Investments in and advances to affiliates and separately operated divisions and other investments as at Dec. 31, 1953-Continued Helicopter Air Service, Inc.: Affiliates: Aeronautical Radio, Inc... Lake Central Airlines, Inc.: Affiliates: Aeronautical Radio, Inc. Airline Clearing House, Inc.. Total. Los Angeles Airways, Inc.: Affiliates: Aeronautical Radio, Inc.. Mohawk Airlines, Inc.: Affiliates: Air Cargo, Inc. Aeronautical Radio, Inc.. Airlines Clearing House, Inc.. Total. New York Airways, Inc.: Affiliates: Air Cargo, Inc.. Extent of control (percent) 22 Investments in and advances to affiliates and separately operated divisions and other investments as at Dec. 31, 1953-Continued Investments in and advances to affiliates and separately operated divisions and other investments as at Dec. 31, 1953-Continued Trans-Pacific Airlines, Ltd.: Affiliates: Aeronautical Radio, Inc. Total... Pan American-Grace Airways, Inc.: Affiliates: Extent of control (percent) Sociedad Neuvo Aeropuerto de Cali, Ltda.. Total.. Compania de Aviacion "Faucett" S. A. capital Miscellaneous investments.. Aeronautical Radio of Siam, Ltd. Airlines Clearing House, Inc. Airlines Terminal Corp.. Central Air Terminal, Inc. Cia de Aviacion Pan American, Argentina, S. A.. East Side Airlines Terminal Corp.. Grandes Hoteis, S. A. Intercontinental Hotels Corp International Aerradio (Carribbean) Ltd. Pan American Airports Corp. Radio Aeronautica de Cuba, S. A. Sociedade Aeroportos Pan American de Macau, Ltda., quotos.. Uraba, Medellin and Central Airways, Inc. Aeropuertos Unidos, S. A. Del Sud Inversora, SRL. Investments in and advances to affiliates and separately operated divisions and other investments as at Dec. 31, 1953—Continued 票 Source: CAB Form 41 reports filed by the carriers with CAB. FUNDS FOR PARTIALLY PAYING INCOME TAX Senator KILGORE. And as you later develop those figures, could you furnish that to the committee? Mr. GURNEY. We will. Senator KILGORE. All right, fine. Now, Mr. Chairman-now you can go ahead and finish what you started. Mr. GURNEY. Your next question, Senator Kilgore: Would it be possible for you to give an estimate of the total amount of money contained in the $73 million which is asked for in the 1955 appropriation bill, to appropriate for the benefit of the airlines, what part would represent money to be given to them or any of them for the purpose of partially paying income tax? Mr. Roth? Mr. ROTH. We did not actually prepare the estimate of subsidy for the individual carriers for 1955, broken down between the tax allowance, the return on investment and the so-called break-even need. So that the figure is not directly available. However, we have developed an approximation which we assume will serve your purpose, developed as follows: For the calendar year 1953, the accrued Federal income taxes by subsidized carriers, with respect to subsidized operations, amounted to 16.18 percent of the estimated subsidy that they accrued in that calendar year. We have therefore taken 16.18 percent of the $80,252,000 subsidy that we believe will be the actual subsidy requirement for fiscal 1955, and that would be $13 million of Federal income taxes included in the figure. I believe that is as good a figure as we could work up at this time although it is probably a little bit on the low side. Senator KILGORE. To get that clear, when you say "subsidy," do you mean outright subsidy of $73 million? You do not include in that any of the so-called 5 trunk lines which you admit, in at least 1 case, has a slight subsidy in the airmail rate. You are not including the matter of where a subsidy might be included in the airmail rate? Mr. ROTH. We are not including any service payments whatsoever. Senator KILGORE. No service payments so that if that is included in the operating expense of the company in computing airmail rates and it is covered that way, it would not be included? Mr. ROTH. That is correct. Senator KILGORE. All right. Now, go ahead, please. Mr. ROTH. That would complete my answer, Senator Kilgore, unless you want additional details behind that. Mr. GURNEY. May I ask Mr. Roth, and I think it is correct, we are paying now on the basis of actual income taxes, so if the carriers did receive 13 million, then they would actually pay back to Uncle Sam, the Internal Revenue Bureau, the same 13 million? Mr. ROTH. Yes, sir. COMPUTING TAX ALLOWANCES Senator KILGORE. Now, again referring to the CAB order, E-4561, adopted by the Board August 25, 1950, where on page 2 occurs the following statement: In computing such tax allowances in previous cases, however, the basis used has in many cases resulted in making provision for a greater amount of tax than would ever be paid by the carrier. Do you find any evidence of that? Mr. ROTH. The statement you just read is unquestionably a correct statement. It is a quotation from the Board's statement of tentative findings. STEPS TO RECOUP OVERPAYMENTS Senator KILGORE. What steps have been taken or what steps can and will the CAB take to recoup the extra money which is given to airlines for the purpose of enabling them to pay tax, part of which apparently they kept since they paid it into the Federal Treasury on orders given them by the Civil Aeronautics Board? Mr. ROTH. The decision to which you refer was in 1950. That was only a tentative decision and is not yet final. That is all part of the Trans-Atlantic Mail Rate case. However, in all decisions since that time the Board has gone on the actual tax policy. Actually, the Board's decision was in a different docket number, involving Western Airlines, Order E-5467, dated June 26, 1951, in which the Board fully spelled out and discussed the actual tax policy. There were many carriers whose subsidy rates were open, going back over a number of years. For example, the TWA and Pan American across the Atlantic, going back to early 1946. When the Board in 1950 and 1951 decided that it was more appropriate to figure taxes on this so-called actual tax basis, right from the tax return itself, the Board made that change of policy retroactive in the case of all carriers whose mail rates were still open. Just to read you a partial list of the cases involving mail rates for earlier years, where we were using the actual tax policy, rather than constructed, TWA and Pan American across the Atlantic go back to 1946, Braniff international rate from 1948 forward, when they first started operating, Northwest operations from 1946 internationally, and from 1948 domestically, United's mail rate for the Honolulu service from 1947 forward, National's mail rate from 1947 through 1951, that is still open, and so on. So you had many cases that were open, and by applying the |