The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1913-01-31
DOUBTS RULING
ON EXCISE TAX
Attorney for Virginia Bankers
Association Believes Courts
Will Favor Banks.
SUGG ESTS TEST CAS- {
State Institutions, He Thinks,
Would Benefit by Liti-
eating Issue.

Attorney George Bryan. of the Viz
giania Bankers Association. an
opinion given yesterday in reply 20 the
query of a Petersburg banking insitu-
ton, takes issue with Commissioners
Royal +. Cabcl's recent ruling with
regard to tho deduction by banks from
their gross incomes. when making
returns for the Federal excise tax. or
taxes paid by them for owners Of the
bank stocks.
such taxes. the Comnisioner Of
Internal Revenue holds. being assessed
against the individual stockholder.
represent the Indebtedness OF the indi-
vidual stockholder. II. In order 20
avoid the trouble or the annoyance OF
the collection OF such taxes. a baking
corporation chooses 90 pay them for Its
stockholders. tho amount so paid. the
Commissioner contends, does not cons
ritute q proper deduction from its
gross income in the return for the special
excise tax on corporations.
The fact that q number OF Virginia
banks had made these unailowcc de-
auctions cause Deputy Collector J. r..
Wade. Of the local revenue office, 20
mail circulars last week 20 the banks OF
the state informing them OF the com
nissioner's ruling. A severe penalty
is provided for failure 20 make proper
returns.
Doubts Cabell's Ruling.
The Petersburg bank asked for an
expression as 20 the legality of the in
depreciation given 10 the Federal act by
Commissioner Cabell Mr.. Bryan. in
his reply. quotes from the act. as among
the deductinos that a bank may pro-
perly make: all sums paid by IL Uthe
corporation) within the year. for taxes
imposed under the authority Of the
United States or OF any State or terri
tory thereof.
Section II Of the Tax Law Of Virginia
prov;des among other things that no
fax shall be assessed upon the capital Of
anv bank but the stockholders in
such banks shall be assessed and taxed
on their shares therein
Reduced 20 its simmpiest form" the
lawyer holds. the question Is whether
II tho bank pays the taxes for the stock
holder as II does under section II supra.
they are paid by IL within the meaning
Of the exercise act. and are therefore a
proper subject OF deduction.
Did Congress mean generally TO
allow bank taxes 10 be deducted? ! am
OF the opinion that IL did and IN what
ever form they are paid. so long az
they are intended by the State to
cover the Represented, by the as
sets Of che bank ! believe that the
court will look through the form to the
substance and will hold that the tax IL
really paid by the bank-not merely
sby IL for the stockholders The stat
ute OF Virginia eIempting the capital
stock OF the banks from taxation and
placing the taxation upon the shares
Of the stock is so far as my informa-
ton goes, peculiar 70 this State.
Suggests Test Case.
Mr. Bryan. in the opinion Just quot
ed. recommends that the bank decide
for itself whether the amount of the de
auctions IL worth the cost OF litigation
and the fine which will be imposed II the
cour. of last resort fails to sustain his
view.
II believe. however" he concludes.
that if il il shown to the court that
the failure TO comply with the request
of the collector il due only TO mani
fest doubt az 20 the correctness of his
contention. a nominal fine only VIII
be imposed. The same question VIII
ariee annually as long as the act
remains unrepealed and II might well
be to the interest of the banks Of the
State 10 make up test case and
obtain a final decision as soon as
practica able