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B. REQUIREMENTS OF REPORTS RELATIVE TO DESCRIPTION OF TANGIBLE PROPERTY, FOR PURPOSE OF VALL'ATION OR
Particular items relative to railroad track.
Does report call for description or statement of ownership of property operated but not owned?
What statements relative to “Cost of Road” and “Cost of Equipment” are required by report?
What other balance-sheet assets must be stated in report?
Does report call for amount authorized, issued, or outstanding?
What information is called for relative to owner or ownership of stock?
Bonds, funded debt, and other liabilities. D. REQUIREMENTS OF REPORTS RELATIVE TO INCOME AND EXPENDITURE FOR PURPOSE OF VALUATION OR TAXATION.
Gross earnings and income.
Does report call for gross earnings on entire line?
Does report call for gross earnings on line within the State; if so, by what rule iletermined?
Does report call for operating expenses on entire line?
Does report call for operating expenses on line within the State; if so, by what rule determined?
Does report call for dividends declared or paid?
Does report call for statement of value; if so, what form of statement is required?
The figures which appear in this table refer to the sections or chapters of codes or laws cited as authority for the statements made. The authorities used in this table are the same as those used in making up Table I and are clearly indicated in the third column of this table.
By referring to the table itself, it is further to be noted that the condition of the law is given as it was in 1890 and as it has been modified by subsequent enactments. In all cases these changes have been brought down to include the enactments to January 1, 1900; in Table I the years 1900, 1901, and 1902 to July 1, are also included.
DESCRIPTION OF TEXTUAL STATEMENT.
The reason for introducing a textual statement into this report has already been explained. The purpose is to give a complete analysis of the laws pertaining not alone to the taxation of railroads, but also of sleeping-car and similar transportation companies. It shows the character of these laws as they existed on January 1, 1890, and as they have developed down to January 1, 1900. A uniform plan of presentation is adopted and is followed for each State, so far as the peculiarities of the statutory provisions in the several States will permit. This plan provides for three general divisions, as follows:
A. General Considerations: System and Development from 1890 to 1900.
C. Taxes on Sleeping-Car and Similar Car and Transportation Companies. Under the heading “General Considerations” are presented the limitations imposed by the constitutions of the several States upon the employment of the taxing power; and a résumé of the nature of the taxation of railroads and sleeping-car and similar transportation companies, stating briefly the chief characteristics of the law. The amendments during the decade are also noted as well as the effect which these amendments have had in modifying the taxing system. One who is in search of general information rather than detailed statements relative to the taxation of railroads by the several States need proceed no further in his study of the text than the reading of these “General Considerations.'
Under “B” and “C,” as above indicated, will be found a detailed statement and analysis of the laws of railroad taxation presented according to a uniform plan. Use is made of marginal indentations as a means of chronological classification. Each branch of ihe law as it is taken up is set forth as operative at the beginning of the decade covered by this report. Such statements appear flush on the left-hand side of the page. A description of any amendments or changes since 1890 is then inserted with an indented margin, so that the eye can readily note the moditications of the law and distinguish all amended or suspended laws from those which have remained unchanged during the decade. If there be an amendment to an amendment, or further modification of the law as it stood January 1, 1890, such changes are not presented with further indentation, but the date of these changes is noted in the margin so that by following down to the last noted change, the reader can discover the conditions of the law as it stood January 1. 1900). Modifications subsequent to 1900 may be read from the footnotes.
The plan according to which the details of legislation for the several States are uniformly presented is as follows: Each particular tax, whether it refers to the taxation of railroads or of sleeping-car and allied transportation companies, is taken up separately and presented under the three following headings:
I. General property tax on railroads.
III. Tax for the support of railroad commissions. Each of these taxes is then analyzed, in so far as the subject-matter of the law allows, under subheadings as follows:
7. Remedies. It will be noted that these subheadings are the bases of the classification which appears in Table II, already described.
The above represents the general treatment that is followed, but the headings are not applied with uncompromising rigor. Wherever the law seems to require, and deviation from the plan conduces to greater clearness, such deviation is allowed. For instance, in the case of certain taxes on gross earnings the assessment and determination of the tax are by one and the same authority and so interwoven as to be practically indistinguishable; both are treated under the one heading, " Assessment and Determination of the Tax."
So far as possible, also, and such uniformity generally is possible, the subtreatment under each of these main headings is the same, and answers to the following analyses of the topics presented:
1. Nature: Nature of the tax; its application; roads or property exempt, if any; treatment of leased property.
2. Assessment: By whom; functions and duties of the railroad company in the making of the assessment, returns, etc.; penalty for failure of return; procedure upon failure of return; time and place of assessment; rules governing the assessment; powers of the assessing body; record; and report of assessment, if any.
3. Apportionment of valuation: Apportionment to counties, by whom and how made apportionment to lesser districts, by whom and how made; record of apportionments.
4. Determination of the tax: By whom; time, place, and manner of determining the tax, and rules concerning the same; rate of the tax, and how computed; notice of the amount of the tax to railroad companies and State and local officials.
