from the standpoint of the business atmosphere in the District to eliminate this very inequitable tax which results in double taxation. So we are in support and would urge its passage. [The complete prepared statement of Mr. Martin, above referred to, follows:] PREPARED STATEMENT OF HERBERT E. MARTIN, JR. I am Herbert E. Martin, Jr., Vice President and General Counsel of Acacia Mutual Life Insurance Company, a Company chartered by Special Act of Congress in 1869. Acacia is a domestic District of Columbia life insurance company. I am chairman of the Legislative Committee formed by the major life insurance companies of the District of Columbia. This consolidated statement on H.R. 6186 is made on behalf of the following domestic District of Columbia life insurance companies: Acacia Mutual Life Insurance Company Government Employees Life Insurance Company Peoples Life Insurance Company United Services Life Insurance Company Peoples Life Insurance Company is also presenting an individual statement to the Subcommittee today. The bill under consideration, H.R. 6186, would correct the present unequal District of Columbia tax treatment of the recipients of intercorporate dividends paid (a) by a general business corporation, and (b) by an insurance company. The District of Columbia, like most jurisdictions, taxes general business corporations based on their net income (Chapter 15 of Title 47, District of Columbia Code), and taxes insurance companies based on their premium receipts (Chapter 18 of Title 47, D.C. Code). As in most jurisdictions, the premium tax levied on insurance companies is in lieu of certain other taxes, including the income tax. Also, like most jurisdictions, the District of Columbia exempts dividends paid by a general business corporation from taxation as income when these dividends are paid to and received by a corporate shareholder. This exemption (Section 47-1580 of the Code) is based on the fact that the corporation paying the dividend has already been taxed. The clear purpose is to prevent double taxation of intercorporate dividends. In this respect, the District of Columbia tax treatment of dividends paid by a general business corporation conforms to the treatment of intercorporate dividends under the U.S. Internal Revenue Code It would be reasonable to expect that when an insurance company (taxable under Chapter 18 instead of under Chapter 15) pays dividends to a corporate shareholder the same exemption should apply in order to prevent double taxation. Such an exemption does apply to insurance company dividends in other jurisdictions, as well as under the provisions of the U.S. Internal Revenue Code. Possibly because of an oversight, specific language to provide such as exemption was not included in Section 47-1580. As a consequence, the District of Columbia has taken the position that intercorporate dividends paid by a District of Columbia insurance company to a corporate shareholder are taxable. This position means that such dividends would be taxable unequally as compared with dividends paid by a general busines corporation-and would be subject to a double tax burden that is not imposed in other jurisdictions. In my opinion, a vigorous and growing insurance industry is important to the District of Columbia. Passage of this bill would correct an inequitable and discriminatory situation that presents serious current problems for two domestic companies. Further, it would place the District of Columbia at least on an equal footing with other jurisdictions as a desirable location for operating insurance companies. It is the position of the companies I represent today that H.R. 6186 is a highly desirable remedial bill. On behalf of the domestic insurance industry, I recommend its passage. Mr. Chairman, I appreciate having the opportunity to present this statement. Mr. STUCKEY. Thank you, Mr. Martin. Mr. Broyhill? Mr. BROYHILL. No questions. Mr. STUCKEY. That winds us up on the witnesses for H.R. 6186. Do we have any people present that would like to testify or make any comments regarding H.R. 6186? [No response.] Mr. STUCKEY. That concludes the hearings on H.R. 7128 and H.R. 6186. Mr. BROYHILL. Mr. Chairman, since both of these bills are noncontroversial, is it possible that a motion be in order to recommend to report these to the full committee? I recognize that a quorum is not present, but I don't think a quorum has to be present for you, as a chairman, to recommend these to the full committee. Mr. STUCKEY. The gentleman is quite correct. If there is no objection raised before the full committee if a quorum is not present. In view of the fact that both bills are noncontroversial, there is a strong possibility the objection will not be raised. So the Chair is in agreement with the gentleman from Virginia; we will report out H.R. 7218 and H.R. 6186 to the full committee, with H.R. 6186 amended to remove section 2 of the bill. Mr. BROYHILL. What about the amendment offered by Mr. Phillips? Mr. STUCKEY. And H.R. 7128 will be reported to the Full Committee with the amendment that was presented in written testimony. Mr. BROYHILL. Mr. Chairman, I am hopeful you can get these bills up to the full committee before the Home Rule bill is acted upon, because that might be next February. Mr. STUCKEY. The gentleman is being very optimistic in placing a heavy burden on the chairman there. We will do our best to see it is reported out. I think there is a possibility of it being reported out because it is noncontroversial at this point. The Chair will assure those present and the gentleman from Virginia, we will do our best to see if we can bring it up before the Home Rule hearings start. Mr. BROYHILL. Mr. Chairman, one more question. As you know, I offered an amendment to another bill that was reported out of the subcommittee, having to do with the Capital Yacht Club, I believe, and the usery laws. The bill I have pending before the committee would exempt large commercial loans in excess of $1 million from the D.C. usery law. The chairman did promise me we would have a hearing on that. I hope that will not be controversial, but again I would like to call it to the attention of the chairman and see if we couldn't have early hearings on it. Mr. STUCKEY. Actually, the bill we are hearing this morning, I think it will be a matter of bringing the bill back up to the subcommittee and the chairman introducing his amendment and the subcommittee reporting the bill. Does the gentleman from Virginia have any comments? Mr. BROYHILL. No, sir. Mr. STUCKEY. The committee will report out the two bills H.R. 7218 and H.R. 6186 and will bring them up as soon as it is possible. I think there is a good chance because of the noncontroversial nature of the bills. The subcommittee will stand adjourned. [Whereupon, at 10:50 a.m., the subcommittee adjourned, to reconvene subject to the call of the Chair.] о H.117 75 594 139 |