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 45

700

PUBLIC LAWS--OH. 412-SEPT. 20,1941

53 Stat. 12.

26,U. . 00123(c).

40 Stat. 302j, 1088;
42 Stat. 271; 48 Stat.
208, 770.

53 Stat. be.
26 U.S. 0. f1131.

U4 Stat. 075; ont,

26 U. 8. 0.
752.

1

O710-

Arfe, p. 27.
4

26U. S.0.

stat..

30

63 $tat. 35.
26I. 8.0.:102(d)
(1) (A)

64Stat. 975; ante,
28U. S. 0. 1 710752.
83 Stat. 12, 887; 54
s
$tat..
20U. 8. 0. 23.

Sts. 0.78, (a
2M
(1) (A).

STAT.

SEC. 202. DEDUCTION OF EXCESS-PROFITS TAX.
(a) AMENDMENT OF SECTION 28(0).-Sectio 28 (F) of the Internal
Revenue Code (relating to the deduction of taxes in computing net
income) is amended to read as follows:
"(e) TAXES GENERALLY."(1) ALLoWAANCE

p. 26.'

[55

IN GENERA.-Taxes

paid or accrued within

the taxable year, except"(A) Federal income taxes;
"(B war-profits and excess-profits taxes imposed by Title
II of the Revenue Act of 1917, Title III of the Revenue
Act of 1918, Title III of the Revenue Act of 1921, section 216
of the National Industrial Recovery Act, or section 102 of
the Revenue Act of 1984, or by any such provisions as
amended or supplemented;
0) income, war-profits, and excess-profits taxes imposed
by
te
authority of any foreign country or possession of the
United States; but this deduction shall be allowed in the
case of a taxpayer who does not signify in his return his
desire to have to any extent the benefits of section 181
(relating to credit for taxes of foreign countries and possessions of the United States);
"(D) estate, inheritance, legacy, succession, and gift taxes;
and
"(E) taxes assessed against local benefits of a kind tending
to increase the value of the property assessed; but this paragraph shall not exclude the allowance as a Aeduction of so
much of such taxes as is properly allocable to maintenance
or interest charges.
"(2) ExcEss-PRoFrs TAX UNDER CHAPTER 2B--SPEOIAL RULES.For the purposes of this subsection, in the case of the excessprofits tax imposed by Subehapter E of Chapter 2"(A) The deduction shall be limited to the tax imposed
for the taxable year, but any portion of such tax paid after
the taxable year shall be considered as having been paid
within the taxable year;
"(B) No reduction m such tax shall be made by reason
of the credit for income, war-profits, or excess-profits taxes
paid to any foreign country or possession of the United
States;
"(O) Such tax shall be computed without regard to the
adjustments provided in section 734; and
"(D) Such tax in the case of a consolidated return under
section 730, shall Ueallocated to the members of the affiliated
group under regulations prescribed by the Commissioner,
with the approval of the Secretary."
(b) AMENDMENT OF SECTION 102 (d).---Section 102 (d) (1) (A)

of the Internal Revenue Code (relating to the deduction of taxes in
computing section 102 net income) is amended to read as follows:
"(A) Taxes.-Federal income, war-profits- and excessprofits taxes (other than the tax imposed by §ubehapter E
of Chapter 2 for a taxable year beginning after December
31 1940) paid or accrued during the taxable year to the
extent not allowed as a deduction by section 23, but-not
including the tax imposed by this section or a corresponding
section of a prior income-tax law."
(o) COMPUTATION OF EXCESS-PROPrrs NE INCOME.(1) TAXABLE YEARS BEGINNING APTER DECEMBER 81$ 1940.'(A) Section 111 (a),(1) (A) (relating to adjustment for
income taxes in computing excess-profits net income inidet
income credit) is amended to read as follow

Nip"

55 STAT.]

701

77M CONG., 1sT SESS.-OH. 412--SEPT. 20, 1941

"(A) Income Taxes.-In computing such normal-tax net
income the deduction for the tax imposed by this subchapter
shall not be allowed*".

(B) Section 711 (a) (2) (C) (relating to adjustment for
income taxes in computing excess-profits net income under
invested capital credit) is amended to read as follows:
"(0) Income Taxes.-In computing such normal-tax net
income the deduction for the tax imposed by this subchapter
shall not be allowed;".
2) TAxA a YEARS IN THE BASE PERIoD.-Section '11 (b) (1)
(A (relating to adjustment for income taxes for taxable years
in the base period) is repealed.
(d) COMPUTATION OF CHArTABLE, FEo., DEDUOTION.(1) Section 711 (a) (1) of the Internal Revenue Code is
amended by inserting at the end thereof the following new

64 v
7..
"
26U .0.1 711 (a)
(2) (0).

54 Mat. 977.
6U. S. 0.711 (b)
.0) (A).

54 Stat. 978.
2 U.S.C.1711 (a)
).

subparagraph:

"(G) Computation of Charitable, Etc Deductions.-In
determining any deduction the amount oY which is limited
to a percentage of the taxpayer's net income (or net income
from the property), such net income (or net income from the
property) shall be computed without regard to the deduction
on account of the tax imposed by thissubchapter."
(2) Section 711 (a) (2) of the Internal Revenue Code is
amended by adding at the end thereof the following new sub-

54 Stat. 976,977.
261U. 8. 0. 1711 (a)
(2).

paragraph:

().Computation of Charitable, Etc Deductions.-In
determining any deduction the amount o? which is limited
to a percentage of the taxpayer's net income (or net income
from the property), such net income (or net income from

the property) shall be computed without regard to the deduction on account of the tax imposed by this subehapter."
(e) EXOEss-PRoFrrs CREDrr CARnY-OvR.-Section 110 ) (1)
(defining the unused excess-profits credit) is amended by adding at
the end thereof a new sentence to read as follows: "For such purpose
the excess-profits credit and the excess-profits net income for any
taxable year beginning in 1940 shall be computed under the law
applicable to taxable years beginning in 1941.".
(f) Equrrr INvESTED CAPrAL.-Section 718 (o) (3) (relating to
the computation of earnings and profits for invested capital purposes)
is amended by adding after the word subchapterr" the worsea or
chapter 1".

