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 enactment. 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 1845 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 privileges 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 174, 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, franchises, 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, except franchises derived from the United States, shall be taxed. It is somewhat beyond our purpose

here, however, to inquire into special charters and particular privileges, and we believe sufficient has already been said to show that the policy of exempting railroad property from taxation is still quite firmly entrenched in the laws of several of the Commonwealths.

CONDITION OF RAILROAD TAXATION IN 1890.

As already remarked, the general property tax, that is to say, a tax based on the value of real and personal property, is quite generally employed by the States in securing contributions from the railroads, special legislation for this species of property being confined, for the most part, to questions of administration and procedure. At the beginning of the decade 1890–1900, the main features of the general property tax found expression in the laws of Alabama, Arizona, Arkansas, California, Colorado, District of Columbia, Florida, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, Ohio, Oklahoma (1891), Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wyoming.

Subject to some qualifications several other States might be included in this list. Georgia provided for the taxation of rolling stock and appurtenant personalty of railroads, partly in the State, for State purposes, and of the general property of railroads in the counties through which the same pass, for county purposes. Mississippi may be properly included, though here an alternative system obtained. Railroads at the beginning of the decade were taxable both for State and local purposes on their general property, but it was stated in the statute that, in case a company should accept the act providing for the payment of a stated sum per mile for State and county purposes, said company should be exempt from all taxes on its property, except those imposed for city and town purposes. Conditions were somewhat similar in North Dakota. By Act 107, March 7, 1889, all companies accepting the act were to pay a tax upon their gross receipts and be exempt from all other taxes whatsoever, and companies not accepting the act were taxed upon their property under the general laws providing for the assessment and taxation of property. In North Carolina railroads, as a rule, were taxed upon the valuation of their general property, and those for any reason not so taxed were subject to a tax upon their gross receipts. New Jersey presents a distinct case, but may perhaps be classed in this group. At the beginning of the decade the entire valuation assessed by the State board, i. e., the valuation of all of the property except that not used in the operation of the road, was subject to taxation for State purposes. The real property used in the operation of the road, but not included in the "main stem," as defined, was subject to taxation for both State and local purposes. And, finally, the property owned by the company but not used in the operation of the road was taxable like similar property belonging to individuals. Virginia also occupies a position on the borderland. At the beginning of the decade railroads were taxed both on their general property and on net earnings, taxes that continued with but slight changes, throughout the decade.

The general property tax was not in all of the above cases an exclusive tax at the beginning of the decade. The cases of alternative taxes have been noted. In addition to these cases, in Alabama there was a tax to defray the expenses of the railroad commission, levied in proportion to the gross earnings of the particular road. In Illinois the Illinois Central Road, in lieu of other taxes, paid seven per cent on its gross earnings to the State. In Texas railroads paid one per cent in gross receipts from passenger traffic in the State for State purposes. Nor should it be assumed that those States not having the general property tax did not, and that frequently, levy a tax upon some element or elements of the property. In Minnesota, indeed, the tax on gross earnings was exclusive; in North Dakota, when at the beginning of the decade and for some years afterwards the alternative system of gross earnings and general property taxes obtained, companies electing the gross-earnings tax were exempt from all taxes on property. The capital-stock taxes in Connecticut and Massachusetts were virtually, if not technically, exclusive of taxes on property; for in Connecticut, if real estate not used for railroad purposes is taxable locally, the valuation on which the State tax is based is reduced by the amount of the local taxes. Similar conditions make the Massachusetts law exceptional. Besides these cases, there is not a State or Territory

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in which some part of the property of railroads did not bear a direct burden of taxation at the beginning of the decade.

In the paragraphs immediately preceding, the States have been mentioned in which the general property tax, or something closely allied to it, existed on January 1, 1890. The remaining States and Territories put in practice some other form of ad valorem taxation or some form of specific taxation. In Connecticut the value of capital stock and of funded and floating indebtedness was taxed for State purposes. The real estate in the State owned by the company, but not used for railroad purposes, was taxed for both State and local purposes, although, as suggested above, the value of this property was deducted from the amount of the valuation of the capital stock taxable for State purposes. In Massachusetts the value of the capital stock assignable to the State, less the value of real estate and machinery subject to local taxation, was taxable for State and local purposes. The real estate and machinery were taxable entirely for local purposes. In Delaware, New York, and Pennsylvania, there were taxes on capital-stock valuation which, if not of major importance in their several systems, were at least coordinate with the other taxes imposed. They are discussed below in connection with the specific taxes.

Among the specific taxes, the most prominent is the gross-earnings tax. At the beginning of the decade it was in operation, in one form or another, as the paramount tax on railroads, in the States of Maine, Maryland, Michigan, Minnesota, North Dakota (alternative), Vermont, and Wisconsin. In New York, Pennsylvania, and Texas, also, the gross-earnings tax was used, though in each of these cases it was described as an additional tax. In North Carolina it was imposed in an exceptional condition of circumstances. In Delaware a tax on net income was levied and here was entirely coordinate with the several other taxes. Virginia presents a somewhat similar case, as is shown later on. In Alabama, Maine, and Massachusetts, furthermore, taxes were levied for the support of the railroad commission, apportioned according to gross earnings of the several companies; in New York, according to net earnings and length of line.

In

In some cases the gross-earnings taxes were at a stated rate for all companies; in others at a rate graduated according to earnings per mile of line or some other comparative measure. Maine the tax was graduated according to earnings per mile of line. In addition to the tax on gross receipts which is for State, city, and town purposes, a tax was levied on all buildings within and without the located right of way and upon lands and fixtures without the located right of way, for municipal purposes. The Maryland gross-receipts tax as operative at the beginning of the decade was at a stated rate and was for State purposes only. The law considered only such companies as are incorporated in the State, but this fact is not of importance, as there was in 1890 no railroad company in the State not incorporated, either by the general laws of the State or by some special act of the legislature. The real and personal property was taxable at the same rate as the property of individuals, for county and municipal purposes, and was almost, if not quite of the same importance as the gross-receipts tax. The Michigan gross-receipts tax was graduated according to earnings per mile of line, was payable to the State and applicable to purposes of a general State nature, e. g., the public-school expenses, the real property not used in the operation of the road being taxable for the same general purposes as is other real property. The Minnesota gross-receipts tax was exclusively for State purposes and was declared to be in lieu of all other taxation on the property, franchises, etc., of such companies. In this regard the law of Minnesota was sui generis at the beginning of the decade. It is true that a like law and practice prevailed in North Dakota, though here, provision for the alternative taxation of the general property deprived the tax of its rigid character, and now that North Dakota has, through the decisions of the courts, entirely abandoned the system of gross-receipts taxation, Minnesota stands quite by itself. Land held by railroad companies in Minnesota was not subject to taxation until it had been sold or leased or contracted to be sold or leased by the company. Vermont's gross-receipts tax was a tax graduated according to earnings per mile of line. It was for State purposes, and nothing was said about the property. The Wisconsin gross-receipts tax was graduated according to earnings per mile of line for State purposes. But it was expressly provided that lands owned or claimed by the railroad not adjoining the tracks should be subject to taxation