The Corporation Tax Law of August 5, 1909, c. 6, 36 Stat. 11,
112, applies to mining corporations.
Income, within the meaning of the Corporation Tax Law of 1909,
includes the proceeds of ores mined by a corporation from its own
premises.
A corporation mining ores from its own premises is not entitled
to deduct from the proceeds of the ores mined, by way of
depreciation under the Corporation Tax Law of 1909, the difference
between the gross proceeds of the sales of ores during the year and
the moneys expended in extracting, mining, and marketing the
ores.
Page 231 U. S. 400
The Corporation Tax Law of 1909, having been enacted before the
ratification of the Sixteenth Amendment, was not in any proper
sense an income tax law; but was an excise tax upon the conduct of
business in a corporate capacity measured by the income, with
certain qualifications prescribed by the act itself.
The process of mining ores is, in a sense, equivalent in its
results to a manufacturing process, and is "business" within the
Corporation Tax Law of 1909.
Income may be defined as the gain derived from capital, from
labor, or from both combined.
In fixing the income by which the excise on conducting business
should be measured, Congress has power to fix the gross income even
though such income involved a wasting of the capital as in mining
ores.
The Corporation Tax Law deals with corporations engaged in
actual business transactions and presumably conducted according to
business principles.
Whatever may be the proper method of computing depreciation
under the Corporation Tax Taw by reason of taking ore from the
premises of a mining corporation, the rules applicable to liability
of trespassers for taking ore have only a modified application
thereto.
Where the case is here under § 239, Judicial Code, and the whole
record has not been sent up, this Court, under Rule 37, deals with
the facts as certified, and not otherwise; under such
circumstances, it answers only the questions of law certified, and
does not go into questions of fact or of mixed law and fact.
The facts, which involve the construction of the Corporation Tax
Act of August 5, 1909, c. 6, 36 Stat. 11, 112, and its application
to mining corporations are stated in the opinion.
Page 231 U. S. 406
MR. JUSTICE PITNEY delivered the opinion of the Court.
This action was brought in the district court of the United
States by Stratton's Independence, Limited, a British corporation
carrying on mining operations in the State of Colorado upon mining
lands owned by itself, to recover certain moneys paid under protest
for taxes assessed and levied for the years 1909 and 1910 under the
provisions of the Corporation Tax Act, being § 38 of the Act of
August 5, 1909, 36 Stat. 11, 112, c. 6. The case was tried upon an
agreed statement of facts, from which it appears, as to the year
1909, that the company extracted from its lands during the year
certain ores bearing gold and other precious metals, which were
sold by it for sums largely in excess of the cost of mining,
extracting, and marketing the same; that the gross sales amounted
to $284,682.85, the cost of extracting, mining, and marketing
amounted to $190,939.42, and "the value of said ores so extracted
in the year 1909, when in place in said mine and before extraction
thereof, was $93,743.43." With respect to the operations of the
company for the year 1910, the agreed facts were practically the
same, except as to dates and amounts. It does not appear that the
so-called "value of the ore in place," or any other sum, was
actually charged off upon the books of the company as depreciation.
Upon this state of facts, each party moved the court for a directed
verdict at the same time presenting for consideration certain
questions of law, and among them the following:
"1. Is the value of the ore in place that was extracted
Page 231 U. S. 407
from the mining property of the plaintiff during the years in
question properly allowable as depreciation in estimating the net
income of the plaintiff subject to taxation under the Act of
Congress of August 5, 1909 (36 Stat., p. 11)?"
"2. Is the right to such credit affected by the fact that the
plaintiff does not carry such items on its books in a depreciation
account?"
