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Cases citing this case: Supreme Court
Cases citing this case: Circuit Courts

U.S. Supreme Court


410 U.S. 356

No. 71-685.

Argued January 15, 1973
Decided February 22, 1973 *  

[ Footnote * ] Together with No. 71-691, Barrett, County Clerk of Cook County, Illinois, et al. v. Shapiro et al., also on certiorari to the same court.

An Illinois constitutional provision subjecting corporations and similar entities, but not individuals, to ad valorem taxes on personalty comports with equal protection requirements, the States being accorded wide latitude in making classifications and drawing lines that in their judgment produce reasonable taxation systems. Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389 , disapproved. Pp. 359-365.

49 Ill. 2d 137, 273 N. E. 2d 592, reversed.

DOUGLAS, J., delivered the opinion for a unanimous Court.

William J. Scott, Attorney General of Illinois, argued the cause for petitioner in No. 71-685. With him on the briefs was Jayne A. Carr, Assistant Attorney General. Aubrey F. Kaplan argued the cause and filed a brief for petitioners in No. 71-691.

Arnold M. Flamm argued the cause for respondents in No. 71-685. With him on the brief was Arthur T. Susman. Louis L. Biro argued the cause for respondents in No. 71-691 and filed a brief for corporation respondents M. Weil & Sons, Inc., et al. Gust W. Dickett filed a brief for respondents Shapiro et al. in No. 71-691. Edward A. Berman, Eugene T. Sherman, and Lewis W. [410 U.S. 356, 357]   Schlifkin filed a brief for proprietor respondents Herman, dba The Spot, et al. in both cases.Fn

Fn [410 U.S. 356, 357]   Richard B. Ogilvie, Governor of Illinois, filed a brief as amicus curiae urging reversal in No. 71-685. Louis Ancel, Stewart H. Diamond, and Samuel W. Witwer filed a brief for Proviso Township High School District No. 209 et al. as amici curiae urging affirmance in both cases. William R. Dillon filed a brief for Members of the Corporate Fiduciaries Association of Illinois as amici curiae in both cases.

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

In 1970 the people of Illinois amended its constitution 1 adding Art. IX-A to become effective January 1, 1971, and reading:

There apparently appeared on the ballot when Art. IX-A was approved the following:

Respondent Lake Shore Auto Parts Co., a corporation, brought an action against Illinois officials on its behalf [410 U.S. 356, 358]   and on behalf of all other corporations and "non-individuals" subject to the personal property tax, claiming that the tax violated the Equal Protection Clause of the Fourteenth Amendment since it exempts from personal property taxes all personal property owned by individuals but retains such taxes as to personal property owned by corporations and other "non-individuals." The Circuit Court held the Revenue Act of Illinois, as amended by Art. IX-A, unconstitutional as respects corporations by reason of the Equal Protection Clause of the Fourteenth Amendment.

Shapiro and other individuals also brought suit alleging they are natural persons who own personal property, one for himself and his family, one as a sole proprietor of a business, and one as a partnership. A different trial judge entered an order in these cases dismissing the complaints except as to Shapiro and members of his class. The trial judge held that all other provisions of Illinois law imposing personal property taxes on property owned by corporations and other "non-individuals" were unaffected by Art. IX-A, in line with the statement on the ballot, quoted above.

All respondents in both cases appealed to the Illinois Supreme Court, which held that Art. IX-A did not affect all forms of real and personal property taxes but only personal property taxes on individuals, which it construed to mean "ad valorem taxation of personal property owned by a natural person or by two or more natural persons as joint tenants or tenants in common." 49 Ill. 2d 137, 148, 273 N. E. 2d 592, 597. As so construed, the Illinois Supreme Court held that the tax violated the Equal Protection Clause of the Fourteenth Amendment. Id., at 151, 273 N. E. 2d, at 599, one Justice dissenting. 2   [410 U.S. 356, 359]   The cases are here on writs of certiorari which we granted. 405 U.S. 1039 .

The Equal Protection Clause does not mean that a State may not draw lines that treat one class of individuals or entities differently from the others. The test is whether the difference in treatment is an invidious discrimination. Harper v. Virginia Board of Elections, 383 U.S. 663, 666 . Where taxation is concerned and no specific federal right, apart from equal protection, is imperiled, 3 the States have large leeway in making classifications and drawing lines which in their judgment produce reasonable systems of taxation. As stated in Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526 -527:

In that case we used the phrase "palpably arbitrary" or "invidious" as defining the limits placed by the Equal Protection Clause on state power. Id., at 530. State taxes which have the collateral effect of restricting or even destroying an occupation or a business have been sustained, so long as the regulatory power asserted is properly within the limits of the federal-state regime created by the Constitution. Magnano Co. v. Hamilton, 292 U.S. 40, 44 -47. When it comes to taxes on corporations and taxes on individuals, great leeway is permissible so far as equal protection is concerned. They may be classified differently with respect to their right to receive or earn income. In Lawrence v. State Tax Comm'n, 286 U.S. 276, 283 , a state statute relieved domestic corporations of an income tax derived from activities carried on outside the State, but imposed the tax on individuals obtaining such income. We upheld the tax against the claim that it violated the Equal Protection Clause, saying:

It is true that in Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389 , the Court held that a gross receipts tax [410 U.S. 356, 361]   levied on corporations doing a taxi business violated the Equal Protection Clause of the Fourteenth Amendment, when no such tax was levied on individuals and partnerships operating taxicabs in competition with the corporate taxpayers. Justices Holmes, Brandeis, and Stone dissented. Id., at 403-412. Mr. Justice Holmes stated:

