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 40

-~ -~

75TH

-.----

~~-~--

813

CONGRESS, lsT SESSION-OHS. 780, 781, 815--AUGUST 25, 20, 1987

and such contracts may contain, subject to the provisions of this

Act, such terms and conditions as may be agreed upon by and

between the common council of said city of Ketchikan and the
United States of America or any agency or instrumentality thereof,
or any other purchaser of the bonds.
Sxo. 7. The provisions of the Act approved May 28, 1986, entitled
"An Act to authorize municipal corporations in the Territory of
Alaska to incur bonded indebtedness, and for other purposes" (49
Stat. 1888), as amended, shall not affect the issuance or payment of
the bonds authorized by this Act or any proceedings taken hereunder.
Approved, August 25, 1937.

~,.-

Terms and condf.

Existing provisons
not to affect iuance,
etc.
49 Stat. 1888.
48 U. S. 0., Supp.
n1, if44-e.

[CHAPTER 781]
JOINT RESOLUTION
To amend the public resolution approved June 5, 19386, entitled "Joint resolution
authorizing and requesting the President to extend to the Government of
Sweden and individuals an invitation to join the government and people of
the United States in the observance of the three-hundredth anniversary of
the first permanent settlement in the Delaware River Valley, and for other
purposes.

Resolved by the Benate and House of Repreentatives of the
United States of America in Congres as8emled, That section 1 of
Public Resolution Numbered 102 of the Seventy-fourth Congress
is amended by inserting a comma and the words "the Government
of Finland" after the words "Government of Sweden" and before
the word "and"; and by inserting the words "and Finnish" after
the word "Swedish" and before the word "colonists".
That section 2 be amended by inserting the words "the Government of Finland" after the words "Government of Sweden" and
before the word "and".
Approved, August 25, 1937.

August 26, 1987
(S. J. Ree.18M)
f Pub. Res.,Wo.71]

DelawareRiver Val.
land to participate In
observanceof.
49 Stat. 1487.

[CHAPTER 8151
AN ACT
To provide revenue, equalize taxation, prevent tax evasion and avoidance, and
for other purposes.

Be it enacted by the Senate and Home of Repre8entative8 of the
United States of America in Congre88 assembled, That this Act may

be cited as the "Revenue Act of 198?".

TITLE I-PERSONAL HOLDING COMPANIES

Au ust 26, 1937
.-R. 825)

(Public, No. 377]

Revenue
1937.

Act

of

Title I-Personal
holding companies.

SEC. 1. AMENDMENT OF 1936 ACT.

Title IA of the Revenue Act of 1936 is amended to read as follows:

"TITLE IA-ADDITIONAL INCOME TAXES

49 Stat. 1732.
26 U. 8. 0., Supp.
II, 1331.
Title IA-Addition.
al income taes.

"SEC. 351. SURTAX ON PERSONAL HOLDING COMPANIES.

"There shall be levied, collected, and paid, for each taxable year
(in addition to the taxes imposed by Title I) upon the undistributed

adjusted net income of every personal holding company a surtax

equal to the sum of the following:
"(1) 65 per centum of the amount thereof not in excess of
$2 0 00 ; lustn
(2)

5uper centumn of the amount thereof in excess of $2,000,'

Surtax on personal
holding companies.

814
"Personal

75TH

CONGRESS, lT SESSION-C.

816-AUGUST 26, 1937

holding "SEC. 352. DEFINITION OF PERSONAL HOLDING COMPANY*
"(a) GEwmuI.Ruiz.-For the purposes of this title and of Title I

company" defined.

Gross Income re"

quirement.

cuirement.

conieincome;

the term' ersonal holding company' means any corporation ifGROSS INCOME REQUIREMENT.-At least 80 per centum of
income for the taxable year is personal holding company
income as defined in section 353; but ifthe corporation is a personal holding company with respt to any taxable year, then for
each subsequent taxable year, th~eminimum percentage shafl be
70 per centum in lieu of 80 per centum, until a taxable year
during the whole of the last half of which the stock ownership
required by paragraph (2) does not exist or until the expiration
of three consecutive taxable years in each of which less than 710
per centum of the gross income is personal holding company

and

EQUIREMENT.-At any time during
anseripe(2)STOCKOWNERSHIP
Stock cuirenent.the
last half of the taxable year more than 50 per centum in

Exoitieons.

