HJ UC-NRLF *C nt DM? GIFT OF I S06I '\i m m •JO)|8N \ sojg pjo|Xvo The Massachusetts Income Tax 17 COURT STREET Temple Place BOSTON 222 Boylston St. O i^iiCh ■■CIA.TIOK a' TRJOAyURI.JR. Officers Chairman Board of Directors GORDON ABBOTT Vice-Chairman Board of Directors FRANCIS R. HART PHILIP STOCKTON, President WALLACE B. DONHAM, Vice-President JAMES C. HOWE, Vice-President S. PARKMAN SHAW, Jr., Secretary BANKING DEPARTMENTS Main Office GEORGE W. GRANT, Vice-President LLEWELLYN D. SEAVER, Cashier Temple Place Branch FRED M. LAMSON, Vice-President ARTHUR Y. MITCHELL, Manager Bay State Branch FREDERICK J. BRADLEE, Actuary CURTIS CmPMAN, Manager Loan and Credit Department JAMES C. HOWE, Vice-President FREDERIC G. POUSLANB, Vice-President WILBUR W. HIGGINS, Treasurer Bond Department WALTER F. WYETH, Vice-President LAURENCE H. PARKHURST, Manager SPECIAL DEPARTMENTS JULIUS R. WAKEFIELD, Vice-President CHESTER B. HUMPHREY, Vice-President Trust Department FERDINAND M. HOLMES, Trust Officer Corporation Department CHARLES B. WETHERBEE, Manager Transfer Department HOWARD W. BURGE, Manager Safe Deposit Vaults RICHARD POPE, Manager STUART W. WEBB, Vice-President JOSEPH G. STEARNS, Vice-President The Massachusetts Income Tax QU @onjyf^t ||pi)mm| BOSTON The informaiion in this book is believed to be accurate, bvi many details of interpretation must of necessity await the regulations of the Tax Com- missioner as large discretionary powers in the enforcement of the law are vested in him. ^=;:o^ Copyright, 1916 By Old Colont Tbubt Company THE ONIVBBSITr PBBSS CAUBBIDGBj UAS8. THE MASSACHUSETTS INCOME TAX THE new Massachusetts Income Tax law makes it possible for the first time for trustees and investors to buy taxable securities of a high grade, such as first-class railroad bonds and other sound investment securities, and at the same time to comply with the tax re- quirements of the commonwealth. For example, while such securities were taxed under the old property tax the average rate throughout the state was in the neighborhood of $20 on the thousand. This tax deducted from the income of a 43^% bond purchased at par left a net return of only 23/^%. The purchase of such a bond therefore became out of the question for either trustees or individuals who made their tax returns. Under the new income tax such a bond will net 4.23%, while a 5% bond, bought at par, will net 4.70%. This opens up the whole field of conservative bonds to trustees and investors at reasonable and attrac- tive rates of return. The state will at the same time benefit from the new revenue which it will receive from its share of the income. This change is particularly important in its effect on trusts and estates, because the main objects of the creator of a trust are, first — conservative investment, and second — a reasonable return to his bene- ficiaries. It has been in the past exceed- ingly diflScult for a trustee who made his returns for tax purposes, as the Old Colony Trust Company is required by law to do, to meet both these objects. Similarly, it has been exceedingly diffi- cult for the Bond Department of the Old Colony Trust Company to furnish to its customers who made returns for tax pur- poses conservative securities which yield a satisfactory net income. These diffi- culties disappear under the operation of the new law. At the same time such security holders as object to the drastic sworn returns re- quired by the act will continue to invest 355989 in Massachusetts corporation stocks and real estate mortgages. This may be ex- pected to maintain the present advanta- geous position in the market of our local securities, particularly as the income of such securities will not be subject to the new tax. The law is both clear and obviously proper that no trustee shall make a profit out of his trust by selling securities owned by him to his trust or by buying for him- self securities from his trust. The Bond Department and the Trust Department of the Old Colony Trust Company are conducted with scrupulous regard to this legal situation. The buying and selling ability of the Bond Department is never- theless placed fully at the disposition of the Trust Department. In this way the beneficiaries of the Trust Department secure, without any profit being charged against them, the benefit of the assistance of specialists in this important phase of the investment problem. We have included in this book an article by Professor Charles J. Bullock, Chairman of the Department of Eco- nomics of Harvard University, containing an able discussion of the more important principles and features of the act, which we are confident will be found both in- teresting and useful. Letters of inquiry and personal calls relating to any of these topics are par- ticularly invited by the officers of the company. Old Colony Trust Company. THE MASSACHUSETTS INCOME TAX By CHARLES J. BULLOCK The income tax enacted in 1916 marks an epoch in the history of taxation in Massachu- setts. For nearly three hundred years, as colony, province, and state, Massachusetts has raised the bulk of her public revenues from the general property tax. Changes in the details of the tax laws have been made from time to time. Corporation taxes were introduced dur- ing the Civil War, and recent years have brought the tax upon inheritances. But most of our public revenues continued to be raised by a tax levied uniformly upon real and personal property by the several cities and towns at whatever rates might be needed to meet local expenses. This method of taxing property, as every- one knows, has not worked well. Prior to the Civil War, when public expenditures were small and a tax of $4 or $5 per $1000 sufficed to meet all public charges, the system gave little reason for complaint, and taxation was not a "problem" in Massachusetts. But between 1850 and 1870 the rapid growth of cities and the heavy outlays during the Civil War led to an unprecedented increase of public expenditures, by which the rate of taxation was increased to $15 or $16 per $1000. Under the strain of these heavy tax rates, the old system of uniform taxation of real and personal property at varying local rates completely broke down. Our tax laws should have been thoroughly overhauled forty years ago; but this proved impossible, and conditions steadily went from bad to worse until at length they became absolutely intolerable. The first evil result of the laws was their tendency to drive personal property out of the cities and towns where rates were high into a small number of favored localities where tax rates were low and the assessors extended a cordial welcome to wealthy immigrants. This at first attracted little attention; but when at length it produced conditions imder which some localities were able to live luxuriously upon a $3 tax rate while others could not provide for press- ing necessities with a tax rate of $20 or $25, it was seen to be an intolerable evil. In 1865, in the state at large, the revenue derived from taxes on personal property and from corpora- tion taxes distributed to the cities and towns, amounted to $5.81 per capita; while in the fourteen wealthiest towns it amounted to $6.87 per capita, or slightly more than the average 6 THE MASSACHUSETTS for the entire commonwealth. But in 1915, after the process of concentration had contin- ued for fifty years, the revenue derived from the stated sources by the average city or town amounted to no more than $7.54 per capita; while in the fourteen wealthiest towns, it had risen to $29.50 per capita. Conditions like these are almost unique in the history of taxation, and they have been a potent argument for such reform of our taxation laws as should put an end to the concentration of taxable property in a handful of wealthy towns. A second great evil has been the creation of an artificial demand for so-called "non-taxable" investments, such as the shares of Massachu- setts corporations. While the average security owner has paid little attention to our taxation laws and has exercised freedom of investment, trustees and some other investors have been unable to enjoy such freedom. Our taxation laws have compelled them to invest largely or wholly in non-taxables, with the result that as a rule they have been unable to purchase bonds, and have been obliged to invest in real estate, mortgages, and shares of Massachusetts cor- porations. For a long time, this was commonly regarded as a good thing, because it was thought to encourage investment in Massachusetts en- terprises. But in time it came to be realized that in proportion as the market for non-tax-. ables became artificial, investors who did not need to consider the tax laws avoided this class of investments. It also happened that this artificial demand for tax-exempt securities created an artificial supply by bringing into existence a large number of non-taxable preferred stocks. Many of these stocks have been dis- tributed by conservative bankers after careful investigation and are well-secured and proper investments, but as was inevitable in such a situation, some of the new securities were of doubtful solidity. Of course the issue of any in- secure tax-exempt stock is not to the advantage of the large number of conservative and well- managed Massachusetts corporations. One of the greatest advantages of the new income tax is that it will tend to restore normal conditions in the local investment market, and will permit an important class of investors to enjoy freedom of investment for the first time in a generation. At the same time Massachusetts securities will retain the advantage of tax exemption, and this will be the more important because the income of other securities must in the future be returned for taxation. INCOME TAX A final evil of the tax laws was that they were tending more and more to drive property out of Massachusetts. So long as they merely drove property from one town to another, the state at large might view the movement with compara- tive indifference. But when it came to actual removals of property, amounting to tens of mil- lions, the state could not be indifferent to what was going on, and reform of the tax laws could not be longer deferred. Since the taxation of intangible property was the worst feature of the system, it was inevitable that the first step should be to provide a better method of dealing with this class of property. In 1907 the so-called "three-mill tax" was pro- posed by a special commission upon taxation. This meant a flat tax at the rate of three mills upon each dollar of the assessed valuation of money, credits, and securities. Since it would have been moderate in amount, it could have been collected with tolerable certainty and with- out danger of driving taxpayers from Massachu- setts; and since the rate would have been the same in every city and town, it would have put a stop to intra-state migration. But the plan en- countered constitutional difficulties which proved insuperable, and therefore came to nothing. In 1911 Governor Foss broached the subject of a state income tax which should be introduced as a substitute, complete or partial, for the ex- isting tax on personal property. Since it was then evident that there was likely to be a federal income tax before very long, the plan of a state income tax was received with general favor, be- cause it was seen that, if taxpayers were obliged to return their incomes for taxation by the federal government, there would be an obvious con- venience and economy in adopting similar methods in state taxation. Differences concern- ing the precise form of an amendment to the state constitution permitting the establishment of a uniform income tax, delayed for several years the adoption of such an amendment. But in 1915 an income tax amendment was at last submitted to the voters, who ratified it by an overwhelming majority, and a way was thus opened for the long-deferred and greatly needed reform of the tax laws of Massachusetts. The legislature of 1915 authorized the ap- pointment of a special commission to investigate " the necessity and advisability of changes in ex- isting tax laws"; and anticipating the adoption of the proposed constitutional amendment, in- structed the commission to draft a law "pro- viding for the taxation of incomes." After the 8 THE MASSACHUSETTS amendment was ratified at the polls, this com- mission took up the subject of the income tax, and in January submitted to the Legislature the draft of a well-considered law imposing: (a) a tax of 6% upon income derived by inhabitants of Massachusetts from such forms of intangible property as were taxable under the existing law; and (6) a tax of 1J^% upon income derived from annuities, trades, and professions. This measure was well received by the public, and after careful consideration by the legislative committee on taxation was finally enacted into law. Apart from perfecting amendments, the only important change made in the draft sub- mitted by the special taxation commission was the insertion of a new provision imposing a tax of 3% upon profits derived from dealings in intangible personal property. Upon the whole the proposed income tax law encountered surprisingly little opposition. In the House there were not enough dissenters to secure a roll call. The responsibility is now shifted from the Legislature to the taxpayers who in 1917 will come under the operation of the act. Turning now to the new law, we find that it imposes what may be called a "partial" as dis- tinct from a "general" income tax. It does not bring all kinds of income within its net, but con- fines itself to incomes derived from three sources : (a) intangible personal property, (b) annuities, trades, and professions, and (c) speculative deal- ings in intangible personal property. It is, therefore, much narrower in scope than the federal income tax which applies to income from nearly all sources, and somewhat narrower than the Wisconsin income tax which reaches most kinds of income but does not apply to dividends from some classes of corporations. The Massachusetts law, however, follows what is undoubtedly the line of least resistance in this state. Our problem has been that of substitut- ing an income tax for such parts of our present system of property taxation as had proved ab- solutely unsatisfactory. There was no popular demand for a new method of taxing real estate or tangible personal property, and the Legislature acted wisely, therefore, in making the income tax merely a logical complement to a system of prop- erty taxes upon tangible property, real and per- sonal. The result is a perfectly logical adjust- ment by which tangible things like real estate, machinery, merchandise, and livestock are as- sessed locally upon their capital value, while intangibles are assessed by the state upon their annual income. INCOME TAX 9 The Massachusetts income tax is imposed upon "inhabitants" of the commonwealth. The word "inhabitant" had long been used in our tax laws, and its precise meaning had often been considered by the Supreme Court. By re- taining it, the new act probably works no change in the taxable status of persons except by aban- doning the old practice of making April 1st the legal tax day, and providing that every person who is an inhabitant of the commonwealth at any time between the first day of January and the thirtieth day of June shall be liable to the income tax. Presumably the retention of the word "inhabitant" will relieve from taxation persons temporarily domiciled in Massachusetts; but it is evident also that the substitution of a six months' period for the single date of April 1st will make it diflBcult for actual inhabitants to evade the tax. The most important provision of the income tax act is that which abolishes the existing tax upon intangible property and substitutes there- for a uniform tax, at the rate of six per cent, upon the income derived therefrom. Since this will be levied at the same rate in every city and town, our tax laws will hereafter offer no in- ducement to changes in domicile; and since the