The Washington herald., 1910-08-11

Building associations in Washington are
greatly interested in the question whether
they will be held for the payment OF the
! per cent franchise tax under the opera
lions Of the corporations act
| Within the past few days all the build
! Ing associations OF the District have re-
ceived notice from the collector Of inter-
nal revenue al Baltimore that they would
be called upon 70 pay the tax, due on
June and now overdue.
This call was issued by the collector IN
connection with instructions from the
commissioner here that the collection of
the franchise tax on corporations must
proceed under the law. The call came
from the collector in Baltimore because
! the District OF Columbia belongs in the
Baltimore district, which includes also
the States OF Maryland and Delaware and
the city OF Baltimore
Has Twenty-eiEht Associations.
Washington has two Incorporated build
1 ing associations about eighteen unincor-
porated and eight which have a nominal
! existence. but are practically inactive.
Most of the local associations have sent
ahidavits 10 the collector at Baltimore
that they are operating as mutual COM
pauies" and are. therefore. exempt from
the operations OF the law Upon this
statement Of fact the associations are
resting by the advice Of their attorneys.
The corporation tax law specifies "Tnu-
tual building and loan associations" as
exempted from the tax. This would
mean that associations. not existing as
! corporations In the ordinary sense Of the
word, but banded together for mutual
/ assistance and dividing profits pro rata
among the stockholders or members OF
the organization. are exempt from the
tax. But the Bureau OF Internal Reeve
nue. had made a ruling that in cases
where the associations are engaged in
] the practice OF lending money for profit
and deriving a revenue therefrom, which
may be divided later among stockholders
or members. are doing to all intents and
| purposes, banking business. and as
such come under the purview Of the
/ corporation tax law.
! Commissioner CabeIPs Views.
IN discussing the matter yesterday,
/ Commissioner Cabell said it had been
/ represented 10 the bureau that many OF
these associations loaned money upon
real estate security. much as the banks
do on other forms OF security. TO per-
sons vino are not members or who be-
come such only during the life OF their
loans. and who do not in fact partic-
ipate in the earnings OF the associations
In such cases. Mr.. Cabel said It was
the opinion OF the bureau that the as
sociatiOns come under the law and
should pay the tax. regardless OF the
form Of organization. Mr.. Caben said
his view was based uson an opinion
handed down TO his Office by the Attor-
ney General
Commissioner CabeIi said ii would prob
ably be necessary 10 take UP Tor consid-
Grafton the case Of each association sep
arately. He thought the protest OF the
| association, with fits constitution and by
laws and methods OF doing business.
would be placed before the solicitor OF the
bureau for q ruling. ana that II II should
be found that the single association was
doing a banking business Il would be tax
ed under the law. and that there could
be no escape from the fairness OF such
/ a Aul4ub-
Would BE Unfair TO Banks.
Mr.. Cabel was OF the opinion that Il
would be unfair TO tax a private bank.
for example. and exempt a building as
sociation for pursuing similar line OF
business.
Commissioner Cabel ssid the question
was a nice enc in law. and that IL would
be handled with care and due considera-
ton as 10 the rights Of all concerned, but
he thought the form OF organization was
Of less consequence than the actual prac-
tice Of the concern in the matter OF lend
ing money and acquiring its revenue.
The practical result Of the operation
Of the law upon the building assocIa-
lions. II II is enforced against them. will
be to assess ! per cent upon their net
revenues over and above 5000 Within
those limits It Will amount TO the de-
crease OF net returns by per cent.