The court directed a verdict in favor of the plaintiff with
respect to certain amounts that were undisputed and concerning
which no question is now raised, but directed a verdict in favor of
the defendant with respect to so much of the taxes paid as
represented the value in place of the ore that was extracted during
the years in question, overruling the contention that such value
was properly allowable as depreciation in estimating the net income
of the plaintiff. To this ruling proper exceptions were taken. The
resulting judgment having been removed by writ of error to the
circuit court of appeals, that court certifies that the following
questions of law are presented to it, the decision of which is
indispensable to a determination of the cause, and upon which it
therefore desires the instruction of this Court:
"I. Does § 38 of the Act of Congress entitled, 'An Act to
Provide Revenue, Equalize Duties, and Encourage the Industries of
the United States, and for Other Purposes,' approved August 5, 1909
(36 Stat. p. 11), apply to mining corporations?"
"II. Are the proceeds of ores mined by a corporation from its
own premises income within the meaning of the aforementioned act of
Congress?"
"III. If the proceeds from ore sales are to be treated as
income, is such a corporation entitled to deduct the value of such
ore in place and before it is mined as depreciation within the
meaning of § 38 of said Act of Congress? "
Page 231 U. S. 408
The provisions of § 38 are set forth in the margin.
*
The principal grounds upon which it is contended that the
questions ought to receive answers favorable to the company are
expressed in various forms;
viz., that mining corporations
are
sui generis, because the
Page 231 U. S. 409
natural enjoyment of mining lands necessarily results in the
waste of the estate; that the true value thereof is impossible of
accurate determination, and hence mining corporations are not
included in general classifications of corporations as such
classifications are employed in other legislation; that the
provisions of § 38 do not fit
Page 231 U. S. 410
the conditions of a mining corporation; that such corporations
are not in truth engaged in "carrying on business" within the
meaning of the act; that the application of the act to them results
in a tax upon the capital, while as applied to other corporations
it does not result in such a tax, the result being an inequality of
operation that is
Page 231 U. S. 411
inherently unjust; that the proceeds of mining operations do not
represent values created by or incident to the business activities
of such a corporation, and therefore cannot be a
bona fide
measure of a tax leveled at such corporate business activities;
that the proceeds of mining
Page 231 U. S. 412
operations result from a conversion of the capital represented
by real estate into capital represented by cash, and are in no true
sense income, and that to measure the tax by the excess of receipts
for one marketed over the cost of mining, extracting, and marketing
the same, is
Page 231 U. S. 413
equivalent to a direct tax upon the property, and hence
unconstitutional. Next, assuming the proceeds of ore are to be
treated as income within the meaning of the act, it is yet insisted
that such proceeds result solely from the depletion of capital, and
are
pari passu, and hence that a mining the provisions of
the act.
We do not think it necessary to follow the argument through all
its refinements. The pith of it is that mining corporations engaged
solely in mining upon their own premises have but one kind of
assets, and that, in the ordinary use of them, the enjoyment of the
assets and the wasting thereof are in direct proportion, and
proceed
pari passu, and hence that a mining corporation is
not engaged in business, properly speaking, but is merely occupied
in converting its capital assets from one form into another, and
that a tax upon the doing of such a business, where the tax is
measured by the value of the property owned by the corporation,
would be in excess of the constitutional limitations that existed
at the time of the passage of the Act of 1909, as laid down in
Pollock v. Farmers' Loan & Trust Co., 157 U.
S. 429, s.c.,
158 U. S. 158 U.S.
601.
The peculiar character of mining property is sufficiently
obvious. Prior to development, it may present to the naked eye a
mere tract of land with barren surface, and of no practical value
except for what may be found beneath. Then follow excavation,
discovery, development, extraction of ores, resulting eventually,
if the process be thorough, in the complete exhaustion of the
mineral contents so far as they are worth removing. Theoretically,
and according to the argument, the entire value of the mine, as
ultimately developed, existed from the beginning. Practically,
however, and from the commercial standpoint, the value -- that is,
the exchangeable or market value -- depends upon different
considerations. Beginning from little, when the existence,
character, and extent of
Page 231 U. S. 414
the ore deposits are problematical, it may increase steadily or
rapidly so long as discovery and development outrun depletion, and
the wiping out of the value by the practical exhaustion of the mine
may be deferred for a long term of years. While not ignoring the
importance of such considerations, we do not think they afford the
sole test for determining the legislative intent.