amount of the tax is reasonable, it will undoubt- edly be paid cheerfully by the taxpayers. To the investing public, the law should bring a profound sense of relief in that it substitutes a definite and reasonable tax for an uncertain and unequal system, under which many escaped altogether, some compounded with the local authorities for a reasonable rate of taxation, and still others paid one-quarter or one-third of their entire incomes. While taxation can hardly be expected to be popular, it can be re- spected as necessary and just. The old law relating to intangible property was neither of these things, and was entitled to little respect; but the new law may be confidently expected to command both the respect and the approval of the people of Massachusetts. The next feature of the tax on the income from intangible property is that it applies only to such kinds of intangibles as were subject to taxation under the former law. Thus the status of mortgages upon taxable Massachusetts real estate is in no wise affected, since the income of such mortgages is exempted from the income tax. Similarly, income from deposits in savings banks, income from tax-exempt state and mu- nicipal bonds, and dividends received from stock of Massachusetts corporations and national 10 THE MASSACHUSETTS banks are all exempt from income tax. The same is true of income from the stock of the so-called "real estate trusts," and of income from the shares of such voluntary associations as hold the shares of Massachusetts corporations or are conducting their business principally in Massa- chusetts and are therefore already sufficiently taxed. In general, the owner of securities will find that he is taxable only upon income derived from sources that were taxable under the old law. About the only exception to this state- ment is found in the case of trusts or other vol- untary associations not owning real estate ex- clusively, or shares in Massachusetts corpora- tions, and not doing business principally in Massachusetts. Such concerns are treated under the new law as foreign corporations, and divi- dends derived from their shares will hereafter be subject to taxation. Another very important feature of the tax on intangibles is that it provides for a deduction or offset on account of indebtedness. The for- mer law only permitted the taxpayer to offset debts against credits, — that is, it allowed the taxpayer to deduct money that he owed from money that was owed to him, — and the result was that most classes of intangible property were taxable without any offset or allowance. The new law does not indeed permit the deduc- tion of interest paid upon any and all debts from the income received by the taxpayer from taxable intangible property. To do so would have been wrong in principle and would have opened the door to wholesale evasion. Deduc- tion of all debts from taxable income is neces- sary as well as proper under a general income tax applicable to income from all sources, but under a partial income tax it is manifestly im- possible. The new law, therefore, follows what may be called the principle of granting the tax- payer a proportional offset or deduction. It provides in effect that, from the income received from taxable intangible property, the taxpayer may deduct such a proportion of the interest paid on his total indebtedness as the income which he derives from taxable intangible prop- erty bears to his total income from all sources. The provisions of the law at this point are necessarily complicated, but their practical operation may be shown by the three following cases: a person receiving $99,000 of income from taxable intangible property and $1000 of in- come from other sources may deduct from his taxable income derived from intangible property 99% of the interest paid upon his indebtedness; INCOME TAX 11 a person receiving $50,000 of income from tax- able intangibles, and $50,000 from other sources will be able to deduct one-half of the interest which he pays upon his debts; and finally, a person receiving $1000 from taxable intangible property and $99,000 from other sources will be permitted to deduct but 1% of the interest upon his obligations. These cases do not take account of all the provisions of the law and are intended merely to illustrate the principle which is emi- nently fair and in practice should offer no serious difficulties. Besides allowing deduction for debts, the new law grants an exemption of $300 of income from taxable intangible property to persons whose total income from all sources does not exceed $600 during the year prior to the assessment of the tax. Under the old law a person owning any amount of taxable securities was liable to taxa- tion, and in many cases of small estates un- covered in the Probate Courts great hardship arose. The statutes, indeed, provided that the assessors might exempt the polls and any por- tion of the estates of persons who by reason of age, infirmity, or poverty were deemed to be unable to contribute toward the public charities. But this did not meet the needs of the case, since a person with a capital of five or ten thou- sand dollars was not in a position to plead "poverty." Thus it came about that persons deriving small incomes from taxable property were frequently taxed for twenty or twenty-five per cent of such incomes. The new law not only reduces the rate of taxation to six per cent of the income from intangibles, but provides an exemption of $300. A final feature of the act is its provision con- cerning the taxable situs of property held in trust. Hitherto the policy of the common- wealth has been to tax beneficiaries who reside in Massachusetts, no matter where the trustee resides or may have derived his appointment, and then to tax trustees who are inhabitants of the commonwealth, even though some or all of the beneficiaries of the trust reside in other states. In some cases a provision was made for avoiding double taxation, but in general the law proceeded upon the principle of "Heads I win, tails you lose," and reflected no credit upon the commonwealth. The new act provides that the taxes levied upon income shall be gov- erned by the domicile of the beneficiary and not by that of the trustee. Under it persons who are inhabitants of Massachusetts and receive income from taxable property held in trust will 12 THE MASSACHUSETTS be taxed upon that income whether or not the trustee is a resident of the commonwealth; and, upon the other hand, if the beneficiary of the trust lives in another state, no tax will be im- posed upon a trustee who happens to live in Massachusetts. This is a matter of simple jus- tice, and it will have the effect of making it possible for inhabitants of Massachusetts to act as trustees under many trusts that otherwise would never come to this state. Since the new law is intended to be strictly enforced, it necessarily requires compulsory re- turns of taxable income. On or before the first day of March in each year the inhabitants of Massachusetts must hereafter make returns of their income from taxable intangible property. Such returns must be made under oath, and failure to comply with the law will make a person liable to heavy penalties. No option is given to taxpayers, as under the former statutes of the commonwealth; and we now have an absolute requirement of full returns of taxable income, with which no careful lawyer or responsible banker will advise his client or customer to trifle. But these returns are not to be made to the local assessors. The law provides that they may be filed with the tax commissioner in Boston or with a special income tax assessor appointed to assess incomes in the district where the taxpayer lives. It is expressly provided that the tax- payer may elect whether to send the return to the tax commissioner or to the income tax assessor, so that the requirement of a sworn return does not mean that the details of a taxpayer's affairs are to become known to the people of his neigh- borhood. The act also provides that neither the tax commissioner nor any deputy, assistant, clerk, or other public employee shall disclose to any unauthorized person "any information whatever contained in or set forth by any such return, other than the name and address of the person filing it." As indicated in the last paragraph, the admin- istration of the income tax is placed in the hands of the state tax commissioner. This is one of the wisest provisions of the law because it is vitally important that the act shall be uniformly ad- ministered without fear of favor by intelligent administrators in every part of the common- wealth. To aid in this work the tax commis- sioner is authorized to appoint an income tax deputy who will have immediate charge of the assessment of income. He is also authorized to divide the state into income tax districts and to appoint an income tax assessor for each dis- INCOME TAX 13 trict. We may expect, therefore, that there will be organized not less than a dozen or fifteen in- come tax districts, so that the administration of the law will be in some measure localized, although retaining the principle of responsibility to the single ultimate authority, the state tax commissioner. Under these provisions we may count on intelligent and even-handed enforce- ment of the law in every town or city in the state, so that when the income tax goes into operation every owner of intangible property will feel assured that all are being treated alike. Under such conditions we may expect that the law will be as fully and as cheerfully complied with as was the income tax act that went into operation in Wisconsin in 1912. We have been so long the victims of a bad system of taxation that many persons have be- come skeptical about the possibility of enforcing any law requiring the taxation of personal prop- erty or income. But the success of Wisconsin in collecting a reasonable income tax has shown that the wholesale evasion that exists under a general property tax is due to the faults of the law rather than to wilful dishonesty of the citi- zens. An unreasonable law administered in three hundred and fifty different ways by three hundred and fifty local boards of assessors in Massachusetts could hardly be expected to pro- duce any result but wholesale evasion. Upon the other hand, a reasonable law administered by state assessors of income under the direc- tion of the tax commissioner will undoubtedly secure as good results in Massachusetts as it does in Wisconsin. We may reasonably expect, therefore, that the new income tax act will solve the most vexed of vexing problems, that of tax- ing intangible personal property. Besides taxing the income from intangible property, the new act imposes a tax at the rate of one and one-half per cent upon income de- rived from annuities and from "professions, em- ployments, trade, or business." This part of the law contains nothing new in principle, since these classes of income have long been taxable as personal property. But the new law imposes a uniform rate and makes important improvements in the details of the tax. Under the old law income from an annuity was taxable upon its entire amount. The new law provides for an exemption of the same sort that is authorized in the case of income from intangible property. Hereafter, $300 of any annuity will be exempt from taxation provided that the total income of the annuitant from all 14 THE MASSACHUSETTS sources does not exceed $600. But the law stipulates that annuitants who also receive tax- able income from intangible property shall not have an aggregate exemption of more than $300. The provisions of the law concerning income from professions, employments, trade, or busi- ness are noteworthy because they carefully de- fine what constitutes taxable income. The old law merely provided that such "income" should be taxed. There was indeed a proviso that in- come "derived from property subject to taxa- tion" should not be taxed, but the Supreme Court had held that this did not prevent a merchant from being taxed upon the entire in- come from his business, so that everything was very much in the air. The new law carefully defines taxable income. In effect, the income hereafter subject to taxation will be the net income of the business determined substantially as any good accountant would compute it; and the further provision is made that a taxpayer shall be entitled to deduct from such net in- come an amount equal to five per cent of the assessed value of the stock in trade and other tangible property, real and personal, owned by him and used in the business. Thus the new act exempts so much of the taxpayer's income as represents a fair rate of interest upon the tangible property for which the business is taxed. The new law continues the exemption of two thousand dollars of professional or business income, which had always been granted by the old. It provides a further exemption of five hundred dollars for a married person, and of two himdred and fifty dollars for each child under the age of eighteen years or for a parent dependent upon the taxpayer for support; but provides that in no case shall this total additional exemp- tion exceed one thousand dollars. The new act, therefore, materially increases the exemp- tions granted to persons subject to the tax on business and professional incomes. The provisions for administering this one and one-half per cent tax are, of course, the same as those relating to the six per cent tax upon in- come from intangible property. Returns must be made on or before the first of March and fail- ure to comply with the law will entail the same heavy penalties. The tax will be assessed on partnerships as such, and the income of the mem- bers of the partnership will be exempt. If any of the partners are not inhabitants of the com- monwealth, their share in the profits will not be taxable, since the law carries out consistently the INCOME TAX 15 idea that the tax is a personal income tax upon inhabitants of Massachusetts. In addition to the tax upon professional and business incomes, the new law provides for a special tax at the rate of 3% upon the excess of the gains over the losses resulting from purchases or sales of intangible personal property. This tax is due from all inhabitants of the common- wealth, whether they are engaged in the busi- ness of dealing in intangible property or not, and applies to dealings in all classes of securities, taxable and non-taxable. In other words, it ap- plies to the individual speculator as well as to the banker or broker. Provision is made, how- ever, that in the case of trustees the gains shall be determined not annually but at the time when a trust is terminated; provided, however, that if the trust continues for more than five years, the gains shall be determined and the tax paid at least in every fifth year. The act does not define in any detail what shall be considered gains and losses, but does state very clearly that in determining them the state shall not go back of the first day of January, 1916. This provision of the act has aroused consider- able discussion. Without it, gains from dealings in intangible property would have been taxable at the rate of 1^^% if they formed part of the income of any business carried on by inhabitants of the commonwealth; but they would not have been taxable to individuals who speculated in securities. Now an income tax diflFers from a property tax in that it exempts from taxation property yielding no income, which, if it has any value, would be taxable under a property tax. It is obviously the intention of the new law that persons who speculate in non-dividend-yielding stocks shall be taxed upon their speculative gains, even though they may not be engaged in the business of buying or selling intangible property. That the rate was placed at 3% instead of 13^% was doubtless due in part to the desire to tax the "speculator"; but it is also explicable on the ground that intangible property is now exempt from taxation as property, so that persons who deal in it may fairly be required