
    The People of the State of New York ex rel. Brooklyn Rapid Transit Company, Relator, v. Nathan L. Miller, as Comptroller of the State of New York, Respondent.
    
      Corporate franchise tax — average cash balance in banks, how arrived at.
    
    A domestic corporation organized under the Business Corporations Law was incorporated for the following purposes, “the construction, extension, repair, improvement, equipment of; and furnishing the motive power for railroads- and other works, and aiding any corporation or individual in such construction, extension, repair, improvement, equipment and furnishing of motive power.”'
    The certificate of incorporation contained the following provision: “The said corporation shall be authorized to purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebtedness of any corporation, domestic or foreign, and issue in exchange therefor its stock, bonds or other obligations.”'
    The corporation did. not have a salary list or payroll and did not own or operate a railroad, but it did own large amounts of the -stock óf numerous street railroad corporations and had furnished and was furnishing such street railroad, corporations with money for construction purposes. It also had a bonded indebtedness of $7,000,000 and it was necessary for it to have on hand money to pay the semi-annual interest on such indebtedness and money with which to. pay taxes and incidental expenses.
    In April, 1901, the corporation sold a quantity of bonds of another corporation, which it had acquired pursuant to a contract which obligated it to spend. $1,500,000 on the property owned by the corporation issuing the bonds. The bonds were sold for the purpose of obtaining money with which to carry out the contract and to further other purposes for which the corporation was organized. The proceeds of the bonds were distributed among several banks and portions thereof were used from time to time for the purposes contemplated at the time of the sale. No part thereof was ever separated and held as idle, uninvested or unemployed funds.
    
      Held, that in determining, for the purpose of assessing the franchise tax against the corporation, the average cash bank balance held by it, it was proper to treat the proceeds of the bonds as a part of the cash on hand.
    Certiorari issued out of the Supreme Court and attested on the 30th day of June, 1902, directed to Nathan L. Miller, as Comptroller of the State of New York, commanding him to certify and return to the clerk of the county of Albany all and singular his proceedings and decisions in relation to the revision and readjustment of the accounts for taxes of the relator assessed against it upon its capital stock for the year ending October 31, 1901.
    The relator is a domestic corporation organized January 18, 1896, under the Business Corporations Law (Laws of 1890, chap. 567, as amd.). The purposes for which the corporation is formed, as stated in its certificate of incorporation, are, “ the construction, extension, repair, improvement, equipment of, and furnishing the motive power for railroads and other works, and .aiding any corporation or individual in such construction, extension, repair, improvement, equipment and furnishing of motive power.”
    The certificate of incorporation also contains a provision as follows : “ The said corporation shall be authorized to purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebtedness of any corporation, domestic or foreign, and issue in exchange therefor its stock, bonds or other obligations.”
    The report of the company to the Comptroller for the year ending October 31, 1901, shows that it had at that time an authorized capital of $45,000,000 divided into shares of $100 each, and that the whole number of shares of stock authorized had been issued.
    The report to the Comptroller consisted of questions and answers, and the 16th and 18th questions, together with the statements in explanation thereof and the answers given thereto, are as follows-: “ 16. The business transacted by this company in the State of New York for the year ending October 31st, 1901, was as follows: viz.: (Give nature of business and how carried on.) Holding securi-
    
      ties and stocks of- street railroad companies and furnishing capital for construction thereon, etc.”
    
      “ 18. Capital stock employed in New York: State..............
    (Preceding line need not be filled out by companies whose capital is all employed in this State.) ”
    During said year the balance of cash held by said company at the end of each month was as follows :
    “ November 30, 1900.............;.. $216,201 30
    December 31..................... 226,851 92
    January 31, 1901............... 191,771 92
    February 28, 1901............ 475,211 34
    March 31........................ 309,567 17
    April 30..................;..... 3,641,280 61
    May 31......................... 3,603,803 29
    June 30......................... 3,550,377 90.
    July 31......................... 3,498,108 55
    August 31.. .................... 3.498.151 88
    September 30.................... 3.324.151 88 '
    October 31...................... 3,039,521 77 ”
    Further facts appear in the opinion.",
    
      Charles A. Collin, for the relator.
    
      John Cunneen, Attorney-General, and William H. Wood, for the respondent.
   Chase, J.-:

The only contention in this court "is whether the relator’s average bank balance for the year ending October 31, 1901, is capital employed within this State.

It has been repeatedly held that a reasonable amount of cash held for use in the ordinary course of business of a-corporation is a part of its capital on which a franchise tax should be paid. The relator contends that the amount of cash deposited by it in banks during the year was largely in excess of its requirements, and' that the amount thereof less an average of $100,000 should be deducted from the amount of the capital on which the franchise tax was computed. The relator had a bonded indebtedness of $7,000,000, and it was necessary for it to have money to pay the semi-annual interest on such indebtedness, and it was also necessary for it to have money to pay taxes and incidental expenses. While the company did not have a salary list or payroll and did not own or run a railroad, and did not require money in the ordinary course of its business for running expenses like a transportation corporation, it appears that it owned large amounts of stock of numerous street railroad corporations and had furnished and was furnishing such street railroad corporations money for construction, which it carried as a charge against said corporations under the head of construction advances ” as a part of its capital. To purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebtedness of any corporation ” made the temporary holding of large sums in cash necessary and to be expected in the ordinary course of its business.

The express purposes for which the company was formed was to construct, extend, repair, improve, equip and furnish motive power for railroads and other works, and aid corporations and individuals in such construction, extension, repair, improvement, equipment and furnishing of motive power and the exercise of its said corporate duties in connection with its interests as shown by the amount of its capital stock and its investments would require that it have at ready command a large amount of cash for immediate use. The largest part of the bank balance shown during the year was obtained in April by the sale of bonds owned by the relator which were á part of a larger amount of bonds taken in a transaction, a part of which consisted of a contract on the part of the relator to expend $1,500,000 on the property owned by the company whose bonds the relator had acquired. The money received from the bonds sold in April was in part intended to be used in carrying out that contract, and at the end of said year relator had paid thereon $600,000 and there was owing on that contract $840,000, which contract was then in the process of completion. The cash on hand at the end of each month, although distributed among several banks, was a general balance and the relator never separated any part of it as idle, uninvested or unemployed funds. It appears that at the time of the hearing before the Comptroller, April 16, 1902, at least two-thirds of the balance on hand at the end of the year had been actually expended in new construction of railroads in which the relator was largely interested. All the bonds sold in April, 1901, were originally acquired with the intention of selling them when the time was right in order to acquire funds for investing in railroad properties.” They were doubtless sold by the relator because “ the time was right,” and also because the money was desired for use from time to time in carrying out its contracts and in continuing the woi’k for which it was expressly organized. Under the peculiar statement of the purposes for which the relator was organized it is difficult in fixing the franchise tax to distinguish any real difference between an amount temporarily in bank drawing interest and a similar amount invested in interest-bearing bonds given by some of the companies in which the relator was interested. The Comptroller has found that the cash held by the relator in different banks as stated was a part of the capital on which the franchise tax should be computed, and we cannot say that he was in error in such determination. The determination of the Comptroller should be confirmed, with fifty dollars costs and disbursements. ■

Determination of the Comptroller unanimously confirmed, with fifty dollars costs and disbursements.  