Albuquerque morning journal., 1922-10-23
FREAR CHARGES
MELLON VO|DED
CONGRESS ACT
Representative CriticiSeS
Secretary for His Ruling.
Regarding Section 220
of the Revenue Act

Washington, oct. 22.--Secretary
Mellon was charged today by Rep
resentatlve Frear. republican, Wis
consin, with overthrowing the ac-
ton Of congress by his ruling that
section 220 of the revenue law de-
signed to reach large surpluses, ac-
cumulated by corporations to pre-
vent the payment Of individual sur
taxes, was not applicable in the
case Of the projected 400 per cent
stock dividend or the Standard Oil
company Of New Jersey.
The charge was made in a letter
to Mr.. Mellon, made public by the
Wisconsin representative. The
communication was in reply to Mr..
Melons response to one written by
Mr.. Frear calling attention to the
report stock dividend and urging
that the penalty provision be in
voked. Mr.. Mellon wrote that sec
stock dividends as that proposed
by the New Jersey oil company but
added that there had been and
would be no laXity on the part Of
the treasury in cvolling that sec
tion, wherever there is any basis
for so doing"
Ignores tho Statute
"Your letter" replied Mr.. Frear
under date or toGay, ignores and
misapprehends the plain reading
and purpose of the statute and your
ruling assumes the prerogatives of
the supreme court when it sets
aside this law,
"G trust that you are not under
a misapprehension as TO the ques-
ton squarely presented to you, be-
cause the press has been filled with
announcements that the purpose
Of the stock dividends to be issued
by the Standard Oil company ana
the proposed stock dividend OF
$500. 100000 in United States Steel
in which you are supposed TO De
Interested, is Tor the purpose OF
avoiding the sur taxes which would
apply if these enormous amounts,
aggreggating over $1,0OO,OOO,OOO
were distributed as cash dividends
Personal Interest Involved
Naturally, as n man OF great
wealth. interested in sixty or more
corporations affected by the ruling
on stock dividends and taxation,
you will find your personal interest
volved in any decision, but !
assume in your position as a pubic
officer you will be governed by the
law and the interests of the puhlic
rather than by any personal con-
sideration.
Unwarranted Surplnscs.
"1n your letter 0 me YOU say the
corporation has paid It's full tax
This refers, | take it, 10 section
$50. but the penalty OF 20 per
cent is impuseG by congress IN or
der TO reach the unwarranted sur
Dluses that are held by corpora
tions and not distributed as cash
dividends in order to evade the tax
pgyment under the individual sur
tax law. That is the distinction sc
clearly made by congress that II
cannot fairly be misunderstood. II
is another way of reaching the taS
ON undisturbcd profits which IS
undoubtedly permitted under the
law and the decision Of the SUI
prcme court in the stock dividend
case.
Your efforts to protect the gov
crnment treasury in the past have
been not directed toward collecting
tax upon large and powerful cor
porations. aud in the present emer-
gcncy your action in overruling the
express act of congress viii result
in loss to the treasury OF an
amount reaching several hundred
million dollars annually.
~ trust that you will reconsider
your ruling"