5. Payment of the tax: When due; to whom payable or by whom collectible; distribution of proceeds; effect of payment, etc.
6. Default of payment: When companies in default; penalty for default; provisions for lien; collection on default
7. Remedies: To alter taxable value as determined; to alter amount of tax as determined.
In the minor taxes-taxes imposed on privileges, on particular real estate for local purposes, etc. --seldom if ever are all these headings employed. This may be for either of the two following reasons: first, because the law itself is so simple as to dispense with some of the complications of the more general and complex law; or, second, because the general revenue laws themselves supply a procedure that may readily be adjusted to the needs of specific taxation of railroads or other transportation agencies.
It should also be held in mind that throughout the entire analysis, unless there are imperative reasons for doing otherwise, only such laws as are specifically applicable to the taxation of railroads are here analyzed and discussed. When railroad taxation in any point falls under the general laws, the analysis usually satisfies itself with a statement of such fact. Any other treatment would involve an almost interminable exposition, cumbersome in the extreme.
DESCRIPTION OF STATE RAILROAD TAXATION.
DEVELOPMENT OF THE PRESENT SYSTEM.
Railroad property was not originally taxed differently from other kinds of property. Its peculiarities, whether one consider the method of its capitalization, the rules for its valuation, or its significance from the social or industrial point of view, were not at first adequately understood, or, if understood, were not considered of sufficient importance to warrant special legislation. One or two States, notably Pennsylvania, differentiated their fiscal treatment of railroads at the outset, but the general rule was otherwise.
A survey of legislation at the present time, however, shows the law of railroad taxation to be almost universally a law of special enactnient. It is true that, in the great majority of cases, railroads are still taxed like individuals upon their general property, but special methods have been devised for the application to railroads of the principles of the general property tax. The method of assessment is usually different. There is not uncommonly an apportionment of the assessed valuation between the States and the minor civil divisions. The nonphysical or franchise element, either by express provision of the statute or by interpretation of the assessors, is often considered in the assessment and taxation of railroad property, a practice unknown to the primitive system. Even in the minor points of administration, as procedure on default of payment, time of payment, and the like, many differences may be noted.
It must not be understood that the early method of taxing railroad property has entirely passed away. Rhode Island is a conspicuous instance to the contrary, for in this State there is no distinction between the taxation of railroad corporations, in fact of corporations generally, and the taxation of individuals. The same was, in general, true of Louisiana at the beginning of the decade, though, unlike Rhode Island, there were special statutes upon the subject. The effect of these statutes, however, was not such as to render the taxation of railroads different from the taxation of other properties. Thus the real estate was assessed and taxed in the parish where located and the other property at the domicile or principal office of the company in the State. But by article 226 of the new State Constitution, adopted May 12, 1898, provision was made for the creation of a State Board of Appraisers invested with the power to assess the property belonging to corporations, associations, and individuals employed in railroad, telegraph, tele phone, and sleeping-car business.” Under the provisions of this article, and Act 106, July 13, 1898, which carried it into effect, this State board determines the value for taxation of all the property used in the railroad business in the State, and distributes this valuation to the minor
civil divisions of the State. This was not a revolutionary departure from the primitive system. The real estate continued to be taxable where located, the personalty at the domicile or principal place of business of the company in the State (Act 170, July 14, 1898), but it is in line with the evolution toward equality and uniformity, or, in other words, toward centralization of assessment, and as such is a change of signal importance.
It is frequently stated by writers on the subject that Oregon, like Rhode Island, and like Louisiana until within the last few years, still adheres to the primitive system, but there seems good reason for doubting the accuracy of such a statement. Like Louisiana the real estate is assessed and taxed where located, but for rolling stock there is an entirely different rule. An Act of November 24, 1885, provides that the movable property, or rolling stock, shall be apportioned among the several counties of the State through which the line or lines may pass, in the ratio that the number of miles of such road in each county bears to the total number of miles of the road in the State. It is made the duty of the secretary or managing agent of every such person, company, or corporation annually "to make out and send to the county clerks of the several counties of the State a sworn statement in writing of the total amount of the rolling stock owned, leased, or operated by such person, company, or corporation, particularly describing it, and also the number of miles of road operated by such person, company, or corporation within the State, and the total number of miles of road so operated." The fact, then, that there is something like an apportionment of rolling stock valuation, though this valuation and apportionment is not made by a State authority, would seem sufficient to remove Oregon at least one stage from the primitive system. Yet it may be that because there is no State or central assessment of the other elements of the railroad property, and because the general revenue laws do in most respects apply to railroads, it is properly described in broad terms as still adhering to the primitive system.
Again, it is stated by some authorities that New Mexico still clings to the old system, but as to the manner of the assessment, at least, this statement is open to criticism. Until February 17, 1897, the assessment and taxation of railroads conformed in all respects to that of properties of individuals and corporations. By Act 12, February 17, 1897, however, a territorial board of equalization was given the power of “fixing the valuation upon all property belonging to railroad, telegraph, telephone, and sleeping-car companies doing business within the Territory of New Mexico.” And the valuation as made by this board is certified by the auditor of the Territory to the boards of county commissioners of the various counties in which any of the above-mentioned class of property may be located." The apportionment is upon a mileage basis.
