verbal defect was forgiven in these cases, there is no apparent common-sense reason why it should not be forgiven in West Virginia's excise on corporations. Once it is granted that a tax on the net income of all corporations need not loose its hold when it comes to income from interstate commerce, even though such income is all that a complaining foreign corporation receives, there is no substantial ground for sparing such income because the tax calls itself an excise on doing business rather than a tax "on net income received by corporations." It is to be anticipated, therefore, that the Supreme Court, if it determines to treat a tax on corporate income in the same way that it regarded Wisconsin's tax on all income, will find little difficulty in taking the further step that a tax, though formally on the business itself, is substantially on the net income from that business and is therefore entitled to the same consideration that would be bestowed on a tax designated as one on such net income.

There remains for consideration the bearing of the commerce clause on complaints of the vice of extra-territoriality in the assessment of an income tax. It has already been suggested that the legal status of the recipient of income may be a factor in cases where it is objected that a state has levied on income from extrastate sources or on income to which extra-state activities have contributed. In dealing with such complaints it will be necessary to determine what basis or bases of jurisdiction underlie the imposition of income taxes. The Western Union case and those following it establish that the taxation of foreign corporations engaged in interstate commerce by a method which takes account of extrastate values is an invalid regulation of interstate commerce as well as a denial of due process of law. This doctrine must apply to taxes on income or to taxes measured by income as forcibly as to taxes measured by property. Plainly foreign corporations engaged wholly or partly in interstate commerce can insist that extra-state income as well as extra-state property is beyond the reach of the state by direct or indirect action.

What can be done with foreign corporations engaged exclusively in local business does not fall strictly within the scope of this study, although the cases that have been reviewed are the ones which throw light on the problem. If Horn Silver Mining Co. v. New York 56

56 143 U. S. 305, 12 Sup. Ct. Rep. 403 (1892).

is still law, it would seem that such foreign corporations may be subjected to an excise measured by their total income as readily as to one measured by their total capital stock. The possibility of the early demise of the Horn case has already been suggested.57 Mr. Henderson in his admirable study of The Position of Foreign Corporations in American Constitutional Law 58 argues forcibly for the view that the decision must be regarded as already abandoned.59 This is a legitimate inference from the opinion of Mr. Justice Van Devanter in International Paper Co. v. Massachusetts,60 in which the due-process objections to an excise measured by extra-territorial values appear to be treated as entirely independent of the commerce clause. The opinion of Mr. Justice Holmes in Equitable Life Assurance Society v. Pennsylvania 61 may also be taken as an implied obituary of the Horn case. This case sustained a tax on a foreign insurance company which included a percentage of premiums paid in other states on policies on the lives of residents of the taxing state, notwithstanding the ruling that such premiums, separately considered, afford no basis for a tax on a company that has ceased to solicit business or to collect premiums in the taxing state.62 Though the Equitable case came within the doctrine of arbitrary power declared in the Horn case, it was not put on that ground by the court. Instead, Mr. Justice Holmes pointed out that many incidents of the contracts insuring the lives of residents were likely to be attended to in Pennyslvania, such as the payment of dividends and the adjustment of claims, and added: "It is not unnatural to take the policy holders residing in the State as a measure without going into nicer if not impracticable details. Taxation has to be determined by general principles, and it seems to us impossible to say that the rule adopted in Pennsylvania goes beyond what the Constitution allows." 63

57 31 HARV. L. REV. 613, 758, 759.

58 Henderson, "The Position of Foreign Corporations in American Constitutional Law," 2 HARVARD STUDIES IN JURISPRUDENCE, Cambridge, Harvard University Press, 1918.

59 For a statement of Mr. Henderson's argument, and a presentation of considerations against its validity as an expression of the present state of the law, see 33 POLITICAL SCIENCE QUARTERLY, 558-65. 60 246 U. S. 135, 38 Sup. Ct. Rep. 292 (1918). 61 238 U. S. 143, 35 Sup. Ct. Rep. 829 (1915).

62 Provident Savings Life Assurance Society v. Kentucky, 239 U. S. 103, 36 Sup. Ct. Rep. 34 (1915).

63 238 U. S. 143, 147, 35 Sup. Ct. Rep. 829 (1915).

Here is a pretty plain implication that an excise measured by premiums which have no relation whatever to the taxing state would have gone beyond what the Constitution allows. The states, therefore, have had a clear warning of the risks they run in seeking to levy on the extra-state income of any foreign corporation.

Such taxation of extra-state income can be justified, if at all, only by the possession of some power over the recipient. The income, as such, is not taxable by a state which has no other relation towards it than that of covetousness. It is at best exceedingly doubtful whether the requisite power exists over any foreign corporation. As to domestic corporations the case is not so clear. Such corporations, whatever their business, may be subjected to any demand exacted as a price for the privilege of coming into being.64 Through control over the corporate entity en ventre sa mère, the state may accomplish indirectly what it cannot attain directly. With reserved power to amend or repeal the corporate charter, this initial arbitrary power may possibly be transformed into a continuing one. But, if so, it must be exercised as an assertion of such arbitrary power, or else find adequate justification on independent grounds. This appears clearly from Mr. Justice Harlan's opinion in Louisville & Jeffersonville Ferry Co. v. Kentucky,65 in which it was held a taking of property without due process of law to include in the valuation of the Kentucky franchise of an interstate ferry the value of the Indiana franchise of the same concern. After stating the conclusion that Kentucky cannot in effect tax the incorporeal hereditament which has its situs in another state, Mr. Justice Harlan continues:

