*1 Judge (concur- BURGER, Circuit

ring) : fully concur result and

I with the

reasoning majority except of the para-

obiter dictum contained the final seeing graph. great difficulty in I have singling an wisdom out one of subjects which

almost infinite number of in-

can arise in a criminal trial and of

timating prosecutor that either judge day upon may trial one be called give legal advice defense coun- long point. sel one in- So as we maintaining rigors

sist on all the inher- aspect adversary

ent in the contest system, prepared accept we must be consequences; one of these conse-

quences that each the advocates try

must be relied case. his own frequently judges

We have chided trial

and reversed convictions because it seem- particular

ed to a division of the court judge the trial had intervened prosecution.

the side of the I fear potential mischief inherent in affirma- tively inviting judge the trial to inter- suggestions vene with For counsel. reason, unwilling join I am majority

caveat which expresses paragraph

the final opinion.

STATE LOAN AND FINANCE CORPO- (Successor by RATION Merger Lin- coln Corporation), Petitioner, Service

v. COLUMBIA, Respondent.

DISTRICT OF

No. 20273. Appeals

United States Court of District of Columbia Circuit.

Argued Feb. 1967.

Decided June Rehearing

Petition for Eh Banc Aug. 17, Denied *2 Wixon, Corpo- Henry Asst. E. Pair brief, for Counsel, on the were ration Duncan,

respondent. T. Mr. Charles ap- Counsel, an Corporation also entered respondent. pearance for Judge, Before Circuit Fahy,* Bas Judge, Senior Circuit Tamm, tian, Judge. Circuit Judge: TAMM, Circuit petitioner Finance The Loan and State Company of a case seeks review1 in this of Columbia decision of District petitioner’s increased the Court which on taxes District Columbia franchise with- its net income derived from sources fiscal for the 30, 1958, year and for the ended June through period July 1, 1958, taxable petitioner March 1959. merged Delaware Sep- Corporation on the Lincoln Service Lin- tember and assumed all of as of that coln’s assets liabilities During periods date. involved, here petitioner, hereinafter holding company Lincoln, called awas principal place whose business was was the Columbia. It all, corpo- all, owner or almost corpora- subsidiary rate stock of several making engaged tions small loans to individual borrowers states which located. their offices were no other subsidiaries except the small loan business. subsidiary Each had to be licensed located, in state in which its office was carry order to on the loan small business. year ending At the 30, fiscal June end operated 103 the subsidiaries Bauersfeld, Washington, Mr. Carl F. states; C., loan in 11 as of Ash, small offices D. with whom Mr. Robert Wash- ington, C., brief, peti- 16, 1959, they operated D. loan March tioner. subsidi- offices 11 states. None of the lending aries conducted the business McCally, Corpora- Mr. Robert E. Asst. Columbia, est, money in id Columbia, tion Counsel for no in the Dis- loan offices located Korman, with whom Messrs. Milton D. Principal trict of nor own Corporation did Asst. Counsel at filed, any payroll properties the time B. brief here. Hubert or have * Fahy Judge Circuit became Senior Circuit 47-2404 D.C.Code Judge April gross management plied supervisory serv- derived (1) on loans subsidiaries in the sev- ices to its located three sources: paid charged (2) subsidiaries, fees administrative eral states and and received sub- supervision and stantial sums such services. These the subsidiaries performed by supervisors management Lin rendered services were services employed by Lincoln, super- coln, (3) declared dividends and these *3 by personnel on Lincoln visors advised the and received sub- the subsidiaries reported capital in subsidia sidiaries and held the Lincoln. The stock the supervisors offices, had head- ries.2 were quartered, in the states which the in was subsidiaries of Lincoln’s Each loan small located. subsidiaries were regula- strictly and controlled laws supervisor supervised Each 8 to small 10 loans were the state which of the tions supervisors loan offices. The visit would subsidiaries, in accordance The made. office, investigate each had all loans that law, kept requirements of state the visit, been made the since last review note, offices the borrower’s home in their manager subsidiary with the of the mortgage, application the chattel the activities, had accom- calculate what been ledger card, loan, and statement the the plished, and endeavor to er- correct managers the The transaction. of the may rors that have been made. In addi- charge loan were subsidiaries tion, supervisor trained and instruct- authority re- complete had offices and personnel subsidiary’s ed the other determining loan, ject as well Virtually office. all of ren- the services procedure followed. collection be supervisors dered to the subsid- belonged or- local civil subsidiaries iaries were rendered outside the District ganizations ac- and maintained bank Lincoln, of Columbia. its office they lo- cities were where counts District, performed services for its managers complete dis- had cated. accounting, purchas- subsidiaries operating of- loan of the cretion in the ing, advertising, printing forms, They hired, trained, dis- and fices. preparation returns, of income and employees; paid charged they ex- their keeping of the formal and rec- books telephone, rent, light, heat, penses such as ords, including general ledgers. Lin- fees, supervisory administrative agreement coln had no written concern- ac- bank from their local taxes local ing management ren- services to be money ; counts determined subsidiaries; paid dered for the fee of the subsidiaries borrowed needs subsidiary each based on pur- operational from Lincoln for funds outstanding subsidiary’s Money amount poses. account the local bank sig- joint corporate could withdrawn loan balance. Lincoln officers manager Lin- cashier. of the nature were also officers of the subsidiaries. authority to draw coln did not have All of the subsidiaries officers of the accounts, officer these but an located in Columbia. were the District of subsidiary physically present all, all, who if Almost of the subsidiaries’ had author- the District of Columbia also directors either were officers or directors ity to draw the local account of Lincoln and were located subsidiary. trict of Columbia. All the directors meetings stockholders Lincoln both During involved, period here held in the and the subsidiaries were approximate- subsidiaries of Lincoln had deter- District. All were dividends ly employees, 350 all of whom worked paid Colum- mined and while outside of the District of sup- employees. Lincoln had bia. 20 Lincoln minority shares, never had a stockholders About 105 subsidiaries held 35% than Lincoln. Most more than 12. stockholder (For computation, Ap- see dur- detailed tax received The amounts pendixA). follows:

