Corporations usually have not been relieved from the assessments of local taxing districts, but the demand for heavier burdens against them has resulted in the imposition of additional taxes, usually by the state, which are designated as franchise taxes. As the name indicates, they represent an exaction for some special privilege, which a corporation is supposed to possess. These privileges may be of a different nature, but so far as concerns the levy of taxes, three classes are usually distinguished - the franchise to become, the franchise to be, and some form of a special franchise other than these two.

Kinds of Franchises. - A franchise to become a corporation is a comparatively simple concept. It is the right which the state gives to an organization to pose and act as an individual. It is an act of the state, done once and for all, but which has a value to the organization. A condition of much greater importance, however, is the continuance of the corporation from year to year, and the enjoyment and advantage which this form of organization gives over the individual or partnership. It can be readily seen that this is the important form of corporation franchise, and it is in connection with the taxation of this franchise that many of the difficult problems have arisen. Special franchises arise when some outstanding advantage is granted to particular corporations that are not enjoyed by others. The best example of this form of franchise occurs in the use of public highways and streets by such public utility companies as telegraph and telephone companies, water and lighting companies, and street railways.

The Incorporation Fee. - The taxation of the privilege to become a corporation is comparatively easy, and is usually accomplished through the collection of an incorporation fee. No uniformity exists in the various states as to the amount of this fee. Since it is paid only once, however, this variation has little to do in determining the location of corporations, for location is determined by factors of greater moment than the size of the incorporation fee. In some states a fixed amount - for example, twenty-five dollars - is exacted from every corporation for profit chartered in the state. A more general plan is to levy a tax which varies directly with the amount of capitalization, after a fixed minimum fee has been reached. The amounts exacted under this incorporation fee have never been so large as to be burdensome, and have occasioned practically no difficulties. Difficulties have arisen, however, in assessing the other franchises, which will be given a more extended treatment.