Prof. LINDSAY. Well, if it were held to be a charitable institution in this country, under our laws, it would be exempt not from taxation but from taxation upon the bequests to that institution.

Mr. CRISP. Societies for the protection of vivisection are held to be a charity, and I understand it has been held that a fund for woman suffrage is a charity.

Prof. LINDSAY. I am afraid that would come under the same heading as the Mitchell case.

Mr. CRISP. Charity is a broad word, and it looks as if we would lose a great deal of revenue that we did not contemplate losing.

The CHAIRMAN. Just a word, again. Referring to the $50,000 exemption, one of the main purposes was to leave it to the States to tax, and for the most of the estates the State takes care of that, and you do not want to drown the Federal courts with all of these little cases. That is one of the main reasons.

Prof. LINDSAY. Yes.

Mr. SLOAN. Have you figured out how much revenue this Government would lose by putting in operation such a proposed amendment as you suggest?

Prof. LINDSAY. No; as I said in answer to another question earlier this morning, we have no official data yet. This tax is a new tax. It has only operated on the estates of decedents after September 16, and the returns are not in yet. I asked a few weeks ago for the returns from the Internal Revenue Bureau, but they are not made up yet, for the first year of operation.

Mr. SLOAN. Could you probably obtain those figures so as to find out what it would be?

Prof. LINDSAY. I presume that I can obtain the results of the tax of the first year, and perhaps for the second year, after you doubled the rates.

Mr. DICKINSON. Doctor, are you leaving a list of the laws of the several States?

Prof. LINDSAY. Yes.

The CHAIRMAN. Just append that to your remarks.

Mr. RAINEY. I do not remember that you covered the question on the effect of the earnings of colleges caused by the war, and the enlistment of students, and what effect that has on the revenue.

Prof. LINDSAY. I referred to that very incidentally a moment ago. I presume, gentlemen, that you are all more or less familiar with those effects. So far as the higher educational institutions go, the effect of the war upon attendance and therefore upon revenue that comes from tuition fees of students has been very great. It varies with different departments and with different schools, different classes and different institutions. In law schools the reduction has been at least 50 per cent and it looks as though by another year that many law schools would have to close up.

Mr. RAINEY. In tuition fees?

Prof. LINDSAY. In reduction of the number of students and, of course, that means a reduction of tuition fees. One of the colleges, Hobart College, has closed up, gone out of business, and turned its buildings over for use as a hospital, and the president of the institu tion has offered his services as a volunteer laborer in one of the departments of the Government, whether the Food Administration. or not, I do not remember.

Mr. DICKINSON. Are not a great many of the students of these various colleges all over the country going into the service, and thereby avoiding the necessity of the expenditure of so much money during the war?

Prof. LINDSAY. Yes; except that there are new problems of education all the time. The more training the men have to have, new departments of service, the greater burden that is being put upon these institutions. If they had the resources to go on, they could enlist, and could train them in special new work-and there is a great deal of work in the training of men for a great many kinds of work— and the reason for maintaining the institutions that they may be able to maintain an effective plant to continue the work of higher education in the training of teachers, etc., after the war. You can't build a plan of that sort overnight. You can not recruit an efficient. and effective college faculty in a short time. It is a long, slow passing, and that is going to cost a great deal more in labor, time, and money to rehabilitate them after the war. There is plenty of work that they can do, even when they can't have the normal number of students on account of the draft.

The CHAIRMAN. Gentlemen, we will return at a quarter to 2. (Thereupon the committee took a recess at 12.30 p. m. until 1.45 p. m.)

(The State laws referred to are as follows:)

PREVIOUS FEDERAL ESTATE-TAX LEGISLATION AND EXEMPTIONS.

United States: The Spanish War Federal inheritance-tax act of June 13, '1898, as originally enacted, contained no exemption of charities.

This defect was partly remedied by the amending act of March 2, 1901, which exempted all "bequests or legacies for uses of a religious, literary, charitable, or educational character, or for the encouragement of art or legacies or bequests to societies for the prevention of cruelty to children, including all bequests or legacies of such character on which the tax imposed had not been paid or collected on the 1st day of March, 1901."

