Office of the Historian

811.512357 Shipping/31

The Secretary of State to the Norwegian Minister (Bryn)

[Washington, November 14, 1922.]

Sir: With further reference to your note of October 5, 1922,24 in which you ask to be advised whether the Re venue Act of 1921, Section 213, Paragraph 8, exempts Norwegian shipping corporations from all taxes so long as Norway does not tax American shipping corporations operating ships which use Norwegian ports, I have the honor to inform you that, inasmuch as Norway apparently satisfies the equivalent exemption provision of Section 213 (b) (8) of the Revenue Act of 1921, it has been ruled that the income of a non-resident alien or foreign corporation, which consists exclusively of earnings derived from the operation of a ship or ships documented under the laws of Norway, is exempt from income and excess and war profits taxes.

In answer to the inquiry made in the penultimate paragraph of your communication under reference, concerning the liability of Norwegian shipping corporations to capital stock tax, I have the honor to advise you that Section 1000 (a) (2) and Section 1000 (b) of the Revenue Act of 1921 provides that:

  • “Sec. 1000 (a) (2) Every foreign corporation shall pay annually a special excise tax with respect to carrying on or doing business in the United States, equivalent to $1 for each $1000 of the average amount of capital employed in the transaction of its business in the United States during the preceding year ending June 30.”
  • “Sec. 1000. (b) The taxes imposed by this section shall not apply in any year to any corporation which was not engaged in business (or, in the case of a foreign corporation, not engaged in business [Page 637] in the United States) during the preceding year ending June 30, nor to any corporation enumerated in section 231, nor to any insurance company subject to the tax imposed by section 243 or 246.”

The basis for the tax in the case of foreign corporations is the “carrying on or doing of business” in the United States. Any foreign corporation which enters the United States for the purpose of its business in any manner is liable to this special excise tax. There is no provision in the Revenue Act of 1921 for the exemption of any foreign corporation, shipping or otherwise, from capital stock tax as long as it is doing business in the United States.

It is, therefore, held that the equivalent exemption satisfied by Norway in accordance with the provisions of Section 213 (b) (8) of the Revenue Act of 1921 has no application in so far as capital stock tax is concerned.

Therefore, Norway shipping corporations “carrying on or doing business” in the United States come within the purview of Section 1000 (a) (2) of the Act and will be required to file capital stock tax returns, Form 708, and pay tax equivalent to $1 for each full $1,000 of the average amount of capital employed in the transaction of its business in the United States during the preceding year ended June 30.

Accept [etc.]

For the Secretary of State:
William Phillips
  1. Not printed.↩