Wheeling Steel Corp. v. Glander

1949-06-20

Headline: Ohio’s ad valorem tax on out-of-state companies’ accounts is struck down as discriminatory, blocking state tax on certain receivables and protecting nonresident corporations admitted to do business in Ohio.

Holding: The Court held that Ohio’s law and its application, which taxed intangibles of out-of-state corporations differently than identical intangibles owned by Ohio residents, violated equal protection and reversed the tax assessments.

Real World Impact:

Stops Ohio from taxing out-of-state companies’ receivables under this scheme.
Protects foreign corporations admitted to do business from unequal intangible property taxes.
Sends the cases back for further proceedings consistent with equal protection.

Topics: state taxation, corporate taxation, equal protection, intangible property

Summary

Background

Two out-of-state manufacturing companies that operated plants in Ohio but kept their headquarters and financial control elsewhere were assessed Ohio ad valorem taxes on intangible property (notes, accounts receivable, prepaid insurance). Each company had been licensed to do business in Ohio and paid franchise and property taxes. Ohio officials applied state statutes (§§ 5328-1, 5328-2) to treat receivables tied to sales from Ohio stocks as having a taxable situs in Ohio while exempting similar intangibles owned by Ohio residents under a reciprocity formula.

Reasoning

The core question was whether Ohio’s tax plan treated nonresident or domesticated foreign corporations unequally compared with resident or domestic firms. The Court avoided deciding due process or interstate commerce claims and focused on equal protection. It found the statutory scheme and its judicial construction produced clear, unequal treatment: identical receivables would be taxed when owned by nonresidents but not when owned by resident firms. The offered “reciprocity” did not cure the discrimination, and other states were not shown to tax in the reciprocal way. The Court therefore held the scheme denied equal protection and reversed the state-court tax assessments.

Real world impact

The ruling prevents Ohio, under the challenged statutory construction, from imposing these unequal ad valorem taxes on intangible receivables of out-of-state companies admitted to do business in Ohio. It sends the cases back for further proceedings consistent with the equal protection conclusion. The Court’s decision does not settle all constitutional challenges to state taxation because it declined to rule on due process or commerce-clause arguments.

Dissents or concurrances

Justice Douglas (joined by Justice Black) dissented on a separate ground, arguing that corporations should not be treated as “persons” under the Fourteenth Amendment and that the long line of cases granting corporations equal protection should be reconsidered.