State Of New York et al v. Mnuchin et al

Filing 47

DECLARATION of Owen T. Conroy in Support re: 44 CROSS MOTION for Summary Judgment .. Document filed by State Of Connecticut, State Of New York, State of Maryland, State of New Jersey. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30, # 31 Exhibit 31, # 32 Exhibit 32, # 33 Exhibit 33, # 34 Exhibit 34, # 35 Exhibit 35, # 36 Exhibit 36, # 37 Exhibit 37, # 38 Exhibit 38, # 39 Exhibit 39, # 40 Exhibit 40, # 41 Exhibit 41, # 42 Exhibit 42, # 43 Exhibit 43, # 44 Exhibit 44, # 45 Exhibit 45, # 46 Exhibit 46, # 47 Exhibit 47, # 48 Exhibit 48, # 49 Exhibit 49, # 50 Exhibit 50, # 51 Exhibit 51, # 52 Exhibit 52, # 53 Exhibit 53, # 54 Exhibit 54, # 55 Exhibit 55, # 56 Exhibit 56, # 57 Exhibit 57, # 58 Exhibit 58, # 59 Exhibit 59, # 60 Exhibit 60, # 61 Exhibit 61, # 62 Exhibit 62, # 63 Exhibit 63, # 64 Exhibit 64, # 65 Exhibit 65, # 66 Exhibit 66, # 67 Exhibit 67, # 68 Exhibit 68, # 69 Exhibit 69, # 70 Exhibit 70, # 71 Exhibit 71, # 72 Exhibit 72, # 73 Exhibit 73, # 74 Exhibit 74, # 75 Exhibit 75, # 76 Exhibit 76, # 77 Exhibit 77, # 78 Exhibit 78, # 79 Exhibit 79, # 80 Exhibit 80, # 81 Exhibit 81, # 82 Exhibit 82, # 83 Exhibit 83, # 84 Exhibit 84, # 85 Exhibit 85, # 86 Exhibit 86, # 87 Exhibit 87, # 88 Exhibit 88, # 89 Exhibit 89, # 90 Exhibit 90, # 91 Exhibit 91, # 92 Exhibit 92, # 93 Exhibit 93, # 94 Exhibit 94, # 95 Exhibit 95, # 96 Exhibit 96, # 97 Exhibit 97, # 98 Exhibit 98, # 99 Exhibit 99, # 100 Exhibit 100, # 101 Exhibit 101, # 102 Exhibit 102, # 103 Exhibit 103, # 104 Exhibit 104, # 105 Exhibit 105, # 106 Exhibit 106)(Conroy, Owen)

Exhibit 31

SIXTY-SEVENTH CONGRESS.

SEss. 1.

CH. 136.

1921.

289

IMOOMS TAX.
public utility, no tax shall be levied under the provisions of this title
upon the income derived from the operation of such public utility, so
far as the payment thereof wil[ impose a loss or burden upon such No personal exempState, Territory, District of Columbia, or political subdivision; but tion.
this provision is not intended and shall not be construed to confer
upon such person any financial gain or exemption or to relieve such
person from the payment of a tax as provided for in this title upon the
part or portion of such income to which such person is entitled under
such contract;
(8) The income of a no esident alien or foreign corporation which etcNonresident aliens
from earningst
consists exclusively of ea rngs derived from the operation of a ship or foreign sps.
Condition.
ships documented underthe aws of a foreign country which grants
an equivalent exemptiodi to citizens of the United States and to corporations organized im the United States;
War risk and reha(9) Amounts received as com sensation, family allotments and bilitaton alowances,
allowances under the provisions of the War Risk Isurance and the etc., and pensions.
Vocational Rehabilitation Acts, or as pensions from the United States
for service of the beneficiary or another in the military or naval forces
of the United States in'time of war;
From building
(10) So much of the amount received by an individual after De- aociat.ons not etc
ex.
cember 31, 1921, and before January 1, 1927, as dividends or interest ceedInj 13W.
from domestic building And loan associations, operated exclusively for Termfination.
the purpose of making loans to members, as does not exceed $300;
Rent
(11) The rental value of a dwelling house and appurtenances thereof dwelling. of ministers
furnished to a minister of the gospel as part of his compensation;
Reepts of
(12) The receipts of shipowners' mutual protection and indemnity owners mutual ship.
assoassociations, not organize for profit, and no part of the net earnings ciations.
of which inures to the benefit of any private stockholder or member, Restriction, etc.
but such corporations shall be subject as other persons to the tax
Post, p. s.
upon their net income from interest, dividends, and rents,
6
Nonresidentaliens.
(c) In the case of a nonresident alien individual, gross income Gross Income means
means only the gross income from sources within the TITnited States, from Umted States
sources.
determined under the provisions of section 217.

