Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1918-04-05
SERIOUS FLAW FOUND
IN BOND LEGISLATION
Would Have Had Effect of
Exempting Bank Stock
From Taxation

WASHINGTON, ID. c., April "A
serious flaw in the bond authorization
bill as passed by the house Saturday
has been discovered in time to save
millions of dollars in taxes to the sew
eral states The curious mixup might
have levied tribute on the tax budget of
every state in the union.
Representative McFadden, president
of the Pennsylvania State Bankers as
sociation, estimated the original lam
guage in the bond bill would have cost
his state 100000 in taxes. The loss
to Georgia and other states would vary
according to state tax laws and the
value of bank stock taxable.
The error occurred in the section re-
lating to the exemption from state tax
alton of a certain percentage of bank
capital when represented by Liberty
bond investment.
Democratic Leader Kitchen went to
the treasury today to get an interpreta-
ton of the house bill The interpreta-
ton made there went much further than
the house intended and made it possi-
BILE for banks practically to avoid state
taxation by heavy purchases of govern
ment bonds.
A meeting OF the ways and means
committee was hurriedly called and the
COMMITTEE voted unanimously to ask
reconsideration of the bill in the house
and it's repassing in modified form.
Meanwhile house leaders did not send
the bill over to the senate, although the
delay is troublesome in view of the adj
ministrations desire to have the bond
Legislation before Secretary McAdoo
stan IS the third Liberty loan drive on
April 6.
The bill should have gone to the SEN
ate Monday, but Leader Kitchen said
the house would hold it and. rectify it's
own mistake. Evidently there was a
hitch in the initial plan to have the
senate correct the error. Old-timers do
not remember when a committee here
tofore has voted unanimously to back
pedal and undo such an important
piece of legislation, and the occurrence
throughout is most unusual.
1t was the intention of the ways and
means committee to exempt from state
taxation that percentage of capital and
surplus represented by Liberty bond
purchasers to the extent that that per-
centage bore to the gross assets of a
bank. Since passage, the bill has been
interpreted to mean that all capital and
surplus might be exempt from state
levies If invested in Liberty bonds The
erroneous language of the house bill
read:
"In determining the value of the
shares of any national bank, state bank,
trust company or other banking insti-
tuition, for the purpose of taxation by
any state or any of the possessions of
the United States, or any local taxing
authority, the par amount of any bonds
or other interest-bearing obligations of
the United States issued during the
present war owned by such bank, trust
company or banking institution shall
be deducted from it's assets"
During debate the fear was expressed
by Representatives Cannon, of Illinois,
republican, and Dominick, of South Car
olina, democrat, that by investing in
Liberty bonds an amount equal to cap
ital. surplus and undivided profits, the
bank might escape state taxation on
shares of stock, regardless of the as
sets of the bank. The ways and means
committee tardily came around to this
view.
Revising his opinion today, Mr.. kitch-
ems cited as an example bank with
81 100000 in assets, with capital and
surplus of 500, 900 each, or 100000 to-
tai. Assuming that the assets made
the value of shares of stock 100000,
Mr.. Kitchens said the intention Of the