(116 A.) It is impossible to always attain absolute | stock issue of $60,000,000, of which $36,000,equality within the same class of taxable 000 is outstanding, the whole issue valued in subjects, but, having in view the state's par- round numbers at $59,900,000. amount purpose, with the legislative will before them, courts must not, by astute efforts, block the intendments of the commonwealth and frustrate a policy that has for its foundation peace and good will among our citizens, based on equality. On the other hand, courts should not be assiduous to burden those who, through energy, thrift, ability, and resourcefulness, have acquired an abundance of the subjects of taxation, simply because they are in this fortunate position. The present appeal is not an endeavor to evade taxation, but one which earnestly and fairly raises questons affecting our taxing laws and the try meaning of their various interpretations neretofore made by this court. If other residents, in the same position, with apellee's view as to the law, have not been ta ed, still more, then this appellee, and other in like position who in the past have pad the tax now disputed, should not ired to continue such payments if thement is not authorized by law. the county of Allegheny has for some me assessed and collected what is commonMy called a personal property tax, under the act of June 17, 1913 (P. L. 507; Pa. St. 1920, §§ 20404-20421), against resident holders of shares of stock of foreign corporations, and for the year in question assessed against appellee a tax of 4 mills on $400,000, the value of 2,444 shares of stock of the Gulf Oil Corporation. Appellee, a taxpayer, took an appeal from the board of revision, which the court below sustained, relieving him from payment of the tax in question, for the reason that the Gulf Oil Corporation itself was liable to a tax, and, even if it was not, the action of the auditor general determining that it was so liable was conclusive on the court. The county takes this appeal. The Gulf Refining Company is a Texas corporation, hereinafter termed "subsidiary," incorporated for the purpose of the production and manufacture of petroleum. It does business in the United States, Mexico, and elsewhere. Later the Gulf Oil Corporation, hereinafter termed "holding company," was formed. It was incorporated under the laws of New Jersey for the purpose of "holding the stocks of subsidiary companies engaged in the business of producing, transporting, man. ufacturing, and marketing petroleum and petroleum products." Holding company ac quired all the stock of subsidiary and was recently registered in Pennsylvania. It filed a consolidated report in the office of the auditor general and paid a capital stock tax of $11,774.10 on approximately $2,250,000, and a loan tax for the year 1920. Both these taxes had been heretofore paid by subsidiary. Holding company has an authorized All tangible property, real and personal, is owned by the subsidiary in its own name; it is a going concern, functioning through its own charter powers. The holding company does not own any tangible property in Pennsylvania, and from its report we find its intangible assets amount approximately to $113,000,000, made up of stock of foreign corporations, United States securities, bonds, advances to corporations, cash in bank, notes and accounts receivable, and other miscellaneous assets. Board meetings are held, money deposited, dividends and interest paid, and all its officers reside here; the company occupying several floors of an office building in Pittsburgh. A personal property tax is a personal levy against resident holders, computed on the value of shares of stock owned by them, not taxable for state purposes or exempt under state laws; and in this case the shares are taxable unless the corporation issuing them is liable for a capital stock tax or is relieved from payment by state laws. Corporate tax is a levy by the state against the capital stock as its value is computed from the assets, less such as are nontaxable, exempt, or on which a state tax has been paid. Corporations are liable for such tax under Act June 8, 1891 (P. L. 228, 235) § 4, as amended by Act June 8, 1893 (P. L. 353, 354) § 1, and by Act July 15, 1919 (P. L. 948) § 1 (Pa. St. 1920, § 20363). A tax of five mills may be levied on the value of the capital stock on all corporations, domestic and foreign, doing business and liable to taxation, or having capital employed or used in this commonwealth in any manner what soever. The holding company is not incorporated as an operating company for producing, distributing, manufacturing, and marketing of petroleum products, but is empowered to hold the stock of such companies, and if, in the light of some decisions of this court, we accept as conclusive the charter powers as being the only source or basis upon which a tax may be founded, we might dismiss this immediate subject by holding the Gulf Oil had no authority to function either in an executive or operating capacity as a manufacturer or vendor of petroleum products. But, apart from this, and conceding for the moment its right to actively engage in manufacturing petroleum products, was it, through its executive officers, doing a business that made it liable to a tax, or did it have property employed or used in the commonwealth? Property employed or used refers, generally, to leasing or some such method of use. Com. v. National Cash Register Co., 114 Atl. 366, 271 Pa. 