Evening star., 1928-03-30
ID. c. BANKS FIGHT
|. TAX ON u. S. BONDS
Battle Starts Against Levy on
Exempt Federal
Obligations.
BY EDWARD G. STONE.

+, the District OF Columbia Bankers As
Sociation are taking action today pre-,
paratory TO fighting payment of take:
/ levied upon interest received from tax.
! exempt United States Government
bonds This income is now included a;
! part Of the banks gross earnings
/ upon which the tax is levied.
The action is being inStigated by the
! associations committee on taxation. oi
which Robert v Fleming, president OF
the Riggs National Bank, is chairman
and follows several conferences with
the District Commissioners.
Frank J, Hogan, general counsel OF
the District Bankers Association. is
handling the legal steps in the pro-
cCdure As a payment on this tax is
due tomorrow. adviceS were sent from
bankers HEADQUARTERS today to the va
riOuS banks suggesting that they deduct
from their taxes the amounts charged
on income from United States Govern
ment Liberty bonds and offer checks in
payment for the remainder of the tax
10 The collector.
As the collector has no authority Ia
accent anything other than the full
amount Of the tax. the banks are ad-
viscd to make the complete payment
under protest. asking for rebate of
the tax charged on Liberty bond in
come. provided the courts agree that ii
is unjust.
Action Based on Wisconsin Case.
Questioning the legality of the impo-
Sltlon of tax upon the interest re-
ccived on tax exempt Government Sc
Curities as a part of the tax levied on
a banks gross earnings, is based on the
United States Supreme Courts decision
handed down in the case of the North
western Life Insurance Co. versus the
State of Wisconsin.
Attorney Hogan has gone into this
case CXhauStiyely The wording Of the
Wisconsin law and of the District Of
Columbia law is practically identical.
Mr. Hogan has filed brief with the
District Commissioners and the cor
poration counsel reviewing the WiScon-
sin case and drawing parallels between
the lax situation there and here.
The decision in the Wisconsin case
ruled that .he tax on the interest re-
celved from tax exempt Liberty Bonds
was not legal Based on this decision.
Attorney Hogan quotes the decision that
q tax on gross earnings. gross income
or gross receipts, partly derived from
United State bonds. amounts 10 an i'm
PNHAsAcAa JAl tlAE JULIUS tklEUlSGINcS.
And Ii was because ii amounted IN
a tax on the bonds themselves that the
court held that the State went pevond
its power" the brief asserts.
The brief reviews the District OF Co.
lumbia tax laws at length and also
quotes the First and Second Liberty
bonds acts as passed by Congress. and
later acts by Congress making these
bonds non-taxable
Banks 10 Make Test Case.
As the local banks are paying the
tax under protest the matter will have
10 be settled in the courts The Riggs
National Bank is one Of the largest
holders in the city Of Liberty bonds.
and, therefore. one of the largest pay
ers of this tax. and it will make
the test case. other banks filing sup
porting statements that they are in ac-
cord with the legal move.
Frank J. Hogan. the Bankers AS
sociat!on counsel also Is counsel for
the Riggs Bank 50 that he is already
thoroughly familiar with the case. The
tax committee Of the association has
put great deal of time and study into
the matter. II has been under consid-
Grafton for months, but only recently
was brought to the attention of the Dis
trict Commissioners When all the
banks are included quite a substantial
sum Of money Is involved
In addition 10 Chairman Fleming, the
other members Of the committee in
clude Francis c. Addison. ir., vice pres
tdent Of the Security Savings g. Com
merciai Bank. Corcoran Thorn. presi-
dent Of the American Security e. Trust
Co. Robert ~ Harper. president, Dis
trict National Bank, Frank StetSon,
trust officer. National Savings 81 Trust
Co. Eugene f. Thompson Of Crane.
Paris &, Co. and Howard Moran. vice
president Of the American Security &
Trust Co.
Al the recent hearing the Commits
sioners expressed the opinion that the
tax would have 10 be paid IN spite Of
the Wisconsin case decision baSing
u On previous decisions IN the courts
here.