in addition, they are authorized to accept trusts and sign surety bonds. No special provision has been made for taxing the stock of corporations organized thereunder.

There are, however, two sections of the Code, one of which should be applied in assessing stock of trust companies. One, section 1503, provides a method for the assessment of the property "of companies or associations." The other section, 1508, is the section heretofor quoted, which provides for the assessment of bank stock. There are two main reasons why section 1503 should not be applied to the assessment of the stock of trust companies.

First. The section authorizes the total amount of indebtedness to be subtracted from the market value, or actual value of the shares of stock. Obviously, this provision would be inappropriate as applied to any corporation authorized to receive, generally, deposits of money, inasmuch as the deposits represent “indebtedness." This would, in every instance, exceed the “actual value of the shares of the stock."

Second. Section 1503 is practically a dead letter as applied to corporations generally, corporations having been assessed in this state on their property only. The defects of this provision as applied to corporations generally are discussed elsewhere in this report.

Local trust companies are not subject to the 22 per cent premium tax on the bond business that they do. This tax is only applicable to foreign companies. They now pay to the insurance commissioner a small license fee and a nominal fee for filing their report.

In view of the nature of their charter and the reasons given above we believe that trust companies should be assessed in the manner provided for assessment of bank stock and to this end we recommend that the provisions of section 1508 amended in the manner hereinbefore indicated should be made expressly applicable to trust companies organized under chapter 22 of the Code of 1905. (See recommendation on page 157 of this report.)

TABLE SHOWING ASSESSMENT OF BANK STOCK IN 1912 AND RANGE OF AVERAGE VALUE PER SHARE

CHAPTER VII.

TAXATION OF CORPORATIONS.

I. PRINCIPLES.

The marvelous development of the country industrially has been accompanied by, if indeed it is not largely attributable to, the great centralization of capital applied to industry under the forms of corporate organization. The amassing of wealth under the ownership of an impersonal legal entity and the superior marketing facilities for the stocks and bonds, representing not merely the wealth but the measure of probable continuing earning ability of the corporation, has given rise to problems of taxation that have been difficult of solution. If evidence is needed of the difficulties involved in the solution of these problems, it is afforded by the most cursory investigation of the methods. adopted by various states. There is an utter lack of agreement on even fundamental matters and the whole question may be said to be involved in a cloud of legal chaos. However, this much is certain, that the problem of handling corporation assessments is one that must be dealt with according to the needs of the situation; and the situation is one that is peculiar to the corporate form of industrial organization.

Prof. E. R. A. Seligman, after a thorough discussion of the subject of Taxation of Corporations, draws certain conclusions and states certain principles which may well form a guide for future legislation on the subject. These conclusions are as follows:

1. "Corporations should be taxed separately and on different principles from individuals."

2. "Corporations should be taxed locally on their real estate only."

3. "Corporations should be taxed for state purposes on their earnings or on their capital loans."

4. "Only so much of total earnings or capital should be taxed as is actually received or employed within the state. In the case of transportation companies, a convenient and fairly accurate test is mileage.'

5. "Where capital and loans are taxed, the residence of the shareholder or bondholder should be immaterial.”

6. "There should be no distinction between domestic and foreign corporations. Each should be taxed for its business done or capital employed within the state."

7. "If corporations are taxed on their property, property beyond the state should be exempt.'

8. "If corporations are taxed on their capital stock, they should not be taxed again on their property."

9. "Where the corporate stock or property is taxed, the shareholder should be exempt. If corporate loans are taxed, the bondholder should be exempt."

10. "Where the corporation and the shareholder or bondholder are residents of different states, the tax should be divided between the states by interstate agreements.'

11. "An additional tax should be levied on corporations which have through natural, legal or economic forces become monopolistic enterprises.'

II. CLASSIFICATION OF CORPORATIONS FOR PURPOSES OF ASSESSMENT IN NORTH DAKOTA.

For purposes of assessment, corporations in North Dakota may be divided into five classes:

1. Those coming within Section 1503 of the Code of 1905, which provides for the assessment of all companies or associations whether incorporated or unincorporated, according to a method therein prescribed, excepting therefrom banking corporations, whose taxation is specially provided for.

2. Banking corporations, the assessment of which is provided for in Section 1508 of the Code of 1905.

3. Railroads, express companies, telegraph, telephone companies, freight line companies, etc., which are assessed by the state board of equalization.

4. Light, heat and power companies, which under the Laws of 1911 are assessable by the tax commission.

5. Foreign Insurance Companies.

In the discussion which follows it will be impossible to entirely separate these classes one from the other on account of provisions of the law which overlap and seemingly apply to more than one class.

I. COMPANIES AND ASSOCIATIONS GENERALLY.

a. The Law:

Section 1503 of the Code of 1905 provides for the assessment of companies and associations as follows:

"Property of Companies or Associations, how and by whom Listed. The president, secretary or principal officer of any company, or association, whether incorporated or unincorporated, except banking corporations whose taxation is especially provided for in this article,shall make out and deliver to the assessor a sworn statement of the amount of its capital stock, setting forth particularly:"

1. The name and location of the company and association. 2. The amount of capital stock authorized and the number of shares into which said capital stock is divided.

3. The amount of capital stock paid up.

4. The market value, or if they have no market value, then the actual value of the shares of the stock.

5. The total amount of all indebtedness except the indebtedness of current expenses, excluding from such expenses the amount paid for purchase or improvement of property.

6. The value of all real property, if any.

7. The value of its personal property."

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'The aggregate amount of the fifth, sixth and seventh items shall be deducted from the total amount of the fourth, and the remainder, if any, shall be listed as 'bonds or stocks,' under subdivision 23 of section 1496. The real and personal property of each company or association shall be listed and assessed the same as other real and personal property. In all cases of failure or refusal of any person, officer, company or association to make such return or statement, it shall be the duty of the assessor to make such return or statement from the best information he can obtain.”

It is manifestly the aim of this statute to provide a means of measuring what is called "corporate excess," "franchise value" or "good will." This excess is the value of the corporate stock over and above the value of its tangible property. The statute quoted above is vitally defective in the means provided for arriving at this value.