Newark evening star and Newark advertiser., 1910-03-15
CORPORATION TAX
DEFENSE PUT IN
BY GOVERNMENT
Signed by Attorney=General, 1t
Is Sent to U. S. Supreme
Court Today.

! WASHINGTON, March 15.-The gov
eInments defense of the constitution
atty of the corporation tax provision
of the new tariff law, was submitted
today in printed form to the United
| States Supreme Court. 1t is the work
of Lloyd w. Bowers, solicitor general,
but bears also the signature of his
chief Attorney General Wickersham.
Upon it the government will shape its
oral defense of the law, when the cor
poration tax cases come up for argu-
rnent, probably on Thursday.
The first point sought to be made is
that the tax is not a direct tax upon
property, but is an excise tax upon
the. carrying on or doing business.
As to the statute, Mr.. Bowers. says in
his brief that it shows the transaction
of business to be the subject of the
tax, and that the income of business Is
used merely as measuring the amount
of tax, (which rests not upon that in
come but upon the occupation from
which it is derived These reasons, to-
gether with the Supreme Court deci-
sion in tho Spreckels case. which the
solicitor general explains as holding
that tax declared in the statute to be
laid on business in an amount equiva-
lent TO certain percentage of income,
is an excise tax on the business. taken
by him as sufficient to show that the
corporation tax is an excise on the
transaction of business list of in
heritance tax cases are cited.
Ii is in the argument that the tax
is not direct one that Mr.. Bowers
first considers the claim that inasmuch
as the tax is rot levied on partnerships
or individuals. but is put on corpora
tions and joint stock companies and 1t
is therefore asse ssed on franchises. The
distinction between partnerships and
individuals on the one hand and cor
porations and joint stock companies on
the other is explained as not proceeding
from the presence or absence of fran
chises. but from the wide and impor-
tant diversity of legal rules affecting
the two kinds of business, of these two
groups.
"A tax upon the use of franchises in
business continues MIR. Bowers, lis
no more a direct tax upon the fran
chises than tax upon the use of prop
erty in business is a direct tax upon the
property so used
The second point Mr. Bowers seeks tc
make is that the tax is not a direct tax
upon the shares of the stockholders nol
upon their income. The third point Is
| that the tax does not become direct IN
| the special case Of a company engaged
| in the business of handling or dealing In
real estate. The fourth point seeks tc
establish that the tax is not an infrac-
ton of the general power of the States
to authorize the formation of corpora
| tionS and stock con1nanies.
No authority exists, Mr. Bowers con-
tinues, that holds or ''even suggests
that the United States cannot tax the
franchise of State corporation, estab
lsheG for ordinary business purposes
on the theory that such Federal tax vii
interfere with legislative independence
of the States in their own sphere.
The solicitor general urges the poin
that the tax does not subject the cor
porations to unreasonable search or sci
zlre by reason of its publicity feature
1t is contended that the tax may
properly be collected in 1910. This is
based on the argument that the tax is
not laid on the income which was re-
celved before the law went into, August
5, 1869, but is merely measured by thai
| income.