LAUNDRIES CANNOT OPERATE WITHOUT SUPPLIES AND REPAIR PARTS

Although the laundry industry's chief production requirement is its labor, it does consume annually, at prevailing market quotations, approximately $75,000,000 of essential supplies consisting in the main of fuel, gasoline, soap, detergents, paper products, repair parts, and cotton goods. Any interruption in the supply of these products to the laundry industry must, of necessity, result in suspension or curtailment of laundry service, depending upon how serious the reduction of these supplies or repair parts might become. The laundry industry, in the interest of the public welfare, therefore, petitions that it be officially declared an essential industry for the duration of the national emergency, and that if and when any priorities affecting its needed commodities are declared, it be placed upon such priority list of essential industries.

We would point out that such a recognition was given on April 6, 1918, by the then Priorities Board which functioned during the days of the First World War. By the resolution creating preference list No. 1, the Priorities Board, with Edwin B. Parker as chairman, saw to it that the laundry industry received sufficient fuel and other supplies to continue its daily operations without interruption to the public and the Nation. It declared that the laundry industry should be placed on the "Preference list of industries, whose operation as a war measure is of exceptional importance." Because the ramifications of the laundry industry's service to the public have vastly increased since 1918, it is, more than ever in this present national emergency, essential in the maintenance of public health and morale.

Obviously, if the laundry industry of the Nation is to continue to serve the public, it must receive operating supplies such as fuel, gasoline, soap, detergents, paper products, cotton goods, repair parts, etc. Without these everyday operating supplies, the laundries of America can no longer service not only the public but also, as previously suggested, the hospitals, orphanages, hotels, restaurants, and other public institutions that rely on laundries in order that they in turn may operate.

There, furthermore, is one definite probability that must be considered in the study of the current problem, and that is the factor of economy. It seems obvious that laundry units especially designed for the purpose are in a better position to operate more economically in the matter of supplies than could be the case with many small widely scattered units. As an example of this point, the subject of laundry-soap consumption may well be considered. In hard-water areas, thousands, if not millions, of pounds of soap are wasted annually in home consumption with the use of hard water. Laundries in these self-same areas operate zeolite softening units that remove the hardening constituents of a water supply, thereby saving enormously in soap consumption per pound of soiled goods.

It likewise should be kept in mind that the same equipment and employees that are used to process hotel, hospital, and similar work often are used to launder work from private homes. One cannot be separated from the other. This point is so well recognized in England that the laundry industry is permitted to operate continuously, in spite of the far more serious commodity situation that England faces than does the United States.

Another factor of equal importance is the matter of power. It must be quite apparent that laundries will use far less power when washing and ironing in bulk than would be the case if this work were distributed in millions of homes (even if such a thing were possible), using an almost unlimited amount of electrical power in the home for washing machines, electric irons, etc. As a matter of record, practically every laundry generates its own power, excess steam being used to heat hot water. Thus, laundries relieve the power load on public service stations in areas in which a shortage of power might be felt.

CONCLUSIONS

The following conclusions are recognized facts:

1. Laundries are in the first line of defense againts the spread of infectious disease and, therefore, of great value in maintaining public health and national morale.

2. Laundries are essential for the daily living and operation of millions of homes and public institutions, including hospitals, sanitariums, orphanages, steamships, hotels, restaurants, and other similar services.

3. Laundries are providing regular employment to 250,000 people, of whom 70 percent are women.

4. Laundries are even more essential in the modern-day operations of the United States than was the case in 1918, when the industry was declared by the Priorities Board of the day to be an industry of "exceptional importance."

Under the circumstances, the American Institute of Laundering, the national trade association of the laundry industry, respectfully urges that serious consideration be given to the matter of the continuous furnishing of sufficient laundry supplies, gasoline, and fuel to the laundries of the Nation to enable them to render a service which, while providing employment for 250,000 people, results in a service of vital importance to the Nation.

In order that this whole question of declaring the laundry industry an essential one during the national emergency may be brought to final conclusion, we respectfully request an opportunity to be heard before the proper official or officials at an early date. The American Institute of Laundering has appointed a small committee to handle this entire matter, and simply awaits your request for a conference in Washington. Be assured that it is our earnest desire to cooperate wholeheartedly with our National Government.

NOTE.-General statistical information. The American Institute of Laundering was established in 1883. Its membership processes approximately 75 percent of all laundry work done in the United States.

The CHAIRMAN. Are there any questions, gentlemen, that you wish to ask Mr. Skinner? If not, Mr. Skinner, thank you for your appearance.

Mr. SKINNER. You are welcome, Senator. I thank the committee for this opportunity.

The CHAIRMAN. Do you wish to make a statement in regard to the matter, Mr. Matthews?

Mr. MATTHEWS. I am here just to support Mr. Skinner.