406. It is contended the holding company man aged, supervised, and controlled the various activities of subsidiary; that, as it was the executive directing energy, through its many instrumentalities, it carried on the work of the refining company, and, on the theory that the law regards the substance, and not the form, through holding company's sole ownership of all subsidiary's stock, such ownership drew to it the physical property of subsidiary; and that, with the screen of corporate existence thrust aside, the holding company was in fact the owner of subsidiary's property, doing business and liable for a tax within the meaning of our tax statutes. Let us examine the question a little more closely. Holding company is a distinct, corporate entity, as is also subsidiary. The latter has power to manufacture and sell, with all the incidental rights necessary to the prosecution of the business. Holding company, as its sole stockholder, controls subsidiary; but, to do so, it must use the rights and powers of the latter. Holding company has no authority to sell oil; but, through its officers, acting as officers of the refining company, or compelling the latter's officers to obey, it imposes its will on subsidiary. Holding company does this, however, only as sole shareholder; it could impose no liability or legal obligation on the subsidiary except as the individuals who acted were brought somewhere within the limits of the latter's functioning body. The directors of the two companies may be identical, but this would not alter the situation. tinct, and we see no reason why thus But it is urged the Westinghouse Case, 251 Pa. 12, 95 Atl. 807, controls. There we decided that, where a lomestic company was actually engaged in manufacturing business within the state, and, order to conduct advantageously certain inor enterprises, ancillary to its nain business, the property of which enterprises it alreay owned, it incorporated companies outsre the state (which assumed control of the business in question for the domestic corpation), we would consider, for taxing purses, the property of these foreign companie as belonging to the domestic concer; and, & situated, we held such property could n be taxed. There the outside enterprises we but a small part of a large body; but here we have a subsidiary company operating under charter powers greater than and different from the powers of the holding company, and in no way subordinate to it, with the former exercising the powers the latter says, mistakenly, it has and exercises. Under such circumstances the subsidiary does not [3] The Gulf Refining Company, the subsid- cease to exist, nor are its powers and propiary, is the living, operating business organ-erty joined with those of the holding comization, with charter powers to so act. It pany, even for convenient taxation, although is this company that comes in touch with the this may be done by consolidation or merger. great commercial world from Mexico to It is not our purpose to extend the WestingCanada; it handles the mammoth produc-house decision beyond the letter of its terms. tion which gives substance to the enterprise. See Com. v. Shenango Furnace Co., 268 Pa. It is this company that directly bears the re- 283, 110 Atl. 721. sult of all acts, good or bad, in relation to or Does Dupuy v. Johns, 261 Pa. 40, 104 Atl. connected with the business of producing 565, control? There the Crucible Steel Comand transporting, manufacturing, and mar-pany, a foreign corporation, invested capital keting petroleum and petroleum products. in Pennsylvania, the largest part in manuThe sole shareholder can lawfully impose its will on Gulf Refining and enforce obedience through the latter's machinery, created by law to govern it. Gulf Oil, eo nomine, could not replevin a wheelbarrow of Refining Company, nor could it, eo nomine, execute a mortgage on the latter's property. Holding company's control does not sweep aside the corporate existence of Refining Company; the corporations are just as separate and distinct as though the sole shareholder did not exist. Gulf Oil, as sole shareholder, receives all net profits of the subsidiary company through dividends or other arrangements. Their dealing, because of share ownership, may assume various closely related forms; and, as no outstanding holder is prejudiced through such acts, there is no one facturing, the remainder not so engaged. We held that the corporation was liable for a capital stock tax, and its resident shareholders were wholly relieved of liability for personal property tax. Here the subsidiary, Gulf Refining, a foreign corporation, has part of its capital engaged in Pennsylvania, part in manufacturing petroleum, and the residue is not so engaged. It is liable for taxation on that part of its capital employed here and not engaged in manufacturing; and its resident shareholders are not liable for a personal property tax. Up to this point the cases are parallel; from this point the additional facts present a very different situation. So far the resident shareholder in each company deals directly with his corporation: (116 A.) law. appears, with a different set of shareholders, I constitute "doing business, and liable to taxand these claim that, because their company ation"; nor is property or capital employed owns all the shares of Gulf Refining liable or used therein within the meaning of the to taxation, they have the same right to be relieved from personal property tax as