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"(b) INCREASE IN PRODUCTION.-An increase in production shall be deemed to have occurred, for the purposes of this section, if the taxpayer establishes that its production during the last 12 months of such 36-month period was 150 percent or more of its production during the 12-month period beginning on the first day of its base period.

"(c) INCREASE IN CAPACITY.-An increase in capacity for production or operation shall be deemed to have occurred for the purposes of this section if the taxpayer establishes that it made an addition or additions to its facilities (as defined in subsection (f)) or replaced all or a part of its existing facilities, and that

"(1) as a result of such additions or replacements, its capacity for production or operation on the last day of such 36-month period was 150 per centum or more of its capacity for production or operation on the day prior to the beginning of such 36-month period, or

"(2) (A) as a result of such additions or replacements, its capacity for production or operation on the last day of such 36-month period was 125 per centum or more of its capacity for production or operation on the day prior to the beginning of such 36-month period, and (B) the adjusted basis for determining gain upon sale or exchange of its total facilities on the last day of such 36-month period was 125 per centum or more of the adjusted basis for determining gain upon sale or exchange of its total facilities on the day prior to the beginning of such 36-month period, or

"(3) the basis (unadjusted) for determining gain upon sale or exchange of its total facilities on the last day of such 36-month period was 150 per centum or more of the basis (unadjusted) for determining gain upon sale or exchange of its total facilities on the day prior to the beginning of such 36-month period.

"(d) AVERAGE BASE PERIOD NET INCOME.-The average base period net income determined under this section shall be computed as follows:

"(1) By multiplying the amount of the taxpayer's total assets as of the last day of such 36-month period by the base period rate of return, proclaimed by the Secretary under section 447, for the taxpayer's industry.

"(2) By subtracting from the amount ascertained under paragraph (1) an amount equal to the total interest paid or incurred by the taxpayer for the 12-month period ending with the end of such 36-month period.

"(e) CAPITAL CHANGES ADJUSTMENT.—In the event the average base period net income of the taxpayer is determined under this section, then, for the purpose of determining the taxpayer's net capital addition or reduction under section 435 (g), no account shall be taken of any capital additions or reductions made by the taxpayer during such 36-month period.

"(f) FACILITIES.-For the purposes of this section, the term 'faciilties' means real property and depreciable tangible property, held by the taxpayer in good faith for the purposes of the business.

"*** [together with technical conforming amendments.] cized.]

EXHIBIT C

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Section 435 (c) of the Internal Revenue Code shall be amended to read as follows:

"SEC. 435. EXCESS-PROFITS CREDIT-BASED ON INCOME.

"(c) AVERAGE BASE PERIOD NET INCOME-DETERMINATION.-For the purposes of this section the average base period net income of the taxpayer shall be the amount determined under subsection (d), subject to the exception that if the taxpayer is entitled to the benefits of subsection (e) of this section, or section 442, 443, 444, 445, or 446, or any subsection of section 459, then the average base period net income shall be the amount determined under subsection (d) or (e) or under such section or subsection whichever results in the lesser tax under this chapter for the taxable year for which the tax under this subchapter is being computed: Provided, however, that

"(1) The average base period net income shall in no event be less than the amount computed by multiplying the taxpayer's total assets for the last day of the taxable year for which the tax under this subchapter is being computed by the base period rate of return, proclaimed by the Secretary under section 447, for the taxpayer's industry;

"(2) For the purposes of this subsection, the taxpayer's industry classification shall be the industry classification under section 447 to which is attributable the largest amount of the taxpayer's gross receipts, as defined in subsection (e) of this section, for its taxable year immediately preceding its first taxable year under this subchapter; and

"(3) In the event the average base period net income of the taxpayer is determined under paragraph (1), then, for the purposes of determining the taxpayer's net capital addition or reduction under section 435 (g), taxpayer shall be deemed to have made no capital addition or reduction after the end of its base period." [Together with technical conforming amendments.] [Additions italicized.]

EXHIBIT D

RETROACTIVITY

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The amendments made by sections - to, inclusive, shall be applicable with respect to taxable years ending after June 30, 1950, and the Secretary shall prescribe such regulations as may be necessary to permit the filing of such returns or amended returns, including the filing of separate returns in lieu of consolidated returns or consolidated returns in lieu of separate returns, for taxable years ending after June 30, 1950. [Technical conforming amendments necessary.]

Mr. MASON. That concludes the testimony for today. We will recess until 10 o'clock tomorrow morning, when we will continue these hearings.

(Whereupon, at 2: 30 p. m., the hearing was recessed, to reconvene at 10 a. m., Wednesday, June 10, 1953.)

