The general property tax applies to business property, but in the cases of the property of railroads, insurance companies, and banks, rules of administration differ from those applying to other property.

A. Railroads

The special administrative rules applying to the tangible values of railroads have not been essentially changed since 1876. A defect in the earlier legislation was the lack of provision for review of rolling stock values by the board of equalization of the county where it was rendered in gross; but this was remedied in 1885.1 It was also enacted then that interstate railroads should render in this state such proportion of their total rolling stock as the mileage of road in this state was to the total mileage of the road.

The assessment of the tangible values has remained unchanged in the hands of the county assessors. An effort was made in 1895 to devolve upon the railroad commission the duty of furnishing the assessors with the value of the road in each county and other information that might be useful to them in their assessment of the properties, but the bill to this end failed of passage.2

Under the existing system of taxation, each railroad company on or before April 30 delivers to the assessor of each county and incorporated city or town through which any part of its road runs or in which it owns real estate, a sworn statement which specifies the number and values of acres of land, the length of road and value per mile, including right of way, roadbed, superstructure, depots and grounds, all shops and fixtures, and all personal property except rolling stock. This rendition is subject to revision by the county board of equalization.1 The physical and personal properties of a road situated in an unorganized county are rendered to the state comptroller. On or before April 1 each railroad must deliver to the assessor of the county in which its principal office is located a sworn statement giving the mileage of the road in each county and the value of all the rolling stock. The valuation of the rolling stock is reviewed by the county board of equalization and, if approved, is certified to the state comptroller, who prorates it among the counties served by the road on the basis of the mileage in each, and each county's share is added by the assessor to the assessment roll. Subdivisions of counties, such as school districts, can not use the tax on rolling stock.2

1 Comptroller's Report, 1881-2. Laws of 1885, p. 30. In 1883 bills were introduced for the equalization and different assessment of railroad property, but none met with success. The agitation was warm and the lobby was strong; Galveston News, February 3, 1883.

2 Houston Post, March 21, 1895.

In 1899 and 1900 the franchises of certain railroads were assessed separately under the property tax, but upon being tested in the courts the assessment was disallowed.3

In 1905 was enacted the most important railroad tax legislation since that of the passenger earnings tax of 1879. By the Intangible Assets Law provision was made to tax railroads on their intangible property, which is declared to be the difference between the whole value of the property and the value of the tangible property. For the determination of the intangible values a state tax board was created, composed of the comptroller, the secretary of state, and the state tax commissioner. Railroad companies are required by this law to fill out sworn statements of the data with which the board works. The intangible values ascertained for each road are certified to the county assessors, the share of each county being in accordance with its proportion of the mileage of the road, and they are placed on the state and county rolls and are taxed at the same rate as other property.1 For the first year of the operation of this law intangible assets to the amount of $152,-827,000 were ascertained, but the county boards of equalization reduced the amount actually assessed to $30,803,000, or to 20 per cent of the amount found by the tax board.2 The law was consequently amended in 1907 and it was made obligatory upon tax assessors to put on the rolls the values ascertained by the tax board and these values were removed from review or change by the board of equalization.3 This law has added a very large amount of property to the tax rolls.4 It has been held, however, that intangible property can not be taxed at a higher per cent of its true value than is other property.5

1 Laws of 1909, p. 372. Rev. Civil Stats., 1911, arts. 7524-7525.

2 Biennial report of Attorney General, 1912-14, p. 632.

3 State v. Austin and Northwestern R. R. Co., 94 Tex. 530 (1901). The court held that in this case to tax the franchise separately would result in double taxation. It did not hold that the franchise was nonassessable, but that it had presumably already been assessed in connection with the other property. See also City of Dallas v. Street R. R., 95 Tex., 268 (1902).

1 Laws of 1905, p. 351. Rev. Civil Stats., 1911, arts. 7414-7426. The law was sustained in M. K. and T. Ry. Co. of Texas v. Shannon, 100 Tex., 379 (1907). It was held (1) that intangible values are not such property as is required by the constitution to be assessed by the county assessor, but that they constitute one of the "other subjects" of taxation for the taxation of which the legislature is authorized to provide by art. 12, sec. 17. It was held (2) that the act confers not judicial but quasi-judicial powers upon the comptroller and the secretary of state. And it was held (3) that the equal and uniform provision of the constitution is not violated by the act, because this provision does not mean that the same method of ascertaining the value of property shall be adopted in all cases.

2 Report of the Tax Commissioner, 1906.

3 Laws of 1907, p. 469. Lively v. M. K. & T. Ry. Co. of Texas, 102 Tex., 345 (1909).

4 The amounts assessed were:

5 Lively v. M. K. & T. Ry. Co. of Texas, 102 Tex., 545 (1909). Also see M. K. & T. Ry. Co. of Texas v. Kone, 122 S. W. Rep., 424 (1909), and M. K. & T. Ry. Co. of Texas v. Hassell, 57 Texas Civil App., 522 (1909).

Some of the Texas railroads are assessed for taxation at a higher valuation per mile than their capitalization per mile or their valuation per mile by the Texas railroad commission. For example, the Houston and Texas Central Railroad had in 1915 stocks and bonds per mile of $25,942 and was valued by the railroad commission at $24,005 per mile, but was assessed for taxation at $28,808 per mile.1 In the case of a number of the roads the railroad commission's valuation is less than the assessed value for taxation, and both amounts are less than the capitalization per mile of line. The overcapitalization of many of the Texas lines explains why the stocks and bonds so greatly exceed the valuations by the commission and by the tax officials, though it is probable that this excess over the commission's valuations would not be so great if a revaluation of the roads should be made. Some of the valuations were made over twenty years ago. It has been contended that there should be the same basis for capitalization, for rate making, and for taxation.2 This contention can not be accepted, however, because the purposes of the valuations are quite different, and the valuations are governed by quite different principles. Particularly is it true that a road may be taxed at a higher figure than that for which it may be capitalized, inasmuch as the selling value - which is also the taxable value - is made up of all the physical and intangible elements, while for capitalization and rate making some of the intangible elements should be excluded. This question has not been raised for adjudication in Texas, but the courts of other states tend to hold that franchises which cost the public service corporations nothing, good will, and other intangible values which do not represent actual investment should not be the bases for charges or securities.3

1 Report of the Texas Railroad Commission, 1915.

2 C S. Potts, Railroad Transportation in Texas, p. 195. Report of the Texas Welfare Commission, 1912, p. 48.

3 Comparatively recent cases bearing on this question are Cedar Rapids Gas Light Co. v. City of Cedar Rapids, 223 U. S., 655 (1912), and Public Service Gas Co. v. Board of Pub. Ut. Comm., et al. (N. J.), 94 Atl. Rep., 634 (1915).