"This view is not met by the suggestion that Kentucky can make it a condition of the exercise of corporate powers under its authority that 64 Railroad Co. v. Maryland, 21 Wall. (U. S.) 456 (1874), 31 HARV. L. REV. 578; Ashley v. Ryan, 153 U. S. 436, 14 Sup. Ct. Rep. 865 (1894), 31 HARV. L. Rev. 580; Kansas City, M. & B. R. Co. v. Stiles, 242 U. S. 111, 37 Sup. Ct. Rep. 58 (1916), 31 HARV. L. REV. 599. The same rule is assumed to apply to charter requirements of a police nature. Louisville & N. R. R. Co. v. Kentucky, 161 U. S. 677, 16 Sup. Ct. Rep. 714 (1896). But intimations that some or all of the justices have doubts as to whether charter provisions may inevitably be enforced under all future circumstances appear in Interstate Consolidated Street Railway Co. v. Massachusetts, 207 U. S. 79, 28 Sup. Ct. Rep. 26 (1907), International & G. N. Ry. Co. v. Anderson County, 246 U. S. 424, 38 Sup. Ct. Rep. 370 (1918), and Detroit United Ry. Co. v. Detroit, 39 Sup. Ct. Rep. 151 (1919).

65 188 U. S. 385, 23 Sup. Ct. Rep. 463 (1903).

the tax upon the franchise granted by it shall be measured by the value of all its property, wherever situated, of whatever nature, or from whatever source derived. It is a sufficient answer to this suggestion to say that no such condition was prescribed in the charter of the ferry company when it was granted and accepted. Nor does the taxing statute in question make it a condition of the ferry company's continuing to exercise its corporate powers that it shall pay a tax for its property having a situs in another State. There is no suggestion in the company's charter that the State would ever, in any form, tax its property having a situs in another State. We express no opinion as to the validity of such a condition if it had been inserted in the company's charter, or if it were now, in terms, prescribed by any statute. We decide nothing more than it is not competent for Kentucky, under the charter granted by it, and under the Constitution of the United States, to tax the franchise which its corporation, the ferry company, lawfully acquired from Indiana, and which franchise or incorporeal hereditament has its situs, for purposes of taxation, in Indiana." 66

Owing to this disposition of the case, the court did not consider whether the tax complained of was an unlawful burden on interstate commerce.

Thus the court leaves open the question whether a state may tax domestic corporations as it pleases, provided it specifically bases its demand on its control over the continued existence of the corporation. This question was left open also by Kansas City, M. & B. R. Co. v. Stiles,67 which was careful to adduce in support of an excise measured by total capital stock the fact that the law was in force when the corporation begged for birth.68 The Supreme Court is still free to apply the doctrine of the Western Union case to domestic corporations which are not under some fairly clear contractual disability to object to the demand complained of. Whether it will do so is still uncertain. Whether it should do so is a question on which disagreement is not difficult. In the opinion of the writer, the less we have in our constitutional law of arbitrary power on the part of one state to deal as it will with affairs in other states, the better. If a tax is not constitutional by 67 Note 64, supra.

66 188 U. S. 385, 23 Sup. Ct. Rep. 398 (1903). 68 For example, the passage quoted in 31 HARV. L. REV. 599: "The railroads comprising this consolidation entered upon it with the Alabama statute before them and under its conditions, and, subject to constitutional objections as to its enforcement, they cannot be heard to complain of the terms under which they voluntarily invoked and received the grant of corporate existence from the state of Alabama."

reason of its own intrinsic merit or absence of sufficient demerit, there is something artificial and unwholesome in making it constitutional by endowing a state with a club which it may brandish at will. A tax on the extra-state income of a domestic corporation, if not good as an exercise of the taxing power, does not, as an original proposition, present a strong claim for recognition as an exercise of unlimited power over corporate creatures. It no longer fits the facts to treat the grant of a corporate charter as a bestowal of gracious favor by an act of high prerogative. In most instances it is today a mere record of a situation that by common consent is one demanded by the exigencies of normal business intercourse.69 Even if it is held that a state is subject to limitations in wielding the taxing power by way of the amendment of corporate charters, there still remains the question whether a tax on the total net income of a domestic corporation can not stand on its own legs. New York,70 Wisconsin, Montana, 72 Connecticut 73 and West Virginia 74 ask domestic corporations to pay only on the income earned from business within the state, or on the proportion of total income roughly estimated to have been earned within the state. Montana, ex abundantia cautelae or inspired by benevolence, excludes income from interstate commerce. Missouri 75 and Virginia, 76 however, take toll from all income no matter whence derived. As the profits from local or interstate commerce in other states increase, the revenues of the chartering state wax correspondingly. A historian might be reminded of a famous tea party, but we are thinking of the Constitution that followed after. Should the fact that the recipient of extra-state income is a domestic corporation justify a tax on that income? If such income is

71

69 For elaboration of this position, to which the writer acknowledges his indebtedness, see Gerard Carl Henderson, "The Position of Foreign Corporations in American Constitutional Law," 2 HARVARD STUDIES IN JURISPRUDENCE, chap. X. While Mr. Henderson is dealing primarily with foreign corporations, his analysis, it is submitted, applies in considerable degree to domestic corporations as well. 70 LAWS OF NEW YORK (1917), chap. 726, § 214. See note 91, infra, for reference to later amendment.

73 ACTS OF 1915, chap. 292; GENERAL STATUTES Of Connecticut (Revision of 1918), chap. 73, §§ 1391, 1394.

74 ACTS OF WEST VIRGINIA, Second Extraordinary Session, 1915, chap. 3.

75 LAWS OF MISSOURI, 1917, 528. S. B. 415, § 7.

76

4 VIRGINIA CODE ANNOTATED (Supplement, 1916),552.