Evening journal., 1910-08-10
BUILDING LOANS
MUST PAY THE TAX
District Internal Revenue Com
missioner Says Only Mutual
Concerns Are Exempt
MEANS MUCH TO
MANY DELAWAREANS

The Commissioner Of Internal Reve-
nue. at Baltimore has rendered a deci-
sion Of far-reaching important to
building and loan associations and
their thousands of members. His deci-
sion is that If these associations are
conducted upon strictly mutual bene-
flt basis. they are not required tofpay
the corporation tax. II, on the other
hand. any profit is derived from out
side sources, then the associations are |
subject TO the tax. Thus II an associa- |
tion lends money to banks and to
| non-members. receives interest. or II
II lends money to members with
view to deriving benefit from the loan,
they are no longer mutual benefit con-
Germs and come under the general pro-
visions of the law. II is said that
there are about ten associations IN
Delaware affected by the decisI97' -
2 The ruling especially applies 20 what
is known as the District of Maryland
p which embraces the District Of Colum-
r bia. the State of Delaware and the city
[ Of Baltimore. Outside OF Baltimore
there are 40 associations located in
both the District Of Columbia and Del
aware that are subject TO the tax and
will have 10 comply with the provi-
sions of the law as enacted by Con-
gress.
Differences Defined.
Pursuant to instructions received
from Washington. the Internal Reve-
nue. Collector in Baltimore sent out
notices to all corporations. including
the building aud loan associations in
the District of Maryland, over which
the Internal Revenue Collectors super
vision extended, notifying them that
they would be expected to pay the cor
poration tax on or before the LIST day
of June, the time limit mentioned in |
| the law
The officials of the building and loan |
associations OF Baltimore as well as /
/ those located i'm other parts of the dis |
| trict OF Maryland, replied to the cir ]
cular letter as forwarded from the [
| Office of the internal revenue collector |
( in this city, notifying him that under
the provisions of the law, all mutual
/ building and loan associations were
exempt from the payment of the cor
pOration or franchise tax.
These communications were read
carefully by the internal revenue col
! lector. but he was not quite satisfied
that they We're exempt from the pay
ment OF tax After looking into the
matter he again forwarded a COM
munication to the officers of the asso-
Citations claiming exemption under the
law, and requested that they call az
his office. i'm the Custom-hOuse, and
take the matter up with him.
Millions I'm Capital Stock.
Representatives of numerous local
associations here presented themselves
at the Collectors Office In the Custom
house, and they were informed that
only mutual building and loan asso-
Citations could escape payment under
the corporation tax law; that is. asso-
Citations which divided the protls OF
the associations with their members.
Associations that did not adopt this
course. the Collector declared. were
subject to the tax which was imposed
under the corporation tax law.
In this connection il was stated that
there were about 1876 building and
loan associations that could not be
classed as mutual building and loan
associations. as there was no division
of profts among the members OF the
various associations, and that there
fore. this being the case, there was
no other alternative but to pay the
tax over TO the government
The ruling is of the utmost impor-
tance i'm Delaware, as the associations
subiect to the tax have thousands OF
dollars of authorized capital stock, and
also have thousands upon thousands
of members. The money to be paid
. i'm the shape of the corporation tax
! will be enormous.