Evening star., 1947-07-09
Third OF q Series.J
By Robert 5. Allen


cial Laboratories today filed COM
plant with Congress charging that
50 grant colleges and universi-
ties are engaged in business opera
tions netting millions of dollars an
nually, and on which they pay no
taxes.
simultaneously, the Justice De-
partment and two congressional
committees intensified probes Of the
business activities and profits of two
tax-exempt organizations-the Aero
dynamics Research Corp. here and
the Robinson Foundation OF New
York.
Both organizations, established as
nonprofit research institutions, ac-
uuired a number of business con-
Germs during the war that received
large and profitable Army and Navy
contracts. The investigation Is be-
ing made to ascertain the extent to
which anv of the profits OF these
tax-eHempt organizations went to
certain individuals.
S1gn1ncancc VI SlA0a SCS'
The charges of the American
Council of Commercial Laboratories
and the probes of the Aerodynam1cs
Research Corp. and the Robinson
Foundation are highly slgnlncant
in the light of an exhaustive in
uuiry that has been launched by
the Treasury Department and Con-
gress into a huge tax avoidance"
loophole that is giving thousands OF
organizations tax exemption on Dill
lions of dollars of income.
A study made by the Joint Com
mittee on Internal Revenue Taxa
ton In 1943 disclosed that more
than $1,000, 100000 annually is es-
Gaping taxation under a 3o-year-olo
provision in the tax law.
In its complaint the American
Council of Commercial Laboratories
charged that in the fiscal year
l943-44 the 50 landgraEt educa-
tional institutions received more
than $4,000 900 'for sales and serv-
ices" on which they not only paid
no taxes but did not have to disclose
how they made the money.
Also, that while these tax-exempt
institutions were engaged in these
extensive and profitable business
operations, they received $120, ,0O0,-
900 In appropriations from State
and other public taxing agencies.
Favors Pure Research.
"It Is a safe bet," the American
Council declared, that If all Of the
more than 200 educational institu-,
tions and foundations doing research
for private companies would be re-
quired to report information on
actual total income, surprising
volume of dollar income would be
found, and the charge Of the ex-
istence Of an excessive tax leak
would be amply supported.
I'VE In the commercial testing and
research industry do not object to
tax-exempt institutions conducting
pure research. 1t is right and proper
for them to do this. 1t is for the
benefit of mankind at large.
However, when they operate In
the field of industrial research for
the benefit of few industries, and
keep the results of that research
confidential to their industrial
sponsors, and when they operate in
the field of testing materials, we
deem that they should pay taxes on
their fees in that field as well as
the rest of us. And we also feel
that some means should be found
to require them to disclose their
income from these sources"
In a recently published study on
tax-exempt organizations, the Rus
sell Sage Foundation also con-
demned the widespread secrecy"
prevalent among these institutions.
The foundation charged that hun
dreds of family institutions" had
refused to submit information con-
cerning their income and activities.
"In most States the report de-
clared, "it is possible for an individ-
ual or family owning a closely held
company to contribute large block
of stock to its foundation, and to
continue to vote and control that
stock. AS a result, wide variety
of abuses is possible"
Institutions Named.
Prominent tax-exempt institutions
with extensive business holdings are
The University of Pennsylvania,
which owns one of the largest de-
partment stores in Philadelphia.
The University of Wisconsin
which, through its highly profit