Evening star., 1940-08-16
Banks Will Not Ask
Excess Profits Tax
Exemptions
Leaders of A. B. A. Hold
Conference Here on
Problems of New Levy

Robert M. Hanes, president OF
the American Bankers Association,
after an extended conference with
leaders of the A. B. A. and Govern
ment officials here yesterday, re-
emphasized the stand Of his organi-
zation that the banks of the coun-
try will not ask for exemption from
the proposed excess profits tax.
After a day spent in consideration
of the possible effects of the pro-
posed tax bill on banks, Mr.. Hanes
and other out-of-town A. B. A.
leaders left the Capital without
making any other definite decisions.
No official communications will be
sent to A. B. A. members now as
a result of the deliberations Of its
officers. 1t was learned.
Among others in the conference,
which took place in the local office
of the A. B. A. in the Washington
Building. were A. L. M. Virgins,
president OF the Bank of Harts-
vile, at Hartsville, S. c., who is
chairman OF the A. B. A. Commit
tee on Federal Legislation; Dr.. Har-
old Stonier of New York City, eX-
ecutive manager of the A B. A:
D. j. Needham of Washington. gen.
eral counsel; j. o. Brott, Wash
irgton, assistant counsel, and Les
ter Gibson OF New York, director of
the news bureau
Several Problems Presented.
Several problems are presented
for banks under the pending legis-
lation, it Is understood. Without
doubt. banks will be subject to the
new tax. Under the old undistrib-
uted profits tax banks were given
special consideration and were not
taxed as other corporations. With
repeal of that tax. however, banks
have returned to taxable status
similar to that of other corporations,
and thus will fall under jurisdiction
of the proposed new levy.
One of the principal problems
facing the banks is how the new tax
will operate in view of the bills tax
base of 1936-l939 a period in which
bank earnings were not so high.
With financial institutions con-
fronted with possibility of increased
lending because of financing defense
operations Of the country, the pros
poets of increased earnings raises
the question of what the invested
capital base in 1868 shall be
Under the bill as it now stands there
are certain inadmissible assets.
which banks will not be allowed 10
consider in arriving at the invested
capital base. These include tax
eXempts, such as Government State
and city bonds. A complicated
fomula is set up requiring corpora
tions, including banks TO deduct such
tax exempts in their calculations
setting up the invested capital tax
base of 1869. for purposes of COM
putting the new excess profits tax in
the future.
Would Lower Base.
Deduction of such tax exempts
from the past records of the banks,
would lower the base, and thus make
the prospective comparative earn
lngs IN the future that much larger.
and so subject the banks to increased
excess profits taxes.
AS the banks move to help finance
defense operations of the country,
and thus ostenslbly face prospect of
greater earnings. they may have to
sell some of their Government tax
exemptS in order to help along the
large-scale defense financing neces-
sary.
Such sale of tax exempts now
would set up a conflict between lend
ing and investing, and put a pre-
MUM on increased lending. thus
operating virtually as a deterrent to
increased bank lending now
President Hanes returned to his
home at Winston-Salem. N. c.,
where he is president Of the Wacho-
via National Bank & Trust Co. He
plans to return to Washington later,
and will 60 TO New York next month
to prepare for opening of the an
nual convention of the A. B. A. there