to pay a some- what heavier rate than persons who deal in merchandise or other taxable tangible property. Since the new income tax is to be strictly en- forced, provision is made for what is called "in- formation at the source." Every employer of labor must report to the tax commissioner an- nually the names and addresses of all regular employees who are inhabitants of Massachusetts and have received wages, salaries, or other com- 16 THE MASSACHUSETTS pensation in excess of $1800. It also provides that every corporation or association having transferable shares which does business in the commonwealth shall report to the tax commis- sioner the names of its shareholders, unless its stocks fall within the class of tax-exempt securi- ties, and also the names of inhabitants of Massa- chusetts to whom it has paid annuities, or inter- est upon its bonds, notes or other evidences of indebtedness, except interest on coupon bonds, and income exempt from taxation under the act. Neither of these requirements is unduly burden- some, so that no such difficulties will arise as have developed under the federal income tax. Taxpayers who in the past have been assessed for intangible property under the old law will need to pay especial attention to Section 22 of the new act. This provides that in 1917, when the income tax goes into effect, and therefore personal income and intangible property become exempt from local taxation, no person's local assessment of personal estate shall be reduced below the amount assessed in 1916, unless he makes a return of such personal property as remains subject to local taxation. This means that, in order to benefit by the exemption of in- come or intangible property, taxpayers must file with their local assessors in 1917 a return of their taxable tangible personalty. For the aver- age taxpayer this will mean household furniture in excess of $1000, automobiles, horses, car- riages, and livestock; and for merchants and man- ufacturers it will mean a return of merchandise and machinery. In this manner there will be secured in 1917 a much fuller return of tangible personal property than has ever been had before, so that the new law, by providing a just and practicable method of taxing intangibles, will remove many of the difficulties that have hitherto attended the taxation of tangible property. The new law is calculated to yield a revenue substantially greater than is now derived from intangible property and taxable incomes, and, with the efficient methods of administration that have been provided, there can be little doubt that it will fulfill expectations. Greatly in its favor is the fact that it was adopted only after nine or ten years of constant discussion, which familiarized the people of the common- wealth with the evils of the existing system and the need of having reasonable and enforceable tax laws. It represents a general consensus of opinion after thorough and long discussion, and therefore gives assurance of relative permanency. The people of the commonwealth can, there- INCOME TAX 17 fore, readjust their affairs with the reasonable expectation that a solution has been found of the most difficult of our taxation problems. This, at any rate, has been the experience of other states that have introduced just and prac- ticable methods of taxing intangible property. Massachusetts makes the change under pecu- liarly favorable conditions, and there is no rea- sonable ground for doubt about the result. SUMMARY OF THE INCOME TAX I. The Following Taxes on Incomes are to BE Levied in the Year 1917 and Each Year Thereafter. (Sec. 1, 1. 1.) II. Income Subject to a Tax of Six Per Cent. (Sec. 2.) A. Income from bonds, notes, money at interest, and debts due is taxed in general; but income from property of the following classes is exempt: * (Sec. 2,1. 6.) 1. Deposits in savings banks in Massa- chusetts. (Sec. 2, 1. 9.) 2. Deposits in savings departments of trust companies in Massachusetts which do not exceed the limits imposed on de- posits in savings banks. (Sec. 2, 1. 12.) 3. Deposits in the Massachusetts Hospital Life Insurance Company. (Sec. 2, 1. 11.) 4. Bonds of the United States. (Sec. 2, 1. 19.) 5. Bonds or certificates of indebtedness of the commonwealth issued since Janu- ary 1, 1906, which state on their face that they are exempt from tax. (Sec. 2, 1. 20.) 6. Bonds, notes and certificates of indebted- ness of political subdivisions of the com- monwealth, issued on or after May 1, 1908, which state on their face that they are exempt from tax. (Sec. 2, 1. 21.) 7. Loans secured exclusively by mortgages of real estate in Massachusetts taxable as real estate to an amount, however, not exceeding the assessed value of the mortgaged real estate. (Sec. 2, 1. 28.) B. Income from shares in corporations and joint stock companies not organized under the laws of the commonwealth is taxed, except that in- come from property of the following classes is exempt: (Sec. 2, 1. 33.) 1. Shares of national banks. (Sec. 2, 1. 36.) 2. Shares of foreign railroad, street railway, electric railroad, telegraph and tele- phone companies doing business in the commonwealth. (Sec. 2, 1. 36.) C Income from shares in partnerships, associa- tions or trusts, the beneficial interest in which is represented by transferable shares, is taxed in general; but income from the following is exempt: (Sec. 2, 1. 44.) * The sections and lines printed in this summary refer to sections and lines of the Act beginning on page 31. INCOME TAX LAW 19 1. Income from shares in such partnerships, associations or trusts which file an agree- ment with the tax commissioner to pay the same taxes for which they would be liable if an individual, and whose property consists exclusively of one or more of the following classes. (Sec. 2, 1. 48; sec. 2, 1. 86.) (a) Real estate wherever situated and supplies therefor and receipts there- from. (Sec. 2, 1. 53.) (6) Stocks of corporations paying so- called franchise tax to the common- wealth. This includes all Massa- chusetts corporations. (Sec. 2, 1. 54.) (c) Intangible property the income from which is exempt from taxation un- der paragraphs 4, 5, 6 and 7 of Sec- tion II (A), above. (Sec. 2, 1. 59.) (d) Property the income of which would be taxable under II if owned by an inhabitant. (Sec. 2, 1. 63.) (e) Shares in partnerships, associations or trusts, dividends on which are ex- empt from taxation under this Section C. (Sec. 2, 1. 66.) 2. Income from shares in such partnerships, associations or trusts which file the agreement mentioned in II (C) (1) and which satisfy the tax commissioner that at least two-thirds of their taxable property is taxed within the common- wealth and the remainder, if taxable, is taxed where situated. (Sec. 2, 1. 69.) D. Distributions of capital in liquidation or other- wise are not included as income; but accumu- lated profits are not regarded as capital. (Sec. 2, 1. 115.) III. Deductions and Exemptions. (Sec. 3.) A. From the income subject to the tax of six per cent, interest paid on the following debts and within the following limits is deductible: (Sec. 3, 1. 1.) 1. Persons engaged in the business of buying y selling or othervrise dealing in intangible personal property may deduct interest on all debts except those secured by mort- gage or pledge of real estate or tangible personal estate. (Sec. 3, 1. 7.) (a) Provided that no such deduction is allowed if such business includes buying, selling, improving or other- 20 THE MASSACHUSETTS wise dealing in or with real estate, or buying, selling, manufacturing or otherwise dealing in or with tangible personal property. (Sec. 3, 1. 11.) 2. Other persons (i.e., practically every one except bankers and brokers) may de- duct interest on all debts except (Sec. 3, 1. 17.) (a) Debts secured by mortgage or pledge of real estate or tangible personal estate, and (Sec. 3, 1. 17.) (6) Debts incurred in connection with profession, employment, trade or business of such person. (Sec. 3, 1. 19.) 3. The deduction under 1 and 2 from loans directly or indirectly secured by in- tangible personal property cannot ex- ceed 80% of the income from such in- tangible property subject to the 6% tax. (Sec. 3, 1. 22.) Example: Assume the case of an individ- ual owning $100,000 of non-dividend yielding taxable and non-taxable securi- ties, $100,000 of tax-exempt securities yielding dividends amounting to $6,000, and $100,000 of taxable securities yield- ing dividends amounting to $6,000. As- sume that he has no other income and that these securities are pledged to secure a loan of $150,000 upon which he is pay- ing $7,500 interest. In this case, the individual would have to return for taxa- tion, under Section 2, the $6,000 of divi- dends derived from taxable securities; then since his taxable income is $6,000 and his total income, without deducting interest, is $12,000, he is entitled to deduct %2 or one half of the $7,500 in- terest paid by him, i. e., $3,750. The rule admits of reduction to the following formula in which X stands for the amount of the deduction, viz.: X : $7,500 = $6,000 : $12,000 There is, however, a provision that the de- duction shall not exceed 80% of the in- come returned by the taxpayer from tax- able securities. If suxih an individual received, in addition, income taxable under Section 5, such in- come would not be included in the calcula- tion. If, however, he received $5,000 in- come from real estate, that amount would INCOME TAX LAW 21 be included in his total income, i. e., would be added to the last quantity in the above proportion. 4. Only the same proportion of interest on debts described under 1 and 2 can be deducted, as the taxable income from intangibles bears to the entire income of the taxpayer from all sources what- ever, whether taxable or not, except annuities, trades, professions and busi- nesses. (Sec. 3, 1. 54.) B, An exemption of $300 is allowed if the total in- come of the taxpayer from all sources is less than $600. (Sec. 4.) IV. Income Subject to a Tax of One and One-Half Per Cent. (Sec. 5.) A. Annuities are taxable at one and one-half per cent, but this does not include income from property held in trust even though paid in the form of an annuity. (Sec. 5, 1. 5.) 1. Exemption: An exemption of $300 is al- lowed if the total income from all sources, including non-taxable income, is less than $600; but the total exemp- tion from income from intangibles sub- ject to six per cent tax, and from annui- ties subject to one and one-half per cent tax, cannot exceed $300. (Sec. 5, 1. 12.) B. The excess over two thousand dollars of in- come from professions, employments, trade or business is taxable at one and one-half per cent. (Sec. 5, 1. 22.) 1. Such income is defined to include, with- out limiting the generality of the above words (a) The rental value of quarters furnished as part of compensation. (Sec. 5, 1. 26.) (6) Gains from the sale of capital assets other than from the sale of intangi- ble property. (Sec. 5, 1. 23; sec. 6, 1. 4.) 2. Exemption: The act exempts from the one and one-half per cent tax, the wages and salaries of employees and ojSBcers of the United States Government; but if the sum of their other income of a taxable nature and their wage or salary exceeds $2,000, they are taxable on the whole of such other taxable income or the excess of such sum over $2,000, which- ever is less. (Sec. 5, 1. 29.) 22 THE MASSACHUSETTS Example : A person who receives as salary from the United States Government $1,800 a year and earns $1,000 during the year in the real estate business would have taxable income of $800. If, how- ever, his salary from the Government was $2,200 and he earned $1,000 from the real estate business, his taxable income would be only $1,000. 3. In determining the excess which is taxable at one and one-half per cent the follow- ing deductions are allowed: (Sec. 6, 1.6.) (a) Expenses paid within the year, in connection with the profession, employment, trade or business, including ordinary repairs (Sec. 6, 1. 8), but Excluding — 1. Personal or family expenses. (Sec. 6, 1. 10.) 2. Insurance premiums paid for use, occupancy or rent insurance. (Sec. 6, 1. 11.) (6) A reasonable allowance for the de- preciation and obsolescence of prop- erty within the year and for the depletion of wasting assets within the year owned and used in connec- tion with such profession, employ- ment, trade or business. (Sec. 6, 1. 15.) (c) Taxes paid within the year in respect to the profession, employment, trade or business, or on property held or used in connection there- with, excluding assessments for betterments. (Sec. 6, 1. 28.) {d) Interest paid within the year on in- debtedness incurred in connection with the profession, employment, trade or business, excluding interest allowed as a deduction for the piu*- poses of the six per cent tax on in- come from intangibles. (Sec. 6, 1. 35.) {e) Losses incurred or sustained in con- nection with the profession, em- ployment, trade or business within the year. (Sec. 6, 1. 41.) 1. Upon the sale of capital assets other than intangible property. (Sec. 6, 1. 41.) 2. By fire, theft, casualty or amounts paid on claims in tort or con- tract, provided the same are INCOME TAX LAW 23 not covered by insurance. (Sec. 6, 1. 44.) (J) Debts arising since December 31, 1915, in connection with the profes- sion, employment, trade or business and actually charged off during the year, provided, (Sec. 6, 1. 49.) 1. They have been included as in- come in a previous return under the act. (Sec. 6, 1. 56.) (g) An amount equal to 5 % of the assessed value (in the year for which tax is being computed), of the stock in trade and other tangible property owned, and used or employed therein. (Sec. 6, 1. 59.) If such property is taxed outside the commonwealth on the basis of its income and not of its capital value, the tax commissioner may allow a deduction of 5% of the value of such property as determined by him. (Sec. 6, 1. 66.) (h) The following specific sums, but the aggregate deduction for husband, wife, children and dependent par- ents is not to exceed $1,000. (Sec. 6, 1. 76.) 1. Five hundred dollars for a husband or wife with whom the taxpayer lives, but that amount may be prorated as they agree or in pro- portion to the net income of each in excess of $2,000. (Sec. 6, 1. 76.) 2. Two hundred and fifty dollars for each child under 18 years. (Sec. 6, 1. 78.) 3. Two hundred and fifty dollars for each parent entirely dependent for support upon the person making return. (Sec. 6, 1. 80.) (i) Interest and dividends taxable under this act at the rate of 6%, and in- come derived from property not subject to taxation under Chapter 490 of the Acts of 1909 and acts in amendment thereof and in addition thereto, and income from certain forest lands. (Sec. 6, 1. 90.) V. Income Subject to a Tax of Three Per Cent. (Sec. 5, 1. 39.) A. The excess of gains over losses from purchases or sales of intangible personal property whether / 24 THE MASSACHUSETTS or not the taxpayer is a dealer in securities. (Sec. 5, 1. 39.) 1. Trustees may pay the tax out of principal and are required to make a return of such gains at least every fifth year. If the trust terminates within five years, then the tax is to be paid at the ter- mination of the trust. (Sec. 5, 1. 44.) 2. Determination of value. (Sec. 7, 1. 6.) (a) If the property was owned January 1, 1916, the value on that date is the basis. (Sec. 7, 1. 8.) (b) If purchased subsequently, then the value on the date of acquisition is the basis. (Sec. 7, 1. 11.) Note: The tax commissioner is authorized to make rules and regulations not inconsistent with the act for the purpose of effecting its pro- visions, and he will doubtless define the words "gains" and "losses" for the purpose of com- puting the excess which is taxable at the rate of 3%. VI. Additional Provision as to Estates, Fiduciaries and Partnerships. (Sees. 8, 9, and 10.) A. Estates of Deceased Persons. (Sec. 8.) 1. Income received by persons since deceased is taxed to the estate of such persons. (Sec. 8, 1. 1.) 