And by the act of June 27, 1902, it was provided that the Secretary of the Treasury should refund all taxes which had been paid upon bequests or legacies of this character under the act of 1898, thus repealing all taxes under the Spanish War Federal inheritance-tax act upon property passing for the religious, literary, charitable, educational, and other uses described.

*

cor

Income-tax exemption: The existing Federal income-tax law recognizes the propriety of exempting from its operation the income of educational and charitable institutions. It contains, among others, the following provision: "There shall not be taxed under this title any income received by any poration or association organized and operated exclusively for religious, charitable, scientific, or educational purposes no part of the net income of which inures to the benefit of any private stockholder or individual." (Act of Sept. 8, 1916, sec. 11.)

The original income-tax law of 1913 contained a similar provision, as did the act of August 27, 1894, section 32. The corporation excise-tax law of August 5, 1909, section 38, provided a similar exemption.

EXISTING
OF

STATE LEGISLATION IN

REFERENCE

ΤΟ

EXEMPTION OF

SUMMARY
BEQUESTS, ETC., FOR EDUCATIONAL, CHARITABLE, AND OTHER PUBLIC PURPOSES
FROM INHERITANCE TAXATION.

I. The following States have no inheritance-tax laws: Alabama, Florida, Mississippi, New Mexico, South Carolina (5); and there are none in the Territory of Alaska and District of Columbia (2)-7.

II. The following States exempt bequests for educational, charitable, and other public purposes, in whole or in part, from the operation of their inherit

ance-tax laws: Arkansas, California, Colorado, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky. Louisiana, Maine, Massachusetts. Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon. Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, Wisconsin (34); Hawaii also exempts such bequests (1)-35.

III. The following States do not provide for such exemption: Arizona, Georgia, Maryland, Montana, Nebraska. Nevada, Pennsylvania, Utah, Wyoming-9.

IV. Summary:

Jurisdictions in which there are no inheritance-tax laws_ _.
Jurisdictions in which bequests for these purposes are exempted___.

Total

Jurisdictions in which such bequests are not exempted---.

Total

7

35

42

51

Arkansas exempts "all property transferred in good faith to societies, corporations, and institutions now or hereafter exempted by law from taxes, or to any public corporation or to any society, corporation, institution, or association of persons engaged in or devoted to any charitable, benevolent, educational, public, or other like work (pecuniary profit not being its object or purpose), or to any person. society, corporation, institution, or association of persons in trust for or to be devoted to any charitable, benevolent, educational, or public purpose by reason whereof any such person or corporation shall become beneficially entitled in possession or expectancy to any such property or to the income thereof." (Laws of 1915, ch. 189.)

California the same as Arkansas. (Laws of 1911, ch. 395, sec. 4.) Colorado exempts "all transfers of property to the State of Colorado, or to any county, city, town, or other municipality, or for the use of public libraries, for religious or charitable purposes exclusively, or for schools and colleges not for profit: Provided, however, That the same be situated within this State or the, property be limited for use within this State." (Laws of 1913, ch. 136, sec. 4.) Connecticut exempts "all property passing to or in trust for the benefit of any corporation or institution located in this State which receives State aid, or for the use of a municipal corporation for public purposes within this State, and all gifts of paintings, pictures, books, engravings, bronzes, curios, bric-a-brac, arms and armor, and collections of articles of public interest passing to any corporation or institution located in this State for preservation and free exhibition for public benefit." (Act of 1915, ch. 332.)

64

Delaware exempts any property, estate, or interest therein passing to or for the use or in trust for, charitable, educational, or religious societies or institutions, or cities or towns for public improvement, or to school districts or library commissions." (Laws of 1909, ch. 225, sec. 1.)

Idaho the same as Arkansas. (Idaho Revised Codes, title 10, ch. ch. 5, sec. 1877.)

Illinois exempts "beneficial interests of any property or income therefrom" passing" to or for the use of any hospital, religious, educational, Bible, missionary. tract. scientific, benevolent, or charitable purpose, or to any trustee, bishop, or minister of any church or religious denomination, held and used exclusively for the religious, educational, or charitable uses and purposes of such church or religious denomination, institution, or corporation, by grant, gift, bequest. or otherwise." (Act of June 14, 1909, sec. 28.)

