carrier public land transportation service along regular routes provided the 60percent passenger fare revenue test set forth in section 6421 (b) (2) is met and subject to the limitation set forth in section 6421 (d) (2). Section 208 also amends the 1954 Code by adding section 6421, subsection (b) of which allows a refund of 1 cent per gallon for gasoline used by local transit systems subject to certain limitations. It is obvious from the above that the legislatures recognized the needs of local transit systems and intended them to be excluded from the additional gasoline, diesel, and special fuel taxes as well as the new highway vehicle use tax. A local transit system is clearly distinguishable from an intercity transportation system by well-defined rules of the Interstate Commerce Commission and is recognized in this bill which adds subparagraph (c) to section 4483 of the 1954 Code which reads in part as follows: "*** the use of any bus which is of the transit type (rather than of the intercity type) * Nevertheless, section 6421 (b) (1) refers to the use of gasoline “in vehicles while engaged in furnishing scheduled common-carrier public-passenger land transportation service along regular routes," a definition so broad that it also includes intercity type operations. The 60-percent passenger fare revenue test limitation provided in section 6421 (b) (2) must be applied to the total passenger fare revenue described in paragraph (1). It is obvious from the above that a person or company operating both a local transit system and an intercity passenger system, completely separable one from the other, could be denied the benefits allowable to local transit systems for that part of his operations which constitute the clearly defined local transit system. We believe that this is the result of the use of all-inclusive descriptive phrases rather than direct definition of legislative intent and therefore suggest that section 6421 (b) (1) of the 1954 Code be amended to read as follows: "(1) Allowance.-If gasoline is used during any calendar quarter in vehicles while engaged in furnishing local transit scheduled common carrier public passenger land transportation service along regular routes," etc. The same amendment should be made to the similar definition contained in section 6416 (b) (2) (L) of the 1954 Code. AMERICAN HOSPITAL ASSOCIATION, Hon. AIME J. FORAND, WASHINGTON SERVICE BUREAU, Washington, D. C., December 27, 1956. Chairman, Subcommittee on Excise Taxes, House of Representatives, Washington, D. C. DEAR CHAIRMAN FORAND: The American Hospital Association wishes to express its strong approval of the decision of the House Ways and Means Committee in authorizing and directing the appointment of the Subcommittee on Excise Taxes to make a study of the excise-tax structure of the Federal Government and administrative problems. Continuing study of the Internal Revenue Code, a law basic to the economic growth and financial stability of the Nation and directly affecting each of us, is not only desirable, but a necessity. All of our citizens have just cause to appreciate the thoughtful consideration that the members of this subcommittee and its staff are devoting to this study. In the report dated April 20, 1956, which your subcommittee made to the House Ways and Means Committee, general recommendation No. 5, page 10, is of great interest to the nonprofit community hospitals of this Nation: "Exemptions from manufacturers, retailers, transportation, and communication excise taxes should be provided for elementary and secondary schools and colleges and universities operated by nonprofit organizations." We are in full accord with the reason behind this recommendation as expressed on page 70 of the report: "The subcommittee believes that exemptions from manufacturers' and retail excises, and those on transportation and communication for purchases by public schools while no similar exemptions are available to nonprofit private schools represents discriminatory treatment." *** This reasoning holds special significance for the nonprofit hospitals of this Nation. We believe in its soundness and can locically contend that the imposition of these excises on nonprofit hospitals constitutes discriminatory treatment. It is of extreme importance to the vitality and continuing growth of our voluntary nonprofit hospital system that, as fully as possible, an approximate balance as to tax liability and tax exemption should be maintained between tax-supported and nonprofit hospitals. The economic plight which the majority of our nonprofit hospitals face is most serious. One of the greatest social needs in the country today is to provide the means and assistance to help these publicservice institutions increase their resources in order to enable them to meet the growing demands made upon them. Today, the purchases of nonprofit hos pitals are subject to retailers, manufacturers, transportation, and communications excise taxes, while those of public hospitals are not. In the final analysis it is sick patients who bear the costs of these taxes. Why then for this purpose distinguish between nonprofit and public hospitals when an inevitable result is to increase the costs of hospitalized illness, thus burdening sick patients at a time when they most need financial help? The exemption which nonprofit hospitals now have from various Federal taxes rests primarily on the principle that they are rendering public