8

[G. L. c. 59 § 3 When decisions of the supreme court of the United States held that a state had no power to tax tangible personal property permanently located outside its limits,' the Massachusetts statutes were amended accordingly, and the section of the statutes now under consideration must be construed in the light of the statute exempting from taxation merchandise, machinery and animals owned by inhabitants of this commonwealth but situated in another state. Intangible personal property belonging to an inhabitant of this commonwealth but situated in another state is still subject to taxation by authority of this commonwealth; but all intangible personal property which is subject to direct taxation in the hands of the owner by the laws of this commonwealth is reached by means of the income tax and is not subject to taxation under this chapter.

Property of such a nature that it cannot be lawfully sold, such as intoxicating liquors, is none the less taxable; 10 and the property of a person is taxable although he is not qualified to vote for the officers by whom the taxes are assessed.11

What is Real Estate for the Purpose of Taxation

SECTION 3. Real estate for the purpose of taxation shall include all land within the commonwealth and all buildings and other things erected thereon or affixed thereto.

Mortgages upon buildings or other things, which with the land upon which they are erected or to which they are affixed are taxable as real estate as defined herein, shall be deemed mortgages of real estate for the purpose of taxation, and shall be taxed under sections eleven to fourteen, inclusive.

All buildings erected on or affixed to land are taxed as real estate regardless of any private agreements which may make the buildings personal property as between the parties interested. A building affixed to land must be taxed to the owner of the land, and cannot be taxed to anyone else, even if taxed as

7 Supra, Part 1, § 43.

8 St. 1909, c. 516, § 1.

9 G. L. c. 59, § 4, clause 19.

10 Dunbar v. Aldermen of Boston, 101 Mass. 317 (1869).

11 Wheeler v. Wall, 6 Allen 558 (1863).

1 Flanders v. Cross, 10 Cush. 514 (1852); Milligan v. Drury, 130 Mass. 428 (1881).

G. L. c. 59 § 4]

real estate. The tax on land and buildings is one and indivisible, and the separate valuation of the buildings is required merely to secure a more specific valuation of each portion of what really constitutes but one item of real estate." Machinery, on the other hand, is not taxable as real estate, but is taxable only as personal property, even if so attached to the building in which it stands as to constitute real estate as between grantor and grantee."

Water power for mill purposes is not a distinct subject of taxation and cannot be taxed independently of the land to which it belongs. As under the mill acts the power may be used by the person who first appropriates it, it is not treated as property until it is appropriated, and when it is appropriated and used for power it is as between different owners and municipalities taxed merely as adding to the value of the property to which it is applied; but power raised in this state and applied in another state may be taxed as an element of value of the land upon which the power is raised." When a mill privilege is situated partly in this state and partly in another state, it is proper in assessing the privilege in this state to take as its value the same proportion of the entire value as the fall in the river in this state bears to the entire fall in the river belonging to the privilege.10

What Personal Property is Subject to Taxation

SECTION 4. Except as provided in the following section and in chapters sixty-two and sixty-three, personal estate for the purpose of taxation shall include:

2 McGee v. Salem, 149 Mass. 238 (1889).

3 Phinney v. Foster, 189 Mass. 182 (1905).

4 G. L. c. 59, § 46, infra page 277.

5 Massachusetts General Hospital v. Somerville, 101 Mass. 319, 327 (1869), Tremont & Suffolk Mills v. Lowell, 163 Mass. 283 (1895).

6 Hamilton Manufacturing Co. v. Lowell, 185 Mass. 115 (1904).

7 Boston Manufacturing Co. v. Newton, 22 Pick. 22 (1839); Lowell v. Middlesex County Commissioners, 6 Allen 131 (1863); Pingree v. Berkshire County Commissioners, 102 Mass. 76 (1869); Farmington River Water Power Co. v. Berkshire County Commissioners, 112 Mass. 206 (1873); Fall River v. Bristol County Commissioners, 125 Mass. 567 (1878); Lowell v. Middlesex County Commissioners, 152 Mass. 372 (1890); Essex Co. v. Lawrence, 214 Mass. 79 (1913).

8 Boston Manufacturing Co. v. Newton, 22 Pick. 22 (1839).

9 Blackstone Manufacturing Co. v. Blackstone, 200 Mass. 82 (1908).

10 Blackstone Manufacturing Co. v. Blackstone, 211 Mass. 14 (1912).

[G. L. c. 59 §4 First, Goods, chattels, money and effects, wherever they are; ships and vessels at home or abroad, except as provided in section eight of this chapter and in section sixty-seven of chapter sixty-three.

Second, Money at interest, and other debts due the person to be taxed more than he is indebted or pays interest for; but not including in such debts due him or indebtedness from him any loan on mortgage of real estate, taxable as real estate, except the excess of such loan above the assessed value of the mortgaged real estate.

Third, Public stocks and securities, bonds of railroads and street railways and stocks in turnpikes, bridges and moneyed corporations within or without this commonwealth.

This section first appeared in the annual tax act of 1777-81 as a part of the directions to the assessors to be included in the warrant from the treasurer of the state and was continued in the periodic tax acts until the Revised Statutes and has been repeated in the subsequent revisions and codifications of the tax law although under the legislation now in force it is somewhat misleading.

Thus the apparent meaning of the first clause is of course limited by the inability of a state to tax property not within its jurisdiction, and the broad phraseology of the statute must be construed in connection with recent decisions and legislation referred to elsewhere so as not to include tangible property permanently located in another state."