Indiana exempts "all property transferred to municipal corporations within the State for strictly county, town, or municipal purposes, or to the bishop, rector. pastor, trustee, board of trustees, or governing body of any educational or religious institution, who shall use the property so transferred solely for religious, charitable, or educational purposes within the State, or to corporations of this State organized under its laws solely for religious, charitable, or educational purposes, which shall use the property so transferred exclusively for the purpose of their organization within the State." (Laws of 1913, ch. 47, sec. 4.) Iowa exempts property passing "to educational and religious societies or institutions, public libraries, and public art galleries within this State and open to the free use of the public"; "to or for hospitals within this State open to the public and not operated for gain, or to societies within this State organized for purposes of public charity, including cementery associations, but not including

societies maintained by fees, dues, or assessments in whose benefits the public may not share"; "to a municipal or political corporation within this State for a purely public purpose." (Laws of 1911, ch. 68, sec. 2.)

Kansas exempts property passing "to or for the use of literary, educational, scientific, religious, benevolent, and charitable societies or institutions: Provided, Such use entitles the property so passing to be exempt from taxation;" and property passing “to or for the use of the State, a county, or a municipality for public purposes." (Laws of 1915, ch. 357.)

Kentucky exempts “property of any amount bequeathed or transferred to any municipal corporation within this State for public purposes, to institutions of purely public charity, to institutions of education not used or employed for gain by any person or corporation and the income of which is devoted solely to the cause of education; to public libraries; or to any person or persons, society, corporation, institution, or association in trust for any of the purposes above mentioned." (Laws of 1916, ch. 26.)

Louisiana exempts "any legacy or other donation mortis causa to or in favor of any educational, religious, or charitable institutions." (Laws of 1912, ch. 42.) Maine exempts property passing "to or for the use of any educational, charitable, religious, or benevolent institution in this State, the property of which is by law exempt from taxation." (Me. Rev. Stat., ch. 8, sec. 69, as amended by Laws of 1911, ch. 163.)

Massachusetts exempts property passing" to or for the use of charitable, educational, or religious societies or institutions, the property of which is by the laws of this Commonwealth exempt from taxation, or for or upon trust for any charitable purposes, to be carried out within this Commonwealth, or to or for the use of the Commonwealth or any city or town within this Commonwealth for public purposes.' (Laws of 1916, ch. 268.)

Michigan exempts property passing "to persons or corporations exempt by law from taxation on real or personal property." (Laws of 1899, ch. 188, as amended by Laws of 1903, ch. 195.)

This includes "religious, charitable, and similar institutions and organizations of a domestic character." (See Instructions issued by auditor general in 1907, quoted in Blakemore and Bancroft on Inheritance Taxes, p. 636.)

Minnesota exempts "all property transferred to municipal corporations within the State for strictly county, town, or municipal purposes.” (Laws of 1911, ch. 209.)

And, by a subsequent act, "property of the clear value of $2,500 transferred to a public hospital, academy, college, university, seminary of learning, church, or institution of purely public charity within this State." (Laws of 1911, ch. 372.)

Under this act any charitable bequest in excess of twenty-five hundred dollars was taxable at 5 per cent as the primary rate, subject to certain increases determined by amount, but by chapter 455 of the Laws of 1913 the primary rate upon such bequests was reduced to 2 per cent, and under the general provisions of the statute of 1911 the primary rate was subject to a progressive increase reaching three times the primary rate upon all gifts in excess of $100,000. Missouri exempts "property conveyed for some educational, charitable, or religious purposes exclusively." (Rev. Stat. of 1909, ch. 2, art. 14, sec. 309.) New Hampshire exempts property passing "to or for the use of educational, religious, cemetery, or other institutions, societies, or associations of public charity in this State, or for or upon trust for any charitable purpose in the State, or for the care of cemetery lots, or to a city or town in this State for public purposes." (Laws of 1915, ch. 106.)

New Jersey exempts property passing to churches, hospitals, and orphan asylums, public libraries, Bible and tract societies, religious, benevolent, and charitable institutions and organizations, organized under the laws of this State, or operating solely within this State." (Laws of 1914, ch. 151.)

