G. L. c. 63, §§ 53, 54]

under this chapter, shall annually, between April first and tenth, make a return to the commissioner, on oath of its treasurer, stating the name and place of business of the corporation, and setting forth as of April first of the year in which the return is made:

First. The total authorized amount of its capital stock; the amount issued and outstanding and the amount then paid thereon; the classes, if any, into which it is divided; the par value and number of its shares; the market value of the shares of each class of its stock outstanding.

Second. A statement in such detail as the commissioner may require of the assets, both within and without the commonwealth, belonging to the corporation, with the value thereof, and of the liabili ties of the corporation.

Third. A statement, in a form prescribed by the commissioner, of the profit or loss resulting from the business of the corporation for the twelve months ending with December thirty-first preceding the year in which the return is made.

Fourth. A complete list of the shareholders of the corporation, their residences, the amount and class of stock, if more than one, belonging to each. If stock is held as collateral security, the list shall state the name and residence of the pledgor and of the pledgee. In lieu of such list a railroad, street railway, electric railroad, gas, electric, water, telephone or telegraph corporation may file a statement of the number of its shares held by non-residents.

So much of said return as relates to the profit or loss which has resulted from the business of the corporation shall be open only to the inspection of the commissioner, his deputies, clerks and assistants, and such other officers of the commonwealth as may have occasion to inspect it for the purpose of assessing or collecting taxes.

SECTION 54. In addition to the facts required by the preceding section, the following classes of corporations shall give in their returns the following information:

Railroad, telegraph, street railway and electric railroad corporations shall state the whole length of their lines and the length of their lines without the commonwealth.

Electric railroad corporations shall also state the length of their lines constructed on private land.

Street railway and electric railroad corporations shall also state the length of track operated by them in each town on March thirtyfirst preceding the return, to be determined by measuring as single

[G. L. c. 63, § 54 track the total length of all tracks operated by them, including sidings and turnouts, and including tracks owned by them, those which they lease and those over which they have trackage rights only, and the amount of dividends paid on their capital stock during the year ending on September thirtieth preceding the return, and during each year from the organization of the company.

Telephone companies incorporated under the general or special laws of the commonwealth, and manufacturing, owning, using, selling or licensing others to use telephones or other apparatus or appliances pertaining thereto wholly or partly within the commonwealth, and all such companies organized without the commonwealth for the purpose of establishing, owning or licensing others to use such telephones, apparatus or appliances, but having in use within it any of their lines or telephones, shall state, in such form as the commissioner may require, the facts necessary to ascertain the deductions authorized by the following section. If the return of a domestic telephone company sets forth the amount and market value of any stocks in other corporations held by the company making the return upon which a tax has been assessed and actually paid either in this or in any other state for the year preceding the date of said return, the commissioner shall examine the books, accounts and papers of such other corporations so far as may be necessary for the verification of said return.

Railroad, street railway and electric railroad corporations or companies organized elsewhere than in the commonwealth, but having lines therein, shall likewise make the returns required by this section.

Every corporation or association chartered or organized without the commonwealth which owns, controls or uses a line of telegraph within the commonwealth, shall make the returns required in this and the preceding section to be made by telegraph companies within the commonwealth, except the list of shareholders, or statement in lieu thereof required by the preceding section; and all telegraph lines within the commonwealth controlled and used by such corporation or association, shall, for the purposes of this chapter, be deemed to be a part of its own lines.

Sections fifty-three to sixty inclusive contain the provisions now in force which impose a tax on corporate franchises based wholly upon the aggregate value of the capital stock less such deductions as are authorized by law, and, in general, continue

G. L. c. 63, § 54]

in force the provisions for the taxation of corporations which were in effect prior to the enactment of the law for the taxation of business corporations in 1919. As national banks, savings banks (including the savings departments of trust companies), co-operative banks and insurance companies were already taxable under other provisions of law, and the 1919 act withdrew from the scope of the old corporate franchise tax domestic business corporations, although sections fifty-three to sixty inclusive in terms impose a tax upon all domestic corporations organized for profit having a capital stock divided into shares (as distinguished from municipal corporations and educational or charitable institutions and fraternal or social organizations) subject to certain specified exceptions, the corporations which come within the exceptions are more numerous than those which do not, and the only corporations which remain subject to the old form of corporate franchise tax are public service corporations, trust companies and possibly a few corporations organized by special law before March 11, 1831.1

It is to be noted that the statute applies to foreign railroad, street railway, electric railroad, telegraph and telephone companies which operate lines within this commonwealth, and it was as a result of the payment of the franchise tax by this class of corporations that the shares of the corporations were exempt from taxation in the hands of the stockholders before the enactment of the income tax law, and that dividends paid by such corporations are not subject to the income tax under the present law.2