So also the vitality has been almost entirely removed from the second and third clauses by the enactment of the income tax and the almost complete removal of intangible property from the sphere of local taxation. It is believed that the second

1 St. 1777-8, c. 13, § 2.

2 Supra, Part 1, § 43.

3 G. L. c. 62, infra page 428. Prior to the enactment of the income tax act it was held that under clause second money deposited in a bank but at the immediate command of the taxpayer was "money" and not a "debt due," Gray v. Street Commissioners of Boston, 138 Mass. 414 (1885); that not every debt was taxable to some one as there might be a considerable balancing of indebtedness, Gray v. Boston, 15 Pick. 376 (1834); that a claim disputed in toto was not a "debt," Lowell v. Street Commissioners of Boston, 106 Mass. 540 (1871); Powers v. Worcester, 210 Mass. 471 (1912); but that a claim disputed only as to amount was a "debt" as to the amount admitted to be due, Deane v. Hathaway, 136 Mass. 129 (1883); that money at interest was not taxable unless it was a debt, Williams v. Boston, 208 Mass. 497 (1911); that bonds secured by mortgage of real estate were not taxable although the bond-holder did not himself hold the mortgage, Knight v. Boston, 159 Mass. 551 (1893); but that bonds secured by mortgage of real estate in part outside the common

G.L. c. 59 §5]

and third clauses of the act are now in force only in the following respects: (1) These clauses are material in governing the distribution of the tax on national bank stock; (2) If an owner of intangible property of the classes which would be taxable under these clauses but for the income tax act fails to include the income derived therefrom in his income tax return, he is made liable to taxation under these clauses; (3) Intangible property taxable under these clauses, so far as it is in the form of "securities" is treated for the purposes of the corporate franchise tax as securities which if owned by a natural person resident in this commonwealth would be liable to taxation."

5

Exemptions from Taxation

GENERAL PRINCIPLES AND THE HISTORY AND DEVELOPMENT OF THE STATUTES

The exemption of any property from taxation results in increasing the burden of taxation upon the other property in the same taxing district, and unless an exemption can be justified on some rational ground, it will result in disproportionate taxation. As the constitution permits only proportional taxation, all property within the commonwealth which is owned and held in such a way that it ought to be available to its owner to increase his ability and enlarge his duty in defraying the expenses of the government must be subjected by law to the annual tax levy. A statute exempting property from taxation is unconstitutional unless it applies only to property already taxed in some other

wealth, or in part secured by exempt real estate were taxable for their full value, Brooks v. West Springfield, 193 Mass. 190 (1906); Sweetser v. Manning, 200 Mass. 378 (1909).

Under the third clause it was held that bonds issued by a state or city to aid in the construction of a public work by a private corporation were "public stocks," Hall v. Middlesex County Commissioners, 10 Allen, 100 (1865), but that bonds issued by a public service corporation were not "public stocks," Hale v. Hampshire County Commissioners, 137 Mass. 111 (1884). Shares in an unincorporated association though transferable like shares in a corporation were not taxable under this clause, Hoadley v. Essex County Commissioners, 105 Mass. 519 (1870). A savings bank was not taxable for stock in which money received on deposit was invested, Worcester County Institution for Savings v. Worcester, 10 Cush. 128 (1852). Stocks bought by a stockbroker on a margin for customers were taxable to the broker, Chase v. Boston, 180 Mass. 458 (1902).

4 G. L. c. 63, § § 5-7 inc., infra page 513.

5 G. L. c. 62, § 49, infra page 500.

6 G. L. c. 63, § 30, infra page 541.

[G. L. c. 59 § 5

way, or to property devoted to a public or semi-public use, or to property of insignificant value and of such a character that it may be supposed to be owned by everyone alike.1

It is in accordance with the policy of our law that all the property of the inhabitants should contribute in fair and just proportion to the public burdens. To this rule there are exceptions carefully defined by statute; but the burden of proof is on every party who claims exemption from taxation to show that his case comes within some one of these exceptions. Any doubt arising must operate most strongly against the person claiming the exemption. So also one claiming an exemption must come into court with clean hands. No person or corporation can claim an exemption upon property held in violation of law or in excess of the authority granted to him or it by the legislature.3

Under the colonial laws the following exemptions were established: (1) Lands lying common for the free feed of cattle, to the use of the inhabitants in general, whether belonging to towns or particular persons. (2) The polls of magistrates and elders of churches. (3) All cattle of all sorts under a year old. (4) All hay and corn in the husbandman's hand "because all meadow, arable ground and cattle are ratable as aforesaid.” (5) The polls of "such persons as are disabled by sickness, lameness or other infirmity." (6) Estates of land in England. (7) The estates of ordained ministers "provided this freedom shall extend only to such estate as is their own proper estates, and under their own custody and improvement."

Under the annual tax acts of the provincial period the governor, lieutenant-governor and their families, the president, fellows and students of Harvard College, settled ministers and grammar-school masters were exempted from being taxed for

1 Opinions of the Justices, 195 Mass. 607 (1908), and see supra, Part I, $ 53.

2 Redemptorist Fathers v. Boston, 129 Mass. 178 (1880); Third Congregational Society v. Springfield, 147 Mass. 396 (1888); Milford v. Worcester County Commissioners, 213 Mass. 162 (1912); Boston Lodge of Elks v. Boston, 217 Mass. 176 (1914); Sullivan v. Ashfield, 227 Mass. 24 (1917). See however Masonic Education, etc., Trust v. Boston, 201 Mass. 320, 326 (1909).

3 Evangelical Baptist, etc., Society v. Boston, 204 Mass. 28 (1910). See however Rural Cemetery v. Worcester County Commissioners, 152 Mass. 408 (1890), infra page 206.

4 Anc. Chart., pp. 69-73