ing periods Period Ended Ended Fiscal Year March June $595,197.03 $986,806.88 Interest 900,768.57 650,035.53 Fees Administrative 689,890.14 700,159.00 Dividends $2,586,465.59 $1,945,391.56 Total *4 Company question Court was and Consoli- the Tax The before Corporation dividends, interest, cases and and ad- dated Title whether the (a) by under Lincoln Section 47-1571 [47-1571a] fees received ministrative D.C.Code 1960 Edition.” taxable from subsidiaries were corporate fran- the of question No is raised court before this tax, 47-1571, 47-1571a chise D.C.Code §§ regard findings now of Tax Court’s in the (1961 ed.). the Code 47-1571 of Section and allocation of the ad- sources the provides shall that “taxable income” ministrative received Lincoln fees derived mean “the of net income amount the The Tax from subsidiaries. Court within the District within from sources found which the the services 47- the of sections 47-1580 partly performed fees were received were 1580b.” the Code Section 47-1571a of partly within and without the provides that: of of section Columbia. On the basis carrying privilege on or “For the of 10-2(c) regulations pertaining to engaging or business in corporate fran- the District of Columbia receiving within the tax, provides chise for allocation income from sources within Dis- site at of the income on the basis hereby for each levied trict there is out, which the was year a at the rate of 5 tax respect stipulation parties in per taxable income centum employ- compensation officers and every corporation or domestic whether in ees Lincoln who were foreign.” including subsidiaries, supervision provides that: Section 47-1580 spent performing in that service the time the District both within purpose of “It this article * * * 42.47 Tax Court found that impose (2) tax a franchise * * * per services cent of the administrative upon every corporation performed the District engag- privilege carrying on or year ended Columbia for fiscal June ing in within the trade or business per fiscal cent for the 34.87 receiving and of thereupon year 30, 1959. It ended June income as is derived from sources applied percentages ad- total these within the District.” to determine ministrative received fees The Tax held: gross properly in the amount includible paid or “the and dividends interest respective periods. income for the issued were them [the subsidiaries] reso- us now for The issue before from within the sole sources income 3 of the source lution is: What was principles trict under announced doing corporations Square Kentucky foreign D Bd. of See Co. v. Kentucky; Appeals, (Ky.1967). them had their neither S.W.2d 594 appellants “principal domicile case, or commercial office In this two princi- payments received discussion because or and interest the rules dividends relating ples “income interest parent ? If was the source of it District,” same, or then and dividend income are from sources within exact, petitioner tax to more same rule pay the franchise one and the must principle applies rule both inter- That it. found that to both. The Tax Court principle respect its source of interest dividend income had est and found, source of That court interest within the District. debtor, presented, the domicile of and as to the basis of the facts subsidiary acquired dividends locale had a com- is the domicile or each paying issuing corporation.” of Colum- the District mercial bia. applied The Tax Court rules then these first, discussed, Tax Court light of its domicile deter- commercial regard finding the source rule mination came to conclusion that income: dividend and both interest had dividend income These two their source within

