mium deposits have been returned to its policy holders, and whatever portions are retained for the payment of losses and expenses, or for reinsurance reserves.

SEVENTH: In the case of any life insurance company; the premium deposits actually returned to its policy holders, or actually credited to its policy holders by being deducted from the premiums otherwise due to the company.

EIGHTH: In the case of any mutual marine insurance company; all amounts paid for reinsurance, and all amounts repaid to its policy holders on account of premiums previously paid by them, plus whatever interest is paid upon any of said amounts, between the times of their ascertainment, and the times of their payment, respectively.

SECTION 4.

NON-EXEMPT FOREIGN ORGANIZATIONS.

The income tax levied upon each of such of the above mentioned non-exempt organizations, as are organized and existing under the laws of any foreign country, and have capital invested, or are doing business in the United States, is ascertained in respect of that business, by a somewhat different method, from that which is applicable to each of the corresponding organizations existing in the United States, in respect of its entire business.

The differences between those two methods of ascertainment, are the following:

FIRST: An organization existing in the United States, is entitled, as its first deduction from its "corporate gross income", to subtract all its ordinary and necessary expenses, in the maintenance and operation of its business and property; whereas a foreign organization is

entitled to make that deduction, only so far as those expenses are paid out of earnings made by it in the United States.

SECOND: An organization existing in the United States, is entitled, as its second deduction, to subtract from its "corporate gross income", certain classes of losses, actually sustained anywhere; whereas a foreign organization is entitled only to subtract the same classes of losses, when actually sustained in business conducted by it in the United States.

THIRD: An organization existing in the United States, is entitled as its third deduction, to subtract from its "corporate gross income", interest accrued and paid on its indebtedness, to an amount of such indebtedness not exceeding one-half of the sum of its interest-bearing debts, and its paid up capital stock outstanding at the end of the year; or if it has no capital stock, this deduction will not exceed interest upon the capital employed in its business at the end of the year; whereas a foreign organization is entitled to make only such a proportion of this deduction, as the gross amount of its income from capital invested and business transacted within the United States, bears to the gross amount of its income from all sources, throughout the world. Also, an organization existing in the United States is entitled to include in its third deduction, the total interest paid by that organization, on any debt which is wholly secured by some collateral, which is the subject of sale in the ordinary business of the organization owing that debt; and a bank, banking association, loan or trust company existing in the United States, is likewise entitled to include, in its third deduction, whatever interest it paid on deposits, or on moneys received for investment and secured by interest bearing certificates of indebtedness issued by that organization; whereas no corresponding organization,

existing under the laws of any foreign country, is entitled to include any interest of either of those classes, in its third deduction from its "corporate gross income".

FOURTH: A corporation organized in the United States, is entitled, in its fourth deduction from its "corporate gross income", to include all taxes imposed by the Government of any foreign country; whereas a foreign organization is not entitled to include any foreign taxes in that deduction.

FIFTH: The provisions of the statute, relevant to special deductions from "corporate gross incomes" in the cases of foreign insurance companies, are identical in language, with the corresponding provisions of the statute, in the cases of insurance companies organized and existing in the United States; which deductions are those above designated as Fifth, Sixth, Seventh and Eighth, respectively, in respect of corporations organized and existing in the United States.

Indeed, the language of those provisions is printed four times, without any change, in two adjoining paragraphs of the statute. The first instance of that printing, begins in line 5 from the bottom of page 115, and ends in line 22 from the top of page 116, of that copy of the statute which constitutes the appendix in this pamphlet. The second instance begins in the bottom line of page 117, and ends in line 27 of page 118, of the same appendix. The third instance begins in line 12 of page 121, and ends in line 3 of page 122, of the same appendix. And the fourth instance begins in line 9 and ends in line 35, of page 122, of the same copy of the statute.

SECTION 5.

MULTIPLE CORPORATE TAXATION.

The income tax law operates alike upon every corporation or other taxable organization; regardless of whether the capital stock of that organization is owned by natural persons, or is owned by some other organization. This operation of the law will result in multiplə taxation of the same money, in each of the numerous cases in which stock in one corporation, is owned by another corporation.

For example, all of the stock of the Philadelphia & Reading Railway Company is owned by the Reading Company; and a large proportion of the stock of the Reading Company, is owned by the Lake Shore & Michigan Southern Railway Company; and substantially all the stock of the Lake Shore & Michigan Southern Railway Company, is owned by the New York Central & Hudson River Railroad Company; and a large amount of the stock of the New York Central & Hudson River Railroad Company, is owned by the Union Pacific Railroad Company. The net earnings of the Philadelphia & Reading Railway Company for the fiscal year ending June 30, 1913, were $12,000,000. Assuming that the net earnings of that corporation for the fiscal year ending June 30, 1914, will be $12,000,000, that corporation will pay an income tax of $120,000 for that year, on that money. Afterward, most of the remaining $11,880,000 will be paid by the Philadelphia & Reading Railway Company, to the Reading Company, as the entire dividend, payable for that year, on the stock of the Philadelphia & Reading Railway Company. Thereupon, the Reading Company will pay an income tax of one per cent upon the entire amount of that dividend.

Afterward, the Reading Company will pay to the Lake Shore & Michigan Southern Railway Company, a considerable share of what is left of the money received by the Reading Company, from the Philadelphia & Reading Railway Company. Thereupon, the Lake Shore & Southern Railway Company will pay an income tax of one per cent upon the money thus received by it from the Reading Company. Afterward, the Lake Shore & Michigan Southern Railway Company will pay to the New York Central & Hudson River Railroad Company, most of what is left of the money received by the Lake Shore & Michigan Southern Railway Company, from the Reading Company. Thereupon, the New York Central & Hudson River Railroad Company, will pay an income tax of one per cent upon the money thus received from the Lake Shore & Michigan Southern Railway Company. Afterward, the New York Central & Hudson River Railroad Company, will pay to the Union Pacific Railroad Company, much of what is left, of the money received by the New York Central & Hudson River Railroad Company, from the Lake Shore & Michigan Southern Railway Company. Thereupon, the Union Pacific Railroad Company, will pay an income tax of one per cent, on the money thus received from the New York Central & Hudson River Railroad Company.

In this particular example of the operation of the income tax law, it will result that the money received by the Union Pacific Railroad Company, through three intermediate corporations, from the Philadelphia & Reading Railway Company, will pay the income tax of one per cent five times. And the money received by the New York Central & Hudson River Railroad Company, through two intermediate corporations, from the Philadelphia & Reading Railway Company, will pay the income tax of one per cent four times. And the money