601.

Rates and Valuation.

Returns and Reports.

Action to Recover Taxes Paid.

Foreign Corporations-Interstate Commerce.

602. Suspension or Forfeiture-For Failure to Pay Franchise Tax. For Failure to Pay License Tax.

603.

609. Situs for Purposes of Taxation.

610. Right to Tax as Affected by Taxation of Corporate Property.

0. Fees

611. Filing Fees of Secretary of State. 612. Other Fees of Secretary of State. 613. Corporation Commissioner's Fees. 614. County Clerk's Fees.

a. Taxation of Corporations

§ 590. Franchise Tax-In General.

Const., Art. XIII, § 1. "All property in the state except as otherwise in this Constitution provided, not exempt

under the laws of the United States, shall be taxed in proportion to its value, to be ascertained as provided by law, or as hereinafter provided. The word 'property,' as used in this article and section, is hereby declared to include moneys, credits, bonds, stocks, dues, franchises, and all other matters and things, real, personal, and mixed, capable of private ownership. . . .

Const., Art. XIII, § 14.

taxes upon all franchises of every kind and nature shall be entirely and exclusively for state purposes,

(d) All franchises, other than those expressly provided for in this section, shall be assessed at their actual cash value, in the manner to be provided by law, . . . and taxes collected thereon shall be exclusively for the benefit of the state.

(e) . All property enumerated in subdivisions a, b, and d of this section shall be subject to taxation, in the manner provided by law, to pay the principal and interest of any bonded indebtedness created and outstanding by any city, city and county, county, town, township or district, before the adoption of this section. The taxes so paid for principal and interest on such bonded indebtedness shall be deducted from the total amount paid in taxes for state purposes."3

Pol. Code, § 3664. taxes upon all franchises of every kind and nature shall be entirely and exclusively for state purposes.

...

The Constitution further provides that the legislature shall pass all laws necessary to carry the provisions for the taxation of franchises into effect, and to fix the rate of taxation. And provisions for that purpose have accordingly been enacted which are found in the Political Code.

3. Subdivision d here referred to is the one providing for the taxation of franchises, while subdivisions a and b provide for a percentage tax on the gross earnings of certain public service corporations and on the gross premiums received by insurance companies, respectively, in lieu of all other taxes.

4. See infra, § 595.

5. See infra, § 596.

6. See infra, §§ 595-599.

§ 591. Franchises Taxable.-Section 1 of article XIII of the Constitution provides for the taxation of all property in the state except as otherwise provided, and not exempt under the laws of the United States, and includes franchises in its definition of property." And section 14 of the same article provides for the taxation of "All franchises, other than those expressly provided for in this section."

Pol. Code, § 3664d, as Amended by Stats. 1927, Chap. 224, Approved April 20, 1927. "3664d. All franchises, other than those of the companies mentioned in sections 3664a, 3664b, and 3664c of this code, shall be assessed at their actual cash value, after making due deduction for good will, in the manner hereinafter provided, and shall be taxed at the rate of one and eight-tenths per centum each year, and the taxes collected thereon shall be exclusively for the benefit of the state. These franchises shall include the actual exercise of the right to be a corporation and to do business as a corporation under the laws of this state and the actual exercise of the right to do business as a corporation in this state when such right is exercised by a corporation incorporated under the laws of any other state or country, also the right, authority, privilege, or permission to maintain wharves, ferries, toll roads, and toll bridges, and to construct, maintain or operate, in, under, above, upon, through or along any streets, highways, public places, or waters, any mains, pipes, canals, ditches, tanks, conduits or other means for conducting water, oil, or other substances."

The constitutional provisions above referred to in effect authorize a tax upon all franchises in this state not exempt under the laws of the United States, unless otherwise expressly provided in the Constitution.8 The corporations exempted from the tax by the sections of the Constitution and code above quoted are public service corporations, insurance companies and banks, which are taxable under the provisions of subdivisions (a), (b) and (c) of section 14 of article XIII of the Constitution.