“Interest and Dividends. purposes. for Columbia revenue combined for franchise classes of are foreign pro Each all the state.” owned which was not [that] recognizable foreign corpora- capital duced in some of one or more sense busi Kentucky.” question presented ness activities S.W. tions. these whol- 2d at 599. dividend whether ly rejected argument corporations The court included owned must be *5 corporate relationship parent appellants’ the the subsidiary taxable net income for of integra- apportioning purpose in taxes caused of income this case an est, Kentucky, operations payable id tion of the overall in- to the State of business “unitary operation,” right to a the have a “reach for such that did the state to statute, Kentucky portion in overall business could have of this income?” The a 141.010(11), production Kentucky to the of the divi- Revenue Statute contributed corporations though dend income. “Even are taxable net of subsidiaries defines income “ engaged in a similar or related busi- ‘net income’ derived from as corporate ness, separation done, property located, activities, or be must * * recognized a unless a sham or in state When is mere sources this activity operations the subsidiaries’ [have lost] is both independent identity by Kentucky not their exceptional integrated reason of and it is within and possible segregate income, relation- to ships.” provided legislature had method and 415 S.W.2d at 601. a court, finding allocating Kentucky pro- that income was a formula produced Kentucky portionate in- that there share of the taxable net object unitary operation present, companies a was not come. The did not Kentucky inter- reversed Board of income therefore of Tax inclusion realized Appeals appel- for the outside the and held related business activities corporations. doing, they apportionment procedure. lant In indi- so state separately They if about there were doubt contended cated the required conclusion, whol- would be dividend income from identifiable strongly corporate operating ly these most “construe statutes owned subsidiaries against government jurisdictions foreign in favor of be could not in included taxpayers.” computing 415 S.W.2d at 602. the overall (Citations omitted.) Appeals “Where there net income. Court of question Kentucky 598, first, a serious as noted at “that it is to the constitutional having right beyond power prop- of the state to income of a to tax state source, foreign erty we state has in other a think the located states because both, showing by convincing either, would violate or the burden evi- taxation process separately or due dence that identifiable commerce clause the clause of the significant foreign has source Constitution the United Kentucky by integrated op- (Citations omitted.) reason of The court States.” fairly pointed apportionment erations which are not severable.” out require- designed process at 602. to meet the due 415 S.W.2d Accord, Humble v. Cal- of a “nexus” the tax and Oil & Ref. Co. ment between vert, Tex.Civ.App., 414 172 the transaction within a for which S.W.2d state (1967). exaction. tax is an “It thus becomes Kentucky tax, apparent that cannot either directly indirectly separable 47-1571a 4. D.C.Code 900 1339, 357, 900, jurisdiction 83 L.Ed.

The rule in U.S. 59 this S.Ct. 162], supra; regard v. on 123 A.L.R. Graves the source interest opin Court, supra, in its Elliot and State [32 note is clear. The Tax U.S. 885] case, Aldrich ion in the reversed Tax Com. of Utah v. [306 grounds,5 747], supra.” there indicated U.S. the: reservation last sentence This “(S)ource income is the constitutionality the im- refers obligor and its is his residence. situs position by tax on the two states of a * * * had to the Resort must intangibles, as well transfer of same ordinary meaning ‘sources.’ term possibility of double taxation Judge in Lord Tor- Corp., As said Goodrich intangibles Wheeling Steel commonly res, 25 BTA ‘the something ques- infra, neither accepted term definition ease. tioned nor at issue in this anything “source” is that from which Court, applying the cor- after The Tax regarded forth, comes as its cause ascertainment rect rules ” origin.’ omitted.] [Citations income, and interest source dividends incorrectly applied the commercial regard here source The rule in Wheeling theory juris laid down equally dividends is clear 193, Fox, Corporation 298 U.S. v. Steel diction. The of Columbia (1936); 773, First Corp. Dis 56 80 L.Ed. 1143 S.Ct. Court in Consolidated Title v. Minnesota, Corp. Columbia,6 Bank v. Stock State trict there indicated that 1061, 677, L.Ed. 301 81 dom U.S. S.Ct. was the 57 source of the dividends Memphis (1937); issuing corporation. 113 A.L.R. paying icile of the Beeler, U.S. Natural Co. v. Gas relating principles to the situs “The (1942), 86 L.Ed. S.Ct. essentially are same as dividends find that the income sources were concerning locale those the taxable District of Columbia.7 treat interest. Statutes treaties *6 guidance in together having are not without some of the same We them meaning in the used of “source” as natures. Both in- characteristics regard inter- money person to dividends of a statute volve the use Corp. obligated corporation In Title pay its source. for est Consolidated supra, Columbia, use The domicile of v. District or retention. organized corporation obligor a a taxable involved in both instances is corpo- course, Maryland, situs, mean, and which the laws of which does not statutory in Balti- jurisdiction may office not ration had its that some other records, kept impose more all of its also on or in relation but books taxes business, McCanless, corporate Curry all transacted [307 thereto. v. ‘doing is not one “The term business’ v. District single meaning Co., possessed U.S.App.D.C. 186, of but a F.2d 390 204 92 many reversing Virginia (1953), with It is used in connection Hotel Co. v. law. Columbia, char- and must be different situations D.C. Tax Court District of according 1302-5, Opinion defined No. 819 acterized and Docket No. doing Thus, (1952). what constitutes context. by purposes a of taxation for business U.S.App.D.C. 221, 275 F.2d 885 107 regul- very may be a different state Court, affirming (1900), D. Tax Docket C. purposes state, a or for ation (1959). Opinion 1042-1660, No. 962 No. doing thing constitutes [sic] from what process Ferguson purposes of also cited Con- 7. The Tax Court foreign corporation subjection Ry., tracting 33 of a Co. v. Coal Coke jurisdiction App.D.C. (1909), local courts.” case in- but this 159 Inc., question Builders, process Goldberg '87 and the v. Southern service of volved 345, doing U.S.App.DC. 191, 193, corporation F.2d suf- 184 a was of whether omitted.] make [Citations District 347 ficient business has As this court such service effective. said:

