The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1893-04-04
Acknowledgement Smith Promulgates
a New Law on Building Associations.
Declares that Holders of This Stock Are Not
Bona Eide St0ckholders-Measure that
Failed in the Assembly.

tirely new ones without leave OF the LeRis-
fatuse.
1t will be remembered that during the re-
cent session Of the Legislature the Attor-
ney general repaired b was known as
the administrative tax bill" providing.
among other things. for the taxation OF
the "paid-up stock" of building associa-
tions. The bill was introduced In the
House by Mr.. Cullop and passed that body.
but died in the Senate. Having failed to
get the measure through, the Attorney.
general evidently determined that the as
sociations should be taxea anyhow. and
yesterday q now aw was promulgated from
his office, in the form of an opinion, adj
dressed to the State Tax Commissioners.
signed by the Attorney general
MIR. SMITHS QUESTIONS.
In addressing them he states that numer.
GUS inquiries have been made about the
taxation of building associations, and pro-
ceeds thus:
deem it expediept for the purpose of aiding
ance OF their duties to call their attention to tho
law, as applicable to these associations. as fol-
lows:
/. How is the stock of the building and loan
association TO be assessed.
2. What moneys properly enter into the item
described In the law as 'the amount shown to
have been paid into said association up 10 said
first. day OF April upon outstanding shares of
stock from which is to be taken the amount
loaned 10 shareholdersl".
3. Under the law what character of loans arc
properly deductible from the amount OF money
purpose OF ascertaining the balance subject to
taxationi
4. Is the certificate Of such an association. for
money loaned TO it, and upon which interest is
paid, generally denOminated paid-up stock, sub.
Ject to taxatIoni
5. Is the holder of q certificate of paid mp
EfnaH ~ al tnp~l nns.an N - A~ ~titlA
TO receive aux OF the profits OF said association
further than the interest stipulated
q: is the stock OF n bona tide subscriber to o
building and loan association which has been
PAID up wholly or partially IN advance OF the
usual assessment, instead OF being paid in
weekly or monthly installments, 10 be consid-
cred as other stock OF the association and taxed
III like inannerf
z. How is the stock of a bona flde shareholder
in such an association OF some county In tho
State of Indiana other than the one in which the
holder of such stock resides, to he assessed
:. How Is tho stock of a bona fide shareholder
In q building and loan association organized un-
der some State other than Indiana. to be assessedl
Nolaw was passed in1893 affecting the taxation
OF building and loan associations.
Senate bill No. Isl. which became q law, pro-
v1des for the regulation and supervision of for
eign and domestic building, loan fund, savings
or INVESTMENT associations, and requires them
TO make and fe statements OF the condition Of
It's affairs. with the Auditor OF State, and author
lies examinations TO be made of the same. and
prcscribes penalties for the violation of its pro-
ee@ AAAo 49," 6ONo AAtO OpCAaNAOA hlA ~
1898.
Nc law which finds a place among the statutes
OF Indiana was designed to accomplish greater
good TO the people. and especially those among
the poorer classes, than the original act author
izing the formation of building and loan ~associa-
tons. Its real purpose was to enable wage
earners, by small weekly payments, to procure
homes. The very language OF the amendatory
act OF 1877 is THAT the company shall have the
power and franchise OF Ioaning or advancing to
the stockholders thereof the moneys acculnu-
lated from time to time, and the power and
right to secure the repayment OF such moneys,
etc." The law plainly and undeniably was in
tended To be confined to bona fide shareholders
out or whose accommodations only homes might
be built. and upOn which mortgages should be
given TO secure the repayment TO the association
of the money advanced for that purpose. IL was
not intended, nor has it the support or the law
now. tnat such associations should engage in the
general business of banking. and afford an OPP
pOrtunity to money lenders by which their
wealth can be placed in such a manner IA to
earn large protits aud ut the same time escape
original purpose OF the law which, II not checked
soon. Will at some time be the rock on which q
great crash will como among the building and
loan associations of the State.
The information desired IN answer to the ques-
tons above propounded may BIO best given in the
order OF the questions asked.
NEW CONSTRUCTION OF II LAW.
Building and loan associations are taxed &c
cording to the terms of Section 50 of the general
tax law of 1891. which provides that "before
INV hAE oAy "a 00AO W AZ 1OoA ~
of every building. loan and savings association
shall file with the auditor OF the county in which
such association was organized, a duplicate
statement. verified by said secretary, showing
the amount paid into said association by share
holders upon their shares OF stock issued by it
up TO the first day of April preceding, and then
outstanding, and also the amount loaned up TO
said date 10 shareholders and secured By mort.
gage upon real estate listed for taxation. And
the auditor shall deliver this statement to the
proper assessor, who shall proceed 10 assess said
association for taxation, with the amount shown
to have been paid into said association upto said
first DAY OF April upon outstanding shares or
stock, less the amount shown by the statement
to have been loaned to shareholders upon said
mortgage security so listed for taxation. and
neither said association nor the shareholders
therein shall he liable TO other taxation upon
said shares OF stock"
The phrase, The amount shown to have been
paid into said association embraces the dues
paid by bona fide shareholders. toVether with all
items OF premium on stock. interest and tines,
the latter item being AS much a part of the in
come of such association as the dues themselves.
The above phrase does not cover, nor Ia il in
tended to embrace. money which the association
Las borrowed and for which it has given It's paid
up certificates, lnasmuch as such certificates
should be listed and assessed against their hold
ers. precisely as other personal property is as
sessed.
Only such loans should be deducted from the
amount paid in to such association. "a above
stated, as are secured by mortgages upon real
estate which has been listed and returned for
taxation. The justice and logic Of this is plain.
The purpose OF allowing a deduction Is TO make
1t possible for the bona fide shareholders who
have drawn out money for the purpose OF build
ing homes To avoid paying taxes both on such
homes and the stock, either in their hands or the
hands OF such associations itself. 1t could not
be known. therefore. whether money which hal
been drawn out upon passbOoks or personal or
other security had been invested In property
listed for taxation or not, and so both as a mat
ter Of safety 20 such associations In conining
them 10 the best class OF security for loans and
to enable the owners themselves, who have in
vested such loans In building homes, TO have the
benefit or such exemption, the law provides:
"That there shall be- deducted from the amount
paid in to such association only the amount
shown by the statement to have been loaned 10
shareholders upon said mortgage security SO
listed for taxation"
Within the past few years, as above indicated,
large money lenders OF the State have under
taken t. use the laws governing building and
loan associations as a means OF making large
profits upon their money. at the same time
avoiding the payment OF taxes; and while thcy
have suocceGed in their efforts in many counties
or the state. it.has been. and still continues TO be.
done In clear violation of the law. 1t IL the duty
OF county ana township assessors ever where
throughout tho State 10 obtain from the officers
OF building and loan associations the names OF
persons To whom paid-np certificates OF such
association have bern issued and 70 Place such
eral persons holding them. There can he moth
ing palmer than that money loaned TO a build
ing and loan association for which paid-up GER
tihcates have becn issued Ia subject TO taxation.
Such certificates are nothing more nor lass than
a promise 10 pay. and. like any other
promissory note. is subject to taxation
the same az other personal property.
In many instances fhese certificates
bear u and 8 per cent. interest in addition 70 a
participation In the general profits Of the asso-
citation. although such certifcate-holders should
not he allowed TO enjoy any of rhe profits or such
al organization beyond the interest provided