Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1871-07-23
DIVIDENDs.
Decision Of the Secretary of the Treasury
Given upon the Tax on the Dividend
Question

uubSuCf
WASHINGTON, July 22.-The follow
| ing important decision of the Treasury
| Department was made public to-day
DEPARTMENT. OF JUSTICE,
/ OFFICE or SOLICITOR OF TREASURY,
- - WASHINGTON, July d., 1871.
lSgr-I have the honor to aeknOwl-
edge the receipt of your letter of the
Sd instant, transmitting one from the
Auditor OF the Joint Railway Com
pany OF New Jersey, and one from
the Commissioner of Internal Revenue
in relation to claims for taxes under
the act of July IA, 1870, made on said
companies by the Internal Revenue
officer. 1t appears that on the 9th of
February, 1871, the Commissioner of
Internal Revenue decided in respect
TO the liability of corporations to tax
on the interest of coupons under sec
ti0ns 120 and 122 of the act of July so,
1864, as amended by act of July IA,
1870, that no tax or interest should be
withheld from interest or coupons
representing interest and falling
due and payable within the period
of five months, from August
/, 1870, to December 81, 1870, and
that the interest falling due on or sub
sequent to January 1, 1871, is tax
able at the rate of two and half per
cent. if such interest accrued either
prior to August 1, or subsequent to
December 81, 1870; from so much of
it as accrued within the last five
months of 1870, no tax whatever is to
be withheld. Acting in accordance
with this decision, joint company
of New Jersey, on the 1st of May,
1871, having a coupon interest falling
due. deducted from the holders of the
coupons one and tWo-thirds per cent,
the tax only being in proportion to
two and a half per cent. accruing in
1871. On the I1th of May, 1871, the
Attorney General, to whom this ques-
ton had been referred by the Secre-
tary of the Treasury, he having de-
cided that the tax on the interest or
coupons imposed by the 18th section
of act July IA, 1870, is applicable to
the interest paid subsequently to
August 1, 1870, and prior to January
l, 1871. The Commissioner Of In
ternaI Revenue, on the 14th of May,
1871, in accordance with instructions
from the Secretary of the Treasury,
revoked his former decision, and
made one in conformity with thei
opinion of the Attorney General.
When the companies, who by the fif.
teenth section above referred to, were
authorized TO deduct the tax in ques-
ton, made the return of the amounts
retained for the Government to the
collector of the District, they were in
formed of the revision of the decision
of February 9th, and a demand was
made for the return of q per cent.
Upon application to the Commits
si0ner on the 10Th May, ult., request
ing that, as they had complied with
the instructions of the department in
making the return of II per cent,
that they be permitted to make such
return to the Assessor, they were in
formed that he could not aceede to
the request unless authorized to
do so by the Secretary of the Treas
ury. Upon this state of facts, my
is asked whether the COM
pany can be legally and equitably held /
to account for deficiency that has Oc-
CURED in consequence of the action of /
the proper officer of the government.
Such being the brief history in ques- |
tion involved in this case, / have to /
say that the Commissioner OF internal /
Revenue is the recognized authority |
under the law and in practice, through |
whom decisions upon questions arising |
under the internal revenue laws are |
70 the public. His decis-
lon of the 9th of February was one,
therefore, upon which the applicants
in this case had right to act in the
Joint railway companies. New Jersey |
did act upon it so far as to adjust her
due upon their coupons, and /
paw the same to the holders thereof |
rhe companies can only be regarded
under the law as agents of the
in reserving the i
tax from their bOndholders, and pay
ing the same into the treasury. They
acted in this case under the direction
Of the principal in the first instance,
and it is by this reason that proper
action has become involved in the
present controversy. 1t is perhaps
fair to assume that owing to the
change of ownership which is con-
5tantly occurring in this form of prop
erty, companies would be unable to
enforce the collection of the balance of
the tax now held to be due from
those to whom interest was paid,
and from whom, in fact, the interest
Is due, and it could not be legally en-
forced to injure any person from whom
tax was not due. ! deem it unfortu-
nate for the Government that
he question has assumed an attitude
where the alternative seems to be
to forgO the collection of
he proper tax in the simple manner
pointed out by the statute, or expose
t to the charge of working to a great
9r or q less degree injustice on the
companies or their bcndhOlders. Un-
Ter all the circumstances, am of the
opinion that, legally and equitably,
he Department is under the necessity
If yielding to the present request, and
If desisting from forcing the collec-
ion of the tax in question from the
companies who prefer application by
enclosures returned"
! am, very respectfully;
i. G. BANFIELD,
Solicitor of Treasury.
To HON. GEO. S BOUTWELL,,