As has been repeatedly remarked, the Corporation Tax Act of 1909
was not intended to be and is not, in any proper sense, an income
tax law. This Court had decided in the
Pollock case that
the income tax law of 1894 amounted in effect to a direct tax upon
property, and was invalid because not apportioned according to
populations, as prescribed by the Constitution. The Act of 1909
avoided this difficulty by imposing not an income tax, but an
excise tax upon the conduct of business in a corporate capacity,
measuring, however, the amount of tax by the income of the
corporation, with certain qualifications prescribed by the act
itself.
Flint v. Stone Tracy Co. 220 U.
S. 107;
McCoach v. Minehill Co., 228 U.
S. 295;
United States v. Whitridge (decided at
this term,
ante, p.
231 U. S.
144).
For this and other obvious reasons, we are little aided by a
discussion of theoretical distinctions between capital and income.
Such refinements can hardly be deemed to have entered into the
legislative purpose. Of course, if it were demonstrable that to
read the act according to its letter would render it
unconstitutional, or glaringly unequal, or palpably unjust, a
reasonable ground would exist for construing it according to its
spirit, rather than its letter. But, in our opinion, the act is not
fairly open to this criticism. It is not correct, from either the
theoretical or the practical standpoint, to say that a mining
corporation is not engaged in business, but is merely occupied in
converting its capital assets from one form into another. The sale
outright of a mining property might be fairly described as a mere
conversion of the capital from land
Page 231 U. S. 415
into money. But when a company is digging pits, sinking shafts,
tunneling, drifting, stoping, drilling, blasting, and hoisting
ores, it is employing capital and labor in transmuting a part of
the realty into personalty, and putting it into marketable form.
The very process of mining is, in a sense, equivalent in its
results to a manufacturing process. And, however the operation
shall be described, the transaction is indubitably "business"
within the fair meaning of the Act of 1909, and the gains derived
from it are properly and strictly the income from that business;
for "income" may be defined as the gain derived from capital, from
labor, or from both combined, and here we have combined operations
of capital and labor. As to the alleged inequality of operation
between mining corporations and others, it is, of course, true that
the revenues derived from the working of mines result to some
extent in the exhaustion of the capital. But the same is true of
the earnings of the human brain and hand when unaided by capital,
yet such earnings are commonly dealt with in legislation as income.
So it may be said of many manufacturing corporations that are
clearly subject to the Act of 1909, especially of those that have
to do with the production of patented articles; although it may be
foretold from the beginning that the manufacture will be profitable
only for a limited time at the end of which the capital value of
the plant must be subject to material depletion, the annual gains
of such corporations are certainly to be taken as income for the
purpose of measuring the amount of the tax.
It seems to us that the first two questions certified must be
answered in the affirmative principally for two reasons. First,
because mining corporations are within the general description of §
38, which comprises
"
every corporation, joint stock company, or association
organized for profit, and having a capital stock represented by
shares, . . . and engaged in business in any state or
territory of the United
Page 231 U. S. 416
States,"
and, secondly, because the act
specifies those classes of
corporations that are to be exempt from its operation, and
mining corporations are not among them. Those exempted are labor,
agricultural, or horticultural organizations, fraternal beneficiary
societies, orders or associations operating under the lodge system,
domestic building and loan associations, corporations and
associations organized and operated for religious, charitable, or
educational purposes, etc. Moreover, the section imposes "a special
excise tax with respect to the carrying on or doing business by
such corporation," etc. That mining companies are doing business
within the fair intent and meaning of this clause seems to us
entirely plain for reasons already given. The conduct of such
business results in profit, for it cannot be seriously contended
that the ores are not worth more at the mine mouth than they were
worth in the ground plus the cost of mining. Corporations engaged
in such business share in the benefits of the federal government,
and ought as reasonably to contribute to the support of that
government as corporations that conduct other kinds of profitable
business.
