UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY THE FEDERAL INCOME LAW ANNOTATED WITH COMPLETE CONSTITU- TIONAL AND HISTORICAL REFERENCES AND DIGEST OF AUTHORITIES BY HENRY CROFUT WHITE, A. M., LL.B. OF THE NEW YORK BAB THE BANKS LAW PUBLISHING CO. NEW YORK 1913 COPYRIGHT, 1913, BT THE BANKS LAW PUBLISHING COMPANY T CHAPTER I PAGE Historical 1 Acts in foreign countries other than England and Colonies . . 2 American colonial and state acts 4 British colonial acts 2 Earliest income tax acts 1 English acts 1 Federal acts 6 Southern Confederacy, 1861 6 CHAPTER II Constitutionality 9 Constitutional power to tax limitations 9 Direct tax constitutional amendment 15 Double taxation 12 Due process, etc 13 Ex post facto statutes 15 Impairment of contracts 10 Income tax, a direct tax 14 Payment of tax at the source 10 Questions as to present act 18 Retroactive and alien taxation 15 Taxation of aliens 20 Uniformity of exemption 11 Uniformity of taxation 11 CHAPTER III Construction 24 Construction of act of 1913 31 Construction of particular acts 30 External evidence of legislative intent 26 General rules 24 Internal evidence of legislative intent 26 Rules specifically applicable to tax acts 27 iii 756015 IV TABLE OF CONTENTS CHAPTER IV PAGE The act of October, 1913, annotated 32 CHAPTER V Revised statutes relating to the administration of the internal revenue law . . .120 APPENDIX Federal income tax acts 169 Tables of dates, limitations and penalties 302 Index.. . 307 TABLE OF CASES Refereaces are to pages A PAGE Adams v. United States, 1 Ct. Cl. 306 163 Adams v. Woods, 2 Cranch, 336, 2 L. Ed. 297 25 Aiken v. Trustees, 1896, W. N. (Eng.), Part 1-120 58 Alkan v. Bean, 8 Biss. 83, Fed. Gas. 202, 23 I. R. R. 351 135 Allegany v. Federal, etc., 179 Pa. St. 424, 36 A. 320 39 American Brush & Broom Co. v. Addickes, 19 Misc. 36, 42 N. Y. Supp. 871 85 American Contractor Pub. Co. v. Bagge, 91 N. Y. Supp. 73 83 American Loan & Trust Co. v. Eastern & Western R. R. Co., 37 Fed. 242 84 American Net & Twine Co. v. Worthington, 141 U. S. 468, 35 L. Ed. 821, 12 S. Ct. 55 28 Ames v. Hager, 13 Sawy. 473, 1 L. R. A. 377, 36 Fed. 129 161 Amy v. Smith, 1 Litt. (Ky.) 326 41 Andrews v. Mayor, L. J. R. N. S. 61 Q. B. D. 715 91 Anglo, etc. Works v. Bell, 38 Solic. J. 325 100 Archer, Re, 9 Ben. 427, Fed. Cas. 506, 24 I. R. R. 110. . 124, 125, 131 Arizona Copper Co. v. Surveyor, 1896 N. W. (Eng.) Part 1, 93 61 Armour v. Roberts, 151 Fed. 844 J 157, 164 Arnold . Davis, 8 R. I. 341 44 Arnson v. Murphy, 109 U. S. 238, 27 L. Ed. 920, 3 S. Ct. 184 159, 164, 166 Attorney General v. Black, L. R. 6 Ex. 78, aff'd 308 93 Attorney General v. Coote, 4 Price, 183 44, 45 Atwood . Weems, 99 U. S. 183, 25 L. Ed. 471 134, 137, 138 Averill v. Smith, 17 Wall. 82, 21 L. Ed. 613 162 B Bailey v. Bull, 5 Barb. 158 45 Bailey v. Railroad Co., 106 U. S. 109, 27 L. Ed. 81 35, 39, 151 Bailey v. Railroad Co., 22 Wall. 604, 22 L. Ed. 840 35, 78, 159 Bank of Memphis v. Tennessee, 161 U. S. 134, 40 L. Ed. 645 28 Barnes v. The Railroads, 17 Wall. 294, 21 L. Ed. 544 21 V VI TABLE OF CASES \References are to pages PAGE Barnett v. United States, 16 Ct. Cl. 515 156 Barron v. Burke, 82 111. App. 116 44 Bartlett v. The Mayor, etc., 7 N. Y. Super. Ct. 44 44, 45 Beard v. Union and American Pub. Co., 71 Ala. 60 86 Becker, Re, 1 Cin. Law Bull. 165, Fed. Gas. 1208, 22 I. R. R. 266, 3 Cent. L. J. 495, 3 N. Y. Week. Dig. 60 14 Bell City Mfg. Co. v. Frizzell, 11 Idaho, 1, 81 P. 58 85 Bell's Gap R. R. Co. v. Pennsylvania, 134 U. S. 232, 33 L. Ed. 892 . 11 Bennett v. Hunter, 9 Wall. 326, 19 L. Ed. 672 134, 138 Bernier v. Bernier, 147 U. S. 242, 37 L. Ed. 152, 13 S. Ct. 244 25 Bertha Zinc & Mineral Co. . Clute, 7 Misc. 123, 57 St. Rep. 70, 27 N. Y. Supp. 342 84 Blacklock v. United States, 208 U. S. 75, 52 L. Ed. 396 136, 146 Blake v. National City Bank, 23 Wall. 307, 23 L. Ed. 119 26, 31 Boardman & Conklin v. House, 18 Wend. 512 44 Boardman v. S. S. McClure Co., 123 Fed. 614 82 Boehm v. United States, 21 Ct. Cl. 290 159, 160 Boyd v. United States, 116 U. S. 616, 29 L. Ed. 746, 6 S. Ct. 524 14, 123 Braun . Sauerwein, 10 Wall. 218, 19 L. Ed. 895 164 Brewer v. Blougher, 14 Pet. 178, 10 L. Ed. 408 24 Brisco v. Bank of the Commonwealth, 11 Pet. 257-323, 9 L. Ed. 709-735 93 Brisenden v. Chamberlain, 53 Fed. 307-8 44 Broughton and Plas Power Coal Co. v. Kirkpatrick, L. R., 14 Q. B. D. 491 61, 63 Brown, Re, Fed. Gas. 1977, 3 I. R. R. 134 26, 29, 125 Brown v. Ashbough, 40 How. Pr. 226 44 Brown v. Burt, 81 L. J. K. B. 17 45 Brown v. Goodwin, 75 N. Y. 409 135, 140, 1 13 Brown, Administratrix, v. United States, 113 U. S. 568, 28 L. Ed. 1079, 5 S. Ct. 648, 20 Ct. Cl. 534 27 Brown Seed Co. v. Richardson, 53 Misc. 517, 103 N. Y. Supp. 243 . . 84 Bruner v. Kansas Moline Plow Co., 168 Fed. 218 83 Burgess v. Salmon, 97 U. S. 381, 24 L. Ed. 1104 18 Burnley Co. v. Aiken (1896) W. N. (Eng.) Part I, 115 61 Burrows v. Miller, 4 How. Pr. 349 44 Burrows Co. v. Caplin, 127 App. Div. 317, 111 N. Y. Supp. 498.. 85 Burton v. Burton, 40 N. Y. (1 Keys) 359 41 Butterworth v. United States, 112 U. S. 50, 28 L. Ed. 656, 5 S. Ct. 25... . 162 Vll G PAGE Cabot v. City of Boston, 66 Mass. 52 44, 45 Caesar v. Capell, 83 Fed. 403 80 Caha . United States, 152 U. S. 211, 38 L. Ed. 415, 14 S. Ct. 513 30 Calder . Bull, 3 Dall. 386-389, 1 L. Ed. 648-650 16 Campbell v. Gordon, 6 Cranch, 176, 3 L. Ed. 190 41 Campbell v. United States, 107 U. S. 407, 27 L. Ed. 592, 2 S. Ct. 579, 18 Ct. Cl. 762 30 Cardinel v. Smith, Deady, 197, Fed. Gas. 2395 25 Carlisle v. United States, 16 Wall. 147, 21 L. Ed. 426, 8 Ct. Cl. 153 26,29 Carpenter v. Pennsylvania, 17 How. (U. S.) 456, 15 L. Ed. 127. ... 16 Gary v. Curtis, 3 How. (U. S.) 236, 11 L. Ed. 576 164 Gary v. The Savings Union, 22 Wall. 38, 22 L. Ed. 779 36 Central National Bank v. United States, 137 U. S. 355, 34 L. Ed. 703, 11 S. Ct. 126 35, 79, 103, 151 Chadwick, Re, 1 Low. 439, Fed. Cas. 2570, 11 I. R. R. 126. . .123, 125 Chaine v. Wilson, 16 How. Pr. 552, 8 Abb. Pr. 78, 1 Bosw. 673 44 Chandos v. Inland Revenue Commissioners, 20 L. J. Ex. 269. ... 28 Cheatham v. United States, 92 U. S. 85, 23 L. Ed. 561 162 Chesebrough v. United States, 192 U. S. 253, 48 L. Ed. 432, 24 S. Ct. 262 165 Chesna Sulphur Co. v. Nicholson, 1 Ex. D. 437, 35 L. T. R. 275. ... 45 Chicago B. & Q. R. R. Co. v. Page, 1 Biss. 461, Fed. Cas. 2668 39 Chicago, M. & St. P. R. Co. v. United States, 127 U. S. 406, 32 L. Ed. 180, 8 S. Ct. 1194 25 Christian v. American Freehold, L. & M. Co., 89 Ala. 198, 7 So. 427 ' 84 Christie Street Com. Co. v. United States, 136 Fed. 326, 69 C. C. A. 464 161, 166 Church v. Rowell, 49 Me. 367 45, 160 Cincinnati Brewing Co. v. Bettman, 102 Fed. 16 161 City v. Board of Assessors, 52 La. Ann. 223, 26 So. 872 88 City of Allegheny v. Federal Street & Pleasant Valley R. R. Co., 179 Pa. St. 424, 36 A. 320 39 City of London Cont. Corp. v. Stiles, 4 Times L. R. 51 62, 63 City of New Orleans v. Davidson, 30 La. Ann. 554 12 City of Philadelphia v. Collector, 5 Wall. 720, 18 L. Ed. 614. .161, 164 City of Philadelphia v. Pennsylvania Hospital, 134 Pa. St. 171, 19 A. 490 90 Clark*. Likens, 26 N. J. Law207 44 Clay v. Swope, 38 Fed. 396 133 viii TABLE OP CASES References are to pages PAGE Clinkenbeard v. United States, 21 Wall. 65, 22 L. Ed. 477 150 Cliquot's Champagne . United States, 3 Wall. 1 14, 18 L. Ed. 1 16 .. 28 Coblens . Abel, 1 Woolw. 293, Fed. Cas. 2926 159, 162 Cohens v. Virginia, 6 Wheat. 264, 5 L. Ed. 257 161 Collector v. Day, 11 Wall. 113, 20 L. Ed. 122 10, 12, 53 Collector v. Hubbard, 12 Wall. 1-8, 20 L. Ed. 272 35, 161, 164 Collins v. New York PostrGraduate Medical School, 59 App. Div. 63; 69 N. Y. Supp. 106 88, 89 Colorado Iron Works t>. Sierra Grande M. Co., 15 Col. 499, 25 P. 325 86 Coltness Iron Co. . Black, L. R. 6 A. C. 315 61 Colton Press Co. v. Collector, 1 Woods, 296, Fed. Cas. 3271 .... 155, 160 Comitis v. Parkerson, 56 Fed. 556, 22 L. R. A. 148 42 Commercial Wood & Cement Co. v. Northampton etc. Co., 41 Misc. 242, 84 N.Y. Supp. 38 83 Commissioners v. Antill, 1902, A. C. 422 62, 63 Commissioners of Sinking Fund v. Buckner, 48 Fed. 533 38, 161, 162, 164 Commissioners v. Lovell & Christmas Co., 1908, A. C. 46 81 Commissioners . Pemsel, L. R. 1891, A. C. 531 88, 163 Commonwealth v. American Bell Telephone Co., 129 Pa. St. 217, 18 A. 122 83 Commonwealth v. Central Transportation Co., 145 Pa. St. 89, 22 A. 209 38 Commonwealth v. Delaware D. C. Co., 123 Pa. St. 602, 16 A. 584, 2 L. R. A. 798 12 Commonwealth v. Erie & Pittsburg R. R. Co., 74 Pa. St. 98.. .37, 151 Commonwealth v. Germania Brewing Co., 145 Pa. St. 83, 22 A. 240 11 Commonwealth v. Gloucester Ferry Co., 98 Pa. St. 105, rev'd 114 U. S. 196, 29 L. Ed. 158 81 Commonwealth v. Long, 1 Pa. Co. Ct. Rep. 190 82 Commonwealth . Ocean Oil Co., 59 Pa. St. 61 34 Commonwealth v. Pittsburgh Ft. W. & C. Ry. Co., 74 Pa. St. 83 37 Commonwealth . Sharon Coal Co., 164 Pa. St. 284, 30 A. 127 11 Commonwealth v. Standard Oil Co., 101 Pa. St. 119 85 Commonwealth v. United States, 37 Ct. Cl. 536 159 Conant v. Kinney, 162 Fed. 580 162, 165 Concord Ry. Corp. v. Topliff, Fed. Cas. 3093 31 Cone v. Tuscaloosa Mfg. Co., 76 Fed. 891 82 Cooper v. Cadwallader, 42 Sc. L. R. 117, 5 Tax Cas. 101 45 TABLE OF CASES IX References are to pages PAGE Cooper Mfg. Co. v. Ferguson, 113 U. S. 727, 28 L. Ed. 1137, 5 S. Ct. 739 85 Cork v. Fry, (1896) W. N. (Eng.), Part 1, 128-131 37 Corning & Co. v. United States, 34 Ct. Cl. 271-278 156 Cox v. Allen, 91 la. 462, 59 N. W. 335 44 Craft v. Schafer, 153 Fed. 175 127 Crawford v. Eidman, 139 Fed. 992 163 Crawford t;. Wilson, 4 Barb. 504 44 Crocker . Muller, 40 Misc. 685, 83 N. Y. Supp. 189 83 Cummer Lumber Co. v. Associated Mfg. Mut. Fire Ins. Corp., 67 App. Div. 151, 73 N. Y. Supp. 668; aff'd 173 N. Y. 633; 6 N. E. 1106 83, 84 Cummings v. Merchants' National Bank, 101 U. S. 153, 25 L. Ed. 903 10 Cunningham v. Mound, 2 Ga. 171 44 Curtis v. Leavitt, 17 Barb. 309 16 D Bandelet v. Smith, 18 Wall. 642, 21 L. Ed. 758 131 Davidson v. New Orleans, 96 U. S. 97, 21 L. Ed. 616 13 Davies v. Arthur, 96 U. S. 148, 24 L. Ed. 758 163 Davis v. Hall, 1 Nott. & M. 292 41 Dawson, Ex parte, 3 Bradf. 130 41 Day v. Buffington, 3 Cliff. 376, Fed. Cas. 3675, 11 I. R. R. 205, 5 Am. L. Rev. 176, 2 Leg. Gaz. 249 32 DeBary v. Carter, 102 Fed. 130, 42 C. C. A. 209 160 DeBary v. Dunne, 162 Fed. 961 159, 160 DeBary v. Souer, 101 Fed. 425, 41 C. C. A. 417. 28 DeBeers Consolidated Mines Ltd. v. Howe, L. R. (1906) A. C. 455. 81 Decatur v. Paulding, 14 Pet. 497, 10 L. Ed. 559 163 Delaware R. R. Co., t>. Prettyman, 17 I. II. R. 99, Fed. Cas. 3767. 157 DeLima v. Bidwell, 182 U. S. 1-178, 45 L. Ed. 1041-1049, 21 S. Ct. 743 164 Denn v. Diamond, 10 E. C. L. 320 25 Diamond Glue Co. v. United States Glue Co., 187 U. S. 611, 47 L. Ed. 328, 23 S. Ct. 206 81 Didier v. Patterson, 93 Va. 534, 25 S. E. 661 45 Dillon v. Corporation of Haverfordwest, L. J. R (1891) N. S., 60 Q.B. 477, L. R. (1891), 1 Q. B. D. 575 93 Dinsmore v. Southern Express Co., 92 Fed. 714, rev'd 102 Fed. 794, 42 C. C. A. 623 161 Doe v. Snaith, 21 E. C. L. 253 . . . . , 25 Doll, Re, 11 I. R. R. 36, 7 Phila. 595, Fed. Cas. 3968 14 X TABLE OF CASES References are to pages PAGE Doll . Evans, 9 Phila. 364, Fed. Gas. 3969, 4 Leg. Gaz. 113, l I. R. R. 143, 29 Leg. Int. 116, 11 Am. L. Reg. (N. S.) 315 13 Dollar Sav. B'k v. United States, 19 Wall. 227, 22 L. Ed. 80. . 30, 90, 150 Dorscheimer v. United States, 7 Wall. 166-173, 19 L. Ed. 187. ... 157 Downes v. Bidwell, 182 U. S. 248, 45 L. Ed. 1088, 21 S. Ct. 770. ... 161 Dugan v. United States, 34 Ct. Cl. 458 159 Dunlap v. United States, 173 U. S. 65, 43 L. Ed. 619, 19 S. Ct. 319. . 26 Dunnegan v. United States, 17 Ct. Cl. 247 156, 162, 164 Dupasseur v. United States, 19 Ct. Cl. 1 155 Duronsseau v. United States, 6 Cranch, 307, 3 L. Ed. 232 25 E Edye v. Robertson, Collector, 112 U. S. 580, 28 L. Ed. 798, 5 S. Ct. 247 11 Eidman v. Martinez, 184 U. S. 578, 46 L. Ed. 697, 22 S. Ct. 515 23, 25, 29 Eley's Appeal, 2 Kulp (Pa.) 467, 103 Pa. 300 37 Eliot v. Freeman, 220 U.S. 178, 55 L.Ed. 424 89 Eliott v. Swartwout, 10 Pet. 137, 9 L. Ed. 373 165 Elk v. Wilkins, 112 U. S. 94, 28 L. Ed. 643, 5 S. Ct. 41 42 Elliott v. Purlin & 0. Co., 71 Kan. 665, 81 P. 500 43 Emery, Bird Thayer Realty Co. v. United States, 198 Fed. 242 80, 111, 164 Enston, Re, 113 N. Y. 174, 3 L. R. A. 464, 21 N. E. 87 28 Equitable Trust Company v. Seldon, Fed. Gas. 4508, afif'd, 94 U. S. 419, 24 L. Ed. 249 24, 28 Erhardt v. Schroeder, 155 U. S. 124, 39 L. Ed. 94 29 Erichson v. Last, L. R., 8 Q. B. D. 414 81 Erie Railway Co. v. Pennsylvania, 21 Wall. 492, 22 L. Ed. 595 .... 28 Erskine v. Hohnbach, 14 Wall. 613, 20 L. Ed. 745 132, 159, 164 Exchange Bank Tax Cases, 21 Fed. 99, aff'd, 122 U. S. 154, 30 L. Ed. 1088, 7 S. Ct. 1244 17 F Fairbanks v. United States, 181 U. S. 283, 45 L. Ed. 862 27 Farmer v. Scottish North American Trust Co., L. R. (1912y A. C. 118 59 Farrior v. New England Mortgage Security Co., 88 Ala. 275, 7 So. 200 86 Fidelity Ins. T. & S. D. Co. v. McClain, 178 U. S. 113, 44 L. Ed. 998 12 First National Bank v. Kentucky, 9 Wall. 353, 19 L. Ed. 701. .. 10 TABLE OF CASES XI References are to pages PAGE First National Bank of Greencastle v. United States, 15 Ct. Cl. 225 156, 164 Flemister v. Flemister, 83 Ga. 79, 9 S. E. 724 143 Fletcher v. Peck, 6 Cranch, 87-137, 3 L. Ed. 162-178 16 Flint v. Stone-Tracey Co., 220 U. S. 107, 55 L. Ed. 389 12, 13, 14 Florer v. Sheridan, 127 Ind. 28, 36 N. E. 365, 23 L. R. A. 278 51 Florsheim Bros. D. G. Co. v. Lester, 60 Ark. 120, 29 S. W. 34, 27 L. R. A. 505 86 Foley v. Fletcher, 3 H. & N. 769 38 Folsom v. United States, 21 Fed. 37 17 Forbes v. Scottish Institute (1896) W. N. (Eng.), Part 1-122 38 Forder v. Handyside, L. R. 1 Ex. D. 233 56 Fox v. Stafford, 90 N. C. 296 143 Francis v. Slack, 4 Cliff. 186, Fed. Cas. 5041, 16 1. R. R. 134 165 Frayser v. Russell, 3 Hughes, 227, Fed. Cas. 5067 157 Fresno Home Packing Co. v. Turle & S., 60 Misc. 79, 111 N. Y. Supp. 839 85 Frost & Dickenson v. Brisbin, 19 Wend. 11 * 44 G Gagert>.Prout,480hioSt.89,26N.E.1013 18, 19 Galm v. United States, 39 Ct. Cl. 55 30 Gates I. Co. v. Cohen, 7 Col. App. 341, 43 P. 667 86 Gehr v. Mont Alto Iron Co., 174 Pa. St. 430, 34 A. 638 80 Georgia v. Atkins, 35 Ga. 315, 1 Abb. (U. S.) 22, Fed. Cas. 5350, 82 R. R. 113, 1 Am. L. T. (U. S.) 105 25 German Savings Bank v. Archbold, 15 Blatch. 398, Fed. Cas. 5364, rev'd, 104 U. S. 708, 26 L. Ed. 901, 24 1. R. R. 413 127 Gilchrist v. Helena Hot Springs and Smelter R. Co., 47 Fed. 593. . . 85 Gillett v. Colquhoun, 33 Weekly Reporter 258 63 Ginn v. New England M. S. Co., 92 Ala. 135, 8 So. 388 82 Goerz . Bell, 2 K. B. 136, 90 L. T. R. 675 45 Gotchcus v. Matheson, 61 N. Y. 420 16 Grant, Collector v. N. H. & H. R. Co., 9 Blatch. S. 43, 93 U. S. 225 100, 102 Gray v. Darlington, 15 Wall. 63, 21 L. Ed. 45 38 Grcsham Life Ins. Soc. v. Styles, L. R. 24 Q. B. D. 500 34 H Haddam Granite Co. v, Brooklyn Heights R. R. Co., 131 App. Div. 685, 116 N.Y. Supp. 96 86 Xll TABLE OF CASES References are to pages PAGE Haffin v. Mason, 15 Wall. 671, 21 L. Ed. 196 138, 164 Hahn v. United States, 107 U. S. 402, 27 L. Ed. 527, 2 S. Ct. 494. . 27 Haight v. Pittsburg, Ft. W. & C. R. R. Co., 6 Wall. 15, 18 L. Ed. 818 21 Hamilton v. Dillin, 13 I. R. R. 164, Fed. Cas. 5979, aff'd, 21 Wall. 73, 22 L. Ed. 528 32 Harding v. Woodcock, 137 U. S. 43, 34 L. Ed. 580, 11 S. Ct. 6 136, 160 Hartman v. Greenhow, 102 U. S. 675, 26 L. Ed. 271 163 Hartung v. People, 22 N. Y. 95 16 Harvard Co. v. Wicht, 99 App. Div. 507, 91 N. Y. Supp. 48 85 Harvey v. United States, 3 Ct. Cl. 38 30 Hastings v. Herold, 184 Fed. 759 30, 164 Hatch v. Ferguson, 57 Fed. 959 41 Havens & Geddes Co. v. Diamond, 93 111. App. 557 83 Hawker v. New York, 170 U. S. 189, 42 L. Ed. 1002, 18 S. Ct. 573. . 16 Headman v. Rose, 63 Ga. 458 41 Heidenbach v. Schland, 10 How. Pr. 477 44 Hendy v. Soule, Deady 400, Fed. Cas. 6359 159, 163 Hepburn v. Griswold, 8 Wall. 603, 19 L. Ed. 513 11 Herold v. Mutual Benefit Life Ins. Co., 201 Fed. 918 80 Hicks v. James, 48 Fed. 542, aff'd, 110 U. S. 272 166 High v. Coyne, 178 U. S. 1 1 1, 44 L. Ed. 997, 20 S. Ct. 747 12 Hobbs, Assignee v. McLean, 117 U. S. 567, 29 L. Ed. 940, 6 S. Ct. 870 25 Hogan v. City of St. Louis, 176 Mo. 149, 75 S. W. 604 83 Holy Trinity Church v. United States, 143 U. S. 457, 36 L. Ed. 226, 12 S. Ct. 511 24 Honeyman v. Colorado Fuel & Iron Co., 133 Fed. 96 83 Houghton v. Ault, 8 Abb. Pr. 89, 16 How. Pr. 77 44 Rowland v. Soule, Deady 413, Fed. Cas. 6800 13, 158 Hubbard v. Brainard, 35 Conn. 563, rev'd, 12 Wall. 1, 20 L. Ed. 272 163 Hubbard v. Kelly, 8 W. Va. 46 160, 163, 164 Hylton v. United States, 3 Dall. 171, 1 L. Ed. 556 14 I Imperial Fire Ins. Co. v. Wilson, 35 L. T. R. 271 102, 114 Improvement Co. v. Slack, 100 U. S. 654, 25 L. Ed. 609 160 Inland Revenue v. Strang, 15 Sc. L. R. 704 35, 36 Ives, Re, Fed. Cas. 7114, 1 I. R. R. 145 39 TABLE OF CASES References are to pages J PAGE Jaehne v. New York, 128 U. S. 189, 32 L. Ed. 398, 9 S. Ct. 70, 6 N. Y. Grim. Rep. 237 19 Jetton v. University of the South, 208 U. S. 489, 52 L. Ed. 584. ... 162 J. L. White Furnace Co. v. Miller Transfer Co., 131 App. Div. 559, 115 N. Y. Supp. 625 85 John Deere Plow Co. v. Spatz, 69 Kan. 255, 76 P. 863 81 John Deere Plow Co. v. Wyland, 69 Kan. 255, 76 P. 863 81 Johnson v. United States, 7 Wall. 166, 19 L. Ed. 187 157 Jones v. Keeler, 40 Misc. 221, 81 N. Y. Supp. 648 >. 85 K Kelly*. Owen, 7 Wall. 496, 19 L. Ed. 283 42 Kendall v. United States, 107 U. S. 123, 27 L. Ed. 437, 2 S. Ct. 277, 18 Ct. Cl. 758 29 Kendall v. United States, 12 Pet. 524, 9 L. Ed. 1181 163 Kendall v. Stokes, 3 How. (U. S.) 87, 11 L. Ed. 506 163 Kensett v. Stivers, 18 Blatch. 397, 10 Fed. 517 31 Kentucky Railroad Tax Cases, 115 U. S. 321, 29 L. Ed. 414, 6 S. Ct. 57 11 Kimball v. Weld, Fed. Gas. 7776 13 King v. United States, 99 U. S. 229, 25 L. Ed. 373 131, 150 Kings County Savings Bank v. Blair, 116 U. S. 200, 29 L. Ed. 657, 6 S. Ct. 353. 155, 159 Kinney, Re, 102 Fed. 468 14 Kirkwood v. Gadd, 1910 A. C. 422 81 Kissinger v. Bean, 7 Biss. 60, Fed. Gas. 7853.. 157, 158 Klumpp v. Thomas, 162 Fed. 853 , 166 Knowlton v. Moore, 178 U. S. 41, 44 L. Ed. 969, 20 S. Ct. 747 . 11, 12, 26 Knights Templar Ac. Co. v. Jarman, 187 U. S. 197, 47 L. Ed. 139, 23 S. Ct. 108 26 Kring v. Missouri, 107 U. S. 221, 27 L. Ed. 506, 2 S. Ct. 443 16 L Lake Shore & M. S. R. R. Co. . People, 46 Mich. 193, 9 N. W. 249 132, 133, 164 Lake Shore & M. S. R. R. Co. v. Roach, 80 N. Y. 339 136 Lake Shore & M. S. R. R. Co. v. Rose, 95 U. S. 87, 24 L. Ed. 376. . . 31 Landis, Est. Re, 66 N. J. Eq. 291, 56 A. 1039 88 Last v. London Assurance Corporation, L. R. 10 A. C. 438 34, 80 Lauer v. United States, 5 Ct. CL 447 159, 160 Lawless v. Sullivan, L. R. 6 A. C. 373 34 XIV TABLE OF CASES References are to pages PAGE League v. Texas, 184 U. S. 156, 46 L. Ed. 478, 22 S. Ct. 475 . 16, 17, 18 Lee v. Chase, 1 Hughes 402, Fed. Gas. 8185 134, 138 Legal Tender Cases, 12 Wall. 457, 20 L. Ed. 287 11 Leszynsky, Re, 16 Blatch. 9, Fed. Cas. 8279, 25 1. R. R. 71, 7 Rep. 358 29 Lima v. Bidwell, 182 U. S. 128, 45 L. Ed. 1041, 21 S. Ct. 743 164 Lippman, Re, 3 Ben. 95, Fed. Cas. 8382, 9 1. R. R. 1 124, 125 Little v. Little, 161 Mass. 188, 36 N. E. 795 38 Lloyd v. Sully, 21 Sc. L. R. 482, 2 Tax Cases, 37 45 Locke v. Dane, 9 Mass. 360 16 Locke v. New Orleans, 4 Wall. 172, 18 L. Ed. 334 17 Logan County v. United States, 169 U. S. 255, 42 L. Ed. 737, 18 S. Ct. 361 90,92, 156, 157, 160, 164 London Bank &c. v. Apthorpe, 1891 L. R., 2 Q. B. D. 378 63 Long v. Ryan, 30 Grat. Va. 718 44 Louisville Public Warehouse Co. v. Collector, 49 Fed. 561, 1 C. C. A. 371 160 Ludlam v. Ludlam, 31 Barb. 486, aff'd, 26 N. Y. 356, 84 Amer. Dec. 193 41 Lynch v. Clarke, 1 Sand. Ch. 583 42 M McArthur v. United States, 29 Ct. Cl. 191 160 McClintock . Dana, 106 Pa. St. 386 34, 37 McClung v. Silliman, 6 Wheat. 598, 5 L. Ed. 340 162, 163 McClure v. United States, 19 Ct. Cl. 18-29 159 McCray v. United States, 195 U. S. 27-56, 49 L. Ed. 78-95, 24 S. Ct. 796 10 M'Culloch v. Maryland, 4 Wheat. 316-332, 4 L. Ed. 579-608 10 M'Dougal v. Southerland, 1896 W. N. Eng. Part I, 113 39 McGregor v. McGregor, 33 How. Pr. 456 42 McKee v. United States, 164 U. S. 287, 41 L. Ed. 437, 17 S. Ct. 92, 32 Ct. Cl. 612 24 McNally v. Field, 119 Fed. 445 28 Magee v. Denton, 5 Blatch. 130, Fed. Cas. 8943 35, 49, 124 Magoun v. Illinois T. S. Bank, 170 U. S. 283, 42 L. Ed. 1037, 18 S. Ct. 594 11 Maillard v. Lawrence, 16 How. (U. S.) 251, 14 L. Ed. 925 24 Mallett v. North Carolina, 181 U. S. 589, 45 L. Ed. 1015, 21 S. Ct. 730 16 Mandell v. Pierce, 3 Cliff. 134, Fed. Cas. 9008, 2 Am. L. Rev. 774, 1 Am. L. T. Rep. 123, 7 I. R. R. 193. , 34, 36, 49, 71 TABLE OF CASES XV References are to pages PAGE Manhattan Co. v. Blake, 148 U. S. 412, 37 L. Ed. 504, 13 S. Ct. 640 79 Mann v. United States, 32 Ct. Cl. 580 128, 165 Mansfield v. Excelsior Refining Co., 135 U. S. 326, 34 L. Ed. 162, 10 S. Ct. 825 143, 146 Mason, Re, 43 Fed. 510 125 Mason v. Rollins, 2 Biss. 99, Fed. Cas. 9252 13 Massachusetts, Re, 197 U. S. 482, 49 L. Ed. 845, 25 S. Ct. 512 161 Matsons Ford Bridge Co. v. Commonwealth, 117 Pa. St. 265, 11 A. 813 79 Maxwell v. Griswold, 10 How. (U. S.) 242, 13 L. Ed. 405 163 Meador, Re, 1 Abb. (U. S.) 317, Fed. Cas. 9375, 10 I. R. R. 74, 2 Am. L. T. Rep. 140-153, 3 West Jur. 209, 5 Am. L. Rev. 166, 2 Leg. Gaz. 193 13, 125 Meads v. United States, 81 Fed. 684, 26 C. C. A. 229 30 Medley, Re, 134 U. S. 160, 33 L. Ed. 835, 10 S. Ct. 384 : 16 Memphis & Charleston R. R. Co. v. United States, 108 U. S. 228, 234, 27 L. Ed. 711, 713, 2 S. Ct. 482 15 Mercer v. Buchanan, 132 Fed. 501-508 38 Merck . Treat, 174 Fed. 388 159, 166 Mersey Docks & Harbor Board v. Lucas, L. R., 8 A. C. 891 34, 93 Metz v. Hagerty, 51 0. St. 521, 38 N. E. 11 19 Michigan Central R. R. Co. v. Slack, 22 1. R. R. 337, 100 U. S. 595, 25 L. Ed. 647 10, 20, 22, 127 Milan Milling, &c. Co. v. Gorten, 93 Tenn. 590, 26 L. R. A. 135, 27 S. W. 971 83 Miles v. Johnson, 59 Fed. 38 158 Milliken v. Fullerton, 101 App. Div. 606, 91 N. Y. Supp. 1104 85 Minehill & S. H. R. Co. v. McCoach, 192 Fed. 670 84 Minor v. Happersett, 21 Wall. 162, 22 L. Ed. 627 41 Moline Plow Co. v. Wilkinson, 105 Mich. 57, 62 N. W. 1119 85 Montclair v. Ramsdell, 107 U. S. 147, 27 L. Ed. 431, 2 S. Ct. 391 25 Moore v. Miller, 5 A. C. (D. C.) 413 11, 12 Morgan v. White, 101 Ind. 413 43 Morrill v. Jones, 106 U. S. 466, 27 L. Ed. 267, 1 S. Ct. 423 30 Mundy v. Van Hoose, 104 Ga. 292, 37 S. E. 783 51, 91 Murphy Varnish Co. v. Connell, 10 Misc. 553, 32 N. Y. Supp. 492, 66 St. Rep. 817 83 Muskrat v. United States, 219 U. S. 350, 55 L. Ed. 248 161 Mutual Benefit Life Ins. Co. v. Herold, 198 Fed. 199 28, 100, 101 XVI TABLE OF CASES References are to pages N PAGE National Bank of New Brunswick v. County of Yankton, 101 U. S. 129, 25 L. Ed. 1046 53 National Knitting Co. v. Bronner, 20 Misc. 125, 45 N. Y. Supp. 714. 