extending the excess-profits tax, regardless of the position thereon, is it your point that these amendments should be adopted to the existing law?

Mr. PARK. Yes, sir. And that is particularly true since I have attended these hearings and heard the amount of inequity involved. Mr. SIMPSON. And the amendments are substantially those found in the bill H. R. 610?

Mr. PARK. Substantially the same. I think some of the language is a little clearer in this.

Mr. SIMPSON. Is it your belief that 610 would provide the administrative manner for settling all the recognizable cases deserving special treatment?

Mr. PARK. I think it would take care of all of the cases involving the average earnings or the credit based upon income. And that is the most important part of any excess-profits-tax law, what you are going to eliminate from the excess-profits-tax rates.

I think it would take care of most of those. As to anything that is inequitable in connection with the determination as to the excess profits for the taxable year, this does not cover that, but I do not believe those are nearly so great as the inequities with respect to the base-period earnings.

Mr. SIMPSON. No, but to the extent they are inequities and to the extent they may exist with respect to the particular company that may be involved, they may be vital.

Mr. PARK. No doubt, sir. And that is true of any tax.

Mr. SIMPSON. Would you have objections, in the event the committee saw fit to adopt 610, to other features being added where specific cases might be taken care of which would not be handled under this one?

Mr. PARK. None at all, sir. I think the American Bar Association passed a general resolution in February 1952, that there were many inequities that should be considered.

Mr. SIMPSON. And this undertakes to provide a means of taking care of the great majority of them.

Mr. PARK. That is correct.

Mr. JENKINS. Mr. Chairman?

The CHAIRMAN. Mr. Jenkins is recognized.

Mr. JENKINS. I am sorry I was not here when you read your statement, but let me ask you this: In view of the fact that it is very apparent that this excess-profits tax provision is going to be permitted to expire or else is going to be continued just for 6 months, would it be desirable to do anything about trying to amend this law with a general relief provision just for that short time?

Mr. PARK. Well, sir, I think so, if there has been the great amount of inequity that we believe has existed as a result of this law. There are some very serious and capricious cases, I believe.

Mr. JENKINS. Is it not true that practically all of these companies have already arranged their financial setup, they already have it arranged, and they are pretty well into it, and that it would be difficult for them? It would seem to me like it would be very difficult for you to put forth any kind of a relief amendment that would satisfy or reach this situation, because every man's case is going to be different from every other man's case.

Mr. PARK. That is just why we offer this provision, sir. The committee that I was chairman of started out with the idea that we must have a slide rule, we must write one that is going to take care of each case. And everybody that came along wanted a specific provision added to the law to take care of his case. We soon realized that that was impossible. We have sort of a, we think, monstrosity now, and it would be a Frankenstein if we tried to amend this act to take care of every individual specific case by a specific individual provision of law. Therefore, we felt we had to turn to the general relief provision that would give everybody some opportunity.

Mr. JENKINS. Of course, you have the Secretary of the Treasury saying there is $800 million at stake. But suppose it were only $500 million. It would be a stake worth looking after. But on the other hand, if you have a hundred thousand people interested in it, it would look to me as if it would be almost an impossibility for you to prepare a bill that would even meet the average of it.

Mr. PARK. That might be, sir. But I believe this would go a long way toward it.

Mr. JENKINS. Anyhow, you have done the best you can.

Mr. PARK. Yes, sir.

Mr. JENKINS. Thank you.

The CHAIRMAN. Mr. Mills may inquire.

Mr. MILLS. Mr. Chairman, I just want the committee to know that I have known Mr. Park for quite some time. He is in the law firm of which one member, at least, Mr. Hamel, has had considerable experience, and I am sure Mr. Park has, with setcion 722. I believe the committee will remember that Mr. Hamel served as chairman of the committee on section 722 for a number of years. I am sure the committee will be very pleased to give most careful consideration to anything that Mr. Park and these gentlemen have to say with regard to these provisions for relief.

The CHAIRMAN. I just want to say, Mr. Park, that I want to compliment you upon your remarks and the information which you have given to our committee.

Mr. MASON. May I make this statement, Mr. Chairman: It is awfully difficult to make a rotten apple palatable.

The CHAIRMAN. Thank you, Mr. Park.