As to what should be deemed "income" within the meaning of § 38,
it, of course, need not be such an income as would have been
taxable as such, for at that time (the Sixteenth Amendment not
having been as yet ratified) income was not taxable as such by
Congress without apportionment according to population, and this
tax was not so apportioned. Evidently Congress adopted the income
as the measure of the tax to be imposed with respect to the doing
of business in corporate form because it desired that the excise
should be imposed, approximately at least, with regard to the
amount of benefit presumably derived by such corporations from the
current operations of the government. In
Flint v. Stone Tracy
Co., 220 U. S. 107,
220 U. S. 165,
it was held that Congress, in exercising the right to tax a
legitimate subject of taxation as a franchise
Page 231 U. S. 417
or privilege, was not debarred by the Constitution from
measuring the taxation by the total income, although derived in
part from property which, considered by itself, was not taxable. It
was reasonable that Congress should fix upon gross income, without
distinction as to source, as a convenient and sufficiently accurate
index of the importance of the business transacted. And, from this
point of view, it makes little difference that the income may arise
from a business that theoretically or practically involves a
wasting of capital.
Moreover, Congress evidently intended to adopt a measure of the
tax that should be easy of ascertainment and simply and readily
applied in practice. The act prescribed that the tax should be
"equivalent to one percentum upon the entire net income over and
above $5,000 received by it from all sources during such year,
exclusive of amounts received by it as dividends upon stock of
other corporations,"
etc., or, with respect to foreign corporations, "upon the amount
of net income over and above $5,000, received by it from business
transacted and capital invested within the United States," etc. And
the net income was to be ascertained by taking, first, the "gross
amount of the income of such corporation . . . received within the
year from all sources," or, in the case of foreign corporations,
"from business transacted and capital invested within," etc., and
deducting therefrom losses sustained, interest paid, etc. And the
return was to be made under oath by the president and treasurer, or
other officers having like duties, indicating in the clearest
manner that it was to set forth data that with proper accounting
would appear upon the books of the corporation. We have no
difficulty, therefore, in concluding that the proceeds of ores
mined by a corporation from its own premises are to be taken as a
part of the gross income of such corporation. Congress no doubt
contemplated that such corporations, amongst others, were doing
business
Page 231 U. S. 418
with a wasting capital, and for such wastage they made due
provision in declaring that from the gross income there should be
deducted (
inter alia) "all losses actually sustained
within the year," including "a reasonable allowance for
depreciation of property, if any," etc.
This brings us to the third question, which is whether such a
mining corporation is entitled to deduct the value of ore in place
and before it is mined, as depreciation within the meaning of § 38.
This question, however, is to be read in the light of the issue
that is presented to the circuit court of appeals for
determination, as recited in the certificate. From that
certificate, it appears that the case was submitted to the trial
court and a verdict directed upon an agreed statement of facts, and
in that statement, the gross proceeds of the sale of the ores
during the year were diminished by the moneys expended in
extracting, mining, and marketing the ores, and the precise
difference was taken to be the value of the ores when in place in
the mine.
That we do not misconstrue the certificate, and that, on the
contrary, the parties advisedly adopted this definition of "value
of the ore in place," is apparent not only from the form of the
agreed statement of facts, but from the arguments presented here in
behalf of the plaintiff. The contention is that, if the proceeds of
ore sales are to be treated as income, the value of the ore in
place and before it is mined is to be deducted as depreciation, and
that such value is to be arrived at by the process indicated.
Briefs submitted in behalf of
amici curiae have suggested
other modes for determining depreciation, but plaintiff stands
squarely upon the ground indicated by the certificate, as the
following excerpts from the brief will show:
"Assuming, then, that the proceeds of ore are to be treated as
income within the meaning of the act, we submit that such proceeds
result solely from depletion of capital, and are therefore
deductible as depreciation under the
Page 231 U. S. 419
provisions [of the act] set out above. . . . And we contend
that, if a part of the capital assets are removed and sold, the
property, as it originally stood, is actually depreciated in value
to the exact extent of such removal. As an actual matter of
experience, the original cost of the property must, from its very
nature, be highly speculative. The values in the property are
invisible and impossible of determination. They may be worth many
times the cost, or they may be worth nothing. . . . The value of
the ore in sight does represent a part of the capital, but there is
no warrant for limiting it to this amount, nor is there any warrant
for limiting the value of ore bodies thereafter discovered in any
case to a standard fixed before their discovery, and therefore, of
necessity, purely conjectural. . . . The true capital of a mining
corporation is the true value of the minerals within the limits of
its properties, irrespective of developed ore bodies or those known
to exist at any one moment. Investigation or development may
demonstrate the existence of values theretofore unknown, but this
results in no addition to the actual capital. It remains the same
as it was before. . . ."