901 U.S.App.D.C. Columbia, 107 and direc- and held all of its shareholders Columbia, 222, meetings F.2d at 886. at in the District of tors divi- the issue of this court had before clearly indicated The court corporation or- dend source. The was place of income was that source ganized carry court-approved out a “principal and busi where the offices reorganization corporation. bankrupt aof The search nesses” located. were Its entire income consisted of dividends place statute of this such a context subsidiary corporations, all three from many. place, is a for one search organized of which under the Dis- were concept domicile one of commercial trict of Columbia and had their laws leading one to more than principal Dis- in the offices and business time, same one and the at trict, they engaged real where domicile taken doctrine of while the and insurance estate title ..examination. unitary concept— sense normal business. single, domicile. one exclusive of a Judge regard source, In to dividend source, meaning plain as used Edgerton said: statute, interpretation of domicile dividend context source of agree, held, “The and we Corp., supra, and Consolidated Title petitioner that received its ques require that common all sense the District’ and ‘sources within domicile in the case tion of source was these taxes. therefore one which and interest source dividend petitioner’s sub- The ‘sources’ were “principal finding of is resolved sidiary corporations. they had Since subsidiary.9 fice and business” principal their offices and businesses question case, is no In this there they were ‘within the were principal offices businesses District’; ‘“domiciled” of Columbia located outside the District commercially’, therein, corporately and where states located and were as the Tax It is immate- Court found. payments there made and the loans were rial that some of their business are clear The facts on received. done We are not concerned elsewhere. for each sub principal place income, with the sources of their but sidiary Colum was not in the only petitioner’s in- the sources argument bia, for source and the come. Cf. Eastman Kodak Co. v. one purposes more than could there U.S.App.D.C. trict of and one without source —one F.2d 348. We need not answered of Columbia —is petitioner consider ‘en- whether pointing its clear * out * * *7 gaging in business within Any interpretation other cannot be. this meaning District’ within the suspect statute make the would also franchise tax. Cf. District of Colum- something taxation, the Su multiple Co., U.S.App. bia v. 92 recently concern 186, 187, 390, preme shown has D.C. Af- Court 204 F.2d 391. Corp. regard tax firmed.” Consolidated v. Title same franchise for in to this Holmes, 8. however, Mr. v. is one Justice Williamson a determination such 619, 442, Osenton, 625, requires, is 232 and that U.S. 34 S.Ct. this statute which 443, (1914), job who L.Ed. of domi those 58 758 said done that must be one; statute, interpret “In if in how hard cile: any its nature it is albeit recognized may case two are for different tax statute Abe. franchise purposes analogy.” wording much need- it is a doubtful to obtain was selected of Colum- ed revenues source, 9. The of a which determination taxing typos statutes other bia. While deter- the context of this case means the selected, not. have been could principal place mination of the of busi- meaning proper to select task is Our requires; ness, is one that statute statute, scope could what not for this easy by such determination is made stat- other under some been taxable facts, have this case. On facts difficult; might very ute. determination 902 questions11 of whether Corp. District constitutional Motors v.

