Evening journal., 1918-02-06
EXPLAIN E | TAX On
EXCESS PROFITS
Regulations Just Received
Here Give Rules For Gcv-
eminent Collectors
PUZZLESLEFT
TO CONGRESS

govern collectors in The assessment Of
the war excess profits fax have been
received here. These regulations. as
told Ia a Washington dispatch yester
day represent the work Of tile Treas
ury committee on excess profits, which
has been studying the constructions to
be placed on the various sections Of
the law FOR more than four months.
Regulations a are in effect com
pendulum Of the rules and regulations
which collectors will apply, and which
taxpayers viii be required So conform
10 in making out their returns and
paving taxes. Such subjects as THE
special committee decided could not be
disposed OF By executive rulings have
been included in a bill ombodyine
amendments which will be presented
10 Congress
What Is considered as excess profits
By the Treasury Department as rep
resented by the Internal Revenue Bu-
.reau is defined, as well as the profits
accruing 10 trade or business as set
forth In the law Detailed insirnc
lions are given as to the manner at
reporting excesses profits for corpora
tions, partnerships, and individuals
subject to the tax The method OF
computing the net income for the pro
war periods and the deductions from
Acome as allowed in the war excess
profits tax is set forth
The term nominal capital IS ex-
planned in full. also the method Of
computing the invested capital OF
business. The valuation Of tangible
and intangible property which is in-
vested In a business is made clear
Certain items that are not ailowed TO
be included in invested capital are de-
fned in the regulations and the method
of ascertaining the average invested
capital for tic year
Article 10 Of the regulations dealing
with corporation rules that every DO
nestle corporation which had for INC
taxable year a net income OF $1,000 or
more Is. unless exempt under Article
f9. required to make q return and pay
the tax, IL any Foreign corporations
having net incomes Of $4,000 or more
from sources within the United states
unless exempt, arc also required To lie
returns Partnerships with net incomes
OF s6,00e or more must make returns
while foreign partnerships also comr
within the purview Of the law proXlden
their net incomes amount to Nd,uuO OF
more drawn from sources IN this coun-
try. ,,-
Article i2. applying to individuals
reads:
Every citizen Or resident Of the
United states who has for the tax
able year an aggregate income N
excess of $4,000 from trades, busi-
- ness occupations. or professions, Is
unless exempt under Article i3, re-
dtlired 10 make \ return and pay
the tax. II any,
The following arc exempt from the
tax: Corporations exempt under the
provisions OF Section II Of Title OF
Inc Act of September s. 1916, from the
tax imposed by such title; partner
ehips carrying on or doing tha same
Kind Of business or coming within the
same description. and individuals TO
me extent that they carry on or do
the same kind Of business or come
within the same description.
The new regulations specify that, for
the purposes Of the excess profits tax
net income which Is subject TO the
tax shall be divided into Two classes, as
follows:
A. Net income which Is derived
from a trade or business having no
invested capital. or not more than q
nominal capital including in the
case OF an Individual salaries
wages. fees. or other compensa-
lions: and
q. Net income which Is derived
from trade or business having
invested capital.
Tax on Net Incomes.
Article IS reads that the tax on mel
Income Of Glass A. as defined IN Article
Al. shall be computed at the rate OF
per cent. upon the amount thereof IN
excess OF $1,000 In the case Of a domes-
tic corporation; upon the amount
thereof in excess Of $1,000 in the case OF
a domestic partnership or 81 a citizen
or resident OF the United states, and
upon the whole thereof in the case o.
foreign corporation or partnership or
OF nonresident alien individual
The rate OF tax on income VI Glass
B Is. except as otherwise provided IN
Article II, computed at the following
rates:
20 per cent. Of the amount Of the net
income ID excess Of the deduction {de-
termiped as provided IN Articles 2i. %
and 241. and not IN excess OF IS per
cent. Of the invested capital for the
taxable year:
Is per cent OF the amount Of the net
income In excess Of IS per cent and not
in excess Of 20 per cent of such capital.
IS per cent OF the amount Of the net
income in excess Of 20 per cent and not
in excess Of 25 per cent. Of such capital
AS per cent. Of the amount OF the net
income In excess Of p per cent and not
! in excess OF 80 per cent Of such eapi-
I tal.
60 per cent. Of the amount of the net
income in excess Of 80 per cent. OF such
capital
Article II. Of the regulations has to
do with cases where deduction exceeds
As per cent. Of invested capital In any
case in which the deduction determined
as provided in Articles 81 % and 2i is
greater than IS per cent. OF the invested
capital and, therefore. not fully allowed
under the first rate or bracket OF Ar
ticle 4, then any remaining po tlon Of
the deduction will be allowed under the
second bracket, and continued II neces-
sary into the succeeding bracket or
brackets until the entire amount Of the
deduction is allowed.
The regulations give illustrations
dealing with the allowance for salary
wnere an individual carries on a trade
or business having an invested capital,
together with dete mination OF net in
~nvsaa fnr oRohtc Srcog.I-k.i1a or fnavp - in