Personal holding
companyincome.

value of its Outstanding stock is owned, directly or indirectly,
b or for not more than five individuals.
(b)rExcuIoNs.-The term 'personal holding company does not
include a corporation exempt from taxation under section 101, a
bank as defined in section 104, a life insurance company, a surety
company, or, except with respect to a taxable year endig on or before
the date of the enactment of the Revenue Act of 1937, a foreign personal holding company as defined in section 331.
"SEC. 353. PERSONAL HOLDING COMPANY.INCOME.
"For the purposes of this title the term 'personal holding company

income' means the portion of the gross income which consists of:
"(a) Dividends, interest, royalties (other than mineral oil, or gas
royalties), annuities.1$
etc.
Stock and securities
d(b)STOCK AND SECURITIES T AliacoNS.-Except in the case of
transactions,
regular dealers in stock or securities, gains from the sale or exchange
of stock or securities.
Commodities traus
"(C) Cobe oDtm
ThrANSACeg
o
Ns.p-Gains from futures transcactions.
tions in any commodity on or subject to the rules of a board of t rfide
or commodity exchange. This subsection shall not apply to gains
by a producer, processor merchant, or handler of the commodity
which arise out of bona Ade hedging transactions reasonably necessary to the conduct of its business in the manner in which such
'business is customarily and usually conductedothers.
"(d) ESTATES AN
RUSTS.-Amounts includible in computing the
net income of the corporation under Supplement E of Title 1; and
gains from the sale or other disposition Of any interest in an estate
or trust.
Persnal"service
.3(e)
PERSONAL SERVICE C ONAcTs.-(I) Amounts
contract under which the corporation is to furnish received under
"ohputa
personal services; if some person other than the corporation has the right to
designate (by name or b, description) there ndamidual who is to perform the services, or if
individual who is to perform the services
is designated (by name or by description) in the contract; and (2)
amounts received from the sale or other disposition of such a contract. This subsection shall apply with respect to amounts received
for services under a particular contract only if at some time during
sermte s year 25 per centum or more in value of the outstanding
fteidvda
woi opromtesre
the taxable ieo
stock of the corporation is owned, directly or indirectly, by or for
the individual who or byperformed, is tothe nieidualw to be desig-1Inate(by'name has description perform, or may per
s
Dividends, interest,

7TH

CONGRESS, leT SESSION-OH. 815--AUGUST 2,

815

1987

"(f) USE or ConPoaTIoN PRornRr aT SIHAREoLDER.-mounts
received as compensation (however designated and from whomsoever
received) for the use of, or right to use,:property of the corporation
in any case where, at any time during the taxable year, 25 per centum
or more in value of the outstanding stock of the corporation is owned
directly or indirectly, by or for an individual entitled to the use o
the property; whether such right is obtained directly from the-corporation or by means of a sublease or other arrangement."(g) Raws.-Rents, unless constituting 50 per centum or more
of the gross income. For the purposes of this subsection the term
'rents' means compensation, however designated, for the use of, or
right to use, property; but does not include amounts constituting
personal holdig company income under subsection (f
(h)MINERALonrE.-Mineral, oil, or gas royalties, unless (1) constituting 50 per centum or more of the gross
income, and (2) the deductions allowable under section 23 (a) (relating to expenses) other than compensation for personal services rendered by shareholders, constitute 15 per centum or more of the gross
income.
"SEC. 354. STOCK OWNERSHIP.