85 Needhamr;. Bowers, L. R. 21 Q. B. D. 436 91 Negley v. City of Henderson, 21 Ky. L. R. 1394, 55 S. W. 554. . . 88 Nelson v. Carman, 5 Blatch. 511, Fed. Gas. 10103, 6 1. R. R. 181. . . 163 New Brunswick Bank v. Co. of Yankton, 101 U. S. 129, 25 L. Ed. 1046 53 New Lamp Chimney Co. v. Ansonia &c. Co., 91 U. S. 656, 23 L. Ed. 336 *. 26 New Orleans v. Houston, 119 U. S. 265, 30 L. Ed. 411, 7 S. Ct. 198. 13 New York Arch. Terra Cotta Co. v. Williams, 102 App. Div. 1, 92 N. Y. Supp. 808, aff'd, 184 N. Y. 579, 77 N. E. 1192 84 New York Telephone Co. v. Treat, 130 Fed. 340-367, 64 C. C. A. 586 27 New Zealand Shipping Co. v. Stephens, 24 L. T. R. 172, 5 Tax Cas. 553 45 Nichols, Re, 54 N. Y. 62 45 Nichols v. United States, 7 Wall. 122, 19 L. Ed. 125 159 Nicol v. Ames, 173 U. S. 509, 43 L. Ed. 786, 19 S. Ct. 522 11, 14 Northrup v. Shook, 10 Blatch. 243, Fed. Cas. 10329, 16 1. R. R. 196, 7 Am. L. Rev. 573 163 Nixon v. United States, 18 Ct. Cl. 448 155, 156, 161 North Carolina v. Kirkpatrick, 42 Fed. 689 162 North Carolina??. Vanderford, 35 Fed. 282 162 Northern Central R. R. Co. v. Jackson, 74 (U. S.) 262, 19 L. Ed. 88. Norton v. Union Bank & Trust Co., 46 S.W. 544 84 Norton?;. W. H.Thomas & Sons Co., 93S. W. 711 84 Novelty Mfg. Co. v. Cornell, 88 Hun, 254, 34 N. Y. Supp. 717, 68 St. Rep. 697 85 Nugent v. Bates, 51 la. 77, 50 N. W. 76, 33 Amer. St. Rep, 117 44 O'Donoghue v. Akin, 63 Ky. 478 16 Ogden v. Saunders, 12 Wheat. 213-285, 6 L. Ed. 606-631 17 Opinion of Justices, 5 Metcalfe 596 34 Orr v. Oilman, 183 U. S. 27, 846 L. Ed. 196, 22 S. Ct. 213 17 Osterberg v. Union Trust Co., 93 U. S. 424, 23 L. Ed. 964 ... 135, 143 Ozark Cooperage Co. v. Quaker City Cooperage Co., 98 N. Y. Supp. 113, 112 App. Div. 62 85 TABLE OF CASES xvii References are to pages P PAGE Pacific Building & Loan Assn. v. Hartson, 201 Fed. 1011 88, 90 Pacific Exp. Co. v. Siebert, 142 U. S. 339, 35 L. Ed. 1035, 12 S. Ct. 250 : 11, 12 Pacific Ins. Co. v. Soule, 7 Wall. 433, 19 L. Ed. 95 14, 35, 129 Pacific Steam Whaling Co. v. United States, 187 U. S. 447, 47 L. Ed. 253, 23 S. Ct. 154 164 Partridge .v. Mallandaine, L. R., 28 Q. B. D. 276 35 Parkview B. & L. Assn. v. Herold, 203 Fed. 876 88 Pascal v. Sullivan, 21 Fed. 496 30 Patton v. Brady, 184 U. S. 608, 46 L. Ed. 713, 22 S. Ct. 493 12 Peabody v. Stark, 16 Wall. 240, 21 L. Ed. 311 27 Pequignot v. Detroit, 16 Fed. 211 42 Pennington v. Coxe, 2 Cranch, 33, 2 L. Ed. 199 24, 25 Pennoyer v. McConnaughty, 140 U. S. 1, 35 L. Ed. 363, US. Ct. 699 27 Pennsylvania Collieries Co. v. McKeever, 93 App. Div. 303, 87 N. Y. Supp. 869, aff'd 183 N. Y. 98, 2 L. R. A. 127, 74 N. E. 935. . 82 Pennsylvania Company for Insurance of Lives v. Bauerle, 143 111. 459, 33 N. E. 166 82 Pennsylvania Life Insurance Co. v. McClain, 105 Fed. 367 27 Pennsylvania Steel Co. v. New York City Ry. Co., 176 Fed. 471. 89, 113 Pennsylvania Steel Co. . New York City Ry. Co., 193 Fed. 286; 198 Fed. 774 . . ,. ; : 90, 113 People v. American Bell Telephone Co., 117 N. Y. 241, 22 N. E. 1057 83 People v. Austin, 47 Cal. 353 32 People v. Miller, 181 N. Y. 328, 73 N. E. 1102 82 People v. Purdy, 58 Hun. 386 88, 89 People v. Seymour, 16 Cal. 332, 76 Amer. Dec. 521. 18 People ex rel. Collins v. Spicer, 99 N. Y. 225, 1 N. E. 680 17 People ex rel. Hackley v. Kelly, 24 N. Y. 74-83 124 People ex rel. Lorillard v. Barker, 70 Hun, 397, 24 N. Y. Supp. 63, 54 St. Rep. 107 34, 45 People ex rel. Southern Cotton Oil Co. v. Roberts, 25 App. Div. 13, 48 N. Y.Supp. 1028 84 People ex rel. McMasters v. Supervisors, 4 Hill 20. . .' 34 Perry v. Newsome, 10 1. R. R. 20, Fed. Cas. 1 1009 36 Peters v. United States, 33 P. 1031 30 Petri v. Commercial National Bank, 142 U. S. 644, 35 L. Ed. 1144, 12 S. Ct. 325 25 Philadelphia v. Diehl, 5 Wall. 720, 18 L. Ed. 614 162, 165 Xviii TABLE OP CASES References are to pages PAGE Philadelphia &c. R. R. Co. v. Kenney, Fed Gas. 1188, 9 Phila. 403, 18 1. R. R. 92 27 Phillips, Re, 10 1. R. R. 107, Fed. Cas. 11097, 2 Am. L. T. Rep. 154, 1 Chic. L. N. 449, 16 Pitts. L. J. 189 14, 124 Phoenix Insurance Co. of London v. Kingston, 7 Ont. 343 82 Pollock v. Farmers Loan & Trust Co., 157 U. S. 429, 39 L. Ed. 769, 15 S. Ct. 673, 158 U. . 607, 39 L. Ed. 1110, 15 S. Ct. 912 10, 15, 32 Pommery & Greno v. Apthorpe, L. J. R. (1887) N. S. 56 Q. B. 155 . . 43 Pooler v. Maples, 1 Wend. 65 44 Portland Co. v. Hall & Grant Con. Co., 121 App. Div. 779, 106 N. Y. Supp. 649 81 Powers v. Barney, 5 Blatch. 202, Fed. Cas. 11361 : 28 Powers v. Mass. Hosp., 109 Fed. 294 89 Providence Bank v. Billings, 4 Pet. 514, 7 L. Ed. 939 12 Pullan v. Kinsinger, 2 Abb. (U. S.) 94, Fed. Cas. 11463, 9 Am. L. Reg. (N. S.) 557, 11 I. R. R. 197, 5 Am. L. Rev. 184 13 R R. & G. R. Co. v. Reid, 13 Wall. 269, 20 L. Ed. 570 29 Railroad Company v. Jackson, 7 Wall. 262, 19 L. Ed. 88 21 Railroad Company v. United States, 101 U. S. 543, 25 L. Ed. 1068. . 151 Raleigh & G. R. R. Co. v. Reid, 13 Wall. 269, 20 L. Ed. 570 29 Ratzky v. People, 29 N. Y. 124, 28 How. Pr. 112 16 Ray v. United States, 50 Fed. 166 166 Real Estate Savings Bank v. United States, 16 Ct. Cl. 335, aff'd 104 U. S. 728, 26 L. Ed. 908 163 Reed, Re, 100 (U. S.) 25, 25 L. Ed. 538 30 Reeder v. Holcomb, 105 Mass. 93 44 Reiche v. Smythe, 13 Wall. 162, 20 L. Ed. 566 24 Religious Tract & Book Society v. Forbes, 1896 W. N. (Eng.) Part 1, 126 63 Reynolds v. Williams, 4 Biss. 108, Fed. Cas. 11734 38 Rice v. Minn. & N. W. R. R. Co., 1 Black 358, 17 L. Ed. 147 25 Rice v. United States, 53 Fed. 910, 4 C. C. A. 104 28 Ridgway v. United States, 18 Ct. Cl. 707 156 Robertson v. Downing, 127 U. S. 607, 32 L. Ed. 269, 8 S. Ct. 1328 . . 27 Robbins v. Freeland, Fed. Cas. 11883, 14 1. R. R. 28 158 Rock Island Plow Co. v. Peterson, 93 Minn. 356, 101 N. W. 616. ... 82 Rodriguez, Re, 81 Fed. 337, 353 41 Rogers v. Inland Revenue, 16 Sc. L. R. 682, 1 Tax Cases, 225 44, 45 Rose v. Barclay, 191 Pa. St. 594, 43 A. 385, 45 L. R. A. 392 38 Rosedale Cemetery Ass. v. Under, 73 N. J. L. 421, 63 A. 904 88 Rowland, Re, 104 U. S. 604, 612, 26 L. Ed. 861 163 TABLE OF CASES XIX References are to pages PAGE Ruckgaber v. Moore, 104 Fed. 947, 42 Russell v. Bank, 13 App. Cas. 418. 101 Ryan v. State, 5 Neb. 276 19 S St. Louis, A., T. R. R. Co. v. Fire Assn. of Phila., 55 Ark. 163, 18 S. W. 43 84 St. Louis Expanded M. & F. Co. v. Beilharz, 88 S. W. 512 81 St. Paul M. & M. R. Co. . Phelps, 137 U. S. 528, 34 L. Ed. 767, 11 S. Ct. 168 27 San Franciso S. & L. Soc. v. Carey, 17 1. R. R. 109 159 Sasportas v. De la Motta, 10 Rich. Eq. 38 41 Satterlee v. Matthewson, 2 Pet. 380-415, 7 L. Ed. 458-470 16 Saunders v. Howard, Fed. Cas. 12375 26 Sawyer, Re, 124 U. S. 200, 31 L. Ed. 402, 8 S. Ct. 482 16 Society for Savings v. Coit, 6 Wall. 594, 18 L. Ed. 897 12 Schell v. Cochran, 107 U. S. 625, 27 L. Ed. 543 162 Schell v. Fauche, 138 U. S. 562, 34 L. Ed. 1040, 11 S. Ct. 376. . . 27 Schmidt v. Trowbridge, 24 I. R. R. 381 150 Scholey v. Rew, 23 Wall. 331, 23 L. Ed. 99 33 Schriefer v. Wood, 5 Blatch. 215, Fed. Cas. 12481 24 Schulenberg-Boeckler Lumber Co. v. Town of Hayward, 20 Fed. 422 157 Schwarzchild & Sulzberger v. Rucker, 143 Fed. 656 165 Seat v. United States, 18 Ct. Cl. 458. 156 Shaefer v. Ketcham, 6 I. R. R. 4 163 Shanks v. Dupont, 3 Pet. 242, 7 L. Ed. 395 41 Sheridan v. Allen, 153 Fed. 568 140 Simons v. United States,, 19 Ct. Cl. 601 163 Smith v. Hooper, 95 Md. 16, 51 A. 844, 54 A. 95 - 37 Smith v. Stevens, 10 Wall. 321, 19 L. Ed. 933 29 Smythe v. Fiske, 23 Wall. 374, 23 L. Ed. 47 24, 26, 28 Snow v. United States, 18 Wall. 317, 21 L. Ed. 784 53 Snyder v. Marks, 109 U. S. 189, 27 L. Ed. 901, 3 S. Ct. 157 157 Sourey v. Harbour Moorings Commissioners, 3 Times L. R. 516. ... 93 South Carolina v. United States, 199 U. S. 437, 448, 50 L. Ed. 261, 271, 26 S. Ct. 110 9, 14, 93 Southern Pac. R. R. Co. v. California, 118 U. S. 109, 112, 30 L. Ed. 103, 6 S. Ct. 993 161 Southern R. Co. v. Kay, 62 S. C. 28, 39 S. E. 785 33 Southwestern R. R. Co. v. Wright, 116 U. S. 231, 29 L. Ed. 626, 6S.Ct.375. 28 xx TABLE OF CASES References are to pages PAGE Southwick v. Southwick, 49 N. Y. 510 16 Spooner v. Phillips, 62 Conn. 62, 24 A. 524, 16 L. R. A. 461 37 Spreckles Sugar R. Co. v. McClain, 192 U. S. 397, 48 L. Ed. 496, 24 S. Ct. 326 79, 80 Springer v. United States, 102 U. S. 586, 26 L. Ed. 253. . 13, 15, 140, 142 Sprinkle v. United States, 141 Fed. 811, 73 C. C. A. 285 30 Stacey v. Emery, 97 U. S. 642, 24 L. Ed. 1035 162 Stanwood v. Green, 2 Abb. (U. S. )184, Fed. Cas. 13331 125 Starin v. New York, 115 U. S. 248, 29 L. Ed. 388, 6 S. Ct. 28. ... 161 State v. American Book Co., 69 Kan. 1, 76, P. 411, 1 L. R. A. (X. S.) 1041 83 State v. Bell, 61 N. C. 76 18 State v. Bristol Savings Bank, 108 Ala. 3 86 State v. Jersey City, 37 X. J. L. 39 133 State v. Smith, 63 N. E. 25 51 Stewart v. Barnes, 153 U. S. 456, 38 L. Ed. 781, 14 S. Ct. 849 162 Stockdale v. Insurance Cos., 20 Wall. 323, 22 L. Ed. 348 18, 22, 26 Stockwell v. United States, 3 Cliff. 284, Fed. Cas. 13446 13 Stoddert v. Ward, 31 Md. 562, 100 Am. Dec. 83 45 Stotesbury v. United States, 23 Ct. Cl. 285, aff'd 146 U. S. 196, 36 L. Ed. 940, 13 S. Ct. 1 30, 155, 156 Strong v. Walton, 47 App. Div. 114, 62 N. Y. Supp. 353 136 Strouse, Re, 1 Sawyer, 605, Fed. Cas. 13548 13, 29, 124 Stuart v. Barnes, 43 Fed. 281 159 Sturges v. Carter, 114 U. S. 511, 21 L. Ed. 240, 5 S. Ct. 1014. ... 17 Sully v. Attorney General, 5 H. & X. 711 43 Swift Co. v. United States, 105 U. S. 691, 26 L. Ed. 1108 27 Swift Co. v. United States, 111 U. S. 22, 28 L. Ed. 341, 4 S. Ct. 244. 163 Sybrandt v. United States, 19 Ct. Cl. 461-466 156, 157 T Tacey v. Irwin, 18 Wall. 549, 21 L. Ed. 786 134, 138 Tallapoosa Lumber Co. v. Holbert, 5 App. Div. 559, 39 X. Y. Supp. 432, 3. X. Y. Ann. Cas. 238 83 Tappan v. Merchants Exchange Xational Bank, 19 Wall. 490, 22 L. Ed. 189 11 Taylor v. Boyd, 63 Tex. 533 .* 32 Tenant v. Smith, (1892) App. Cas. 161 39 Tennessee v. Davis, 100 U. S. 257, 25 L. Ed. 648 161 Tennessee v. Whitworth, 6 S. Ct. 645, 1 17 U. S. 129, 29 L. Ed. 830. . 13 Thatcher v. United States, 15 Blatch. 15, Fed. Cases 13851 30 Thayer v. City of Boston, 124 Mass. 132, 26 Amer. Rep. 650. . .44, 45 TABLE OF CASES XXI References are to pages PAGE The Exchange v. McFaddon, 7 Cranch, 137, 3 L. Ed. 294 42 Thomas v. United States, 192 U. S. 363 14 Thompson v. Utah, 18 S. Ct. 620, 170 U. S. 343, 42 L. Ed. 1061 16 Thorn v. De Breteuil, 86 A. D. 405-417, 83 N. Y. Supp. 849, mod. 179 N. Y. 64, 71 N. E. 470 34 Tischler & Co. v. Apthorpe, 52 L. T. R. N. S. 814 43 Toledo Commercial Co. v. Glen Mfg. Co., 55 0. St. 217, 45 N. E. 197 85 Tomkins v. Ashley, 5 L. J. K. B. 246 28 Tompkins v. Little Rock & Ft. Scott Ry. Co., 15 Fed. 6. 79 Treat v. Farmers Loan & Trust Co., 185 Fed. 760, 10 1. R. R. 57. . . 162 Treat . White, 181 U. S. 267, 21 S. Ct. 61 1, 45 L. Ed. 853 24 Troy Iron & Nail Factory v. Corning Winslow, 45 Barb. 231, 247. 38 U Union Trust Co. . Sickles, 125 App. Div. 105, 109 N. Y. Supp. 262. 83 United States v. Acorn Roofing Co., T. D. 1784, July 1, 1912. ... Ill United States v. Allen, 14 Fed. 263 30, 133 United States v. American Bell Telephone Co., 29 Fed. 17 81, 86 United States v. Anthony, 11 Blatch. 200, 30 Leg. Int. 266, Fed. Cas. 14459, 17 I. R. R. 197, 5 Chic. L. N. 462, 20 Pitts. L. J. 199 41 United States v. Baltimore & Ohio R. R. Co., 17 Wall. 322, 21 L. Ed. 597 10, 11, 21, 92 United States v. Bank of America, 15 Fed. 730 150 United States v. Bank of Montreal, 21 Fed. 236 81 United States v. Barrows, 1 Abb. (U. S.) 351, 7 Phil. 609, 26 Leg. Int. 276, Fed. Cas. 14529, 10 I. R, R. 186, 3 Pitts. Rep. 151, 1 Chic. L. N. 409 30 United States v. Beebe, 127 U. S. 338, 8 S. Ct. 1083, 32 L. Ed. 12 . 146, 147 United States v. Black, 11 Blatch. 538, Fed. Cas. 14600, 9 I. R. R. 16 150 United States v. Black, 128 U. S. 40, 9 S. Ct. 12, 32 L. Ed. 354 . . 150, 163 United States v. Bristow, 20 Fed. 378 133, 150 United States v. Brooklyn City & N. R. R. Co., 14 Fed. 284 127, 133, 150 United States v. Brown, 1 Sawyer 531, Fed. Cas. 14671, 13 I. R. R. 126 124 United States v. Brown, Deady 566, Fed. Cas. 14662 29 United States v. Buchanan, 9 Fed. 689, 4 Hughes 487 24 United States . Central National Bank, 15 Fed. 222. . . 100, 103, 151 United States v. Chamberlain, 219 U. S. 250, 55 L. Ed. 204. . 127, 150 XX11 TABLE OF CASES References are to pages PAGE United States v. Cole, 134 Fed. 697 28, 150 United States v. Crosley, 196 U. S. 327, 25 S. C\ 261, 49 L. Ed. 497 24 United States v. Craft, 43 Fed. 374 151 United States v. Cummings, 130 U. S. 452, 9 S. Ct. 583, 32 L. Ed. 1029 162, 165 United States v. Curry, 201 Fed. 371 135 United States v. Davis, 54 Fed. 147, 4 C. C. A. 251 156 United States v. Distillery No. 28, 6 Bliss 483, 2 Cent. L. J. 749, Fed. Gas. 14966, 21 1. R. R. 366, 8 Chic. L. N. 57 19 United States v. Dollar Sav. Bank, 12 1. R. R. 157, 15 1. R. 193 78 United States v. Dustin, Fed. Cas. 15012, 15 1. R. R. 30 33 United States v. Eliason, 16 Pet. 291, 10 L. Ed. 968 30 United States v. Elliot, Fed. Cas. 15043 151 United States v. Erie R. R. Co., 106 U. S. 327, 1 S. Ct. 223, 24 1. R. R. 76, 27 L. Ed. 151 22, 127, 129 United States v. Finnell, 185 U. S. 236, 22 S. Ct. 633, 46 L. Ed. 890. 27 United States v. Fordyce, 13 1. R. R. 77, Fed. Cas. 15130 125 United States v. Freeman, 3 How. (U. S.) 556, 11 L. Ed. 724 24, 26 United States v. Frerichs, 8 S. Ct. 514, 124 U. S. 315, 31 L. Ed. 471. 162 United States v. Frost, Fed. Cas. 15172, 9 1. R. R. 41, 16 Pitts, L. J. 196, 1 Chic. L. N. 129 .37, 55 United States v. Gen. Insp. & L. Co., 192 Fed. 223 90, 111 United States v. Giller, 54 Fed. 656 29 United States v. Goldenberg, 18 S. Ct. 3, 168 U. S. 95, 42 L. Ed. 394 24 United States . Hadley, 99 Fed. 437 40 United States v. Halloran, 14 Blatch. 1, 11 Am. L. Rev. 379, 22 I. R. R. 321, 14 Abb. L. J. 279. Fed. Cas. 15286, 24 Pitts. L. J. 39. 150 United States v. Hess, 5 Sawyer 533, Fed. Cas. 15358 142 United States v. Hill, 120 U. S. 169, 7 S. Ct. 510, 30 L. Ed. 627 27 United States v. Hill, 123 U. S. 681, 8 S. Ct. 308, 31 L. Ed. 275 33 United States v. Hodson, 14 1. R. R. 100, Fed. Cas. 15376 28 United States v. Howell, 9 Fed. 674; 20 Fed. 718 29, 53 United States v. Hughes, 8 Ben. 29, Fed. Cas. 15416, 11 Abb. L. J. 199, 21 1. R. R. 84, 2 Am. L. T. Rep. (N. S.) 300 19 United States v. Indianapolis & St L. R. R. Co. ,5 S. Ct. 716, 113 U. S. 711, 28 L. Ed. 1140 18, 31 United States v. Insley, 9 S. Ct. 485, 130 U. S. 263, 32 L. Ed. 968 146, 151 United States . Isham, 17 Wall. 496, 21 L. Ed. 728 24, 28 United States v. Johnston, 8 S. Ct. 446, 124 U. S. 236, 31 L. Ed. 389 27 United States 0. Kallstorm, 30 Fed. 184 26 United States v. Kaufman, 96 U. S. 659, 24 L. Ed. 792 156, 159 TABLE OP CASES Xxiii References are to pages PAGE United States v. Kenton, 2 Bond 97, Fed. Gas. 15526 27 United States v. Kirby, 7 Wall. 482, 19 L. Ed. 278 26 United States v. Laescki, 29 Fed. 699 29 United States v. Lee, 1 S. Ct. 240, 106 U. S. 196, 27 L. Ed. 171 134, 137, 138 United States v. Little Miami R. R. Co., 1 Fed. 700, reversed 108 U. S. 277, 2 S. Ct. 627, 27 L. Ed. 724 99, 150 United States v. McGinnis, 1 Abb. (U. S.) 120, Fed. Cas. 15678, 3 1. R. R. 83 129 United States v. Malone, 22 I. R. R. 403, 8 Ben. 574, Fed. Cas. 15713 157 United States v. Mann, 95 U. S. 580, 24 L. Ed. 531 128 United States v. Mayer, Deady 127, 7 I. R. R. 60, Fed. Cas. 15753 . 55, 58 United States t>. Marquette, H. & O. R. Co., 17 Fed. 719 100 United States v. Military Construction Co., T. D. 1774, May 21, 1912 110 United States v. Mooney, 116 U. S. 106, 29 L. Ed. 551, 6 S. Ct. 304 24, 161 United States v. Moore, 95 U. S. 760, 24 L. Ed. 588 27 United States v. Mosley, Fed. Cas. 15823, 15 1. R. R. 8 128 United States v. Mullins, 1 19 Fed. 334, 56 C. C. A. 238 ~. 28 United States v. Myers, 3 Hughes 239-243, 24 1 R. R. 44, Fed. Cas. 15846, 5 Rep. 364, 25 Pitts. L. J. 143 131, 150, 159 United States v. Natl. Surety Co., 122 Fed. 904, 59 C. C. A. 130. . . 27 United States v. Nebraska Distilling Co., 80 Fed. 285, 25 C. C. A. 418 151, 165 United States v. N. Y. N. H. & H. R. R. Co., 10 Ben. 144, Fed. Cas. 15874, 24 1. R. R. 341 151 United States v. New York Guaranty & Ind. Co., 8 Ben. 269, Fed. Cas. 15872 127, 133, 151 United States v. Nipissing Mines Co., 202 Fed. 803 99, 123 United States v. One Black Horse, 129 Fed. 167 29 United States v. One Hundred Bbls. of Spirit, 2 Abb. 305, 1 Dill. 49, 3 Chic. L. N. 25, Fed. Cas. 15948, 12 1. R. R. 153 29 United States v. One thousand four hundred and twelve Gals. Dis- tilled spirits, 10 Blatch. 428, Fed. Cas. 15960, 17 1. R. R. 86. .28, 29 United States*. O'Neill, 19 Fed. 567 131 United States v. Oregon & C. R. R. Co., 164 U. S. 526, 17 S. Ct. 165, 41 L. Ed. 541 26 United States v. Pacific R. R. Co., 4 Dill. 66, Fed. Cas., 15983 134, 151 United States v. Pacific R. R. Co., 1 Fed. 97 135 xxiv TABLE OF CASES References are to pages PAGE United States v. Parkhill, Fed. Cas. 15994, 12 Weekly Notes 604. . 128 United States v. The Penelope, 2 Pet. Adm. 438, Fed. Cas. 16024 . . 44 United States v. Philadelphia & R. R. Co., 123 U. S. 113, 8 S. Ct. 77, 31 L.Ed 138 131, 150 United States v. Real Estate Savings Bank, 104 U. S. 728, 17 Ct. Cl. 434, 26 L. Ed. 908 160, 166 United States v. Reese, 92 U. S. 214, 23 L. Ed. 563 41 United States v. Rhawn, 11 Phil. 521, 22 I. R. R. 235, 2 Weekly Notes, 604, Fed. Cas. 16150, 33 Leg. Int. 258, 8 Chic. L. N. 372, 23 Pitts. L. J. 199 128 United States v. Rhindskopf, 105 U. S. 418, 26 L. Ed. 1131 150 United States v. Rindskopf, 8 Biss. 507, Fed. Cas. 16166, 8 Rep. 426, 11 Chic. L. N. 376 131, 150 United States v. Ronzone, 14 Blatch. 69, Fed. Cas. 16192 38 United States v. Savings Bank, 104 U. S. 728, 26 L. Ed. 908 155, 159, 160, 164 United States v. Schillinger, 14 Blatch. 71, Fed. Cas. 16228 31 United States v. Schurz, 102 U. S. 378, 26 L. Ed. 167 162 United States v. Simons, 1 Abb. (U. S.) 470, 3 Pitts. Rep. 261, Fed. Cas. 16291, 12 1. R. R. 10, 7 Phil. 607, 18 Pitts. L. J. 60, 27 Leg. Int. 236, 5 Am. L. R. 187 38 United States v. Sixty-four bbls. of Dist. Spirits, 3 Cliff. 308, Fed. Cas. 16306 135 United States v. Smith, 1 Sawyer, 277, Fed. Cas. 16341 36, 37, 39 United States v. Smith, 12 1. R. R. 135 38 United States v. Smock, 4 1. R. R. 202 25 United States v. Snyder, 149 U. S. 210, 13 S. Ct. 846, 37 L. Ed. 705 . 135 United States v. Stowell, 133 U. S. 1, 133 L. Ed. 555, 10 S. Ct. 244 28, 29 United States v. Tanner, 147 U. S. 661, 28 Ct. Cl. 553, 37 L. Ed. 321, 13 S. Ct. 436 27 United States v. Temple, 105 U. S. 97, 26 L. Ed. 967, 17 Ct. Cl. 436 24 United States v. The Coquitlam, 57 Fed. 706 29 United States v. Thirty-six Bbls. High Wines, 7 Blatch. 459, Fed. Cas. 16468, 12 I. R. R. 40 28 United States v. Thompson, 98 U. S. 486, 25 L. Ed. 194 146 United States v. Three Tons Coal, 21 1. R. R. 251, 6 Biss. 379, Fed. Cas. 16515 124 United States . Tilden, 9 Ben. 368, Fed. Cas. 16519, 24 I. R. R. 99 151 United States v. Tilden, 10 Ben. 566, Fed. Cas. 16522 123 United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 41 L. Ed. 1007, 17 S. Ct. 540 24 TABLE OF CASES XXV References are to pages PAGE United States v. Triplett, Fed. Cas. 16539, 22 I. R. R. 207, 3 Cent. Law. J. 399 143 United States v. Twenty-eight Casks of Wine, 2 Ben. 63, Fed. Cas, 14281 28 United States v. Two hundred and forty-six and one-half Ibs. of tobacco, 103 Fed. 791 29 United States v. Vinson, 8 Fed. 507 29 United States v. Ward, 42 Fed. 320 40 United States v. Watts, 1 Bond 580, Fed. Cas. 16653, 1 1. R. R. 17 . . 27 United States v. Wigglesworth, 2 Story, 369, Fed. Cas. 16690. ... 28 United States v. Willetts, 5 Ben. 220, Fed. Cas. 16699 29 United States v. Wilson, 1 18 U. S. 86, 30 L. Ed. 1 10, 6 S. Ct. 991 . . . 135 United States v. Windom, 137 U. S. 636, 34 L. Ed. 811, 11 S. Ct. 197 163 United States v. Wittig, 2 Low. 466, 23 Pitts. L. J. 151, Fed. Cas. 16748, 22 1. R. R. 98, 3 Cent. L. J. 270, 13 Abb. L. J. 240 29 United States v. Wong Kim Ark, 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456 '. . .40, 41, 42 United States v. Zemel, 137 Fed. 989. . 30 Utley v. Clark-Gardner Lode & M. Co., 4 Col. 369 84 V Van Volkenburg v. Brown, 43 Cal. 43, 13 Am. Rep. 136 41 Vaughn M. Co. v. Lighthouse, 64 App. Div. 138, 71 N. Y. Supp. 799 85 Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482 10, 14 Vio Chemical Co. v. Studholme, 53 Misc. 470, 103 Supp. 463 83 W Walker v. Walker, I Mo. App. 404 44 Ward v. Maryland, 12 Wall. 427, 20 L. Ed. 452 9 Ware v. Wisner, 50 Fed. 310 40 Warren v. United States, 58 Fed. 559 25 Warrington v. Furbor, 8 East. 242 25 Washington Loan & Trust Co. v. United States, 39 Ct. Cl. 152 165 Watson v. Mercer, 8 Pet. 88-109, 8 L. Ed. 876 16, 17 Wayne v. United States, 26 Ct. Cl. 274. 160 Werle & Co. v. Colquhoun, 20 L. R. Q. B. D. 753 43 West Jersey Ice Mfg. Co. v. Armour, 12 Pa. Sup. Ct. 443 81 Western Union R. R. Co. v. United States, 101 U. S. 543, 25 L. Ed. 1068 18, 31 Westfall v. Shook, 5 Blatch. 383, Fed. Cas. 17448, 1 1. R. R. 54 12 XXVI TABLE OF CASES References are to pages PAGE Weston v. Charlestown, 2 Pet. 449, 7 L. Ed. 481 10 White v. Arthur, 10 Fed. 80, 20 Blatch. 237 162 White v. Clements, 39 Ga. 232 41 Wilcox v. County Commissioner, 103 Mass. 544 34 Wilders Steamship Co., Re, 183 U. S. 545, 46 L. Ed. 321, 22 S. Ct. 225 133 Williams v. Sangar, 10 East. 66 25 Wilmington Railroad Co. v. Reid, 13 Wall. 264, 20 L. Ed. 568 29 Wilmot v. Mudge, 103 U. S. 217, 26 L. Ed. 536, 4 Ky. L. Rep. 82. . . 25 Wilson v. Ohio & M. Ry. Co., 64 111. 542, 16 Am. Rep. 565 16 Wolf, Dryer Co. v. Bigler, 192 Pa. St. 466, 43 A. 1092 86 Woolner v. United States, 13 Ct. Cl. 355-434 156, 161 Wright v. Blakeslee, 101 U. S. 174-180, 25 L. Ed. 1048-1050. .163, 165 Wright v. Michigan Cent. R. R. Co., 130 Fed. 843, 65 C. C. A. 327. 