Act of 1924. Act of 1921. the taxable year 1921 was less than 20 per centum of its invested capital for such year: Provided further, That any taxpayer who takes advantage of this section shall pay the tax imposed by section 1000206 of the Revenue Act of 1918 as if such taxpayer had been a corporation on and after January 1, 1921. Act of 1918. PART III.-CORPORATIONS. TAX ON CORPORATIONS. SEC. 230. In lieu of the tax imposed by section 230 of the Revenue Act of 1921 there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax of 121⁄2 per centum of the amount of the net income in excess of the credits provided in sections 236216 and 263.21 206 Sec. 1000, Capital Stock Tax. 207 Title I, Act of 1916. SEC. 230. That, in lieu of the SEC. 230. (a) That, in lieu of tax imposed by section 230 of the taxes imposed by section 10 the Revenue Act of 1918, there of the Revenue Act of 1916, as shall be levied, collected, and amended by the Revenue Act of paid for each taxable year upon 1917, and by section 4 of the the net income of every corpora- Revenue Act of 1917, there shall tion a tax at the following rates: be levied, collected, and paid SEC. 230. (a) For the calendar for each taxable year upon the year 1921, 10 per centum of the net income of every corporaamount of the net income in ex- tion213 a tax214 at the following 208 Title I, Part II, Act of 1916, as amended by Sec. 1206 (1), Title XII, Act of 1917. 209 The uniformity required by the constitution is a geographical uniformity; hence, the exemption of a part or all of the income of certain designated persons, classes, and corporations, did not render the Act of 1913 anconstitutional. Brushaber v. U. P. R. R. Co., (1916) 240 U. S. 1; Stanton v. Baltic Mining Co., (1916) 240 U. S. 103. 210 (a) A trustee of a bankrupt corporation who was not "operating the property or business" of the corporation, was not required under the Act of 1916 to pay an income tax on funds received by him in 1916 as the result of a compromise of an old claim which the bankrupt corporation had against another corporation. In re Heller, Hirsch & Co., (C. C. A., Second Cir. 1919) 258 Fed. 208. 210 (b) A corporation cannot avoid income taxation by dissolution. U. S. v. McHatton et al., (D. C., D. Mont. 1920) 266 Fed. 602. 210 (c) Stockholders who received all the assets of the corporation in liquidation were liable for an assessment made against the corporation subsequently to the dissolution, which resulted from the retroactivity of the Act of 1916. U. S. v. McHatton et al., (D. C., D. Mont. 1920) 266 Fed. 602. 211 (a) The income of corporations in receivership was not taxable under the Act of 1913. Only receivers of individuals, mentioned in sub-paragraphs S and E, Sec. II, were required to make returns. Scott v. Western Pacific Ry. Co., (C. C. A., Ninth Cir. 1917) 246 Fed.. 545, affirming Equitable Trust Co. of N. Y. v. Western Pacific Ry. Co., (D. C., N. D. Cal., S. D. 1915) 236 Fed. 813. 211 (b) A corporation was taxable under the Act of 1913, although not engaged in business. Rensselaer S. R. Co. v. Irwin (Col.), (C. C. A., Second Cir. 1918) 249 Fed. 726, affirming Id., (D. C., N. D. N. Y. 1917) 239 Fed. 739, Certiorari denied, (1918) 246 U. S. 671. 212 Where a number of corporations were organized under the law of Hawaii, permitting corporations to form a partnership, there being no changeability of ownership, transferability of shares, or capital stock, and where the organization was managed by a board of managers made up of individual representatives of the respective corporations-such an arrangement did not constitute a joint stock company under the Act of 1913. Haiku Sugar Co. et al. v. Johnstone, (C. C. A., Ninth Cir. 1918) 249 Fed. 103. 66 213 (a) Six individuals by a written contract organized an unincorporated joint stock association" to be known as "Burk Waggoner Oil Association.'' The contract provided that the association should not dissolve on the death of a member but should continue for twenty-one years after the death of the last one, unless sooner dissolved. The objects of the association were to purchase or lease lands containing oil, to extract the same, and to do all things necessary or proper, incident to the mining, manufacture, sale or transportation of oil and its products. The capital stock was $60,000, divided into 600 shares of $100 each, evidenced by certificates, to be signed by the board of trustees and countersigned by the secretary, transferable only on the books of the company. No member or owner of any certificate had any power to transact business for the association, and was not personally liable for any of its debts. Its business was transacted by a board of six stockholding trustees elected by a majority of the shares. The board held title to all property as joint tenants and not as tenants in common. The board had the right to adopt by-laws, declare dividends, etc. At the time of the suit about 200 persons owned Act of 1917. Act of 1916. Act of 1913. PART II.