Returns filed under this section are, unlike the returns filed by business corporations, privileged against public disclosure of the amount of profit and loss.3

'The corporations actually taxed under the provisions of sections fifty-three to sixty, inc., appear to consist of trust companies, safe deposit companies, gas and electric light companies, street railway companies, railroad companies, telephone and telegraph companies, power companies, crematory companies, water companies, aqueduct companies, bridge companies and canal companies. Electric railroad and trolley motor companies and any other corporations having the right to take land within the commonwealth by eminent domain or to exercise franchises in public ways granted by the commonwealth or by any county, city or town are also subject to taxation under these sections.

"G. L. c. 62, §1 (b). The only foreign corporations subject to the tax at the present time are the American Tel. & Tel. Co., the New England Tel. & Tel. Co. and the Western Union Tel. Co.

[G. L. c. 63, § 55

Valuation and Deductions

SECTION 55. The commissioner shall ascertain from the returns or otherwise the true market value of the shares of each corporation required to make a return under section fifty-three or fifty-four, and shall estimate therefrom the fair cash value of all the shares constituing its capital stock on April first preceding, which, unless by the charter of a corporation a different method of ascertaining such value is provided, shall, for the purposes of this chapter, be taken as the true value of its corporate franchise. From such value there shall be made the following deductions:

First. In case of a railroad, telegraph, street railway or electric railroad corporation or company, whether chartered or organized in this commonwealth or elsewhere, so much of the value of its capital stock as is proportional to the length of that part of its line, if any, lying without the commonwealth; and also the value of its works, structures, real estate, machinery, poles, underground conduits, wires and pipes, subject to local taxation within the commonwealth.

Second. In case of a domestic telephone company, the amount and market value of all stock in other corporations held by it upon which a tax has been paid in this or other states for the twelve months last preceding the date of the return.

Third. In case of a domestic or foreign telephone company, so much of the value of its capital stock as is proportional to the number of telephones used or controlled by it, or under any letters patent owned or controlled by it, without the commonwealth.

Fourth. In case of a domestic or foreign telephone company, the value of its works, structures, real estate, machinery, poles, underground conduits, wires and pipes, subject to local taxation within the commonwealth.

Fifth. In case of corporations subject to section fifty-three or fifty-four, other than railroad, telegraph, telephone, street railway and electric railroad corporations or companies, the value as found by the commissioner of their works, structures, real estate, machinery, poles, underground conduits, wires and pipes, subject to local taxation wherever situated.

For the purposes of this section the commissioner may take the value at which any works, structures, real estate, machinery, poles, underground conduits, wires and pipes are assessed at the place where

G. L. c. 63, §§ 55, 56]

they are located as the true value, but such local assessment shall not be conclusive of the true value thereof.

1

The principles applicable to the valuation of the shares of a corporation are discussed at length in connection with statutes providing for the valuation of the shares of domestic business corporations. The decisions interpreting the statutory provisions as to deductions are also discussed in the same connection." It is to be noted that public service companies whose lines extend into other states are taxed on the "unit system," the share of Massachusetts being apportioned according to mileage within and without the commonwealth in the case of railroad, telegraph, street railway or electric railroad companies, and according to the number of telephones within and without the commonwealth in the case of telephone companies. It has been held by the supreme court of the United States that the method of taxation prescribed by this section when applied to a corporation engaged in interstate commerce is not open to constitutional objections either as an interference with interstate commerce or as an attempt to tax property outside the commonwealth.*

The commissioner may adopt the valuation of the local assessors of the real estate and other structures locally taxed in determining the value of such property for purposes of deduction, but is not bound to do so. The procedure in case of conflicting valuations is discussed elsewhere."

Deduction of Mortgages Held by Trust Companies

SECTION 56. In determining under the preceding section the value of the corporate franchise of a trust company, that part of its real estate represented by its interest as mortgagee in taxable real estate within the commonwealth shall, for purposes of deduction under clause fifth of said section, be regarded as the average amount of value of such part of its real estate for the year for which the tax on the corporate franchise is levied, such average amount of value to be

1

3

1 G. L. c. 63, §30, cl. 3, Valuation of Shares, supra, page 536.

2 G. L. c. 63, §30, cl. 3, Deductions, supra, page 538.

Supra, Part I, §42.

'Western Union Tel. Co. v. Massachusetts, 125 U. S. 530 (1887); Massachusetts v. Western Union Tel. Co., 141 U. S. 40 (1890).

'See G. L. c. 63, §§57, 59, infra, pages 580, 583.