The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1913-06-07
INCOME TAX LAW INVALID.
SECTION OF TARIFF BILL REIAT.
ING TO INCOME TAX MUST
BE AMENDED.
Officers of Mutual Insurance Comma
nies Claim That They Will be Taxed
Twice and Declare Measure Unjust.

.
senate acts on the Underwood tariff
bill the income tax section will be
amended to remedy a defect which.
it was discovered today, would make
the measure unconstitutional. When
the trainers of the income tax pro-
vision fixed January l, 1913, as the
date from which to compute incomes
for taxation, they overlooked the fact
that the constitutional amendment
authorizing an income tax was not
proclaimed as ratified until February
25, 1913.
This fact was brought to the atten-
ton of the senate finance subcomni.-
tee which has the income tax under
consideration and an amendment
probably will be drafted at once.
Aside from the constitutional de-
feet arguments have been presented
in favor of making the taxable in
come accrue for the first year from
July l or later. AS far as the con-
stitutiOnal limitation is concerned. it
would be legal to compute incomes
for 1913 from March /.
Senator Williams subcommittee
still has under advisement the scores
Of protests filed by officials Of mu-
tual life insurance companies against
their inclusion under the provisions of
the income tax law and the commit
tee still is considering an amendment
which would give such mutual con-
Germs exemption if they are able to
prove, after the tax has been assessed.
that they are not conducted for profit
and that all of their surplus earnings
are participated in by their policy
holders.
Among the briefs on this subject
filed with the subcommittee is one
by Il. Steiner, q business man OF
Birmingham, Ala, which includes
correspondence with Representative
Underwood, chairman Of the house
ways and means committee In a
letter to Mr.. Underwood Mr.. Steiner
cited the objections to taxing incomes
OF mutual life insurance companies,
maintaining that this would result in
tax on the policyholders, who woIlG
really be taxed twice. Replying to
this Mr. Underwood wrote:
You seem to overlook the fact en-
tirely that these companies are be-
ing taxed under the present CORPORA
ton tax at exactly the same amount
as they will be taxed in our income
tax; that we are not levying on them
what they do not pay at present. An
ordinary corporation is organized for
the benefit Of it's stockholders: q mu
tual life insurance company is or
ganized for the benefit of it's policy
holders. In one instance the indivi-
dual holds the stock, in the other Ia
stances the corporation is operated to
earn dividends or net profits for his
benefit"
III i0PiS MI. STEINER epltOmiZed
the arguments of the insurance presi-
dents and others who are working
for an amendment to the sections as
follows:
When you state that the tax pro-
posed under the income tax bill is
for life insurance companies, sub
stantially continuation of the pres
ent corporation tax, you are in gem
eral terms correct, but not altogether
So The federal court holds, under
the present corporation tax. that SO.
called dividends in companies operat-
ing on the mutual plan are not divi-
dends and can be deducted by a COM
pany in making it's returns The lam
guage of the present bill clearly di
rects that these sOcalled dividends
snail not be deducted, and therefore
that they shall enter into the net in
come of company for purposes OF
taxation.
Moreover, by implication at least,
under this bill, every maturing en-
downment and every cash surrender
value amounting i'm any individual
case Of $4,000 or over would be tax
ed; and if such payments, plus the
other income of the recipient, amount
To $4,000, it will also be taxed. This
phase of the tax would not fail on n
company's net income, but will be q
uirect ana heavy burden on indivi-
duals to whom the payments are
made
Action by the subcommittee, to be
ratiilcd by the finance committee, in
putting live stock and grain on the
lfec list, returning on the free list also