2. Income received by the estate of a de- ceased inhabitant is assessed to the ex- ecutor or administrator, to the extent that the beneficiaries are residents of Massachusetts. (Sec. 8, 1. 3.) S. No person is taxable for income received from an estate which has been taxed on such income. (Sec. 8, 1. 15.) 4. Taxes must be assessed within one year from the appointment of the executor or administrator or within three months from the time of filing the inventory, if the inventory has not been filed at the end of nine months. (Sec. 8, 1. 19.) B. Trustees. (Sec. 9.) 1. Except as follows, trustees are taxed under the same provisions as executors and administrators. (Sec. 8, 1. 34.) 2. If any trustee lives in Massachusetts, or is appointed by a court in this common- wealth, the income received by such trustee is subject to tax to the extent INCOME TAX LAW 25 that the beneficiaries to whom it is paid or for whom it is accumulated are in- habitants of Massachusetts. No tax is assessed as to the balance of the income. (Sec. 9, 1. 1; sec. 9, 1. 12.) Example: A trustee in Massachusetts re- ceives during the year $1,000 in dividends from foreign corporations and $1,000 in interest on tax-exempt municipal bonds. By the terms of the trust the income is di- vided equally between two beneficiaries , one a resident and one a non-resident. The trustee would be subject to a tax of 6% on $500. 3. If all the trustees are non-residents, the income received by the beneficiaries who are inhabitants is taxable according to the nature of the income received by the non-resident trustees. (Sec. 9, 1. 17.) Example: If the trustee in the example under 2 lived outside of Massachusetts, the Mas- sachusetts beneficiary would be required to include in his return as taxable income the sum of $500. 4. No person is taxable for income received from a trustee who has been taxed on such income. (Sec. 8, 1. 34; sec. 8, 1. 15.) 5. Provision is made for the fiduciary to claim the benefit of the $300 exemption. (Sec. 9, 1. 26.) 6. These same principles apply so far as ap- plicable to guardians, conservators, trustees in bankruptcy, receivers and assignees for creditors, as are applicable to trustees. (Sec. 9, 1. 70.) 7. Income accumulating for unborn or un- ascertained interests is taxed as if for a resident. (Sec. 9, 1. 75.) 8. In order to facilitate settlement of estates, the tax commissioner with the approval of the attorney general may agree upon the amount of taxes due or to become due and payment of such amount is full satisfaction of the taxes referred to in such agreement. (Sec. 9, 1. 80.) Partnerships (not including partnerships, as- sociations or trusts, the beneficial interest in which is represented by transferable shares). (Sec. 10.) 1. Partnerships of which any member is an inhabitant of Massachusetts and which have a usual place of business in Massa- chusetts are assessed on their profits or income in proportion to the interest of 26 THE MASSACHUSETTS the partners who are inhabitants of Massachusetts. (Sec. 10, 1. 1.) 2. The individual partners are not assessable for income from such partnership. (Sec, 10, 1. 14.) 3. At the request of any partner, the partner- ship may claim the benefit of the $300 exemption to which such partner may be entitled. (Sec. 10, 1. 17.) 4. A Massachusetts inhabitant who is a member of a partnership not doing business in Massachusetts is taxable on income received therefrom as he would be if the income were received directly by him instead of through the partner- ship. (Sec. 10, 1. 39.) 5. The provisions of the act as to returns, as- sessment, abatement and collection of taxes apply to partnerships subject to tax. (Sec. 10, 1. 47.) D. Partnerships, associations and trusts, the bene- ficial interests in which are represented by transferable shares are 1. Liable for all taxes imposed by the act as if an individual, if dividends on such transferable shares are exempt from tax hereunder. (Sec. 2, 1. 77; sec. 5, 1. 66.) VII. Exemption from Local Taxation. (Sec. 11.) After 1916, income taxable under this act at the rate of \}/2% or 3% and property the in- come of which is taxable under this act and has been returned, are exempt from other tax- ation. VIII. Returns are Required under Oath AS Follows. (Sec. 12.) A. Such returns are due annually on or before March 1st, beginning 1917, covering income for calendar year ending the preceding December 31st. (Sec. 12, 1. 46.) B. Such returns are required from (Sec. 12, 1. 1.) 1. Every individual inhabitant, including partnerships, associations and trusts, whose annual income exceeds two thousand dollars, except that he need not return income from (Sec. 12, 1. 1.) (a) Real estate. (Sec. 12, 1. 6.) (6) Dividends exempt under this act. (Sec. 12, I. 7.) (c) Interest on bonds of the United States. (Sec. 12, 1. 8.) INCOME TAX LAW 27 (d) Interest upon bonds, notes or certifi- cates of indebtedness of the com- monwealth and its poHtical subdi- visions, which is exempt under the act. (Sec. 12, 1. 10.) (e) Interest on loans secured by mort- gage of real estate within the com- monwealth not exceeding the as- sessed value. (Sec. 12, 1. 18.) (J) Wages or salaries received from the United States. (Sec. 12, 1. 22.) 2. Every other individual inhabitant who receives any income subject to the 6% tax, or from an annuity (except from a trust) or any gains in excess of losses as defined by the tax commissioner, on dealings in intangible property, must make a return of such income. (Sec. 12, 1. 23.) 3. Every fiduciary, person, trustee in bank- ruptcy, assignee for creditors and cer- tain receivers, who receives taxable in- come must file like returns of taxable income. (Sec. 12, 1. 29.) 4. Every person who is or who becomes an inhabitant of Massachusetts at any time between January 1st and June 30th, in any year, and who received tax- able income in the preceding year. (Sec. 12, 1. 51.) C. Filing. (Sec. 12, 1. 37.) 1. Such returns may be filed with the income tax assessor for the district where the taxpayer resides or has his principal place of business, or at option of tax- payer, with the tax commissioner. D. Forms and blanks. (Sec. 12, 1. 72.) 1. The tax commissioner is required to provide blanks, but failure to receive one does not excuse the making of a return. (Sec. 12, 1. 72.) E. Special returns under oath may be required of all income, whether taxable or not, if the tax commissioner is of the opinion that any person has not filed a return when required to do so, or intentionally or through error has omitted taxable income from a return which has been filed. Such special return does not relieve the taxpayer from the penalties imposed. (Sec. 12, 1. 87.) IX. Penalties. (Sec. 13.) Severe penalties as follows are provided for failure to file returns when required: 28 THE IVIASSACHUSETTS 1. Fine or imprisonment, or both. (Sec. 13, 1. 1; sec. 13, 1. 33.) 2. Disqualification for public office. (Sec. 13, 1. 44.) 3. The tax commissioner is to assess a tax on twice the amount of income he can dis- cover. (Sec. 14, 1. 27.) 4. Abatements are limited to an amount equal to twice the amount of the tax. (Sec. 19, 1. 21.) 5. A writ of mandamus may issue compelling a person to file a return. (Sec. 13, 1. 1 1 .) X. Assessment, Collection, Abatement and Distribution of Taxes. (Sees. 14-19.) A. The tax commissioner or his deputy have charge of all the administrative features of the act. (Sec. 14.) B. The tax commissioner may proceed under the authority given to discover income and collect taxes thereon within two years from the time when the return was due. (Sec. 14, 1. 13; sec. 14, 1. 27). C. The tax commissioner may allow extensions of time for filing returns in case of sickness, ab- sence or other disability. (Sec. 14, 1. 36.) D. Taxes are due on October 15th of each year and may be paid to the tax commissioner or to the income tax assessor for the district in which the taxpayer lives. (Sec. 15, 1. 6.) E. Returns are to be open only to the tax com- missioner and the income tax assessors and their deputies, assistants and clerks when act- ing under their authority. (Sec. 16.) 1. Penalty for disclosure is a fine not exceed- ing $1,000 or imprisonment not exceed- ing six months, or both, and disquali- fication for public office for not over three years. (Sec. 16, 1. 6.) 2. Indexes of persons fifing returns are to be open to the public at the office of each income tax assessor. (Sec. 16, 1. 24.) F. The act provides for income tax assessors who are to have charge of the income tax districts into which the state is to be divided. Such as- sessors are appointed by the tax commissioner with the advice and consent of the governor and council. (Sec. 17.) 0. Abatements. (Sec. 19.) 1. Tax may be abated or refunded by the tax commissioner upon an appfication filed within three months from the date of notice of assessment. (Sec. 19, 1. 1.) 2. No abatement below double the amount INCOME TAX LAW 29 of the tax is allowed if the return is not filed on time; or if a fraudulent, incorrect or insujQScient return has been filed and is not corrected after notice to do so. (Sec. 19, 1. 15.) S. Appeal may be taken from the decision of the conmiissioner to the board of appeal or a complaint entered against the tax commissioner in the Superior Court. (Sec. 20.) E. Additional local taxes. (Sec. 21.) 1. Unless a return is filed with the income tax assessor or the tax commissioner, taxes at the local rate are to be assessed on property, the income of which would be taxable under this act, if such a tax is greater than the income tax would be, imless the taxpayer establishes: (Sec. 21, 1. 1.) (a) That the income was properly re- turned, or (Sec. 21, 1. 39.) (6) That it was not taxable, or (Sec. 21, 1. 41.) (c) That there was reasonable excuse for not making a return. (Sec. 21, 1. 41.) 2. Unless a return is filed in 1917 with the local assessor of taxable tangible personal 'property, the taxpayei* is to be assessed at the local rate on an amount of per- sonal property not less than that on which he was assessed in 1916. (Sec. 22.) /. Distribution of the tax. (Sec. 23.) 1. The commonwealth is to pay each city and town in 1917 an amoimt equal to the difference between the amount ob- tained by applying the 1915 local rate to the 1917 assessment on tangible per- sonal property, and the amount of local taxes on tangible and intangible per- sonal property in 1915. Any balance is distributed in the same proportions as the state tax is assessed. After 1917 taxes are to be distributed as Legislature determines. XL Information at the Source. (Sec. 25.) A. Every employer doing business in or being an inhabitant of the commonwealth is required to file annually on or before March 1st, the names and addresses of every employee to whom have been paid wages, salary or compensation in excess of $1,800 during the preceding year, and 30 THE MASSACHUSETTS the amount paid to each such employee. (Sec. 25, 1. 1.) B. Every corporation and every partnership, as- sociation or trust, the beneficial interest in which is representee! by transferable shares, doing business in Massachusetts is required to file with the tax commissioner on or before March 1st of each year. (Sec. 25, 1. 14.) 1. The names and addresses of all share- holders as of record December 31st, or at its option, of those in Massachusetts, unless the income on its shares is exempt under the act. (Sec. 25, 1. 14.) (a) The tax commissioner may accept a Ust as of any other date. (Sec. 25, 1. 27.) 2. The names and addresses of residents to whom it has paid annuities, or interest upon its bonds, notes or other evi- dences of indebtedness, except on bearer coupons and except income exempt from taxation under this act. (Sec. 25, 1. 33.) C. Penalties for failure to file such returns. (Sec. 25, 1. 58.) 1. A fine of not less than $25 nor more than $500 is provided for each failure to file the required return. (Sec. 25, 1. 58.) D. The treasurers of every city, town and county, and the auditor of the commonwealth is to file not later than April 10th of each year the names and addresses of all employees receiving more than $1,800 a year, and the amounts re- ceived by each. (Sec. 26.) THE MASSACHUSETTS INCOME TAX LAW An Act to impose a Tax upon the Income re- ceived from Certain Forms of Intangible Property and from Trades and Professions. Be it enacted by the Senate and House of Repre- sentatives in General Court assembled, and by the authority of the same, as follows: Section 1. There shall be levied in the year nineteen hundred and seventeen, and in each year thereafter, a tax upon incomes as herein- after set forth. taxation of income derived from certain intangibles Section 2. Income of the following classes received by any inhabitant of this common- wealth during the calendar year prior to the assessment of the tax shall be taxed at the rate 5 of six per cent per annum: (a) Interest from bonds, notes, money at interest and all debts due the person to be taxed, except from : First: Deposits in any savings bank char- 10 tered by this commonwealth or in the Massa- chusetts Hospital Life Insurance Company, or such of the deposits in the savings department of any trust company so chartered as do not exceed in amount the limits imposed upon de- 15 posits in savings banks by section forty-six of chapter five hundred and ninety of the acts of the year nineteen hundred and eight, and acts in amendment thereof and in addition thereto. Second : Bonds of the United States and such 20 bonds, notes and certificates of indebtedness of the commonwealth and of political subdivisions thereof as are exempt from taxation under the provisions of clause fifteen of section five of Part I of chapter four hundred and ninety of 25 the acts of the year nineteen hundred and nine, and acts in amendment thereof and in addition thereto. Third: Loans secured exclusively by mort- gages of real estate, taxable as real estate, situ- 30 ated within the commonwealth, to an amount not exceeding the assessed value of the mort- gaged real estate. (6) Dividends on shares in all corporations 32 THE MASSACHUSETTS and joint stock companies organized under the 85 laws of any state or nation other than this com- monwealth, except national banks and except such foreign corporations as are subject to a tax upon their franchises payable to this common- wealth under the provisions of sections forty- 40 three and fifty-two of Part III of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, and acts in amend- ment thereof and in addition thereto. (c) Dividends on shares in partnerships, as- 45 sociations or trusts, the beneficial interest in which is represented by transferable shares, except dividends on shares of the following: First: Partnerships, associations or trusts, which file with the tax commissioner the agree- 60 ment hereinafter provided for, and the property of which consists exclusively of one or more of the following specified kinds of property, to wit: real estate wherever situated and supplies there- for and receipts therefrom; stocks of corpora- 55 tions taxable under the provisions of sections forty-three and fifty-two of Part III of chapter four hundred and ninety of the acts of the year nineteen hundred and nine and acts in amend- ment thereof and in addition thereto; bonds, 60 notes, loans secured by mortgage of real estate, and certificates of indebtedness, the income of which is exempt from taxation under the pro- visions of this section; property the income of which, if any, would be taxable under this 65 section if owned by an inhabitant of the com- monwealth; shares in partnerships, associa- tions or trusts, dividends on which are exempt from taxation under this section. Second: Partnerships, associations or trusts, 70 the beneficial interest in which is represented by transferable shares, which file such agree- ment and furnish satisfactory proof to the tax commissioner that two thirds, at least, of their taxable property is taxed within the common- 75 wealth and that the remainder, if taxable, is taxed where it is situated. Partnerships, associations or trusts, the divi- dends on shares of which are exempt from taxation under this section, shall pay to the tax 80 commissioner annually a tax of six per cent of the income derived from any property owned by such partnerships, associations or trusts, so far as such income would be taxable under this section if received by an inhabitant of the com- 85 monwealth. Dividends on the shares of any partnership, association or trust, of the classes designated in paragraphs first and second of subsection (c) of INCOME TAX LAW 33 this section shall be subject to taxation under 90 this section unless the trustees or managers of such partnership, association or trust shall file with the tax commissioner, in such form as he shall determine, its agreement to pay to the commonwealth annually the tax imposed by 95 the preceding paragraph and any tax imposed by section five of this act. In case of any breach of the terms of any such agreement, the same may be enforced by information in equity to be brought by the attorney-general at the relation 100 of the tax commissioner in the supreme judicial court for the county of SufiFolk. This remedy shall be in addition to all other means of collec- tion provided by this act, and to the penalties hereinafter imposed. 