CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES,

AT

OCTOBER TERM, 1904.

THE PEOPLE OF THE STATE OF NEW YORK ex rel. METROPOLITAN STREET RAILWAY COMPANY v. NEW YORK STATE BOARD OF TAX COMMISSIONERS.

ERROR TO THE SUPREME COURT OF THE STATE OF NEW YORK.

No. 74. Argued April 17, 18, 19, 1905.-Decided May 29, 1905.

Presumptively all property within the territorial limits of a State is subject to its taxing power and the burden of proof is on one claiming that any particular property is by contract or otherwise beyond the reach thereof; and, growing out of the conditions of modern business a large proportion of valuable property is now to be found in intangible things such as franchises,, which are, like other property, subject to taxation. In grants from the public nothing passes by implication, and, in the absence of direct stipulations relinquishing the right of taxation, a provision, in grants of privileges or franchises, that the grantee shall pay something therefor is not to be construed as an equivalent or substitute for taxes amounting to a contract of exemption from future taxation within the impairment clause of the Federal Constitution.

The omission of the legislature for one year, or for a series of years, to tax certain classes of property, otherwise taxable, does not destroy the power of the State to subject them to taxation when it sees fit to do so. Nothing in the Federal Constitution prevents a State from granting exemptions from taxation; and the reduction, upon equitable considerations, of payments made in the nature of taxes by certain corporations on their franchises from the amount to which they are subjected by a VOL. CXCIX-1

(1)

general law does not entitle every franchise owner to a similar reduction and render the tax invalid because it denies the holders of some franchises the equal protection of the law or deprives them of their property without due process of law.

The difference between surface street railroads and subsurface street railroads is sufficient to justify classification in the mode and extent of taxation, and a tax otherwise legal on surface street railroad franchises does not deprive the owners thereof of the equal protection of the laws because subsurface street railroad franchises are not subjected to a similar tax. The tax law of New York as amended May 26, 1899, c. 712, p. 1589, imposing taxes on certain public franchises is not repugnant, so far as the franchises in this case are involved, to the equal protection, due process, or impairment of obligation clauses of the Federal Constitution and of the Fourteenth Amendment thereto.

ON May 26, 1899, the legislature of New York passed an act amending the tax law of the State. Laws of New York, 1899, c. 712, p. 1589. The first section reads:

"SECTION 1. Subdivision three of section two of the tax law is hereby amended to read as follows:

"3. The terms 'land,' 'real estate,' and 'real property,' as used in this chapter, include the land itself above and under water, all buildings and other articles and structures, substructures and superstructures, erected upon, under or above, or affixed to the same; all wharves and piers, including the value of the right to collect wharfage, cranage or dockage thereon; all bridges, all telegraph lines, wires, poles and appurtenances; all supports and inclosures for electrical conductors and other appurtenances upon, above and under ground; all surface, under ground or elevated railroads, including the value of all franchises, rights or permission to construct, maintain or operate the same in, under, above, on or through, streets, highways, or public places; all railroad structures, substructures and superstructures, tracks and the iron thereon; branches, switches and other fixtures permitted or authorized to be made, laid or placed in, upon, above or under any public or private road, street or ground; all mains, pipes and tanks laid or placed in, upon, above or under any public or private street or place for conducting steam, heat, water, oil, electricity

or any property, substance or product capable of transportation or conveyance therein or that is protected thereby, including the value of all franchises, rights, authority or permission to construct, maintain or operate, in, under, above, upon, or through, any streets, highways, or public places, any mains, pipes, tanks, conduits, or wires, with their appurtenances, for conducting water, steam, heat, light, power, gas, oil, or other substance, or electricity for telegraphic, telephonic or other purposes; all trees and underwood growing upon land, and all mines, minerals, quarries and fossils in and under the same, except mines belonging to the State. A franchise, right, authority or permission specified in this subdivision shall for the purpose of taxation be known as a 'special franchise.' A special franchise shall be deemed to include the value of the tangible property of a person, copartnership, association or corporation situated in, upon, under or above any street, highway, public place or public waters in connection with the special franchise. The tangible property so included shall be taxed as a part of the special franchise. No property of a municipal corporation shall be subject to a special franchise tax."

The portions in italics are the new matter introduced by the amendment. Other sections were added to the tax law, of which section 46 is as follows:

"SEC. 46. Deduction from special franchise tax for local purposes.-If, when the tax assessed on any special franchise is due and payable under the provisions of law applicable to the city, town, or village in which the tangible property is located, it shall appear that the person, copartnership, association or corporation affected has paid to such city, town or village for its exclusive use within the next preceding year, under any agreement therefor, or under any statute requiring the same, any sum based upon a percentage of gross earnings, or any other income, or any license fee, or any sum of money on account of such special franchise, granted to or possessed by uch person, copartnership, association, or corporation, which payment was in the nature of a tax, all amounts so paid for