service. These hospitals, as you know, stand at the hub of our whole system of care for the seriously ill, and they carry a large burden of care for those unable to pay. It has been said with truth that if these private hospitals did not exist, their functions would have to be performed by government. Congress, indeed, has recognized their essentiality, not only through exemption from various taxes, but even more forcefully by appropriating under a continuing program, in the past decade, well over three-quarters of a billion dollars for the construction of hospitals and making these funds available to nonprofit institutions on precisely the same terms as to public hospitals. We believe that the parallel between public institutions on the one hand and nonprofit institutions on the other is closer in the case of hospitals than it is in the case of schools; we believe that this is true in fact, and even more clearly true in terms of established congressional policy. The existing excisetax discrimination against nonprofit institutions seems to us difficult to justify as to schools and even more so in the case of nonprofit hospitals. In addition to their primary function of caring for the sick, hospitals play a major role in the educational process itself and might well on this score alone be accorded the same treatment as schools. They are the centers where graduate medical education is carried out through internships and residencies. Moreover, they play a significant role in the postgraduate education of physicians. In fact, hospitals are becoming an increasingly important factor in undergraduate medical education as medical schools require their students to take a portion of their clinical studies in hospitals. The education of our professional nurses is centered primarily in hospitals. Much of the basic and clinical research which has made possible tremendous advances in medical science is conducted in hospitals. In the past year, the Federal Government spent over $100 million to finance research on the major killing diseases, most of which research is being done in hospitals. Hospitals also train and educate practical nurses, technicians, and other auxiliary health personnel so necessary and so needed in caring for sick patients. To the degree that excises are imposed on nonprofit hospitals they impair the ability of such hospitals to perform these public services. Under the Federal income-tax law, contributions to nonprofit hospitals and schools give equal entitlement to donors to the extra 10-percent deduction for charitable contributions. General recommendation No. 5 of your subcommittee previously referred to, would, as to exemption from certain Federal excises, treat nonprofit private hospitals differently than nonprofit private schools. Such a result cannot be supported in logic nor is it one that gives due and equal recognition to the public-service character of hospitals. The American Hospital Association, therefore, strongly urges that nonprofit hospitals be exempted from retailers, manufacturers, communication, and transportation excise taxes. It would be appreciated if you would include this letter in the record of your subcommittee hearings. Sincerely yours, KENNETH WILLIAMSON, STATEMENT OF LAURENCE R. LUNDEN, TREASURER AND COMPTROLLER, UNIVERSITY OF MINNESOTA, REPRESENTING THE AMERICAN COUNCIL ON EDUCATION EXEMPTION OF EXCISE TAXES FOR ALL NONPROFIT EDUCATIONAL INSTITUTIONS I am Laurence R. Lunden, treasurer and comptroller of the University of Minnesota. I am here as chairman and representative of the committee on taxation and fiscal reporting to the Federal Government of the American Council on Education. The American Council on Education is an organization whose membership is made up of educational institutions and organizations. It now includes 142 national and regional educational associations with interests in education at all levels, and 973 institutions comprising universities, colleges, and junior colleges, as well as State departments of education, public and private school systems, secondary schools, public libraries, and educational divisions of business and industrial concerns. The Committee on Taxation and Fiscal Reporting to the Federal Government has gone on record in favor of the exemption of excise taxes for all nonprofit educational institutions. We have noted with satisfaction that H. R. 12298, the omnibus excise tax bill introduced last July by Congressman Forand, provides for the exemption of manufacturers', retail, transportation, and communications excise taxes for elementary and secondary schools and colleges and universities operated by nonprofit organizations. Our committee has spent considerable time discussing these taxes and feels strongly that the provisions in H. R. 12298 concerning these exemptions are both desirable and sound. While our committee heartily supports the exemption of excise taxes for all nonprofit educational institutions, I should like to address myself at this time to the committee's consideration of the subject as it relates to higher education. The committee has discussed the discriminatory nature of these taxes. Colleges and universities, both privately and publicly supported, have traditionally been exempt from taxes, yet, in this instance, excise taxes are levied against the privately supported institutions but not against the publicly supported institutions. Almost half of all the students enrolled in institutions