28 Wrigley, Inre, 8 Wend. 134 44 Wroughton*. Turtle, 11 M. & W. 560 25 Y Yazoo & M. V. R. Co. v. Adams, 180 U. S. 1, 45 L. Ed. 395, 21 S. Ct. 240 28 Young v. Solicitor, 12 Sc. L. R. 602, 1 Tax Gas. 57 44, 45 Z Zartarian v. Billings, 204 U. S. 170, 51 L. Ed. 428 42 PREFATORY NOTE AND EXPLANATION This work has been designed to furnish a means of convenient reference to all information obtainable upon the many difficult questions involved in the practical application of the Income Tax Act, as well as a compila- tion of all authorities believed to be valuable for more serious investigation. To this end, it has been deemed proper to insert in the same place all notes upon one subject, regardless of the fact that provisions concerning the same may be, and frequently are scattered indiscriminately throughout the Act. Due regard should, therefore, be paid to cross- references wherever noted. Attention is also called to the fact that certain of the citations, digested for purposes of simplification in the form of a mere categorical statement, necessarily de- pended upon the wording of the particular statutes, which will be found in the Appendix, and which should be con- sidered in the interpretation and application of these authorities to questions arising under the present Act. Sections 3167, 3172, 3173 and 3176, of the Revised Statutes amended by this Act, have, as amended, been included in order to preserve the sequence, in Chapter V, which contains the several sections of the Revised Statutes relating to the Income Tax and its collection. Under Section 3226 are included all notes upon actions and proceedings brought against the United States, the Commissioner of Internal Revenue, or the Collector of Taxes. Convenient references to the several various dates and limitations specified in the Act, and to the various penal- ties prescribed therein for the same offense, but contained xxvii XXV111 PREFACE in different parts thereof, will be found in the tables at p. 302. In examining the subjects "Income," "Exemptions," and "Deductions," particular attention should be paid to the cross-references in the notes. Digest of citations referred to in leading cases is gener- ally omitted, except where such citations illustrate a point not covered in the leading case. Parallel citations to unofficial series, where not appear- ing in the text, will be found in the Table of Citations. The abbreviations "T. D.," "Op. Atty. Gen.," and "I. R. R.," refer, respectively, to Treasury Decisions (Internal Revenue Department) ; Opinions of the Attor- neys General; and Internal Revenue Reports. The author desires to recognize with grateful apprecia- tion the co-operation and assistance of his associates, Mr. William Bell Wait, Jr., and Mr. Rufus B. Cowing, Jr. HENRY CROFUT WHITE. FEDERAL INCOME TAX LAW CHAPTER I HISTORICAL Earliest income tax acts The earliest European income taxes were those imposed by certain mediseval towns upon the earnings of artisans and tradesmen. 1 English acts The first general income tax act was passed in England, in 1799 (39 Geo. 3, chaps. 13, 22), and was succeeded by a number of acts of like tenor, of which the following are the most important : 2 180343 Geo. 3, c. 122. 180545 Geo. 3, c. 49. 180646 Geo. 3, c. 65. 18425 & 6 Viet., c. 35. 185316 & 17 Viet., c. 34. 186932 & 33 Viet., c. 67. 188750 & 51 Viet., c. 15. 189457 & 58 Viet., c. 30. 189760 & 61 Viet., c; 24. 189861 & 62 Viet., c. 10. 19077 Edw. 7, c. 13. 191010 Edw. 7, c. 8, 1 Geo. 5, c. 35. '5 Pol. Sc. Q. 57. 'Dowell, English Income Tax (1913), pp. IX, 1-14. 2 FEDERAL INCOME TAX LAW British Colonial Acts l Australian Commonwealth No national or federal act. The several States have independent local acts, as follows New South Wales 1895. Queensland 1902; amended 1906-7. South Australia 1884, 1894; amended 1908. Tasmania 1902, 1910. Victoria 1895. Western Australia 1907. British Columbia 1903. Canada No general income tax act, but Ontario and a few towns in Alberta have partial tax acts. Cape of Good Hope 1904. India 1886. New Zealand 1891, 1897. St. Vincent 1905. Seychelles 1900. Acts in other foreign countries l Austria 1702, 1849, 1896, 1898. Belgium No national or federal act. Many of the small Communes have local acts. Denmark 1903. Finland 1863, 1864 Now discontinued, but some of the cities have local acts. France 1871, 1907. Germany No national or federal act. Each Duchy and State has an independent local act, as follows : 1 Income Taxation, K. K. Kennan, 1910; Accounts and Papers, 1905, Vol. 42 (English Parliamentary Documents); Report from the Select Committee on Income Tax (English Blue Book), Nov., 1906, p. 90; Seligman Essays in Taxation, 2nd edition, p. 314; 9 Pol. Sc. 2, 614: 1 Br. Selec. Par. Papers (1905), Rep. on Inc. Tax in Foreign Countries, 26 Cong. Rec., Pt. I, p. 584. HISTORICAL Alsace-Lorraine 1892, 1901, 1905. Anhalt 1894. Baden 1884. Bavaria 1881, 1899. Bremen 1874, 1893, 1905. Brunswick 1899. Hamburg 1903, 1908. Hesse 1899. Lippe-Detmold 1894, 1903, 1905, 1907. Liibeck 1889. Luxemburg 1 89 1 . Mecklenburg-Schwerin 1 903. Mecklenburg-Strelitz 1905. Oldenburg 1906, 1908. Prussia 1811, 1891; amended 1893, 1896, 1899. Reuss (Older Line) 1893. Reuss (Younger Line) 1898. Saxe-Altenburg 1896, 1899, 1901. Saxe-Coburg 1874, 1900. Saxe-Gotha 1902, 1908. Saxe-Meiningen 1890. Saxe-Weimar 1908, 1910. Saxony 1878, 1894. Schaumburg-Lippe 1901, 1904, 1905. Schwalzburg-Sondershausen 1 894, 1 904. Schwarzburg-Rudolstadt 1902, 1908. Waldeck 1893. Wiirtemberg 1852, 1903, 1905. Holland (The Netherlands) 1892, 1893. Hungary 1903. Italy 1864, 1894, 1907. Japan 1 1899, 1904, 1905. Norway 1882, 1899, 1911. Panama 1904, 1909. Portugal No income tax proper. 1 Financial & Economic Annual, Japan, 1901. 4 FEDERAL INCOME TAX LAW Russia No national or federal act, but many of the states have local acts. Spain 1896, 1900. Sweden 1897, 1902. Switzerland No national or federal act, but each of the Cantons has separate local acts passed between 1892 and 1900, as follows: Aargan, Appenzell, Bale-campagne, Bale-ville, Berne, Friborg, Orisons, Geneva, Neuchatel, Lucerne, Schaffhausen, Soleure, St. Gall, Thur- gan, Ticino, Vallis, Vaud, Zug, Ziirick. American colonial and state acts ' The first income tax act in the American colonies was passed by the Colony of Massachusetts in 1634, by which taxes were to be levied according to estate and ability. 2 Other colonial acts were the following : 3 Alabama, 1844, repealed 1884. Connecticut, 1649. Assessments apportioned to the estimated gains or profits arising from all lucra- tive professions, trades and occupations, 177 1. 4 Repealed 1884. Delaware, 1869. Tax imposed on estimated annual income; and gains and profits of certain classes; and ground rents. 5 Repealed 1871. Florida, 1845. Repealed 1855. Georgia, 1797, 1863. Tax imposed upon persons conducting specified professions or business. 6 Repealed 1866. 1 Income Taxation, K. K. Kennan, 1910; The Income Tax, Selig- inan, 1913; The Income Tax in the Commonwealths of the U. S. (Vol. 42, 1903, Pub. Amer. Econ. Assn., 320 series), D. O. Kinsman; The Present Period of Income Tax Activity, &c., 23 Q. J. Econ. (1909), p. 296. 2 5 Pol. Sc. Q. 57-8; 1 Mass. Col. Rec. (Shurtleff) 120. 3 Pollock v. Farmers' L. & T. Co., 158 CL S. 607. 4 1 Conn. Col. Rec. 548, 559. 5 7 Am. St. Papers 1 Fin. 429. 8 Watkins' Dig. Laws Ga. (1800) 646. HISTORICAL 5 Hawaii, 1901. Kentucky, 1867. Repealed 1871. Louisiana, 1865. Repealed 1910. Allowed to lapse since 1900. Maryland, 1777, 1842. Tax imposed upon annual income or profit of persons holding public office; conducting certain specified professions and occupations; or receiving annuity or stipend. 1 Repealed 1850. Massachusetts Colony, 1635. Tax imposed upon persons according to whole ability. 2 Massachusetts Colony, 1646. Tax imposed upon specified classes of tradesmen to be rated for returns and gains. 3 1695, 1780. Massachusetts, 1843, 1882, 1888, 1902. Tax upon income from certain sources. 4 Missouri, 1861. Repealed 1866. New Hampshire, 1719, 1772. Tax on general ability. New Jersey, 1684, 17^5. Tax imposed upon persons following any trade or merchandizing, to be assessed according to discretion of assessor. 5 North Carolina, 1849, 1893, 1907. 6 Oklahoma, 1908. Pennsylvania, 1782. Offices, posts of profit, trades and occupations to be rated at discretion of assessors with reference to their respective profits, 1841. Repealed 1871. 7 1 Md. L. 1777, ch. 22, 35-6. 2 5 Pol. Sc. Q. 57; 1 Mass. Col. Rec. (Shurtleff) 166. 3 2 Col. Rec. of Mass. Bay, 173, 213; 3 Col. Rec. of Mass. Bay, 88; Charters & Gen. Laws of Mass. (1814) 70. 4 1 Mass. Rev. Stat. 206, sec. 4. 5 N. J. Laws, 1664-1702 (Jenning & Spicer) 494; N. J. Laws, 1732 (Kinzey) 171. 6 N. C. Acts 1848-9, c. 77, p. 129; Laws 1907, c. 256 Pell's Re- visal, 1908, 5127 et seq. 7 2 Dallas' Digest, 8. 6 FEDERAL INCOME TAX LAW Plymouth Colony, 1643, 1689. Persons to be taxed according to goods, faculties and personal abilities. 1 Rhode Island, 1673. Repealed 1750, 1774. Tax im- posed upon all persons who profit by their facul- ties and rated accordingly. 2 South Carolina, 1701, 1758, 1760, 1838, 1902. Per- sons to be taxed, among other things, on abilities and profits from office or employment. 3 Tennessee, 1883, 1895. Tax upon income from cer- tain sources. 4 Texas, 1863. Repealed 1871. Tax upon receipts of certain corporations and occupations, 1907. 5 Vermont, 1779, 1797. Assessments proportioned to the profits of specified professions and busi- ness. 6 Virginia, 1777, 1782, 1786. Tax imposed upon per- sons conducting specified business and profes- sions, 7 1843, 1849, 1903, 1908, 1910. 8 West Virginia, 1863. Repealed 1864. Wisconsin, 1911. Southern Confederacy, 1861 9 Federal acts 1794 "An act laying duties upon carriages for the conveyance of persons." Chap. XLV, Laws of 1794, approved June 5, 1794. 10 1 4 Plymouth Col. Rec. (Pulsifer) 102; 6 Plymouth Col. Rcc. 22. 2 R. I. Acts & L., Newport, 1845, p. 295; 3 R. I. Col. Rec. 300; 2 R. I. Col. Rec. 510; cp. 1 New Haven Col. R,ec. 494. 3 Cooper, Stat. at L., ss. 2, 36, 183. 4 Tenn. Laws 1895, c. 120, sec. 9, subsec. 10. 5 Tex. Laws 1907, p. 497, 1-24. 6 Vt. Laws (1798) p. 565. 7 12 Henning's Stat. 283; 13 Henning's Stat. 114. 8 Va. Tax Bill, Apr. 16, 1903, as amended by Laws 1910, p. 487. 9 Inc. Taxation, Kennan; Inc. Tax Act, Seligman. 10 1 Stat. 373. HISTOKICAL 7 1796 Same act, as amended, Chap. XXXVII, Laws of 1796, approved May 28. 1 The above statutes, although not properly income tax acts, are here noted because frequently referred to in cases considering this subject. 1861 " An act to provide increased revenue from imports, to pay interest on the public debt, and for other purposes." Chap. XLV, Laws 1861, approved Aug. 5. 2 1862 "An act to provide internal revenue to sup- port the government and to pay interest on the public debt." Chap. CXIX, Laws 1862, ap- proved July I. 3 1863 "An act to amend 'An act to provide internal revenue to support the government and to pay interest on the public debt/ approved July 1, 1862, and for other purposes." Chap. LXXIV, Laws 1863, approved March 3. 4 1864 "An act to provide internal revenue to support the government, to pay interest on the public debt, and for other purposes." Chap. CLXXIII, Laws 1864, approved June 30. 5 1864 Joint resolution imposing special income duty. July 4, 1864. 6 1865 "An act to amend 'An act to provide internal revenue to support the government, to pay interest on the public debt, and for other purposes/ approved June 30, 1864." Chap. LXXVIII, Laws 1865, approved March 3. 7 1866 "An act to declare the meaning of certain parts of the internal revenue act, approved June 30, 1864, and for other purposes." Chap. XV, Laws 1866, approved March 10. 8 1 U. S. Laws 1796, p. 95. B 13 Stat. 223. * 12 Stat. 292. 6 13 U. S. Stat. 417. 3 12 Stat. 432. 13 Stat. 469. * 12 Stat. 713. 8 14 Stat. 4. FEDERAL INCOME TAX LAW 1866 "An act to reduce internal taxation and to amend 'An act to provide internal revenue to support the government, to pay interest on the public debt, and for other purposes/ approved June 30, 1864." Chap. CLXXXIV, Laws 1866, approved July 13. 1 1867 "An act to amend existing laws relating to internal revenue and for other purposes." Chap. CLXIX, Laws 1867, approved March 2. 2 1870 "An act to reduce internal taxes and for other purposes." Chap. CCLV, Laws 1870, approved July 14. 3 1894 "An act to reduce taxation, to provide revenue for the government, and for other purposes." Chap. CCCXLIX, Laws 1894, approved Aug. 27. 4 1895 Joint resolution extending time to file returns. Feb. 21, 1895. 5 1909 "An act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes." Chap. VI, Laws 1909, approved Aug. 5. 6 1913 "An act to reduce tariff duties, and to provide revenue for the government, and for other purposes." Chap. XVI, Laws 1913, approved Oct. 3, 1913. 7 1 14 Stat. 98. 28 Stat. 509. * 14 Stat. 471. 28 Stat. 971. 8 16 Stat. 256. 36 Stat. 112. 7 38 Stat. Ch. 16. CHAPTER II CONSTITUTIONALITY Constitutional power to tax. Limitations Congress has, without question, always possessed con- stitutional power to levy and collect taxes of every nature, extending to all usual taxable objects; and to pass all laws necessary therefor, subject only to the limitation that it might not tax exports, and to the qualifications that every tax must be uniform, and that every direct tax must be imposed by apportionment among the states according to their respective population. 1 A limitation is also indirectly imposed by the special provision of the Constitution that the compensation of neither the President nor the federal judges shall be dimin- ished during their period of office. 2 A further limitation has been declared by the courts that Congress cannot by taxation, or otherwise, interfere with the exercise by the several states of their sovereign powers, which powers are absolute within their respective domains, 3 and that it cannot, therefore, constitutionally impose a tax upon the compensation of the officers or em- 1 U. S. Cons., Art. I, sec. 8, par. 1; Art. I, sec. 2, par. 3; McCray v. United States, 195 U. S. 56, 49 L. Ed. 95, 24 S. Ct. 796; Pacific Ins. Co. v. Soule, 7 Wall. 433, 19 L. Ed. 95; Cyc. "Internal Revenue Tax"; 27 A. & E. Enc. 586-7; Ward v. Maryland, 12 Wall. 427, 20 L. Ed. 452. 2 U. S. Cons., Art. II, sec. 1, par. 7; Art. Ill, sec. 1. 3 U. S. Cons., Art. X; South Carolina *. United States, 199 U. S. 448, 50 L. Ed. 464, 26 S. Ct. 110. 9 10 FEDERAL INCOME TAX LAW ployes, 1 or upon the financial obligations or income 2 of a state or any political subdivision thereof. Subject to these limitations, the power of Congress is absolute; and the question as to whether a tax is wise, rea- sonable, excessive, or oppressive is not a matter of judicial inquiry. 3 Impairment of contracts The constitutional prohibition of laws impairing the obligation of a contract extends only to state and not to federal enactments. 4 An existing contract between in- dividuals or between the State and an individual cannot, therefore, be set up to defeat a tax. 5 Payment of tax at the source From this rule, and from the inherent power of Congress to enact all necessary laws to carry into effect any tax which it may constitutionally enact, 6 it would seem to follow that the provision for payment of taxes upon income by the "source" is not unconstitutional. Such provisions have in fact been upheld, 7 even where the tax was to be paid by the source out of any funds then or thereafter coming into its possession, 8 the source being constituted 1 Collector v. Day, 11 Wall. 113, 20 L. Ed. 122; United States t>. B. & O. R. R- Co., 17 Wall. 322, 21 L. Ed. 597; Weston v. Charlestown, 2 Pet. 449, 7 L. Ed. 481; McCulloch v. Maryland, 4 Wheat. 432, 4 L. Ed. 582. 2 United States v. B. & 0. R. R. Co., 17 Wall. 322, 21 L. Ed. 597; Pollock 0. Farmers' Loan & Trust Co., 157 U. S. 429, 561, 39 L. Ed. 759-812, 15 S. Ct. 673. 3 McCray v. United States, 195 U. S. 27, 49 L. Ed. 78, 24 S. Ct. 796; Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482. 4 U. S. Cons., Art. I, sec. 10, par. 1. 5 Mich. Cen. R. R. v. Slack, 22 I. R. R. 337, affd. 100 U. S. 595, 25 L. Ed. 647. 6 1 Cooley, Taxation, 3d Ed., p. 54. 7 First. Natl. Bank v. Kentucky, 9 Wall. 353, 19 L. Ed. 701. 8 Cummings v. Mchts. Natl. Bank of Toledo, 101 U. S. 153, 25 L Ed. 903. CONSTITUTIONALITY 11 the agent of the government for the collection of the tax. 1 Uniformity of taxation Uniformity of taxation, as required by the constitution, demands only that the same plan and method shall be operative throughout the United States. 2 In general, the requirement is satisfied if the tax is uniform throughout the territory affected. 3 Any reasonable classification may be adopted, and the rates and modes of taxation of such classes need not be uniform, 4 provided property similarly situated is taxed at the same rate, 5 and there is no distinction between members in the same class. 6 The Supreme Court has, in fact, gone so far as to declare that an assessment which imposed the same tax upon every species of property, irrespective of its nature, con- dition or class, would be destructive of the principle of uniformity and equality in taxation, and of a just adapta- tion of property to its burden. 7 Uniformity of exemption The same rule is held regarding the classification of 1 United States v. B. & 0. R. R., 17 Wall. 322, 21 L. Ed. 597. "Edye v. Robertson, 112 U. S. 580, 28 L. Ed. 798, 5 S. Ct. 247; Knowlton v. Moore, 178 U. S. 41, 44 L. Ed. 969, 20 S. Ct. 747; Moore v. Miller, 5 A. C. (D. C.) 413; Nicol v. Ames, 173 U. S. 509, 19 S. Ct. 522, 43 L. Ed. 786; Tappan v. Mchts. Natl. Bank, 19 Wall. 490, 22 L. Ed. 189; Legal Tender Cases, 12 Wall. 457, 20 L. Ed. 314; Hepburn v. Griswold, 8 Wall. 603, 19 L. Ed. 513. 3 27 A. & E. Enc. 595. 4 Commonwealth v. Germania Brewing Co., 145 Pa. St. 83, 22 A. 240; Commonwealth v. Sharon Coal Co., 164 Pa. St. 284, 30 A. 127; Ky. Ry. Cases, 115 U. S. 321, 29 L. Ed. 414, 6 S. Ct. 57; Magoun v. Bank, 170 U. S. 283, 42 L. Ed. 1038, 18 S. Ct. 594; Cooley, Taxation, 3d Ed. 260. 6 27 A. & E. Enc. 600. Bell's Gap R. R. Co. v. Pennsylvania, 134 U. S. 232, 33 L. Ed. 892. 7 Pac. Express Co. v. Siebert, 142 U. S. 339, 12 S. Ct. 250, 35 L. Ed. 1038, 12 S. Ct. 250. 12 FEDERAL INCOME TAX LAW exemptions from taxation. 1 Thus, for example, the exemption of charitable and educational institutions - and the exemption of the salaries of state officers and employes 3 are held not to offend against the rule of uniformity. It is apprehended that if an exemption were so disproportionate as to be utterly unreasonable, the imposition of a tax upon persons or property not so exempted might be held confiscatory the taking of property without due process. The fact that taxes may vary by reason of the imperfect knowledge or judgment of the assessor does not render the act unconstitutional, for taxes are uniform when they are so imposed upon the subjects of a given class as to make the same amount payable upon values held to be the same by the proper official in the exercise of his rea- sonable judgment. 4 The only exception to this principle may be where an inequality in the enforcement of the act is so great as to be presumed intentional. 5 i Double taxation It is also well established that an act is not unconstitu- tional which results in double taxation, 6 particularly where 1 Pac. Exp. Co. v. Siebert, 142 U. S. 339, 12 S. Ct. 250, 35 L. Ed. 1038; Knowlton v. Moore, 178 U. S. 83, 20 S. Ct. 747, 44 L. Ed. 986; Cooley, Taxation, 3d Ed. 262, 269-273, 343, 356; High v. Coyne, 178 U. S. Ill, 20 S. Ct. 747, 44 L. Ed. 997; Fidelity, etc., Ins. Co. . Mc- Lain, 178 U. S. 113, 44 L. Ed. 998; City of New Orleans v. Davidson, 30 La. Ann. 554; Flint v. Stone, Tracey & Co., 220 U. S. 107, 55 L. Ed. 389. 2 25 A, & E. Enc. 163, 169; Cooley, Taxation, 3d Ed. 354. 3 Collector v. Day, 11 Wall. 113, 20 L. Ed. 122. 4 Commonwealth v. Del. Co., 123 Pa. St. 602, 16 A. 584, 2 L. R. A. 798. 6 27 A. & E. Enc. 599. 6 Patton v. Brady, 184 U. S. 608, 22 S. Ct. 493, 46 L. Ed. 713; West- fall v. Shook, 5 Blatch. 383, Fed. Cas. 17448; Society for Savings v. Coit, 6 Wall. 594, 18 L. Ed. 897; Providence Bk. v. Billings, 4 Pet. 514, 7 L. Ed. 939; Moore v. Miller, 5 A. C. (D. C.) 413; Cooley on Tax., 3d Ed. 392. CONSTITUTIONALITY 13 no real substantial inequality of burden is occasioned thereby. 1 The rule against double taxation applies in any event to a property tax based on values, and not to income taxes. 2 Due process, etc. It has also been held that the provisions of the revenue laws for distraint of property for the payment of taxes, 3 or the grant of power to a collector to require the produc- tion of books for examination, 4 or to enter a building or place where taxable articles or objects are kept, 5 or to impose the statutory penalties 6 did not offend against the constitutional guaranty of due process of law, or constitute a grant of judicial powers to an admin- istrative officer. 7 The prohibition of any action to restrain either assess- ment or collection of taxes (Rev. Stat., 3224) has also been held constitutional. 8 On the other hand, the requirement for the production of private books and papers has been held unconstitu- 1 27 A. & E. Enc. 608, citing Davidson v. New Orleans, 96 U. S. 97, 21 L. Ed. 616; Tennessee v. Whitworth, 117 U. S. 129, 6 S. Ct. 645, 29 L. Ed. 830; New Orleans v. Houston, 119 U. S. 265, 7 S. Ct. 198, 30 L. Ed. 411 2 27 A. & E. Enc. 610. 3 Springer v. United States, 102 U. S. 586, 26 L. Ed. 253; Mason v. Rollins, Fed. Gas. 9252, 2 Biss. 99. 4 Re Meadow (Meador) & Bros., Fed. Gas. 9375, 1 Abb. (U. S.) 317, 10 I. R. R. 74. s Kimball v. Weld, Fed. Gas. 7776; Stockwell v. United States, 3 Clif . 284. 6 Doll v. Evans, 9 Phila. 364, Fed. Gas. 3969; Flint v. Stone Tracy Co., 220 U. S. 107, 55 L. Ed. 389. 7 Re Meador, 1 Abb. (U. S.), 317, Fed. Gas. 9375; Re Strouse, 1 Sawy. 605, Fed. Gas. 13548. * Rowland v. Soule, Deady, 413, Fed. Gas. 6800; Pullan v. Kin- singer, 2 Abb. (U. S.) 94, Fed. Gas. 11463. 14 FEDERAL INCOME TAX LAW tional so far as applied to statutes for penalties or for- feitures. 