The Federal Corporatlon Tax Constitutlonal? business which is subject to a federal excise, the income may be used as a
basis for computing the amount of the excise. This distinction is logical and sound. The principle on which is rests has been repeatedly aflirmed by the Supreme Court. It leaves the doctrine of the Income Tax cases unimpaired.
171
case of McColloch v. Maryland,“ in 1819. The state of Maryland had levied a tax upon the issue of notes by the Bal timore branch of the bank of the United States.
The federal government had
incorporated the bank of the United States, not in pursuance of any asserted
authority to create corporations, but
Of course, the income must constitute a fair and reasonable measure of the value of the subject-matter, for if it
because Congress deemed it an appro priate means of exercising certain gov
cannot serve as the measure of the tax,
by the federal Constitution. Among them
the only possible function left for it to fulfill is that of the subject-matter itself.
taxes, of borrowing money, and of regu
ernmental functions imposed upon it were the right and duty of collecting
This qualification would render it im
lating commerce.
possible to select arbitrarily a certain portion of its income as measuring the taxable value of a right or privilege
bank it created an agent for the purpose
productive of income from several other sources as well. Rather than accuse Congress of evad ing the limitations of the Constitution,
tax upon the operations of the bank,
let those who shut their eyes to a real
ment. Accordingly the court held the tax unconstitutional.
distinction,
founded
on
reason
and
authority, suggest a more equitable mode
By incorporating the
of expediting the discharge of the powers of government, and hence, in levying a
the state of Maryland was doing nothing more nor less than taxing the operation of a function of the national govern
In subsequent decisions,15 the taxing
of taxing a corporate franchise or busi
power of the federal government has,
ness than that adopted in the Act of 1909.
in the interest of the states, been subjected to the same lcind of restraint, so
If we are satisfied, then, that the law contemplates not a tax upon the cor
that there is now no principle more
porate income but an excise upon the
upon an implied restraint on the taxing
tional law than that neither the nation nor the states may impede the exercise of the proper functions of either, by the exercise of the power of taxation. Did Congress, in enacting the federal cor poration tax, contravene this well founded principle? That taxation by a state of the fran chise of a corporation created by the
power of both the nation and the states, incident to the distribution of the powers
federal government, excepting those cor porations chartered for general purposes
of government among them. The prin
in the territories and District of Colum bia, is invalid is more than probable.
corporate franchise or business, we are confronted with a further ground of attack, based, not on the omission to
assess the tax in accordance with the modes stipulated in the Constitution, but upon a complete absence of taxable
jurisdiction. This want of authority rests
ciple underlying this restraint is almost as old as the Constitution itself. It was enunciated contemporaneously with that of implied powers when the court, pre sided over by John Marshall, decided the
securely established in our constitu
But because the restraint itself is recip
rocal, that is to say, because it controls 1‘ 4 Wheat. 316. 1‘ Notably, Collector v. Day, 11 Wall. 113.