EXCESS-PROFITS TAX EXTENSION

WEDNESDAY, JUNE 10, 1953

HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D. C.

The committee met, pursuant to recess, at 10 a. m., in the main hearing room, Hon. Daniel A. Reed, chairman, presiding.

Mr. MASON (presiding). The hearing will come to order.

The chairman is tied up in another meeting with the other members of my committee and he instructed me to call this meeting to order at 10 o'clock and to continue the hearing on the extension of the excessprofits tax as recommended by the President.

The first witness that we are to hear this morning is Mr. John D. Biggers, chairman, Libbey-Owens-Ford Glass Co., Toledo, Ohio, and Ottawa, Ill.

We will hear from Mr. Biggers.

STATEMENT OF JOHN D. BIGGERS, CHAIRMAN, LIBBEY-OWENSFORD GLASS CO., TOLEDO, OHIO

Mr. MASON. All right, Mr. Biggers, you may proceed.

Mr. JENKINS. Mr. Biggers represents a great industry, and he is a great representative of a great industry.

Mr. BIGGERS. Mr. Chairman and gentlemen, it is a privilege to appear before your committee. I am John D. Biggers, chairman of the Libbey-Owens-Ford Glass Co. Our headquarters are in Toledo, Ohio, but we have factories in Illinois, Lousiana, Pennsylvania, Texas, and West Virginia, as well as in Ohio. We employ 12,779 workers who are receiving the highest take-home pay in the history of our company and of the glass industry.

The excess-profits tax has cost us $16,539,027. That is a lot of money for a company the size of ours. Nevertheless, I urge continuance of the present level of taxation, including the highly objectionable excess-profits tax, to the end of this present calendar year. I agree with the President's position that we should not cut taxes at the risk of the security of the free world, the solvency of our country, or the soundness of the American dollar.

All history proves that a sound currency lies at the very heart of social progress and economic stability. In other countries throughout the years where currencies have been debased by continued government deficits, the results have always been the same. The savings of the people are eaten away, thrift is discouraged, and morality undermined.

In our own country the national debt has been increased $224 billion since 1939. Since then almost half of the value of the dollar has been wiped out. In 1939 savings deposits, bond investments, and life insurance policy reserves had a combined value of $195 billion. During these last 14 years their combined purchasing power has shrunk approximately $97 billion.

We must call a halt if we are to survive as a great and strong Nation; a secure and prosperous people. There is only one way so far as I know-the hard way. Reduce expenses wisely to or below the level of our Federal income which would then permit a fair, sound, and timely reduction of taxes. From my experience in Government in 1940 and 1941, I know how hard it is to make the desired expense reductions; but I am confident that the desired objective can and will be accomplished by the executive and legislative branches of this Government working together to that end.

The present excess-profits tax law, as I mentioned, has cost our company $16,539,027. In addition to that, the 92 percent Federal income tax has, during the same period, cost us $81,195,007. Nevertheless, much as these taxes hurt us, I urge that you do not lighten the tax burden on corporations before the Government is in a sound position to relieve individuals of a portion of their heavy tax load. And that, I hope, can be on January 1, 1954.

Even if the excess-profits tax were permitted to expire on June 30 of this year, its provisions, as you know, would be effective for the full calendar year of 1953. The only change would be a rate of reduction from 30 percent to 15 percent. Those companies most severaly affected, like our own company, are paying the 70 percent maximum and in such cases the actual reduction would probably be only 9 percentage points instead of 15.

All of the inequities and disadvantages of the excess-profits tax would be in effect for the full year. We taxpayers would merely obtain moderate tax reduction at the expense of what I believe to be good government fiscal policy, that is, the earliest possible balancing of the Federal budget and the restoration of the soundness of our

currency.

Therefore, in the national interest, I contend we can all bear this tax for 6 months longer and then, as has been said, "get rid of it once and for all."

Mr. JENKINS (presiding). Are there any questions?

Mr. HOLMES. Mr. Biggers, may I ask you this question: Are you a member of the National Advisory Council of the Department of Commerce?

Mr. BIGGERS. Yes, sir. It is called the Business Advisory Council of the Department of Commerce.

Mr. HOLMES. And have there been any findings in that Advisory Council concerning how the council itself feels toward the continution of the excess-profits tax?

Mr. BIGGERS. May I explain first that the Business Advisory Council was first created by Secretary Roper with the approval and sanction of President Roosevelt 20 years ago and that it has continued during that 20-year period as an advisory body to the Secretary of Commerce. It has never made public its representations or findings on the subject. It has never attempted to testify or influence legis

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