statute. General 1156, in a deter 553, the use of commercial U.S. 85 S.Ct. 380 case, statute within this the mination of source In that 14 L.Ed.2d 68 ap regula- an unconstitutional Supreme would result construed certain Motors portionment within General the Commissioners tions issued beyond case, supra,12 or being under General would be franchise tax statute Washington, U.S. Corp. authority ne- 377 avoided Motors v. thus their (1964), reaching 436, without cessity a tax 1564 the constitutional 84 S.Ct. apportionment,13 “nexus” question. within the state. interpretation as to Because our the statu used of source as in some Lincoln was District,14 te,10 difficult id reach the we need business or Davis, 10. 125 District of v. on within See to the commerce taxing cert, 311, 964, U.S.App.D.C. de v. 371 F.2d Live Stock state.’ Western 256, 1034, 1487, 250, Revenue, 18 L. nied 386 U.S. 87 S.Ct. 303 U.S. Bureau Ap (1967), 823, where [115 Ed.2d 598 this Court L.Ed. 82 S.Ct. 58 statutory- Mfg. peals also based its decision D. Adams A.L.R. See J. 944]. 307, Storen, avoid construction of the tax statute to 58 S.Ct. v. 304 U.S. Co. questions. 913, 429.]” constitutional A.L.R. [117 1365 82 L.Ed. Corp. Washington, 561, page 1 1. General Motors v. S.Ct. 12. said at 85 The Court 449, 1564, 436, page page 377 at S.Ct. re- U.S. 84 the Court has at 1161: “While page 1572, (1964), any attempting 12 at L.Ed.2d 430 to define frained dissenting, apportion- single appropriate Justice Brennan said: method presents again ment, sought “This case thorny once it has ensure power problem display State of a a modicum of reason- methods used gross receipts corporate from inter- able activities relation arising state from activities oc- sales the State.” curring only partly within borders. Washington, Corp. v. Motors General Washington gross upholding In re- 448, supra, at 84 S.Ct. at 1571. has, my judg- ceipts tax the Court Washington is “The tax that levied quite ment, two different is- confused by the wholesale sales of the measured case, doing raised sues respective divisions General Motors ignored fatal so has defect unapportioned and, the State. It Washington statute. is, therefore, pointed out, have sus- we transaction, “In order to tax pect. must whether We determine requires that a Due Process Clause closely local activities related to the so between a sufficient ‘nexus State show corporation as to form ‘some defi- within the such a tax and transactions link, minimum connection be- nite some exaction.’ for which the tax is an state person, property a state tween Portland Cement Northwestern States Miller it seeks to tax.’ or transaction Minnesota, [State of] U.S. Co. v. 358 Maryland, 347 U.S. Bros. v. State 421, 464, 357, 450, 3 79 S.Ct. L.Ed.2d 340, 535, 344-345, L.Ed. 744 98 S.Ct. question, 1292]. A.L.R.2d This [67 (1954).” E. which we considered in McLeod v. J. proviso engaged, Co., 327, it was 64 S.Ct. Because so Dilworth 322 U.S. 1304, (1961), 1023, v. L.Ed. and Norton Co. D.C.Code 47-1580 Department Revenue, reads: U.S. However, (1964), [t]hat “Provided L.Ed. 71 S.Ct. corporation, precondition the amount re- case the most fundamental *8 corporation power ceived as dividends from a But the strictures state to tax. subject power taxation under this do which is to on this of the Constitution and, corpora- article, stop in a the case of a For in the case of not there. any engaged carrying gross receipts imposed in- an tion not in District, though transaction, trade or business within the even terstate corpora- by taxing minimum interest received it from a ‘some State can show subject connection,’ Port- which is to taxation States tion Northwestern Co., supra, shall not be considered this article Cement U.S. at land 358 from sources within at the Commerce 79 S.Ct. purposes The requires article. for the of this measured that ‘taxation Clause by receipts the franchise tax shall gross measure of com- from interstate * ** portion fairly apportioned of the net income of that [be] merce

