Evening star. [volume] (Washington, D.C.) 1854-1972, 1947-07-20
District Banks
Increase
In Tax Rate
$500, 900 Reported
Involved in Mojor
Legal Bottle

A legal battle involving more than
$100, 900 in taxes is under way before
the District Board of Tax Appeals
between most of the major local
banks and the city government, 1t
was learned last night.
In one phase of the struggle, seven
banks are attacking a ruling by the
District taking them out of the
category of savings banks" with q
resulting increase in the rate of their
gross earnings tax from 4 to 6 per
cent, a sum of about 100000.
In second phase these seven and
an additional group of seven are
fighting the city's Interpretation OF
what constitutes gross earnings" on
which they are taxed.
Six Cases Tried.
Six of the cases in the first phase
already have been tried before
Lawrence Koenigsberger, sole mem
Der OF the tax appeal board. None
of those in the second phase have
been argued.
District banks are taxed under
two statutes dating back to 1902
and 1904. Under the act of 1902 a
6 per cent tax is levied on the gross
earnings of national banks, trust
companies and "other incorporated
banks" Under the act of 1904 saw
ings banks having no capital stock
and incorporated savings banks"
are taxed at only per cent of their
gross earnings and, in addition, are
permitted to deduct interest paid to
depositors.
The first phase of the battle is
the outgrowth of a Court of Appeals
decision in the Hamilton National
Bank case in June of 1916. Hamil-
ton commended that it should be
permitted to deduct interest paid
depositors. The court found there
was discrimination in the taxing Of
banks here and remanded the case
to the assessor with instructions to
remove it.
Taxing System Changed.
The action of District assessors in
carrying out this mandate was to
shift the seven banks from taxation
under the act of 1904 to the category
of "other incorporated banks" UNI
der the act of 1902.
These banks had filed tax re-
turns for 1945 on the 4 per cent
basis. The District rejected the re-
turns and assessed them under the
earlier act.
In contesting this, the seven banks
argue generally that they are saw
ing banks and that they filed re-
turns which the assessor had no
right to reject and make new as
sessment.
The District Classics them gen.
orally as state banks" and COM
rather than incorporated
savings banks" within the meaning
of the law of 1904.
Banks Are Listed.
Banks involved are the McLach-
len Banking Corporation, the Citi-
zens Bank of Washington then the
Morris Plan Bank, the Anacostia
Bank, the Industrial Bank of Wash
ington, the Bank of Commerce and
Savings, the Security Savings and
Commercial Bank, and the City
Bank.
All these cases except that of the
Morris Plan have been tried. No
decisions have been handed down.
The second phase of the conflict
grows out of the ruling by District
lawyers that gross earnings" is
generally the same thing as gross
income" This Interpretation would
allow the banks to deduct virtually
nothing.
In general, the banks contend that
what the District calls gross earn j.,
ings" is really gross receipts. They
feel that a number of deductions
should be permitted before arriving
at the amount on which they are
taxed.
Bankers Win Round.
The bankers succeeded in winning
one round of the struggle earlier
this year when an amendment to
the National Debt Act of 1912 was
passed clearly placing beyond the
reach of the District government
interest earned by banks on Federal
bonds bought since the debt act
was passed. Under ruling by
Corporation Counsel Vernon West
the city had asserted right to tax
these earnings.
Other banks involved in this
phase include the Riggs National,
the Second National, the Columbia
National, the National Savings and
Trust Co., the Liberty National, the
Union Trust and Hamilton. Taxes
for the years 1916 and 1947 are in
vo1ved