Louisville and Jeffersonville Ferry Company v. Kentucky

Background

A ferry company organized under Kentucky law bought and used a separate ferry franchise that Indiana had originally granted to operate from the Indiana shore to the Kentucky shore. The company ran ferries between Jeffersonville, Indiana, and Louisville, Kentucky, and paid taxes on its tangible property. Kentucky’s Board of Valuation and Assessment valued the company’s Kentucky franchise as if all of the company’s business and value were located in Kentucky, without deducting the value of the separate Indiana franchise, and the state courts upheld that assessment.

Reasoning

The central question was whether Kentucky could tax the value of a franchise that had its legal home in another State. The Court explained that the ferry right granted by Indiana is an intangible property interest with its situs in Indiana, and a State may not tax property that lies outside its jurisdiction. Relying on prior decisions about where property has its taxable home, the Court held that including the Indiana franchise’s value in the Kentucky assessment deprived the company of property without due process under the Fourteenth Amendment. The Court reversed the state appellate judgment and remanded for proceedings consistent with this opinion. The Court expressly declined to decide whether the assessment also unconstitutionally burdened interstate commerce.

Real world impact

The ruling prevents states from treating out-of-state intangible rights as if they were located in-state for franchise taxation. Companies that hold separate rights or franchises in other States get protection from being taxed by a State where that intangible property has no legal situs. The decision reverses the Kentucky court and limits how states can value and tax multistate businesses.

Dissents or concurrances

Two Justices (the Chief Justice and Justice Shieas) dissented from the decision, indicating disagreement about the result.