903 subsidiaries, agree; first, supervising subsidiaries. We cannot be- est, its that any subject impossible cause would seem activity it that it became and for that more could been relevant facts be elicited than has not franchise tax.15 It to the already appeared true, have in extensive suggested, that nor would it be regard engaged a record in in before us now Lincoln in case was this solely re- activities of Lincoln and subsidiaries it its or trade because business beyond and, secondly, payments.16 it clear us is ceived interest or dividend peradventure made is that the Tax Court receipt and dividends The of interest implicit finding an the basis of the franchise in this case under taxable was, not en- only facts before it Lincoln was that tax statute if its source gaged in a or within fact, Mere business of Columbia. in the District by more, meaning showing receipt alone, of the franchise tax statute without a “engaging receiving by interest dividends would not be covered provision, its any subsidiaries. It is of course true that be- or trade” business engaging explicit finding appears no receipt simply effect to that cause not opinion Court, means of the Tax This business trade. procedure company the better be to make the business would that if a is in finding. may lending money such a now do what We within by “engaging” apply. provision It this court done would may is, case, supra, company apply and that we because the would do, showing opinion. engaged, look to whole we When a mere so but bring finding enough implicit we there find receipt an that not of interest engaged Lincoln was not business this section. action within or trade of the fran- within the although agree- brother, learned Our receiving chise tax statute ing our case result or dividend income from its subsidiaries as used dividend and interest source presented case. on the facts in this section 47-1580 of the Code was Judge Fahy support The items cited would, Columbia, District of regard, our these view in this because nevertheless, hear- for a further remand (as example, and other such items ing Lincoln was to determine whether the answer of the Government engaging in or trade in the a business ap- complaint filed in Court first within the assessments) peal show increased loaning part (2) of section 47-1580 con- that before the Tax it was Court money receiving from its to or dividends tended that Lincoln was either unincorporated it has Lincoln concedes in its brief engaged in within the on or in the District of commercial and such other net for the did file returns covering period question within the Dis- from sources fran- derived taxable * * portion trict of income re- chise taxes for the give only regard to divi- would relief the sub- ceived for the services rendered if subsidi- dends received Lincoln in the District. sidiaries tax, the franchise aries became Compare Robb, Inc. v. District of Co- us, question but before which is not lumbia, U.S.App.D.C. F.2d interesting possibility which raises might perhaps the have sued following: question 17. The Tax of the tax indicated subsidiaries. computa- responsibilities Lincoln’s will be seen from activi- “As of the subsidiaries’ income, - fully its rev- net tion its have been then ventilat- would ties gross three income consisted of enue action would have as well ed. Such an ‘interest,’ namely, appor- classes, opportunity ‘ad- kinds or them an afforded supervisory fees’ ministrative income between the tion their performed managerial services the District of Columbia done within ques- subsidiaries, without; course, and ‘dividends.’ and of that done *9 to the de- then have available it would previously taxed duction of the dividends proviso quoted above. under the wholly for the taxable interest income dends and in business periods income here involved. all of its it derived con- trade or business activities so ordered. It question ducted within the District. (dissenting): for deter- Judge which he now remand FAHY, would Circuit clearly precisely raised and mination was Having and the interest held that before, by, and the Tax Court. decided are not sub- dividends earned still, he which cites Further the case ject “such other franchise tax as authority cited was also net derived from sources income as is incidentally, Court,18 sole, whose member District,” 47- within the D.C.Code § during presiding there whole was believe, 1580, court, remand should I proceeding remand that and proceedings in the the case for further imply Court the Tax case. To now that for determin- Tax Court. There remains very per- disregarded that case is not question interest ation the whether that suasive. It should be noted too dividends, thereof, any part should argument by opening coun- concession measuring tax franchise be used in in contradistinction sel for Lincoln stands portion paid the net on “of that * * * president testimony vice fairly attributable slight Lincoln, only that who indicated en- carried on or or business gaged profit pure D.C. interest in within the District.” was made on the Code And see District 47-1580. money on the loaned received Virginia Co., Columbia v. Hotel 92 U.S. know subsidiaries and that he didn’t App.D.C. 186, F.2d 390. “profit” whether there was a after obtaining Even Lincoln concedes that some expenses” “other incurred in Dis- it earned against money charged were attorney stated Its trict of Columbia. “profit.” inconsistencies, These as well Lincoln, opening that his statement others, merely issues show that of loan- in the present decided, they were were to be management rendering ing money and decided: corporations subsidiary services to the opinion As much of the Tax Court’s located the States which were imposes the District of Columbia fran- Louisiana, Kentucky, Florida, Georgia, chise dividend and interest Ohio, Pennsylvania, Maryland, South by petitioner received from its subsid- Carolina, Virginia Texas, and West during year ending iaries the fiscal June Virginia. plus interest, with this judgment is remanded to the Tax to March and the opinion period July 1, petitioner taxes reversed. The case the refunds paid consistent to enter divi- due, poration treated ministrative periods In (cid:127)X- filing the interest ^[*] here Franchise its District fees as ^[*] involved, Tax Return for ^[*] of Columbia received ^[*] taxpayer appor- ^[*] Cor- ad- opinion, domicile, presents the Court is of tion which here itself is ‘where the commercial and here holds was the source or locale of income?’ proceed of the subsidiaries Court will now to answer sup- question.” sufficient of Columbia was trict ruling port interest and divi- paid in- following: them or issued dends The Tax Court indicated the Ferguson within the from sources Con- come “While is true that principles Ry. Co., tracting announced v. Coal Coke Co. Company process, Consoli- supra, of- involved the service Corp. Supreme under sec- cases and dated Title the cited three Court cas- 47-1571a, of Columbia tion the taxation of the cor- es sustained provides: Edition, poration’s intangibles by Code, which the states * * acquired omitted.] [Citations had a commercial *10 Lincoln filed the Assessor Columbia after in the District tionment appor- made no return. Since the Tax Court to as not and dividends findings or conclusions law fact tionment because dividends, or wholly interest and to whether sources any thereof, part were “attributable attributable en taxpayer activity District. gaged in of Columbia” judgment Lincoln seeks In this court considera case for I would remand the claimed,” that “for the amount refunds is, matters.1. assessed tion amount of the deficiencies these A