of higher education are enrolled in privately supported colleges and universities. These schools already are generally hard pressed to meet their operating expenses in fulfilling this important public responsibility. With the prospects of enrollment doubling between the years 1952 and 1970, it is all the more urgent that privately supported colleges be given every sound means of assistance and encouragement to aid them in meeting their part of the increasing demand for higher education. The savings to privately supported institutions by the exemption from excise taxes has been estimated at $3 million a year. This amount, although not large, would be of significant assistance to most of these institutions. It is the judgment of our committee that privately supported colleges and universities should enjoy the same tax-exemption privileges as publicly supported colleges and universities. The committee believes this to be in the public interest and hopes that you will lend your support to this legislation. A list of members of the council's committee on taxation and fiscal reporting to the Federal Government is attached. LIST OF MEMBERS OF COMMITTEE ON TAXATION AND FISCAL REPORTING TO THE FEDERAL GOVERNMENT Laurence R. Lunden, treasurer and comptroller, University of Minnesota, Minneapolis, Minn., chairman. Raymond B. Allen, chancellor, University of California, Los Angeles, Calif. J. R. Anthony, comptroller, Georgia Institute of Technology, Atlanta, Ga. Howard R. Bowen, president, Grinnell College, Grinnell, Iowa. R. B. Draughon, president, Alabama Polytechnic Institute, Auburn, Ala. C. O. Emmerich, business manager, Emory University, Emory University, Ga. Laurence M. Gould, president, Carleton College, Northfield, Minn. J. Parker Hall, treasurer, University of Chicago, Chicago, Ill. G. E. Harwood, comptroller, University of Notre Dame, Notre Dame, Ind. D. I. McFadden, controller, Stanford University, Stanford, Calif. Carl M. McFarland, president, Montana State University, Bozeman, Mont. John F. Meck, vice president and treasurer, Dartmouth College, Hanover, N. H. STATEMENT BY EDWIN H. WILSON, EXECUTIVE DIRECTOR, IN BEHALF OF THE AMERICAN HUMANIST ASSOCIATION AND ITS COMMITTEE ON CHURCH AND STATE, YELLOW SPRINGS, OHIO The American Humanist Association, a national organization of philosophical and religious liberals, is interested in several sections of H. R. 12298, the proposed bill now before this committee, under which present excise-tax practices of the Federal Government as they apply to private educational institutions would be modified. Our interest is in the larger questions of financial policy as they affect church and state; we are not competent to discuss detail tax mechanisms, nor do we venture to express any convictions concerning them. We are not lobbyists, and we do not ordinarily participate in any legislative processes. Our interest in these proposals is not partisan or selfish. Our organization, which includes many of the country's most distinguished educators, believes that both private and public educational institutions have a place in our society and that they should both be encouraged. The names of our officers symbolize this conviction. Our president is Herman J. Muller, Nobel prize geneticist and professor of zoology at the University of Indiana; our committee on church and state (which I represent in submitting this satement) is headed by George B. Axtelle, professor of education at New York University. We believe that the new exemptions from excise taxes on goods and services handled by private educational institutions, proposed in sections , are not justified. They are essentially special favors which go beyond our present policy of reasonable generosity. The proposed exemptions from excise taxes on such items as gasoline, telephone calls, and school buses are primarily favors granted to a church, America's largest church which happens to be having a large private school system of its own. We are not concerned so much with the amount of money involved-in these days of astronomical budgets it is not large-but we are concerned with the principle of the concessions. Any church, of course, has the right to organize its own school system. This is a fundamental right in our free society. But when a school serving one sect asks for substantial financial favors from the general taxpayer, that is another matter. Then its smallest request must be weighed in the light of its total policy. Then the question arises: Why should the members of other sects and the 70 million people in this country who do not belong to any church be compelled to contribute to a sect which they do not necessarily endorse? Our Constitution answers this question by prohibiting the "establishment" of religion. There are many ways to establish a religion indirectly, and one of them is to grant financial concessions in taxation to a school system which is an organic part of a church. It is true that the concessions in this bill are ostensibly made to all private educational institutions which have bona fide classes, as described in sections 137, 4057, and 4221, of the Internal Revenue Code. Nominally no special concession is made to any church. But this appearance is deceptive. It is estimated that about half of the total benefits of $3 million would accrue to the parochial schools of one church, the Roman Catholic Church. The published discussion of the proposed concession, when originally