American Smelting & Refining Co. v. Colorado Ex Rel. Lindsley
Headline: Court strikes down Colorado law that doubled annual license tax on out-of-state corporations, protecting companies admitted under earlier state rules from heavier taxes during their twenty-year corporate term.
Holding: The Court held that Colorado’s 1902 law, which doubled the annual license tax on a foreign corporation, impaired the contract made when the company was admitted and was void as to that company.
- Prevents Colorado from charging double annual license tax to the admitted out-of-state company.
- Protects other companies similarly admitted under the same state law during their term.
- Limits states’ ability to raise taxes on foreign corporations already granted entry.
Summary
Background
An out-of-state company paid the required fees and obtained a permit to do business in Colorado under the state laws in effect when it applied. At that time, domestic corporations had a twenty-year corporate life, and the statutes said foreign companies would be subject to the same liabilities and duties as similar domestic corporations.
Reasoning
The central question was whether those statutes and the company’s admission created a contract preventing Colorado from later taxing the foreign company more heavily than domestic ones. The Court explained that by allowing the company to enter after payment and by tying foreign companies to domestic liabilities, Colorado effectively promised that foreign companies would not face greater burdens than domestic corporations for the term of their corporate life. The 1902 law imposed a tax rate twice that of domestic corporations, and the Court held that this increased tax impaired the obligation of that contract and was therefore void as applied to the company.
Real world impact
The decision protects the specific out-of-state company from the 1902 extra tax and prevents Colorado from imposing a higher annual license tax on it for the twenty-year period tied to corporate existence. The ruling means other companies admitted under the same statutory scheme may claim similar protection while their agreed term lasts. The case was sent back to the Colorado court for further steps consistent with this ruling.
Dissents or concurrances
Four Justices — the Chief Justice, and Justices Harlan, Holmes, and Moody — dissented. The opinion text notes their disagreement but does not state their reasons in the excerpt provided.
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