1 It has also been suggested that the statutes (Rev. Stat., 3173, 3175) granting to collectors power of entry and examination, and punishing disobedience of their summons, as a contempt, would be unconstitutional, if construed to make the exercise of such power depend- ent solely upon the arbitrary discretion of a collector, and regardless of its connection with his proper juris- diction; or the said disobedience as punishable without prior judicial action. 2 That the taxation of corporations, organized under state laws either by way of franchise tax or excise for the privilege of doing business is within the power of the federal government, is unquestioned. 3 This is the case even though the tax imposed upon a public service corporation, or on a private business carried on by a state and not directly connected with the exercise of its sovereign powers. 4 Income tax, a direct tax The constitutionality of the several income tax acts, as well as of acts kindred thereto, has been constantly at- tacked upon the ground that they laid direct taxes not based upon apportionment; but prior to the consideration of the act of 1894, these taxes were invariably sustained as being excise taxes in the case of corporations, a payment for the privilege of doing business, as was the case with the corporation tax act of 1909. 5 1 Boyd v. United States, 116 U. S. 616, 29 L. Ed. 746. 2 Re Kinney, 102 Fed. 468; Re Becker, 22 I. R. R. 266, Fed. Cas. 1208. Cp. Re Phillips, Fed. Cas. 11097, 10 I. R. R. 107; Ex parte Doll, 11 1. R. R. 36, 7 Phila. 595, Fed. Cas. 3968. 3 Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482; Nicoll v. Ames, 173 U. S. 509, 43 L. Ed. 786, 19 S. Ct. 522; Thomas v. United States, 192 U. S. 363; Flint v. Stone, Tracey & Co., 220 U. S. 107, 55 L. Ed. 389. 4 South Carolina v. United States, 199 U. S. 437, 50 L. Ed. 261, 271, 26 S. Ct. 110; Flint v. Stone, Tracey & Co., 220 U. S. 107, 55 L. Ed. 389. 5 Hylton v. United States, 3 Ball. 171, 1 L. Ed. 556; Pac. Ins. Co. CONSTITUTIONALITY 15 If the reasoning of the authorities upon this point is not entirely satisfactory, it will be remembered that the acts were passed to meet the necessities occasioned by the Civil War, and were inevitably construed with this in mind. Upon a consideration of the same question in connection with the Act of 1894, the Supreme Court practically reversed the earlier decisions, holding the act unconstitu- tional as laying a direct tax. 1 Direct tax Constitutional amendment The point is now settled by the constitutional amend- ment granting power to Congress "to lay and collect taxes on incomes from whatever source derived, and without apportionment among the several states, and without regard to any census or enumeration." 2 Retroactive and alien taxation There are two questions that have occasionally arisen in the administration of income tax laws which cannot be considered as entirely settled. These are whether tax acts (a) having a retroactive effect, or (b) taxing the income of non-resident aliens are constitutional. (a) Ex post facto statutes The class of statutes prohibited, as ex post facto, does not necessarily include all retroactive laws: it includes those laws which 1. Make criminal, actions committed before the enact- ment and which were innocent when committed. 2. Make a crime greater than when committed. . Soule, 7 Wall. 433, 19 L. Ed. 95; Springer . United States, 102 U. S. 586, 26 L. Ed. 253; Memphis R. R. Co. v. United States, 108 U. S. 234, 27 L. Ed. 713. 1 Pollock v. Farmers' L. & T. Co., 158 U. S. 601, 39 L. Ed. 1108, 15 S. Ct. 912. 2 U. S. Cons., XVI Amdt., 36 Stat. Ft. I. 16 FEDERAL INCOME TAX LAW 3. Inflict a greater punishment than that imposable for a crime when committed. 4. Require less or different testimony for conviction of an offence than that required at the time of its com- mission. 1 In general, therefore, it has been held that the ex post facto prohibition applies only to statutes respecting crimes and punishments. 2 Although the decisions upon this subject will be found generally to deal with criminal cases, the prohibition has frequently been declared to extend to laws of a penal nature; 3 thus, acts rescinding a state grant of real property because of fraud in its inception; 4 or increasing the penalty for a failure to comply with the specifications of the Railroad Law as to locomotive bells; or providing for an award of punitive damages hi certain cases, 5 were held unconstitutional. 6 It has also been generally stated that statutes imposing penalties and forfeitures cannot be extended by construc- tion without virtually enacting ex post facto laws by judicial legislation. 7 1 Calder v. Bull, 3 Ball. 389, 1 L. Ed. 650. 2 Carpenter v. Pennsylvania, 17 How. (U. S.) 462, 15 L. Ed. 128; Satterlee v. Matthewson, 2 Pet. 415, 7 L. Ed. 470; Willoughby, Cons. Law, 802; Lock v. Dane, 9 Mass. 360; Southwick v. Southwick, 49 N. Y. 510; Hartung t>. People, 22 N. Y. 95; Ratzky v. People, 29 N. Y. 124. 3 Kring v. Missouri, 107 U. S. 221, 2 S. Ct. 443, 27 L. Ed. 506; Hawker v. N. Y., 170 U. S. 189, 18 S. Ct. 573, 42 L. Ed. 1002; Mallctt . N. C., 181 U. S. 589, 21 S. Ct. 730, 45 L. Ed. 1015; Thompson v. Utah, 170 U. S. 343, 18 S. Ct. 630, 42 L. Ed. 1061; Watson v. Mercer, 8 Pet. 109, 8 L. Ed. 883; League v. Texas, 184 U. S. 161. 22 S. Ct. 475, 46 L. Ed. 480; Re Sawyer, 124 U. S. 200, 8 S. Ct. 482, 31 L. Ed. 402; Gotcheus v. Matheson, 61 N. Y. 101; Re Medley, 134 U. S. 160, 10 S. Ct. 483, 33 L. Ed. 835. 4 Fletcher v. Peck, 6 Cranch, 137, 3 L. Ed. 178. 5 O'Donoghue v. Akin, 63 Ky. 478 Wilson . Ohio & M. Ry. Co., 64 III. 542. 7 Curtis v. Leavitt, 17 Barb. 309. CONSTITUTIONALITY 17 It is not essential, in order to render a statute invalid as ex post facto, that the action to which it relates should be assumed to be criminal, or the punishment provided on that ground. The prohibition will apply to any law subjecting an individual to a pecuniary penalty for an act which when done, involved no responsibility, or de- priving a party of any valuable right, such as the right to follow a lawful calling, because of acts which were in- nocent, or at least not punishable by law, when com- mitted. 1 Although in terms thus restricted to criminal and penal laws, there is one early decision of the Supreme Court, which may well be considered in connection with this subject, indicating that, where necessary to prevent manifest injustice, the ex post facto doctrine might even be extended to cases arising under statutes of other nature. 2 There is no question that while a retroactive operation will not be given by construction, so as to subject persons to a tax upon interests which they may have acquired long prior to the enactment; 3 or, after annual tax settlements, to authorize inquiries by the taxing officer extending back for a number of years, 4 an act is not void from the mere fact that it may divest antecedent rights of property. 5 The principle, originally laid down by the Supreme Court, that tax acts having a retrospective operation, are not, upon that ground, to be classed as ex post facto and unconstitutional, has been uniformly held unques- tionable. 6 This was maintained even where such act resulted in 1 Cooley on Cons. Lim. (1903) 375. 2 Ogden v. Saunders, 25 U. S. 285, 6 L. Ed. 630. ' Folsom v. United States, 21 Fed. 37. 4 Sturges v. Carter, 114 U. S. 511, 5 S. Ct. 1014, 21 L. Ed. 240. 5 Watson v. Mercer, 8 Pet. 110, 8 L. Ed. 884; League v. Texas, 184. U. S. 161, 46 L. Ed. 478; People ex rel. Collins v. Spicer, 99 N. Y. 225. 8 Locke v. New Orleans, 4 Wall. 172, 18 L. Ed. 334; Exchange Bank Tax Cases, 21 Fed. 91; Orr v. Oilman, 183 U. S. 278, 22 S. Ct. 213, 46 L. Ed. 196; Cooley, Taxation, 3d Ed. 492. 18 FEDERAL INCOME TAX LAW the practical imposition of a penalty because of the dis- tribution of dividends prior to the enactment. 1 The character of the statute under consideration in this case should, however, be carefully noted. Apparent qualifications of this principle will be generally found dependent upon the reading of particular statutes. 2 Further, acts passed after a tax has fallen due, providing the method of collection thereof, 3 or requiring payment of interest from the due date; 4 and acts authorizing addi- tions to be made to taxable property omitted by the owner in previous years, are constitutional. 5 Questions as to present act The substantial questions which may arise as to the ex post facto nature of provisions of the present act will, accordingly, be chiefly as to the validity of provisions im- posing penalties; conferring upon public officials rights of entry or examination; and compelling the production of individual books and papers. The decision of the Supreme Court most frequently cited in this connection 6 actually turned upon the fact that the commission of the act attempted to be penalized was at an hour of the day prior to the passage of the stat- ute, and not, therefore, subject to the provisions thereof. Directly in point, however, are the following decisions: (a) An act providing that refusal to make an affidavit as to business done during a period beginning before the date of the enactment, should be deemed a misdemeanor, punishable by fine or imprisonment, is constitutional : 7 Stockdale v. Insurance Co., 20 Wall. 323, 22 L. Ed. 348. 2 Western Union R. R. Co. v. United States, 101 U. S. 543, 25 L. Ed. 1068; United States v. Indianapolis R. R. Co., 113 U. S. 711, 28 L. Ed. 1140. 3 People v. Seymour, 16 Cal. 332; League v. Texas, 184 U. S. 156, 22 S. Ct. 475, 46 L. Ed. 478. 4 League v. Texas, 184 U. S. 156, 46 L. Ed. 478. 5 Gager v. Prout, 48 Ohio St. 89, 26 N. E. 1013. 8 Burgess v. Salmon, 97 U. S. 381, 97 L. Ed. 1104. 7 State v. Bell, 61 N. C. 76. CONSTITUTIONALITY 19 (6) In a proceeding begun before the enactment of a statute authorizing the court, in any civil suit arising under the revenue laws, to require a defendant to produce any books and papers tending to prove the government's allegations or take such allegations as confessed, an order directing such production, if expressly limited to books and papers referring to business done subsequent to the date of enactment, would be valid. 1 (This decision suggests that in an action, begun subsequent to the date of the enact- ment, an order directing the production of books relating to business done prior thereto, would have been held illegal, as ex post facto. This is emphasized by the fol- lowing decision): (c) An act authorizing the court to require such produc- tion is ex post facto as to any proceeding begun before the date of the enactment, where the order is not so limited : 2 (d) Acts providing for the imposition of penalties for defaults committed in years prior to the date of enactment, are ex post facto and unconstitutional: 3 (e) A statute which is ex post facto as to certain offenses is not, therefore, wholly void, but may be valid as to such offenses as are committed after the date of the enactment. 4 A further, and important question may arise as to the constitutionality of the present statute in so far as it may be applicable to any income earned or accrued before the passage of the constitutional amendment, because prior thereto no power rested in Congress to levy a tax upon incomes except by apportionment. The act imposes the tax upon individual net income accruing from March 1st to December 31st, 1913. If by "accruing" is meant received or becoming payable, * United States v. Distillery No. 28, 6 Biss. 493, Fed. Gas. 14966. 2 United States v. Hughes, 8 Benedict, 29, Fed. Cas. 15416; United States v. Distillery No. 28, 6 Biss. 493, Fed. Cas. 14966. 3 Gager v. Prout, 48 Ohio St. 89, 26 N. E. 1013; Metz v. Hagerty, 51 0. St. 521, 38 N. E. 11; Ryan v. State, 5 Neb. 276. Jaehne v. New York, 128 U. S. 189, 9 S. Ct. 70, 32 L. Ed. 398. . 20 FEDERAL INCOME TAX LAW it may be questioned whether the provision is constitu- tional as to the taxation of any income so received, but which may have been earned prior to the amendment. The act imposes the tax upon corporate net income accrued within that portion of 1913 from March 1st to December 31st, both dates inclusive. As "accrued" may be assumed to be intended to have the same meaning as "accruing" in the case of individual income, the same objection will apply to this provision. A second objection may also be made upon the ground that the corporate net income for the specified portion of said year is to be taken as five-sixths of the entire net income for the calendar year, which may be entirely contrary to fact, and objectionable not only as including income actually earned prior to the constitutional amend- ment, but also as based upon a physical untruth. The further objection, sometimes urged, that no retro- active income tax act can be constitutionally passed, be- cause income received prior to the enactment of the statute has become principal, and no longer exists as income for any purpose, is probably untenable for reasons discussed above (p. 15). In this general connection, see "Construction of Par- ticular Acts," (p. 30). Taxation of aliens The right of any sovereignty to tax aliens resident within its territory, upon property therein located, has never been doubted. As to the right to tax non-resident aliens upon such prop- erty, the question does not appear to have been directly and satisfactorily settled, at least in the United States. The Supreme Court has consistently held that the con- stitution is the only limitation upon the power of Congress in this respect of which the judicial branch of the govern- ment will take notice. 1 i Mich. Cen. R. R. Co. v. Slack, 100 U. S. 595, 25 L. Ed. 647. CONSTITUTIONALITY 21 The question as to whether this power could be consti- tutionally exercised, was raised at an early date (1868), l but not decided, in view of the court's conclusion that the Act of 1864 did not apply to non-resident aliens. The opinion there expressed, that a somewhat similar state statute, under examination in the same case, imposed a tax upon the property of the alien, must be cautiously accepted as here in point, because of the peculiar wording of that statute. The act having been made to include non-resident aliens by legislative declaration, 2 and amendment, 3 the question as to the incidence of the tax was, in 1872, incidentally but carefully considered, 4 but can scarcely be said to have been satisfactorily determined. Although in the majority opinion it was stated that the tax was imposed upon the corporation, and not upon the creditor or stockholder, one member of the court con- curred upon another ground, and from the opinion four members dissented, holding the corporation to be merely a collector for the Government. Moreover, in the next reported case, 5 decided about a month later, the court expressly adopted the doctrine of the earlier cases, 6 declaring these to have been a clear, distinct, and unqualified adjudication that the tax im- posed by the Act of 1864 was upon the creditor or stock- holder, and not upon the corporation, the latter being merely used as a convenient and effective instrument for collection. 7 1 R. R. Co. v. Jackson, 7 Wall. 263, 19 L. Ed. 88. 2 Laws 1866, Chap. XV, 14 Stat. 4. 3 Laws 1866, Chap. CLXXXIV, 14 Stat. 98. Barnes v. B. & O. R. R., 17 Wall. 294, 21 L. Ed. 544. 5 United States v. R. R. Co., 17 Wall. 322, 21 L. Ed. 597. 8 Haight v. R. R. Co., 6 Wall. 17, 18 L. Ed. 819; R. R. Co. v. Jackson, 7 Wall. 262, 19 L. Ed. 88. * United States 7.. B. & 0. R. R. Co., 17 Wall. 322, 21 L. Ed. 597. 22 FEDERAL INCOME TAX LAW In 1873, this doctrine was reiterated in both prevailing and dissenting opinions. 1 In 1879, the court reversed its ruling in all of the earlier cases, holding that the tax imposed under the Act of 1864, as thus amended, was essentially an excise on the business of the corporation, 2 and, therefore, again declined to pass upon the direct question as to taxation of a non-resident alien. It is curious that this was done without comment or dissenting opinion, the probable explanation being found in the court's statement that the tax involved was small, the law under which it was collected long since repealed, and the case, therefore, of little consequence, as re- gards any principle involved in it, as a rule of future action. In 1882, by a divided court, this case was held as an authority for a decision imposing upon a corporation pay- ment of taxes which it had failed to deduct from dividends paid to such aliens. 3 A vigorous and convincing dissenting opinion was rendered by Field, J., however, to the effect that no language or argument could conceal the fact that this tax was upon the property of the stockholder or creditor; that the situs of such property was that of its owner; and that it was, accordingly, an absurdity to suppose that Congress had power to tax such income when payable to a non- resident. 4 In a separate opinion, Bradley and Harlan, JJ., while declaring the tax to be one upon neither the corporation, nor the stockholder and creditor, but upon the income, itself, expressly sustained its validity, upon the theory that Congress has the right to tax all property physically within the territory of the United States. 5 1 Stockdale v. Insurance Cos., 20 Wall. 323, 22 L. Ed. 348. 2 Mich. Gen. R. R. Co. v. Slack, 100 U. S. 595, 25 L. Ed. 647. 3 United States v. Erie Ry. Co., 106 U. S. 327, 27 L. Ed. 151. 4 United States v. Erie Ry. Co., 106 U. S. 330, 27 L. Ed. 153. 6 United States v. Erie Ry. Co., 106 U. S. 703, 27 L. Ed. 151. CONSTITUTIONALITY 23 The reasoning of the court in a more recent case with regard to a succession tax : would probably be held applica- ble to this question. 1 Eidman v. Martinez, 184 U. S. 578, 22 S. Ct. 515, 46 L. Ed. 697. CHAPTER III CONSTRUCTION General rules The basic principle of construction is to ascertain and give effect to the legislative intent. 1 This object is to be attained though it necessitate giving to general language a limited construction; 2 or extending the ordinary meaning of precise words; 3 or adopting a construction of the statute contrary to its terms. 4 This intent is to be found in the language of the statute, 5 in the interpretation of which, words of common usage should be accorded their ordinary meaning. 6 Where, however, words used in a statute have already acquired an accepted meaning, they will be presumed to be used in that sense. 7 1 United States v. Crosley, 196 U. S. 327, 25 S. Ct. 261, 49 L. Ed. 497. 2 McKee v. United States, 164 U. S. 287, 17 S. Ct. 92, 41 L. Ed. 437; Brewer v. Blougher, 14 Pet. 178, 10 L. Ed. 408; Reiche v. Smythe, 13 Wall. 162, 20 L. Ed. 566; United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 41 L. Ed. 1007. 3 United States . Freeman, 3 How. (U. S.) 556, 11 L. Ed. 724. 4 Treat v. White, 181 U. S. 267, 21 S. Ct. 611, 45 L. Ed. 853; United States v. Buchanan, 9 Fed. 689; Holy Trin. Church v. United States, 143 U. S. 457, 12 S. Ct. 511, 36 L. Ed. 227; Smythe v. Fiske, 23 Wall. 374, 23 L. Ed. 47. 6 United States v. Goldenberg, 168 U. S. 95, 18 S. Ct. 3, 42 L. Ed. 394; Pennington v. Coxe, 2 Cranch, 33, 6 L. Ed. 199. 6 United States v. Temple, 105 U. S. 97, 17 S. Ct. 436, 26 L. Ed. 967; United States v. Isham, 17 Wall. 496, 21 L. Ed. 728; United States v. Buchanan, 9 Fed. 689; Equit. Tr. Co. . Seldon, 8 Fed. Cas. 4508; Schriefer v. Wood, 5 Blatch. 215, Fed. Cas. 12481; Maillard v. Law- rence, 16 How. (U. S.) 251, 14 L. Ed. 925. 7 United States v. Mooney, 116 U. S. 106, 6 S. Ct. 304, 24 L. Ed. 551. 24 CONSTRUCTION 25 The whole statute should be construed in determining the meaning of any of its parts, 1 and effect should be given to every word and clause of the statute, in case of a con- flict, the act being so construed, if possible, as to render every word operative. 2 General expressions will not be considered so restrained by particular words as to render useless a distinct reference to an entire clause. 3 Part of an act cannot be disregarded unless so clearly repugnant to the residue that the whole cannot stand together. 4 Nor can a provision, omitted purposely or by error, be supplied. 5 If there be ambiguity in any particular, such construc- tion should be adopted as to harmonize the act with the general legislative purpose and spirit. 6 As Congress is bound to express its intention to impose a tax in clear and unambiguous language, words of ex- ception limiting its imposition should be liberally con- strued. 7 Statutes should be construed to apply only to the 1 Georgia v. Atkins, 1 Abb. (U. S.) 22, Fed. Gas. 5350; Pennington v. Coxe, 2 Cranch, 33, 2 L. Ed. 199. 2 Chicago, etc., R. R. Co. v. United States, 127 U. S. 406, 8 S. Ct. 1194, 32 L. Ed. 180; Montclair v. Ramsdell, 107 U. S. 147, 2 S. Ct. 391, 27 L. Ed. 431; Bernier v. Bernier, 147 U. S. 242, 13 S. Ct. 244, 37 L. Ed. 152; Wilmot v. Mudge, 103 U. S. 217, 23 L. Ed. 536. 3 Adams v. Woods, 2 Cranch, 336, 2 L. Ed. 297. 4 Rice v. Minn., etc., R. R. Co., 1 Black, 358, 17 L. Ed. 147. 5 Hobbs v. McLean, 117 U. S. 567, 29 L. Ed. 940. 6 Cardinel v. Smith, Deady, 197, Fed. Gas. 2395; United States v, Smock, 4 I. R. R. 202; Warren v. United States, 58 Fed. 559, also 4 Ct. Cl. 526; Bernier v. Bernier, 147 U. S. 242, 13 S. Ct. 244, 37 L. Ed. 152; Petri v. Commercial Bank, 142 U. S. 644, 35 L. Ed. 1144; Durons- seau v. United States, 6 Cranch, 307, 3 L. Ed. 232. 7 Eidman v. Martinez, 184 U. S. 578, 46 L. Ed. 697; Denn v. Dia- mond, 10 E. C. L. 320; Doe . Snaith, 21 E. C. L. 253; Wroughton v. Turtle, 11 M. & W. 560; Williams v. Sangar, 10 East, 66; Warrington v. Furbor, 8 East, 242. 26 FEDERAL INCOME TAX LAW future, unless they clearly and explicitly cover past trans- actions. 1 Construction will not favor fanciful or unsubstantial distinctions: 2 all general terms should be so limited in application as to prevent injustice, oppression, or uncon- stitutional operation: 3 and resort must be had to every reasonable construction to save a statute from uncon- stitutionally. 4 Internal evidence of legislative intent Where the words of statute are not explicit, the legis- lative intent may be ascertained from the context and general purpose of law, 5 and reference may be had to the title of an act, in cases of doubt or ambiguity. 6 External evidence of legislative intent In cases of doubtful meaning, all statutes in pari materia, whether repealed or not, should be considered : 7 And resort may also be had to the journals of Congress. 