105 For the purposes of this act any securities of the classes designated in this section, held in pledge, or on margin or otherwise, by an agent or broker as security for a debt of his principal, whether such securities stand in the name of 110 the principal or of any other person, shall be deemed to be the property of the principal, and the income arising therefrom shall be included in the total income of the principal under this section. 1 15 No distribution of capital, whether in hquida- tion or otherwise, shall be taxable as income under this section; but accumulated profits shall not be regarded as capital under this provision. DEDUCTIONS ALLOWED Section 3. From the income taxable under section two of this act the taxpayer may, under the conditions prescribed in this section and in section seven, receive a deduction on account of 5 interest paid by him during the year on debts of the following classes: (a) Debts, except those secured by mortgage or pledge of real estate or tangible personal property, owed by persons engaged in the busi- 10 ness of buying, selling, or otherwise dealing in intangible personal property, provided that such business, if it includes other classes of deal- ings, does not include buying, selling, improving or otherwise dealing in or with real estate or 15 buying, selling, manufacturing or otherwise dealing in or with tangible personal property. (6) Debts owed by other persons, except debts secured by such mortgage or pledge and debts on account of which the taxpayer is en- 20 titled to claim a deduction under sections five and six. In determining as hereinafter provided the 34 THE MASSACHUSETTS deduction authorized in the preceding para- graph, no deduction shall be allowed in respect 25 of interest upon any debt belonging to either class (a) or class (b) above enumerated which arises from loans or open accounts directly or in- directly secured by intangible personal property, except to an amount not exceeding eighty per 80 cent of the income returned by the taxpayer for taxation under section two on account of intangible personal property which secured such loans or open accounts. The said deduction shall be determined in 35 the following manner : A taxpayer who claims the benefit of the said deduction shall file with the tax commissioner or the income tax assessor of his district a re- turn, in such form as the tax commissioner shall 40 from time to time prescribe, of his entire in- come from all sources, together with such other information as the tax commissioner may deem necessary for the determination of the an^ount of said deduction. The tax commissioner may, 45 in lieu of such return, accept a sworn duplicate of the annual return of income made under the provisions of the act of congress of the United States, approved October third, nineteen hun- dred and thirteen, and acts in amendment 60 thereof and in addition thereto; he may also, in any case where he shall deem it necessary, require the taxpayer to file such a sworn duphcate. From the said return and information the tax 55 commissioner or the income tax assessor shall determine the amount of interest paid during the year by the taxpayer on debts of classes (a) or (6) above enumerated, for which deduction is authorized by this section, which interest for 60 the purpose of this section shall be called the net interest. He shall also determine the total net income of the taxpayer, exclusive of income tax- able under section five, as such total net income would be if no deduction were made for interest 65 paid during the year. The taxpayer may de- duct from his income taxable under section two an amount of interest paid by him during the year which shall bear the same proportion to the net interest paid as his income taxable under 70 section two bears to his total net income as above determined. A partnership, association or trust, the bene- ficial interest in which is represented by trans- ferable shares, paying to the commonwealth a 75 tax upon income subject to taxation under sec- tion two of this act, as provided in said section, may receive the deduction authorized by this INCOME TAX LAW 35 section on the same terms as an individual inhabitant. 80 Any person filing a fraudulent return or giving fraudulent information to the tax com- missioner or the income tax assessor under this section, shall be subject to the penalties set forth in section thirteen of this act in the case 85 of fraudulent returns. EXEMPTION Section 4. A person whose total income from all sources does not exceed six hundred dollars during the year preceding that in which the tax is assessed shall have an exemption of 6 three hundred dollars of that part of his income which is liable to taxation under section two of this act. INCOME FROM ANNUITIES, PROFESSIONS, EMPLOYMENTS, TRADE AND BUSINESS Section 5. Income of the following classes received by any inhabitant of this common- wealth, during the calendar year prior to the as- sessment of the tax, shall be taxed as follows : 5 (a) Income from an annuity shall be taxed at the rate of one and one half per cent per annum. The income of property held in trust shall not be exempted from taxation under section two nor shall payments to beneficiaries 10 be taxed under this section, because of the fact that the whole or any part of the payments to the beneficiaries is in the form of an annuity. A person whose total income from all sources does not exceed six hundred dollars during the year 15 preceding that in which the tax is assessed shall have an exemption of three hundred dollars of that part of his income which is hable to taxa- tion under this paragraph; provided, however, that no person shall have exemptions under 20 this paragraph and under section four exceed- ing in all three hundred dollars of income. (6) The excess over two thousand dollars of the income, as defined in section six, derived from professions, employments, trade or busi- 25 ness shall be taxed at the rate of one and one half per cent per annum. In determining such income the rental value of hving quarters fur- nished any individual as part of his compensa- tion shall be included. The wages and salaries 80 of employees and officers of the United States government shall not be taxed; but if such em- ployees and oflficers receive other income tax- able under this section, that part of such other 36 THE MASSACHUSETTS income shall be taxed which, when such other 85 income is added to the amount of the wages or salary received as an employee or officer of the United States government, shall be in excess of two thousand dollars. (c) The excess of the gains over the losses 40 received by the taxpayer from purchases or sales of intangible personal property, whether or not the said taxpayer is engaged in the busi- ness of dealing in such property, shall be taxed at the rate of three per cent per annum; pro- 45 videdy that in the case of intangible personal property held by trustees or other fiduciaries, the said excess shall be determined and the tax imposed by this section shall be assessed by the tax commissioner or income tax assessor and 60 the tax shall be paid, at the time when such trust is terminated, but such trustee or other fiduciary may at his option include the' said excess in any return of income made prior to the termination of the trust, and the tax shall 55 be assessed and paid as of the year in which the return is made. In the case of trusts that con- tinue for more than five years, the said excess, if not previously returned, shall be included in a return of taxable income at least in every fifth 60 year, and the tax shall be assessed and paid as of the year in which the return is made. Any such trustee or other fiduciary may charge any taxes paid under this paragraph against princi- pal in any accounting which he makes as such 65 trustee. Income of the classes enumerated in para- graphs (a), (6) and (c) of this section received by any partnership, association or trust, the beneficial interests in which are represented by 70 transferable shares, shall be taxed under this section to the same extent as if the partnership, association or trust were an individual inhab- itant of this commonwealth, imless the divi- dends on the transferable shares issued by such 75 partnership, association or trust are taxable under the provisions of section two. Interest and dividends taxable under section two of this act shall not be taxed under this section; and income derived from property not 80 subject to taxation under chapter four hundred and ninety of the acts of the year nineteen hun- dred and nine and acts in amendment thereof and in addition thereto, and also income de- rived from forest lands classified under chapter 85 five hundred and ninety-eight of the acts of the year nineteen hundred and fourteen, shall not be taxed under this act. INCOME TAX LAW 37 DETERAONATION OF TAXABLE INCOME FROM PRO- FESSION, EMPLOYMENT, TRADE OR BUSINESS Section 6. Income taxable under para- graph (6) of section five of this act shall be the gross income from the profession, employment, trade or business, including gains from the sale 5 of capital assets, other than intangible personal property, employed therein, less the following deductions : (a) Expenses paid within the year in the pro- fession, employment, trade or business, includ- 10 ing the cost of ordinary repairs but not includ- ing personal or family expenses; provided, that premiums paid for use and occupancy insur- ance, or rent insurance, shall not be deducted as part of such expenses. 15 (&) A reasonable allowance for the deprecia- tion and obsolescence of property within the year, and for the depletion within the year of wasting assets owned by the person taxed and used in the profession, employment, trade or 20 business; provided, that with the approval of the tax commissioner a taxpayer may, in lieu of the aforesaid allowance for depreciation and obsolescence, be allowed to deduct actual ex- penses of replacement of capital and extraordi- 25 nary repairs, and with such approval may in any year defer such deductions in whole or in part to one or more subsequent years. (c) All taxes paid within the year to the United States or any other nation, or to any 80 state, county, city, town or district, in respect of the profession, employment, trade or busi- ness, or the property held or used in connection therewith, but not including assessments for betterments. 35 (d) Interest paid within the year on indebted- ness of the person taxed incurred in connection with his profession, employment, trade or busi- ness; but no interest allowed as a deduction under section three of this act shall also be al- io lowed under this section. (e) Losses from the sale within the year of capital assets other than intangible personal property and losses sustained within the year by fire, theft or other casualty, or amounts paid 45 within the year on account of claims in tort or contract incurred in connection with the pro- fession, employment, trade or business, when not compensated for by insurance or otherwise. (J) The amount of any debts receivable 50 arising from the conduct of a profession, em- ployment, trade or business subsequent to December thirty-first, nineteen hundred and 38 THE MASSACHUSETTS fifteen, determined by the person taxed to be worthless and actually charged off during the 55 year; but no debts receivable as income shall be so charged off and deducted, unless they have previously been included as income in a return made under this act. (g) An amount equal to five per cent of the 60 assessed value of the stock in trade and other tangible property, real and personal, owned by the person taxed and used or employed in the profession, employment, trade or business within or without the commonwealth, on the 65 day as of which such property is assessed in the year for which the income is computed. In case any such stock in trade or other tangible property located without the commonwealth is taxed in respect of its income, and not in respect 70 of its capital value, by the taxing district in which it is located in such year, the tax com- missioner may determine its value in any other manner, and may allow a deduction of ^n amount equal to five per cent of the value so 75 determined. (h) The sum of five hundred dollars for a husband or wife with whom the taxpayer lives, and the sum of two hundred and fifty dollars for each child under the age of eighteen years, 80 or parent entirely dependent for support upon the person making the return. The aforesaid deduction shall not be made by both husband and wife, but may be made by either as they shall mutually agree, or shall be prorated be- 85 tween them in proportion to the net income of each in excess of two thousand dollars. In no case shall the total deduction on account of husband and wife, and children and parents, exceed one thousand dollars. 90 (i) Income of the classes specified in the last paragraph of section five. METHODS OF DETERMINING TAXABLE INCOME Section 7. Persons who customarily esti- mate their income and expenditure on a basis other than that of actual cash receipts and dis- bursements may, with the approval of the tax 5 commissioner, compute upon a similar basis their income taxable under this act. In de- termining the gains or losses realized from the sale of capital assets, the value on January first, nineteen hundred and sixteen, of such property 10 owned on that date shall be the basis of de- termination, and in case property is acquired after January first, nineteen hundred and six- teen, the value on the date that it is acquired shall be the basis of determination. INCOME TAX LAW 39 ESTATES OF DECEASED PERSONS Section 8. The income received by persons since deceased shall be taxed to their estates. The income received by estates of deceased persons who last dwelt in this commonwealth 5 shall be subject to the taxes assessed by this act, to the extent that the persons to whom such income is payable or for whose benefit it is ac- cumulated are inhabitants of this common- wealth, which shall be assessed to the executor 10 or administrator, and before the appointment of an executor or an administrator such taxes shall be assessed in general terms to the estate of the deceased, and the executor or administrator subsequently appointed shall be liable for the 15 tax so assessed as though assessed to him: provided, that no person shall be taxed under the provisions of this act for income received from any executor or administrator which income has itself been taxed under the provisions of 20 this section; and provided, that an executor or administrator who has given due notice of his appointment, and who has filed an inventory within nine months thereafter, shall not be obliged to pay any tax hereunder except upon 25 income received by him or income of his de- cedent with respect to which he is required to make a return hereunder, unless the same shall be assessed within one year after his giving bond for the performance of his trust. K the 80 inventory shall not have been filed within the said nine months, the executor or administrator shall be obUged to pay any taxes that may be assessed hereunder within three months after the filing of the inventory. 