Omaha daily bee., 1911-03-14
Omaha High Relay Tamfo ndoorMee

were inserted as an amendment 70 thei
Payne bill passed by the house They
remained there and became a part OF the
tariff act
other Provisions of Law.
The provisions Of the law stated that.
the tax was a special excise tax with
respect to the carrying on or doing bust
ness" 1t was to be paid by every cor
poration Joint stock company or associa-
tion. organized under the laws OF the
United states or Of any state or territory"
Il was provided that the tax should be
equivalent to per centum upon the en-
tire net income over and above 5000 re-
oeived from all sources" exclusive OF
amounts received as dividends upon stock
OF other corporations, joint stock COM
panies or associations, or insurance com.
panies subject TO the lax.
The law provided also that returns should
be made by those taxed to the Treasury
department, TO be used as a basis for as
sessing the tax These were open to in
spection, but in 1910 congress enacted legis-
lation providing that the returns should be
open to inspection only upon rules and
regulations approved by the president.
The first action in the courts to test the
NuAASAlluAihuallNN Oh the law was begun In
the United States circuit court for the Dis
trict Of Vermont. A woman began II
Stella p. Flint guardian Of the property
Of Samuel N. Stone, jr. a stockholder IN
the Stone-Tracy Company Of windsor VI
began an action TO have the company re
strained from paying the tax. She asserted
that the tax was unconstitutional Her at
torney, Maxwell Evarts, brought the case
to the supreme court, after the circuit court
had declined to hold the tax unconstitu-
tional
When the Stone-Tracy case came up for
argument before the supreme court In
March, 1910, fourteen other cases likewise
raising the validity OF the law, and de-
oisions likewise sustaining the constitution
atty Of the tax, had reached the court.
They were advanced and heard with the
original case. Because presumably Of va
cancies on the bench. the cases were re-
stored to the docket for reargument This
reargument occurred in January 1911
BASIS of the Attacks.
The consttutionality OF the tax was at
tackled from all the points from which any
tax possible of enactment by congress
could be attacked. Prominent among the
objections TO the law was the argument
that the tax was a direct tax. not appor-
toned, according TO the constitution. Some
dubbed the tax "a corporation income tax"
and invalid for the same reasons that the
income tax was declared unconstitutional
in 1895. Others set up that II was a tax on
state franchises. and hence was an uncon-
stitutional interference with the sovereignty
of the states. Another line OF objections
was based on the argument that as an
excise tax il was not uniform, but con-
tained unconstitutional clsssificatons. The
/ LII.
tackled as taking private property without
compensation. To all Of these objections
the Department Of Justice, through the late
Solicitor General Lloyd w. Bowers, at the
! first hearing and through his successor,
Frederick w. Lehman, at the second hear
ing, made answer.
After the argument of the fifteen cases
the court took up three her cases in
! volving the tax. In these the principal
| controversy was over the Interpretation of
the law The leading point was whether
the tax was to be imposed on Boston
| trusts organized to hold real estate. but
not Incorporated. The Boston concerns
| contended that the tax should be assessed
/ only on concerns organized under the stat
utes OF the United States, states or terri
tories The government argued that bust
! ness concerns organized under the common
| law were included within those meant TO
| be taxed.
Big Sum Already Collected.
The decision Of the supreme court in
unfolding the constitutionality OF the cor.
porRtion tax law relieves the government
| from an embarrassing situation. Had the
law been declared unconstitutional the
government would have to return to 262,-
40 coroprations an aggregate OF more than
S26, 10000 paid by them into the federal
treasury by operation Of the law and an
issue OF government bonds probably would
have been found necessary.
| According to the commissioner Of internal
revenue there were at the end Of the last
fiscal year, 400 taxable corporations on
the list Of the internal revenue bureau
| These corporations had a. capital stock
represented by 52..S71, s26, 752 bonds and
other indebtedness and S31, ,952. $50 and
their net income was SS125,1 O1.