DEDUCTIONS ALLOWED INDIVIDUALS.

SEO. .214. (a) That in computing net income there shall be allowed

Deductions allowed.
Items specified.

as deductions:
(1) All the ordinary and necessary expenses paid or incurred during Business expenses.
the taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal
Traveling, etc., inservices actually rendered traveling expenses (including the entire cluded.
amount expended for meals and lodging) while away from home in
the pursuit of a trade or business; and rentals or other payments
required to be made as-a condition to the continued use or possession,
for purposes of the trade or business, of property to which the taxpayer
has not taken or is not taking title or in which he has no equity o
(2) All interest paid or accrued within the taxable year on indebt- Interest on debts.
Exception.
edness, except on indebtedness incurred or continued to purchase or
carry obligations or securities (other than obligations of the United
States issued after September 24, 1917, and originall subscribed for
by the taxpayer) the interest upon which is wholly exempt from
taxation under this title;
(3) Taxes paid or accrued within the taxable year except (a) in- Taxes aId.
come, war-profits, and excess-profits taxes imposed by the authority
of the United States, (b) so much of the income, war-profits and
excess-profits taxes, imposed by the authority of any foreign country
or possession of the ITited States, as is owed as a credit under
section 222, (c) taxes assessed against local benefits of a kind tending
to increase the value of the property assessed, and (d) taxes imposed

240

SIXTY-SEVENTH CONGRESS.

Seas. I. CH. 136.

1921.

upon the taxpayer upon his interest as shareholder or member of a
reimburseEstate,etc., ~t eC.
. corporation,the taxpayer. For the purpose of this paragraph estate,
ment from which are paid by the corporation without
inheritance, legacy, and succession taxep accrue on the due date
thereof except as otherwise provided by the law of the jurisdiction
Imposing such taxes;
(4) Losses sustained during the taxable year and not compensated
for by insurance or otherwise, if incurred in trade or business;
(5) Losses sustained during the taxable year and not compensated
w oi ess.ed
for by insurance or otherwise, if incurred in any transaction entered
into for profit, though not connected with the trade or business;
but in the case of a nonresident alien individual only if and to the
extent that the profit, if such transaction had resulted in a profit,
Restriction as to would be taxable under this title. No deduction shall be allowed
sales ofstock.
under this paragraph for any loss claimed to have been sustained in
any sale or other disposition of shares of stock or securities made
after the passage of this Act where it appears that within thirty days
before or after the date of such sale or other disposition the taxpayer
has acquired (otherwise than by bequest or inheritance) substantially
identical property, and the property so acquired is held by the taxAlnowance for part payer for any period after such sale or other disposition. If such
of loss.
acquisition is to the extent of part only of substantially identical
property, then only a proportionate part of the loss shall be disallowed;
S
losses, not
(6) Losses sustained during the taxable year of property not conconnendwt
h
nected with the trade or business (but in the case of a nonresident
business.
alien individual only property within the United States) if arising
from fires, storms shipwreck, or other casualty, or from theft, and if
Assigned tor
in not compensated for by insurance or otherwise. Losses allowed under
which sustain.
paragraphs (4), (5), and (6) of this subdivision shall be deducted as
of the taxable year in which sustained unless, in order to clearly
reflect the income, the loss should, in the opinion of the Commissioner,
JIergr
need be accounted for as of a different period. In case of losses arising
befrom destruction of or damage to property, where the property so
destroyed or damaged was acquired before March 1, 1913, the deduction shall be computed upon the basis of its fair market price or
value as of March 1, 1913;
Worthless debts.
(7) Debts ascertained to be worthless and charged off within the
taxable year (or, in the discretion of the Commissioner, a reasonable
addition to a reserve for bad debts); and when satisfied that a debt
Recoveredin part
S Orecoverable only in part, the Commissioner may allow such debt
to be charged off in part;
Exhastion, tc., of
(8) A reasonable allowance for the exhaustion, wear and tear of
business property".property
Incos TAX.

used in the trade or business, including a reasonable allow-

ance for obsolescence. In the case of such property acquired before
March 1, 1913, this deduction shall be computed upon the basis of its
fair market price or value as of March 1, 1913;
r world

(9)
o
,oaton In

war uses.

