The true northerner. [volume] (Paw Paw, Mich.) 1855-1920, 1871-08-04
The Tax on Interest COup0ns-An Inn.
DOrtant Decision.

The following important decision by
the Treasury Department was made
public to day:
DEPARTMENT OF STATE. OFFICE or THE
SOLICITORS OF THE TREASURY,
WASHINGTON. July Il, 1871.
cept of your letter of the 81 inst. transmitting
one from the auditor of the joint railway cOmpa-
mics of New Jersey. and one from the Commits
sioner of Internal Revenue. in relation TO the
claims for taxes under the act Of July IL, 1870.
made on said companies by the internal revenue
office. IL appears that on the 9th OF February.
1871, the Commissioner OF Internal Revenue de-
cided in respect TO the liability Of corporations to
the tax on their interest coupons under sections
l20 and ~ of the act of July 30 1864, amended
by the act OF July il, 1870, that no tax should be
withheld from interest, or coupons representing
interest falling due and payable within period
of five months from Aug; 1870 TO December 81,
1870 and that interest falling due on or suisse
quent TO Jan. |, ISL is taxable at the rate Of 21
per cent. If such interest accrued either prior TO
Aug. or subsequent to Dec; 81, 1870, from such
oft as accrued within the last five months Of
1870 no tax whatever Is 10 be withheld Act
ing in accordance with this decision the joint
companies Of New Jersey on the lst OF May, 1871,
having coupon interest falling due, deducted
from the holders of coupons Ia per cent of the
tax only. that being the proportion Of the % per
cent accruing In 1871. On the nth Of May. 1871,
the Attorney General. to whom this question had
been referred by the Secretary of the Treasury,
having decided that the tax on interest or cou-
pons imposed by the 18th section Of the act of
quently to Aug j. 1870 and prior to Jan. |, 1871,
the Commissioner of Internal Revenue. Oh the
l4th Of May, 1871. in accordance with instructions
from the Secretary of the Treasury, revoked his
former decision and made one in conformity with
the opinion Of the Attorney General. When the
companies, who by the 18th section above re-
ferred to were authorized to deduct the tax in
question, made return Of the amounts retain ed
for the government to the collector Of the dis
trict they were informed of the revocation of the
decision Of Feb. ~ and demand was made for
the return of the 21s per cent. Upon application
10 the Commissioning on the Goth of May ultimO.
requesting that. as they had complied with the
instructions of the department in making the re-
turn OF ! p per cent, they be permitted to make
such return TO the assessor, they were informed
that he could not accede TO their request unless
authorized to do so 10y the Secretary of the Treas
ury. Upon this state of facts my opinion is ask ed
whether the companies can be legally or equt
ably held 10 account for the deficiency that has
occurred IN consequence OF the action OF IA proper
officer of the government.
Such being brief history Of the question in
volved in the case, | have TO say that the Com
missioner of Internal Revenue is the recognized
authority under the law and In practice through
whom the decisions upon questions arising under
the internal revenue laws are promulgated TO the
public. His decision Of the 9th of February was
one, therefore, upon which the applicants in this
case had the right to act. The Joint railway com
panies of ew Jersey did not act upon it far as
to adjust the interest due upon their coupons and
to pay the same TO the holders thereof The com
panies can only be regarded under the law as the
agent of the government in reserving the tax
from their bondholders and paying the same into
the treasury. They acted in this case under the
direction of the principal in the first instance, and
by reason of that proper action have become in
yolved in the present controversy; 1t is perhaps
fair 10 assume that owing 70 the change IN own
ership which is constantly occurring in this form
! Of property. companies would be unable to en-
force the collection of the balance Of the tax now
held to be due from those TO whom the interest
was paid and from whom, in fact, the tax is due,
and it could not be legally enforced TO the injury
| of any persons from whom the tax not due.
| | deem it unfortunate for the government that
! the question has assumed an attitude where the
alternative seeing to be to compel the departm ent
| TO forego the collection Of proper tax in the
| simple manner pointed out by the statute, or to
! expose it TO the charge of working greater or
less degree of INJUSTICE upon, the companies OF
! their bondholders Under all the circumstances
| / am Of the opinion that legally and equitably,
the department is under the necessity of yielding
! TO the present request and Of desisting from en-
| forcing the collection Of the tax in question from
/ the companies who prefer the application.
Enclosures returned.
! am, very respectfully L. c. BAYFIELD,,
Solicitor of the Treasury.
To Hon. GEORGE :. boutwell,. Secretary of
! the Treasury,