8 Although construction of the law is the duty of the judiciary, departmental decisions may be considered in, case of doubt. 9 Such decisions will usually be given weight; 10 and will be followed unless there are cogent 1 Stockdale v. Ins. Co., 20 Wall. 323, 22 L. Ed. 348; Re Brown, 3 I. R. R. 134, Fed. Gas. 1977. 2 United States v. Kallstrom, 30 Fed. 184. 3 Carlisle v. United States, 16 Wall. 147, 8 Ct. Cl. 153, 21 L. Ed. 426; United States v. Kirby, 7 Wall. 482, 9 L. Ed. 278. 4 Knights Templar, etc., Co. v. Jarman, 187 U. S. 197, 23 S. Ct. 108, 47 L. Ed. 139. 6 Saunders v. Howard, Fed. Cas. 12375; United States v. Freeman, 3 How. (U. S.) 556, 11 L. Ed. 724. United States v. 0. & C. Ry. Co., 164 U. S. 526, 17 S. Ct. 165, 41 L. Ed. 541; Knowlton v. Moore, 178 U. S. 41, 20 S. Ct. 747, 44 L. Ed. 969. 7 17 Op. Atty. Gen. 646; New Lamp Chimney Co. v. Ansonia, etc., Co., 91 U. S. 656, 23 L. Ed. 336. 8 Blake v. Natl. Bank, 23 Wall. 307, 23 L. Ed. 119. 9 Dunlap v. United States, 173 U. S. 65, 43 L. Ed. 619, 33 Ct. Cl. 135. 10 Smythe v. Fiske, 23 Wall. 382, 23 L. Ed. 49. CONSTRUCTION 27 reasons to the contrary. 1 The courts will not, however, feel bound to follow such decisions except in cases of doubt and where the construction adopted therein has been long accepted. 2 Rules specifically applicable to tax acts Congress is bound to express its intention to tax in clear and unambiguous language. If the language is clear, there is no room for presumption and what Congress intended is immaterial. 3 Words of exemption should be liberally construed. 4 Before property can be taken under the taxing power, it is necessary that the statute be clear and unambig- uous. 5 The courts are not at liberty by construction or legal decision to enlarge the scope of an act to include subjects of taxation not within its terms. 6 Revenue statutes, being neither remedial, nor founded 1 United States v. Moore, 95 U. S. 760, 24 L. Ed. 588; United States v. Finnell, 185 U. S. 236, 22 S. Ct. 633, 46 L. Ed. 890; Pennoyer v. McConnaughty, 140 U. S. 1, 35 L. Ed. 363; Schell v. Fauche, 138 U. S. 562, 34 L. Ed. 1040; United States v. Johnston, 124 U. S. 236, 8 S. Ct. 446, 31 L. Ed. 389; United States v. Hill, 120 U. S. 169, 7 S. Ct. 510, 30 L. Ed. 627; Brown v. United States, 113 U. S. 568, 28 L. Ed. 1097; Peabody v. Stark, 16 Wall. 240, 21 L. Ed. 311; United States v. Natl. Surety Co., 122 Fed. 904, 59 C. C. A. 130; United States . Tanner, 147 U. S. 661, 13 S. Ct. 436, 37 L. Ed. 321; Robertson v. Downing, 127 U. S. 607, 8 S. Ct. 1328, 32 L. Ed. 269; Hahn v. United States, 107 U. S. 402, 2 S. Ct. 494, 27 L. Ed. 527; St. Paul, etc., Ry. Co. v. Phelps, 137 U. S. 528, 11 S. Ct. 168, 34 L. Ed. 767. 2 Swift v. United States, 105 U. S. 691, 26 L. Ed. 1108; Fairbank v. United States, 181 U. S. 283, 45 L. Ed. 863. 3 N. Y. Tel. Co. v. Treat, 130 Fed. 340; Eidman v. Martinez, 184 U. S. 578, 46 L. Ed. 697. 4 Eidman t. Martinez, 184 U. S. 578, 46 L. Ed. 697. 6 Pa. Life Ins. Co. v. McClain, 105 Fed. 367; Phila., etc., R. R. Co. v. Kenney, Fed. Cas. 1188, 18 I. R. R. 92. United States v. Watts, 1 Bond, 580, Fed. Cas. 16653; United States v. Kenton, 2 Bond, 97, Fed. Cas. 15526. 28 FEDERAL INCOME TAX LAW upon permanent public policy, are construed in favor of the taxpayer and against the government. 1 They are, however, to be construed liberally so far as may be necessary to carry out the purposes of their enact- ment. 2 They should be construed with reasonable fairness to the citizen. 3 Where a tax act is of doubtful construction, the doubt is to be construed in favor of the taxpayer under both the English and American rules. 4 On the other hand, it has been held that an exemption from taxation will never be presumed, but must be clearly granted; 5 that a statute granting such exemption should be strictly construed; 6 and that where exceptions are 1 Amer. Net & Twine Co. v. Worthington, 141 U. S. 468, 35 L. Ed. 821; Rice v. United States, 53 Fed. 910, 4 C. C. A. 104; Mut. Ben. Life Ins. Co. v. Herold, 198 Fed. 199. 2 Smythe v. Fiske, 23 Wall. 374, 23 L. Ed. 47; United States v. Stowell, 133 U. S. 1, 10 S. Ct. 244, 33 L. Ed. 555; Cliquot v. United States, 3 Wall. 114, 18 L. Ed. 116; United States v. 28 Cases of Wine, 2 Ben. 63, Fed. Cas. 14281; United States v. Hodson, Fed. Cas. 15376, 14 I. R. R. 100; United States v. 36 Bbls. High Wines, 7 Blatch. 469, Fed. Cas. 16468; United States v. Cole, 134 Fed. 697. 'United States v. 1412 Gals. Dist. Spirits, 10 Blatch. 428, Fed. Cas. 15960, 22 Cyc. 1604; DeBary v. Souer, 101 Fed. 425, 4 C. C. A. 417. *A., N. and T. Co. v. Worthington, 141 U. S. 468, 35 L. Ed. 821; United States v. Isham, 17 Wall. 496, 21 L. Ed. 728; Wright v. Mich. Cen. R. R. Co., 130 Fed. 843, 65 C. C. A. 327; McNally v. Field, 119 Fed. 445; United States v. Muffins, 119 Fed. 334, 56 C. C. A. 238; Eq. Trust Co. v. Seldon, Fed. Cas. 4508; Powers v. Barney, 5 Blatch. 202, Fed. Cas. 11361; United States v. Wigglesworth, 2 Story, 369, Fed. Cas. 16690; Tomkins v. Ashley, 5 L. J. K. B. 246; Chandos v. Inland R. Comrs., 20 L. J. Ex. 269; Mut. Ben. Life Ins. Co. v. Herold, 198 Fed. 199. 5 Bank v. Tennessee, 161 U. S. 134, 40 L. Ed. 645; Southwestern R. R. Co. v. Wright, 116 U. S. 231, 6 S. Ct. 375, 29 L. Ed. 626; Yazoo, & M. V. Ry. Co. v. Adams, 180 U. S. 1, 21 S. Ct. 240, 45 L. Ed. 395. 8 Re Enston, 113 N. Y. 174; Erie R. R. Co. v. Pennsylvania, 21 Wall. 492, 22 L. Ed. 595. CONSTRUCTION 29 provided in a general statute, all others than those named are excluded. 1 A tax statute for the protection or convenience, only, of a taxpayer and primarily directed to public officers for their guidance and the substantial protection of the Government, is not so vital as to be regarded as manda- tory, and acts not done in strict conformity thereto, as void. 2 There is, however, a difference in construction of those provisions of the revenue laws which point out the sub- jects to be taxed, etc., and those which impose penalties. 3 Even such provisions as impose penalties, however, are so construed as best to carry out the legislative intent. 4 Although revenue laws should not be so construed as to be odious or oppressive to the people, 5 they will be con- strued liberally in favor of the Government in case of fraud. 6 Where, however, the statute prescribes a particular procedure, it excludes any other method, 7 so that, e. g., the provisions of Revised Statutes, 3184-5, must be 1 Kendall v. United States, 107 U. S. 123, 2 S. Ct. 277, 27 L. Ed. 437. 2 Erhardt v. Schroeder, 155 U. S. 130, 39 L. Ed. 96. 3 Cooley on Tax., 3d ed. 460. 4 United States v. Giller, 54 Fed. 656; Re Leszynsky, 16 Blatch. 9, Fed. Cas. 8279; United States v. 100 Bbls of Spts., 2 Abb. (U. S.) 305, Fed. Cas. 15948; United States v. 1412 Gals, of Dist. Spts., 10 Blatch. 428, Fed. Cas. 15960; United States v. One Black Horse, 129 Fed. 167; United States v. 246% Ibs of Tobacco, 103 Fed. 791; United States v. Laescki, 29 Fed. 699; United States v. Willetts, 5 Ben. 220, Fed. Cas. 16699; Re Strouse, 1 Sawy. 605, Fed. Cas. 13548; United States v. Stowell, 133 U. S. 1, 10 S. Ct. 244, 33 L. Ed. 555; United States v. Brown, Deady, 566, Fed. Cas. 14662; United States y. The Coquitlam, 57 Fed. 706; Contra, Re Brown, 3 I. R. R. 134. B United States v. Howell, 20 Fed. 718; Carlisle v. United States, 16 Wall. 147, 8 Ct, Cl. 153, 21 L. Ed. 426. United States v. Vinson, 8 Fed. 507; United States v. Wittig, 2 Low. 466, Fed. Cas. 16748. 7 R. & G. R. Co. v. Reid, 13 Wall. 269, 20 L. Ed. 570; Smith v. Stevens, 10 Wall. 321, 19 L. Ed. 933. 30 FEDERAL INCOME TAX LAW strictly construed and literally followed, or good title will not be derived by a sale thereunder. 1 Although the law-making power rests solely in Congress and cannot be delegated, regulations made by an execu- tive department, under authority of Congress, have the same force as if incorporated in the act, 2 and judicial notice of such regulations will be taken by the courts; 3 but the statutory law cannot, even with the sanction of the Secretary of the Treasury, be altered or amended. 4 The published construction, by a Commissioner, o f a statute, is not, however, of such dignity as to be re- adopted by the re-enactment of such statute. 5 Construction of particular acts : Act of 1861 : Galm v. United States, 39 Ct. Cl. 55 - Act of 1862: Boutwell 275; 12 I. R. R. 157. Act of 1864: Barnes v. R. R., 17 Wall. 294, 21 L. Ed. 544; Manhattan Co. v. Blake, 148 U. S. 112, 37 L. Ed. 504, 13. S. Ct. 640, 2 I. R. R. 44, 3 I. R. R. 140; Northern Central Ry. Co. v. Jackson, 74 U. S. 262, 19 L. Ed. 88. Act of 1866: Hendy v. Soule, Deady, 400, Fed. Cas. 6359. 1 United States . Allen, 14 Fed. 263. 2 Ex parte Reed, 100 U. S. 13, 25 L. Ed. 538; United States v. Eliason, 16 Pet. 291, 10 L. Ed. 968; Stotesbury v. United States, 23 Ct. Cl. 285; Harvey v. United States, 3 Ct. Cl. 38; United States v. Barrows, 1 Abb. (U. S.) 351, Fed. Cas. 14529; Meads v. United States, 81 Fed. 684, 26 C. C. A. 229. 3 Peters v. United States, 33 Pac. 1031; Caha v. United States, 152 U. S. 211, 14 S. Ct. 513, 38 L. Ed. 415; Sprinkle v. United States, 141 Fed. 811, 73 C. C. A. 285; United States v. Zemel, 137 Fed. 989; Hast- ings v. Herold, 184 Fed. 759. 4 Thatcher v. United States, 15 Blatch. 15, Fed. Cas. 13851; Camp- bell . United States, 107 U. S. 407, 2 S. Ct. 579, 27 L. Ed. 592; Pascal z. Sullivan, 21 Fed. 496; Merrill ?;. Jones, 106 U. S. 466, 1 S. Ct. 423, 27 L. Ed. 267. 5 Dollar Sav. Bank v. United States, 19 Wall, 227, 239, 22 L. Ed. 80. CONSTRUCTION 31 Act of 1867: Kensett v. Stivers, 18 Blatch. 397, 10 Fed. 517; Concord Railway Corporation v. Toplif, Fed. Cas. 3093. Act of 1870: United States v. Schillinger, 14 Blatch. 71, Fed. Cas. 16228, Blake v. Natl. City Bank, 23 Wall. 307, 23 L. Ed. 119; Lake Shore & Mich. So. R. R. Co. v. Rose, 95 U. S. 78, 24 L. Ed. 376; Western Union Railroad Co. v. United States, 101 U. S. 543, 25 L. Ed. 1068. Act of 1871: 14 I. R. R. 33; United States v. Indian- apolis & St. L. R. R. Co., 113 U. S. 711, 28 L. Ed. 1140, 5 S. Ct. 716. Construction of act of 1913: It is evident that without due additions from other sources, the national revenues will be so depleted by the sweeping reduction of tariff duties provided by this Act, as to result hi an annual deficit. The legislative intent to meet this deficit through tax upon incomes is evidenced, not only by the title of this Act, but by the fact that the provisions for such tax are included in the Act, itself, and are of the most comprehensive character. For these reasons, as well as in accordance with the rules of construction above discussed, it may be safely assumed that the Act will be accorded a construction of the utmost liberality toward the Government. The question suggests itself, however, as to whether, if the rule of strict construction should be deemed appli- cable in certain cases, it might not necessarily be held, that as the tax is declared to be upon income, it could only be a lien upon the specific funds constituting such income, and in no case either a lien upon, or collectible, by distraint, out of any other property. This question should be borne in mind in considering the application to this Act of the provisions of the Revised Statutes, relative to the lien and collection of taxes t CHAPTER IV THE ACT, ANNOTATED AN ACT 1 To reduce tariff duties and to provide revenue 2 for the Government, and for other purposes. SECTION II A. Subdivision 1. That there shall be levied, assessed, 1 An income tax having been adjudged to be a direct tax, and uncon- stitutional unless apportioned among the states (Pollock v. Farmers L. & T. Co., 158 U. S. 607, 39 L. Ed. 1108), the Constitution was amended by the adoption of Article XVI, permitting such a tax to be levied without apportionment. By virtue of such authority, Congress hat, included, as Section II of the Tariff Act of 1913, the income tax enactment. The remainder of the Act is omitted, as not pertinent. As to the broad construction which will probably be accorded to these provisions in view of the above title, the reason for their enact- ment, and the inclusion thereof in the tariff act as an integral part thereof, see p. 31. 2 General Definitions. Tax. A rate or sum of money assessed on the property of a citi- zen by the government for the use of the nation or state* Hamilton v. Dillin, Fed. Cas. 5979. Charges imposed by the legislative power upon persons or property to raise money for public purposes: Day v. Buffington, 3 Cliff. 376, Fed. Cas. 3675. Enforced proportional contribution of persons and property levied by authority of the state for the support of government and for all public needs: Taylor v. Boyd, 63 Tex. 533-541. A charge levied by the sovereign power upon the property of its subjects: People . Austin, 47 Cal. 353-361. The means by which a burden primarily borne by the state is 32 THE ACT, ANNOTATED 33 collected and paid * annually 2 upon the entire net income s arising or accruing from all sources in the preceding cal- transferred to the citizen: Southern R. Co. v. Kay, 62 S. C. 28-32, 39 S. E. 785. Revenue Laws. Legislative enactments with regard to internal revenue, as well as customs. United States v. Dustin, Fed. Gas. 15012. As used in connection with the jurisdiction of United States Courts, laws imposing duties on imports and tonnage, or pro- viding in terms for revenue: laws directly traceable to the power accorded to Congress by the constitution "to lay and collect taxes, duties, imposts, and excises." United States v. Hill, 123 U. S. 681, 31 L. Ed. 275, 8 S. Ct. 446. Excises. "Excise" is defined to be an inland duty or impost op- erating as an indirect tax on the consumer a fixed, absolute, and direct charge laid on merchandise, products, or commod- ities. Scholey v. Rew, 23 Wall. 331-346, 23 L. Ed. 99-101. 1 " Levied, assessed, collected, and paid." The important word "assessed" is used in this Act in every instance wherein the levy, etc., of the tax is referred to. Further, the Act pro- vides in many places for the making of the assessment by the Commis- sioner, and payment of the assessment by the taxpayer, thus making it clear that the Act itself does not constitute the complete and perfect imposition of the tax. In the construction of this Act particularly with respect to "Liens" and "Penalties", this phraseology should be compared with that employed in former acts where the word "assessed" was generally omitted from the clause imposing the tax, although frequently em- ployed in that connection indicating the date at which the statutory tax period was to begin. 12 Stat. 292, 432; 3 Stat. 223, 469; 14 Stat. 98, 471. 2 " Annually." For dates of assessment and payment, see pp. 72-73. 1 " Net income, etc." (See, also, Corporations, p. 78). These words, as used in this act, include the gross, whole, or total receipts of the preceding calendar year, ending December 31st (p. 65) (the taxable income for the year ending December 31st, 1913, is only that accruing for the period between March 1st and December 31st of that year), less such items as are declared by the statute to be exempt or deductible. The net income for the tax period of the year, 1913, is arbitrarily provided to be five-sixths of the income for the calends.' 1 year. 34 FEDERAL INCOME TAX LAW endar year to every citizen of the United States, whether residing at home or abroad, and to every person residing Net Income Continued It includes the share, to which the taxpayer would be entitled, of distributed or undistributed gains and profits of any corporation or partnership formed, or fraudulently availed of to escape the tax by allowing the accumulation of such gains or profits. The taxable income of a non-resident alien or foreign corporation is the gross income from property owned and business carried on in the United States by such alien or corporation, less the statutory ex- emptions and deductions. The term income as used in this act must be carefully differentiated from the same term as employed either colloquially, or in a statute of different phraseology. Income has been defined as follows: The receipts from any business or investment, without regard to expenditures. People ex rel. McMaster v. The Supervisors, 4 Hill, 20, cited 80 A. D. 241; 86 A. D. 413, 417. The gain which accrues from property, labor and business. Mc- Clintock v. Dana, 106 Pa. St. 386; Thorn v. DeBreteuil, 86 A. D. 405-417, 83 N. Y. Supp. 849, 179 N. Y. 64. Income from a business differs from that of a "profession, trade or employment." The former is the creation of combined capital, industry, and skill. Wilcox v. County Comrs., 103 Mass. 544, 546; Commonwealth v. Ocean Oil Co., 59 Pa. St. 61; People v. Barker, 18 Wend. 605, 70 Hun 397, 24 N. Y. Supp. 63; Opinion of Justices, 5 Met calf e, 596. Annual income includes the total receipts of the income year, al- though received within any fractional period of such year, derived from a business or vocation which can be, or is pur- sued for only a part of the year, or conveyed away before the close thereof. Mandell v. Pierce, 3 Cliff. 134, Fed. Cas. 9008. For definitions of kindred terms, see Lawless v. Sullivan, L. R. 6 A. C. 373; Mersey Docks v. Lucas, L. R. 8 A. C. 891, 905; Last v. London Assurance Corporation, L. R. 10 A. C. 438, 450. Income, applicable to individuals, has been construed to include the following: (See also page 78). Annuity for term of years, even though received as a legacy. 5 I. R. R. 138; 7 I. R. R. 60; Gresham Life Ins. Society v. Styles, L. R. 24 Q. B. D. 500. Articles used by manufacturer, salable value of. Boutwell (1863), 254. THE ACT, ANNOTATED 35 Income, Individual Continued Betting profits, where derived from gaming conducted as a regular business. Partridge . Mallandaine, L. R. 28 Q. B. D. 276. Building erected by tenant to become the property of the owner of real estate. 6 I. R. R. 130. Contract. Rule for estimating net income on partially completed work under; T. D., 1675, Feb. 14, 1911. Corporate assets distributed upon liquidation. Income therefrom being difference between price paid for stock and sum re- ceived on such distribution. 2 I. R. R. 138. Debts formerly considered bad, but paid during the income year. Boutwell, 274. Dividends. 3 I. R. R. 188. Dividends payable in the income year, no matter when earned or declared. Boutwell, 274; 2 I. R. R. 44. Dividends declared by mistake. Central Natl. Bank v. United States, 137 U. S. 355, 34 L. Ed. 703, 11 S. Ct. 126. Dividends declared and payable, although not collected. Magee . Denton, 5 Blatch. 130, Fed. Cas. 8943. Dividends divided or otherwise, embracing both dividends de- clared and profits partly invested in real estate and partly used in paying debts of previous years. Collector v. Hubbard, 79 U. S. 1, 29 L. Ed. 272. Dividends applied to payment of renewal premiums, purchase of paid-up insurance, etc. T. D., 1743, Dec. 16, 1911. Dividends in coin, legal tender, value of at time when, and place where dividend payable. 5 I. R. R. 74; Pacific Ins. Co. v. Soule, 74 U. S. 433, 19 L. Ed. 95. Dividends in scrip representing profits earned during period covered by the act. Bailey v. R. R. Co., 106 U. S. 109, 27 L. Ed. 81. (Cited in 137 U. S. 364, 34 L. Ed. 698; 48 Fed. 541.) Dividends in scrip, par value of. 5 I. R. R. 91. Dividends in scrip, market value of. 7 I. R. R. 60. Dividends represented by dividend-bearing certificates evidencing expenditure of earnings and convertible into stock at option of the Company, although conferring no right to vote. Bailey v. R. R. Co., 22 Wall. 604, 22 L. Ed. 840. Tor further discussion of stock dividends, see Contingent In- come.) Extra pay granted to officers by statute. 2 I. R. R. 108. Farm produce, proceeds of, actually or constructively sold and delivered within income year. 7 I. R. R. 59. Fees paid to ministers for marriages and the like. 7 I. R. R. 59. 36 FEDERAL INCOME TAX LAW Income, Individual Continued Gifts to ministers when in nature of compensation. 7 I. R. R. 59; Inland Revenues v. Strang, 15 Sc. L. R. 704. Gifts to employees as additional compensation. 7 I. R. R. 35. Improvement of land in lieu of rent. 7 I. R. R. 60. Income of decedent for portion of income during which life con- tinued. Mandell v. Pierce, 3 Cliff. 134, Fed. Cas. 9008. Income of an inherited foreign estate by a citizen, formerly of the U. S., who has become a citizen of the foreign country to take such inheritance. 3 I. R. R. 140. Increase in value of unsold property. T. D., 1606, March 29, 1910. Insurance premiums returned by mutual life insurance company to policy holder not in excess of those paid by him. 6 1. R. R. 139. Interest, good and collectible, accruing during year, whether collected or not, 7 I. R. R, 59. Interest paid to savings bank depositors. Boutwell (1863), 226. Interest paid to savings bank depositors in the form of a pro rata distribution of net profits. Gary v. Savings Union, 89 U. S. 38, 22 L. Ed. 779. Leases, see Profits. Mining, see Profits. Pensions from government. 4 I. R. R. 55; Boutwell, 274. Prize money irrespective of date of captures. 7 I. R. R. 11. Profits from leases. 2 1. R. R. 44; 7 I. R. R. 59. Profits of partnerships and corporations, though undivided, to which taxpayer is entitled. 7 I. R. R. 60. Profits from sale of live stock being gross receipts less purchase price. 7 I. R. R. 58. Profits on sale of corporate mining property. Perry v. Newsome, 10 I. R. R. 20. Profits on sale of personal property received, without relation to date of purchase. 11 1. R. R. 66; 2 1. R. R. 44; 1 1. R. R. 139. Profits from sale of real estate. T. D., 1606, March 29, 1910. Profits upon sale of real estate equivalent to mortgage and re- conveyance. 3 I. R. R. 140. Profits, pro rata share of, from sale of real estate purchased prior to tax year, where time of increase in value not accurately determinable. T. D., 1606, Mch. 29, 1910. Profits from exchange of stock for land sold within the income year. United States v. Smith, 1 Sawy. 277, Fed. Cas. 16341. Profits from sale of stocks, irrespective of date of increase in value. United States v. Smith, 1 Sawy. 277, Fed. Cas. 16341. THE ACT, ANNOTATED 37 Income, Individual Continued Profits from sale of stocks, irrespective of date of purchase. 