-ON CORPORATIONS.20 207 SEC. 1206. [1] (1) 208 That the first paragraph of section ten of such Act of September eighth, nineteen hundred and sixteen, is hereby amended to read as follows: PART II.-ON CORPORATIONS. SEC. 10. [1] That there shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation,210 joint"SEC. 10. (a) That there stock company or association, or shall be levied, assessed, col-insurance company, organized in lected, and paid annually upon the United States, no matter how the total net income received in created or organized but not in- or association, 215 and every in certificates of stock, which were traded in generally by the public. The suit was brought under the Texas code authorizing associations and joint stock companies to sue and be sued. The organization was an association and not a partnership. It was taxable as a corporation under the Act of 1918. Sec. 1 defines corporations as including associations. Burk-Waggoner Oil Assn. v. Hopkins (Col.), (D. C., N. D. Tex. 1924) 296 Fed. 472. 213 (b) Sec. 230 of the Act of 1918, which subjected corporations organized under the laws of one of the United States to an income tax for the benefit of the United States and Sec. 261 of said Act, which subjected them to an income tax for the benefit of Porto Rico, did not constitute double taxation. Porto Rico Coal Co. v. Edwards (Col.), (D. C., S. D. N. Y. 1921) 275 Fed. 104. 213 (c) The Acts of 1917 and 1918 did not deprive corporations organized under the laws of one of the United States of "due process of law," in requiring them to pay a war excess profits tax and an income and excess profits tax under said Acts, respectively, on income derived from Porto Rico, although citizens of Porto Rico were not taxable under said Acts. Porto Rico Coal Co. v. Edwards (Col.), (D. C., S. D. N. Y. 1921) 275 Fed. 104. 213 (d) A corporation organized under the laws of one of the United states, doing business in and deriving its income from Porto Rico, could not invoke a supposed immunity from federal taxation granted by the Bill of Rights of Porto Rico, so as to defeat the income and excess profits tax imposed by the Acts of 1917 and 1918, merely because it derived its income from Porto Rico. Porto Rico Coal Co. v. Edwards (Col.), (D. C., S. D. N. Y. 1921) 275 Fed. 104. 213 (e) A corporation organized under the laws of one of the United States, which derived practically all G. (a) [1] That the normal tax209 hereinbefore imposed upon individuals likewise shall be levied, assessed, and paid annually upon the entire net income arising or accruing from all sources during the preceding calendar year to every corporation,211 joint-stock company, 212 of its income from Porto Rico, owned all of its property, kept its books, and did all of its business there, was taxable under Sec. 201 of the Act of 1917 and Secs. 230 and 301 of the Act of 1918. Porto Rico Coal Co. v. Edwards (Col.), (D. C., S. D. N. Y. 1921) 275 Fed. 104. 214 Income and excess profits taxes imposed by the Acts of 1917 and 1918 do not come within the class of duties, imposts or excises, which are enumerated in Clause 1 of Sec. 8 of Art. I of the Constitution, and which are required to be uniform throughout the U. S. Porto Rico Coal Co. v. Edwards (Col.), (D. C., S. D. N. Y. 1921) 275 Fed. 104. 215 (a) The owners of the stock of five railway corporations entered into an agreement whereby for unitary control the legal title of the stock was transferred to trustees who were to do certain specified things, a committee of the stockholders being authorized to control the power of the trustees in voting the capital stock of the companies. The language of the agreement read very much like the old corporation law of Illinois. This arrangement was an association and not a partnership under the Act of 1913. Chicago Title & Trust Co. v. Smietanka (Col.), (D. C., N. D. Ill., E. D. 1921) 275 Fed. 60. 215 (b) Where trustees were appointed for the whole term of the trust, the beneficiaries not having the power of removal but merely the privilege of filling vacancies caused by death or resignation, and otherwise limited in power to consenting to changes in the terms of the trust, the trustees in fact having the power of owners, such an arrangement was taxable as a trust and not as an association under the Act of 1913. Malley (Col.) v. Crocker, (1919) 249 U. S. 223, reversing Id., (C. C. A., First Cir. 1918) 250 Fed. 817. 216 Sec. 236, p. 218. 