Evening star., 1937-04-18

be more simple. He will merely pay
all his income tax to the Federal Gov
ernment and the District and then pay
his regular taxes in Maryland, with no
credit whatever for his District tax.
Problems presented by attempts to
tax foreign" corporations, the prin-
cipal Offices of which are outside the
District, are expected to puzzle the
wisest officials and perhaps provide
loopholes through which big corpora
tions doing substantial business here
might escape.
| The broad scope of the bills at
tempt to collect such a tax is shown
by its definition of taxpayer" to be
ANY person, corporation, partner
ship, trust or estate" subject to the
act. The term corporation" is de-
| fined to include corporations, joint
stock companies, associations and all
enterprises operated by trustees, the
| interest in which is evidenced by
| shares Of stock, whether with or with
out par, face or nominal value"
In the case Of corporations whose
entire business is transacted within
the District, the tax of per cent will
be levied on the entire net income.
II, however, the business of cor
poration is transacted both within and
without the District, the tax imposed
enters a field over which there has
been complex State legislation, long
litigation and many reversals in higher
| tribunals.
The District bill will attempt to COL
lect tax from corporations operating
both inside and outside the Dis
trict, upon the portion Of such en-
tire net income for each taxable
year as is derived from sales, wher-
ever made, of goods, wares and
merchandise. manufactured or which
originated in this District and from
other business done or property located
within this District, which may be de-
termined by an ALLEGATION and separate
accounting when the books of the cor
poration show income derived from
business done and property located
within this District"
"Otherwise," the bill further pro-
videS, II data in this first method is
insufficient, the tax imposed shall be
on such proportion of the entire net
income Of such corporation as the fair
market value of the real estate and
other physical assets in this District
on the date of the close OF the taxable
year and the amount of the gross re-
ceipts in this District during that
year OF such corporation bears to the
total fair market value of all the real
estate and other physical assets within
and without this District on the date
of the close Of the taxable year and
the amount Of the total gross receipts
within and without the District during
that year of such corporation" This
could be applied to big outside corpo-
rations doing business here.
One OF the admitted worst features
OF State taxation, according to tax
experts, Is this attempted ALLEGATION"
Of the amount OF income derived with
in State. Preliminary study Of the
District Of Columbia bill points to a
suspicion that this provision may at
tempt to attribute too much income to
this city from goods, wares and mer-
chandise, manufactured or which orig
mated, here.
Reference to North Carolina Case.
The bill might fall under the scope
OF line of Supreme Court rulings
which held that a State is not al
lowed to attribute too much income
either to manufacture or sale. In the
case, for instance, of Hans Rees Sons
Co. OF New York State against the
State OF North Carolina, the Supreme
Court held the North Carolina income
tax law unconstitutional on such a
point. 1t was unconstitutional, the
nigh tribunal said, because the stat
utory method Of apportionment "as
applied to the appellants business for
the years in question operated unrea-
sonably and arbitrarily in attributing
to North Carolina percentage Of in
come out OF all appropriate proportion
to the business transacted b, the ap-
pellant In that State"
No State has been able to work q
perfectly satisfactory rule on the dis
puted problem of "apportionment,"
according to the history of State in
come tax legislation. In many cases
specific rules which have been devel-
oped have been found by the Supreme
Court to be unconstitutional. Big cor
porations would be wary Of such a
District income tax and keen to pro-
test and fight any tax which they
think can be successfully defeated.