Drafts of the Iron Cliffs Company

Drafts of the Iron Cliffs Company
By Ron Lesher

We turn this month to some relatively plentiful, but nonetheless interesting material. I suppose we should call this material from the Iron Cliffs Mining Company a study in fiscal history.

The four documents we will examine are all written in the form of drafts, involving three parties: the payee, the superintendent of the Iron Cliffs Company located on the upper peninsula of Michigan (Negaunee), and the treasurer of the Iron Cliffs Company located in New York City. In brief the superintendent is ordering the treasurer to pay the amount on the draft. These were negotiable drafts and were payable when presented at a bank, which with these particular drafts turned out to be the Third National Bank in New York, but more on this later.

The first draft (Figure 1) comes from what I will call the first printing of the drafts and it has a 2¢ stamp imprinted in the center (Scott RN-B1). The draft, dated November 17, 1868, features a delightful mining vignette at the left and is payable “at sight.” The tax on sight drafts, regardless of the amount that was to be paid, was indeed 2¢.

A fairly common business practice in the Civil War era was to write drafts to be paid at a later date; the term for such instruments is a time draft. In a very real sense this combines the features of a check and a promissory note and in fact were taxed at the same rate as a promissory note. Before August 1, 1864 there was a complex rate structure that involved both the monetary amount and the time period. That structure need not concern us here, since the next instrument was written after August, 1864 and the simplifi ed tax rate was 5¢ per $100 or fraction thereof regardless of the time period.

The draft in Figure 2 was payable 30 days after the date (May 18, 1870) in the amount of $497.27. So the tax due is 25¢. Even though a two cent stamp had already been imprinted on the draft, the superintendent applied a 25¢ adhesive to the instrument and wrote his initials, E. B. I., Superintendent with the date cancelling the stamp. But in fact only an additional 23¢ in adhesive stamps needed to have been applied. The superintendent ignored the imprinted stamp and overpaid the tax due by two cents.

Every example of the time drafts with added adhesives of the Iron Cliffs Company from this period that I have seen ignores the imprinted stamp, in essence overpaying the tax due.

On October 1, 1870 the tax on time drafts under $100 was eliminated and two years later the tax on all promissory notes and domestic time drafts was eliminated entirely.

How well these changes were understood by the Iron Cliffs Company can be seen from the next two instruments that will be discussed. Draft number 3124 (Figure 3) was written on October 7, 1870, seven days after the elimination of the tax on time drafts and promissory notes. The draft does not have an imprinted stamp nor has an adhesive stamp been added. Quite properly no adhesive stamps have been added since no tax is due.

Two weeks later the superintendent wrote draft number 1347 (Figure 4), but this time the instrument is payable at sight. One might think that this draft should be liable to the tax on sight drafts and bank checks. In fact when I acquired this item recently, I thought that I had obtained a draft that should have an adhesive on it. But as I sat down to write this article, I went to Michael Mahler’s defi nitive A Catalog of United States Revenue-Stamped Documents of the Civil War Era by Type and Tax Rate, published and distributed by the American Revenue Association. The Iron Cliffs Company’s superintendent had written a draft directing the treasurer to pay; but instruments payable on institutions other than banks or trust companies were not subject to the tax on bank checks and drafts. This was a very interesting arrangement to avoid paying the the tax, in spite of the handstamp on the draft reading “Payable at Third National Bank” with this directive dated and signed by the bank’s treasurer.

I am curious whether Internal Revenue would have agreed with the company. Did not the directive of the treasurer convert this instrument into a draft payable on a bank?

If you collect fiscal paper of the Civil War era you need to own a copy of the Mahler work. This fine work unlocks all the intricacies of the laws and helps to explain why fiscal paper of the period was stamped in the way it was.