New York by the law of 1911 exempts Any property devised or bequeathed for religious ceremonies, observances or commemorative services of or for the deceased donor, or to any person who is a bishop or to any religious, educational, charitable, missionary, benevolent, hospital, or infirmary corporation, wherever incorporated, including corporations organized exclusively for Bible or tract purpose also personal property other than money or securities bequeathed to a corporation or association wherever incorporated or located, organized exclusively for the moral or mental improvement of men or women or for scientific, literary, library, patriotic, cemetery, or historical purposes or for the enforcement of laws relating to children or animals or for

* *

two or more of such purposes and used exclusively for carrying out one or more such purposes. But no such corporation or association shall be entitled to such exemption if any officer, member, or employee thereof shall receive or may be lawfully entitled to receive any pecuniary profit from the operations thereof except reasonable compensation for services in effecting one or more of such purposes or as proper beneficiaries of its strictly charitable purposes; or if the organization thereof for any such avowed purpose be a guise or pretense for directly or indirectly making any other pecuniary profit for such corporation or association or for any of its members or employees or if it be not in good faith organized or conducted exclusively for one or more of such purposes." (Act of 1911, ch. 732.)

And in 1913 added the following exemption: "Exemption of certain personal property. A transfer of pictures, statuary, works of art, antiques, books, manuscripts, or other similar personal property shall be exempted from and not subject to the provisions of this article if within two years after such transfer the person to whom such transfer is made shall present the same to the State, or to a municipal corporation of the State for educational, scientific. literary, library, or historical purposes, and if the tax thereon shall have been theretofore paid the amount thereof shall be refunded in accordance with the provisions of this article." (Laws of 1913, ch. 639.)

North Carolina by act of 1911 (ch. 46, sec. 6) placed property passing for religious, charitable, or educational purposes in the exempt class with husband and wife, but by the Revised Law of 1913 (ch. 201) husband and wife were placed in the 1 per cent class and the charitable exemption seems to have been omitted.

North Dakota exempts "all bequests and devises of property within this State when the same is for one of the following charitable purposes, namely, the relief of aged, indigent, and poor, maintenance of sick or maimed or for the support or education of orphans or indigent children." (Laws of 1913, ch. 185. sec. 24.)

Ohio exempts property passing "to the State of Ohio under the intestate laws of the State, or embraced in a bequest, devise, transfer, or conveyance to, or for the use of the State of Ohio, or to or for the use of a municipal corporation or other political subdivision thereof for exclusively public purposes, or public institutions of learning, or to or for the use of an institution in this State for purpose only of public charity or other exclusively public purposes

卑

while used exclusively, for any of such purposes." (Ohio General Code of 1910, sec. 5332.)

Oklahoma exempts all transfers “made in good faith for religious, charitable, or educational purposes and uses." (Laws of 1915, ch. 162, sec. 4.)

Oregon exempts “ devises, bequests, legacies, and gifts to benevolent, charitable, or educational institutions incorporated within this State and actually engaged in this State in carrying out the objects and purposes for which so incorporated, or to any person or persons to be held in trust for any such institution in lieu thereof." (Act of 1905, ch. 178, sec. 1.)

Rhode Island exempts "all property or interests transferred to any corporation, association, or institution, located in Rhode Island, which is exempt from taxation by charter or under the laws of this State, or to any corporation, association, or institution, located outside of this State, which if located within this State would be exempt as aforesaid, or to any person in trust for the same, or to any city or town in this State for public purposes." (Laws of 1916, ch. 1339.)

South Dakota exempts "all property transferred to municipal corporations within the State for strictly county, town, or municipal purposes; also * property of the clear value of $2,500 transferred to a public hospital, academy, college, university, seminary of learning, church, or institution of purely charity within this State." (Laws of 1915, ch. 217.)

Tennessee exempts all property passing "to any religious, charitable, scientific, literary, or educational institution." (Laws of 1903, ch. 561.)

NOTE. This exemption has been held to violate the Tennessee constitutionIn re Speed, not yet reported.

Texas exempts property passing to "any public corporation or charitable, educational, or religious organization within this State when such bequest, gift, or devise is to be used for charitable, educational, or religious purposes within this State." (Laws of 1907, ch. 21, sec. 1.)

Vermont exempts property passing to a "bishop in his ecclesiastical capacity for religious uses within this State, or a city or town for cemetery purposes";