The midland journal. (Rising Sun, Md.) 1885-1947, 1930-07-25

STATE TAX men And !
/ BANKERS IN ACCORD

Months of Negotiation Lead to
nAgreement on Changes Broad
M ening Method of State or Local
WTaxation. of National Banks.
NEW YORK.-Months Of conferences
and negotiation between an American
Bankers Association special committee
and the Committee of the Association
Of States on Bank Taxation have re-
suited in an agreement on a form OF
amendment to the Federal statute
dealing with state or local taxation Of
national banks that maintains the in
tegrity Of the protective principles OF
the section and is satisfactory to the
commissioners committee" says the
American Bankers Association Journal.
Thomas B. Patton, the organizations
General Counsel, in making the am
nouncement says that previously pro.
posed amendments to the statute,
which is known as Section 5219, have
been opposed when it was felt their
terms would enable any state to place
banks in a tax class by themselves.
1.-THE law as it stands today" Mr..
Patton says, permits state or local
taxation Of national banks or their
shareholders in one or the other OF
the four following forms: the share.
holders upon their ehares,-a prop
erty tax; the shareholders upon their
dividends,-a personal income tax
the bank upon its net income; the
bank according to or measured by its
net income. Only one form Of tax can
be imposed, except that the dividend
tax may be combined with the third or
fourth form if other corporations and
shareholders are likewise taxed.
1.-THE conditions permitted are: the
tax on shares must be at no greater
rate than on other competing moneyed
capital; the income tax on sharehold-
ers must be at no greater rate than
on net income from other moneyed
capital; the tax on bank net income
must be at no higher rate than on
other financial corporations nor the
highest rates on mercantile and manu-
featuring corporations doing business,
within the state; the tax measured by
net bank income is subject to the
same limitations as the tax on net
income Of the bank but may include
entire net income from all sources"
States Seek Broader Law
National banks and their sharehold.
ers are taxed in different states under
a diversity Of systems, he says. The
U. s. Supreme Court has held that the
low millage rate on Intangible person-I
al property is in violation Of the pressI
ent law where it results in national
bank shares being taxed at a rate
greater than that assessed upon COM
peting moneyed capital. A number OF
states, unwilling to use the income
methods permitted, had the alterna-
tive of either repeating the intangible
tax laws or limiting taxation OF ma.
tional bank shares at the intangible
rate. Therefore they sought broad
ening Of the permissive provisions.
Also, Mr.. Patton points out a Su-
preme Court decision held a states
excise tax on corporations invalid
where It included income from Federal
and local government bonds in the ex-
else measure. This created doubt as
to some state bank excise taxes.
Conferences have been held to
reach some agreement which would
protect the banks, satisfy the tax COM
missioners and avoid contest in Con-
gress," Mr.. Patton says. "From the
standpoint Of the tax authorities, the
main detectives have been an amend !
ment which would permit certain
states to retain their low rate tax upon
intangibles and at the same time de-
rive an adequate, but not excessive, |
revenue from national bank shares,
and an amendment which would per-
nit certain states to tax corporations
on their net income, excluding income
from tax-exempts, and at the same
time derive the same revenue from
the banks as heretofore. From the
standpoint of the banks, it has been
deemed imperative to maintain the
protective principles Of Section 5219. a
The Changes Agreed On
"Tn the proposed amendment the exc
listing provision permitting taxation OF
bank shares no higher than the rate
upon competing moneyed capital has
been modified with respect to certain
intangible tax states only by provi-
sion under which, instead Of the
moneyed capital limitation. the rate
shall not be greater than the rate upon
the shares Of other financial corpora
lions, nor upon the net assets of indi-
viduals, partnerships or associations
employed in the banking, loan or In
vestment business, nor higher than
the rate assessed upon mercantile.
manufacturing and business corpora
lions with head office in the state.
"Also an added fifth alternative per-
missive method, designated as a sDe-
cific tax, permits state, in place Of
an ad valorem tax on bank shares, to
N y