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IX. ILLINOIS CENTRAL RAILROAD.
Historical account of the Illinois Central provision. The lllinois Central railroad was chartered in 1851. Whenever the charter lines of the road crossed land owned by the state, the charter granted a right-of-way not exceeding 200 feet in width across these lands. In addition, the railroad was granted 2,595,000 acres of land received by the state from the federal government for railroad purposes. In return for these grants the railroad was required to pay 5 % of its annual gross income to the state, and an annual tax was to be assessed by the auditor of public accounts upon all the corporate assets as determined by a statement of those assets filed annually by the company with the auditor. If the sum of the two taxes should not equal
% of the annual income of the company, the company was required to pay 7% of its yearly income to the state in lieu of all other taxes both state and local.1
The proposed constitution of 1862 contained a provision that "the general assembly of this state shall have no power to release, suspend, modify, alter, remit or in any way or manner impair the obligations of the Illinois Central Railroad Company to pay into the state treasury all sums of money secured to the state by the charter of said company, approved Feb. 10, 1851 ; nor to release, suspend, modify, alter, remit or in any manner impair any right of taxation of lien secured to the state by said charter".
The position of the Illinois Central Railroad was discussed fully in the constitutional convention of 1870. Representatives of the counties through which the railroad operated wished to have the amount received by the state under the charter distributed among the counties in which the right-of-way lay, in view of the fact that those counties were compelled to forego the collection of taxes from the railroad. However, the opponents of this proposal finally prevailed and the section submitted to the people made the sums received from the company applicable solely to state purposes. The section of the constitution with respect to the Illinois Central Railroad was submitted to the people separately and was adopted by a vote of 147,032 to 21,310. The only counties in which a majority of the voters were opposed to the adoption of the section were Champaign, Fayette, Iroquois, Kankakee and Marion.
The section of the constitution relating to the Illinois Central Railroad Company has been the subject of a good deal of litigation in recent years. This litigation has related primarily to accounting methods in determining the 7% payment to be made from the gross receipts of the railroad. It should, of course, be borne in mind that the 7% gross receipts tax relates merely to the original charter lines of the railroad. The charter lines constitute a total mileage of 705.50, and comprise the line from Chicago to Cairo (364.73) and from Dunleth to Branch Junction (340.77).
1 Charter of Illinois Central Railroad Company, Private Laws 1851, pp. 61-74. Brownson, H. G., History of the Illinois Central Railroad to 1870. University of Illinois studies in the social sciences, Vol. 4, Nos. 3 and 4 (1915). See also W. K. Ackerman, Historical Sketch of the Illinois Central Railroad, Chicago 1890.
* Proceedings and Debates, Constitutional Convention of 1870, pp. 1199-1202, and 1243-1256.
Two important cases have passed upon questions involving the duty of the company to pay 7 % upon the gross receipts from its charter lines. These cases are State v. Illinois Central Railroad Company (246 Ill. 188. 1910), and People v. Illinois Central Railroad Company (273 Ill. 220. 1916). A review of the cases bearing upon the Illinois Central section will be found in the Annotated Constitution. For a full review of the issues involved in the case decided in 246 Ill. see a pamphlet prepared by Attorney General W. H. Stead on the Illinois Central case.
Problems of collection. The cases just referred to outline in detail some of the problems involved in the segregation of the receipts of the charter lines from the receipts of the Illinois Central Railroad system as a whole, and present in detail a number of the problems which have arisen for decision. A large number of the points at issue as between the railroad and the state have been settled by these two decisions. Since 1907 there has been a good deal of expenditure on the part of the state in connection with the collection of the Illinois Central gross receipts payments, and it has been thought worth while to give a brief statement here of appropriations since 1907. Some appropriations have been made directly to the governor, but the appropriations have in the main been made to the attorney general. In the table, original appropriations alone have been counted and reappropriated items have merely been noted but not included in the totals.
Appropriations for Illinois Central Litigation.
Amounts received from Illinois Central railroad. A table is given below of the amounts paid into the state treasury by the Illinois Central Railroad for a period beginning with the year 1855.