And again:
"With every dollar's worth removed, the land from which it is
taken contains that much less of value; the corporation owns
precisely that much less real property than it possessed before;
for every dollar of cash received, it relinquishes an equivalent
amount of ore in place, and makes no gain or profit by the
exchange."
Reading these extracts in connection with what is contended
respecting the first and second questions -- to the effect that
mining corporations are not "doing business," but are merely
converting their capital assets from one form into another -- it is
clear that a definition of the "value of the ore in place" has been
intentionally adopted that excludes all allowance of profit upon
the process of mining, and attributes the entire profit upon the
mining
Page 231 U. S. 420
operations to the mine itself. In short, the parties propose to
estimate the depreciation of a mining property attributable to the
extraction of ores according to principles that would be applicable
if the ores had been removed by a trespasser.
It is at the same time obvious that any method of stating the
account that excludes all element of gain from the process of
mining must, through one process or another, exempt mining
companies from liability to tax under the Act of 1909 with respect
to their mining operations. And so, an affirmative answer to the
third question as propounded would be the same in effect as an
affirmative answer to the first or the second. For it is a matter
of little or no moment whether it is to be said (a) that mining
corporations are not "engaged in business" at all, or (b) that they
are engaged in business, but the proceeds of ore mined are not
income, or (c) that such proceeds are income, but that there must
be allowed as depreciation all that part of the proceeds which
remains after paying the bare outlays of the business. In either
case, mining corporations would be exempt from the tax.
In our opinion, there are at least two insuperable obstacles in
the way of returning an affirmative answer to the third question as
certified.
In the first place, it is fallacious to say that, whatever may
have been the original cost of a mining property or the cost of
developing it, if in fact it afterwards yield ores aggregating many
times its original cost or market value, this result merely proves
and at the same time measures the intrinsic value that existed from
the beginning. We are here seeking the correct interpretation and
construction of an act of legislation that was at least designed to
furnish a practicable mode of raising revenue for the support of
the government, and to do this in part by imposing annual taxes
upon corporations organized for profit, and by measuring the amount
of the contribution
Page 231 U. S. 421
to be required from each corporation according to its annual
income. The act deals with corporations engaged in actual business
transactions, and presumably conducted according to ordinary
business principles. It was, of course, contemplated that the
income might be derived from the employment of property in
business, and that this property might become more or less
exhausted in the process, and because of this, a reasonable
allowance was to be made for depreciation of it, if any. But
plainly, we think, the valuation of the property and the amount of
the depreciation were to be determined not upon the basis of latent
and occult intrinsic values, but upon considerations that affect
market value and have their influence upon men of affairs charged
with the management of the business and accounting of corporations
that are organized for profit and are engaged in business for
purposes of profit.
And secondly, assuming the depletion of the mineral stock is an
element to be considered in determining the reasonable depreciation
that is to be treated as a loss in the ascertainment of the net
income of a mining company under the act, we deem it quite
inadmissible to estimate such depletion as if it had been done by a
trespasser, to whom all profit is denied.
With respect to the proper measure of damages where ore has been
unlawfully mined by one person upon the land of another, there is
much conflict of authority. Different modes of determining the
damages have been resorted to, dependent sometimes upon the form of
the action, whether trespass or trover, sometimes upon whether the
case arose at law or in equity, and often upon whether the trespass
was willful or inadvertent.
See Woodenware Co. v. United
States, 106 U. S. 432, and
cases cited;
Benson Mining Co. v. Alta Mining Co.,
145 U. S. 428,
145 U. S. 434;
Pine River Logging Co. v. United States, 186 U.