Mr. PARK. Thank you, gentlemen.

The CHAIRMAN. The next witness is F. A. LeSourd, Esq., on behalf of the Superior Portland Cement, Inc., of Seattle, Wash. We are very glad to see you here. You have come a long way.

Mr. LESOURD. Thank you, Mr. Chairman, I certainly have.

The CHAIRMAN. We appreciate your being here. I would like to have you give your name and the capacity in which you appear for the record.

STATEMENT OF F. A. LeSOURD, ESQ., COUNSEL, SUPERIOR PORTLAND CEMENT, INC., SEATTLE, WASH.

Mr. LESOURD. My name is F. A. LeSourd, an attorney from Seattle, Wash. I appear here on behalf of the Superior Portland Cement, Inc., of that city.

The CHAIRMAN. Mr. Holmes will inquire.

Mr. HOLMES. May I say that Mr. LeSourd is a member of a fine law firm in the city of Seattle, and is a distinguished lawyer of the State of Washington.

Mr. LESOURD. Thank you, Mr. Holmes, for those very kind remarks. I am here to give you a case illustration of the necessity of correcting inequities in this excess-profits tax law, and to support the adoption of the American Bar Association bill for doing that which is along the lines of H. R. 610, which Mr. Simpson of this committee has introduced in this House. When our tax law gives a bonanza to a wrongdoer, and penalizes his victim, then it is time that we should adopt some sort of corrective legislation.

This company, in addition to its regular cement plant, for many, many years leased a plant-we will call it the Diamond Plant. That lease expired on December 31, 1946. The lease contained a first reducible clause, whereby the Superior had the first right to buy if the lessor decided to sell. The lease terminated; the plant was turned back and a few days later Superior discovered that the lessor was selling to a competitor. So, Superior brought an action for specific performance; deposited $600,000 in court; the case went to the Supreme Court of the State of Washington, and in 1949 the supreme court held that Superior had the right to buy, that the lessor had wrongfully withheld this plant, the possession of this plant all during these base-period years, 1947, 1948, and 1949, ordered the plant returned to Superior, and required the lessor to pay to Superior the profits earned from that plant during this period of wrongful withholding.

But the legal case was not finally terminated until early in 1950, and these profits were not paid to Superior until 1950.

Now, in that situation, the Bureau has ruled that because it did not receive the income until 1950 Superior gets no excess-profits tax credit by reason of the income during these base-period years. So here we are. We were legally entitled to ownership and possession of the plant during 1947, 1948, and 1949; we were legally entitled to the income that plant owned during those years.

We were actually finally paid that income. And yet we must operate this plant during the excess-profits tax years without any excess-profits tax base by reason of the earnings of that plant. The wrongdoer gets an excess-profits credit for income to which he was not legally entitled and which he had to pay over to us.

We have attempted to secure relief from the Bureau. We asked them to rule that section 444 of the present act was applicable. We asked them to permit us to accrue the 1950 income in 1949. They had declined to do so. They say 444 is not applicable for this reason:

Under 444 you have to have, on December 31, 1949, 150 percent of the capacity for production that you had on December 31, 1946. On December 31, 1949, Superior owned this plant outright. On December 31, 1946, that day was the last day of the lease on which we held. the plant under lease we turned it back to the lessor that day. The plant had been closed down for several weeks prior to that time, preparing for the turnback. It had no actual capacity to produce in our hands on that day, and yet the Bureau says that we had no increase in capacity because we held it under lease on December 31, 1946, and we held the same plant owned on December 31, 1949.

You can see the arbitrary nature of the present relief provisions. If section 444 measured the difference between January 1, 1947, and December 31, 1949, relief would have been granted to us under that section.

Gentlemen, this committee in the past, since the 1950 act was adopted, has followed the policy of passing some individual amendments to meet individual cases of inequity. It seems to me that that is a cumbersome procedure. It involves the Congress in details rather than general principles. The proper way to meet the problem, it seems to me, is by a general provision, such as the American Bar Association proposes, and such as Congressman Simpson has introduced in this session, which will lay down general rules to meet this problem; general rules, may I say, that take into account the experience that we have under 722 under the previous act.

