The sun. [volume] (New York [N.Y.]) 1833-1916, 1915-09-24
NEW MOVE TO UPSET
INCOME TAX LAW
Union Pacific stakeholder in
Supreme Court Brief At
tacks IL in Many Ways.
INJUNCTION Is SOUGHT

WAsHiNGroN. Sept. 23.-An attack on
the constitutiorallty Of the Federal in
ONE tax law is @ ntained IN a brief filed
with the United states Supreme Court
in the case OF Frank r. Brushaber, n
s~tockholder, against the Union Pacific
Railroad.
The appeal. which is take' by
Brushaber from a decision Of the Fed
eral Court for the Southern District Or
New York. Is one OF q group OF cases to
be argued before the Supreme Court 10
,est the income tax law. Ii seeks to
cnJoin the railroad from complying with
the provisions Of the act. Julien r.
Davies, Brainard Tolles and Hiarrard
Gienr are counsel for Brushaber.
Although five points are raised against
the validity Of the law principal stress
Il laid on the charge that il i, u~njuslS
discriminatory between individuals aud
corporations that 1t aims at seizure Of
property without due process OF law AMI
that without constitutional authority It
aims at retroactive operation In requir-
ing the payment Of the tax On incomes
derived prior to October ., 1913. the date
when the act weift into effect.
In discussing the provision Of the law
which exempts individuals from paying
tax on incomes derived from corpora
tons which have already paid the tax on
their earnings. while not eXomp;ing cor
porations, the brief shows that the Union
Pacific is required TO pay the tax three
times on the earnings OF q single sub
sidiary.
II shows. I'm other words, that tho rail-
road pays the tax on its entire earnings,
including the income derived from the
stock of the oregon Short Line that the
Oregon short Line pays ON its earnings,
including dividends from the stock of the
Oregon Washington railroad and NaNi-
cation Company, which in turn pays the
tan on It's " earnings
This discrimination. the brief charges,
is based solely on the prejudice of CON
gress against corporations which own
controlling stock IN other corporations.
despite the fact that the Federal Cuusti-
tuition leaves to the individual States the
right TO determine whether corporations
they charter can own stock in other cor
porationS.
The effect OF tho discrimination. q.
brief contends. Is TO divide corporations
into two classes, those which do and
those which do not exercise the fran
chises given them by the state that
charters them. and seeks by an add
tional tax to penallZe those corporations
which do what their home state con-
siders IT public policy TO PERM; them
to do.
dividends upon stock owned by AN
individual the lrief reads. are taxed
once when the earnings of the corpora
tions are taxed they are not taxed
again. The same dividends when thu
stock is held by a corporation are taxed
twice. once when tho earnings OF the cor
poratlons issuing thu stock are taxed
and a second time when the earnings
OF the corporation owning the stock are
taxed.
"a certain class of owners H. singled
out for special burden for no othes rea-
son than the disapproval Of Congress ir
respect to the method used IN holding
title to their property.
1T is obvious that this process Of
taxing the same amount of money over
and over again would bc repeated As
often is the original dividend ~ the
first corporation issuing stock passed
along through different holding Compt-
MES and was represented In the earn
ings OF those companies and the process
OF tuNing II would not cease un,il the
dIllpull VI INC Ulel NV l''Nl Ifd'llri inc
hands of the individual uwners OF the
capital stock OF the last holding com
pany."
While the brief does not attack the
principle OF the law which requires the
tax TO be paid at the source OF the
income. Il holds that To- require The corr
poratiuns to collect this tax without
compensation for the service involved
amounts virtually to Cuunscitiou with
out due process Of law considering the
amount OF additional bookkeeping and
auditing Expenses involved
In the case Of the Union Pacific. the
brief declares. the defendant company
admits these extraordinary expenses toe
tai between $1,000 and $4,000 a year,
Practically, the brief contends. this pro-
vision Of ;hc law requires the corpo-
ration ana iduciary concerns without
COMPENSATION to hold out and pay over
10 the Government the taxes under
threat OF sever penalty il they fail 10
perform their task I'm a satisfactory
m
All such corporations or other iiduci-