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Show INCOME TAX IS PROVING A PUZZLE Tribune 'Collectable at the 1 source," that bugbear phrase that has j made a tort of Chinese puzzle out of the Income tax law and over w hich j the financial world is losing sleep, I obtruded Itself on the consciousness of W. H Shearman; city auditor, yesterday yes-terday with a violence that left that gentleman In the middle of a sea of uncertainties. Mr. Shearman, as city auditor, pays out about $5000 a month interest to holders of special improvement tax warrants Undoubtedly many of the Interest coupons go to holders whose net income exceeds $3000 a year and hence are subject to the income tax. The city auditors office being the source or some of those Income la responsible perhaps, for Uncle Sam's lawful percentage of those incomes in so far as those Incomes are dependent de-pendent on the special Improvement tax warrant Interest. Failure to ob serve that responsibility means serious seri-ous trouble with the possibility of a fine and imprisonment All this dawned on the city audi tor yesterdaN as he casually looked over the latest interpretation of the Income law immediately he gave orders that no more Interest should be paid on the special Improvement warrants until more could be learned about the situation. Having protected himself, Mr. Shearman hied himself to the city attorney and BOUghl legal advise. It was not forthcoming. The law department de-partment was about as confident of ;ts own opinions on the income tax law as Wall street is ' present Accordingly, a hurried call for m- forma ion was sent out. The following follow-ing telegrams were dispatched by Mr. Shearman to Washlntgon. "William G McAdoo, Secretary ot he Treasury: Is city bound to withhold with-hold Income tax from Interest on warrants which olty Issues against abutting property and collects as agents for unknown holders. "Senator George Sutherland: Have wired secretary of the treasury ask Ing Information about cilv holding income tax out of interest on special CU warrants and sums duo contractors contrac-tors will you kindly hurrv them along with reply Important. ' Until definite answer comes from the secretary of the treasury, holders of the Improvement, warrants and contractors to whom money Is due from tho city will get nothing from tho city auditor unless they are willing will-ing to accept the discount of 1 per cent for tho satisfaction of tho income in-come tax Applications for the Interest on a number of warrants were received yesterday b the auditor and were turned down, except with the provision provi-sion that tho holder submit to the discount or else furnish affidavits to the effect that his income is le-s than $3000 a year. "If we are Informed that this office of-fice Is responsible for the collection of the tax there will still remain tho problem of determining from what holders th tax is to be withheld," said Mr Shearman The special Improvement warrants are scattered all over the country nnd we have no way of determining who are the real owners or tJie financial status of those owners I sep no way out of It except to withhold Interest on the warrants until those to whom it is pa v able file proof thai, they are not amenable to the Income tajc." Fortunately the same problem doe? not arise in regard to the holders or City bonds Tho law provides that interest paid cm nnv bonds or warrants war-rants that represent a city liability are immune from tho Income tax, at least at the source. But special improvement im-provement warrants are not municipal munici-pal liabilities Inasmuch as the city I acts only as an agent for the prop I erty owners and the warrant holders oo |