The conditions in the State of Texas are in a somewhat similar case. Here, at the present time and throughout the decade, the real estate has been assessed and taxed where located. The rolling stock is rendered in the county where the company has its principal office in the State; the return is revised by the county board of equalization of the county in which the return is made, and the results of such review must be certified to the comptroller of public accounts of the State. The comptroller apportions the rolling stock valuation to the several counties through which the railroad runs “in proportion to the distance such road may run through any such county.” Supplementary to the property tax on railroads there is a tax on gross receipts from passenger traffic payable to the State, and railroad companies are also required to pay an annual “franchise tax" to the State. In these several respects, then, Texas has grown away from the primitive system.
The District of Columbia does not distinguish railroad from other property in its revenue laws, though here, as conditions of administration and political responsibility are somewhat anomalous, peculiar conditions of taxation might well be expected.
In Hawaii the taxation of railroads is the same as that of other corporations, but a degree of advancement has been attained there in the provision that where property of several kinds is "combined and made the basis of an enterprise for profit,” such property shall be assessed as a whole on its fair and reasonable aggregate value. And in making such assessment, net profit, gross receipts, actual running expenses, the market price of its stock, and all other facts which reasonably and fairly bear upon such valuation ” are to be taken into consideration.
EXEMPTIONS FROM TAXATION.
Before entering upon a more detailed description of the modern method of taxing railroads, it may be proper to say a word respecting exemptions. The experiments of the States with internal improvements between 1830 and 1815 ended disastrously, and as a result the task of providing the country with a means of inland communication was handed over to private enterprise. This change in public sentiment took place about the time that engineers convinced themselves of the enduring superiority of railroads, as compared with canals. By 1860 the people also had begun to realize the importance of railroads and to encourage private corporations by every means in their power to build and equip these new highways of commerce.
Aid was given, subsidies granted, franchises and privileges bestowed, and prominent among these pririleges was a limited immunity from taxation. This practice of exempting railroads from taxation, however, did not continue for any considerable length of time and very early in their history railroads were called upon to contribute their quota for the support of government.
While the above is true, as a general statement, it must not be understood that the exemption of railroads from taxation belongs to a policy entirely past. In Arizona acts were passed in 1891, 1893, 1895, 1897, 1899, and 1901 which, in order to encourage the construction of railroads, provided for exemptions for varying periods in case of compliance with the provisions of the said acts. In New Mexico, by Act of February 4, 1897, it was provided that every railroad corporation formed under this act should be exempt from all taxation until the expiration of six years from the completion of its road, and this act further guaranteed the railroad's profits by the provision that the maximum charges for freight and freightage as fixed by the act should not be reduced so as to affect any such corporation until the surplus earnings of its road and telegraphs exceed ten per cent upon the cost of the construction and equipment thereof. By the laws of New Hampshire it is provided that any portion of every railroad which has not been opened for use for the period of ten years from September 15th preceding the time when such tax is assessed, shall be exempt from taxation. The Louisiana Constitution of 1898 provides that any railroad constructed after the adoption of such constitution and completed prior to January 1, 1904, shall, subject to certain conditions, be exempt for ten years from the date of its completion. Thus it is seen that these provisions for exemption are not limited to States of undeveloped resources. Some of the older communities even have perpetuated them. The history of the Michigan law during the past decade is well in point here. Act 17+, June 30, 1891, reenacting with some changes the law providing for the taxation of the gross receipts of railroad companies, provided that the tax should not apply to any railroad or railroad company "hereafter building and operating a line of railroad within this State north of parallel forty-four of latitude, until the same has been operated for the full period of ten years," etc., with certain limitations. These provisions reappeared in substance in Act 129, May 27, 1893, but were entirely superseded and abrogated by Act 228, June 4, 1897, which provided that " Every railroad company and union railroad station and depot company owning or operating any railroad situated in whole or in part in this State” shall pay the tax imposed, the provisions concerning roads built and operated north of the forty-fourth parallel being omitted. The railroads for this short period exempted from taxes fought the new law in the courts, but it was decided that the exemption was merely a gratuity repealable at will.
There have been numerous cases in which the property, francbises, etc., of particular roads have been exempted in whole or in part, some of which exemptions still continue. North Carolina, prior to 1891, exempted three of its most important railroads, but in that year these exemptions were annulled, the fruit of a persistent agitation. One way in which particular roads have been released from the revenue laws is worthy of special notice here, viz., those cases in which franchises have been granted by the United States, and, by virtue of their source and the conditions of their creation, have been held nontaxable. Several of the Western States in framing their tax laws have taken cognizance of their incapacity with respect to such properties, and so have provided that the property real and personal and the franchises of railroads, ercept franchises derived from the United States, shall be taxed. It is somewhat beyond our purpose