The times. [volume] (Washington [D.C.]) 1897-1901, 1900-08-28
STAMP TAX ON POLICIES
The Complaint of Fraternal In
surance Companies.
Decision of the Ccmniissioncr of
Internal Revenue Which Threat
ems the Life of ORGANIZATIONS With
n Membership OF Three Millions
l-Anizing Votes Agninst MIIiturism.

The fraternal insurance companies OF
the United States, having a membership
of more than three millions, are threat
ened by decision of the Commissioner OF
Internal Revenue interpreting schedule A
(stamp taxi of the War Revenue law of
1895
The decision of Commissioner Wilson Is
one of the items tending to increase pop
ular impatience with war revenue Law
which is continued in operation two years
after the close of the war. the cost of
which it was enacted to meet, and which
is being continued in full force and effect
to pay for wars not declared by Congress
and not contemplated when the War Reve-
nue. act Of 1898 became a law. Already
the decision of Commissioner Wilson is
persuading many hitherto consistent Re
publicans who are members of fraternal
insurance companies that militarism costs
money and that this money must come
from the pockets Of the people-and from
tho pockets of the plain. producing people
at that.
1t is the contention of fraternalists that
ed for profit are exempt from stamp taxes.
Commissioner Wilson maintains that
these companies shall pay revenue tax of
S cents per each 800 on every policy writ
ten since July l, 1898. the date when the
revenue law became operative. This is
said on high authority to be tax which
fraternal insurance companies cannot pay.
With some of the larger companies like
the Modern Woodmen. the Woodmen of the
World, the Royal Areanum, and tire United
Worknen the decision. il enforced, will
mean the payment of hundreds of thou
sands OF dollars in taxes, and as the COM
panies named have no reserve fund to
draw upon it is probable that they would
be forced into dissolution.
The paragraph in the war revenue law
relating to the life insurance follows:
Insurance Qife): Policy of insurance. or
other instrument, by whatever name the same
shall be called, whereby any insurance shall
hereafter be made upon any life lives. for each
one hundred dollars or fractional part thereof
eight cents the amount insured: provided
that or all policies, for life insurance only,
issued cn the industrial OF weekly payment plan
OF insurance, the tax shall be forty per centum
OF the amount OF the first weekly premium. And
it shall be the duty Of each person, fsm or
corporation issuing such policies to make within
the hrst fifteen days OF every month n sworn
statement to the collector Of internal revenue in
each OF their respective districts, of the total
amount of first weekly premiums received on
such policies issued by the said person, firm, OF
corporation during the preceding month, and upon
the total amount SO received the said person.
firm, or corporation shall pay the said tax OF
forty ser ccntum; provided further, that the pro-
visions Of this section shall not apply to any
fraternal. beneficiary society, order, or farm
ers purely local cooperative company or associl-
tion, or employees relief associations operated on
the lodge system. local cooperative plan or
sanized and conducted solely by the members
thereof for the exclusive benefit Of its members
and no. toT profit.
1t is under the terms OF the second
proviso Of the foregoing paragraph Of the
War Revenue law that the fraternal in
surance companies claim exemption from
the stamp tax.
The Commissioners Decision.
Commissioner Wilson's decision was
rendered in the matter of the application
Of the Bankers Life Association of Des
Moines, Iowa, for exemption from the war
revenue tax in regard to its policies of
life insurance. He held that the proviso
in the question relates to policies of in
suranee issued by, first, fraternal socie-
ties or orders: second, beneficiary socie-
ties or orders; third. farmers purely local
cooperative companies or associations;
ated on the lodge system or local CO.
operative plan.
The Commissioners ruling in part fol-
lows:
1T is only policies of life insurance is
sued by the classes or associations that can
be exempt from taaxtior; and the further
restriction Is applied TO the above named
associations that they must be such or
ganizations as are conducted solely by
the members thereof for the exclusive
benefit of their members, and not for
profit
Il am of the opinion that it was the in
tention of Congress to exempt from taxa
tion policies Of life insurance issued By
fraternal societies or orders, and bene-
ficiary societies or orders which are
operated on plans similar to the lodge or
ritualistic form.
1T surely canrot be said that mutual
life insurance company is fraternal SOC
iety or order: nor can it be said that a
mutual life insurance company is a bene-
ficiary society or order, although frater-
nal and beneficiary societies may be mu-
tual. carnot therefore agree with you
in your premise wherein you state that it
is clear that the exemptions can only ap-
ply to mutual companies"
While passing upon the question Of the
taxation of policies. Commissioner Wilson
discusses the question of profit, and ad
dresses himself to what is conten. plated by
the phrase Organized and conducted not
for profit" He says. in part.
AN association coming within the ex-
empted classes which is organized and
does business on the plan of levying a
sum upon its members to pay losses, or
losses and expenses incurred, is prima facie
not doing business for profit. This is in
cases where the assessments are made TO
provide for the payment OF losses as they
occur
Such companies as make assessments
based upon fixed premiums, TO be collected
at regular intervals without regard To
whether or not a loss actually occurs. ara
companies that are, in the opinion Of this
office, prima facie conducted for profit.
From the above this Office holds that
the proviso in the paragraph relating to
the question of profit. can only apply 10
societies or associations which collect
funds for the payment of losses. by assess
ment, upon their members and in whose
contract no provision is made for any re-
turns to the policy-holder before a death
or a loss occurs
Enforcing the Ruling.
This decision of the Commissioner OF
Internal Revenue was rendered on Novem-
ber 16. 1899, but so far as known no ef-
fort was made to carry it in effect against
any of the fraternal insurance companies
until June "a, 1900. when C. p. R. Will
Jams, a deputy collector Of internal reve-
nue. for the State of Nebraska called at
the office of the Nebraska Mutual Life In
surance Company, at Stromsburg, Neb, and
presented TO Albert NJ. Little. Secretary OF
The company, a communication from J. f
"a
1900
Collector Houtz quotes the decision OF
Commissioner Wilson, and concludes as
folloWs-