"(a) CoNsmtucTm OwNmnsHiP.-For the purpose of determining
whether a corporation is a personal holding company, insofar as
such determination is based on stock ownership under section. 352
(a) (2), section 853 (e), or section 358 (f)"'(1) STOCK NOT OWNED BT INDIVmuAL.-Stock owned, directly
or indirectly, by or for a corporation, partnership, estate, or
trust shall be considered as being owned proportionately by
its shareholders, partners, or beneficiaries.
"(2) FAMILY AND PARTNERSHIP OWNERSHIP.-An individual
shall be considered as owning the stock owned, irectly or indirectly, by or for his family or by or for his partner. For the
purposes of this paragraph the family of an individual includes
only his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants.
"(3) OrIoNs.-If any person has an option to acquire stock
such stock shall be considered as owned by such person. For
the purposes of this paragraph an option to acquire such an
option and each one of a series of such options, shall be considered as an option to acquire such stock.
"(4) APPLICATION OF FAMILY-PARTNERSHIP AND OPTION RULES.Paragraphs (2) and (3) shall be applied"(A) For the purposes of the stock ownership requirement provided in section 352 (a) (2), it, but only if, the
effect is to make the corporation a personal holding com-

Use of corporation
<rpttyby share.

Rents.

Mineral, oil, or gas
royalties.

Stock ownership.
Constructive ownership.

Stock not owned by
individual.

Family and partnership ownership.

Options.

Application

of

famuy partnership
and option rules.

pany

P"(B) For the purposes of section 353 (e) (relating to
personal service contracts) or of section 353 (f) (relating
to the use of property by shareholders), it, but only if the
effect is to make the amounts therein referred to includible
under such subsection as personal holding company income.
"(5)

CoNSnTarlVE OWNERSHIP AS ACTUAL oWNERSHIP.--Stock

constructively owned by a person by reason of the application
of paragraph (1) or (3) shall, for the purpose of applyin
paragraph (1) or (2), be treated as actually owned by such
person; but stock constructively owned by an individual by
reason of the application of paragraph (2) shall not be treated
as owned by him for the purpose of again applying such paragra hin order to make another the constructive owner of such

Constructive ownership as actual ownership.

816

75TH

Option rul e in ieu
of Wfanly and partnership rule.
ConvertibI le e
ties.

Undistribu ted adjusted not inccome.
Definition.
computail

on.

Adjusted net
Come.
Definition.
Additional
tons.

In.

deduo-

Computanti on.
49 Stat. 1
1732.

ss8,

1o7,

(Jharitabli e, etc.,
contributions
49 Stat. 16 '.

CONGRESS, leT SESSION-OH. 815-AUGUST 26, 1987

"(6) OPrIoN RULE IN LIEU OF FAMILY AND PARTNERSHIP RULE.If stock may be considered as owned by an individual under
either paragraph (2) or (8) it shall be considered as owned by
"()him under paragraph (8).
SEOURM&lS.-Outstandin securities convertiescur
(b)CONERmI
ble into stock (whether or not convertible during the taxable year)
shall be considered as outstanding stock"(1) For the purpose of the stock ownership requirement provided in section 352 (a) (2), but only if the effect of the inclusion of all such securities is to make the corporation a personal
holding company;
"(2) For the purpose of section 353 (e) (relating to personal
service contracts), but only if the effect of the inclusion of all
such securities is to make the amounts therein referred to includible under such subsection as personal holding company income;
and
"(8) For the purpose of section 853 (f) (relating to the use
of property by shareholders), but only if the effect of the inclusion of all such securities is to make the amounts therein referred
to includible under such subsection as personal holding company
income.
"The requirement in paragraphs (1), (2) and (8)
that all convertible
securities must be included if any are to be included shall be subject
to the exception that, where some of the outstanding securities are
convertible only after a later date than in the case of others, the class
having the earlier conversion date may be included although the
others are not included, but no convertible securities shall be
included unless all outstanding securities having a prior conversiondate are also included.

"SEC. 355. UNDISTRIBUTED ADJUSTED NET INCOME

"For the purposes of this title the term 'undistributed adjusted
net income' means the adjusted net income (as defined in section 356)
minus"(a) The amount of the dividends paid credit provided in section
27, computed without the benefit of subsection (b) thereof (relating
to the dividend carry-over); and
"(b) Amounts used or irrevocably set aside to pay or to retire
indebtedness of any kind incurred prior to January 1, 1934, if such
amounts are reasonable with reference to the size and terms of such
indebtedness.
"SEC. 356. ADJUSTED NET INCOME.

