Vashon Island news-record. [volume] (Vashon, Wash.) 1919-1954, 1930-07-24
STATE TAX men AND
BANKERS IN ACCORD
Months of Negotiation Lead to
Agreement on Changes Broad
ening Method Of State or Local
Taxation of National Banks.

NEW YORK.-Months Of conference
and negotiation between ali American
Bankers Association special committee
and the Committee Of the Association
of States on Bank Taxation have re-
quilted in an agreement on form Of
amendment to the Federal statute
dealing with state CT local taxation OF
national banks that maintains the In.
tegrity of the protective principles Of
the sectioa and Is satisfactory to tho
commissioners committee" says the
American Bankers Associations Journal.
Thomas B. Patton, the organizations
General Counsel. In making the an.
noumcement says that previously pro.
posed amendments to tho statute,
which is known as Section 52l9, have
been opposed when 1t was felt their
terms would enable any state to place
banks In tax class by themselves.
THE law as 1t stands today" Mr..
Patton says, permits state or local
taxation Of national backs or their
shareholders In one or The other of
the four following forms: the share
holders upon their shares,-a prop
erty tax. the shareholders upon their
1ividends,--a personal income tax;
the bank upon its net income; the
bank according to or measured by Its
let income. Only one form Of tax can
be imposed, except that the dividend
tax may be combined with the third or
fourth form II other corporations and
shareholders are likewise taxed.
THE conditions permitted are: the
tax on shares must be at no greater
rate than on other competing noneyed
capital; the income tax on sharehcld-
ers must be at no greater rate than
or 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 mana-
featuring corporations doing businesr
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
diversity of systems, he says. The
U, S. Supreme Court has held that the
low nillage rate on intangible person.
al property Is in violation of the pres
ent law where 1t results in national
bank shares being taxed at a rate
greater than that assessed upon COM
peting moneyed capital. A number Of
states, unwilling 10 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 a broad
ening of the permissivs provisions.
Also, Mr.. Patton points out, q Su-
preme Court decision held a states
excise tax on corporations invalid
where 1t included income from Federal
and local government bonds in the ex-
else IuedSuTe. Lio CIcdtSu uouut 90
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 por-
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, 1t has been
deemed Imperative to maintain the
protective principles of Section 5219.
The Changes Agreed On
"In the proposed amendment the ex-
listing provision permitting taxation Of
bank shares no higher than the ratio
upon competing moneyed capital has
L.