Repository: UIHistories Project: Board of Trustees Minutes - 1940 [PAGE 155]

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152

BOARD OF TRUSTEES

[November 29

(26) T h e desire to pipe joint on which

CONTRACT WITH BERRY ASPHALT COMPANY Berry Asphalt Company has advised the University that it does not renew the license, which expires on November 15, 1938, to use the filler discovered by Francis R. Grant, a former member of the staff, the University holds a patent.

This report was received for record.

FEDERAL TAXATION OF UNIVERSITY SALARIES (27) Following a recent decision of the United States Supreme Court, involving the liability for Federal Income T a x of the salary of a state employee in New York, Federal courts in Illinois and Minnesota applied the rule of that case in holding taxable the salaries paid under the Smith-Lever and other Congressional Acts to members of the faculties of the Universities of Illinois and Minnesota. T h e court in one of these cases ruled that "the University of Minnesota is an instrumentality of the State, that it is engaged in the performance of an essential governmental function, and that the plaintiff, in the performance of his duties as Assistant Professor . . . . was performing an essential governmental function of the S t a t e ; and yet, under the principles above stated, the tax on the plaintiff's salary was valid because it did not impose an actual, substantial burden on the government of the State of Minnesota." Shortly thereafter, a United States Board of T a x Appeals decision relied on the same case to hold taxable the 1934 salary of an employee of the Workmen's Compensation Bureau of the New Jersey Department of Labor. T h e effect of these decisions is to create a grave threat of twelve years of retroactive taxation of the salaries of public employees, including public school teachers and librarians, in spite of a previous law which has held them exempt until now. T h e Natioual Association of State Universities has brought this situation to the attention of member institutions, soliciting support of a movement to secure Federal legislation preventing the United States Treasury Department from making the rule of the New York case retroactive. This movement also includes the matter of the taxability of securities of States and of State agencies. T h e problem is of serious importance to all employees of the State of Illinois, including members of the University staff, for if the rule should be made retroactive it will be very difficult for many of them to pay the large accumulated tax with interest.

On motion of Mr. Cleary, the following resolution was adopted. The Board of Trustees of the University of Illinois is deeply concerned over the fact that recent Federal court decisions holding that the salaries of State employees are taxable under the Federal income tax have been relied upon to hold taxable State salaries paid in past years, notwithstanding a previous law which has held them exempt until now. The effect of such decisions and such interpretations thus constitutes a grave threat of retroactive taxation of salaries of public employees. In view of this grave threat the Board of Trustees respectfully solicits the cooperation of the Governor and Attorney General, the United States Senator and Representatives in Congress of Illinois in urging Federal regulations against such retroactive taxation, or, if that fails, Congressional legislation against it.

HEARING OF DELEGATION OF PHARMACISTS (28) A request for a hearing of Mr. Otto Pelikan and a delegation of members of the faculty and alumni of the College of Pharmacy, on the needs of the College.

This hearing was granted, and Mr. Pelikan, Professor Clark, and five associates were introduced. Mr. Pelikan made a statement con-