Corry v. Mayor and Council of Baltimore

Background

Maryland requires domestic corporations to report the value of their shares each year to the state tax commissioner, who sets an aggregate value and a per-share taxable value. The law treats a corporation as the agent for its shareholders: the corporation must pay taxes assessed on shares and may later sue a shareholder to recover what it paid. For shares owned by non-residents, the statutes fix the tax location at the corporation’s principal Maryland office. A transportation company and non-resident shareholders challenged these rules as violating the Fourteenth Amendment’s protections.

Reasoning

The central question was whether Maryland’s system — making corporations pay shareholder taxes, treating the corporation as the shareholders’ representative for notice and appeals, and letting the corporation sue for reimbursement — denied non-resident owners due process. The Court relied on prior decisions holding that the State that creates a corporation can impose reasonable conditions on stock ownership. It said treating the corporation as agent and giving it a recovery right are lawful parts of the corporate charter and state regulation. The Court also found that using the corporation to receive notice and pursue appeals is a practical, non-arbitrary method to protect shareholders’ interests.

Real world impact

The decision affirms that Maryland can assess and collect taxes on corporate shares through the corporation, without sending separate notices to every shareholder. Corporations will continue to pay assessed taxes and may seek reimbursement from shareholders. Both resident and non-resident shareholders of Maryland corporations remain subject to this collection and recovery scheme.