S. 279,
186 U. S. 293;
United States v. St. Anthony R. Co., 192 U.
S. 524,
192 U. S. 542;
Martin v. Porter (1839), 5 M. & W. 351,
Page 231 U. S. 422
352;
Jegon v. Vivian (1871), L.R. 6 Ch. 742, 760, 40
L.J.Ch. N.S. 389, 19 W.R. 365;
Livingstone v. Rawyards Coal
Co. (1880), 5 App.Cas. 25, 34, 42 L.T., N.S. 334;
Coal
Creek M. & M. Co. v. Moses, 15 Lea 300, 54 Am.Rep. 415;
Winchester v. Craig, 33 Mich. 205.
See also
English and American Notes to
Martin v. Porter and
Jegon v. Vivian, 17 Eng.Rul.Cas. 873, 876, etc. We are not
at this time concerned with this vexed question beyond saying that
the rules applicable to trespassers can have only a modified
application to the case of a mine owner conducting mining
operations upon its own lands, where the question is what is the
income derived from the business? -- and the incidental question
what is the reasonable depreciation, if any, of the mining
property?
What has been said necessitates a negative answer to the third
question as certified. And we shall not go further into the
question of depreciation. The case comes here under § 239, Judicial
Code (derived from § 6 of the Evarts Act, March 3, 1891, 26 Stat.
828, c. 517). It is established that, in the exercise of this
jurisdiction, this Court, unless it see occasion to require the
whole record to be sent up for consideration, is to make answer
respecting the several propositions of law that are certified, and
is not to go into questions of fact, or of mixed law and fact. Our
Rule 37 requires that the certificate shall contain a proper
statement of the facts upon which the questions of law arise, and
we deal with the facts as thus certified, and not otherwise.
Graver v. Faurot, 162 U. S. 435,
162 U. S. 437;
Cross v. Evans, 167 U. S. 60,
167 U. S. 63;
United States v. Union Pacific Railway, 168 U.
S. 505,
168 U. S. 512;
Emsheimer v. New Orleans, 186 U. S.
33;
Cincinnati, Hamilton Railroad v. McKeen,
149 U. S. 259.
It would therefore be improper for us at this time to enter into
the question whether the clause, "a reasonable allowance for
depreciation of property, if any," calls for an allowance on that
account in making up the tax, where
Page 231 U. S. 423
no depreciation is charged in practical bookkeeping; or the
question whether depreciation, when allowable, may properly be
based upon the depletion of the ore supply estimated otherwise than
in the mode shown by the agreed statement of facts herein, for to
do this would be to attribute a different meaning to the term
"value of the ore in place" than the parties have put upon it, and
to instruct the circuit court of appeals respecting a question
about which instruction has not been requested, and concerning
which it does not even appear that any issue is depending before
that court.
The first and second questions certified will be answered in
the affirmative, and the third question will be answered in the
negative.
MR. CHIEF JUSTICE WHITE, MR. JUSTICE McKENNA, and MR. JUSTICE
HOLMES dissent with respect to the answer made to the third
question.
*
"SEC. 38. That
every corporation, joint stock company,
or association,
organized for profit and having a capital stock
represented by shares, and every insurance company, now or
hereafter organized under the laws of the United States or of any
state or territory of the United States, or under the Acts of
Congress applicable to Alaska or the District of Columbia, or now
or hereafter
organized under the laws of any foreign country,
and engaged in business in any state or territory of the United
States, or in Alaska or in the District of Columbia,
shall
be subject to pay annually a special excise tax with respect to the
carrying on or doing business by such corporations, joint
stock company or association, or insurance company, equivalent to
one percentum upon the entire net income over and above five
thousand dollars received by it from all sources during such year,
exclusive of amounts received by it as dividends upon stock of
other corporations, joint stock companies or associations, or
insurance companies, subject to the tax hereby imposed; or
if
organized under the laws of any foreign country, upon the amount of
net income over and above five thousand dollars received by it from
business transacted and capital invested within the United
States and its territories, Alaska, and the District of
Columbia during such year, exclusive of amounts so received by it
as dividends upon stock of other corporations, joint stock
companies or associations, or insurance companies, subject to the
tax hereby imposed;
provided, however, that nothing in
this section contained shall apply to labor, agricultural or
horticultural organizations, or to fraternal beneficiary societies,
orders, or associations operating under the lodge system, and
providing for the payment of life, sick, accident, and other
benefits to the members of such societies, orders, or associations,
and dependents of such members, nor to domestic building and loan
associations, organized and operated exclusively for the mutual
benefit of their members, nor to any corporation or association
organized and operated exclusively for religious, charitable, or
educational purposes, no part of the net income of which inures to
the benefit of any private stockholder or individual."
