation, the notation made by the Secretary of State is of no probative force. We are not sure that we understand what is meant by the combination of "Dec. 31, 1952" and "12 P.M." We cannot discern an interval of time which is not a part of some day. As a matter of fact, the filing had to occur on December 31 or January 1.

The true question remains whether we should recognize a right to accomplish a merger without tax consequences under the statute here involved. And if the answer is no, then upon the record the only possible finding is that the mergers occurred on December 31.

A separate question is whether, for the purposes of the allocation formula to which we will later refer, whereby the portion of total net worth taxable in New Jersey is ascertained, we should take note of the particular hour upon which the mergers occurred or deem the mergers to be effective

during the entire day. As to that question, the answer, required by sheer practicality, is that the mergers must be treated as effective for the entire day upon which they were accomplished. The law will not ordinarily concern itself with fractions of a day; the day is deemed to be the single unit of time, unless the statute or the agreement of the parties where it is controlling expressly provides for a different approach. See 52 Am. Jur., Time, § 15, p. 339; Loughran v. Jersey ...

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