Ottumwa semi-weekly courier. [volume] (Ottumwa, Iowa) 1899-1903, 1901-12-12
BANKS ARE LIABLE.
A Sweeping Decision by Revenue Com
missioner,

missioner.
j. w. Yerkes, United States revenue
collector, has just rendered an impor-
tant decision that affects banks all
over the country. The commissioner
holds that bankers must return for
taxation capital, surplus, undivided
profits, and borrowed money used in
the business of banking All decis-
ions at variance with this last ruling
are rescinded by the order of the
commissioner. The decision in full is
as follows:
Treasury Department, Office of Com
missioner of Internal Revenue.
Washington, d. c., Dec. 5, 1901
Sir:-Your letter of October q, 1901
Enclosing certain claims for the refund
ing or certain amounts alleged to
have been paid in excess as special
tax on the business of banking, has
been received.
These claims have been examined,
and have been rejected, as you have
already been advised. :.
You are informed that the act of
June 10, 1898, and the act of March 2,
1901, provide that bankers using or
employing capital not exceeding
$4,000 shall pay $50; when using or
employing capital exceeding $4,000
for every additional $1,000 in excess
of $4,000, 81 and in estimating capl-
tai surplus shall be included
The law defines banker and des-
cribes the business of banking The
law provides that bankers shall pay
tax on their capital employed d. e.,
employed in the business of banking)
and tbaf n nctfr, nti inc FOL c,,rn1,,s
shall be included
| This Office holds that capital is tax
able whether invested as in the case
of the United States bonds or the
bank building (see T. D. 19S43, PIP. 4
and 81. or circulating as in the case
of money, including money borrowed
(see T. d. 20154), also surplus includ,
ing undivided profits.
In providing that surplus shall be
included as capital. it is obviously the
purpose of the law to have the tax i'm
posed apply to all money used or en-
ployed by banks as capital in carry.
| ing on their business.
| Money borrowed by banks, and
used as capital, is held to be taxable
IT. D. 19S43), and it is clearly no less
liable to tax because of the fact that
it is borrowed by a bank from it's own
undivided profits.
The fact that surplus SO consists
wholly or in part of undivided profits
or that such undivided profits have OF
have not been formally set apart fol
such use, seems wholly immaterial sc
far as the purpose of the act is con
|cerned. 1t is the use, not the author
lity to use, that brings such profits
within the taxing provisions of the
act
Banks should, therefore, return fol
taxation the capital, the surplus fund
their undivided profits or other profit
and loss account, except so much
| thereof as may be actually necessary
and has been set apart to meet ascer
tanned liabilities and losses, or to pay
dividends actually declared by the
directors of the bank, to pay taxes, o.
to pay fixed annual charges, such as
salaries and other necessary annua
expenses.
The opinion of this Office is, tina
capital and surplus" include al
funds employed by the bank in thu
business of banking, and that natu
rally and in the ordinary course o
banking business are so employed, ey
GLIDING only such funds which. though
temporarily used by the bank are o
necessity withdrawn from the bankin,
business through the payment of di
vidends, taxes, ascertained losses, o
fixed charges of whatever character
Any decision of this Office ct var
lance with the above is hereby re
scinded. Respectfully,
J. w. Yerkes, Commissioner