The Hermiston herald., July 31, 1930, Page 4, Image 4

PAGE FOUR
STATE TAX ;«£N ANO
> BANO IN ACCORD
Month« of Negotiation Lead to
Agreement on Changes Broad*
ening Method of State or Local
Taxation of National Banks.
NEW YORK.—Month« of conference
and negotiation between an American
Bankers Association special committee
and the Committee of the Association
of States on Bank Taxation have re­
sulted In an agreement on a form of
amendment to the Federal statute
dealing with state or local taxation of
national banks that “maintains the In­
tegrity of the protective principles of
the section and Is satisfactory to the
commissioners’ committee,” says the
American Bankers Association Journal.
Thomas B. Paton, the organisation’s
General Counsel, in making the an­
nouncement says that previously pro­
posed amendments to the statute,
which la known as Section 6219, have
been opposed when It was felt their
terms would enable any state to place
banks In a tax class by themselves.
"The law as It stands today," Mr.
Talon says, “permits state or local
taxation of national banks or their
shareholders In one or the other of
the four following forms: the share­
holders upon their shares,—a prop­
erty tax; the shareholders upon their
dividends,—a personal Income tax;
the bank upon Its net Income; the
bank according to or measured by Its
net lnoome. Only one form of tax can
be Imposed, except that the dividend
tax may be combined with the third or
fourth form If other corporations and
shareholders are likewise taxed.
"The conditions permitted are: the
tax on shares must be at no greater
rate than on other competing moneyed
capital; the Income tax on sharehold­
ers must be at no greater rate than
on net Income from other moneyed
capital; the tax on bank net Income
must be at no higher rate than on
other financial corporations nor the
highest rates on mercantile and manu­
facturing corporations doing business
within the state; the tas measured by
net bank lnoome Is subject to the
same limitations as the tax on net
Income of the bank but may Include
entire net Income from all sources."
States Seek Broader Law
I National banks and their sharehold-
ers are taxed in different states under
S diversity of systems, he says. The
C . 8. Supreme Court has held that the
low millage rate on Intangible person­
al property Is In violation of the pree-
ent law where It results In national
bank shares being taxed at a rate
greater than that assessed upon com­
peting moneyed capital. A number of
states, unwilling to use the income
methods permitted, had the alterna­
tive of either repoallng the Intangible
tax lows or limiting taxation of na­
tional bank shares at the Intangible
rate. Therefore thoy sought a broad­
ening of the permissive provisions.
Also, Mr. Paton points out, a Su­
preme Court decision held a state's
excise tax on corporations Invalid
whore It included income from Federal
and local government bonds In the ex­
cise measure. This created doubt as
to some state bank excise taxes. '
"Conferences have been held to
reach soma agreement which would
protect tho banka, satisfy the tax com­
missioners and avoid a contest in Con­
gress," Mr. Paton says. "From the
standpoint of the tax authorities, the
main objectives have been an amend­
ment which would permit certain
states to retain their low rate tax upon
Intangibles and at the same time de­
rive an adequate, but not excessive,
revenue from national bank shares,
and an amendmont which would per­
mit certain states to tax corporations
on their net income, excluding income
from tax-exempts, and at the same
time derive the same revenue from
the banks as heretofore. From the
standpoint of the banks. It has been
deemed imperative to maintain the
protective principles of Section B219.
The Changes Agreed On
1 "In the proposed amendment the ex­
isting provision permitting taxation of
bank shares no higher than the rate
upon competing moneyed capital has
been modified with respect to certain
Intangible tax states only by a provi­
sion under which, instead of the
moneyed capital limitation, the rate
ehall not be greater than the rate upon
the shares of other financial corpora­
tions, nor upon the net assets of Indi­
viduals, partnerships or associations
employed In the banking, loan or In­
vestment business, nor higher than
the rate assessed upon mercantile,
manufacturing and business corpora­
tions with head office In the state.
| "Also an added fifth alternative per­
missive method, designated as a spe­
cific tax, permits a state. In place of
an ad valorem tax on bank shares, to
add together total dividends paid the
preceding year and the Increase la
capital, surplus and undivided profits,
less additions to capital or surplus
paid In by stockholders, and to divide
this total by the number of shares.
The state may tax the share« based
upon this amount but not to exceed
the rate on other corporations In pro­
portion to their net profits.
| "This method Is designed for states
Which have heretofore taxed national
banks upon their entire net lnoome
from all sources at a proportionate
rate to that assessed upon business
corporations. The amount which la
the basis of the tax Is the equivalent
of the entire net Income from all
sources, but being assessed against
the shareholder upon his property In
¡the shame and not a tax upon the
sank. It la not open to the objection
pa aa Indirect tax op exempt income."
THE H gBM lSTpy HERALD, gBBMIMTOM. O BIG O I.
THURSDAY, JULY 31.