Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1936-08-29

s
Old MarysviIle in the Boom DAYS,
! in the Near Future. The DrumIur
! Opened With Shovel and vVheeIb
/ Daniel o. HASTINGS are certainly worthy Of
notice to any corporation executive who Il
obliged to face the effects of this tax upon
his corporation. These minority members
characterized the law as unjust and in
equitable; and in the report Of the first two
mentioned, It was stated:
1T strikes a wholly unnecessary and deadly
blow at many Of the 90 percent of small cor
porate structures now STRUGGLING TO compete
with the larger corporations so wen financed
with funds often selfishiy withheld from their
/ small stockholders"
! And further.
and the small corporations are unjustly treat
/ ed by the present tax law ."
/ Senator Hastings said In his report
The existing tax on corporations Is high
enough to impose q real penalty upon those
who adopt the corporate form to do BUSH
ness"
The evidence submitted to the committee
on finance showed conclusively that this
would not work out in actual practice without
destroying the framework Of corporate business
itself"
Sufficient has been shown to place the cor
poration executive on guard; and we're it not
presumed to work tmpartialiy In the handling
Of tax matters between the taxpayer and the
government. the real sounding Of an alarm
or warning might make the accountant
appear as having taken q one-sided view Of
the situation
The oil fraternity has long suffered bur-
densome taxes very patiently. This is evil
dencede BY the fact that the grave situation
in the application OF depletion and deprecia-
ton Of drilling costs and the burden of sus-
tanning the position Of the oil fraternity on
such matters, was left to the Dakota Mon
tana OIL Co to carry to the supreme court.
Had the oil fraternity generally recognized
the situation and got behind that company,
they would not have lost some ten million
dollars Of potential tax refunds and allowed
themselves to be subjected to an interpyets-
ton that the costs Of an oil wen ''deplete"
rather than "depreciste" and by which they
Will continue to lose millions and millions
Of dollars In taxes SO long as income tax
administration on this point remains the same. /
Other Corporate Taxes Described
Besides this brand new tax that has Just /
been described, II Is wen to remember that the !
oil and mining corporation In Montana is /
burdened with stin others, some 10 Of which /
are quite important. brief description Of
these follows.
l. The general property tax which is be-
coming more important each year, not so
much because OF the tax rate but on ac-
count Of the arbitrary and unreasonable values I
at which the property Is assessed and the
Interpretation or application Of the provisions
OF Sections 2000.1 and 200O.3, Revised Codes
OF Montana. 1885. Extravagance in public ex-
penditures Is not alone to blame; but when
added to the present obsolete and ineffi-
cient public business methods. poorly devised
budgets, keeping books on g cash disburse-
ments basis. ponderous and unwieldly tax
records and bungling auditing procedure, 8
exists that is taking its toll from
the taxpayers Of this state, funds that could
be employed far more economically by cor
porations In expanding their businesses and
employing more workers than is possible at
the present time
2. The net proceeds tax is essentially
tax. Mining properties including oil
and gas leases are subject TO this tax. NET
proceeds" is not to be confused with the ac-
counting term. met incoxk H@@or is IL to be
siven the same significance as 1t has In or
iinary business transactions. It is the amount
II gross proceeds from the production Of min
rails oil and gas recovered from the mine
" lease leach mine or lease separately COM
'uteD less the actual operating expenses; (
development outlay, royalties paid. and fire
md workmen's compensation insurance, but
10 administration expenses or financial
harges, depletion or depreciation are allowed.
The so-caIled net proceeds Ga legally defined I
ERIN for this purpose only is then sub {
ected TO the general county, state and school I
district leyies Of located in a city or town,
o the town or city rates, ALSO upon the fun J
90 percent net proceeds determined BY
he process described above. This value is t
sed instead Of one that would be determined, :
erhaps arbitrarily by an assessor as Is done 1
nth other taxable property. G
The state board Of equalization has held '
hat this value must be aScertained upon the a
ccrual basis and not upon a cash basis. In ?
Their words, production recovered, whether C
old or not. must be included at the full Q
mount Of all production sold plus production {
n hand at the generally accepted value on s
he date Of the inventory. Likewise contracts {
Or development drilling and like expendi- y
lres should be deducted for the year In Z
hich the obligation was incurred &
,. Special Improvement district taxes are o
nose assessed against local benefits such as o
~ paving streets, constructing curbs, side q
alks, sewers etc. Most accountants charge =
lch outlay to tax expense accounts, but In q
sality these items should be capitalized; s.
owever, the interest on installments Of spe- q
al Improvement taxes should be CHARGED to
xpenditures Is not deductible for either I
,deral income or state license tax returns. 5
ut the interest on installments is deductible i
both classes Of returns, as interest Spe- G
al taxes for garbage removal, street light e.
g and cleaning, care OF boulevards, xprink- q
ng Of streets and others OF like nature are q
sductible as taxes IN both federal and state ?
The Montana corporation license tax is r
4 Excise tax on the right to do business q
a corporation, and the amount OF tax is A
easured BY the taxable net income COM d
lted accordins to law. The rate Of percent al
the entire net income including interest a
BON the bonds Of federal and state govern "a
ents and from municipal warrants Is as N
ssed Attempts have been made to secure n
e exemption Of income from federal sources, e.
ch as from tribal and ailottee lands under "a
strumentality Of the federal government; ri
It IN view OF the construction OF the statue n
the courts It IL doubtful that any relief OF
d be obtained Ia this way. Federal income
xes paid within the year and the corpora In
ID license tax itself paid during the year VI
e deductible items. II has been held that tr
xes sspaid' alone are deductible but naesa "a
accrue taxes as they become "a
q Il Is hopeful that the law may be amend *
SO as 10 allow the net income to be com Ia
ted BY ds6ucEin@ accrued taxes. and Ia III
her respects making the income taxable IN
on accrued BASIS similar to the federal "a
come tax Depletion and depreciation how- IA
er are atlowod upon the same bassa ne tins th
asral government, and In most other re- TX