made by the chairman of this committee in the last session of Congress, indicates that the real motive behind the changes was the desire to reward the Catholic schools. These schools were the only schools mentioned by the chairman when he made the original suggestion. He prefaced his appeal for the changes with a plea that we should give the parochial schools "the same exemptions *** that we are giving to the public schools." What disturbs us in this proposed measure is that any financial concession to a sectarian school system is likely to be seized upon as a precedent for more concessions. In fact, this very proposed concession in excise taxes has already been hailed in some religious newspapers as proof that the Government is he ginning to recognize the justice of the claims of sectarian schools for public support. We regard the proposed concessions as a symbol, the wrong kind of symbol of a tendency pointing in the wrong direction. The United States should hold firmly to its historic policy: No public revenue for sectarian schools. We do not want to follow in the pathway of so many European nations which have divided their children into denominational segments in schools having sectarian labels, all supported by the taxpayers. Our Supreme Court has drawn the line against general expenditures for sectarian education, and we believe that the spirit of its decisions in this field should be adhered to in tax administration. We think it particularly inappropriate at this moment in history to reward segregated schools in any way, schools which are segregated by creed or denomination. The public schools of our country, open to children of all creeds without discrimination, are in desperate need of Federal tax grants. If financial sacrifices are to be made by the Federal Government in behalf of education, it would seem to be logical to make those sacrifices for the public schools rather than for private schools. Last year the Roman Catholic bishops of the United States issued an official appeal for public support of their denominational schools, and declared that: "The students of these schools have the right to benefit from those measures, grants, or aids which are manifestly designed for the health, safety, and welfare of American youth, irrespective of the school attended." Statements made in the Catholic press simultaneously made it clear that the Catholic bishops had no intention of limiting their concept of "welfare" to bus transportation, textbooks, and school lunches. They have repeatedly indicated that "distributive justice" demands full financial support for their sectarian schools out of the Public Treasury. This is what they have achieved in the Catholic countries of Europe and in many parts of Canada and Latin America. This is the worldwide policy of the Roman Catholic Church. The drive of the Catholic bishops for full public support from public funds goes back to 1948, when they issued their famous attack on the Supreme Court's decision in the McCollum case. Then, in a pronouncement called The Christian in Action, they implied that the Supreme Court's interpretation of the first amendment, and our policy of the separation of church and state, was "doctrinaire secularism," and they advocated a theory of the Constitution under which it would be perfectly legal for the Federal Government to support all sectarian schools completely out of tax dollars. Last year, in reply to the demand of the Catholic bishops for "welfare" funds, our committee on church and state said: "To grant this claim for special privilege would discriminate against every non-Catholic taxpayer." Concerning the present proposed concessions we would go even further. To grant such claims would discriminate against all taxpayers who disbelieve in sectarian schools— and there are many millions in our society. We believe that we represent many of these silent millions in protesting against any tendency to widen the scope of financial favors to sectarian enterprise. Hon. AIME J. FORAND, COLUMBIA BROADCASTING SYSTEM, INC., Chairman, Subcommittee on Excise Tax, Technical, and Administrative DEAR MR. CHAIRMAN: Columbia Broadcasting System, Inc., wishes to record its vigorous support of the proposal to eliminate the excise tax on all-channel (VHF-UHF) black-and-white and color television receivers. CBS believes that such elimination is a basic and necessary step toward achieveing the sound development of UHF television broadcasting. And use of the UHF portion of the spectrum, along with VHF, is in turn necessary for full utilization of the television spectrum and for the effectuation of a wholly free system of nationwide competitive television broadcasting. CBS approaches this problem solely from the point of view of the broadcaster. It manufactures no television receivers and hence would derive no tax savings from the elimination of the excise tax. The sole interest of CBS, as a broadcaster, is to encourage the wider use and sounder growth of UHF. As is well known, a number of factors have retarded the development of UHF. Some of these factors lie in the technical realm which only time and the ingenuity of engineers can solve. But the economic factor can be substantially and immediately solved by the elimination of the excise tax on all-channel receivers. The price differential between VHF-only and all-channel receivers has been an important deterrent to the growth of UHF because the consumer has been |