Montana Attorney General Opinion 15-530

Opinion No. 530 Taxation-Corpol·ation License Ta..x --Securities, Taxation of Income from-Intangible Property --Situs. HELD: The corporation license tax, levied under Chapter 166, Laws of 1933, is assessable on both domestic and foreign corpol"Utions on income de- rived from sources within the State of :\:lontana from interest on bonds, notes and other interest .bearing obli- gations of residents, corporate or other· wise. But such license tax is not le\'ied on like securities of non-residents, cor- porate or otherwise, since it is the source of income, not the situs of the evidence of the indebtedness or of the !<ecurity which governs the levy. May 8, 1934. Your letter to us of the 24th ult .. gives such a clear and concise state- ment of the facts that we take pleasure in reproducing it as follows: "The Montana Life Insurance Com- pany is a corporation organized under the laws of the State of Montana with its principal place of husiness in Hel' ena, :\iontana. It also has qualified and is permitted to and does tranf;- act business in several western states including the states of California, Ida- ho, Minnesota, North Dakota, Oregon, South Dakota, Utah, Washington untI Wyoming. "Its income is derived from the fol- lowing sources, to-wit,: "1. Interest on U. S. Government securi ties. "2. Interest on bonds and warrants of the State of Montana and its po. litical subdivisions and Montana cor- porations, and interest on notes se- cured by mortgages upon Montana real estate. "3. Interest on bonds of other states and foreign municipalities and bonds of foreign corporations, including rail- way, industrial and public utility bonds. "4. Interest on premium notes and policy loans made to: (a) Residcnt policy holders. (b) Nonresident policy holders. "All of such securities are in the possession of said Insurance company at their main office in Helena. "In computing the Montana corpora- tion license tax, which is administered by this Board, are we entitled to in- Clude as income of this domestic cor- poration: "1. Interest on government securi- ties'! "2, Interest on bonds of other states 366 OPINIONS OF THE ATTORKEY GENERAL and their political subdidsions amI honds of foreign corporations where the maker of such bonds is domiciled : (a) In a state other than a state in which the taxpayer is engaged in business, (b) In a state in which the tax- payer is engaged in husiness '! "3. Interest on premium notes and policy loans executed by nonresident policy holders?" Section 1 of Chapter 166, Laws of 1!l33, is in part as follows: "The term corporation includes as- sociations, joint stock companies, com- mon law tru'sts and business trusts which do business in an organzed ca- pacity whether created under and pur- suant to state laws, agreements, decla· rations of trust. Every corporation, .except as hereinafter provided, orga- Ilized and existing under the laws of the State of Montana and engaged in business therein, shall annually pay to the State Treasurer, as a license fee for carrying on husiness in said State of Montana, two (2) per centum upon the total net income received by such corporation in the preceding fis- cal year from all sources within the State of Montana, including interest on bonds, notes or other interest bear- ing obligations of residents, corporate or otherwise, and including the income uerh-ed from dividends on capital stock or from net earnings of resident corporations whose net income is tax- able under this title; and every cor- poration, except as hereinafter pro- vided, organized and existing under the laws of any other state or country, or the United States, and engaged in business in t.he State of Montana, shall annually pay fOL· the exclush-e use and benefit of the State of :Mon- tana a license fee for carrying on its business in the State of Montana of two (2) per centum upon the total net income recei'-ed by such corpora- tion in the preceding fiscal year from all sources within the State of ~fon­ tana, including the interest on bonds, notes or other interest bearing ohli- gations of reSidents, corporate or otherwise, and including the income derived from dh-idends on capital stock, or from net earnings of resi- dent corporations, jOint. stock COIU- panies or associations whose net in- come is taxable under this title_" The law as its terms disclose exacts a license fee from both (}olUestic and foreign corporations for the privilege of carrying on husiness in the state of Montana. The situs of the intanbrihles men- tioned in the letter is in this sta te and it governs so far as the imposition of general taxes is concerned (Monidah Trust v. Sheehan, 45 Mont. 424; State ex rei. Walker v. Jones, 80 Mont. 574; State ,-. Gellller, 8 S. w. (2d) 1057,5n A. L. R. 1026), hut is such situs the test in determining whether or not the in- come from such intangihles should be included in the gross receipts of the corporation for the purpose of fixing the license fee which it. must pay.! The statute places domestic and for- eign corporations practically on a par. 