85 The provisions of this act with reference to the taxation of income received by trustees shall, so far as apt, and except as otherwise provided herein, apply to the income received by executors and administrators. PROPERTY HELD IN TRUST Section 9. The income received by estates held in trust by trustees, any one of whom is an inhabitant of this commonwealth or has derived his appointment from a court of this 5 commonwealth, shall be subject to the taxes assessed by this act to the extent that the per- sons to whom the income from the trust is pay- able, or for whose benefit it is accumulated, are inhabitants of this commonwealth. The tax 10 shall be assessed to such of the trustees as are inhabitants of the commonwealth. 40 THE MASSACHUSETTS Such part of the income of intangible per- sonal property held in trust as is payable to or accumulated for persons who are not inhabit- 15 ants of the commonwealth, shall be exempt from the taxes imposed by this act. If an inhabitant of this commonwealth re- ceives income from one or more executors, ad- ministrators or trustees, none of whom is an 20 inhabitant of this commonwealth or has derived his appointment from a court of this commonwealth, such income shall be subject to the taxes assessed by this act, according to the nature of the income received by the executors, i5 administrators or trustees. An executor, administrator, or trustee may, at the request of any beneficiary, claim the benefit of the exemptions provided by sections four and five of this act for each person to whom 80 the income from the trust is payable, or for whose benefit it is accumulated, and an inhabit- ant of this commonwealth receiving incotne from one or more executors, administrators or trustees, none of whom is an inhabitant of this 35 commonwealth, or has derived his appointment from a court of this commonwealth, may also claim the benefit of such exemptions; provided, however, that no such exemptions shall be al- lowed unless the tax commissioner is satisfied 40 by an aflBdavit from the beneficiary who claims exemptions, or for whose benefit the same are claimed, or otherwise, that such beneficiary is not allowed in all trusts or estates under which he may be a beneficiary, and on account of all 45 income on which he is liable to taxation under this act, more than the total amount of exemp- tions to which he is entitled under said sections four and five respectively. Corporations authorized under the laws of 60 this commonwealth to act as trustee or in any other fiduciary capacity shall, with respect to the income received by them in that capacity, be subject to the provisions of this act in the same manner and under the same conditions as 55 individual inhabitants of this commonwealth acting in similar capacities, except that no such corporation shall be taxed on account of any property the income of which would be taxable under section two hereof if received by an in- 60 dividual inhabitant, or on account of the income derived from such property, if such property is held by such corporation as mortgagee or pledgee to secure the payment of bonds, notes or other evidences of indebtedness the interest 65 on which is taxable under section two of this act to such individual inhabitants of the com- INCOME TAX LAW 41 monwealth as receive it, or the principal of which is exempt from taxation under laws other than this act. 70 The provisions of this act with reference to the taxation of income received by trustees shall, so far as apt, apply to the income received by guardians, conservators, trustees in bank- ruptcy, receivers and assignees for the benefit 75 of creditors. Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests shall be taxed as if accumulated for the benefit of in- habitants of this commonwealth. 80 For the purpose of facilitating the settlement and distribution of estates held by executors, administrators, trustees, guardians, conserva- tors, trustees in bankruptcy, receivers and as- signees for the benefit of creditors, the tax com- 85 missioner, with the approval of the attorney- general, may on behalf of the commonwealth agree upon the amount of taxes at any time due or to become due from such estates under the provisions of this act, and payment in accord- 90 ance with such agreement shall be full satisfac- tion of the taxes to which the agreement relates. PARTNERSHIPS Section 10. Profits or income, of the classes hereinbefore made taxable, of partnerships of which any member is an inhabitant of this commonwealth and which have a usual place 5 of business in this commonwealth, shall be sub- ject to the taxes assessed by this act. If any of the members of the partnership are not inhabit- ants of this commonwealth, only so much of the income thereof as is proportionate to the 10 aggregate interest of the partners who are in- habitants of this commonwealth in the profits of the partnership shall be taxed. The tax shall be assessed on such a partnership by the name under which it does business, and the 15 partners shall not be taxed with respect to the income derived by them from such a partner- ship. A partnership may, except as hereinafter provided, in computing the amount of income with respect to which it is taxable, deduct at 20 the request of any partner the whole or any part of the amount of any exemption to which such partner may be entitled under the provisions of sections four and five of this act; provided^ however, that no such exemption shall be allowed 25 unless the tax commissioner is satisfied by an affidavit from the partner for whose benefit an exemption is claimed, or otherwise, that such 42 THE MASSACHUSETTS partner is not allowed, in all partnerships in which he may be a partner, and on account of 80 all income on which he is liable to taxation under this act, more than the total amount of exemptions to which he is entitled under said sections four and five of this act. Each amount so deducted shall be set forth in the return of 85 such partnership, and the partner requesting the same shall be allowed no further exemption on account of the amount so deducted by the partnership. An inhabitant of this commonwealth who is 40 a member of a partnership having no usual place of business in this commonwealth, who receives income from such partnership derived from such a source that it would be taxable if received directly by such partner, shall as to 45 such income be subject to the taxes imposed by this act. The provisions of this act in respect to the filing of returns, and the assessment, abatement and collection of taxes, and to notices concern- 50 ing the same, shall apply to partnerships sub- ject to taxation hereunder. This section shall not apply to partnerships, associations or trusts, the beneficial interest in which is represented by transferable shares, 55 and nothing in this section shall aflfect other provisions of this act so far as the same relate to such partnerships, associations or trusts, the beneficial interest in which is represented by transferable shares. EXEMPTION OF PROPERTY THE INCOME OF WHICH IS TAXED Section 11. After the year nineteen hun- dred and sixteen, income which is taxable under the provisions of section five of this act, and, except as provided in section twenty-one, 5 property, whether held by an executor, adminis- trator, trustee or otherwise, the income of which, if any, is taxed or would be taxable under the provisions of section two of this act if received by an inhabitant of this common- 10 wealth, shall be exempt from taxation under the provisions of chapter four hundred and ninety of the acts of the year nineteen hundred and nine and acts in amendment thereof and in addition thereto; provided, however, that in 15 determining the amount of any tax upon a cor- porate franchise under the pro\'isions of Part III of said chapter four hundred and ninety, the value of securities the income of which, if any, is taxed or would be taxable under the provi- INCOME TAX LAW 43 20 sions of this act if owned by a natural person, shall not be included in the deduction, author- ized by section forty-one of said part of said chapter, of securities which, if owned by a natural person resident in this commonwealth, 25 would not be liable to taxation, but, for the purposes of section forty-three of said part of said chapter, shall be included among securities which, if owned by a natural person resident in this commonwealth, would be liable to taxation. SO This act shall not be construed to impose a tax upon any corporation or person in respect to income derived from property exempted from taxation by provisions of law existing prior to the passage of this act, nor shall anything in 35 this act exempt from taxation, under the provi- sions of said chapter four hundred and ninety, real estate and tangible personal property. Except as provided in section nine, the in- come received by corporations shall not be tax- 40 able under the provisions of this act. Every corporation liable to taxation under said section nine shall make the returns required by this act, and shall be subject to the penalties therein provided. Section 12. Every individual inhabitant of the commonwealth, including every partner- ship, association or trust, whose annual income from all sources exceeds two thousand dollars 6 shall annually make a return of his entire in- come, except income derived (a) from real estate, (6) from dividends exempt from taxa- tion under section two of this act, (c) from in- terest upon bonds or other obligations of the 10 United States, (d) from interest upon such bonds, notes and certificates of indebtedness of the commonwealth and political subdivisions thereof as are exempt from taxation under the provisions of clause fifteen of section five of 15 Part I of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, and acts in amendment thereof and in addition thereto, (e) from loans secured exclusively by mortgages of real estate, taxable as real estate, 20 situated within the commonwealth to an amount not exceeding the assessed value of the mortgaged real estate, and (/) from wages or salaries received from the United States. Every other individual inhabitant, including every 25 partnership, association or trust, who receives income taxable under section two or subdivision (a) or (c) of section five of this act shall make an annual return of such taxable income. 44 THE MASSACHUSETTS Every executor, administrator, trustee, guar- 30 dian, conservator, trustee in bankruptcy, as- signee for the benefit of creditors and receiver, other than a receiver of a corporation organized under the laws of the commonwealth, and every other person receiving income taxable under 85 this act shall make an annual return of his taxable income as herein provided. The aforesaid return shall be under oath, and shall be filed with the income tax assessor for the district in which the taxpayer resides or has 40 his principal place of business or, at the option of the taxpayer, may be filed with the tax com- missioner, and shall be made in such form as the tax commissioner shall from time to time prescribe and shall contain such further infor- 45 mation as the tax commissioner may deem pertinent. The return shall be made on or before the first day of March in each year, and shall relate to the income received durihg the calendar year ending on the preceding thirty- 50 first day of December. The return required by this section shall be filed by every person who is at any time be- tween the first day of January and the thirtieth day of June in any year an inhabitant of the 55 commonwealth, if such person has in the pre- ceding year received income taxable hereunder: provided, that the return relating to income taxable under the provisions of this act, and received by any person who shall have deceased 60 without having made a return relating to such income, shall be made by his executor or admin- istrator; and provided, that in the case of any such person who has become an inhabitant of the commonwealth after the first day of Feb- 65 niary in any year, such return shall be due and shall be filed ninety days after he becomes such an inhabitant. Every person who is an inhabit- ant of the commonwealth at any time between the first day of January and the thirtieth day 70 of June, both inclusive, in any year, shall be subject to the taxes imposed by this act. The tax commissioner shall cause to be pre- pared blanks for the said returns, and shall cause them to be distributed throughout the 75 commonwealth; but no person shall be excused from making the return by failure of the tax commissioner to send or give one of the blanks to him. The tax commissioner shall give seasonable 80 notice of the requirement of this section, in the manner prescribed by section forty-one of Part I of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, INCOME TAX LAW 45 not later than the fifteenth day of January in 85 each year, in every city and town in the com- monwealth. If the tax commissioner shall, from informa- tion derived from the return or otherwise, be of opinion that any person whose income is tax- 90 able under the provisions of this act may have failed to file a return, or to include in a return filed, either intentionally or through error, all the sources of his taxable income, he may re- quire from such person a return or a supple- 95 mentary return under oath, in such form in each individual instance as the commissioner shall prescribe, of all the sources from which the tax- payer received any income, whether or not taxable under the provisions of this act, in the 100 year for which the return was made. If from a supplementary return or otherwise the commis- sioner finds that any sources of taxable income have been omitted from the original return, he may require the amount of income from each 105 source of taxable income so omitted to be dis- closed to him under oath of the person liable for the tax, and added to the original return. Such supplementary return and the correction of the original return shall not relieve the 110 person making the same from any of the penalties to which he may be liable under any provision of this act. The tax commissioner may proceed under the provisions of section fourteen of this act, whether or not he requires 115 a return or a supplementary return under this section. PENALTIES Section 13. If any person required to file a return under the provisions of this act fails to file the return within the time prescribed by such provisions, there shall be added to, and 5 become a part of the tax, as an additional tax, the sum of five dollars for every day during which such person is in default; provided^ how- ever, that the tax commissioner may, in his dis- cretion, abate any such additional tax in whole 10 or in part. If any person fails to file a return required under the provisions of this act on or before the first day of May of any year, any justice of the supreme judicial court or of the superior court, 15 upon petition of the tax commissioner or of the income tax assessor for the district in which such person is required to file the return, or of any ten taxable inhabitants of the common- wealth, shall issue a writ of mandamus requiring 20 such person to file the return. The order of 46 THE MASSACHUSETTS notice upon the petition shall be returnable not later than ten days after the filing of the peti- tion. The petition shall be heard and deter- mined on the return day or on such day there- 25 after as the court shall fix, having regard to the speediest possible determination of the cause consistent with the rights of the parties. The judgment shall include costs in favor of the prevailing party. All writs and processes may SO be issued from the clerk's office in any county, and, except as aforesaid, shall be returnable as the court shall order. If any person files a fraudulent return, or if any person who has failed to file a return, or has 35 filed an incorrect or insufficient return, and has been notified by the tax commissioner of his delinquency, without reasonable excuse fails to file a return within twenty days after re- ceiving such notice, such person shall be pun- 40 ished by a fine of not less than one hundred dollars nor more than ten thousand dollars, or by imprisonment for not more than one year, or by both such fine and imprisonment, and shall forfeit his right to hold pubHc office any- 45 where within the commonwealth for such period, not exceeding five years, as the court may determine. In the case of a partnership of which one or more members are inhabitants of this common- 50 wealth and having a usual place of business in this commonwealth, the penalties imposed by this act may be inflicted upon any member of the partnership who is an inhabitant of this commonwealth and who has any active part in 65 the management of the affairs of the partner- ship, and if there is no such member, upon the person or persons in charge of its affairs within this commonwealth. In the case of a partner- ship, association or trust, the beneficial interests 60 in which are represented by transferable shares, the penalties imposed by this act for failure to file a return may be inflicted upon the trustees, managers or officers whose duty it was to make the return. 