217 Sec. 263, p. 270. cess of the credits provided in rates: section 236;216 and Act of 1918. (1) For the calendar year SEC. 230. (b) For each calen- 1918, 12 per centum of the dar year thereafter, 122 per amount of the net income in excentum of such excess amount.219 cess of the credits provided in section 236;216 and (2) For each calendar year thereafter, 10 per centum of such excess amount. SEC. 230. (b) For the purposes of the Act approved March 21, 1918, entitled "An Act to provide for the operation of transportation systems while under Federal control, for the just compensation of their owners, and for other purposes,' "' fivesixths of the tax imposed by paragraph (1) of subdivision (a) and four-fifths of the tax imposed by paragraph (2) of subdivision (a) shall be treated. as levied by an Act in amendment of Title I of the Revenue Act of 1917. 218 (a) The words "no matter how created or organized" in Sec. II, Par. G(a), Act of 1913, apply not only to insurance companies, but also relate back to the words "every corporation, joint stock company or association.'' Chicago Title & Trust Co. v. Smietanka (Col.), (D. C., N. D. Ill., E. D. 1921) 275 Fed. 60. 218 (b) An association may be organized independently of any statute, and when so organized is subject to the tax imposed by the Act of 1913. Chicago Title & Trust Co. v. Smietanka (Col.), (D. C., N. D. Ill., E. D. 1921) 275 Fed. 60. 218 (c) Under Par. II, G. (a), Act of 1913, an association organized under the common as well as statutory law was taxable. Crocker v. Malley (Col.), (C. C. A., First Cir. 1918) 250 Fed. 817. This case was reversed by the Supreme Court in Id., (1919) 249 U. S. 223, on other reasoning, "assuming" that the above holding was correct. 219 The Act of Sept. 19, 1922, amended Sec. 230 (b) of the Act of 1921 to read as follows: (b) For each calendar year thereafter, 121⁄2 per centum of the amount of the net income in excess of the credits provided in sections 236 and 264." 220 The uniformity required by Section 8, Art. I, of the Federal Constitution is a geographical uniformity. LaBelle Iron Works v. U. S., (1921) 256 U. S. 377, affirming Id., (1920) 55 Ct. Cl. 462. 221 A Canadian corporation which employed solicitors to sell its paper product in the United States, paid their expenses, maintained desk room, paid rent, used storage rooms, kept funds, and entered into contracts in the United States through its agents, subject to the approval of the corporation in Canada, "transacted'' business within the United States. The income derived therefrom was taxable under the Act of 1913. Laurentide Co., Ltd. v. Durey (Col.), (D. C., N. D. N. Y. 1916) 231 Fed. 223. 222 An additional normal tax was imposed by Sec. 4 and an additional tax on undistributed net income by Sec. 1206 (2) of the Act of 1917, as follows: SEC. 4. That in addition to the tax imposed by subdivision (a) of section ten of such Act of September eight, nineteen hundred and sixteen, as amended by this Act, there shall be levied, assessed, collected, and paid a like tax of four per centum upon the income received in the calendar year nineteen hundred and seventeen and every calendar year thereafter, by every corpora tion, joint-stock company or association, or insurance company, subject to the tax imposed by that subdivision of that section, except that if it has fixed its own fiscal year, the tax imposed by this section for the fiscal year ending during the calendar year nineteen hundred and seventeen shall be levied, assessed, collected, and paid only on that proportion of its income for such fiscal year which the period between January first, nineteen hundred and seventeen, and the end of such fiscal year bears to the whole of such fiscal year. The tax imposed by this section shall be computed, levied, assessed, collected, and paid upon the same incomes and in the same manner as the tax imposed by subdivision (a) of section ten of such Act of September eighth, nineteen hundred and sixteen, as amended by this Act, except that for the purpose of the tax imposed by this section the income embraced in a return of a corporation, joint-stock company or association, or insurance company, shall be credited with the amount received as dividends upon the stock or from the net earnings of any other corporation, joint-stock company or association, or insurance company, which is taxable upon its net income as provided in this title. SEC. 1206. [2] (2) Section ten of such Act of September eighth, nineteen hundred and sixteen, is hereby further amended by adding a new subdivision as fol lows: Act of 1917. Act of 1916. Act of 1913. the preceding calendar year cluding partnerships, a tax of surance company, organized in from all sources by every cor- two per centum upon such in- the United States, no matter poration, joint-stock company come; and a like tax shall be how created or organized,218 not or association, or insurance levied, assessed, collected, and including partnerships; but if company, organized organized in the paid annually upon the total net organized, authorized, or existUnited States, no matter how income received in the preceding ing under the laws of any forcreated or organized, but not in- calendar year from all sources eign country, then upon the cluding partnerships, a tax220 within