Unum Real Estate Corp. v. Graves , 256 A.D. 417 ( 1939 )

McNamee, J.

For many years the petitioner had been a corporation “ wholly engaged in the purchase and sale of, and holding title to, real estate for itself,” as defined by section 182 of the Tax Law. It continued that character until November 22, 1930, when it purchased a large quantity of the stock of the City Investing Company, which it still holds, for business purposes.

On May 24, 1938, the State Tax Commission finally determined that the petitioner pay a franchise tax of $5,922.03 for the calendar year 1931, pursuant to the provisions of section 182 of the Tax Law, “ based on business for the calendar year ending December 31, 1930.” No question is raised about the amount of the tax, if payable at all; and none of the facts are in dispute.

The only question on this review is whether a franchise tax may be assessed against the petitioner for the year 1931, as a corporation wholly engaged in the purchase and sale of, and holding title to, real estate for itself, when the petitioner was not such a corporation at any time during the year 1931. Both parties agree that this is the question involved. Stated otherwise, the question is, has the statute imposed the tax which the State Tax Commission has assessed.

When the petitioner purchased the stock of the City Investing Company it thereupon became a “ business corporation,” within the meaning of section 209 of the Tax Law. The two sections mentioned give classification to real estate ” corporations and to “ business ” corporations so called, respectively; many other corporations, created for various purposes, are separately classified in the Tax Law.

By section 209, and for the purposes of this case, the tax year for a “ business ” corporation begins November first, and the tax payable by it is measured by its net income for the preceding calendar year; and by section 182, the tax year for a “ real estate ” corporation begins January first, and the tax payable by it is measured by the value of its gross assets within the State during the preceding year. Both of these taxes are levied for “ the privilege of exercising ” a corporate franchise. It is the privilege that is taxed, and not the exercise thereof. In either case this franchise tax is payable in advance, and the tax becomes a liability on November first or January first, as the case may be. (Carey v. Keith, Inc., 250 N. Y. 216.)

At the time the tax in question was levied on January 1, 1931, the petitioner was not a “ real estate ” corporation by the very terms of section 182, nor was it such at any time during that year. As soon as the petitioner bought and held property other than real estate for itself, on November 22, 1930, ipso facto it became a “ business ” corporation, and was never anything else thereafter. It did not require an adjudication of the court, nor other legal proceeding, to effect that result. The conceded facts and the statute themselves determined it. (People ex rel. Fox Film Corp. v. Loughman, 259 N. Y. 30; People ex rel. Goodwin Sand & Gravel Co. v. Law, 207 App. Div. 567.)

It is urged by the Attorney-General that it is the purpose of the State to impose on all profit-motive corporations a franchise tax each year, and he urges also a construction indicating that it was the intention of the statute in question that the petitioner should pay such a tax in advance for the year 1931, because it was a “ real estate ” corporation and had assets in this State a greater part of the year 1930; and, accordingly, it is asserted that the petitioner should not be exempted therefrom. There is no warrant for “ construction ” of a statute which is mathematically clear in its terms; and, of course, no exemption is claimed. The petitioner contends that no tax was laid upon it. The record presents no question of taxation under any other statute. It is our view that the franchise tax in dispute was not assessable by the State Tax Commission against the petitioner in 1931 for the reason that during that year the petitioner was not such a corporation as was comprehended within section 182 of the Tax Law.

The determination should be annulled, with costs to the petitioner.

Hill, P. J., Bliss and Heffernan, JJ., concur; CrapsEr, J., dissents, with a memorandum.