the shareholders of the subsidiary. To reach this position, however, their holdings must be viewed by our taxing statutes through two distinct corporations; whereas the separate rights of a shareholder must come through the corporation which issues to him his shares, and, if the source of the existence of such shares is not doing business and liable to taxation, then the shareholder's right to immunity is never gained. In ascertaining the liability of the holding company to capital stock tax, different principles of law are involved. We must, in viewing it, eliminate actual ownership of tangible property and engagement in business as a manufacturer; for it had none of the first and did not enter upon the second. Was the holding company's stock otherwise taxable? This company, an independent entity, with its domicile in New Jersey, used in Pennsylvania capital contributed by its shareholders in the purchase of stock of Gulf Refining, a Texas corporation, which stock it here holds on deposit in safety vaults. The use of capital by a foreign corporation in purchasing stock of a Pennsylvania corporation is not the subjection by the purchasing company of so much capital to doing business in Pennsylvania. Com. v. Standard Oil Co., 101 Pa. 119, 149; Com. v. Curtis Publishing Co., 237 Pa. 333, 337, 85 Atl. 360. This is likewise true if the purchase is here made of stock of a foreign corporation doing business in Pennsylvania. In purchasing, the capital is transferred to the selling company; it is that company which uses or employs it in Pennsylvania or elsewhere as it sees fit. Construction Co. v. Winton, 208 Pa. 467, 472, 57 Atl. 955. The thing here purchased was not, and is not now, in Pennsylvania; and the same is true of shares bought from shareholders. We may illustrate what might happen if the law were to the contrary. Resident shareholders of a foreign corporation, not liable to state tax, must return and settle for a personal property tax. Suppose such company, with a large list of such holders, here liable to this tax, purchases 10 shares in a domestic concern liable to a tax. After registration, would this purchase constitute the "employment of capital or doing business, and liable for taxation" contemplated by the act, so as to relieve resident shareholders? It does not need much discussion to demonstrate the gross frauds that could, and probably would, be practiced if the law answered in the affirmative the proposition just put, which, of course, it does not. If 10 shares will not accomplish the result, will one-third, one-half, or all? Such transactions do not 116 A.-15 To what extent do the benefits of the thing bought pass on to the shareholders of the purchasing corporations? The shareholders of the two companies do not stand in the same relation to subsidiary's property or capital employed. Holding company, a corporate entity, is a shareholder of subsidiary, standing in the same relation to that company as any individual owner of stock; but the legal relations between the two companies, qua companies, are entirely different, as must be the rights of their stockholders. The thing purchased is shares of stock. In both instances the rights of the separate shareholders in their respective companies are determined by the law of New Jersey (McCloskey v. Snowden, 212 Pa. 249, 254, 61 Atl. 796, 108 Am. St. Rep. 867; Kinney v. Mexican Plantation Co., 233 Pa. 232, 233, 82 Atl. 93), where the company was created and where the intangible property of each is properly taxable (Com. v. Curtis Publishing Co., 237 Pa. 333, 335, 85 Atl. 360). A corporation owns its property. The stockholder has no right to it or any part of it, and its special benefit (tax free) does not pass to him, any more than would the right to make a patented article, which the company manufactured under a license. When distributed in dividends, he is entitled to his share. Holding company's shareholders do not receive the dividend as shareholders of subsidiary, nor could they force a redistribution of the dividend so received. A personal property tax is not intended to reach the property of a corporation. There is no connection under the law between the different sets of stockholders. Each must work out his rights through his own company, and the rights of one do not pass to the other, under circumstances as here related. The assets (shares of stock) so purchased are not, as such, liable to a state tax. They are incorporeal, intangible things connected with a foreign corporation, which are not within the taxing jurisdiction of the state, the ownership of such property being referred to the state of its domicile; its situs is there (Com. v. Standard Oil Co., 101 Pa. 119, 146; Neiler & Warren v. Kelley, 69 Pa. 403, 407; Com. v. Curtis Publishing Co., supra; Com. v. Traction Co., 233 Pa. 79, 80, 82, 81 Atl. 932), though the foreign corporation may be employing capital in Pennsylvania subject to tax. What is here said applies to all intangible assets of Gulf Oil, the holding company. If Gulf Oil were a domestic corporation, owning intangible assets located in another state, Pennsylavnia would be the taxable domicile of such assets. Com. v. Semet-Solvay Co., 262 Pa. 234, 236, 105 Atl. 92. Or if both Gulf Oil and Gulf Refining were do- | business in and liable to taxation," the situamestic corporations, under the state of facts tion which our taxing statute requires, and here presented, it would, when settling the through which appellee