New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1881-09-06
TAXING BANKS AND BROKERS.

TIE NEW CONSTRUCTION OF AN OLD LAW.
Arrr,tpr OF THE COMMISSIONER OF INTERNAL REV
xNUE TO TAX GROSS DEPOsITs-THE HEARING
AT. ACKNOWLEDGEMENTS TO BE KxPEcTED IN
CAsEMR RAUM SUCCEEDS.
The Federal taxation of banks and bankers as
snmes great Importance Mt the present time In con-
eeonence of the recent action of the Commissioner OF
spternal Revenue Green b. Raum in attempting to
smpose tax on the average amount of tho gross de-
Dosits Under the order of the Commissioner an ex-
animation OF the State banks and trust companies
in this city, TO ascertain their methods of making
Yurns Tor taxation has been made. Examiners, also
acting under the authority Of Commissioner Raum,
have visited the Offices of of the large private
bankers and demanded access to their books. In some
cases this has been refused absolutely and in others
delay has been asked and permitted The Commits
sjoner has ALSO it is understood, list OF over 700
brokerage firms whose business the examiners
TO investigate.
As soon as the examination of the Stat banks was
begun, William Dowd. president of the Bank of
North America. wrote to Commissioner Raum and
to Secretary Window. The result of his corre-
spondence was that the Commissioner agreed not to
levy assessments for the taxes he claimed until after
n hearug, which fixed for September 8. Mr..
Dowd Yesterday received letter from the Assistant
Commissioner, stating that the hearing had been
postponed to September IL In the meantime
the Tax Committee Of the New-York Clear
ing House has appointed subcommittee to
represent il at this hearing The subcommittee
mas been gwen authority to invite any PERSONS it
may choose 20 accompany the members to Washing
tom This committee consists OF William Dowd,
William l.. jenkins, president Of the Bank of Amer
ica and Charles F. Hunter president of the Peoples
Bank. They will be accompanied by George S. Coe,
president of the American Exchange National Bank
and Chairman of the Tax Committee of the Clear
ing House, Jacob D. Vermilye president of the
Merchants National Bank, and promi-
nent member of the Cle9Ting House Com,
lnlttee, aud by Charles +. Southmayd, of
the law firm of Evarts SOuthmayd IL
Choate, Eiihu Root and Wager Swayne, as
may go on to Washington with the committee, but in
any event their institutions win be represented by
counsel Committees OF bankers from other cities
viii be.preSent The hearing viii take place before
Commissioner Raum, but the importance of the
question IS SO great that the Secretary of the Treasury
and the Attorney-General may deem 1t proper TO
attend.
THE POINT AT ISSUE
Tho question which Commissioner Raum has
brought to sudden life is not
it came up shortly after the passage of
the law, aud in 1864 and in 1866 it
decided by tho Secretary of the Treasury,
who declined to support the claims OF the Internal
Revenue Bureau. Until 1870 the Fifth National
Bank of Chicago paid the tax on its uncollected
checks; but learning accidentally that such not
1he common practice among the banks, II sought
relief from the Treasury Department which ut once
refunded the excess paid by it. The present
method Of making returns for taxation ON deposits
Department since the law has been in force. The
Internal Revenue Bureau has been stimulated, how
international Bank of Chicago, winch was based
partly on the same claim. It is understood
stances in this case which rendered almost certain
the success of the sui The Commissioner of Inter
claim against all the banks, and it is understood
that he is preparing to levy assessments for the adj
hearing at Washington shall be concluded 10 re-
cover the additional taxes previous to two years
ago, suits will have to be brought.
The claim made by Commissioner Raum is that
the banks should pay the Federal tax of one-half of
deposits The Act of Congress ITO provide aNational
Currency, etc., was approved June 3, 1864, and in
tie 41st section it was provided thai National
banks established under the act should pay to the
Treasurer of the United States "a duty of one
quarter of one per cent each half year upon the
average amount OF their deposits" and they We're
required to make n return under oath in such form
as the Treasurer might prescribe. Under the an-
thorty Of That act the treasurer issued regulations
an regard TO the law, and afterward prescribed
form of return for the use of National banks Ac-
cording TO these instructions banks were allowed,
IN estimating the average amount of deposits
from balances at the close of business
each day, to exclude only from the balance
OF any days deposits such checks city banks as
were deposited on that day for collection with the
understanding that the money not TO be drawn
from the bank until the next day" Under this con-
struction of The statute the National banks for six
teen years have made their returns of deposits for
taxation. In general it has been their habit take
from their gross deposits the uncolected checks
payable through the Clearing House. 1t was long "A
custom with many banks TO stamp checks certified
by them, Payable only through the New-York
Clearing House." and the custom has not entirely
fallen into dlsuse.
AN ILLUSTRATION
The difference between the banks and the Com
missioner of Internal Revenue in regard to tho
average amount of deposits is shown clearly by
actual bank transactions. well-known Wall
Street bank keeps a record of its daily balances
Its deposits yesterday morning, according to this
record were % G44000, and It's balance So DAG 900
the difference being the amount of its exchanges
AT the same time the loans were 50 9G1 600 That
clearly represented the banks business Saturday
wishes to impose the tax on So. Ga, 600 taking
that as the basis for aVerage). while
the bank insists that the deposits that day
were $3o46,O9o' The president 81 the
bank this morning had that $5,G44,O00, as Raum
would say It had. we were not smart that we did
not loan more OF it. But / say emphatically that
the bank did not have the money"
still more striking Illustration is found daily in
The Clearing House statement. Yesterday the ex-
Changes were In round figures $135, 900 600 and
The balances 81, 10000 According to the In
terual Revenue Bureau the returns of the hank
should he made on the basis of the $l35 900 900
and not on that of 81, 400, 900. An officer of a
3romlnent wall Street bank suggested that il the
federal tax should be laid the basis of the
larger sum, then the legal requirement. of % nrr
cent reserve should be calculated on the same basis
- That would require" he added "iust $50 600 OOO
more money than tue banks now hold, This shows
me utter abS9rdity of tho reckoning. Why
toner deposits check with me for S 100 900 have
got 10 go out and borrow sos 900 in money to keen
good my reserve, and haven't yet received a cent
Oh money"
An officer of another bank remarked
The effort is wholly unjust to the broker banks
might not work hardship to country banks except
that 1t would increase the burden of taxation but