A foreign corporation is one whose charter is granted in some other state than the one in which the business of the corporation is located. Corporations, moreover, do not come under the " privileges and immunities granted to the citizens of the states" clause of the Federal Constitution, but may be singled out for special legislation. Two opposite policies have been followed in treating this foreign capital - either treat foreign corporations leniently to attract foreign capital, or treat them severely to protect domestic capital.

With forty-eight states, each legislating on the matter, no semblance of uniformity in the taxation of foreign corporations can be expected. States sometimes adopt retaliatory features in their tax legislation. These laws provide that, if any other state impose heavier burdens upon its foreign corporations than had been provided for by domestic legislation, then foreign corporations of that state shall be taxed to the same extent as it would inflict burdens upon its foreign corporations. The result has been the multiplication of taxes upon foreign corporations, and especially upon those engaged in life insurance.

Some uniform system of taxing such corporations would, of course, be the most desirable, if states provided a uniform plan for taxing domestic corporations. This is not to be expected, and foreign corporations should be taxed in such a way that the burden upon them does not vary greatly from the burden placed upon domestic concerns in the same line of business. No good reason appears for placing especially heavy burdens upon a business just because it is incorporated in another state, nor is there any reason for especial leniency. The most logical ideal is to place the same burdens upon similar enterprises wherever they are organized, and to do this the same methods of taxation must be used for domestic and foreign corporations.

It would be difficult to get equality of burdens in a state that taxed the capital of domestic corporations if a tax were placed upon earnings of foreign companies of the same nature. Even if the same method be used, the difficulty still remains of determining what part of a corporation should be taxed to each of the various states in which it may be doing business. One commonly used plan is to compare the amount of assets within a state to the total assets, and levy the tax accordingly. This comparison is not always good. For example, an advertising corporation might be doing a large business in several states and have no assets except, perhaps, in one state. A more just basis of comparison would be to levy the taxes in proportion to the amount of business arising in the different states.