the United States by ev- amount of net income accruing of two per cent222 upon such in- ery corporation, joint-stock com- from business transacted221 and come; and a like tax shall be pany or association, or insurance capital invested within the levied, assessed, collected, and company organized, authorized, United States during such paid annually upon the total net or existing under the laws of any year.223 income received in the preceding foreign country, including intercalendar year from all sources est on bonds, notes, or other within the United States by interest-bearing obligations of every corporation, joint-stock residents, corporate or othercompany or association, or in- wise, and including the income. surance company, organized, au- derived from dividends on capithorized, or existing under the tal stock or from net earnings of laws of any foreign country, in- resident corporations, joint-stock cluding interest on bonds, notes, companies or associations, or inor other interest-bearing obli-surance companies whose net ingations of residents, corporate or come is taxable under this title. otherwise, and including the in come derived from dividends on capital stock or from net earnings of resident corporations, (b) In addition to the income tax imposed by subdivision (a) of this section there shall be levied, assessed, collected, and paid annually an additional tax of ten per centum upon the amount remaining undistributed six months after the end of each calendar or fiscal year, of the total net income of every corporation, joint-stock company or association, or insurance company, received during the year, as determined for the purposes of the tax imposed by such subdivision (a), but not including the amount of any income taxes paid by it within the year imposed by the authority of the United States. "The tax imposed by this subdivision shall not apply to that portion of such undistributed net income which is actually invested and employed in the business or is retained for employment in the reasonable requirements of the business or is invested in obligations of the United States issued after September first, nineteen hundred and seventeen: Provided, That if the Secretary of the Treasury ascertains and finds that any portion of such amount so retained at any time for employment in the business is not so employed or is not reasonably required in the business a tax of fifteen per centum shall be levied, assessed, collected, and paid thereon. "The foregoing tax rates shall apply to the undistributed net income received by every taxable corporation, joint-stock company or association, or insurance company in the calendar year nineteen hundred and seventeen and in each year thereafter, except that if it has fixed its own fiscal year under the provisions of existing law, the foregoing rates shall apply to the proportion of the taxable undistributed net income returned for the fiscal year ending prior to December thirty-first, nineteen hundred and seventeen, which the period between January first, nineteen hundred and seventeen, and the end of such fiscal year bears to the whole of such fiscal year." 223 (a) Sec. IV, of the Act of 1913, imposed a tax for January and February, 1913, as follows: S [3] And provided further, That a special excise tax with respect to the carrying on or doing of business, equivalent to 1 per centum upon their entire net income, shall be levied, assessed, and collected upon corporations, joint-stock companies or associations, and insurance companies, of the character described in section thirty-eight of the Act of August fifth, nineteen hundred and nine, for the period from January first to February twenty-eighth, nineteen hundred and thirteen, both dates inclusive, which said tax shall be computed upon one-sixth of the entire net income of said corporations, joint-stock companies or associations, and insurance companies, for said year, said net income to be ascertained in accordance with the provisions of subsection G of section two of this Act: Provided further, That the provisions of said section thirty-eight of the Act of August fifth, nineteen hundred and nine, relative to the collection of the tax therein imposed shall remain in force for the collection of the excise tax herein provided, but for the year nineteen hundred and thirteen it shall not be necessary to make more than one return and assessment for all the taxes imposed herein upon said corporations, joint-stock companies or associations, and insurance companies, either by way of income or excise, which return and assessment shall be made at the times and in the manner provided in this Act: 223 (b) A holding company which endorsed the notes of a subsidiary was not "doing business" during the months of January and February, 1913, under Sec. S of the Act of 1913. Butterick Co. v. U. S., (D. C., S. D. N. Y. 1917) 240 Fed. 539. (See 223 (a), supra.) |