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THE G E N E R A L C O U N S E L OF T H E TREASURY WASHINGTON August 18, 1942 Dear Marriner: I enclose herewith a confidential copy of Mr. Stam's Fiscal Year Plan. I also enclose a copy for your confidential use of comments we have developed on the so-called Ruml plan. Hon. Marriner S. Eccles, Chairman, Board of Governors, Federal Reserve System, Federal Reserve Building, Washington, D. C. Enclosures STRICTLY CONFIDENT! Fiscal Year Plan Corporations Compute the corporation income and excess-profits tax under the 1941 law for the full fiscal year. In the case of a corporation with a fiscal year ended after May 31> 1942, impose the following additional tax for that year: (1) Assess an additional excess profits tax for the fiscal year computed as follows: (a) Determine the adjusted excess-profits net income according to the 194-1 law. Apply to this an excess profits tax rate of 30 percent. The additional tax will be an amount equal to that proportion of the total tax under (a) which the number of months ending after May 31* 1942, bears to twelve months. (2) Determine the surtax net income according to the 1941 law, except in arriving at such surtax net income reduction should be made of the adjusted excess profits tax net income instead of the excessprofits tax. Apply to this a surtax rate of 14 percent. The additional tax will be an amount equal to that proportion of the total tax under (2) which the number of months ending after May 31> 1942, bears to twelve months. The following examples show how the plan operates: 2. Corporation "A11 STRICTLY omvj-n^jrvT * Fiscal year ended June 30. 1942. (Computed under 1941 law) Normal tax net income before excess-profits tax Excess-profits tax net income Excess-profits credit Adjusted Excess-Profits Net Income Excess-profits tax: 1st $500,000.00 $254,000*00 Balance ($5,500,000.00) 60% of 3,300,000.00 $ 12,000.000.00 12,000,000.00 6,000,000.00 6,000,000*00 3.55A.OOO.OO Normal tax: Normal tax Net Income Less Excess-profits tax Normal tax base Normal tax at 21$ 12,000,000.00 5fi4,000.00 8,44,6,000.00 2,027,040.00 Surtax: Surtax Net Income 1st $25,000 at 6% Balance at 1% 8,446,000.00 1,500.00 589.470.00 Total surtax Total tax: Excess profits Normal tax Surtax Total 590,970.00 3,554,000.00 2,027,040.00 590.970.00 6,172,010.00 Additional Tax Excess Profits: Adjusted Excess-Profits Net Income Excess profits at 30$ Additional tax - (1/12 of excess-profits tax) $6,000,000.00 1,800,000.00 150,000.00 Surtax: Surtax Net Income Less Adjusted Excess-profits Net Income Taxable Surtax Net Income Surtax of 14$ Additional tax - (1/12 of surtax) 12,000,000.00 6.000,000.00 6,000,000.00 840,000.00 70,000.00 STRICTLY CONFIDENT 3. Total additional tax: 150,000.00 70.000.00 220,000.00 Excess-profits Surtax Total additional Grand Total Regular tax Additional tax 6,172,010.00 220.000.00 Grand Total 6,392,010.00 Corporation "B" Fiscal Year ended November 30. 1942 Regular tax Additional tax: Excess-profits 6/12 of $1,800,000.00 Surtax 6/12 of $840,OCX).00 Total additional 6,172,010.00 900,000.00 420.000.00 1,320,000.00 Grand Total Regular tax Additional tax 6,172,010.00 Grand total 7,492,010.00 1.320.000.00
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