APPENDIX CORPORATION LOAN FINANCE STATE AND by merger Corporation Successor Service

Computation Statement March

June Administrative Less: Expenses Total Less: Income plicable dends & Interest thereto Expenses Expenses Fees applicable Divi- ap- $1,426,486.22 1,101,155.38 $ 900,768.57 325,330.84 $1,068,811.61 769,770.48 $ 650,035.53 299,041.13 Appor- Net Income to be 350,994.40 575,437.73 tioned $ $ Multiplied Appor- .3487 tionment Factor .4247 122,391.75 244,388.40 D. Portion C. $ $ Add: Income Allocable D. C. 700,159.00 698,890.14 Dividends ? $ 595,197.03 986,806.88 Interest $1,685,697.02 $1,295,356.03 Total Expenses appli- Less: 584,541.64 769,770.48 525,585.55 1,101.155.38 thereto cable 647,977.30 828,930.04 D. Net C. Income Taxable $ $ 32,398.87 41,446.50 Tax at 5% $ ? 23,798.61 37,341.19 Previously Less: Tax Paid 8,600.26 4,105.31 Tax Balance Due $ $ 1 Expenses Applicable Income: to Dividend Interest 626,692.53 941,473.49 Expenses Interest $ $ Long 14,917.46 Expense 20,254.38 Term Debt 641,609.99 961,727.87 Sub Total $ $ Expenses $1,426,486.22

