Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1911-03-14
CORPORATION TAX,
Supreme Court Decides The
Provisions Constitutional.
Justice Day Announces Decision
In 10,OO0-word Opinion.
:nds Fight Which Began with Enact
ment Of Payne Aldrich Law.

nous opinion TO-DAY tn" supreme court
Of the United states held that the cor
pOrItion tax provisions Of the Payne
Aidrich tariff act were constitutions
Thus ended Il controversy Wagcd almOS
continuously since President Taft first
suggested their enactment To Congress
The decision was announced by JUS
ticc Day. appointcu 10 the supreme
court bench from ohio in 1909. 1t was
an elaborate treatment Of the subject
containing Approximately 1o,oAo words
About half an hour was spent ny The
Justice in explaining the position %
the court orally to the bar. the pfinte,
opni"n being used as a basis for tn,
remarks.
The justice first determined that the
tax was just what it purportcd To be il
the act. namely. an excise tax on the
transaction al corporate business and
not Il direct tax ON tn" ownership OF
property With that point decided tn
Justice took up at more or less length
the various objections urged against
;hc tax as an excise tax and disposed
of them To the satisfaction of the court
Finally he interpreted the law 50 as
to apply tn real estate companies and
the so-called public service corpora
lions, but hot to real estate trusts.
Practically all OF the $27,13e.904 as
sessrd for tie fiscal year ending June
-, 1910 on corporations in the United
states has been paid into the treasury
The exact amount received on Feb. /,
t9iI, the latest dat" for which precise
fgurcs ara available was S27.1oS.1S9
a
PENALTIES amounting to about $l00.000
81 failure to pay the tax when due.
What the tax viii amount to this
ftar. the commissioner of internal
,cvcn.lo. Who has charge of the collec-
ION is not vet able to determine even
approximately.
The fight against the constitution
alitY OF the corporation tax began
almost Immediately after the enact
ment of the Payne Aldrich tariff law
of 1863 of which il is a part. Dur
ing the long days of Wranglng in
Congress over that measure. Presi
dent Taft originated a plan to raise
part OF the revenue necessary for the
running Of the government by impos-
ing a corporation tax. He is said TO
hay" made the first rough draft Of the
proposed law and To have asked the
Department of Justice Ia perfect il.
Scarcely fifteen years before, tAe
Supreme Court of the United States
had declared unconstitutional the IN
come tax measure. enacted by Con-
grcsS. Ia order to have a valid tax.
the errors Of that law had To be
avoided Finally the attention of
4
We're called tn the proposed corpora
ton tax as a constitutional measure.
Ii was urged as preferable To another
income tax which, it was argued.
probably would be declared mconsu-
tutional and as under the crcum.
stances better legislation than an in
heritancc tax. When the tariff bill
was in the Senate, the corporation tax
provisions Were inserted as an amend
ment To the Payne bill passed by the
House. They remained there and be
came a parr of the tariff act.
that a1 , pF't tax In" spcc @ excise
tax with respect to the carrying on
or doing business ~ 1t was to be paid
by every corporation, joint stock
profit and having capital stock
represented by shares, and every in
surance company organized under the
laws of the United States or of any
StHtr or territors." 1t was provided
that the tax should be equivalent to
one per centunl upon the entire net
income over and above $4,000 received
from all sources" exclusive of amounts
received as dividends upon stock OF
other corporations. joint Stock com
panies. or associations or insurance
companies. subject to the tax.
The law provided also that retlrns
should be made by those taxed To the
Treasury Department. t. be used as
Il basis for assessing the tax. These
were open to inspection. but in 1919
Congress enacted legislation providing
that the returns should be open to in
spection only upon rules and regula.
tions approved by the President
The first action in the courts to test
the constitutionality of the law was
begun in the United States Circuit
Court for the District nj Vermont.
\ woman began it. Stella p. Flint.
guardian OF the property of Samuel
" Stone. Ir.. a stakeholder in the
Stone Tracy Company, Of Windsor,
Vt, began an action to have the com
pany restrained from paying the tax.
she claimed that the tax was uncon
Stitutional Her attorney. Maxwell
Evarts. brought the case to the Su-
preme Court. after the circuit court
mad declined to hold the tax unconsti-
tutional.
When the stone Tracy case came
up for argument before the Supreme
Court in March. 1910. fourteen other
cases likewise raising the validity "f
the law and decisions likewise sus-