The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-02-07
DIFFERENTIAL TAX
OFF CORPORATIONS
Twelve Per Cent. of Net In
come for 1918 Agreed Upon
by COnferees.
OIL AND GAS AFFECTED
Gold Mining Concerns Exempt
From the War Excess
Profit Tax.
SpecinI b,spdfch TO TIE suN.

Special Despdfch to THE Sun.
WARRINGTON, Feb. 6. Corporations
under the provisions OF the new revenue
bill as agreed upon in conference be-
tween the Senate and House and made
public to-day will not be burdened with
, the "differential' tax insisted on by the
House Ways and Means Committee and
| approved by the House, but will pay
normal taxes for the year 1913 amount
| ing to 10 per cent. Of the net income In
| excess OF the credits allowed. For sub
sequent calendar years. however. the
| Senate conferees yielded to the House
managers to the extent Of agreeing TO in
crease the corporation normal tax from
| 8 per cent TO 10 per cent
| AS originally provided by the House
corporations would have had to pay
normal tax of Is per cent on all net In
come except that distributed in the form
OF dividends which would have paid II
per cent. When this was written into the
| bill II aroused storm OF protest all over
| the country with the result that the Sem
ate knocked It out of the measure and
! the Senate conferees refused to yield to
the demands of Representative Kitchin
! On. c., chairman OF the Ways and
Means Committee. to put 1t back in the
| bill in conference.
| Agree on Excess Profits,
With one modification in rate. the con-
| ferees adopted the Senate provisions
| for the war excess profits tax In lieu OF
| the cumbersome and penalizing House
| provisions for q war profits tax and an
excess profits tax. making it necessary
| for every corporation to make two re-
turns and pay under whichever method
would yield the higher amount Of the
money to the Federal treasury. The one
change in the war excess profits rates
was in the second bracket. where the rate
| OF tax was raised from so per cent. to 81
| per cent.
| The conferees added a special pro-
| vision to cover corporations deriving net
incomes OF more than $4,000 a year
from Government contracts or which
derived that much net income from con-
! tracts made with the Government be-
tween the date of the beginning OF the
war ard the signing Of the armistice
| Such corporations are subject to these
provisions:
The Senate amendment was retained
in the bill providing that where the full
amount of the excess profits credit can
not be allowed under the first bracket OF
the war excess profits tax because the
credit exceeds 20 per cent OF the in
vested capital the part not so allowed
shall be deducted from the amount in the
| second bracket Of the tax.
Deductions allowed are practically The
same as in the individual income tax
| provisions OF the bill. The Senate pro-
vision affecting oil and gas wells. natural
| deposits or other sorts and timber was
! adopted by the conferees in lieu Of the
! House provision.
| Insurance PrOvfstOns Restored.
! The House provisions affecting insur-
| ance companies stricken out by the Sem
ate were restored IN conference. These
! deductions include in addition to all 9TH
ers the net addition required by law to
4 be made within the taxable year 10 the
reserve fund: amount other than divi-
| dends paid on policies and annuity con-
| tracts: such additions to the reserve not
required by law which the Commits
| sioner Of Internal Revenue finds neces-
sary for the protection of policy holders
| in corporations issuing policies covering
! life health and accident insurance COM
| bined In one policy. Issued on the weekly
| premium plan, continuing for life and
| not subject 10 cancellation in the case
| OF mutual marine insurance companies
the amounts paid to policy holders on
account OF premiums previously paid by
| them In the case of other mutual in
/ surance companies requiring their mem
! bers TO make premium deposits to pro-
| vide for losses and expenses are allowed
| to deduct the amount of premium de-
, posts returned to policy holders and the
amount OF premium deposits retained to
pay losses, expenses and reinsurance re-
serves.
1t Is provided IN the bill also that
at the time of filing return claims in
abatement based on substantial losses
| realized during the taxable year and
payment OF the tax Is not to be required
until such claims are adjusted. but q
bond must accompany the claim, double
the amount of the claim
Fer the protection OF small corpora
tons the bill provides for limiting tho
amount of war excess profits tax for
the year 1918 to 30 per cent. of the
amount of net income exceeding $4,000
and not exceeding $4,000 plus so per
cent. OF the amount of net income IN
excess OF $4,000. For succeeding years
the so per cent. rate is reduced to 40 per
cent. II is specifically provided that this
Irelief section shall not be construed to in 4.
crease the tax in any way.
The finished bill provides for an al!oca-
| tion OF taxes In corporations where n
distinct part of the net income--not less
than 80, per cents due to activities
which would he classed under tho gem
eral class OF personal service corpora
| tlOnH ne OF net lHCOUls "
received would be taxed as the income Of
personal service corporations. the bal
ance under the corporation tax and the
| war excess profits tax.
| Gold mining corporations are exempt
from the war excess pronts tax, the con-
| ferees having agreed TO the Senate
amendment in this respect.
Ths war profits credit as agreed upon
Is $1,000 plus an amount equal to the
average net income OF the corporations
| 1879. plus or minus. as the case may
be, 10 per cent. OF the difference be-
| tween the average invested capital for
the pre-war period and the taxable year.
Foreign Corporations Pay.
| Foreign corporations are not entitled
to the specific exemption on $4,000.
The excess tax profits credit consists
| OF $4,000. plus an amount equal to per
| cent. OF the invested capital FOR the
taxable year In this credit too foreign
corporations are deprived of the specific
exemption OF $4,000. Provisions for the
taxation OF corporations reorganzed
during the taxable year are a compro-
mise between the Senate and the House
plans, with some additional language
| added by the conference committee.
The penalties for the avoidance OF the
obligations imposed under the income tax
provisions of the bill for the payment re-
turn or the payment OF taxes are fixed
| by the bill at not to exceed 81 900, but,
| on the other hand, refusal to pay or
| make such return or to supply such in
formation at the time or times required