Mr. Park has outlined the proposal, and I do not intend to go into detail in it. In order to be certain to cover our situation, there would need to be a very slight amendment to the bill as introduced by Congressman Simpson. That amendment has already been made by the bar association in its proposed bill, so that if the bar association's bill is enacted that would meet our problem.

Mr. JENKINS. It would seem to me that if this bill meets your situation it would not meet any other one, because I do not conceive how there would be another situation exactly like yours anyplace in the country.

Mr. LESOURD. Well, sir, I think you are right; that probably there is no situation just like ours. But I think that if you take the language of H. R. 610, that the wrongful withholding of this cement plant certainly was an abnormal circumstance which adversely affected our income, and if we take the words "pattern of" out of the bill, as I suggested in my prepared statement, and which are taken out in the bar association's bill, I think we probably would be covered. Mr. JENKINS. You are entitled to relief. There is no question about it.

Mr. LESOURD. We have not met a single individual in the Government or out that did not say that we had an awful situation and relief should be given. But nobody can tell us how relief is to be given. If the committee should decide not to adopt a general retroactive relief provision, then in my prepared statement-and which, Mr. Chairman, I ask be set forth in the statements of this committee and made a part of my remarks

The CHAIRMAN. Without objection, your entire statment will be included in the record at the conclusion of your remarks.

Mr. LESOURD. In my prepared statement I have outlined a short amendment to 444 that would meet my problem, and that would not, I think, involve the Treasury in any trouble elsewhere. All it says is that where on December 31, 1946, you hold property or facilities under lease that terminates on that date, and it is not renewed, that those facilities have no capacity for production in your hands.

In conclusion of my remarks, if I may say so, upon arriving here yesterday, and again in Mr. Folsom's testimony this morning, I learned that the adoption of provisions correcting these inequities is being opposed on the ground that the amounts involved would be so great as to wipe out the benefits to the Treasury of extending this tax.

Now that, indeed, was a surprise to me. I do not believe that they will be anything like the $800 million they talk about. These inequities are vital to the particular taxpayers faced with them, like our case. But the overall amount, I don't think, will be significant in terms of the national tax revenues. But, gentlemen, let's assume that they are. Let's assume that to retroactively correct these inequities would involve such a sum as $800 million. Then what are we saying? We are saying that this Government has or will collect that large sum from the taxpayers of this country from taxpayers who should not have paid it; that they have collected as excess-profits taxes money from people who really had no excess profits, and that they have improperly and unconscionably collected taxes from those individuals.

Now we are also told that we must extend this tax for 6 months, and we cannot correct these inequities because if we correct the inequities there will not be enough money come in from this, and then we cannot reduce personal income taxes at the beginning of next year. What are we saying there?

Gentlemen, we are saying there that what we want to do is to take $800 million or whatever the amount is from people who should not have paid a tax, from people who equitably were not subject to the tax, we take their money and use it to give a tax reduction to someone else. That violates the very basic principle that this committee has stood for as long as I can remember, and it violates the very first principles of taxation. How could we be proud of a reduction in taxes next January 1, if we rob Peter to pay Paul? It seems to me it would be a blot on our national record. Where we admit that people did not owe the tax and yet we take the money from them and use that money to reduce someone's else tax.

Mr. MASON. Mr. Chairman, that is exactly what the Treasury is asking this committee to do.

Mr. LESOURD. Well, that is what I gathered from Mr. Folsom's testimony this morning, and I think that the action violates the fundamental principles of fairness. We should remind ourselves at all times that this country has collected in taxation amounts of such staggering magnitude that never before in history have such amounts been collected by a tax system. And we have done it with a minimum of inconvenience and a minimum amount of enforcement.

The reason that we have done that, the goose that lays that golden egg is the confidence of the American public that they are going to be treated fairly, the confidence of the American public that one taxpayer is shouldering only his fair share of the burden. When we lose that confidence, we have killed the goose that lays the golden egg. Thank you, Mr. Chairman.

The CHAIRMAN. We want to thank you, sir, for a very excellent statement, and one which contains information very useful and valuable to us, and also the information you have given ought to have very wide publicity

Are there any questions?

Mr. BYRNES. Mr. LeSourd, after the court action was completed and this other company was required to pay over to Superior the earnings over this period that the property had been wrongfully withheld, when was that money received?

Mr. LESOURD. 1950.