1 I. R. R. 139. Profits from sale of stock, represented by collectible promissory notes. United States v. Smith, 1 Sawy. 277, Fed. Gas. 16341. Profits from sale of timber standing or cut, estimated by adding net amount received to value of land after removal of timber and deducting estimated value of land on first of year. 1 I. R. R. 171; 2 I. R. R. 61. Receipts of installments of purchase price of land received during income year. T. D., 1606, Mch. 29, 1910. Receipts from sale of patent rights. T. D., 1606, Mch. 29, 1910. Rent, excess received from lease, of own house over that paid for lease of another. 4 1. R. R. 46; 5 I. R. R. 154. Rent of land received in shape of produce. 7 I. R. R. 60. Rent received in shape of building erected by tenant. 7 1. R. R. 60. Rent for privilege of working open mines, though mines are thereby exhausted. Rule of estimation, 7 I. R. R. 60; Mc- Clintock v. Dana, 106 Pa. St. 386; Eley's App., 2 Kulp (Pa.), 467, 103 Pa. 300. Stock See Dividends, Profits. Income, applicable to individuals, has been construed contin- gently to include the following: Accounts payable to taxpayer, only if possessing intrinsic value and convertible into money, property, or available assets. United States v. Frost, Fed. Cas. No. 15172. Interest, only when paid, unless collectible and remaining unpaid by consent of creditor. Boutwell, 274. Promissory notes, only when having intrinsic value and con- vertible into money, property, or available assets. United States v. Frost, Fed. Cas. No. 15172. Stock dividends, only if representing division of profits. Com- monwealth v. Pittsburgh, etc., Ry. Co., 74 Pa. St. 83; Com- monwealth v. Erie, etc., Ry. Co., 74 Pa. St. 98. For discussion as to nature of stock dividend and question of income dependent thereon, see Smith v. Hooper, 95 Md. 16; Spooner v. Phillips, 62 Conn. 62, 24 A. 524, 16 L. R. A. 461. Income, applicable to individuals, has been construed not to in- clude the following: Accumulated funds, see Dividends, Funds, Profits. Advance in value of personal property, see Increase. Advance in value of real property, see Increase. Allowance made by father to son. Corke v. Fry (1896), W. N. (Eng.) Part I, 131. 38 FEDERAL INCOME TAX LAW Income, Individual Continued Annual instalments of purchase price of land. Foley v. Fletcher, 3 H. & N. 769. Annual value not producing income. Troy Factory v. Corning Winslow, 45 Barb. 247. Associations, see Profit. Capital, bona fide, distributed to stockholders with corresponding reduction of capital stock. Commonwealth v. Central Trans- portation Co., 145 Pa. St. 89, 22 A. 209; Rose . Barclay, 191 Pa. St. 597, 43 A. 385. Corporations, see Profits. Damages for personal injuries. 3 I. R. R. 118; 7 I. R. R. 60. Dividend in stock, representing earnings before enactment of Tax Act. 2 I. R. R. 61. See, also, Construction of Particular Acts. Dividend in stock, not dividing assets of corporation or changing property therein. Commissioners v. Buckner, 48 Fed. 533. Dividend in stock, made after distribution of net eamings and representing nominal increase. 1 I. R. R. 188. Farm produce, raised during income of previous years, remaining unsold at end of income year. 2 I. R. R. 90; 11 I. R. R. 113. Farm produce consumed in immediate family. 7 I. R. R. 58; United States v. Simons, 1 Abb. (U. S.) 470, Fed. Cas. 16291. Funds accumulated in 1863 from net earnings turned over in 1867 to trustee for stockholders not income of stockholders for 1867. Reynolds v. Williams, 4 Biss. 108, Fed. Cas. 11734. Income from personalty held by trustee for non-resident alien or wife of alien. 3 1. R. R. 140; 6 I. R. R. 66. Increase in value of property, estimated. 5 I. R. R. 154. Increase in value of stock, until after sale. 1 1. R. R. 139. Increase in value of securities during series of years not income for year of sale. Gray v. Darlington, 15 Wall. 63, 82 L. Ed. 45; Mercer v. Buchanan, 132 Fed. 508; 1 I. R. R. 139; cp. United States v. Smith, 12 I. R. R. 135. Increase in value of building caused by permanent improvements. Boutwell, 275; Little v. Little, 161 Mass. 188, 36 N. E. 795. Interest derived from foreign investments and reinvested abroad. Forbes v. Scottish Inst. (1896), W. N. (Eng.) Part 1, 122. Moneys received by way of damages, see Damages. Note, received as purchase price of sale made one year, but not due and payable until succeeding year, not income for year received. United States v. Ronzone, 14 Blatch. 69; Fed. Cas. 16192. THE ACT, ANNOTATED 3d in the United States, though not a citizen thereof, 1 a tax of 1 per centum per annum upon such income, except as Income, Individual Continued Profits, see Funds. Profits of incorporated companies or associations having dis- tinct entity, in which individual is interested. 10 I. R. R. 39; T. D., 1675, Feb. 14, 1911. Profits used for construction or carried to account of any fund already taxed in one year, not again taxable as income of stockholder. Bailey v. Railroad Co., 106 U. S. 109, 27 L. Ed. 81. Profits applied to enlargement of business. Ex parte Ives, Fed. Cas. No. 7114. Profits, prospective, upon executory contract of sale. 1 I. R .R. 139. Rental value of living quarters in employer's building. Tenant v. Smith (1892), App. Cas. 161. Rental value of manse occupied by a minister. M'Dougal v. Southerland (1896), W. N. (Eng.), Part I, 113. Silent partner, rule as to gains of. 4 I. R. R. 46. Stock received from bona fide exchange of other stocks regardless of apparent profit resulting therefrom. United States v. Smith, 1 Sawy. 277, Fed. Cas. 16341. Stock of consolidated company received in exchange for stock of component company. City of Allegheny v. Federal Street & P. V. R. R. Co., 179 Pa. St. 424, 36 A. 320. Stock issued after beginning of tax period, representing property purchased at foreclosure of mortgages held to secure loans made before passage of Tax Act. C., B. & Q. R. R. Co. v. Page, 1 Biss. 461, Fed. Cas. 2668. 1 " Every citizen, etc." For the purposes of income taxation, four classes of persons must be considered: the resident citizen, the non-resident citizen, the resident alien, and the non-resident alien having income- producing property within the United States. The act clearly provides for the payment of the tax upon the entire net income of citizens resident and non-resident, and all resident aliens. The non-resident alien is taxed only upon the net income of property owned, and business, trade, or profession carried on in the United States by him. There can be, of course, no question as to the power ol Congress to levy a tax upon the first three classes. As to the taxation of non-resident aliens, see pp. 26, 42, 56. 40 FEDERAL INCOME TAX LAW Citizens Statutory definition All persons born or naturalized in, and subject to the jurisdiction of the United States. U. S. Cons., 14th Amend. All persons born in the United States and not subject to any foreign power, excluding Indians not taxed. U. S. R. S., 1992. All children born outside of the limits and jurisdiction of the United States, whose fathers are, at the time of their birth, citizens thereof, except children whose fathers never resided therein. U. S. R. S., 1993. Any woman married to a citizen of the United States, who is, herself, one of the class who may be lawfully naturalized. U. S. R. S., 1994. Children, minor, of parents naturalized or citizens of a state, on April 14th, 1802, if dwelling in U, S. Rev. Stat., 2172. Children of parents who were on April 14, 1802, or had been citi- zens of the United States, though born out of the limits and jurisdiction of the United States. Rev. Stat., 2172. Inhabitants of Philippines or Porto Rico, formerly Spanish sub- jects, living therein, subsequent to April 11, 1899. Treaty of Paris, Art. IX, 30 Stat. 1754; 31 Stat. 79; 32 Stat., Pt. I, 692. Spaniards residing in Porto Rico or the Philippines, on April 1 1 , 1899, who continued to reside there after that date, and did not, within one year, file a declaration of allegiance to Spain. Treaty of Paris, Art. IX, 30 Stat. 1754; 31 Stat. 79; 32 Stat., Pt. 1, 692. Judicial and departmental construction Age or majority Citizenship not dependent upon. Abb. L. Diet. 224. Alien, see Woman. Children born in United States are citizens, regardless of alien parentage (for exceptions see Aliens, p. 42). 10 Ops. Atty. Gen. 382; United States v. Wong Kim Ark., 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456. Children born on ocean, of citizen parents, are citizens. United States v. Wong Kim Ark, 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456. Children of white father and Indian mother living apart from tribe, born within United States, are citizens. U. S. v. Hadley, 99 Fed. 437; U. S. r. Ward, 42 Fed. 320. Children born in foreign country, of citizen parents, are citizens. Ware v. Wisner, 50 Fed. 310. Children, minor, of naturalized parents, dwelling within United THE ACT, ANNOTATED 41 Citizens, Judicial construction Continued States at time of naturalization, are citizens. Campbell v. Gordon, 6 Cranch, 176, 3 L. Ed. 190. Citizens are persons owing allegiance to, and having reciprocal claim upon the protection of a government: members of a nation or of the body politic of a sovereign state. Abb. L. Diet., 223. Citizenship, federal Not dependent upon state citizenship. United States v. Wong Kim Ark, 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456. Citizenship of children born abroad dependent on status of father. Ludlam v. Ludlam, 31 Barb. 486; Davis v. Hall, 1 Nott. & M. 292; Sasportas v. De la Motta, 10 Rich. Eq. 38. Consuls, children, born in United States, of foreign consuls, not expressly having additional diplomatic functions, are citizens. U. S. v. Wong Kim Ark, 169 U. S. 619, 42 L. Ed. 890, 18 S. Ct. 456. Franchise, right to exercise Citizenship not dependent upon. 10 Ops. Atty. Gen. 382, 387; Minor v. Happersett, 21 Wall. 162, 22 L. Ed. 627; Van Volkenburg v. Brown, 43 Cal. 43, 13 Am. Rep. 136, cp. White . Clements, 39 Ga. 232; Amy v. Smith, 1 Litt. 326. Half-breed, see Children. Indians, see Aliens, p. 42. Indian woman becomes citizen by leaving tribe and marriage to citizen. Hatch v. Ferguson, 57 Fed. 959. Interference, United States will never exercise, to disturb relation- ship of children born abroad, while there remaining. 13 Op. Atty. Gen. 89. Majority, see Age. Minors, see Children. Property rights Not a test of citizenship. Abb. L. Diet. 225. Race Citizenship not dependent upon. Abb. L. Diet. 224; United States v. Wong Kim Ark, 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456; Re Rodriguez, 81 Fed. 353. Sex Citizenship not dependent upon. U. S. v. Anthony, 11 Blatch. 200, Fed. Cas. 14459; Minor v. Happersett, 21 Wall. 162, 22 L. Ed. 627; U. S. v. Reese, 92 U. S. 214, 23 L. Ed. 563. Woman, alien, becomes citizen by marriage to citizen, regardless of time or place of marriage, non-residence in United States, non-entrance into United States, or life apart from husband. Shanks v. Dupont, 3 Pet. 242, 7 L. Ed. 666; Headman v. Rose, 63 Ga. 458; Burton v. Burton, 40 N. Y. 359; 10 Ops. 42 FEDERAL INCOME TAX LAW Citizens, Judicial Construction Continued Atty. Gen. 321; 14 Op. Atty. Gen. 402. See Kelly v. Owen, 7 Wall. 496, 19 L. Ed. 283. Woman marrying alien, resident of United States, with purpose there to continue residence, does not become alien, by mar- riage. Whether right of expatriation declared by Revised Statutes, 1999, includes citizens of United States or only foreigners, expatriation cannot be effected without actual departure from the country. Comitis v. Parkerson, 56 Fed. 556. Woman does not lose citizenship by marriage to alien, without withdrawal from United States or equivalent act expressive of expatriation. Ruckgaber v. Moore, 104 Fed. 948. Aliens Judicial and departmental construction Alienage may be resumed by woman who has become citizen by marriage, through divorce and re-marriage to an alien. Pe- quignot v. Detroit, 16 Fed. 211, Contra, 15 Ops. Atty. Gen. 599. All persons born out of the jurisdiction of the United States, and who are not citizens thereof by statutory declaration or naturalization are aliens. Abb. L. Diet. 51 ; Lynch v. Clarke, 1 Sandf. Ch. 583, 668; Ex parte Dawson, 3 Brad. 130, 136; Mcgregor v. Mcgregor, 33 How. Pr. 456. Children of alien enemies, born in a part of this country at the time in hostile occupation, are aliens. United States v. Wong Kim Ark, 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456. Children of ambassadors, or diplomatic or official representatives of another sovereignty, although born in the United States, are aliens. United States v. Wong Kim Ark, 169 U. S. 649, 42 L. Ed. 890, 18 S. Ct. 456. Children born on foreign war vessel in a United States port are aliens. The Exchange, 7 Cranch, 137, 147, 3 L. Ed. 294. Children, minor, of naturalized aliens, born abroad and who re- main abroad until after parents' naturalization, are aliens. Zaratrian v. Billings, Comr., 204 U. S. 170, 51 L. Ed. 428. Indian, even though separated from his tribe and having his resi- dence among white citizens, is an alien. Elk v. Wilkins, 112 U. S. 94, 28 L. Ed. 643, 5 S. Ct. 41. Wife, see Citizenship. , Woman married to citizen of France, and there residing, even though never having complied with formality required by code to make her a citizen, became such through marriage and is not taxable as a citizen of United States. 13 Ops. Atty. Gen. 128. THE ACT, ANNOTATED 43 hereinafter provided; and a like tax shall be assessed, levied, collected, and paid annually upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States 1 by persons residing elsewhere. 2 1 Doing business Individuals The following decisions and those on p. 53, relating to corpora- tions, although rendered in connection with various subjects, have been included as probably useful for purposes of com- parison: Individuals living in one state, sending agents to another to settle accounts and make contracts, held doing business in latter. Elliott v. Parlin & Orendorff Co., 81 P. 500, 71 Kan. 665. Partnership, foreign, engaged in wine business, none of whose mem- bers was resident in England, having chief office in France and resident agent in London, through whom wine was sold and money received, held taxable in England as to such receipts. Pomery & Greno v. Apthorpe, 56 L. J. Rep. N. S. Q. B. 155.. Partnership, foreign, engaged in wine business, employing English firm to obtain orders in England, which orders were sent to home office; keeping no wine in England; filling all orders from home office by direct shipment to customer, at his risk; and receiving payment directly from customer, held taxable in England. Werele & Co. v. Colquhoun, 20 L. R. Q. B. D. 753. Partnership, foreign, one member of which spent portion of each year in England taking orders, and which had agents in England, who guaranteed and collected accounts thus accru- ing, and an office room and clerk, in such agent's building, held taxable in England as to profits, although tax already paid thereon by agents. Tischler v. Apthorpe, 52 Times L. R. N. S. 814. Partnership having one partner in England to purchase goods shipped to New York and sold, held foreign as to England, and its profit arising in United States. Sully v. Atty. Gen., 5 H. & N. 711. Person, whose only business in a state is to appoint persons to conduct a business, is not doing such business within such state. Morgan v. White, 101 Ind. 413. 8 Resident. For explanation of liability of non-resident aliens under the various prior acts, see 9 I. R. R. 113, 139. 44 FEDERAL INCOME TAX LAW i Subdivision 2. In addition to the income tax provided under this section (herein referred to as the normal in- Resident Continued Residence is a settled fixed abode with present idea of permanency, as contradistinguished from a mere temporary locality of existence. Brisenden v. Chamberlain, 53 Fed. 307, 308; Mat- ter of Wrigley, 8 Wend. 134; Houghton v. Ault, 16 How. Pr. 77; Reeder v. Holcomb, 105 Mass. 93; Barren v. Burke, 82 111. App. 116; Long v. Ryan, 30 Grat. (Va.) 718. A resident is, however, frequently defined with greater liberality, as one who dwells, abides, or lives in a place (U. S. v. Penelope, Fed. Cases, 16024; Bun-ill's Law Diet.; Brown v. Ashbough, 40 How. Pr. 260, 263). For many purposes, a person may have several residences at the same time. Bartlett v. The Mayor &c. of City of N. Y., 7 N. Y. Sup. Ct. 44; Barron v. Burke, 82 111. App. 116. Intent is generally, but not always, the determining factor (Thayer v. City of Boston, 124 Mass. 132, 26 Am. Rep. 650; Cabot v. City of Boston, 66 Mass. 52), and residence will not be estab- lished by transient visits, or temporary sojourn for business, or otherwise (Arnold v. Davis, 8 R. I. 341; Boardman v. House, 18 Wend. 512); or by mere entrance into a new place, after abandonment of all dwellings in a former residence. Burrows v. Miller, 4 How. Pr. 349. On the other hand, it may include abode in a place without intent to live elsewhere (Heidenbach v. Schland, 10 How. Pr. 477) ; a more or less indefinite sojourn (Pooler v. Maples, 1 Wend. 65; Clark v. Likens, 26 N. J. Law, 207; Walker v. Walker, 1 Mo. App. 404) ; or an entrance into the state with intent to remain, although a home has not yet been secured. Cox ?'. Allen, 91 la. 462, 59 N. W. 335. Neither the location of the domicile or legal residence, nor the question of investment with the full rights or obligations of a citizen, necessarily determines the actual residence. Crawford v. Wilson, 4 Barb. 504; Bartlett . The Mayor &c. of City of N. Y., 7 N. Y. Sup. Ct. 44; Atty. Gen. v. Coote, 4 Price, 183; Frost v. Brisben, 19 Wend. 11. An important consideration is the location of home and family (Chaine v. Wilson, 1 Bosw. 673; 8 Abb. Pr. 78; Cunningham v. Mound, 2 Ga. 171 ; Nugent v. Bates, 51 la. 77; 50 N. W. 76; 33 Am. St. Rep. 117; Long v. Ryan, 30 Grat. (Va.) 718; Rogers v. Inland Revenue, 16 Sc. L. R. 682; 1 Tax Cases, 225; Re Young, 12 Sc. L. R. 602; 1 Tax Cases, 57), although this is THE ACT, ANNOTATED 45 come tax) there shall be levied, assessed, and collected upon the net income of every individual an additional Resident Continued not conclusive. Didier v. Patterson, 93 Va. 534, 25 S. E. 661. Where the home is in several places at different seasons of the year, the location of the principal place of business is an element for consideration. Bartlett v. The Mayor, 7 N. Y. Sup. Ct. 44. Residence is not affected by temporary absence (People ex rel. Lorillard v. Barker, 70 Hun, 397, 24 N. Y. S. 63, 54 St. Rep. 107; Church v. Rowell, 49 Maine, 367), even where such absence is long continued because of the exigencies of business. Rogers v. Inland Revenue, 16 Sc. L. R. 682; 1 Tax Cases, 225; Re Young, 12 Sc. L. R. 602; 1 Tax Cases, 57. Once acquired, it is presumed to continue, in default of satisfactory evidence of termination (Re Nichols, 54 N. Y. 62), which is not effected by intent, alone, without actual removal. Stod- dart v. Ward, 31 Md. 562; 100 Am. Dec. 83. If levy for the year has been completed before actual removal, its assessment against the person so removing is valid. Stoddart v. Ward, 31 Md. 562, 100 Am. Dec. 83. As applied to taxation, the question of residence is one of fact, to be determined by the jury. Bailey v. Bull, 5 Barb. 158. While residence, for purposes of general taxation, is generally held, as in other cases, to depend largely upon intent of the tax- payer, (Thayer v. City of Boston, 124 Mass. 132; Cabot v. City of Boston, 66 Mass. 52), it has been construed very liber- ally toward the Government where involving an income tax, so that there have been held taxable, as residents: A person living on his yacht, in full commission, in English waters. Brown v. Burt, 81 L. J. K. B. 17: A Leghorn merchant, owner of a Scotch estate, occupied by him for a few months each year. Lloyd v. Sully, 21 Sc. L. R. 482, 2 Tax Cases, 37: An American citizen in business in the United States, spending a small part of each year shooting on a leased Scotch estate. Cooper v. Cadwallader, 42 Scot. L. R. 117, 5 Tax Gas. 101: A person having an establishment outside of England, but main- taining in London a rented, furnished house, where he spent a small part of the year. Atty. Gen. v. Coote, 4 Price, 183: A corporation having its principal office in the country. Goerz v. Bell, 2 K. B. 136, 90 L. Times R. 675; Chesna Sulphur Co. . Nicholson, 1 Exch. Div. 437, 35 L. Times R. 275; New Zealand Shipping Co. v. Stephens, 24 L. Times R. 172, 5 Tax. Cas. 553. 46 FEDERAL INCOME TAX LAW income tax (herein referred to as the additional tax) of 1 per centum per annum upon the amount by which the total net income exceeds $20,000 and does not exceed $50,000, and 2 per centum per annum upon the amount by which the total net income exceeds $50,000 and does not exceed $75,000, 3 per centum per annum upon the amount by which the total net income exceeds $75,000 and does not exceed $100,000, 4 per centum per annum upon the amount by which the total net income exceeds $100,000 and does not exceed $250,000, 5 per centum per annum upon the amount by which the total net income exceeds $250,000 and does not exceed $500,000, and 6 per centum per annum upon the amount by which the total net income exceeds $500,000. All the provisions of this section relating to individuals who are to be chargeable with the normal income tax, so far as they are applicable and are not inconsistent with this subdivision of paragraph A, shall apply to the levy, assessment, and collection of the additional tax imposed under this section. 1 1 The amount of tax laid by the act upon net income is shown in the following table. Note statutory deductions and exemptions. On the first $3,000 ($4,000, see p. 65) Exempt On next $ 17,000 or fraction thereof (normal tax only) 1% " (normal tax 1% surtax 1%) 2% " (normal tax 1% surtax 2%) 3% " (normal tax 1% surtax 3%) 4% " (normal tax 1% surtax 4%) 5% " (normal tax 1% $ 30,000 " " " $ 25,000 " " " $ 25,000 " " " $150,000 " $250,000 " All in excess of $500,000 surtax 6%) . 