(g

ADJUSTMENT OF ABNORMAL BASE PERIOD Nwr INOoME.-Section

722 c (placing a limit on the amount of relief afforded under section Ct2) is amended by adding at the end thereof a new sentence
to read as follows: "For the purposes of this subsection and subsection (d) the taxpayer's normal-tax net income shall be computed
without deduction of the tax imposed by this subchapter.".
(h) NONDEDUCTIBILITY OF EXCESS PROFITS TAX IN COMPUTAT[ON OF
DEOLARED VALUE ExOEss PRorrrs TAx.-Section 602 of the Internal
Revenue Code is amended by striking out "computed without the
deduction of the tax imposed by section 600" and inserting in lieu
thereof "computed without the deduction of the tax imposed by section 600 or the tax imposed by Subehapter E of Chapter 2".
(i) ADJUSTED DECLARED VALUE.(1) Section 1202 (b) (1) (0) of the Internal Revenue Code
is amended to read as follows:I
"(0) its net income computed without the deduction of
the tax imposed by Subchapter E of Chapter 2,".

-4

Z;

Ante, p. 17.

54 Stat

n94.

28 U. S. 0. 1 718 (0)
(3).

Ante, p. 24.

63 Stat. Ill.
(
261 .8. -.

c602.

63 Stat. 111.
20 U.8S.C.1I0MO.
Pwst, p. 704.
84 SMat. 76;o anteo
P. 26.
28 U. 8. 0. ifo110762,1

t3stat. 170.
26U. . 0, 11202 (b)

702
63 Stat. 170.
28 U.S.0. 11202 (b)
(1) (m).

PUBLIC LAWR-OH. 412-SEPT. 20, 1941

[55 STAr.

(2) Section 1202 (b) (1) (iii) is amended to read as follows:
"(iii) the excess of the deductions allowable for
income tax purposes (not including the deduction for
the tax imposed by Subehapter E of Chapter 2) over its
gross income."
SEC. 203. NEW CAPITAL.

54 $tat' 982983
28 U. S. C. R71(a).

63 Stat. 37-3.
26 U. S. 0. 1 112.
63 Stat. 101.
2U.3S.iC.31(g).
63 Stat. 40.
26 U. S. C. 112 (h).

Controlled groups.

Section 118 (a) of the Internal Revenue Code is amended by striking out "and" at the end of paragraph (4); by striking out the
period at the end of paragraph (6) and inserting in lieu thereof a
semicolon and the word "and', and by inserting at the end thereof
the following:
"(6) NEW OAPIAL.-An amount equal to 25 per centum of the
new capital for such day. The term 'new capital' for any day
means so much of the amounts of money or property includible
for such day under paragraphs (1) and (2) as was previously
paid in during a taxable year beginning after December 81, 1940,
and so much of the distributions in stock includible for such day
under paragraph (3) as was previously made during a taxable
year beginning after December 81, 1940, subject to the following
limitations:
"(A) There shall not be included money or property paid
in by a corporation in an exchange to which section 112 (b
(8), (4), or (5), or so much of section 112 (e)I (d), or le
as refers to section 112 (b) (8), (4), or (5) is applicable
(or would be applicable except for section 87 (g)), or would
have been applicable if the term 'control' had been defined
in section 112 (h) to mean the ownership of stock possessing
more than 50 per centum of the total combined voting power
of all classes of stock entitled to vote or more than 50 per
centum of the total value of shares of all classes of stock.
"(B) There shall not be included money or property paid
in to the taxpayer by a transferor corporation if immediately
after such transaction the transferor and the taxpayer are
members of the same controlled group. As used in this subparagraph and subparagraph (C), a controlled group means
one or more chains of corporations connected through stock
ownership with a common parent corporation if (i) more
than 50 per centum of the total combined voting power of all
classes of stock entitled to vote, or more than 50 per centum
of the total value of shares of all classes of stock, of each of
the corporations (except the common parent corporation) is
ownedd irectly by one or more of the other corporations, and
(ii) th6 common parent corporation owns directly more than

Limitation on stock
distribution.(

64 tat. 985.
26 U, .0. 72D (b).

50 per centum of the total combined voting' power of all
classes of stock entitled to vote, or more than 50 per centum
of the total value of shares of all classes of stock, of at least
one of the other corporations.
"(0) There shall not be included a distribution in stock
described in paragraph (8) made to another corporation, if
immediately after the distribution the taxpayer and the
distributes are members of the same controlled group.
"(D) Increase in Inadmissible Assets.-The now capital
for any day of the taxable year, computed without the application of subparagraph (E), shall be reduced by the excess,
if any, of the amount computed under section 120 (b) with
respect to inadmissible assets held on such day, over the
amount computed under section (20 (b) with respect to
inadmissible assets held on the first day of the taxpayers first