'l'he corporation, whether it be domestic or foreign, shall annually pay as a li- cense fee ';two per centum upon the total net income received by it in the preceding fiscal year from all sources within the State of Montana, including interest on bonds, notes or other in- terest-bearing obligations of residents. corporate or otherwise." 'l'he language employed is highly significant. The in- come must come from sources within the State of Montana. lnterest on bonds, notes or other obligations of per- sons or corporations residing in the State of Montana is included in such income. If the legislature of Montana wanted domestic corporations to ac- count for income from bonds and notes or similar obligations, whether such in- come be from sources within or with- out the state, it could easily have said so. Kor was it entirely without. pre- cedent of a related kind. 'l'he Income . Tax Law passed by the legislature of 'Yisconsin in 1911 provided, among other things, that ·'so much of the in- come of any person residing within the state as is derived from rentals, stocks, honds, securities or evidences of in- debtedness shall be assessed and taxed, whether such income is derb-ed from sources within or without the state." (State ,-. Eberhardt, 147 X. W. 1016.) 'l'he word ·'source," according to 'Yebster, means ;;that from which any- thing comes forth, regarded as its cause or origin; the first. cause." An interest- ing and instructive application of the words ';income from sources within the United States" is found in Ingram v_ Bowers, 47 .l1'ed. (2d) 925. OPINIO~S OF 'l'HE AT'l'UR~EY GE~ERAL 367 It is our view, then, that it is not the situs of the thing but the sOI1\'ce of the income which comes throu),rh ownership of the thing that controls under the statute, Accordingly, we answer the three questions propounded in the negatb·e. Opinion No, 531 1\10001' Vehicles-Licenses-Tntckel's, Owners TI'ucldng for Own Use -l.eased Bus-Tourists, HELD: Truck ownf'rs from Canll(ln who buy produce in ~Iontana and haul it home for their own use are not within the proYisions of Section 7. Chapter 126, I,aws of 1!l3.3. subjecting foreign licensed trucks to Montana li- cense' fee. -Tourists operating a leased bus. if the lease CO\'ers not less than thi rty (SO) succe:,;siye da~'s, are entitled to the priYileges granted non· resident own- ers, under Chapter 126, r~aws of HIR:3, of thirty (SO) days operation in the state without payment of license fee. May 1, 19:34 You request an opUllon on the fol- lowing propositions: 1. A number of Aluerta farmers cross the internlltional boundary line. purchase at. Whitlash. Montana, and han I in their own trucks into Alberta, crude petroleum for their own use. Should they he required to obtain Montllnalicense plates for such trncl{s'! 2. A cluh or organization whose members are residents of Massachu- setts, chartered or leased a hu:,; for the .purpose of touring the country. The expense is paid by the members H nd the bus is not opera ted for profit. Should persons operating such busses be required to ohtain Montana license plates? "'e do not think the purchal5ing Hnll hauling home of a product for the u"e of the truck owner would constitute hauling for hire or profit so as to come within the proYisions of Section 7, Chapter 12H, Laws of 198:::, subjecting foreign licensed trucks to the 1\Iontana license fee. III reply to ~o. 2, Section 1758. R C. 1\1., 11)21. as amended by Chapter ]59, Laws of In::::::, pro\'ides,' among other things, that "a 1:IC1'son having the lawful use or control, or right to the use or contl'ol of a "ehicle. under leasc or otherwise, for a l:ICriotl of thirty or more successive days shall be de- fined as the owner thereof." The Massachusetts tourists operat· ing the leased bus. if the lease ~ovel's not less than thil-ty successiyc days, are entitled to the prh'i!eges J.,"I'anted non-resident owners under Chapter 126, hel'etofore referred to, which permits operation of busses in this state hy non· residents for a period of thirty dars without any charge hy the state for license fee, and on proper showing, such prh'i!ege may be extended for thirty days additional.