The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1910-04-30
IS CORPORATION TAX
CONSTITUTIONAL?
Continued from Page 81

ted States for its consideration and it
is the general expectation that this
court will decide the question before
the time arrives to pay the tax. If the
court should declare the law uncon-
sttutional, of course no further at
tempts would be made by any of the
federal officers to collect the tax and
nothing would remain to be done by
the companies which have made their
returns.
But if, for any reason, the decision
should be delayed, or if the decision
should sustain the law in some parti-
culars and declare it invalid in other
particulars, then 1t behooves COM
panies paying their taxes to do so un-
der proper protest and to follow that
procedure required by the federal
statutes as basis for any subsequent
effort to recover the taxes so paid or
any part of them.
Previous Income Tax Laws.
1t is not the purpose of this article
to attempt to forecast the decision Of
the Supreme Court but brief state
ment of the outlines along which that
make clear the form of protest which
should be used in the event that it
should be necessary for companies,
for their own protection. to pay their
taxes under protest .,.I.
Income taxes levied by the federal
government are no novelty. Such taxes
were levied during the period of the
Civil War by various statutes enacted
between 1861 and 1870. The income
taxes levied In those times were sub
sequently abolished. In 1894, in time
of profound peace, another income tax
was levied and the law imposing this
tax was declared unconstitutional by
the United States Supreme Court in
1895 in the case of Pollock VS.. Farm
ers Loan and Trust Co. The income
tax of 1894 imposed percentage tax
on all incomes, whether derived from
business transacted or invested CAPT.
tai and whether earned by individuals
or corporations. The tax was thus I'M
posed upon incomes derived from the
following sources:
I. Income from real property.
9. Income from business property.
g.. Income from business transacted
(including earnings of profession
al mem, and
Income by way of interest on
state or municipal bonds.
The Decisions in the Pollock Case.
There were two hearings and two
decisions in the Pollock case, and.
at both hearings and in both decisions
the Supreme Court was unanimously
of the opinion that in so far as the in
come tax of 1894 taxed income derived
as interest on state or municlpaI
bonds the law was invalid. Beyond
this point in the first decision, the
court went no further than to holu
that the tax was invalid in so tar as
II taxed income derived from real
property. Upon this latter point the
court divided by vote OF six to tWo'
Mr.. Justice Jackson not participants
in the hearing. In the second decision
of the Pollock case, the court was
still unanimously or the opinion that
the tax was invalid in so far as II
taxed interest derived from state Of
municipal bonds, and also held that
the tax was invalid in so far as II
taxed income from real property ana
income from personal property. upon
this last point the court divided nVe
to four. Mr.. Justice Brown joining
and Mr.. Jackson reinforcing the RANKS
of the minority The majority having
reached the above conclusion helu
that the income tax of 1894, BENG
valid in the particulars noted, must
fall as a whole, although the sugges-
ton was made that a tax levied upon
income derived solely from the tram
saction of business or the exercise Oh
a profession might be good under the
IeQefdl CONSTITUTION 90 az SNNNA1N
if it stood alone.
Possibility of Law Being Held Invalid
Only In Part.
It is apparent and, indeed, is is
matter of common notority, that che
CONGRESS in passing the law imDoS-
ing a federal tax on corporations AM
other companies intended to profit by
the suggestion made in the Pollock
decision and make this tax strictly a
excise tax. The law itself characterlzes
the tax imposed as a special excise
tax with respect to the carrying on CT
doing business" But in describing
the income which forms the basis OF
the amount of the tax, the law pro-
vides, with reference to American