Norwich bulletin., 1918-02-04
Regulations for the
 Excess Profits Tax
MADE PUBLIC BY BUREAU OF
 INTERNAL REVENUE
TO CLEAR UP POINTS
Excess Profits Return Forms Will Be Available in Few Days and Re- turns Must Be Made Before March 1st.

Washington, Feb. 8. - Regulations under which the excess profits tax law is to be administered. made public to- night by the bureau of internal rev. enue, clear pp many long disputed questions affecting the determination of the basis for figuring profits, but leave a number yet to be threshed out by individual rulings, or by amend ment of the law. A new draft of the war tax act is. now being prepared by the bureau enbodying proposed cials think cannot properly be passed on by executive rulings
 Excess Profits Forms.
 Excess profits return forms will be available in a few days, and returns must be made by March 1, on 1917 business. Some extensions of this time has been urged by business interests.
 Since deductions based on a per centage of invested capital may be taken from aggregate profits before de- ter1nining the taxable amount, cor porations or partnerships are anxious to figure their invested capital as high as possible. By the regulations, in- vested capital is defined as the total of the capital surplus and undivided profits as shown on the books with certain adjustments required by the law. If any change in the invested capital has been made during the year, the monthly average is to be taken Surplus of Undivided Profits.
 If the true surplus of undivided profits are not shown by the books, 1 because of failure to provide for de- pletion, depreciation, obsolescence, or other losses, the regulations make it mandatory to figure corrections, and thus reduce the capital figures. This would prevent corporations from fig uring their tax exemptions at too high a figure by over-es estimating their cap | ital,
 On the other hand, it is permitted to add to the surplus account expen- ditures in the past for extension of ] the plant or equipment which still is in active use, if the expenditures have been charged as current expens- es.
 l Trademarks and Copyrights. l One of the most disputed points nas 1 related ito the valuation of trademarks tgood wiE. patents or copyrights, nlosi businesses arguing for inclusion oi l those at 8 high figure in their cap ital investment. The regulations provide however, that only in cases where actual payment has been made for these items can the expense be added to the invested capital total No adjustment is allowed, either, fol expenditures made to develop gooG will or other intangible assets. B, this ruling the plea of number O corporations which have spent thous ands or even millions of dollars de
 veloping a business is refused.
 Earnings of New Concerns.
 The excess profits law provides tl1a
 in cases where it seems impossible
 to determine deductions in the ordin
 ary way, because a business did no
 exist in pre-war years, or because o exceptional conditions, such, as ex
 traordinarily low profits then, the bus
 mess of representative concerns $ t be taken as a basis for figuring de
 auctions. This provision. the regula tions provide. may apply to business es having defective accounting sys tems making it impossible to com
 pute invested capital; foreign taxpay CTS when it is deemed inpracticabl
 to investigate invested capital figure
 in another country; long eseablishe tbusiness concerns which maintai
 conservative or unusual business or s ganizations; and businesses for whic
 "the invested capital is seriously dis ; proportionate to the taxable income.
 An example of the last case would
 a business which made large profit in 1917, but which had had severs { previous unproductive years. Applies to Professional Men. : The eight per cent tax on profit \ over S6.0O0 for taxpayers having onl 3 a nominal capital, is held to apply f professional men, or to trades or bus s inesses rendering professional service If a corporation is engaged in tw
 kinds of business. one being profes sional and requiring no capital, th Regulations provide that it's entire ir
 come is to be considered as of it's prir
 cipal business.
 How Physicians Are Taxed.
 If an individual is engaged in tH
 or more businesses, however, one tat
 ing no capital, and one with capita
 income from each is to be taxed ser
 arate1y. For instance, physicia
 owning hospital would be taxed 1;
 per cent. on his professional incon i above $6,000, and in addition, on caI 1 ital invested in the hospital at oth, rates
 l The regulations require corporation [ to describe in making returns the
 relations with other affiliated corpo
 ations. This is expected to disclos many facts concerning business col
 porations not now on record. PROPERTY OF FORMER GEAR |