7. For text of this section, see supra, § 590.

8. People v. Ford Motor Co., 188 Cal. 8, 204 Pac. 217.

The right to be a corporation is a franchise, and is property and taxable as such.10 The assessment of a corporation on its "franchise per state law" embraces both its franchise to be a corporation and a franchise granted it by the Constitution to occupy city streets.11

A state may not tax secondary.franchises granted to a corporation by the federal government.12 But it may tax a franchise granted by the state though the grantee has afterwards received a similar franchise from the federal government, where the two are not merged.13

The right to tax the franchises of foreign corporations14 and corporations engaged in interstate commerce15 is considered in other places.

§ 592.

Situs of Franchise-Foreign Corporations.-The franchise to do business as a corporation is property, and its situs is ordinarily the place of residence of the corporation; that is, its home office.16 But when its power to do business is exercised beyond the limits of its home state, the franchise acquires a substantial existence wherever it is so exercised;17 and in so far as this franchise or intangible property consists of the exercise of the power to transact intrastate business within a state other than that of the corporation's domicile, it

9. See supra, § 7.

10. Bank of California v. San Francisco, 142 Cal. 276, 100 Am. St. Rep. 130, 64 L. R. A. 918, 75 Pac. 832.

11. Los Angeles Gas & Elec. Corp. v. County of Los Angeles, 21 Cal. App. 517, 132 Pac. 282.

12. San Francisco v. Western Union Tel. Co., 96 Cal. 140, 17 L. R. A. 301, 31 Pac. 10, foreign corporation having federal franchise to construct and operate telegraph lines.

13. People v. Central Pac. R. Co., 105 Cal. 576, 38 Pac. 905, where a domestic corporation formed to construct and operate a railroad in the state subsequently received a franchise from the federal government to construct and operate a road from the Pacific ocean eastward.

14. See infra, § 592.

15. See infra, § 593.

16. People v. Alaska Pacific S. S. Co., 182 Cal. 202, 187 Pac. 742; Los Angeles v. Western Union Oil Co., 161 Cal. 204, 118 Pac. 720.

17. People v. Ford Motor Co., 188 Cal. 8, 204 Pac. 217; People v. Alaska Pacific S. S. Co., 182 Cal. 202, 187 Pac. 742.

may be taxed by such state.18 Hence a foreign corporation which is actually exercising its right to do business in this state, and is doing an intrastate business here, thereby has taxable intangible property here. And since the exercise of such right is a franchise in this state not exempted under the laws of the United States, and not excepted in the state Constitution, it is property taxable under the constitutional provision for the taxation of franchises.19

The only franchise of a foreign corporation which can be characterized as property within this state is the franchise which it exercises within the state. Its franchise or potential right to do an intrastate business here is not a property here nor taxable as such until it is exercised in this state, and ceases to be property in this state when its exercise is discontinued.20 The method of determining the value of the corporate excess in California of a foreign corporation is considered in another section.1

§ 593. Corporations Engaged in Interstate Commerce.The right of a foreign corporation to carry on interstate business and to acquire and convey the real property necessary therefor and to maintain actions to protect its rights therein is not taxable by the state. But the tangible property of an interstate commerce company which is situated in this state, its incorporeal hereditaments in the nature of local franchises or rights in real property or to the use thereof, in short, all the instrumentalities by means of which it carries on interstate commerce and which have a local situs as property within the state, may be taxed. And the state may tax the intangible property or franchise of a domestic corporation within the state, although

18. People v. Ford Motor Co., 188 Cal. 8, 204 Pac. 217.

19. People v. Ford Motor Co., 188 Cal. 8, 204 Pac. 217.

20. People v. Alaska Pacific S. S. Co., 182 Cal. 202, 187 Pac. 742.

1. See infra, § 594.

2. People v. Alaska Pacific S. S. Co., 182 Cal. 202, 187 Pac. 742. Powers exercised in the state exclusively in carrying on interstate commerce are not taxable in the state. People v. Alaska Pacific S. S. Co., 182 Cal. 202, 187 Pac. 742.

3. People v. Alaska Pacific S. S. Co., 182 Cal. 202, 187 Pac. 742.