65 The penalties provided by this section shall apply to individuals and corporations acting in any fiduciary capacity. In the case of a corpo- ration, the penalty may be imposed on the corporation, on the officers whose duty it was 70 to make the return, or on both. ASSESSMENT AND ADMINISTRATION Section 14. The tax commissioner shall de- termine from the returns required by this act, INCOME TAX LAW 47 or in any other manner, the income of every person taxable under this act, and shall assess 5 thereon the tax hereby provided; but he shall not determine the income of a person who has filed a return in accordance with section twelve, within the time prescribed by law, to be in ex- cess of that disclosed by such return, without 10 notifying such person and giving him an op- portunity to explain the apparent incorrect- ness of his return. For the purpose of verifying any return made pursuant to this act the tax commissioner may, 15 within two years after the date when such re- turn was due, if he has reason to believe the return to be fraudulent or incorrect, direct by special authorization a deputy or other agent to verify the return; and for the purpose of 20 such verification the books and papers of the person shall be open to the examining officer, or shall be produced for the purpose upon a summons, which the tax commissioner, or the examining officer, is hereby authorized to issue. 25 The person making the return may be examined by such officer under oath. If no return, or a fraudulent, incorrect or insufficient return, has been filed by a person required to file a return under the provisions of 80 this act, and the person so in default refuses or neglects, after notice, to file a proper return, the tax commissioner shall determine the in- come of such person, taxable under this act, according to his best information and belief, and 35 shall assess the same at double the amount so determined. In the case of sickness, absence or other disability of a person liable to the tax, the tax commissioner may allow such further time for filing the return as he may deem neces- 40 sary. If the tax commissioner discovers from the verification of a return filed under this act, or otherwise, that the income of any person sub- ject to taxation under this act, or any portion 45 thereof, has not been assessed, he may, at any time within two years after first day of September of the year in which such assess- ment should have been made, assess the same, first giving notice to the person so to be assessed 50 of his intention, and such person shall there- upon have an opportunity within ten days after such notification to confer with the tax com- missioner in person or by counsel or other rep- resentative as to the proposed assessment. 65 After the expiration of ten days from such notification the tax commissioner shall assess the income of such person subject to taxation. 48 THE MASSACHUSETTS or any portion thereof, which he believes has not theretofore been assessed, and he shall 60 thereupon give notice to the person so assessed under the provisions of section fifteen of this act, and the tax shall be payable fourteen days after the date of such notice. The provisions of this act in respect to the abatement and col- 65 lection of taxes shall apply to a tax so assessed. The tax commissioner may from time to time make such rules and regulations, not in- consistent with the provisions of this act, as he may deem necessary for the purpose of carry- 70 ing out its provisions. Section 15. The tax commissioner shall, on or before the first day of September in each year, give notice to every person taxable under the provisions of this act of the amount of the 5 tax payable by him, and of the date upon which the tax is due and payable, which date shall be the fifteenth day of October. The notice shall be a written or printed notice, and shall be mailed, postage prepaid, ad- 10 dressed to the person assessed at his place of residence or business, or at the address given in his return, or otherwise delivered at such place of residence or business or at such address. All taxes assessed hereunder 15 may be paid at the oflfice of the tax commis- sioner in Boston or at the oflBce of the income tax assessor for the district in which the tax- payer resides or has his principal place of busi- ness, at the option of the taxpayer, and the 20 notice shall state the places at which the tax may be paid. Failure to receive the notice provided for by this section shall not affect the validity of the tax. Section 16. Returns shall be open to the in- spection of the tax commissioner and of his deputies, assistants and clerks, when acting under his authority, and of the income tax as- 6 sessors and of their deputies, assistants and clerks, when acting under their authority. The disclosure by the tax commisioner, or by any deputy, assistant, clerk or assessor, or other em- ployee of the commonwealth, or of any city or 10 town therein, to any person of any information whatever contained in or set forth by any such return, other than the name and address of the person filing it, except in proceedings to collect the tax or by proper judicial order, shall be 15 punishable by a fine not exceeding one thousand dollars, or by imprisonment for a period not INCOME TAX LAW 49 exceeding six months, or by both such fine and imprisonment, and by disqualification from holding oflBce for such period, not exceeding 20 three years, as the court may determine. Said returns shall be preserved for two years, and thereafter until the tax commissioner orders them to be destroyed. Lists or indexes of persons in the district who 25 have filed returns shall be kept in the olBSce of each income tax assessor, and shall be open to public inspection. The name of each person filing a return shall be placed on such list or index immediately on the fifing of the return. Section 17. For the purpose of carrying out the provisions of this act, the tax commissioner shall divide the commonwealth into income tax districts, and he may from time to time change 6 the limits of the districts. He shall, with the advice and consent of the governor and council, appoint, and may with their consent remove, an income tax assessor for each district, to assist him in such manner and under such rules and 10 regulations as he may from time to time pre- scribe in the performance of his duties here- under. An income tax assessor need not be a resident of the district in which he is to serve: provided, 15 that, so far as practicable preference shall be given to residents of the respective districts. The commissioner may transfer any income tax assessor from one district to another, and may assign any such assessor to temporary or ex- 20 traordinary service in any district. The tax commissioner may also appoint such deputy income tax assessors, who may be mem- bers of boards of assessors of cities or towns, and such clerical and other assistants in the 25 several districts, as may, in the opinion of the governor and council, be necessary for the proper performance of his duties. The salaries of the income tax assessors and their deputies shall be fixed by the tax com- 30 missioner with the approval of the governor and council, and the income tax assessors, their deputies, assistants and clerks, shall be allowed such reasonable and necessary traveling and other expenses incurred in the performance of 85 their duties as may be approved by the tax commissioner and by the governor and council. All taxes received by the income tax assessors shall be accounted for and turned over to the tax commissioner as often as once in each week, 40 and the commissioner shall transmit to the treasurer and receiver-general as often as once 50 THE MASSACHUSETTS in each month all taxes received by him under the provisions of this act. The tax commissioner shall require the in- 45 come tax assessors to give bonds in such form, with such sureties and in such amounts as may be approved by the governor and council, and all premiums upon such bonds shall be paid by the tax commissioner out of moneys appropri- 50 ated for the purposes of this act. The tax commissioner may also, with the advice and consent of the governor and council, appoint, and with their consent remove, a deputy to be known as the income tax deputy, 55 who shall receive such salary as the governor and council may approve, and who, under the direction of the tax commissioner, shaU have supervision and control of the assessment and collection of the income taxes provided for 60 by this act; and the tax commissioner shall appoint such additional clerical and other as- sistants to the income tax deputy and income tax assessors as the governor and council may approve. 65 The aforesaid income tax deputy, income tax assessors and deputy assessors shall have such duties and powers consistent with the provi- sions of this act as the tax commissioner shall from time to time prescribe. Their appoint- 70 ment shall be governed by the provisions of law relative to the appointment of the present deputies and assistants of the tax commissioner, and supervisors of assesors. Section 18. If a tax assessed under the pro- visions of this act is not paid at the time when it is due, interest at the rate of six per cent per annum from that time shall be added to and become 5 part of the tax. The tax commissioner, and the income tax assessors in their respective districts, shall have all the remedies for the collection of taxes assessed under the provisions of this act that are provided by chapter four hundred and 10 ninety of the acts of the year nineteen hundred and nine, and acts in amendment thereof and in addition thereto, for the collection of taxes on personal estate by collectors of taxes of cities and towns, and shall be allowed charges 15 and fees as therein provided. Any action of contract brought to recover any such tax shall be brought in the name of the commonwealth. ABATEMENTS Section 19. Any person aggrieved by the of a tax under the provisions of this INCOME TAX LAW 51 act may apply to the tax commissioner for an abatement thereof at any time within three 5 months after the date of the notice of the assess- ment; and if, after a hearing, the tax commis- sioner is satisfied that the tax is excessive in amount or that the person assessed is not sub- ject to the tax, he shall abate the tax in whole or 10 in part accordingly; and if the tax has been paid, the treasurer and receiver-general shall repay to the person assessed the amount of such abatement, with interest thereon at the rate of six per cent per annum from the time 15 when it was paid : provided, however, that no tax assessed upon any person liable to taxation imder this act shall be abated in any event unless the person assessed shall have filed, at or before the time of bringing his petition for abatement, 20 a return as required by section twelve of this act; and if he failed without good cause to file his return within the time prescribed by law, or filed a fraudulent return, or, having filed an in- correct or insufficient return, has failed, after 25 notice, to file a proper return, the tax commis- sioner shall not abate the tax below double the amount for which the person assessed was properly taxable under the provisions of this act. The tax commissioner shall notify the SO petitioner by registered letter of his decision upon the petition. Any person aggrieved by the refusal of the tax commissioner to abate, in whole or in part, under the provisions of this section, a tax as- 35 sessed under the provisions of this act, may, within thirty days after receiving notice of the decision of the tax commissioner, appeal there- from by filing a complaint with the clerk of the board of appeal provided for by section sixty- 40 eight of Part III of chapter four hundred and ninety of the acts of the year nineteen hundred and nine. If, upon a hearing, the board of ap- peal finds that the person making the appeal is entitled to any abatement from the tax as- 45 sessed upon him, it shall make such abatement as it sees fit. The decision of the board of appeal shall be final and conclusive, and shall be communicated in writing to the petitioner and the tax com- 50 missioner within five days after the decision of the board. If the tax appealed from has been paid, the treasiu-er and receiver-general shall repay to the petitioner the amount of any abatement and 55 interest from the time of payment, upon pres- entation to him by the petitioner of the notice of the decision of the board. 