Evening star., 1938-03-12
Provisions of Tax Bill
Ondistributed Profits Levy Omitted in Case of
Firms With Net Incomes of
S25, 900 or Less
$4,000 or Less

Py the Associated Press.
Here are the major provisions of the
tax revision bill approved by the
House:
Corporation Taxes.
l. Corporations having net incomes
of $25,000 and less a year would pay
income taxes of 1912 per cent on the
first $4,000, IA per cent on the next
sl5, 900 and Is per cent on the last
$4,000. They would pay no undistrib-
uted profits tax.
2. Corporations having net incomes
in excess of $4,000 and distributing
no profits in dividends would paw a
minimum of 20 per cent tax on their
net income. This compares with a
32.4 per cent maximum under present
law.
Such corporations would get "divi-
dends paid credit if they distributed
any profits. The credit would be 4
per cent Of the amount of dividends
disbursed and would operate to pro-
ouce a minimum tax of 1e per cent If
all profits were paid out.
II a corporation in any year de-
clared out dividends in excess of net
income. the amount of the excess
could be used in the following two
years to increase the dividends paid"
credit against the tax in those years.
In event corporation had a net
operating loss in any year, it might
be carried forward into the next wear
and treated as dividend for purposes
OF the dividends paid credit.
A corporation could retain all its
profits and pay only the is per cent
minimum rate, provided the stock
holders agreed to pay income taxes
on the profits just as if they had re-
ceived them in dividends.
Corporations having incomes OF
slightly more than $4,000 would be
given special treatment so their actual
tax rates would be somewhere between
the effective rates paid by those with
incomes Of less than $25, 900 and the
effective rates paid by the larger
income companies.
Capital Gains and Losses,
Capital gains and losses would be
separated into short-term and long
term categories for the purpose of dis
tlnguishing between speculative and
investment transactions.
Short-term transactions would be
classed as those involving capital
assets sold or exchanged within a year
after they were acquired. Long-term
transactions would be those involving
assets retained more than a year.
Short-term losses would be allowed
to offset only short-term gains and not
ordinary income or long-term gains.
When short-term gains exceeded
short-term losses, the excess would be
added to the ordinary income of the
taxpayer and taxed at the applicable
normal and surtax income tax rates.
Long-term losses could Offset only
long-term gains. except that $4,000 Of
the excess of losses could be charged
against ordinary income, rs under ex-
isting law.
A one-year carryover for net long
term losses also would be allowed.
The excess Of long-term gains over
losses would be included in ordinary
income, subject to income tax rates.
However, the taxpayer would have the
option Of paying a fiat 40 per cent tax
on such gains.
A full 100 per cent of net long-term
gains and losses would not be taken
into account for tax purposes, except
when an asset had been retained less
than i3 months.
If the asset were held more than l3
months but not over II months, 90
per cent Of the gain or loss would be
taken into account, and the propor-
ton would graduate downward until
40 per cent would be taken into ac-
count in the case Of assets held more
than five years.
Through the operation of this grad
uation and the 20 per cent optional
tax, the maximumNtes on total satns
would vary from 5t2 per cent to l0'