bases his contentions capital stock tax of the former or holding as to the nontaxability of his shares here in company, be liable for the fractional or pro- question. The act recognizes a distinction portionate part of the value of its subsidi- between doing business that requires regisary's shares, untaxed in Pennsylvania, as tration to bring a company within reach of such fractional part adds value to the capi- legal process or that will require filing a tal stock to be taxed. Though such intrinsic loan report, and doing business in and liable value of shares may be out of the state to taxation (capital stock tax). Herein the (Com. v. Shenango Furnace Co., supra), Hazelton-Wilkes-Barre Case, 251 Pa. 6, 95 shares of a corporation held by a domestic Atl. 915, is parallel. Under its facts that corporation are not taxed under a personal company would not be liable for a capital property tax. The act of 1913 does not make stock tax. We held it was doing business such ownership taxable (see Com. v. Lehigh within the state and liable, under the act of Coal & Navigation Co., 162 Pa. 603, 29 Atl. 1885, to make a report of corporate loans. It 664, on earlier legislation), but the value of is somewhat like Colonial Trust Co. v. Monthe stock thus held adds to the general value tello Brick Works, 172 Fed. 310, 95 C. C. A. of the capital stock of the holding corpora- | 144, and Washington-Virginia Ry. v. Real Estion, to be deducted as the whole or part tate Trust Co., 238 U. S. 185, 35 Sup. Ct. pays a state tax; but in personal property 818, 59 L. Ed. 1262, where the registration levies the tax is computed on the value of the shares, qua shares, and the act of 1913 does not contemplate a fractional division of such value (Dupuy v. Johns, supra). was required with no tangible property to tax. Attention is directed to the act of 1919 on the subject of loan tax. The Gulf Oil is in like situation, doing business within the meaning of the loan report and registration act, while its capital stock is not liable to a state tax through lack of taxable value. A corporation becomes liable for a capital stock tax when its stock has value through its assets to make it liable; it is on that value the tax is computed. Dupuy v. Johns, [4] It follows that a mere holding com261 Pa. 40, 45, 104 Atl. 565; Com. v. Mc- pany, chartered in another state solely for Glinn Distilling Co., 265 Pa. 346, 350, 108 the purpose of "holding the stock of subsidiAtl. 823. Value, for purposes of capital ary companies," as the Gulf Oil Corporation stock taxation, comes through property, and is, can have no property in this state which if the corporation in question is doing busi- is "liable to taxation," under our laws reness here, with no property or capital locat-lating to the capital stock tax, and hence ed or used in the commonwealth assessable for state purposes, its stock has no value upon which a capital stock tax may be based. Registration in the nature of a license or a right to do business has no taxable value; nonregistration simply renders a foreign corporation's acts unlawful; and registration, without more, does not cause the corporation to become liable for a state tax. such a tax cannot be properly levied against it, though it may have personal property here which is liable to the personal property tax. If it is not so liable, the act of 1913 applies, and appellee must pay a personal property tax. "The defendant below being a citizen of this state, it is clear he is subject personally to its power to tax, and that all his property accomWhen we look for the value of Gulf Oil in the territorial jurisdiction of the state, is panying his person, or falling legitimately withstock, we find intangible assets beyond our equally within this authority. The interest taxing jurisdiction. The best evidence of which an owner of shares has in the stock of this is the company's report, where all in- a corporation is personal. Whithersoever he tangibles are treated as extraterritorial. If goes it accompanies him, and when he dies his this is the home of Gulf Oil for some purMcKeen v. domicile governs its succession." poses, as urged, the report shows the offi- County of Northampton, 49 Pa. 519, 525, 88 cers do not regard it as such for taxation.Am. Dec. 515; Dupuy v. Johns, 261 Pa. 40, 46, While these facts do not influence our decision of the main question, they show how Gulf Oil regards its intangible assets. 104 Atl. 565. If the last-stated conclusion is not correct, we permit resident holders of valuable shares As the business relating to charter pur- to escape taxation on the ground that the poses of the company "holding the stock of company whose shares they hold, though subsidiaries" was conducted in Pittsburgh, stripped of all taxable value so far as its where its board of directors met, this, it is stock is concerned, with no assessable capiurged, is doing business liable to taxation, tal, is merely doing business. As first statthough the holding company owned no prop-ed, the tax policy is an effort to reach all inerty in the state. vestments of capital in corporations, except Acts in conformity to, and in furtherance where relieved, as indicated. of, the sole business purpose of a going concern undoubtedly represent "doing business"; The commonwealth here is not deprived of any tax, and the counties secure that which (116 A.) the reports of all companies which make returns. In adjusting and deciding questions of the character which