6% (normal tax 1% surtax 6%) 7% THE ACT, ANNOTATED 47 Every person subject to this additional tax shall, for the purpose of its assessment and collection, make a personal return of his total net income from all sources, corporate or otherwise, for the preceding calendar year, under rules and regulations to be prescribed by the Com- missioner of Internal Revenue and approved by the Secretary of the Treasury. 1 The statute is not clear as to whether the deduction of Three thousand dollars ($3,000) is to be made in deter- mining the net income for the purpose of computing the additional tax. The table, as given on the foregoing page, is based upon what appears to be the intent of the statute, but the point must be determined by judicial construction. Note the increase of exemption to Four thousand dollars ($4,000) in case of marriage (p. 65). 1 Return: Return, as used in this act, signifies a statement in writing, in the prescribed form, made and verified by, or on behalf of a tax- payer, and containing the information specified by the stat- ute. (See pp. 66, 102.) Return, as applicable to individuals Statutory provisions: (See, also, pp. 66, 102). (As to right of taxpayer to require preparation of return by col- lector, see p. 122). (As to filing affidavit and statement for exemption, see p. 74). Statutory requirements as to filing individual returns are shown by the following table: Time: On or before March 1st of each year, beginning with the year 1914 (p. 65). Place: By resident: Office of Collector of Internal Revenue for the district of taxpayer's residence or principal place of business: By non-resident: Office of Collector of the district in the United States hi which taxpayer's principal business is con- ducted (p. 65). 1 1. R. R. 153. Period covered: Preceding year, ending December 31st (p. 65). By whom made, verified, and filed: 48 FEDEKAL INCOME TAX LAW For the purpose of this additional tax the taxable in- come of any individual shall embrace the share to which he would be entitled of the gains and profits, if divided or distributed, whether divided or distributed or not, of all Return, Individuals Continued (a) Every citizen, resident or non-resident in the United States, having an income, during the preceding tax year, of three thousand dollars, or over (pp. 34, 65). (6) Every alien, resident in the United States, having an in- come, during the preceding tax year, of three thousand dollars, or over (pp. 39, 65) . (c) Every non-resident alien, having an income of three thou- sand dollars, or over, from property owned, or business, trade, or profession carried on in the United States (pp. 43, 65). As to the constitutionality of the taxation of non-resident aliens, see p. 20. As to judicial constructions of what is carrying on a business, trade, or profession in any particular territory, see p. 43. Exceptions: No return is required of (a) Income not exceeding three thousand dollars (p. 65) ; (b) Income derived from dividends on capital stock or net earnings of corporations, joint stock companies, associations, or insurance companies taxable upon their net income (p. 69, cp. 75); (c) Income of which return has been made at the source (p. 71). Note that but one deduction of three thousand dollars can be made from the income of any individual in determining whether a return thereof must be made, and that such deduc- tion once having been made, either by the individual, or by the source, all other taxable income must be returned (p. 72). Contents of return: (a) A statement of the gross amount of income from all separate sources; (6) The aggregate statutory deductions claimed; (c) Taxable net income. While the words of the statute, literally construed, would require mere totals of income and credits to be returned, the form of return is provided to be such as shall be prescribed by the Commissioner of Internal Revenue, with approval of the Secretary of the Treasury, and will be found to require a much greater detail. The return of a non-resident alien is, in general, the same as that THE ACT, ANNOTATED 49 "corporations, joint stock companies, or associations however created or organized," formed or fraudulently availed of for the purpose of preventing the imposition of such tax through the medium of permitting such gains Return, Individuals Continued of a citizen, except that the income therein set forth is that derived from property owned and business, trade or profes- sion carried on in the United States (p. 43), and the de- ductions therein claimed are those incurred in connection with such property and business, etc. (p. 64). Return, as applicable to individuals Construction: (See, also, pp. 71, 110.) Statutory requirements as to individual returns have been con- strued as follows: Items returnable: Accounts, uncollected, at estimated value. Boutwell, 273. Cost, see Stock. Debts formerly considered bad, but paid during income year. Boutwell, 274. Decedents, income of, received during portion of year prior to death, returnable by executor. Mandell v. Pierce, 3 Cliff. 134; Fed. Cas. 9008; 7 I. R. R. 193; contra, 2 I. R. R. 54. Dividends in scrip, at par value. 5 I. R. R. 91. Dividends declared, but uncollected. Magee v. Denton, 5 Blatch. 130; Fed. Cas. 8943. Fees, see Lawyers, Physicians. Husband, separate income of. 1 1. R. R. 188. Income, see Husband, Wife, Decedent. Income of portion of legacy transferred by executor to legatee returnable by legatee. 7 I. R. R. 59. Lawyers' fees On basis of either annual fees, or amounts be- coming due within tax year. (See Rules, below.) 7I.R. R.59. Manufacturer, see Stock. Pensions, government. 4 I. R. R, 55; Boutwell, 274. Physicians' fees On basis of either annual fees, or amounts be- coming due within tax year. (See Rules, below.) 7 I. R. R. 59. Rent received by person renting own house and paying rent else- where. 4 1. R. R. 46; 5 1. R. R. 154. Salary of minor child, portion of, not subject to special salary tax. 7 I. R. R. 59. 50 FEDERAL INCOME TAX LAW and profits to accumulate instead of being divided or distributed; and the fact that any such " corporation, joint stock company, or association is a mere holding company," or that the gains and profits are permitted to accumulate beyond the reasonable needs of the business shall be prima facie evidence of a fraudulent purpose to escape such tax; but the fact that the gains and profits are in any case permitted to accumulate and become sur- plus shall not be construed as evidence of a purpose to escape the said tax in such case unless the Secretary of the Treasury shall certify that in his opinion such accumula- tion is unreasonable for the purposes of the business. When requested by the Commissioner of Internal Revenue, or any district collector of internal revenue, such "corpora- tion, joint stock company, or association." shall forward to him a correct statement of such profits and the names of the individuals who would be entitled to the same if distributed. (See p. 67). B. That, subject only to such exemptions and deduc- tions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income de- rived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or Return, Individuals Continued Stock, cost value of. 3 1. R. R. 109. Wages, property of minor, returnable by himself. 11 1. R. R. 122 Wife, separate income of, returnable by herseli. 1 I. R. R. 188' 21. R. R. 61; 7 I. R. R. 59. Items not returnable: Farm produce consumed by farmer's family. 7 I. R. R. 58. Less than statutory income. 13 1. R. R. 97. Wages of minor, property of himself, not returnable by parent. 11 1. R. R. 122. Rules: Method of making return, once adopted, should not be thereafter changed. 3 I. R. R. 109; 7 I. R. R. 59. Returns based on any other period than tax year not acceptable. T. D. 1606, Mch. 29, 1910. THE ACT, ANNOTATED 51 from professions, vocations, businesses, trade, commerce, or sales or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent: Provided, That the proceeds of life insurance policies paid upon the death of the person insured or payments made by or credited to the insured, on life insurance, endowment, or annuity contracts, upon the return thereof to the insured at the maturity of the term mentioned in the contract, or upon surrender of the con- tract, shall not be included as income. 1 ^'Exemptions" should be differentiated from "deductions," im- mediately following. An exemption is something not included within the class made sub- ject to taxation, and is, therefore, wholly independent of the taxing provisions, and, in the absence of specific statutory direction, is not to be included in the taxpayer's return. A deduction is a statutory credit or allowance permitted, if claimed by the taxpayer, to be subtracted from either the gross value of the taxable object, or from the tax, itself. Unlike an exemption, it must, therefore, appear in the return, as a partial offset diminishing the assessable value of the whole taxable object therein shown. Florer v. Sheridan, 127 Ind. 28, 23 L. R. A. 278, 36 N. E. 365; State v. Smith, 63 N. E. 25; Cooley, Taxation, 3d ed., 270. General Rules. Exemptions are not made to favor the individual, but in the in- terest of the whole people. Being exceptions to the general rule, they are not favored. The provision therefore must be clear and unam- biguous, and will not be enlarged by construction, but will be strictly construed. Cooley, Taxation, 2d ed., 204; Mundy v. Van Hoose, 104 Ga. 292, 37 S. E. 783. Exemptions, applicable to individuals, are declared by the statute to include the following : (See, also, pp. 87, 92.) 52 FEDERAL INCOME TAX LAW That in computing net income for the purpose of the normal tax there shall be allowed as deductions: First, the necessary expenses actually paid in carrying on any business, not including personal, living, or family ex- penses; second, all interest paid within the year by a .Exemptions, applicable to individuals Continued (a) The value of property acquired by gift, that is, from a living person. (6) The value of property acquired by bequest, devise or descent, that is, through the testamentary disposition of, or kinship or heirship with a decedent. (c) The proceeds of a life insurance policy received by the benefi- ciary upon the death of the insured. (d) Receipts by the insured, upon the maturity or surrender of life insurance, endowment, or annuity contracts, of payments made by him or for his credit. Unless the word "proceeds" in this paragraph of the Act be construed to apply to such "payments," as well as to life in- surance policies, it would seem that any excess return over and above the amount paid would not be exempt. (e) Interest upon obligations of a state or any political subdivi- sion thereof, and upon the obligations of the United States or its possessions (p. 64). Exemption as to interest of a state or political subdivision thereof is included for the same reason noted with regard to the obli- gations and income of political sovereignties (p. 92), the imposition of a tax upon their obligations being construed as lessening the value of such obligations, and a consequent in- terference with their sovereign rights and functions. (/) The compensation of the President of the United States dur- ing the term for which he has been elected (p. 65). This is in compliance with Art. II, Sec. 1, of the Constitution, which prohibits an increase or decrease in the President's com- pensation during the period for which he shall have been elected. (0) The compensation of the federal judges now in office (p. 65). This is in compliance with Art. Ill, Sec. 1, of the Constitution, which prohibits a diminution of the compensation of federal judges during their continuance in office. (h) The compensation of all officers and employes of a state or any political subdivision thereof (p. 65). This exemption is included for the same reason as noted with regard to the exemption of the obligations and income of THE ACT, ANNOTATED 53 taxable person on indebtedness; third, all national, State, county, school, and municipal taxes paid within the year, not including those assessed against local benefits; fourth, losses actually sustained during the year, incurred in Exemptions, applicable to individuals Continued political sovereignties (p. 64, 92). Collector v. Day, 78 U. S. 113, 78 L. Ed. 122. It does not extend to the salaries of the officers and employe's of the District of Columbia, Porto Rico, and the Philippine Islands (p. 116). Whether it extends to the salaries of the officers and employe's of the other territories is not clear, as the statute only provides that the word "State" or "United States" shall be construed to include territories, when neces- sary to carry out its provisions. The status of territories is for many purposes extremely vague. They have been defined as political subdivisions of the out- lying dominion of the United States, the relation of which, to the general Government, is much the same as that which counties bear to the several states. None of them is in any sense a sovereign power, and even such quasi sovereignty as they are granted is- entirely subject to be directed or overruled by Congress. New Brunswick Bank v. Co. of Yankton, 101 U. S. 129, 25 L. Ed. 1046; Snow v. U. S., 18 Wall. 317, 21 L. Ed. 784; 16 Op. Atty. Gen. 114; 38 Cyc. 196. There does not appear to be, therefore, any constitutional pro- hibition, as in the case of the states, against the taxation of their resources or administrative expenditures, and it is not necessary in order to carry out the provisions of this Act that the exemption should be construed as applicable to them. On the other hand, the specific exception of the District of Columbia, the Philippines, and Porto Rico would indicate a legislative intent to extend the privilege to the territories not so specified. Exemptions, applicable to individuals have been construed not to include the following: (See, also, pp. 89, 92). Damages recovered in tort actions. 1 I. R. R. 155. Income of honorably discharged soldiers. 11 I. R. R. 122. Property declared exempt by a state statute, as a homestead. Upon the ground that the state exemption laws are inappli- cable to debts due from a citizen to the United States. United States v. Howell, 9 Fed. 674. 54 FEDERAL INCOME TAX LAW trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise; fifth, debts due to the taxpayer actually ascertained to be worthless and charged off within the year; sixth, a reasonable allowance for the exhaustion, wear and tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per centum of the gross value at the mine of the output for the year for which the com- putation is made, but no deduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof for which an allowance is or has been made: l Provided, That no deduction shall be allowed for any amount paid out for new buildings, permanent improvements, or betterments, made to in- crease the value of any property or estate; seventh, the amount received as dividends upon the stock or from the net earnings of any corporation, joint stock company, association, or insurance company which is taxable upon its net income as hereinafter provided; eighth, the amount of income, the tax upon which has been paid or withheld for payment at the source of the income, under the provi- sions of this section, provided that whenever the tax upon the income of a person is required to be withheld and paid at the source as hereinafter required, if such annual income does not exceed the sum of $3,000 or is not fixed or certain, or is indefinite, or irregular as to amount or time of accrual, the same shall not be deducted in the personal return of such person. 1 Deductions, applicable to individuals, are declared by the statute to include the following: (See, also, Non-resident aliens, p. 56.) Note, that for the year, 1913, only five-sixths of the total amount of deductions are to be made (p. 65). It is apprehended that the word, exemptions, here used, does not apply to ex- emptions, proper, but to certain of those deductions which have been loosely styled exemptions in the Act. (a) Necessary expenses actually paid in conducting business, ex- clusive of personal, living, or family expenses. THE ACT, ANNOTATED 55 Deductions, applicable to individuals Continued It should be noted that certain expenses which might be con- sidered personal but which accrued directly in connection with the conduct of business are deductible. (/>) Interest paid within the year on indebtedness. (c) Taxes paid within the year, exclusive of assessments for local benefits. "National, state, county, school, and municipal" taxes include, generally, all taxes payable by an individual. Import duties and internal revenue taxes are national excise taxes. The Treasury Department has held the former, and doubtless would hold the latter, not deductible if included in figuring the cost of goods. T. D., 1606, Mch. 29, 1910. License fees being either excise taxes or business expenses, are presumably deductible. (d) Assessments formerly deductible (5 I. R. R. 115) are now excepted upon the ground that they are balanced by the im- provement made. (e) Losses during the year incurred in trade or arising from fires, storms, or ship-wreck, not compensated by insurance. The decisions noted below as to what items are not properly deductible as included in this class, should be carefully consid- ered. (/) Debts ascertained to be worthless and charged off during the year. Reasonable discretion is allowed as to the determination of bad debts although not technically charged off to profit and loss. United States v. Frost, 9 I. R. R. 41; United States v. Mayer, Deady, 127. It may be presumed that in order to enjoy the benefit of this deduction the taxpayer need not necessarily keep books in which worthless debts are technically "charged off" that it would be sufficient if such debts arc determined in good faith to be worthless, are so specified, and are deducted in the return. (g) Reasonable allowance for depreciation of property consequent upon its use in business; not exceeding, in the case of mines, five per cent of gross value, at the mine, of its output for the tax year (T. D., 1606, Mch. 29, 1910); and exclusive of out- lay for new construction and betterments. As literally expressed, this deduction might exclude such de- preciation as results to business property when standing idle. Whether idle or operating, such property is employed in business and the addition of the term "employment" may, 56 FEDERAL INCOME TAX LAW Deductions, applicable to individuals Continued therefore, be presumed to indicate the legislative intent to include in this deduction whatever is fairly and generally understood as covered by the term depreciation. T. D., 1606, Mch. 29, 1910. Under the English act, an amount set aside to cover deprecia- tion of plant, was held an addition to capital and taxable. Forder v. Handyside, L. R. 1 Ex. D. 233. Note the decisions given below as to allowance for construc- tion, betterments, etc. (h) Dividends of any corporation, association, or joint stock or insurance company taxable upon income under this act. The expression "dividends upon the stock or from the net earnings" is apparently intended to include broadly all divi- dends received from taxable companies, and not to vary any rules heretofore laid down by the courts. It should be noted that the deduction is not limited to dividends of companies which have paid the tax, but includes all companies "taxable." Partnerships are not taxable, as such, and dividends there- from are not, therefore, deductible. (i) Income upon which tax has been paid or withheld at the source. The exception following, that is, the case where the annual in- come does not exceed three thousand dollars, or is not fixed or certain, etc., is not an actual exception, as in such cases, the tax is not provided to be paid by the source (p. 73). (?) $3,000. This is the basic deduction made for the purpose of exempt- ing from the tax all incomes of less than that amount. (/c) $1,000 (additional) in the case of a taxpayer living with non-taxable husband or wife. This deduction does not depend upon whether the non-taxable husband or wife is supported by the taxpayer, the only pro- vision being that the couple live together; that both do not have taxable incomes; and that only one shall be allowed the deduction. As to apportionment between the husband and wife in certain cases, see 1 1. R. R. 188. Non-resident aliens: The deductions allowed to non-resident aliens are the same as those allowed to residents (p. 54), except that, as in the case of a foreign corporation (p. 65), the deductible business ex- penses and losses are those incurred in connection with the alien's business or property in the United States (p. 79); THE ACT, ANNOTATED 57 Deductions, applicable to individuals Continued the deductible taxes are United States, state, or territorial taxes (p. 95); and the deductible interest payments are the same fraction of the total interest payments, as the income received from business in this country is of the said alien's total income. As to the last item interest there may be some doubt, because of the ambiguity of the provision re- specting computation of incomes of aliens of this class (p. 65), but the construction here given appears to be the most just and reasonable. Judicial construction will be necessary to determine whether this class are entitled to the basic deduc- tfon of $3,000 or $4,000. Deductions, applicable to individuals, have been construed to in- clude the following: (See, also, p. 98.) Alien, resident in the U. S., the same deductions as those allowed to a citizen. 6 I. R. R. 18. Assessments upon property holders, where laid upon all taxpayers of municipality. 1 1. R. R. 150, 196. Betterments, see Repairs. Bad debts, see Debts. Balance of cost of property destroyed by fire over insurance re- ceived. 5 I. R. R. 154. Children, see Family, Guardian, Step-children. Commission, see Salaries. Cost, see Balance, Repairs, Salaries, Wages, Rent. Cost of animals, purchased, lost by death. 3 I. R. R. 100. Cost of articles, manufactured or in process of manufacture, in- cluding cost of materials, labor, etc. T. D., 1606, Mch. 29, 1910. Cost of commutation tickets necessary for business. 111. R. R. 172. Cost of fertilizers, purchased. 7 I. R. R. 58. Cost of labor, to nursery companies, for care of stock. T. D., 1606, Mch. 29, 1910. Cost of litigation. 