Amounts Paid to the State. The Illinois Central has paid into the state treasury the following sums : 1855 $ 29,751.59 1888
. $ 418,955.89 1856 77,631.66 1889
460,244.65 1857 .145,645.84 1890
486,281.13 1858 132,005.53 1891
538,005.67 1859 132,104.46 1892
589,486.02 1860 .177,557,22 1893
753,067.24 1861 .177,257.81 1894
553,911.49 1862 .212,174.60 1895
614,988.17 1863 .300,394.58 1896
624,550.83 1864 .415,514.04 1897
584,532.74 1865 .496,489.84 1898
657,032.81 1866 .427,075.75 1899
696,047.35 1867 444,007,74 1900
784,093.01 1868 428,397.48 1901
844,133.47 1869 .464,933.31 1902
942,061.19 1870 .464,584,52 1903
.1,078,790.52 1871 .463,512.91 1904
1,062,571.86 1872 .442,856.54 1905
.1,085,233.17 1873 428,574.00 1906
1,192,425.01 1874 .394,366.46 1907
1,238,536.12 1875 .375,766.02 1908
. 1,093,106.44 1876 .356,005.58 1909
1,152,669.34 18777 .316,351.94 1910
1,217,927.84 1878 320,431.71 1911
.1,239,484.24 1879 326,477.38 1912
1,219,160.54 1880 ..368,348.66 1913
1,355,178.98 1881 .384,582.52 1914
1,379,880.57 1882 396,036.11 1915
.1,365,607.89 1883 388,743.19 1916
.1,617,918.62 1884 :356,679.62 1917
.1,902,440.57 1885 367,788.92 1918
.2,259,740.64 1886 378,714.50 1919
(These statistics are for the fiscal years ending October 31).
Comparison of payments of Illinois Central to the state with taxation of other railroads in Illinois. In any comparison of payments into the state treasury by railroads in this state, it should be borne in mind that the Illinois Central Railroad not only received exemption from state and local taxation in return for the 7% gross receipts payment, but also a large amount of land. In Brownson's History of the Illinois Central Railroad he says that “by 1874 approximately two million two hundred thousand acres had been sold” which made an average receipt per acre of a little over twelve dollars including expenses, or eleven dollars net receipts. This grant of two million five hundred thousand acres of land has been a source of a great profit to the company, and at the same time has been managed well and sold to the best advantage of the community as a whole as well as of the company.” On page 139 of Brownson's study will be found a table giving the receipts of the land office from 1851 to 1907 as $29,480,292.82.
So far as actual annual taxation is concerned it is difficult to make a precise comparison with other railroads. A table is here inserted which seeks to give, for several years, a comparison of Illinois Central Railroad payments on its charter lines with the payments by other railroads. In connection with this table it must, however, be borne in mind that terminal roads at Chicago and East St. Louis pay a higher tax per mile than do other roads and more per mile in proportion to gross earnings than do the Illinois Central charter lines. A comparison of tax per mile of main line track is really of little value.
The Illinois Central charter lines are through lines of large earning capacity, and the only mileage comparison of any value would be that of the Illinois Central charter lines with the principal lines of other roads. The main track of other roads includes branch lines with small earnings; and the corresponding subsidiary lines of the Illinois Central are not included in the charter lines.
Attention may also be called to the fees imposed by the corporation and public utilities laws; and the new franchise tax on corporations established in 1919. Such fees have in the past been paid by the Illinois Central as well as other railroads; and the Attorney General has held that the new franchise tax is also applicable to the Illinois Central railroad.
* Compiled from "Tabular statement of the amount of_taxes charged for collection against the Equalized Assessed valuation of Railroad Property," issued by the Auditor of Public Accounts. The amounts for the Illinois Central Railroad do not agree exactly with the figures in the biennial reports of the Anditor of Public Accounts, as shown on p. 1185.
Constitutionality of Illinois Central gross receipts tax. Professor Henry Schofield in an article in the Illinois Law Review several years ago raised an issue as to the constitutionality of the Illinois Central gross receipts payments, on the ground that this payment might be held to be a burden upon interstate commerce. His view was that the tax provisions of the charter are broad enough to comprehend gross receipts from interstate as well as from domestic commerce, and the charter requirement is construed to apply to receipts from both sources. In reply to this article Dean James P. Hall took the view that the gross receipts provision was constitutional. No issue of federal constitutionality of the gross receipts provision has been made and · so far as can now be discovered none is likely to be made.3
* Henry Schofield, The State Tax on Illinois Central Gross Receipts, and the Commerce Power of Congress, Illinois Law Review, I, 440. J. P. Hall, The State Tax on Illinois Central Gross Receipts-Another View, Illinois Law Review, II, 21.