Lumltanon.

the case of buildingsmachinery, equipment, or other

facilities, constructed, erected, installed, or acquired, on or after April
6, 1917, for the production of articles contributing to the prosecution
of the war against the German Government, and in the case of
vessels constructedor acquired on or after such date for the transportation of articles or men contributing to the prosecution of such
war, there shall be allowed, for any taxable year ending before March
8, 1924 (if claim therefor was made at the time of filing return for the
taxable year 1918, 1919, 1920, or 1921) a reasonable deduction for the
amortization of such part of the cost of such facilities or vessels as
has been borne by the taxpayer, but not again including any amount

otherwise allowed under this title or previous Acts of Congress as a

SIXTY-SEVENTH CONGRESS.

SMs. I.

CH. 136.

241

1921.

deduction in computing net income. At any time before March 3, RdeotoTAn of
1924, the Commissioner may and at the request of the taxpayer shall tax, etc., allowed be.
usMBFdh 3, 21.
reexamine the return, and ihe then finds as a result of an appraisal
or from other evidence that the deduction originally allowed was
incorrect, the income, war-profits, and excess-profits taxes for the
year or years affected shall beredetermined; and the amount of tax Paywent or refund.
due upon such redetermination, if any, shall be paid upon notice and
demand by the collector or the amount of tax overpaid, if any shall
," m.
be credited or refundeA to the taxpayer in accordance with the
provisions of section 252;
w
(10) In the case of mines, oil and gas wells, other natural deposits, bet
and timber, a reasonable allowance for depletion and for depreciation Alowance for depleof improvements, according to the peculiar conditions in each case,
based upon cost including cost of development not otherwise dems it acured
ducted:Provided, That in the- case of such properties acquired prior
the fair market value of the property or the tax- prior to March 1,1013.
to March 1, 1913
payer's interest therein) on that date shall be taken in leu of cost up
to that date: Providedfurther, That in the case of mines, oil and gas Discovered tsereawells, discovered by the taxpayer, on or after March 1, 1913, and not te.
acquired as the result of purchase of a proven tract or lease, where
the fair market value of the property is materially disproportionate
to the cost; the depletion allowance shall be based upon the fair
market value of the property at the date of the discovery, or within Allowance based on
thirty days thereafter: And provided further, That such depletion ivery value.
allowance based on discovery value shall not exceed the net income,
computed without allowance for depletion, from the property ppon
which the discovery is made except where such net income so computed is less than the depletion allowance based on cost or fair Regulations to be
market value as of March 1, 1913; such reasonable allowance in all prescribed.
the above cases to be made under rules and regulations to be prescribed by the Commissioner, with the approval of the Secretdry. Leases
In the case of leases the deductions allowed by this paragraph shall
be equitably apportioned between the lessor and lessee;
etc.
(11) Contributions or gifts made within the taxable year to or for
rubio uses.
the use of: (A) The United States, any State Territory, or any
political subdivision thereof, or the District of Columbia, for ex- Community chests,
clusiveoly public purposes; (B) any corporation, or communitychest, reugixus, sientifc,
fund, or foundation, organized and-operated exclusively for religious, etc.,organizations,etc.
charitable, scientific, literary, or educational purposes, including posts
of the American Legion or the women's auxilary units thereof, or Condition.
for the prevention of cruelty to children or animals, no part of theCi
net earmngs of which inures to the benefit of any private stockholder Vocational rehabili.
or individual; or (0) the special fund for vocational rehabilitation tato nfud.
authorized by section 7 of the Vocational Rehabilitation Act; to anVo40.1
amount which in all the above cases combined does not exceed 15 amit.
per centum of the taxpayer's net income as computed without the flynonresidentallen
benefit of this paragaph. In case of a nonresident alien individual individuals.
this deduction shall e allowed only as to contributions or gifts made
to domestic corporations, or to community chests, funds, or foundations, created in the United States, or to such vocational rehabilitation
fund. Such contributions or gifts shall be allowable as deductions
only if verified under rules and regulations prescribed by the Commissioner, with the approval of the Secretary;r'oedfomno-