"For the purposes of this title tie term 'adjusted net income' means
the net income with the following adjustments:
"(a) AliDITIONAL DEDUCTIONs.-There shall be allowed as
deductions"(1) Federal income, war-profits, and excess-profits taxes paid
or accrued during the taxable year to the extent not allowed as
a deduction under section 28; but not including the tax imposed
by section 102, section 351 (either before or after its amendment
by the Revenue Act of 1937), or a section of a prior income-tax
law corresponding to either of such sections.
"(2) In lieu Of the deduction allowed by section 23 (q), contributions or gifts made within the taxable year to or for the
use of donees described in section 23 (q) for the purposes therein
specified, to an amount which does not exceed 15 per centum
of the taxpayer's net income, computed without the benefit of
this paragraph arid section 23 (q), and without the deduction of
the amount disallowed under subsection (b) of this section.

'a

II

A
z

k
,
I

A

a

817

75Tn CONGRESS, laT SESSION-OH. 815--AUGUST 26, 1937

4t'a "e
"(8) In the case of a corporation organized prior to January of d
1, 1936, to take over the assets and liabilities of the estate of a
decedent, amounts paid in liquidation of any liability of the corporation based on the liability of the decedent to make contributions or gifts to or for the use of donees described in section
28 (o) for the purposes therein specified -to the extent such
liability of the decedent existed prior to january 1, 1934. No
deduction shall be allowed under paragraph (2) of this subsection
for a taxable year for which a deduction is allowed under this
pt(Earagraph..
Deductions not al.
b) DEDUCIsNoT A wE.--The aggregate of the deductions
under section 28 (a), relating to expenses, and section 28 (1),lowed.
allowed
relating to depreciation, which are allocable to the operation and
maintenance of property owned or operated by the corporation, shall
be allowed only m an amount equal to the rent or other compensation
received for the use or right to use the property, unless it is established (under regulations prescribed by the Commissioner with the
approval of the Secretary) to the satisfaction of the Commissioner:
"(1) That the rent or other compensation received was the
highest obtainable, or, if none was received, that none was obtaina e;
"(2) That the property was held in the course of a business
carried on bona fide for profit; and
"(8) Either that there was reasonable expectation that the
operation of the property would result in a profit, or that the
property was necessary to the conduct of the business.

"SEC. 357. MEANING OF TERMS USED.

Meaning of terms

"The terms used in this title shall have the same meaning as when
used in Title I.

49stat. 1852.

"SEC. 358. ADMINISTRATIVE PROVISIONS.

"All provisions of law (including penalties) applicable in respect Administrative proof the taxes imposed by Title I of this Act, shall insofar as not incon-vons.
sistent with this title, be applicable in respect of the tax inosed b
this title, except that the provisions of section 181 of that title shall49tat. 19.
not be applicable.
"SEC. 359. IMPROPER ACCUMULATION OF SURPLUS.

"For surtax on corporations which accumulate surplus to avoid

surtax on stockholders, see section 102.
0
"SEC. 360. FOREIGN PERSONAL HOLDING COMPANIES.
"For provisions relating to foreign personal holding companies and
their shareholders, see Supplement P of Title I."
SEC. 2. CHANGES IN CROSS-REFERENCES.

Section 12 (c), section 14 (f) , and section 102 (e) of the Revenue
Act of 1936 are amended by striking out "section 351" and inserting
in lieu thereof "Title IA".
SEC. 3. EFFECTIVE DATES.
The amendment made by section 1 shall apply only with respect
to taxable years beginning after December 31, 1936; and Title IA
of the Revenue Act of 1936, as it existed prior to such amendment
shall not apply to a foreign personal holding company (as defined

in section 331 of the Revenue Act of 1986, added to such Act by
section 201 of this Act) with respect to any taxable year ending after
the date of the enactment of this Act.

1251610--37- ---162

Improper aocumu

lation of surplus.

49 Stat. 1878.

Foreign

personal

holdigcmais
et, p. 818.

Changes in cross ret.

ereDCOS.
49 Stat. 1655, 168,
1877.

Effective dates.

4e Stat. 1732.
P**P.*818