
    The People of the State of New York ex rel. The New York Central and Hudson River Railroad Company, Relator, v. Erastus C. Knight, as Comptroller of the State of New York, Respondent.
    
      Franchise tax—measure of the tax where the dividends are less than six per cent—• what is the capital stock of a railroad corporation which is subject to the tax—tax-on the stock held by it of other corporations. -
    Under section 182 of the Tax Law (Laws of 1896, chap. 908), relating to the franchise tax payable by corporations, where dividends amounting to less than six per cent have been declared upon the capital stock and the cash value of the-capital stock exceeds the par value thereof, the tax should be at the rate of one and a half mills upon the cash value of that portion of the capital stock employed within the State of New York and not upon the par value thereof.
    In assessing the franchise tax payable by a railroad company which carries in its capital account items for anticipated dividends and for bills receivable, consisting respectively of anticipated dividends on stocks of other corporations-owned by the railroad company, calculated on the assumption that such corporations will continue to declare dividends, and Of expenditures for lessee and. other corporations and special expenditures for the common good of the several corporations, such items should be deducted.
    The value of such proportion of all the railroad company’s rolling stock as the-mileage thereof without the State bears to the entire mileage of all such rolling-stock, and the value of coal and supplies owned by the railroad company without the State, should also be deducted. '
    The railroad company is not entitled to a deduction for that portion of the capital stock of a domestic corporation owned by it which corresponds with the proportion of the assets of such domestic corporation used without the State.
    
      Certiorari issued out of the Supreme Court and attested the 16th day of November, 1901, directed to Erastus C. Knight, as Comptroller of the State of New York, commanding him to certify and return to the office of the clerk of the county of Albany all and singular the proceedings had before him on the application of the relator for the. revision and readjustment of a corporation franchise tax imposed upon it for the year ending October 31, 1900.
    
      Ira A. Place and Thomas Emery, for the relator.
    
      John G. Paries, Attorney-General, and Henry .B. Goman, Peputy Attorney-General, for the respondent.
   Chase, J.:

The principal contention of the relator is that under section 182 of the Tax Law (Laws of 1896, chap. 908) in cases where dividends amounting to less than six per centum have been declared upon, the capital stock of the corporation and the cash value of the capital stock exceeds its par value, the tax should be at the rate of one and one-half mills upon the par raime of that portion of the capital stock employed within this State and not upon its cash value. We understand that the Court of Appeals in People ex rel. New York & East River F. Co. v. Roberts (168 N. Y. 14) has held against the relator’s contention. The court in that case say ■: “ The direction that the tax shall he ‘upon such.portion of the capital stock at par as the amount of capital employed within this State bears to the entire capital of the corporation,’ was not intended to establish or fix the rate at which such capital stock was to be asessed, but a rule for the computation of the amount of capital stock on which assessment was. to be made.” (See People ex rel. Union Ferry Company v. Roberts, 66 App. Div. 157.) The question. raised by the relator is not now an open one for discussion in this court.

The Comptroller fixed the amount upon which the tax should be eomputed against the relator under section 182 of the Tax Law at •$10.6,000,000, and the tax thereon at $159,000. The relator contends that even if the amount Upon which the tax should be computed is based upon the cash value of its capital stock and not its par value, the amount as fixed by the Comptroller was excessive. We are unable to ascertain just how the amount was determined by the Comptroller. The relator claims that its entire capital on the '31st day of October, 1900, was $338,897,656.69, and included in this amount is an item of $965,217.97 for anticipated dividends on stock of other corporations owned by the relator, and an item of $171,653/20 carried on the books of the relator as bills receivable. The item for anticipated dividends was made up by taking the portion of the year since dividends were last declared on the stock so owned by the relator and computing dividends for such time upon the assumption that further dividends would thereafter be declared at the same rate per annum. Possible or probable dividends until declared are a mere incident to the stock included in its market value. The item called bills receivable consists of expenditures for lessee and other corporations, and special expenditures for the common good of the several corporations. This item is not an obligation against any corporation or corporations, and the .relator expects no direct return for it. It does not exist as an asset apart from the property of the corporations or the stock therein. For the purpose of fixing the amount upon which this tax should be computed these items should be deducted from the capital of the relator, as above stated, leaving the amount $337,760,785.52. Of this amount the relator admits that $205,029,380.45 was employed within this State. The balance of the assets consists of $15,230,186.06 for rolling stock, being such proportion of all relator’s rolling stock as the mileage thereof ■without the State bears to the entire mileage of all such rolling stock; $100,000 for coal and supplies without the State; $115,089,533.01 for stock owned by the relator in foreign corporations, and $2,311,686 for that portion of the capital stock owned by the relator in a domestic corporation, which corresponds with the proportion of the assets of such domestic corporation used without the State.

Under the decision in People ex rel. Lackawanna, Transportation Company v. Knight (75 App. Div. 164) the rolling stock without the State and the said coal and supplies are not capital employed within this State. The Court of Appeals in People ex rel. Edison Electric Light Co. v. Campbell (138 N. Y. 543), referring to stocks owned by the relator in that case, say : As to so much of such stocks as was in corporations organized and existing in this State, it cannot be doubted that its capital was employed within this State. So much of its capital, to wit, its patents, as was used to purchase such stocks, was employed for that purpose, and was thus used for the business of the relator. The stocks existed within this State and were kept and held to produce revenue here, and, hence, in every sense were employed within this State. They took the place as a portion of the relator’s capital of the patent rights transferred in payment for them.

“ The stocks which the relator took in companies organized outside óf this State stood for so much of the relator’s capital invested outside of the State. It took a portion of its capital, to wit, a portion of its patent rights, and employed it outside of the State to purchase those stocks. Its property in those corporations, represented by its shares of stock, was outside of this State, and was in no sense employed here. Those stocks had no situs here, and were not taxable here under any system of taxation which has ever existed in this State.” (See People ex rel. Edison Electric Light Co. v. Wemple, 148 N. Y. 690.) The fact that' the principal part of the stock, owned by the relator in foreign corporations has' been pledged as collateral seem rity for bonded indebtedness of the relator does not require that the stock so pledged but still retained for all practical purposes shall be omitted from the statement of, relator’s capital. The capital employed within this State, therefore, is said $205,029,380.45, to which should be added $2,311,686, making a total of $207,341,066.45, and being .61386+ per cent of the entire capital of the relator. The. average amount of the relator’s capital stock'at par during the year was $108,750,000, and the' average price 129.8125. The average cash value of the average amount of relator’s capital stock was $141,171,039.75. The amount upon which the tax should be computed against the relator, therefore, is $86,659,287.62, and the tax should have been $129,988.93.

The determination of the Comptroller should be modified by reducing the tax to $129,988.93, and as so modified confirmed, with fifty dollars costs and disbursements to the relator.

All concurred.

•Determination of the Comptroller modified by reducing .the tax to $129,988.93, and as so modified confirmed, with fifty dollars costs and disbursements to the relator.  