Total $1,068,811.61 641,609.99 961,727.87 Dess: Sub Total Above Remaining 427,201.62 Expenses 464,758.35 $ $ 128,160.49 128,160.49 Multiplied 139,427.51 139,427.51 30% $ $ 769,770.48 $1,101,155.38 Total $ appeal questions arising requires said all 47-2403 D.C.Code findings seprate express findings of fact [sic] make fact shall make law, render and shall and conclusions [now “The board and conclusions law. writing.” thereon its decision and determine Court] the Tax shall hear *11 engaged corporation of B case a not in APPENDIX carrying any with- on trade or business Regulations Involved and Statutes District, by it received and Income The District of Columbia subject corporation from a which is 345, 1947, Franchise Tax Act of 61 Stat. subchapter to taxation this shall under seq., 258, (Sec. et ch. 47-1571 as amended not be considered income from 1961), regulations D.C.Code and the the sources within the District for promulgated forth in are set thereunder purposes subchapter. this pertinent part as follows: measure of franchise shall be the portion the of the net income of Corporations VII. Title Tax on corporation unincorporated and busi- income defined. Taxable 47-1571. any § fairly as is ness attributable engaged title, trade or carried on or purposes and business the For of this in the required con- within District and such other unless otherwise net income text, mean as is derived from sources income” “taxable words further, within from District: Provided income derived amount net That income derived from sale of sources within the District within tangible personal corpo- property a to 47- of sections 47-1580 345, unincorporated ration 1947, or 16, business (July 1580b. Stat. carrying engaging 1.) 258, VII, on or or I, trade ch. Art. title § business within the defined District as Imposition and rate 47-1571a. § in sections 47-1551 to 47-1551c shall tax. not be considered income from carrying privilege on or For the pur- sources within the District for engaging any trade or business poses subchapter, of this with the ex- receiving within District and of ception of income from sale to the income from sources the Dis- within United to be excluded from States hereby trict, each there is levied for gross provided income as in section year a tax at the rate of (July 1947, 47-1557a (b) per upon centum the taxable income 349.) 61 Stat. every corporation, whether domestic foreign (except expressly or those Appor- 47-1580a. Allocation and § 47-1554). exempt (July section under tionment. —The entire net income of I, ch. Art. 61 Stat. any corporation unincorporated or VII, 2.) title § business, any from derived trade or engaged business or Purpose Subchapter Title X. and wholly shall, within the Apportionment Allocation purposes article, of this be deemed Purpose subchapter. 47-1580. District, to be from sources shall, along purpose subchapter It is the with other income this District, impose (1) upon from an income tax sources within the be every allocated If entire net District. the trade income of resident every (2) any corporation trust, or business of or un- resident estate and every incorporated corporation or a carried on franchise tax business is engaged unincorporated both within and without business engaging District, privilege carrying the net there- income derived or any shall, purposes from or of this business within receiving article, from deemed to be income sources within and is derived from sources with- without however, Provided, trict. the net cor- District: Where That, any corporation, poration unincorporated or business the case from derived sources within and amount received as dividends both District, subject portion taxa- there- which is subchapter, and, article tion under to tax under this regulation 10.2-(e). or Sec. Income Attributed determined shall be regulations prescribed Com- Columbia. If the trade is author- Assessor carried on or missioners. wholly formulas employ within the the entire ized formula regula- regulation net provided income from trade or shall *12 be prescribed the Commissioners allocated the If tions to District. the opinion, which, partly in his trade or is article business under this carried applied properly partly District, within and in order to should be the any portion cor- income of of determine the net income from net poration unincorporated apportioned business trade or or business to be to under this article. District shall be determined as to tax follows: Income, Income Gross Title III. Net (2) any income for taxable Where Therefrom, Exclusions and year is derived from done or work and Deductions performed, portion services thereof (a). Al- Deductions apportioned 47-1557b to be to District shall following shall deductions lowed. —The percentage be of such of the total such gross in com- income aggregate' charges be allowed from as income of puting net income: for or costs done of such work performed services (14) Allocation deductions. —In of aggregate charges bears to the of such corporations and unincor- the case for or costs of services work done and pro- businesses, porated deductions performed by taxpayer everywhere. al- section shall be for in vided The Assessor is authorized to use only the extent to lowed aggregate “charges” aggre- or the arising income are connected with gate respect of “costs” with to work the District within sources within from performed done if in his services to 47- sections 47-1580 opinion equitable produce it will an 1580b; apportionment proper and the apportionment. to be deductions allocation of the by the determined shall allowed be (8) any year Income for formulas Assessor formula or rents, interest, dividends, from derived provided for in section 47-1580a. royalties, of real income from the sale property, of in- from the sale income of Columbia Income and tangible personal property, income Regulations Franchise Tax from other the sale assets than capital and or income from a business Sec. 10.2. Measure Tax. —Alloca- Apportionment. tion those hereinbefore sources than The measure to, por- fairly referred which is attributable franchise tax shall corpora- or carried on tion of net or business income of the engaged District; unincorporated tion or within as is business fairly within derived from sources is attributable trade or District, engaged allocated to the shall be business on or If or here- within District. the trade defined Act, referred carried on or and such other income net within and without the Dis- derived both from sources within the trict, portion from portion of the income trict. income of such net apportioned “fairly to be which is trade or business attributable” percentage such trade or shall be such other net as the income the total such income as is derived sources charges aggregate of income or such the District shall be determined apportionment done or costs of done work work allocation and there- aggregate 10.2-(b), prescribed the District bears in Sections charges 10.2-(c), 10.2-(d). income or work done or costs work done taxpayer everywhere. The Assessor aggregate use authorized to aggregate

“income” “charges” aggregate “costs” respect income in his to such if

opinion produce equitable it will an

apportionment. 10.2-(d). Deduc-

See. Allowable may

tions. be taken No deductions applicable not sub-

which are exempt ject to tax or which is *13 part the Act. Where apportioned applicable

the deductions thereto 3(a) of

allowable as such under Sec. apportioned

Title III on the shall be apportion-

same basis that used in ing income, unless, opinion such Assessor, deductions should part. In

be allocated in whole or in corporations the case of unincor- porated businesses, pro- deductions 3(a) vided for in Title III shall Sec. only be allowable to the extent fairly are connected

attributable trade or business carried on or in within

District and from District sources. CO., Inc.,

RED LION BROADCASTING al., Petitioners, et

FEDERAL COMMUNICATIONS COM-

MISSION and United States of America, Respondents.

No. 19938. Appeals

United States Court of Columbia Circuit.

Argued Sept.

Decided June