arise in setting a capital stock tax, the auditor general hears one side only, and is often not presented with the real problems in dispute; but, even so, we have sufficient admissions in the present record to show the facts before indicated, and upon them we base our decision; we are not deciding anything about the right to file a consolidated return. Gulf Refining Company must account for all ed the report, as is usual in that office as to the property taxable in Pennsylvania, and it has always so responded. Neither Gulf Refining Company nor its shareholders are injured. Gulf Oil will pay no capital stock tax, though accounting for loans, and though its shareholders may not secure the same immunity as subsidiary's stockholders. They stand in a different sphere and are placed on a par with all other investors in the stock of foreign corporations not taxable for state purposes. Until the Legislature adopts a different system of apportionment or division of stock value, one representing capital invested in the commonwealth and the other outside, we may expect difficult problems presented, and in some cases inequality; but, if the bars are thrown down, as urged by appellee, personal property tax in Pennsylvania, so far as it relates to foreign investments, will be a dead letter. We now conclude that all the tangible property here involved belongs to the underlying company, and all the intangible property is referable to the home of the reporting company, and this corporation, though doing business in Pennsylvania, has no property on which a value may be placed so as to compute a value on its capital stock; consequently the corporation is not liable to a capital stock tax. posed, we think the board of revision should take this matter into consideration and grant relief as to this item. The county's desire is not to punish, but to have the law definitely settled. The order of the court below is reversed. and the decision of the board of revision is reinstated; the appellee to pay the costs. FRAZER, SADLER, and SCHAFFER, JJ., dissent. [5] One other question presents itself, and it forcibly illustrates what may be done to A penalty of 50 per cent. for failure to escape this personal property tax by means file a personal property return was added, as of a very small state tax, illegally assessed. provided by law. The failure to file the reThe auditor general, who received and filed port in this case was due to an honest misa report of the Gulf Company, assessed conception of the law relative to our taxing against it what plainly is a mere nominal statutes. While it is not within our power tax on capital stock. It is here contended to relieve the appellee from the penalty imthat the auditor general's report, fixing liability to tax, is conclusive, and the court cannot go behind it. The Legislature has seen fit to set up two taxing tribunals, each having equal powers, to determine a fact, to wit, a corporation's liability to a tax on its capital stock. The auditor general made an assessment or finding. The county, the other cotaxing authority, is in no position to appeal from this action. It could not be heard as a party in interest. If the auditor general's reports are to be received as conclusive, as that official is diligently looking after the state's revenues, one can easily see where the counties might suffer. On the other hand, it would be intolerable to have the auditor general's action subjected to an attack or set aside indiscriminately by the 67 county taxing officials. The court below was in error in holding the report conclusive under the facts in this case. Generally speaking, the reports of the auditor general are not only prima facia evidence, but conclusive, except in case of fraud, legal or constructive, or where the face of the report exhibits an assessment of tax contrary to law, or where the officers of the company admit a situation of stock appellee seeks to exclude from conthat makes it nontaxable. The cases relied sideration in fixing the tax due by him, has upon relate solely to situations where efforts no legal power to do anything except to hold were made to resist the collection of a tax the "stocks of subsidiary companies." The assessed by the auditor general, and do not place of taxation of such intangible assets is reach the facts in this case. Here all facts the domicile of the owner, whether a corpo-. necessary to a decision of the case were ration or an individual, unaffected by the sworn to by the secretary of the company, fact that the stock certificates may be in anand it naturally followed that some explana- other jurisdiction; for, after all, they are tion had to be made, when the corporate pur- only evidences of ownership; their location pose of the holding company filing the report may change from day to day; and thus, unwas considered. The auditor general accept- less the domicile of the owner is fixed as the SIMPSON, J. Upon the assumption that Depuy v. Johns, 261 Pa. 40, 104 Atl. 565, is not to be overruled (and this seems to be the view of a majority of the court, including the three dissenting justices), I concur in the order of reversal, not only because this court is "bound to prevent the abuse of its own decision" (Comm. v. Moir, 199 Pa. 534, 561, 49 Atl. 351, 53 L. R. A. 837, 85 Am. St. Rep. 801), but also for the reasons set forth in the opinion prepared by our Brother Kephart, more particularly because the Gulf Oil Corporation, the value of whose shares |