Each of these dissenters thought Flint v. Stone Tracy Co., 220 U.S. 107 , should govern Quaker City Cab. The Flint case involved a federal tax upon the privilege of doing business in a corporate capacity, but it was not laid on businesses carried on by a partnership or private individual. It was, therefore, contended that the tax was "so unequal and arbitrary" as to be beyond the power of Congress. Id., at 158. We had not yet held that the Fifth Amendment in its use of due process carries a mandate of equal protection. 4 But the Court in dictum stated:

While Quaker City Cab came after Flint, cases following Quaker City Cab have somewhat undermined it. White River Co. v. Arkansas, 279 U.S. 692 , involved a state statute for collection of back taxes on lands owned by corporations but not individuals. The Court sustained the statute. Mr. Justice Butler, Mr. Chief Justice Taft, and Mr. Justice Van Devanter dissented, asserting that Quaker City Cab was not distinguishable. The majority made no effort to distinguish Quaker City Cab beyond saying that it did not involve, as did White River, back taxes. Id., at 696. [410 U.S. 356, 363]  

In Rapid Transit Co. v. New York, 303 U.S. 573 , an excise tax was levied on every utility but not on other business units. In sustaining the tax against the claim of lack of equal protection, the Court said:

We reached the same result in Nashville, C. & St. L. R. Co. v. Browning, 310 U.S. 362 , where Tennessee had used one system for making assessments under its ad valorem tax law as respects most taxpayers and a totally different one for public service corporations. So far as equal protection was concerned, we said that the grievance of the particular complainant was "common to the whole class" and not "invidious to a particular taxpayer." 5 Id., at 368. [410 U.S. 356, 364]  

Approval of the treatment "with that separateness" which distinguishes public service corporations from others, ibid., leads us to conclude in the present cases that making corporations and like entities, but not individuals, liable for ad valorem taxes on personal property does not transcend the requirements of equal protection.

In Madden v. Kentucky, 309 U.S. 83 , a State laid an ad valorem tax of 50 per $100 on deposits in banks outside the State and only 10 per $1,000 on deposits within the State. The classification was sustained against the charge of invidious discrimination, the Court noting that "in taxation, even more than in other fields, legislatures possess the greatest freedom in classification." Id., at 88. There is a presumption of constitutionality which can be overcome "only by the most explicit demonstration that a classification is a hostile and oppressive discrimination against particular persons and classes." Ibid. And the Court added, "The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it." Ibid. That idea has been elaborated. Thus, in Carmichael v. Southern Coal Co., 301 U.S. 495 , the Court, in sustaining an unemployment tax on employers, 6 said:

Illinois tells us that the individual personal property tax was discriminatory, unfair, almost impossible to administer, and economically unsound. Assessment practices varied from district to district. About a third of the individuals paid no personal property taxes at all, while the rest paid on their bank accounts, automobiles, household furniture, and other resources, and in rural areas they paid on their livestock, grain, and farm implements as well. As respects corporations, the State says, the tax is uniformly enforceable. Illinois says, moreover, that Art. IX-A is only the first step in totally eliminating the ad valorem personal property tax by 1979 but for fiscal reasons it was impossible to abolish the tax all at once.

We could strike down this tax as discriminatory only if we substituted our judgment on facts of which we can be only dimly aware for a legislative judgment that reflects a vivid reaction to pressing fiscal problems. Quaker City Cab Co. v. Pennsylvania is only a relic of a bygone era. We cannot follow it and stay within the narrow confines of judicial review, which is an important part of our constitutional tradition.


[ Footnote 1 ] In 1969, the Illinois Legislature had provided for the submission of the proposed amendment to a referendum vote.

[ Footnote 2 ] The result was either to reverse with directions to dismiss the complaints or to affirm the judgment that dismissed the complaints. Those two cases were heard by the Illinois Supreme Court along with [410 U.S. 356, 359]   a petition to file original suit with that court by one Maynard, who owned nonbusiness personal property, and by three school districts. That petition was dismissed.

[ Footnote 3 ] Classic examples are the taxes that discriminated against newspapers, struck down under the First Amendment (Grosjean v. American Press Co., 297 U.S. 233 ) or that discriminated against interstate commerce (see Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157 ) or required licenses to engage in interstate commerce.

[ Footnote 4 ] See Bolling v. Sharpe, 347 U.S. 497 , decided May 17, 1954, which held that federal discrimination (in that case racial in nature) may be so arbitrary as to be violative of due process as the term is used in the Fifth Amendment.

[ Footnote 5 ] In Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412 , a State classified chain stores for purposes of a chain store tax according to the number of stores - inside and outside the State. The Court sustained the tax, saying: "The statute bears equally upon all who fall into the same class, and this satisfies the guaranty of equal protection." Id., at 424. In Carmichael v. Southern Coal Co., 301 U.S. 495 , a State laid an unemployment tax on employers, excluding, inter alia, agriculture, domestic service, crews of vessels on navigable waters, and eleemosynary institutions. The Court sustained the tax, saying: "This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption, infringe no constitutional limitation." Id., at 509. And it added: "A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and when [410 U.S. 356, 364]   subjected to judicial scrutiny they must be presumed to rest on that basis if there is any conceivable state of facts which would support it." Ibid.

[ Footnote 6 ] Note 5, supra. [410 U.S. 356, 366]  

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