(12) If property is compulsorily or involuntarily converted into
cash or its equivalent as a result of (A) its destruction in whole or in
part, (B) theft or seizure, or (C) an exercise of the power of requisition or condemnation, or the threat or imminence thereof; and if
the taxpayer proceeds forthwith in good faith, under regulations
prescribed by the Commissioner with the approval of the Secretary,
to expend the proceeds of such conversion in the acquisition of other

untaryco
prowety.

neso of

Conditins onuse of.

242

SIXTY-SEVENTH CONGRESS.

Szss. I. OH, 136.

1921.

property of a character similar or related in service or use to the
property so converted, or in the acquisition of 80 per centum or
more of the stock or shares of a corporation owning such other property or in the establishment of a replacement fund, then there shall
be allowed as a deduction such portion of the gain derived as the
portion of the proceeds so expended bears to the entire proceeds.
to prior 'he provisions of this paragraph prescribing the conditions under
which a deduction may be taken in respect of the proceeds or gains
derived from the compulsory or involuntary conversion of property
into cash or its equivalent, shall apply so far as may be practicable
to the exemption or exclusion of such proceeds or gains from gross
Allowance to non- income under prior income, war-profits and excess-profits tax acts.
(b) In the case of a nonresident alien individual, the deductions
reiestniess.In
United states.
allowed in subdivision (a), exce t those allowed in paragraphs (5),
Determinaion of.
(6),
InCous

TAX.

and (11), shall be allowed on y if and to the extent that they are

connected with income from sources within the United States; and
the proper apportionment and allocation of the deductions with
respect to sources of income within and without the United States
shall be determined as provided in section 217 under rules and regu-

Post, p. 243.

lations prescribed by the Commissioner with the approval of the
Citis, of
inUnite States pos- Secretary. In the case of a citizen entitled to the benefits of section
sessions.
262 the deductions shall be the same and shall be determined in, the

same manner as in the case of a nonresident alien individual.

Items not deductible.

ITEMS NOT DEDUCTIBLE.

SEe. 215. (a) That in computing net income no deduction shall

Objects specified.

Personal,e.,ein any case be allowed in respect of-

.

penses.
men

y improve-

Restoring exhausted
property.
Life Insurance
employees.

(1) Personal, living, or family expenses;
(2) Any amount paid out for new buildings or for permanent
improvements or betterments made to increase the value of any
property or estate;
(3) Any amount expended in restoring property or in making good
the exhaustion thereof for which an allowance is or has been made;

for or

(4) Premiums paid on any life insurance policy covering the life
of any officer or employee, or of any person financially interested in
any trade or business carried on by the taxpayer, when the taxpayer
Income from ute is directly or indirectly a beneficiary under such policy.
etc., Interests acqued
(b) Amounts paid under the laws of
Territory, District
by it, etc.
of Columbia, possession of the United any State, foreign country as
States, or
income to the holder of a life or terminable interest acquired by gift,
bequest, or inheritance shall not be reduced or diminished by any
deduction for shrinkage (by whatever name called) in the value of
such interest due to the lapse of time, nor by any deduction allowed
by this Act for the purpose of computing the not income of an estate
or trust but not allowed under the laws of such State, Territory,
District of Columbia, possession of the United States or foreign country for the purpose of computing the income to wkch such holder
is entitled.
Credits allowed.

CREDITS ALLOWED INDIVIDUALS.

SEC. 216. That for the purpose of the normal tax only there shall

Items specified.

be allowed the following credits:
(a) The amount received as dividends (1) from a domestic corpo109, ration other than a corporation entitled to the benefits of section 262,
or (2) from a foreign corporation when it is shown to the satisfaction
of the Commissioner that more than 50 per centum of the gross
income of such foreign corporation for the three-year period ending
with the close of its taxable year preceding the declaration of such
dividends (or for such part of such period as the corporation has been

Dividends from corpe110!on.
amended.

Poset, p.s.