Evening journal., 1921-03-08
Sees BLOW At
STATE income
IN TAXPLAN
CONTINUED from page one)

But Nowhere Defines What Consti-
tutes Doing Business
Does the following constitute do
ing business. viz:
The mere maintenance of a prin-
cipal or statutory office in this State.
or the mere holding OF stockholders
or directors meetings. or the doing
of any act or acts in the State re-
quired by the laws to be done in the
State, or the mere deposits of
moneys I'm the banks OF this State
THE answer to this question is
dificult in view OF the language of
subsection 60 OF Section 81. which
reads as follows:
"A rule shall not be deemed to be
inapplicable to corporations doing
business in the State, merely be-
cause all OF the real estate and tang
ible personal property is found to
be situated outside the State or be-
cause all OF the gross receipts are
found to have been received outside
of the State
docs this not show an intention
to classify the above acts as doing
business in the State?
This would be a direct blow at
the numerous holding companies in
corporated in this State.
Section 50 exempts certain cor
porations from the provisions OF the
act, but the great majority OF cor
porations OF this State ordinarily
classified as holding companies
would not be included within the
provisions OF subdivision IL OF said
section. Most so-called holding
companies. whose principal business
sists OF holding the stocks Of
other corporations, do not hold a
majority Of the stocks OF such other
corporations and therefore do not
control the management and affairs
OF such other corporations. None OF
such holding companies are exempt
under the provisions OF the bill.
This phraseology was copied lit
orally from section 210. az amended
by chapter $40. Laws OF 1920. OF the
New York Corporation Income Tax
Law. The result in New York State
has been that practically all OF the
holding companies organized under
the laws OF that State have become
reorganized under the laws OF other
States which do not have similar
provisions.
THE passage OF this bill would
cause the loss OF thousands of hold.
ing companies now incorporated
here, and hereafter holding compan.
ies would not incorporate in Della.
ware
| ssrbo ro,,opro to-, - a.. c,...
from. this class Of corporations alon,
would amount TO a very consider
able item. This may be easily veri
fed by an examination OF the rec
ords Of the Secretary Of State.
THE complicated and uncertain
. provisions OF section SO make tn,
federal tax laws seem simple b,
comparison, and would eliminat
, Delaware from the list OF incorpor
/ ating states.
5 Every subsection and sub-para
5 graph of section 81 is so dinicul
=. OF construction and interpretatio
] that in the aggregate they hav
Q already caused a great deal OF con
troversy among those who would b
5 affected thereby, and the law fror
which this entire bill has bee
copied has been a prolific source o
! litigation since Il was placed upo
the statute books and there still re
, main many provisions OF this lay
. which need but have not yet receive
judicial Interpretation. Under thes
circumstance is II conceivable tina
5 with this bill on the statute book
, OF Delaware a lawyer in selectin
for his client the proper state 4
which to incorporate would spen
the time requisite for an analysis q
the many provisions OF this bill [
, determine whether or not his clier
! would bS affected thereby and {
what extent. when there were avail
able for selection so many othe
states having simpler and less ez
q pensive Incorporating laws? Their
can be but one answer TO this que;
: ton, and that is the loss OF III
4 major portion OF approximately on
= million and a half annual revenu
p. derived by the State OF Delawar
from its corporation business. TIL;
= this is not conjectural is proven b
the experience Of other incorpora
ing states who have made attemp
= to increase their revenue along sin
I, liar lines.
y New York lost the bulk OF n
- Incorporation business through
law almost identical
a Practically the only corporation
- having a domicile in New Yoi
70 State now are those who find
10 necessary, because It is the fnanci
center OF the country or for pure
= local reasons. II was once one Of Il
- most popular States OF incorporate
= with a very large number OF holdiI
~ companies.
= West Virginia adopted tax Ia
10 in 1915 with many similar provisio
IN and has almost entirely lost
charter business
This law contained allocati,
II provisions similar to those set o
in this bill and the net result n
i been that the revenues from the CO
poration business was greatly d
minished while the inhabitants
~ the state are now required to p
- heavier taxes than prior to {
- change in the law.
- Maine decreased her chart
III revenue from s75O.0oO 10 $1,000
per year by passing a burdensol
- tax law.
New Jerseys corporation rev
/. nue.. once enormous. is now reduc
~ to approximately $50, 900 per mon
=. due TO passage OF burdensome la
= affecting corporations.
Notwithstanding the fact n
New Jersey has repealed the la