Evening star. [volume] (Washington, D.C.) 1854-1972, 1955-03-01
By John Hunt
North Amsrieon Newspaper Alliones

North American Newspaper Ailiones
Charges that businesses have
been given a SIS billion tax
'windfall" though a widening
loophole in the 1854 tax revenue
act were before Congress today.
The provision. which allows
many corporations to deduct
two years expenses in figuring
their 1854 tax. was originally de-
scribed by the Treasury Depart
ment as a minor bookkeeping
adjustment" with negligible eff
feet on tax returns. Private
accountants today confirmed,
however, that corporations were
seeking-and flnding-increas-
ing numbers of expense items
which will be deducted.
The "windfall" case was laid
before Congress by Representa-
tive Zelenko, Democrat-Liberal,
of New York in his maiden
speech to the House.
1.-THE effect of the section win
be that the government viii lose
about IS billion in tax receipts
this year which it will never re-
COUP" Mr.. Zelenko declared, ASH
ing that Secretary of the Treas
ury Humphrey be called by Con-
gress to explain.
Leadership Caught by Surprise.
Mr.. Zelenko first made the
charge when speaking during last
weeks debate over the proposed
$40 deduction from individuals
tax bills.
The charges apparently caught
the Republican leadership una
ware. G. o. p. spokesman have
not yet refuted Mr.. Zelenko's
declaration that the revenue
"loopholes" in effect provided
corporations a multibillion-dollar
tax forgiveness" which the
Treasury had not anticipated.
Wisconsin Representative
Byrnes, Republican member of
the Ways and Means Committee.
said that if the provision CON
tains all the faults" Mr.. Zelenko
charges, it should be repealed.
Another committee m e m b e +,
Representative Mills, Democrat,
of Arkansas said Secretary Hum
phrey had conceded the poten-
tial revenue loss had mot come
to his attention"
Mr.. Zelenko's target was the
revenue acts Section 462. It
provides that, in computing taxes
for 1854, many businesses may
deduct not only expenses for that
year, but also "a reasonable addi-
ton" for expenses during the
next tax year. A tax handbook
in standard use terms this a
double deduction"
Accrued Method Permissive.
AS an example, Mr.. Zelenko
raised the case of a business
house having a $4,000 income
and $4,000 expenses. Before the
statutes enactment, he said. the
firm would have paid taxes on
| $4,000.
Under the act of 1854" he
went on, this business can now
estimate what its costs will be
in the year of 1855 in the way
of expenses.
The firm can be expected to
set aside at least another So
900, he continued, making a
| taxable income of not $4,000,
but $4,000. keeping the extra
$4,000 in what is called reserve
which just means the Govern
\ ment does not get it.
1.-THE Government will never
recoup that, money because, in
1856, If this statute remains on
the books, the business house
will again estimate its future
expenses for 1857, and on and
on forever. :"
Under the statutes terms, Mr..
zelenko pointed out, the "dou-
BILE deduction" system may be
used this year by any business
using an accrual method of &C.
counting.
Future" Items Growing.
| Accountants asked about the
statute said that in the absence
of specific rulings on what flu
ture costs may be included in
| the tax-exempt reserve, the list
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