man's cows may be tested, while it is much more difficult to trace the source of milk sold by non-producers.

§ 170. Prima facie rules of evidence, Of a similar character are many so-called prima facie rules of evidence, which make the proof of some fact, if unexplained, a sufficient ground for conviction of an offense with which the proven fact is ordinarily closely connected. Thus, a statute may make the possession of policy slips prima facie evidence of the illegal paying of policy (59); or the drinking of liquor in a shop prima facie evidence that it was sold there (60). The fact upon which the presumption is to rest must have some fair relation to, or natural connection with the act which is made criminal; and in any case of this kind the defendant may rebut the presumption by explaining the fact that is made prima facie evidence, and thus showing his innocence.

(59) Adams v. New York, 192 U. S. 585.

(60) Board of Excise v. Merchant, 103 New York 143,

CHAPTER IX.

DUE PROCESS AND EQUAL PROTECTION OF LAW:

ΤΑΧΑΤΙΟΝ.

§ 171. General requisites. The fundamental guarantees of the Fifth and Fourteenth Amendments regarding due process and equality restrict the powers of taxation of both Federal and state governments. They prohibit legislation that is arbitrary and unreasonable in respect to taxation, just as they restrict such legislation in other fields. Other specific restrictions upon the taxing powers of the states and the United States, not included under the fundamental guarantees of due process of law and equal protection of the laws, will be discussed elsewhere. See §§ 314-17, below.

The principal requisites, with respect to taxation, enforced by these constitutional provisions are as follows: (a) The taxing power must have jurisdiction of the subject of taxation.

(b) The tax must be levied for a public purpose. (c) The tax must not be arbitrarily discriminatory, nor disproportionate, nor confiscatory, as respects the standards proper for any particular case.

SECTION 1. JURISDICTION FOR PURPOSES OF TAXATION.

§ 172. Object taxed must have situs in jurisdiction. When a government levies a tax upon property, it is not

valid unless the property is located, for purposes of taxation, within the territorial jurisdiction of the taxing power; that is, it must have a situs, as it is called, in the jurisdiction. Similarly, when it taxes occupations, or privileges, or the doing of acts, the occupation must be pursued, or the privilege exercised, or the act done, inside the jurisdiction of the taxing power. Otherwise, it is not taxation at all, but is confiscation (1).

§ 173. Real estate and chattels. It has always been admitted that real estate is taxable only in the jurisdiction where it is located. Where the tax is upon the tangible land itself this is perfectly clear, but the rule is the same even when the right is an intangible one connected with the land, a so-called "incorporeal hereditament," such as a right of way over the land of another, or a right to ferry from the shore of a river. Such rights can be taxed only where the land is to which they are attached (1a). A mortgage on land is an interest in land taxable where the land is (2).

The same rule applies to tangible personal property, chattels. If permanently kept in one place they can be taxed as property there only, although their owner may live elsewhere. The state where he lives cannot tax them (3). Where an owner employs the same article of property part of the time in the state where he lives and a part of the time elsewhere, it may be taxed as property

(1) State Tax on Foreign-held Bonds, 15 Wall. 300, 319. (1a) Louisville & Jeffersonville Ferry Co. v. Kentucky, 188 U. S. 385. (2) Savings & Loan Society v. Multnomah County, 169 U. S. 421. (3) D., L. & W. R. R. Co. v. Pennsylvania, 198 U. S. 341.

where he lives (4). But where a refrigerator company domiciled outside of Colorado ran its cars irregularly in the state according to the demands of business, so that there was an average of forty-one cars in the state, though composed of constantly changing cars, it was held that Colorado could tax the company upon the value of forty-one cars (5). This average amount of property received the protection of the state, and so might fairly be taxed there.

§ 174. Corporate assets. Suppose a corporation, doing business wholly in Illinois, has issued $1,000,000 worth of stock, owes $500,000 worth of bonds, and has $750,000 worth of tangible property, real and personal, in the state. What is the total property value of this corporation? Evidently it is not merely the value of its tangible property, for its stock alone is worth more than this, and in addition to the stock value it is able to sustain the value of $500,000 worth of bonds that it has issued. The value of the corporation as a going concern is fairly indicated by the value of its stock and bonds together, for if the bonds were paid all of the stock would be worth approximately that much more. It is the various intangible values connected with the corporation that account for this great difference between the $750,000 of tangible property and the $1,500,000 gross value of the corporation. These intangible values consist of franchises, contracts, the good-will of an established business, the business ability of its managers, and like elements upon

(4) New York v. Miller, 202 U. S. 584.

(5)

American Refrigerator Co. v. Hall, 174 U. S. 70.

which are based the expectations of dividends. These intangible values may be taxed by the state just like any other property, and the method of determining them by adding together the market value of the stock and bonds of the corporation is valid (6).

§ 175. Corporate assets in several states. Suppose, however, that the corporation in question is not doing business in Illinois alone, but in several states, although its home office is in Illinois. May these other states also tax a share of these intangible values of the corporate assets, or are they restricted to such tangible property as they can find belonging to it within their respective limits? The Adams Express Company had altogether $16,000,000 worth of corporate assets. About $4,000,000 of these consisted of tangible real and personal property. In Ohio it had about $67,000 of property, including money and credits. About 1-30 of its mileage and business was in the state of Ohio. Ohio taxed express companies upon such part of their entire capital stock as was proportional to their mileage and amount of business done in Ohio. On this basis the property of the Adams Company in Ohio was assessed at $533,000. This was upheld by the United States Supreme Court, which said:

"But where is the situs of this intangible property? The Adams Express Company has, according to its showing, in round numbers $4,000,000 of tangible property scattered through different states, and with that tangible property thus scattered transacts its business. By the

(6) State Railway Tax Cases, 92 U. S. 575.