Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1917-10-18
INSURANCE MEN
FIGHT EXCESS TAX
Mutual Life Concerns Hold
They Are Exempt by
Inference
NOMINAL CAPITAL ONLY
Fidelity Mutual and Penn Mu-
tual Company Heads Deny
Added Liability on Profits

Although mutual life insurance com.
panies, which constitute perhaps two-thrds
Of all the life insurance companies doing
business in this country. are not specifically
exempted from the excess profits tax pro-
vision Of the war revenue bill. they believe
that they are so exempted by inference since
the excess profits tax is specifically applied
TO concerns which are stocb-lssuIng institu-
tons, The mutual life insurance companies
are not capitalized
This "tacit" exemption, II the mutual
companies carry their point, will deprive
the Government of millions Of dollars Of
revenue it s estimated, To achieve it,,
however, it is probable that each company
Will be obliged TO bring suit against the
Collector OF Internal Revenue TO recover
the per cent additional tan which the war
revenue bill assesses upon concerns having
no capital or nominal capital.
FIDELITY MUTUAL DENIES LIABILITY
Walter lie Mar Talbot. president Of the
Fidelity Mutual Life Insurance Company
OF this city today took the view that the
mutual life insurance companies were free
from the excess profits tax provision. OF
the score Of mutual life insurance COM
psnies represented in this city only two
large ones. the Fidelity and the Penn
Mutual, are local institutions
- cannot understand that the war ex-
cess-pronts tax will apply to mutual insur-
ance companies" said Mr. Talbot because
the law distinctly applies 10 capitalized
concerns. We have no capital. We dis
tribute our profits to our policyholders and
our surplus is necessary for the protection
OF the policyholders' interests. So our sur
plus can in no way be accepted as capital
To our minds II would be very inconsistent
TO apply the eXcess-prohts tax to a fund
Nigl s-N.
persons insuring their own lives"
BELIEVES INFERENCE PLAIN
The liability Of mutual life insurance con-
Germs TO the per cent tax. added to the
2 per cent tax imposed by the law of 1916,
on income. was admitted by Mr.. Talbot
while refusing to admit the possibility OF
the eXcess-proht tax being applied to such
companies. The mutual life insurance COM
panies were represented before the Con-
gresslonal committees framing the war
revenue bill, he said, by the executive COM
mttce Of the Association of Life Insur-
ance Presidents, and, inasmuch as the
bill as subsequently, enacted did not state
that uncapitalzed life insurance companies
should be liable TO the eXcess-profts tax,
the inference might be drawn that the ar
guments OF the companies had carried
weight.
PENN MUTUAL TO FIGURE
That the Penn Mutual will make con-
test was indicated by L. X. Passmore, vice
president of the company, when he said in
the course Of an Interview:
I'm times such as these we all want TO
pay our proper share of taxes, but we do
not want 10 encourage an Interpretation or
den on companies Of this kind we have
no capital stock and no profits. The com
pany is operated solely for the benefit OF
its members.
we admit our liability to the per cent
income tax under the law OF 1915, to the
4 per cent income tax law under this years
war revenue law, to eighty cents per $1,000
on our S102, 100000 annual business and TO
the host Of stamp taxes on various sorts
OF papers, such as assignments and trans
fers Beyond that we do not believe we
should be taxed
The Penn Mutual as well as many of
the other companies OF the same kind, was
represented at Washington while the war
revenue bill was in the making. Frederick
II. Garrigues mathematician of the COM
pany, made the arguments TO Representa- .
tives and Senators on various phases of the
law affecting mutual life insurance COM
panies.
That the Government will call upon such
companies for the per cent additional tax
assessed upon business having no capital or
only nominal capital virtually is certain, ac-
cording TO students OF the law who are IA
miliar with the workings of the law OF
1915. When this is done there will be no
alternative for the companies but TO pay
the tax They then may enter suit against
the collector of internal revenue TO whom
it was paid TO recover the amount
In the case OF the Penn Mutual basuE
the estimate on the income tax paid last
year, IL will mean a saving of 100000 4
year TO escape the excess-profits tax. The
company paid $4,000 income tax last year,
which was per cent of the taxable amount,
IL win pay this year in addition a 4 per
cent war-income tax, or $4,000. These
two taxes total $4,000 The 8 per cent
excess-prohts tax, under this estimate,
would be $4,000 more, or total of $175,-
900.
Under the excise law OF 1909 the Penn
Mutual entered several suits against the
collector of internal revnue for this dis
trict for the recovery of sums which it as
serted were illegally assessed against It,