Evening star., 1936-09-11
ALIEN DIVIDEND"
:.CUT SCRUT|N|zED
Americans Faced With Re-
duction Under Firms Oras-
tic Interpretation.

Nv tiIkSt ~ VkNtIVth
Many American citizens today are
faced with drastic application of the
new 1886 revenue act provisions de-
signed only to require nonresident
aliens, foreign partnerships or foreign
corporations" to pay a 10 per cent
tax on dividends through withhold
ing at the source"
This was disclosed today as it was
learned some corporations have sent
out notices of intent to withhold the
10 per cent tax from all their stock
holders whose addresses are listed "in
care of" some one else, unless it can
be proved provisions of law do not
apply.
One such notice from certain
corporation reads in part:
"The revenue act of 1896 requires
the company to withhold tax equal
to 10 per cent of any dividends pay
able to stockholder if a nonresident
alien individual, or foreign partner
ship or foreign corporation. Under
the provision, the Treasury Depart
ment calls for such Withholding in
the case of any stockholder whose ad-
dress on our books is either:
IAN address outside of the United
States, or,
IAN address in the United States,
but listed as in care Of
Call for Proof.
"If your address as listed on our
books, and as shown on the reverse
side of this postal. includes the words
in care Of the 10 per cent deduction
will be made by this company, unless
we receive from you a letter in sub
stantially the following form"
Then follows the suggested letter
saying the undersigned stockholder
us not subject to such withholding"
because he is either: "An individual
citizen or resident of the United
States, a domestic corporation, a
foreign corporation resident in the
United States, with an office at :;
a partnership doing business in the
United States, with an Office at :"
The notice from this company
further warns the stockholder that
''your immediate attention is necessary,
to avoid the 10 per cent reduction
from the dividend payable September
Fl. 1886"
In well informed quarters it was
explained that this particular COM
pany has leaned over backwards, 4"
In its efforts to comply with a certain
Treasury regulation. which was not
compulsory, but only suggestion.
Hinges on Word "May."
The Treasury decision on the point
declares that although the burden of
Withholding from dividends Is placed
upon the payor corporation, or any
other person Gncluding a nominee)
having the control, receipt, custody,
disposal, or payment of dividends, if
such payor corporation or person has
no other reason to believe that the
dividends are subject to withholding,
the following procedure in general may
be adpted:"
In well informed quarters it was
emphasized here that the verb is
may" and not shall be-" In other
words 1t Is optional, not obligatory, to
do this.)
"As to those stockholders whose
name and style indicate that they are
nonresident aliens, foreign partner
ships, or foreign corporations, the
tax shall be withheld in all cases If
the address OF any such stockholder
Is without the United States.
IF the address Of such stockholder
Is in care Of an individual, q partner
ship, or corporation. within the
United States. the tax shall likewise
be withheld, but as to any stockholder
whose address is within the United
States, the tax need not be withheld. I"
Stockholders Mystified.
Stockholders in Washington who
have received threats to have the tax
withheld have been mystified at the
company's action, especially in view
of the wording of the Treasury de-
cision. It was pointed out that the
Treasury intends such Withholding to
be enforced only against those stock
holders whose name and style indicate
they are nonresident aliens, foreign
partnerships, or foreign corporations.
Yet some stockholders here, with
familiar American names have been
DO notified, merely because they were
addressed Gin care Of"
The corporation could not be held
10 be negligent, or in violation of
the law in so warning its stock
holders, it was explained, but the
corporation, nevertheless appeared to
have been leaning over backwards"
perhaps in an effort to guard itself
against any possible attempts by the
Government to recover the 10 per
cent from the corporation, after full
dividend has been paid to the stock
holder without the 10 per cent deduc-
ton.
Further study is being given the
Treasury decisions and regulations in
terpreting the 1886 act, it was learned,
with a view to making them more
specific. and more readily interpreted
by both the corporation and the
stockholder.