"Payable At . . ."

Many a shareholder last week happily cashing a July 1 dividend check was in reality cashing a dividend draft. A check is an order for a bank to pay a certain sum of money. A draft is a corporation's order upon itself, designating the place of payment. The payment can be at the corporation's own office or, more often, at a bank which is in reality acting as the corporation's agent. Because of this differentiation corporations with large payrolls and many shareholders have found a neat legal loophole through the new 2-c- check tax.

No shrewd lawyer discovered the loophole to his own great glee. When the Senate was framing the tax law, Pennsylvania's Senator Reed explained how it could be evaded and the method of evasion, with proper samples, was read into the Congressional Record. On June 4 the House also was told about it. The evasion was left open in order to aid big check-users, including especially the dairy companies. An average dairy writes over a million checks a year, many of them for less than $1. On a 50-c- check the 2-c- tax would be a prohibitive 4%.

Last week members of the New York Clearing House made the evasion available to all corporations by saying they would handle small dividend and payroll drafts as they do checks. Thus, when last week shareholders of National Dairy Products Corp. received their dividend drafts, they could cash them as they would ordinary checks. The drafts were payable at Bankers Trust Co. As agent, Bankers Trust would meet the drafts, add them up at the close of every day. Then National Dairy would give Bankers Trust one check for the day's total and upon that check it would pay to the U. S. its lawful 2-c-.

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