Mr. SKINNER. Mr. Matthews is here simply to support me in a technical way, he being more familiar with the laundry machinery manufacturing business.

Senator DANAHER. Mr. Chairman, one question.

The CHAIRMAN. Yes.

Senator DANAHER. As to whether or not, during the period of the last war, or just subsequent thereto, your industry was taxed on the manufacture of washing machines?

Mr. MATTHEWS. I could not answer that.

Mr. SKINNER. You mean whether there was a tax on washing machines?

Senator DANAHER. Yes.

Mr. SKINNER. I would say "no." I am not 100 percent sure of that statement, however.

Mr. MATTHEWS. There is one thing I might add. The figure given of the $4,500,000 on washing machines is based on the fact that they are built out of monel and nonferrous metals. Well, we cannot get them, so we will have to build wood machines, and wood machines will sell at 40 percent, approximately, less than this figure.

The CHAIRMAN. I do not know whether my recollection is correct, but that is one of the reasons why the defense committee recommended this type, so as to prevent competition with necessary defense purposes.

Mr. MATTHEWS. It is impossible for us to get it. We are out of it and we cannot get it so we will have to go to wood, and when we go to wood, it will be 40 percent less than this, so you see you will get nowhere near the amount of taxes that you expect to get.

Mr. SKINNER. It seems Mr. Stettinius has taken care of that. He has put priority on it so we cannot get but very little monel metal; and very little steel.

The CHAIRMAN. Thank you very much.

(The following letter was received from Mr. Matthews and ordered inserted in the record:)

THE AMERICAN LAUNDRY MACHINERY Co.,
Cincinnati, Ohio, August 15, 1941.

The Honorable WALTER F. GEORGE,
Acting Chairman, United States Senate Committee on Finance,

Washington, D. C.

MY DEAR SENATOR: On Monday, August 11, 1941, I had the honor of appearing with Mr. R. B. Skinner and a group of men representing the American Institute of Laundering (a national association representing 75 percent of all work done in laundries in this country), also the Laundry and Dry Cleaners Machinery Manufacturers Association, and the Laundry and Cleaners Allied Trades Association, each of which represents 95 percent of the volume in their respective fields. The purpose of our appearance was to protest against the proposed 10-percent tax to be placed on washing machines of the type used in commercial laundries. This tax is referred to on page 75, paragraph 8, subsection 3406 of section 552, and reads as follows:

"Washing machines of the kind used in commercial laundries, 10 percent. No tax shall be imposed under this paragraph on washing machines of the household type."

You made the statement during this hearing that one of the reasons this tax was placed was due to the necessity of restricting the use of monel and nickel in the manufacture of these machines. It was pointed out it is now impossible to secure any of these materials, even though we do not have a tax at the present time.

It was expected that a revenue of $1,100,000 would be realized on the basis of a 10-percent tax on the sale of commercial washing machines. It was brought out this was in error. It was liberally estimated that during the year of 1940 not over $4,500,000 worth of commercial washing machines were manufactured in this country. In the year 1941 the amount of sales probably will be increased considerably due to the fact the Government purchased a large number of this type machine for cantonment laundries. However, the Government is not subject to tax; therefore, the revenue would be materially reduced and it would be questionable whether during the year of 1941 even $350,000 would be realized if a tax of 10 percent were imposed on the sale of all commercial washing machines.

We are faced with the necessity of substituting wood in the construction of, commercial washing machines due to the fact that it is impossible for us to secure noncorrosive metals. In event we do manufacture machines of wood, the selling price would be reduced at least 40 percent over the price of those machines manufactured of noncorrosive metals, which would mean a large reduction in the estimated amount of revenue to be derived from such a tax.

Furthermore, this tax is discriminatory due to the fact, as brought out in the brief by Mr. Skinner, it taxes one type of processing machine, and many other types of processing machines bear no tax whatsoever.

The household washing machine industry, which is a direct competitor of the commercial washing machine, manufactured in the year 1940, $104,000,000 worth of household washing machines. A 1 percent tax on this class of machine would bring forth as much money as it was expected to receive from the proposed 10 percent tax on commercial washing machines.

In view of the fact that this proposed tax is so discriminatory we are asking you to support us in our plea to remove this proposed 10 percent tax on commercial washing machines from the new tax bill.

Respectfully submitted.

THE AMERICAN LAUNDRY MACHINERY Co., By A. MATTHEWS,

Assistant to President, General Sales Manager.

The CHAIRMAN. Mr. Hugh M. Bennett.

STATEMENT OF HUGH M. BENNETT, COLUMBUS, OHIO, REPRESENTING THE SUPERINTENDENT OF INSURANCE OF OHIO

The CHAIRMAN. Mr. Bennett, would you please give the reporter your name and address, for whom you appear here, if you appear for someone other than yourself?

