Try to Get It

When Congress saddled U.S. corporations with the excess profits tax of 1940, it also vaguely promised relief, in famed Section 722, for those unfairly whacked. Under cover of 722's foggy wording, 34,000 corporations have filed claims for $12 billions paid in excess profits taxes. In an earnest attempt to clear away the fog, the Bureau of Internal Revenue issued a 210-page booklet. It told businessmen how they might try to get their money back.

The terms under the law were hard. Claims can be made under 722 only if a corporation can prove that the base period income on which excess profits taxes are computed (either invested capital or "average" earnings) has been unfairly set. Under 722 the Bureau will consider readjusting the base for the "average" period, 1936-39, only if earnings were subnormal because of: 1) flood, fire, etc.; 2) a temporary economic upset such as war-caused material shortages; 3) an unusual profit cycle for the corporation, differing materially from the regular business cycle; 4) changes in products, capacity, etc., which are not reflected in the base earnings.

This last seemed to be a wide-open door, thus brought the greatest flood of claims. Actually, it is a mere chink, well guarded by the Bureau's multitude of hairline distinctions, and holds little hope for war babies.

Even when a corporation has a claim, the battle is just starting. The corporation must then prove what its average earnings would have been if it had opened its new plant earlier, if the fire had not occurred, etc. The basic problem is to reconstruct something that never happened. This is roughly comparable, under the rules, to guessing how many angels can dance on a pin.

Actually, many of the corporations which have filed know that their chances of collecting are slim. A large number have put in a bid only to get in under the statute of limitations, while they mull over whether to push their case. Others have filed merely for the record, i.e., to protect themselves against suits of stockholders who might otherwise feel the corporation was lax. Some tax experts guess that, at most, corporations may prove their claims to $3 billions. This is well worth the try, although the net gain will be far less. In many cases, corporations will have normal income taxes and surtaxes taken out on cash returned.

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