Second.
Such net income shall be ascertained by deducting
from the gross amount of the income of such corporation, joint
stock company or association, or insurance company,
received
within the year from all sources, (first) all the ordinary and
necessary expenses actually paid within the year out of income
in the maintenance and operation of its business and properties,
including all charges such as rentals or franchise payments,
required to be made as a condition to the continued use or
possession of property; (second)
all losses actually sustained
within the year and not compensated by insurance, or otherwise
including a reasonable allowance for depreciation of property, if
any, and in the case of insurance companies the sums other
than dividends, paid within the year on policy and annuity
contracts, and the net addition, if any, required by law to be made
within the year to reserve funds; (third) interest actually paid
within the year on its bonded or other indebtedness to an amount of
such bonded and other indebtedness not exceeding the paid-up
capital stock of such corporation, joint stock company or
association, or insurance company, outstanding at the close of the
year, and in the case of a bank, banking association, or trust
company, all interest actually paid by it within the year on
deposits; (fourth) all sums paid by it within the year for taxes
imposed under the authority of the United States or of any state or
territory thereof, or imposed by the government of any foreign
country as a condition to carrying on business therein; (fifth) all
amounts received by it within the year as dividends upon stock of
other corporations, joint stock companies or associations, or
insurance companies, subject to the tax hereby imposed;
provided, that
in the case of a corporation,
joint stock company or association, or insurance company,
organized under the laws of a foreign country, such net income
shall be ascertained by deducting from the gross amount of its
income received within the year from business transacted and
capital invested within the United States and any of its
territories, Alaska, and the District of Columbia, (first)
all
the ordinary and necessary expenses actually paid within the year
out of earnings in the maintenance and operation of its
business and property within the United States and its territories,
Alaska, and the District of Columbia, including all charges such as
rentals or franchise payments required to be made as a condition to
the continued use or possession of property; (second)
all
losses actually sustained within in the year in business conducted
by it within the United States or its territories, Alaska, or
the District of Columbia, not compensated by insurance or
otherwise,
including a reasonable allowance for depreciation of
property, if any, and in the case of insurance companies the
sums other than dividends, paid within the year on policy and
annuity contracts, and the net addition, if any, required by law to
be made within the year to reserve funds; (third) interest actually
paid within the year on its bonded or other indebtedness to an
amount of such bonded and other indebtedness, not exceeding the
proportion of its paid-up capital stock outstanding at the close of
the year, which the gross amount of its income for the year from
business transacted and capital invested within the United States
and any of its territories, Alaska, and the District of Columbia
bears to the gross amount of its income derived from all sources
within and without the United States; (fourth) the sums paid by it
within the year for taxes imposed under the authority of the United
States or of any State of territory thereof; (fifth) all amounts
received by it within the year as dividends upon stock of other
corporations, joint stock companies or associations, and insurance
companies, subject to the tax hereby imposed. In the case of
assessment insurance companies the actual deposit of sums with
state or territorial officers, pursuant to law, as additions to
guaranty or reserve funds, shall be treated as being payments
required by law to reserve funds.
