The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1936-02-25
BIG COMPANIES
ACT TO REDUCE
IMP0ST BURDEN
Holding Units Consolidating
Subsidiaries in Many
Fields.
BY HOWARD CARSWELL
Times Special Writer

NEW YORK, Feb. 25.-The move
ment under way among big corpora
lions toward simplifying their cor
porate structures, through CONSOLE
dalton of subsidiaries, aims toward
reducing tax burdens and conciliat-
ing political agitation against hold
ing companies and farf1ung indus
trial set-ups, it was explained today
by corporation lawyers.
The latest case in point is the
action of the Gulf Oil organization
in welding many of its far-flung
operating units. The United States
Steel Corp, the Bethlehem Steel
Corp. and others are pursuing the
same objective. Other reorganiza-
tions are anticipated.
Tax Burden Factor
The prime influence IS the new
Federal policy of subjecting 10 per
cent Of dividends received from SUBJ
salaries or domestic companies 20
the corporate income tax A prior
but less potent factor was the aboli-
ton of the consolidated income tax
return by the Revenue Act of 1884.
Other phases of the same problem
are the capital stock and excess
profits taxes. Political agitation
against big business and holding
companies, and the prospect of in
creasing tax burdens, render the
problem of sinplified corporate
structures very important one.
The Federal policy of taxing 10
per cent of dividends received is
new with 1886. This graduated tax
ranges from 1914 per cent on net
incomes of $4,000 or less UP to Is
per cent on net incomes of $40, 900
or more. In effect, this is a IL per
cent levy on such dividends received
by big corporations.
Further Imports Feared
Since 1913 dividends received have
been listed as gross income, then
deducted 100 per cent for income
tax purposes. The revenue act of
1885 subjected to 10 per cent of such
dividends received to the tax, thus
allowing, in effect, go per cent de-
duction or exemption"
Big businos xecuSives now fear
that this go per cen, exemption"
might be pared to 80 per cent, so
per cent or any other figure. On a
corporate set-up of superimposed
holding companies this may become.
in effect, multiple taxation and quite
oppressive, lawyers 1sSert.
Abolition of consolidated tax re-
turns in the revenue act of 1884
made for higher taxes by virtue of
the fact that losses of some sub
salaries were not allowed to offset
profits of others. One subsidiary
might be a separate entity legally,
but fundamentally just another de-
partment of the same. business.
Railroads were excepted. -
Knotty Problems Posed
One provision of the new Federal
revenue act which has puzzled tax
attorneys is that relating to dissolu-
ton of a subsidiary whereby no
present loss or gain is entailed
thereby. Though aimed at easing
the problem of simplifying corporate
structures, It possesses knotty prob
lens as to depreciation and other
phases of bookkeeping.
The public utility act is retard-
ing the utilities in this movement,
according to attorneys. Not recog-
nizing the validity of the law until
tested conStitutionally. nor the au-
thority of the Securities and Ex-
change Commission pursuant to it,
the utilities are chary of asking SEC
permission to consolidate subsid-
iaries. Moreover, those operating in
interstate commerce also are obliged
to consult the Federal Power Com
mission.