Wright v. Louisville & Nashville Railroad
Headline: Georgia allowed to tax out-of-state railroad stock held by a Georgia bank; Court reversed injunction, letting state require reporting and collect tax from holders of such shares.
Holding: The Court reversed the injunction and held that Georgia’s constitution and tax laws permit taxing shares of an Alabama railroad owned by a Georgia corporation, allowing the state to require reporting and collect the tax.
- Allows Georgia to tax shares of out-of-state railroad companies owned by Georgia entities.
- Requires owners to report number and value of out-of-state corporate shares for taxation.
- May make banks or leaseholders liable to reimburse taxes assessed on those shares.
Summary
Background
A Georgia bank, the Georgia Railroad and Banking Company, owned shares in the Western Railway of Alabama, a railroad incorporated in Alabama. The State’s Comptroller General attempted to collect a 1900 tax on those shares. Lessees of the Georgia bank sued and secured a court order preventing the Comptroller from collecting the tax; the appeals court affirmed that order before the case reached this Court.
Reasoning
The Court examined Georgia’s constitution and laws. The constitution requires uniform, ad valorem taxation of property subject to tax within the State’s limits. State statutes and tax rules define stocks and require taxpayers to report shares held in corporations located outside Georgia. The opinion rejected older reasoning that out-of-state railroad stock could not be taxed simply because the railroad’s land lay elsewhere. Reading the constitution and the 1898 law together, the Court concluded Georgia’s rules properly reach these shares and that the state may require reporting and tax them.
Real world impact
The decision lets Georgia tax shares in out-of-state railroads when those shares are owned by Georgia entities. Tax officials may ask for returns showing the number and value of such shares and collect the assessed tax. Owners in Georgia — including banks and those who would reimburse them — face possible tax liability on those out-of-state corporate shares.
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