The Bennington evening banner. (Bennington, Vt.) 19??-1961, 1910-03-16
TAX
DEFENDED BY
GOVERNMENT
Brief Holds That Provision Of
Tariff Act is Constitutional
COURT DECISIONS CITED
Not a Tax on Property But an Excise
Upon 1.-THE Carrying on Of
Business"


Washington, d. c., March 1.-THE
governments defense of the consti
nationality of the corporation tax pro
vision of the new tariff law was sub
mitted yesterday in printed form to
the supreme court of the United
States. 1t is the work of Lloyd w.
Bowers solicitor general, but bears
also the signature of his chief, Attor-
ney General Wickersham. Upon II
the government will shape its oral
defense of the law when the corpora
ton tax cases come up for argument
probably on Thursday
The first point sought to be made
is that the tax is not direct tax up
on property but is an excise tax upon
the carrying on or doing business"
The declaration of the statutes as
well as decisions of the courts are
relied upon to support this point. AS
to the statute Mr.. Bowers says in his
brief that lit shows the transaction
OF business to be the subject of the
tax and the incomesof business is
used merely as measuring the amount
OF tax, which rests not upon that in
come but upon the occupation from
which 1t is derived"
In his consideration in cases bear.
ing upon the point Of whether the
corporation tax was a direct tax or
excise, Mr.. Bowers refers to the fam
Gus income tax case He says these
cases have been interpreted, undoubt-
edly with the concurrence of the en-.
tire supreme court as referring to a
tax imposed upon property solely bv
reason OF its ownership. Finally on
this point Mr. Bowers contends that
the franchises cannot be the specific
subject of the tax as no tax is i'm.
posed in any way unless business is
actually done.
the second point Mr.. Bowers
seeks to make Is that the tax is not
direct tax upon the shares of the
stockholders nor upon their incomes.
the reasons given for the tax not be-
ing a direct tax on property is held
to apply to the claim that il is not a
direct tax on the shares or income of
stockholders.
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. Five of the fifteen cases
Tor consideration by the court involve
such corporations. Mr. Bowers
claims they raise no constitutional
question, but only the query as IN
whether they are engaged in carry.
ing on or doing business. If any
corporation is not so engaged il is
not reported by the statute, he ar.
CUES.
me fourth point Mr.. Bowers seeks
TO establish is that the tax is NOT an
nfraction of the general power of
the states to authorize the formation
or corporations and stock comnan-
les. Even If the tax were on fran.
chlses of state corporation, he saws
instead OF being on the use of the
franchises, it still would not he =
TAX on the legislative power of the
state Corporate franchises. he adds
grew out of an offer by the state and
the act of free choice of election nv
the persons to whom the offer is OK.
tended Hence, he concludes fran.
chises are created, not bv the state
ouI by the persons who accept them.
The several objections to the law
as an excise law, because Of its al.
legged lack Of uniformity, are consid.
cred by Mr.. Bowers The constitnt.
iohal requirements are met he Claims
II the tax is geographically uniform
one reason assigned for exemptino
individuals and PARTNERSHIPS Is that
Ihey are without the aid of legal
rules applicable to corporations and
Joint stock companies. Both reason
ana authority. it is claimed. Justify
the exemption of corporations whose
net income is not over S50O1
LABOR, agricultural and horticultur.
al organizations are exempted he
says, because they seem hardly n
De organized for profit" He adds
that II 1t Is necessary the statute
could well be construed as not OK.
empting such associations IL their
primary purposes is business profit
me exception of societies operating
under the lodge system, he contends
Justiiies itself. Such Mr.. Bower saws
are the Knights of Pythias. Knights
OF Labor certain Masonic orders the
fed Men of America and the Wood
men of the World
Inc solicitor general urges the
point that the tax does not subject
the corporations to unreasonable
search or seizure by reason of ms
publicity feature. Neither the mai,
ing nor the publication of the re
turns can by any possible view be in
terpreted as search or seizure h,
contends ~
Finally 1t is contended that the IN,
may properly be collected in 1et0
Ihis is based on the argument tha
the tax is not laid on the income
which was received before the law
went into effect August s, 1909 but (,
merely measured by that income.