Mr. BENNETT. Mr. Chairman, my name is Hugh M. Bennett and I appear on behalf of the Superintendent of Insurance of Ohio. I have a prepared statement which it is my hope you will receive in due course and permit to be placed into the record. I would rather not read the statement, I would rather speak informally to the members of the committee.

The CHAIRMAN. You may put your statement in, Mr. Bennett. We would rather approve that course, if you are ready to explain what you have in mind without reading the statement. You may give it to the reporter and it will be inserted in the record, or such parts of it as you wish.

Mr. BENNETT. The American Insurance Union is one of the old fraternal benefit societies that have rapidly passed out of existence. It had more than 20,000 members and its claims are widely scattered throughout the United States, and in fact the company was, at one time authorized to do business in 28 different States.

It became necessary to reorganize almost its sole asset, the largest office building in the city of Columbus. It is a 46-story building. For the purpose of that reorganization they used the method that all you lawyers on the committee understand, and that is, the equity foreclosure method to transfer title from the predecessor.

Senator HERRING. Some of the rest of us understand it, too, some of us who are not lawyers.

Mr. BENNETT. If you had that misfortune, that really calls for sympathy.

Of course, the old American Insurance Union issued a block of bonds to build the building back in 1927. A committee was directed to be formed by the court in Ohio to solicit the deposit of these bonds. A plan of reorganization was approved by two courts, the Federal court of Columbus as well as the Ohio Court of Appeals. As a result the plan was consummated finally by having a sale made at an upset price fixed by the Federal judge, and the sale transferred the title to the taxpayer corporation in this case. The sale was made for $1,650,000, which I submit has no bearing whatever upon the value of the property. The property cost in 1927, exclusive of the land, $8,000,000 approximately. I submit naturally that that is not its value today, nor was it its value on July 1, 1937, when the transfer of title was supposed to have taken place but which was not finally consummated, due to court involvement, until December 16, 1938.

Now, I am not down here, gentlemen, pleading the case of an individual taxpayer. I merely go into these preliminary details for the purpose of laying before you an illustrative case which applies to hundreds of corporations in this country.

The Treasury may say to you, as they said to me when I thought I might get relief without an amendment to the law, that this was an isolated transaction. There are over 15 cases today, either in the

circuit courts of appeals or the United States Supreme Court involving analogous angles, which has led to a great amount of litigation, a great amount of expense, and the Government has not received its tax. The solution is not administrative, the solution is not judicial, the solution is legislative.

The Treasury said that the solution might lay with the administration of the law. The reorganization sections are so complex that Mr. Stam himself will tell you that perhaps they are not easily understood, and I know that for the professions, either in the accountancy profession or legal profession, they are not understood at all.

Now, the immediate problem which brings me before the committee is because in last March the Congress of the United States repealed section 722 of the Excess Profits Tax Act of 1940. Section 722 vested in the Commissioner absolute discretion to give relief where there were abnormalities in invested capital. Today we do not have that privilege. I have perfect faith in the Commissioner. Some groups did not want to vest that power in the Commissioner and therefore they sought to have the section stricken out. The result is that today there is no relief where a corporation has an abnormality in invested capital, yet the excess-profits tax credit is based upon the invested capital.

I say that the revenue law now being considered by this committee, by the Senate, and by the entire Congress eventually, should provide that when a judicial sale occurs and there is a transfer of title to a new corporation, the transferee corporation should receive the same basis as the transferor whether it comes within the technical definition of tax-free reorganization or not. Why do I take that position? The Treasury very properly protected the Government in July last year by sponsoring before the Congress, and the Congress passed it as an amendment to the Chandler Act, an amendment to the bankruptcy law by which not to exceed the fair value of the property transferred through a bankruptcy reorganization could be used as a basis for the transferee, that is, the purchaser at the bankruptcy sale. But I submit, and all of you lawyers know that all corporations cannot use the bankruptcy law. Municipal corporations, insurance companies, building and loan companies, and banks cannot reorganize through bankruptcy, never have been able to do so, yet there is a gross discrimination against those corporations because they cannot seek that method of reorganization. The American Insurance Union was an insurance corporation under the insurance laws of Ohio. It could not reorganize this large office building, 46 stories in height, except in one manner, that is, through an equitable foreclosure suit.

The Treasury's purpose in having the Chandler Act amended last summer was to prevent, so it has been explained to me by the Treasury, a group of bidders who had the defaulted bonds getting together and pooling their interests through deposit with a committee, which is a usual method, or any other manner, whereby the interests are pooled, and getting an upset price fixed that was away in excess of the market value of the property at that time and using it as a base.

Let us see what might have been done. The bondholders in this case, instead of bidding $1,650,000 for this building, we have enough