The Telegraph-courier. [volume] (Kenosha, Wis.) 1888-1946, 1920-03-11
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Government to Pay Back
Income Taxes on Stock
Dividends Soon.
TO REACH SlOO,OOO,OOO

refund, if you have paid income taxes
assessed on stock dividends, is the
advice of X. X. Kennan of Milwaukee.
Such dividends are not taxable as in
come, the United States supreme court
announced on Monday.
As result of this decision, experts
declare that Wisconsin men have be
come entitled to refunds aggregating
hundreds Of thousands Of dollars.
Another anticipated result is the
declaration of stock dividends by cor
porations which have withheld action
waiting for this decision.
A test application for refund will
be made at once, according to Mr..
Kennan, who is an income tax expert.
The test, among other things, will de-
termine whether the government will
decide to refund only taxes which have
been paid under formal protest.
May Waive Right.
1t is recognized legal principle,
| lawyers declare, that the voluntary
payment of tax valves the right to
refund However, the government
has shown disposition to view this
matter literally in past cases, and
refunds on overcharges have been Sc
cured without trouble.
1t is believed that vast majority
of Milwaukeeans who have paid income
taxes on stock dividends have done so
under protest of one kind or another.
Some have used deliberately prepared
| blanks, while others have contented
themselves simply with writing the
words paid under protest at the
foot of the check sent to the govern
ment collectors.
While no definite ruling d at hand
yet, the belief is expressed that the
government will probably recognize
any protest that may have been filed.
The process of securing refunds on
the taxes thus paid is likely to be
subjected to considerable delay, ac-
cording to numerous experts, for the
reason that the money to pay them
is not believed to be available.
May Reach $1OO,OOO,OOO.
Steps will have to be taken by the
i treasury department to create fund
adequate to handle the refunds, it is
declared. The total amount of taxes
made refundable by the supreme
courts decision is estimated to be in
the neighborhood of $100,000,000
For this reason, experts are advis-
/ ing those who have become entitled to
return of taxes legally levied, to
prepare applications for the refund as
soon as possible. 1t will probably be
case of first come, first served,
they point out, and the later the
application is filed, the longer delay
there will be.
While state income taxes have been
levied on stock dividends, the amount
Of such taxes here has been relative
ly small, according to Joseph A. Dali
ton, county income tax assessor. In
an informal statement Monday night,
he pointed out that the state tax on
! dividends has been confined almost
exclusively to that percentage of
dividends accruing from business done
outside the state.
Tax Here Is Small.
"For instance" he explained, "a cor
poration doing business entirely in
Wisconsin pays a state tax on its net
earnings, and its dividends are not
subject to taxation Now, if this cor
poration does fifty per cent of its
business in Wisconsin, fifty per cent
of its net earnings are taxed by the
state. Stockholders who live in the
state, and who receive a dividend will
pay an income tax on that part of the
dividend not already taxed here.
Dividends declared from surplus
existing before January 1, 1911, are
not taxable under the state law, be-
cause they were classed as capital at
that time. Dividends declared on earn
ings realized since 1911 are not taxable
because the corporation has already
paid tax on it's net. earnings"
"The decision of the United States
supreme court regard to stock divi-
dends filed on Monday appears to af-
firm the principle maintained by Judge
Geiger in the United States district
court here, in the Manitowec Products
case" said William H. Austin, general
counsel for the Wisconsin Brewers
association.
Ruling Is Limited.
According to the press reports, the
supreme court holds that an act of
congress defining stock dividends as
"income" under the sixteenth amend
ment to the constitution, is void be-
cause a stock dividend is in no sense
income and congress is without power
| to classify thing as income when,
in the nature of things, it is not.
80 in the Manitowoc case, Judge
Geiger held that, under the eighteenth
amendment prohibiting the manufac-
ture and sale of Intoxicating liquors"
congress in passing the Volstead act,
which attempted to include thing
manifestly not Intoxicating, exceeded
its powers and the act is void.
1.-THE same principle was held by
the supreme court of this state in the
Bundy case, 1913 Wisconsin street,
Milwaukee, wherein the court said the
word Income" as used in the state
constitution, had a definite, well UNI
derstood meaning and could not be ex-
tended by legislative definition"