52 THE MASSACHUSETTS Section 20. Any person aggrieved by the refusal of the tax commissioner to abate in whole or in part, under the provisions of the preceding section, a tax assessed under the pro- 5 visions of this act may, instead of pursuing the remedy provided in the preceding section, ap- peal from such refusal by iBling a complaint against the tax commissioner in the superior court for the county in which such person re- 10 sides or has his principal place of business, within thirty days after the notice by the tax commissioner of his decision in accordance with the preceding section. An order of notice shall be issued by said court and served upon the tax 15 commissioner within such time as the court shall direct, and the subsequent proceedings shall be conducted in accordance with the pro- visions of sections seventy-seven to eighty, in- clusive, of Part I of chapter four hundred and 20 ninety of the acts of the year nineteen hundred and nine, and acts in amendment thereof and in addition thereto; but if the complainant was subject to taxation under this act and did not file his return within the time prescribed by law 25 he shall not be entitled to have any part of his tax abated by the court, unless the court finds that he had good cause for his delay, or the tax commissioner had previously so found. If an abatement is granted, the amount thereof shall 30 be repaid to the complainant by the treasurer and receiver-general, with interest at the rate of six per cent per annum from the time when the tax was paid, and costs. The remedies provided by sections nineteen 35 and twenty hereof shall be exclusive, whether or not the tax is wholly illegal. ADDITIONAL LOCAL TAXES Section 21. All property owned by a resi- dent of this commonwealth on the first day of April in any year, which during the preceding calendar year had produced for such owner any 5 income taxable under this act, shall, despite anything in this act, be subject to taxation to such owner in accordance with the provisions of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, and acts 10 in amendment thereof and in addition thereto, if such owner does not make to the tax com- missioner a full return of his taxable income from such property on or before the first day of September of the year in which a return of in- 15 come is required by section twelve of this act, and provided the tax so assessed is greater than INCOME TAX LAW 53 the amount of the tax properly payable under sections two and fourteen of this act. Property taxable in any year under this section shall be 20 assessed in that year between the second day of September and the tenth day of December, both inclusive. The amount of taxes assessed by the local assessors upon such property in such city or town in any year, less the amount 25 assessed and collected by the tax commissioner as hereinafter provided, shall be entered on the tax list of the collector of such city or town, and he shall collect and pay over the same to the city or town. 30 Any taxpayer aggrieved by the assessment of a tax under the provisions of this section may appeal to the tax commissioner within thirty days after the receipt of the tax bill therefor, or other actual notice of the assessment. In 35 case of an adverse determination by the tax commissioner, the taxpayer may appeal to the board of appeal as provided in section nineteen, or to the superior court as provided in section twenty; and if the taxpayer shall 40 establish that the income of the property was duly returned or that it was not taxable or that there was reasonable excuse for not making the return, the tax shall be abated, and if it has previously been paid, the amount abated 45 shall be repaid by the city or town to the tax- payer, with interest from the time of such pay- ment. At any time prior to the collection by the city or town of the tax provided for by this section, the tax commissioner may assess and 50 collect the tax provided for by the act, on the income of the property subject to the limitation of time provided by section fourteen. Upon the collection of the tax, the tax commis- sioner shall at once notify the tax collector of 55 the city or town in which the taxpayer resides, and the tax collected by him shall be deducted from the tax assessed in that city or town; and if the tax assessed in such city or town has been collected, the amount so deducted shall be re- 60 paid by the city or town to the taxpayer. If a tax collected by a city or town under the pro- visions of this section is afterward abated, the amount of the abatement, together with the amount of any interest paid by the taxpayer 65 on that amount, shall be paid by the city or town to the taxpayer. Upon discovery of property the income of which for the preceding calendar year, taxable under this act, has not been returned on or be- 70 fore the first day of September of the year in which the return is required, the tax commis- 54 THE IMASSACHUSETTS sioner shall forthwith notify the assessors of the city or town in which the property is taxable, unless there is within his knowledge a reasonable 75 excuse for the failure of the taxpayer to file the return. Upon making any assessment under the provisions of this section, the assessors shall forthwith notify the tax commissioner. Section 22. Any taxpayer who in the year nineteen hundred and seventeen fails to bring in a list of taxable personal estate, as provided in sections forty-one to forty-nine inclusive of Part 6 I of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, and acts in amendment thereof and in addition thereto, shall be assessed in that year for an amount of personal estate not less tJian that for which he 10 was assessed and taxed in the year nineteen hundred and sixteen. The tax commissioner shall have authority to assess any taxpayer in any city or town for any amount of tax for which said taxpayer may be hable imder the 15 provisions of this section; and any assessor who shall violate the provisions of this section shall be Uable to the penalties imposed by sec- tion thirty-nine of Part I of chapter four hun- dred and ninety of the acts of the year nineteen 20 hundred and nine, and acts in amendment thereof and in addition thereto. DISTRIBUTION Section 23. On or before the fifteenth day of November in the year nineteen hundred and seventeen the treasurer and receiver-general shall pay to each city or town an amount equal 6 to the difference between the amount of the tax levied upon personal property in such city or town in the year nineteen hundred and fifteen and the amount, computed by the tax commis- sioner, that would be produced by a tax upon 10 the personal property actually assessed in such city or town for the year nineteen hundred and seventeen at the same rate of taxation as pre- vailed therein in the year nineteen hundred and fifteen. If the amount of taxes collected from 15 incomes shall exceed the sum necessary to make such payments, the balance shall be distributed among the several cities and towns in propor- tion to the amount of the state tax imposed upon each of them in the year nineteen hundred iO and seventeen; provided, that of the aforesaid excess the commonwealth shall retain a sum sufficient to reimburse it for the expenses in- curred under this act during the year nineteen INCOME TAX LAW 55 hundred and seventeen, and abated taxes re- t5 paid hereunder during said year. In years subsequent to nineteen hundred and seventeen, the taxes collected under this act shall be dis- tributed as the general court may determine. Section 24. On or before the first day of August in each year the tax commissioner shall, upon the basis of the information then in his possession, notify the assessors of each city 5 and town of the amount of income tax such city or town is to receive under this act. The said assessors, in determining the rate of taxa- tion to be levied upon taxable property for the year, shall include in the estimated receipts 10 lawfully applicable to the payment of expendi- tures the aforesaid amount of income tax. INFORMATION AT THE SOURCE Section 25. Every individual, partnership, association, trust or corporation, being an in- habitant of the commonwealth or having a place of business therein, shall file annually 5 with the tax commissioner a return in such form as the tax commissioner shall from time to time prescribe, giving the names and addresses of all regular employees residing in this common- wealth to whom the said individual, partner- 10 ship, association, trust or corporation has paid wages, salary or other compensation in excess of the sum of eighteen hundred dollars during the previous calendar year. Every corporation and every partnership, 15 association or trust the beneficial interest in which is represented by transferable shares, doing business in the commonwealth, shall, un- less the dividends paid upon its shares are ex- empt from taxation under section two of this 20 act, on or before the first day of March in the year nineteen hundred and seventeen and in each year thereafter, file with the tax commis- sioner a list of the names and addresses of its shareholders as of record on the thirty-first day 25 of December of the previous year, or, in its discretion, of such shareholders as are residents of the commonwealth; provided, however, that the tax commissioner in his discretion may accept in lieu of the above list from any cor- 30 poration, partnership, association or trust re- quired to make a return hereunder a list of its shareholders as of record on any other date satisfactory to him. Every such corporation, partnership, association or trust shall also re- 35 port to the tax commissioner on or before the 56 THE MASSACHUSETTS first day of March in each year the names and addresses of residents of the commonwealth to whom it has paid interest during the preceding calendar year upon its bonds, notes, or other 40 evidences of indebtedness, and to whom it has paid any annuity or annuities, except, however, interest coupons payable to bearer, and income exempt from taxation under this act. In any individual case, any such corporation, partner- 45 ship, association or trust shall, upon request of the tax commissioner, state the respective amounts of dividends, interest and annuities so paid by it to any person during any calendar year. 60 The returns provided by this section shall be made on or before the first day of March in each year; but the tax commissioner may, in his discretion, authorize such returns to be made at any other date and in connection with 55 any other reports or returns that the said indi- viduals, partnerships, associations, trusts and corporations may be required to file with him. Any individual, partnership, association, trust or corporation that without reasonable 60 excuse fails to comply with the provisions of this section shall be punished by a fine of not less than twenty-five nor more than five hun- dred dollars for each offence. Section 26. The treasurer of every city, town and county, and the auditor of the com- monwealth shall, in each year not later than the tenth day of April, in the form prescribed 5 by the tax commissioner, furnish said commis- sioner with the names and addresses of all em- ployees of said cities, towns, coimties and of the commonwealth respectively who received during the preceding calendar year as salary, 10 wages, or otherwise amounts exceeding eight- teen hundred dollars in each case, together with the amount received by each. GENERAL PROVISIONS Section 27. If any part, subdivision or sec- tion of this act shall be declared unconstitu- tional, the vahdity of the remaining parts of this act shall not be affected thereby. Section 28. No caption to any section or set of sections shall in any way control or affect the interpretation of this act or of any part thereof. Section 29. After the passage of this act or the fifteenth day of May in the year nineteen INCOME TAX LAW 57 hundred and sixteen, whichever last occurs, no bonds shall be registered under chapter seven 5 hundred and sixty-one of the acts of the year nineteen hundred and fourteen, and acts in amendment thereof and in addition thereto. The tax imposed by this act shall not be as- sessed upon the income from any bond regis- 10 tered under any of said acts until the term for which such bond was exempted by registration has expired. Section 30. This act shall take effect upon its passage. Personal Trusts THE reasons that prompt a person to engage the services of specialists in other lines should impel him to exercise the same care in selecting those who are to administer his estate. The OLD COLONY TRUST COMPANY offers you the services of an effi- cient trust department, experi- enced specialists in all matters relating to trusts, specialists in investing trust funds, and the security of a strong and respon- sible company. Capital $6,000,000 Surplus. ..... 6,000,000 Stockholders' Liability 6,000,000 Under the new income tax law all trustees and executors are re- quired to make proper sworn re- turns of their income taxable under the act. At the same time the tax is at a reasonable rate, so that trustees can pay the tax and still obtain a satisfactory net return for their beneficiaries from con- servative taxable securities. This change in the law revolutionizes the investment of trust estates. The officers of the Old Colony Trust Company are always glad to explain the many advantages that can be obtained through the employment of this company in any of its fiduciary capacities. Trust Department 17 COURT STREET, BOSTON Your Estate YOUR estate is now receiving the benefit of your manage- ment, care, and thought, and you should determine wlho is best equipped to manage it after your death. THE CONTROLLING FAC- TORS to be considered IN CHOOS- ING AN EXECUTOR AND TRUSTEE ARE HIS FINANCIAL STANDING, EXPERIENCE, and JUDGMENT. In appointing the OLD COLONY TRUST COMPANY Executor of your will you secure THE SERVICES OF A STRONG FINANCIAL INSTITUTION, THE EXPERIENCED JUDGMENT OF AN ORGANIZATION WHOSE BUSINESS IS SETTLING ESTATES, THE CONFIDENCE THAT YOUR ESTATE WILL BE FAITHFULLY ADMINISTERED, and THE SYSTEMATIC, EFFICIENT MANAGEMENT OF SPECIALISTS. The settling of estates is the work of the specialist, and you must choose the executor wisely in order to secure the greatest benefit for those who are to enjoy your prop- erty and for whom it must be conserved. TODAY YOU WOULD NOT CON- SIDER EMPLOYING ANYONE OTHER THAN A SPECIALIST TO MANAGE YOUR BUSINESS AFFAIRS. YOU SHOULD SECURE A SPECIAL- IST WHEN HE IS MOST NEEDED, THAT IS, IN THE SETTLEMENT OF YOUR ESTATE. NAME THE EXECUTOR UNDER YOUR WILL To Trustees and Other Investors THE new Income Tax Law has been laid be- fore you in the preceding pages. Income You are Now Receiving" from tax- able securities is subject to this tax. In place of low yield tax-exempt bonds, you may now buy well-secured taxable municipal, rail- road, and other corpora- tion bonds which will net you, tax paid, from 4 per cent to 5 per cent. Instead of being limited practically to the purchase of non-taxable stocks in your desire for a fair yield, you may now obtain a reasonable return with the security afforded by high-grade mortgage bonds. It will be to your advan- tage to consult our Bond Department if you con- template changes in or additions to your invest- ments at the present time. A copy of our invest- ment circular will be sent on request. Bond Department Directors GORDON ABBOTT, Chainnan of Board. FRANCIS R. HART, Vice-chairman. PiULIP STOCKTON, President. CHARLES F. ADAMS, Treasurer of Harvard College. F. LOTHROP AMES, Director American Agricultural Chemical Company. OLIVER AMES, Vice-President and Treasurer Oliver Ames & Sons Corporation. V/ILLIAM AMORY, Treasurer Pepperell Manufacltiring Company. DANIEL F. APPEL, Vice-President New England Mutual Life Insurance Compaiky. CHARLES F. AYER, Director New England Telephone and Tele- graph Company. JOHN S. BARTLETT, President Lynn Gas and Electric Company. SAMUEL CARR, Trustee The Ames Estate. Hon. T. JEFFERSON COOLIDGE. CHARLES E. COTTING, Trustee. ALVAH CROCKER, Treasurer Crocker, Burbank & Co., Paper Man- ufacturers. THOMA*: K. CUMMINS, Treasurer Edison Electric Illuminating Company. PHILIP y. DE NORMANDIE, Bliss, Fabyan & Company, PHILIP DEXTER, Chairman Executive Committee, Massachusetts Electric Companies. GEORGE A. DRAPER, Treasurer of the Draper Company. FREDERIC C. DUMAINE, Treasurer Amoskeag Manufacturing Company. WILMOT R. EVANS, President Boston Five Cents Savings Bank. FREDERICK P. FISH, Fish, Richardson, Herrick & Neave. W. CAMERON FORBES, J. M. Forbes & Company. REGINALD FOSTER, Foster & Turner. GEORGE P. GARDNER, Executive Committee General Electric Company. EDWIN FARNHAM GREENE, Treasurer Pacific Mills. ROBERT F. HERRICK, Fish, Richardson, Herrick & Neave. HENRY S. HOWE, Lawrence & Company. WALTER HUNNEWELL, Director Calumet & Hecla Mining Co. HENRY C. JACKSON, Vice-President Home Savings Bank. GEORGE E. KEITH, George E. Keith Company, Shoe Manufac- turers. Col. THOMAS L. LIVERMORE. ARTHUR LYMAN, Director Waltham Watch Company. Hon. GEORGE vcn L. MEYER. LAURENCE MINOT, Trustee. MAXWELL NORMAN, Trustee. Hon. RICHARD OLNEY. ROBERT T. PAINE, 2d, Executive Committee, General Electric Company. HENRY PARKMAN, Treasurer Provident Institution for Savings. ANDREW W. PRESTON, President United Fruit Company. RICHARD S. RUSSELL, William A. Russell & Brother. HERBERT M. SEARS, Trustee Suffolk Savings Bank. HOWARD STOCKTON, Actuary Massachusetts Hospital Life In- surance Company. P. F SULLIVAN, President Bay State Street Railway Company. E. V. R. THAYER, President Merchants National Bank. H. O. UNDERWOOD, William Underwood Company. STEPHEN M. WELD, Stephen M. Weld & Co., Cotton Buyers. CHARLES W. WHITTIER, C. W. Whittier & Brother, Real Estat*. SIDNEY W. WINSLOW, President United Shoe Machinery Cor- poration. tltliiiil;!!!! O-.D^^ ■ 7 a /\ .— UNIVERSITY OF CALIFORNIA LIBRARY