Third. There shall be deducted from the amount of the net income
of each of such corporations, joint stock companies or
associations, or insurance companies, ascertained as provided in
the foregoing paragraphs of this section, the sum of five thousand
dollars, and said tax shall be computed upon the remainder of said
net income of such corporation, joint stock company or association,
or insurance company for the year ending December 31, 1909, and for
each calendar year thereafter, and
on or before the first day
of March, 1910, and the first day of March in each year thereafter,
a true and accurate return under oath or affirmation of its
president, vice-president, or other principal officer, and its
treasurer or assistant treasurer, shall be made by each of the
corporations, joint stock companies or associations, and
insurance companies,
subject to the tax imposed by this
section to the collector of internal revenue for the district
in which such corporation, joint stock company or association, or
insurance company, has its principal place of business, or,
in
the case of a corporation, joint stock company or association,
or insurance company,
organized under the laws of a foreign
country, in the place where its principal business is carried on
within the United States, in such form as the Commissioner of
Internal Revenue, with the approval of the Secretary of the
Treasury, shall prescribe, setting forth, (first) the total amount
of the paid-up capital stock of such corporation, joint stock
company or association, or insurance company, outstanding at the
close of the year; (second) the total amount of the bonded and
other indebtedness of such corporation, joint stock company or
association, or insurance company at the close of the year;
(third) the gross amount of the income of such corporation,
joint stock company or association, or insurance company, received
during such year from all sources, and if organized under the laws
of a foreign country the gross amount of its income received within
the year from business transacted and capital invested within the
United States and any of its territories. Alaska, and the
District of Columbia; also the amount received by such corporation,
joint stock company or association, or insurance company, within
the year by way of dividends upon stock of other corporations,
joint stock companies or associations or insurance companies,
subject to the tax imposed by this section; (fourth) the total
amount of all the ordinary and necessary expenses actually paid out
of earnings in the maintenance and operation of the business and
properties of such corporation, joint stock company or association,
or insurance company, within the year, stating separately all
charges such as rentals or franchise payments required to be made
as a condition to the continued use or possession of property, and,
if organized under the laws of a foreign country, the amount so
paid in the maintenance and operation of its business within the
United States and its territories, Alaska, and the District of
Columbia;
(fifth) the total amount of all losses actually
sustained during the year, and not compensated by insurance or
otherwise,
stating separately any amounts allowed for
depreciation of property, and in the case of insurance
companies the sums other than dividends, paid within the year on
policy and annuity contracts and the net addition, if any, required
by law to be made within the year to reserve funds,
and in the
case of a corporation, joint stock company or association, or
insurance company,
organized under the laws of a foreign
country, all losses actually sustained by it during the year, in
business conducted by it within the United States or its
territories, Alaska, and the District of Columbia, not compensated
by insurance or otherwise,
stating separately any amounts
allowed for depreciation of property, and in the case of
insurance companies the sums other than dividends, paid within the
year on policy and annuity contracts and the net addition, if any,
required by law to be made within the year to reserve fund; (sixth)
the amount of interest actually paid within the year on its bonded
or other indebtedness to an amount of such bonded and other
indebtedness not exceeding the paid-up capital stock of such
corporation, joint stock company or association, or insurance
company, outstanding at the close of the year, and in the case of a
bank, banking association, or trust company, stating separately all
interest paid by it within the year on deposits; or in the case of
a corporation, joint stock company or association, or insurance
company, organized under the laws of a foreign country, interest so
paid on its bonded or other indebtedness to an amount of such
bonded and other indebtedness not exceeding the proportion of its
paid-up capital stock outstanding at the close of the year, which
the gross amount of its income for the year from business
transacted and capital invested within the United States and any of
its territories, Alaska, and the District of Columbia, bears to the
gross amount of its income derived from all sources within and
without the United States; (seventh) the amount paid by it within
the year for taxes imposed under the authority of the United States
or any state or territory thereof, and separately the amount so
paid by it for taxes imposed by the government of any foreign
country as a condition to carrying on business therein; (eighth)
the net income of such corporation, joint stock company or
association, or insurance company, after making the deductions in
this section authorized. All such returns shall, as received, be
transmitted forthwith by the collector to the Commissioner of
Internal Revenue.