vided the names and locations of businesses displaced and relocated and the names and addresses of owners plus other related information. This information was used by IRS in obtaining business and employment income data for owners of businesses displaced. The IRS searched the Baltimore District Office files to determine the income characteristics of the businesses displaced. Income data were compiled by IRS to show the earnings of each business. The data on earnings were reported by IRS to the subcommittee staff in a manner that protected the identity of business owners. The staff analyzed and evaluated this data. It developed the tabulations and computations plus the explanations presented below. The results of the analyses were discussed with IRS personnel to assure reasonableness of the conclusions.

GENERAL CHARACTERISTICS OF BUSINESSES DISPLACED

3

A total of 211 businesses were displaced from the project during the approximate period 1959 through 1960. Most were proprietorships. The tenure classification of these establishments was:

In most instances, a business occupied only one establishment or property in the project. However, there were exceptions.

In a few instances, two or more similar establishments or properties were operated by the same party. For example, one operator had several roominghouses, while another had two service stations. Where two or more similar establishments were operated by one party, the establishments were tabulated as one business.

There also were a few instances in which one party operated two different establishments. For example, one party operated a laundromat and a roominghouse, while another party operated a poolroom and a barbershop. Where two or more dissimilar establishments were operated by one party, the establishments were tabulated as separate businesses.

The businesses varied substantially in character. They ranged from small service and retail establishments relying upon neighborhood trade, to service, wholesale and light manufacturing establishments relying upon Metropolitan Washington, D.C., and outlying areas.

Most of the proprietorships served neighborhood customers, relying upon them as their main source of trade. These proprietorships included restaurants, retail grocery stores, roominghouses, liquor stores, hardware stores, drugstores, laundry and drycleaning establishments, barbershops, beauty parlors, and other service establishments for such purposes as carryout foods, shoe repair, auto service and repair,

"Businesses Displaced From Southwest Urban Renewal Areas, 1959 and 1960." Provided by the District of Columbia Redevelopment Land Agency, Apr. 1, 1964.

watch repair, parking, dental services, retail storage, and entertainment. In most instances, these businesses were operated by the proprietor with no employees or with one or two employees. A few of the proprietorships did not depend upon neighborhood trade. These included wholesale establishments for meat, eggs, fish, produce, prepared foods, wood and coal, plus seafood restaurants, and printing and scrap metal businesses.

Most of the corporations relied upon a trade area extending well beyond the neighborhood. These corporations included wholesale establishments for fruit, produce, meats, dairy products, poultry, eggs, fish or seafood, beer, cigars, dogfood, lumber, and plumbing supplies. They also included establishments for meat brokers, furniture storage and warehouse services, woodwork and sign manufacturing, printing, light engineering, radiator repair, and waste materials.

The incorporated businesses that relied upon neighborhood customers as their main source of trade were similar to the proprietorships relying upon neighborhood trade. The only major exception was that there were no incorporated rooming establishments.

Most of the partnerships relied upon a trade area extending well beyond the neighborhood. Business activities were similar to those of corporations. A few relied upon the immediate neighborhood as their main source of trade.

Owners of businesses displaced generally rented the real property occupied by the business. Three-fourths of the businesses displaced occupied rented property. The numerical and percentage breakdown for owned and rented property was:

Tenants frequently do not receive any of the compensation paid for real property.

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Of the 211 businesses displaced from the project during the period 1959-60, a total of 83 businesses discontinued upon being displaced. The numerical and percentage breakdown of discontinued businesses

For all businesses displaced, the percentage of discontinued businesses was 39 percent. However, these group figures mask the fact that only approximately 9 percent of the corporations discontinued, while approximately 62 percent of all proprietorships discontinued at the time of displacement. Not only is the percentage of discontinued proprietorships high; the proprietorships constituted the lion's share of all discontinued businesses.

The proprietors who rented the property they occupied were hardest hit by the displacement. As the data below show, 68 percent of those proprietorships discontinued upon being displaced.

The proprietors who owned the property they occupied fared only slightly better. Approximately 47 percent discontinued upon being displaced.

A total of 128 out of 211 businesses 'relocated upon being displaced. The numerical and percentage breakdown of relocated businesses

Approximately 61 percent of all businesses relocated at the time of displacement. Most corporations and partnerships relocated. However, only about 38 percent of all proprietorships relocated upon being displaced from the project area.

INCOME CHARACTERISTICS OF BUSINESSES DISPLACED

Income data on displaced businesses were provided by the Internal Revenue Service. Time and fund limitations did not permit a Service-wide record search for those businesses filing returns in districts other than the Baltimore District. Consequently, income data.

See footnote 3.

Attachments to letter to the Honorable Clifford Davis, from William H. Smith, Assistant Commissioner, Planning and Research, Internal Revenue Service, U.S. Treasury Department, Washington, D.C., June 12, 1964.

were available only on 127 of the businesses displaced. In some instances, the data available were partial, suggesting that for one or more years the business owner may have filed his return in another district. Business income and employment income, which comprise total earnings, were computed for the owners of businesses for the years from 1956 until displacement, for the year of displacement, and for the years from displacement until 1962.

Earnings before displacement

Earnings data for years prior to displacement were available for 74 proprietorships. A 3-year average of the combined business earnings (net business profit or loss) and employment earnings (wages or salaries of the principal owner or owners other than wage or salary payments made by the business) usually could be computed.

Approximately three-fourths of the proprietorships for which information was available had average net earnings before displacement of less than $10,000, and half had earnings of less than $5,000. Usually these proprietors had no part-time income from employment elsewhere. The earnings of proprietorships were as follows:

Corporations displaced generally had business earnings that exceeded $10,000. For example, data available on earnings before displacement for 31 corporations showed that approximately three-fourths had average earnings of $10,000 or more. The earnings of these corporations were as follows:

Earnings for several other corporations were not evaluated by IRS because the portion of their business in the project area was a very small portion of their total activities. If these were included, they would increase the proportion of corporations in the $50,000 or more category and would accentuate the earnings difference between corporations and proprietorships.

The data available on earnings of partnerships were too fragmentary to be of value. They are not used in this and subsequent evaluations of earnings.

7 In the case of corporations, "business earnings" is taxable income before net operating loss deductions and special deductions, such as for dividends received from other taxable corporations, plus compensation of officers.

Income during year of displacement

The majority of proprietorships showed decreased earnings during the year of displacement compared to their average earnings for years prior to displacement. Data available for 66 proprietorships show that approximately 60 percent had reduced earnings in the year of displacement and the majority of these experienced decreases well in excess of $1,000.

By contrast, approximately 45 percent of the corporations showed decreased earnings during the year of displacement compared to their average earnings for years prior to displacement. In most instances, these losses were in excess of $5,000. Just under one-half of the corporations showed increases in the year of displacement.