7 I. R. R. 59. Cost, pro rata part of, upon sale of fractional part of patent right. 1 I. R. R. 188. Cost of salesmen, to nursery companies. T. D., 1606, Mch. 29, 1910. Cost of seed purchased for planting. 7 I. R. R. 58. Cost of seedlings to nursery companies. T. D., 1606, Mch. 29, 1910. Cost of slaves' clothing and subsistence, to planter. Boutwell (1863), 275. 58 FEDERAL INCOME TAX LAW Deductions, applicable to individuals Continued Cost of goods, in estimating value or market value upon annual inventory and balance. 7 I. R. R. 59. Debts, see Loss. Debts, believed to be good in one year, but found worthless the following year, deductible in the latter. 5 I. R. R. 123. Debts, bad or worthless, or such as appear so to be at the end of the year. United States v. Mayer, Deady, 127; 7 I. R. R. 60; Fed. Cas. 15753. Depreciation in value of patents expiring during year. 1 I. R. R. 188. Depreciation, of stock, to a reasonable amount. T. D., 1606, Mch. 29, 1910. Depreciation, in value of real estate, pro rata of. T. D. 1606, Mch. 29, 1910. Dividends paid to employe's in lieu of wages. T. D., 1606, Mch. 29, 1910. Dividends on stock of foreign corporations. T. D., 1606, Mch. 29, 1910. Estimated depreciations of value of property. 5 I. R. R. 154. Excise penalties, see Penalties. Expenditure, see Labor, Repairs. Expenses of conveyances necessarily used in business traveling. 7 I. R. R. 60. Expenses of distribution of profits by trustee. Aiken v. Trustees (1896), W. N. (Eng.) Part 1, 120. Expense of cultivating farm leased upon rent to be paid in produce. 7 I. R. R. 60. Expenses of keeping horse for business purposes. 7 I. R. R. 59. Expenses of sinking oil wells, where the business is the production and sale of oil. 11 1. R. R. R. 123. Family consisting of mother and minor children entitled to but one statutory deduction. 11 1. R. R. 89. Family Definition of. 1 I. R. R. 171. Fire, see Repairs. Husband, pro rata share of statutory deduction where wife has legal control of her own house, even though living separate, unless legally separated. 2 I. R. R. 61 ; 7 I. R. R. 59. Fruitgrowers, see Horticultural. Guardians, see Minors. Guardians of minor children entitled to pro rata statutory deduc- tion for each ward. 1 1 1. R. R. 89. Insurance paid by tenant as part of rent. 7 I. R. R. 59. Insurance paid by landlord on leased building. 5 I. R. R. 123. THE ACT, ANNOTATED 59 Deductions, applicable to individuals Continued Insurance on property, whether productive or not. 1 1. R. R. 149. Interest paid on time deposits and deposits subject to check. L. R. App. Cas. 1912; Farmer v. Scottish North American Trust Co., L. R. App. Cas. 1912, 118; T. D., 1606, Mch. 29, 1910. Interest on mortgage, whether property productive or not. 1 I. R. R. 149. Interest on homestead mortgage given to raise money invested in business from which income is derived. 11 1. R. R. 89, 97. Interest on mortgage paid by rental of premises to mortgagee. 11 I. R. R. 89, 97. Interest, pro rata part of, paid during year on notes given prior thereto. T. D., 1606, Mch. 29, 1910. Labor, see Cost, Wages. Labor, expense on farm in year when no crop is sold, deductible from income of any business. 4 I. R. R. 12. Litigation, see Cost. Loss in business of same nature. 1 I. R. R. 149, 154; 11 I. R. R. 105. Losses, only when ascertained and settled during tax period. 5 I. R. R. 74. Loss on account of payment made as surety. On ground that loss is a bad debt uncollectible from principal. 9 I. R. R. 121. Loss of stock rendered worthless by failure of corporation. 2 I. R. R. 5; 11 1. R. R. 105. Loss by sale of stocks deductible in year of sale. 5 I. R. R. 115; 7 I. R. R. 59. Loss on sale of stocks bought for investment and sold to change investment, may be charged against annual receipts from dividends, but not if stock was bought for speculation. In latter case, loss may be charged against profit on sales in same year. 1 1. R. R. 196. Loss on sale of real estate. 7 I. R. R. 60. Market value, see Cost. Minors, see Guardians. Minors, rule as to deductions by guardians of. 11 I. R. R. 153. Mother, see Family. Parents-in-law treated as parents. 1 1. R. R. 156. Profit used for restoration of income producing property destroyed by fire. 21. R. R. 36. Profits set aside to maintain property at average value, etc. 8 I. R. R. 19. Patent rights, see Cost, Depreciation. GO FEDERAL INCOME TAX LAW Deductions, applicable to individuals Continued Penalties imposed for violation of excise laws deductible from income from business in which incurred. 4 I. R. R. 46. Real estate, see Loss. Real estate Pro rata share of decrease in value of real estate, ac- quired in some prior year and sold, or held for sale, where exact decrease for year cannot be estimated. T. D., 1606, Mch. 29, 1910. Rent, see Insurance, Taxes. Rent, difference between rent paid and rent received. 7 1. R. R. 60. Repairs, see Cost, Profits. Repairs on homestead. 1 I. R. R. 154. Repairs to rails or machinery not resulting in increase of original value of repaired article. 2 I. R. R. 61. Repairs, such as laying new floor, putting on new roof, etc., if not a substitution of superior for inferior article. 11 1. R. R. 50. Repairs for purpose and with result of maintaining property at average value at beginning of period. 8 1. R. R. 19. Repairs, irrespective of productive nature of property. 1 1. R. R. 156. Salaries of agents necessarily employed to care for real estate. 3 I. R. R, 102. Salaries of salesmen of nursery companies. T. D., 1606, Mch. 29, 1910. Salaries paid to salesmen in form of commissions. T. D., 1606, Mch. 29, 1910. Silent partner, rule as to losses of. 4 1. R. R. 46. Step-children treated as children. 1 I. R. R. 156. Taxes upon property whether productive or not. 1 I. R. R. 149; 11 I. R. R. 98. Taxes in the year in which they are paid. 7 I. R. R. 60; T. D., 1606, Mch. 29, 1910. Taxes paid upon a homestead. 11 I. R. R. 89. Taxes paid upon property occupied by the owner. 1 1. R. R. 155. Wages of house-servants employed in productive labor, as making butter for sale. 7 I. R. R. 58. Wife having separate income entitled to pro rata share of statutory deduction, even though living apart from husband, unless legally separated. 2 1. R. R. 61 ; 7 I. R. R. 59. Deductions, applicable to individuals, have been construed not to include the following: (See, also, p. 101.) Animals, see Value.- THE ACT, ANNOTATED 61 Deductions, applicable to individuals Continued Assessments, laid upon owners of property increased in value by improvements. 1 I. R. R, 150. Betterments, see Repairs. Bonds, see Premium. Bonus, see Lease, Premium. Bonus paid for loan not deductible as an expense of operation. Arizona Copper Co. v. Surveyor, 1896, N. W. (Eng.), Part I, 93. Business, see Purchase Price. Construction, see Improvements. Corporations, see Loss. Debts paid out of income. 7 I. R. R. 59. Depreciation, estimated. 5 I. R. R. 154. Depreciation in value of lease. 2 I. R. R. 92. Depreciation in value of stocks unsold. 3 I. R. R. 109; 7 I. R. R. 59. Depreciation in value of vessel unsold. 3 I. R. R. 151. Depreciation in value of vessel becoming obsolete. Burnley Co. v. Aiken (1896), W. N. (Eng.) Part 1, 115. Dividends of non-taxable corporations. T. D., 1857, June 9, 1913. Dividends, payable by corporation "tax free," tax upon, not de- ductible by stockholder unless paid by corporation. 1 I. R. R. 153. Duties, see Taxes. Earnings, see Repairs. Expenses, see Gifts, Improvements, Labor, Living Expenses, Pensions, etc. Expenses, not specified and of doubtful legality. 1 1. R. R. 100. Expenses, business, of prior years. Broughton Coal Co. v. Kirk- patrick, L. R. 14 Q. B. D. 491. Expenses of farming or gardening for recreation. 7 I. R. R. 60. Expenses for fuel. 1 I. R. R. 100. Expenses, ordinary family. 7 I. R. R. 59. Expenses of sinking new mine pits. Coltness Iron Co. . Black, L. R. 6 App. Cas. 315. Expenses of sinking oil wells by persons engaged in sale of wells. 11 I. R. R. 123. Expenses for army substitute. 2 I. R. R. 92. Farmers, see Funds. Farming, see Labor. Fertilizers, cost of, produced on farm. 7 I, R. R. 58, Fuel, see Expenses, 62 FEDERAL INCOME TAX LAW Deductions, applicable to individuals Continued Funds, see Insurance. Gifts. 71. R. R. 59. Gifts made to employes. T. D., 1606, Mch. 29, 1910. Good will, see Purchase Price. Hotel bills, see Living Expenses. Import duties, see Taxes. Insurance. 5 I. R. R. 115. Improvements, see Repairs. Improvements to property. 1 I. R. R. 180; 5 I. R. R. 130; 8 I. R. R. 19; T. D., 1606, Mch. 29, 1910. Improvements to new land by ditching, etc. 7 I. R. R. 58; Comrs. v. Antill, 1902, App. Cas. 422. Insurance, fund set aside for self-insurance. T. D., 1606, Mch. 29, 1910. Interest accruing prior to tax year. T. D., 1606, Mch. 29, 1910. Interest on purchase monej^ mortgage. 11 1. R. R. 89, 97. Interest payment, guaranteed pending construction of works through stockholders of other companies. City, etc., Corp. v. Styles, 4 Times L. R. 51. Interest nominally falling due in tax year, payment of which can- not be compelled. 7 I. R. R. 59. Interest on notes given in current tax year but payable in subse- quent year. T. D., 1606, Mch. 29, 1910. Investments in business. 7 I. R. R. 60. Judgment in tort action. 1 1. R. R. 155. Labor, see Wages. Labor, expense of in one year not deductible from profits of crop in subsequent year. 4 I. R. R. 12; 6 I. R. R. 3. Labor, value of labor performed by farmer's minor children. 7 I. R. R. 58. Labor, value of inventor's time and labor not deductible from profit of sale of patent right. 1 1. R. R. 188. Labor, value of proprietor's. 1 1. R. R. 156. Labor, expense of farm labor in year when no crop was sold not deductible from rent, dividends, etc. 4 I. R. R. 12. Lease, see Depreciation, Premium. Living expenses. 7 I. R. R. 60. Loan, see Bonus. Losses since end of tax year. U. S. Int. Rev. Dec. No. 110, May. 1863, 1 1. R. R. 181; 2 I. R. R. 68. Losses in one business not deductible from profit in another. 1 I. R. R. 149, 196. Losses in one branch of business not deductible from income of THE ACT, ANNOTATED 63 Deductions, applicable to individuals Continued another distinct branch. Religious Tract Society v. Forbes (1896), W. N. (Eng.), Part 1, 126. Losses by robbery. 5 I. R. R. 123; 7 I. R. R. 60. Losses through suretyship. 5 I. R. R. 123. Losses on sale of stock purchased for speculation not deductible from dividends. 1 I. R. R. 196. Losses of stock company, though non-taxable, in which individual is interested. 5 1. R. R. 148. Losses through speculation. 1 I. R. R. 154. Loss of income of former year, except occasioned by use in business in current tax year. 4 1. R. R. 46. Loss of moneys invested hi stock-holding companies. 4 I. R. R. 46. Mining, see Expenses, Value. Ore, see Value. Pensions paid to employes. T. D., 1606, Mch. 29, 1910. Premium paid for lease. Gillett v. Colquhoun, 33 Weekly Rep. (Eng.) 258. Premium paid upon U. S. bonds. 5 I. R. R. 74. Produce, see Rent. Profits of manufacturer because of prior payment of excise tax. U. S. Int. Rev. Dec. No. 110, May, 1863. Purchase price of good will of business. 7 I. R. R. 60. Purchase price of a business, paid out of income. City, etc., Cor- poration v. Styles, 4 T. L. R. 51. Purchase price of certain rights paid by branch office in foreign country. London Bank v. Apthorpe, 1891, L. R. 2 Q. B. D. 378. Rent, where tenant's own house is left unoccupied, or occupied by another, rent free. 4 I. R. R. 46. Rent paid in produce. 7 I. R. R. 60. Rent of prior years. Broughton Coal Co. v. Kirkpatrick, L. R. 14 Q. B. D. 491. Rental value of land held under Crown lease and tax exempt. Comrs. v. Antill, 1902, A. C. 422. Rental value of property occupied by owner. 1 1. R. R. 171. Repairs, see Improvements. Repairs giving permanent additional value. 5 I. R. R. 130. Repairs amounting to betterments. T. D., 1606, Mch. 29, 1910. Repairs of injuries to building, which occurred prior to purchase. 2 I. R. R. 61 ; 6 1. R, R. 18; 7 I. R. R. 60; 11 1. R. R. 50, 73. Repairs by substitution of higher priced or superior article. 2 I. R. R. 61; 11 I. R. R, 50; Boutwell, 306. 64 FEDERAL INCOME TAX LAW The net income from property owned and business carried on in the United States * by persons residing else- where 2 shall be computed upon the basis prescribed in this paragraph and that part of paragraph G of this section relating to the computation of the net income of corpora- tions, joint-stock and insurance companies, organized, created, or existing under the laws of foreign countries, in so far as applicable. That in computing net income under this section there shall be excluded the interest upon the obligations of a State or any political subdivision thereof, and upon the Deductions, applicable to individuals Continued Salaries, when deemed excessive. T. D., 1606, Mch. 29, 1910. Speculation, see Losses. Substitute, see Expenses. Taxes or import duties if included in estimating cost of goods. T. D., 1606, Mch. 29, 1910. Taxes accruing prior to tax year. T. D., 1606, Mch. 29, 1910. Taxes deducted from income of previous year. 1 I. R. R. 181. Taxes not actually paid at end of tax year. 7 I. R. R. 60. Taxes on stocks not taxable by municipalities, but by state, etc. II. R. R. 181 ;cp. 101. R. R. 9. Taxes, federal legacy and succession, rule as to. 7 I. R. R. 59. Timber, see Value. Value, see Depreciation. Value of animals raised by farmer, lost by death. 3 I. R. R. 100. Value of ore extracted from mine. T. D., 1796, Sept. 13, 1912. Value of timber removed from timber lands. T. D., 1606, Mch. 29, 1910. Wages of farmer's adult children working for him. 7 I. R. R, 58. Wages of officer's servant. 1 I. R. R. 100. Wages for production of articles consumed in family. 7 I. R. R. 58. Wages for unproductive labor. 7 I. R. R. 58. 1 See Doing Business, p. 43. 1 See Non-resident aliens, p. 23, 42, 44, 56. THE ACT, ANNOTATED 65 obligations of the United States or its possessions; also the compensation of the present President of the United States during the term for which he has been elected, and of the judges of the supreme and inferior courts of the United States now in office, and the compensation of all officers and employees of a State or any political subdivi- sion thereof l except when such compensation is paid by the United States Government. C. That there shall be deducted from the amount of the net income of each of said persons, ascertained as provided herein, the sum of $3,000, plus $1,000 additional if the person making the return be a married man with a wife living with him, or plus the sum of $1,000 additional if the person making the return be a married woman with a husband living with her; but in no event shall this addi- tional exemption of $1,000 be deducted by both a husband and a wife: Provided, That only one deduction of $4,000 shall be made from the aggregate income of both husband and wife when living together. 2 D. The said tax shall be computed upon the remainder of said net income of each person subject thereto, accruing during each preceding calendar year ending December thirty-first: Provided, however, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax shall be computed on the net income accruing from March first to December thirty-first, nineteen hun- dred and thirteen, both dates inclusive, after deducting five-sixths only of the specific exemptions and deductions herein provided for. On or before the first day of March, nineteen hundred and fourteen, and the first day of March in each year thereafter, a true and accurate return, under oath or affirmation, shall be made by each person of lawful age, except as hereinafter provided, subject to the tax imposed by this section, and having a net income of $3,000 or over the taxable year, to the collector of internal revenue for the 1 See Exemptions, p. 52. 2 See Deductions, p. 54. 66 FEDERAL INCOME TAX LAW district in which such person resides or has his principal place of business, or, in the case of a person residing in a foreign country, in the place where his principal business is carried on within the United States, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth specifically the gross amount of income from all separate sources and from the total thereof, deducting the aggregate items or expenses and allowance herein authorized; guardians, trustees, executors, administrators, agents, receivers, conservators, and all persons, corpora- tions, or associations acting in any fiduciary capacity, shall make and render a return of the net income of the person for whom they act, subject to this tax, coming into their custody or control and management, and be subject to all the provisions of this section which apply to in- dividuals: l Provided, That a return made by one of two or more joint guardians, trustees, executors, administra- tors, agents, receivers, and conservators, or other persons acting in a fiduciary capacity, filed in the district where such person resides, or in the district where the will or other instrument under which he acts is recorded, under such regulations as the Secretary of the Treasury may prescribe, shall be a sufficient compliance with the re- quirements of this paragraph; and also all persons, firms, companies, copartnerships, corporations, joint-stock com- panies or associations, and insurance companies, except as hereinafter provided, in whatever capacity acting, having the control, receipt, disposal, or payment of fixed or determinable annual or periodical gains; profits, and in- come of another person, subject to tax, shall in behalf of such person deduct and withhold from the payment an amount equivalent to the normal income tax upon the same and make and render a return, as aforesaid, but separate and distinct, of the portion of the income of each person from which the normal tax has been thus 1 See Return, p. 47. THE ACT, ANNOTATED 67 withheld, and containing also the name and address of such person or stating that the name and address or the address, as the case may be, are unknown : Provided, That the provision requiring the normal tax of individuals to be withheld at the source of the income shall not be construed to require any of such tax to be withheld prior to the first day of November, 1913: Provided, further, That in either case above mentioned no return of income not exceeding $3,000 shall be required : Provided further , That any persons carrying on business in partnership shall be liable for income tax only in their individual capacity, and the share of the profits of a partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxa- tion and the tax paid, under the provisions of this section, and any such firm, when requested by the Commissioner of Internal Revenue, or any district collector, shall for- ward to him a correct statement of such profits and the names of the individuals who would be entitled to the same, if distributed: l Provided further , That persons liable 1 Return, as applicable to representatives and " source " Statutory provisions. (See, also, pp. 46, 102). The act provides for return to be made in behalf of another, by two classes, of individuals, firms, and corporations. While the act does not sharply distinguish these classes, it is evident that the first is intended to include representatives acting in an official or fiduciary capacity (p. 66); the second, those chargeable with the funds of another, by reason of temporary custodianship, indebtedness, or other business relations (p. 73). _ A representative return and application for exemption, may also be made for a minor, lunatic, absentee, or one seriously ill, by the person required to withhold and pay the tax (p. 75). There is no provision for such return in case the taxpayer alone is responsible. Statutory requirements as to filing representative returns are shown by the following table: Time: On or before March 1st of each year, beginning with the 68 FEDERAL INCOME TAX LAW for the normal income tax only, on their own account or in behalf of another, shall not be required to make return Return, as applicable to representatives Continued year 1914 (p. 65). This date is probably unaffected by the provision allowing a corporation to make a return sixty days after the date designated by it as the end of its fiscal year (p. 103), the latter provision being, in terras, applicable to the return of the corporation's own income. Place: Office of Collector of Internal Revenue for the district of principal's residence, or the district where the will, or other instrument under which representative acts, is recorded. Period covered: Preceding year, ending December 31st. By whom made, verified, and filed: (a) By a representative: An unconditional duty is imposed to make return of the princi- pal's taxable net income coming into the custody or control and management of representatives of this class. While the act provides that they are subject to the provisions of this section, which apply to individuals (p. 66), and that no re- turn of income not exceeding $3,000 shall be required, it does not specify whether this income, upon which the neces- sity of return is based, is the total income receivable by prin- cipal and representative, or that receivable by representa- tive only. This ambiguity, and the personal liability for the tax by a repre- sentative responsible for return (p. 74), suggests the wis- dom of a representative return in all cases. In case of two or more joint representatives, return may be made by either. In case the representative is an association or corporation, the return must, undoubtedly, be made and veri- fied by its president, vice-president, or other principal officer, and treasurer or assistant treasurer, as in the case of corporate returns (p. 103). (6) By the source: A return must be made by any representative of this class having the control, receipt, disposal, or payment of fixed or determin- able annual [or periodical] gains, profits, and income of an- THE ACT, ANNOTATED 69 of the income derived from dividends on the capital stock or from the net earnings of corporations, joint-stock corn- Return, as applicable to representatives Continued other person subject to tax. This applies only to return for normal tax (p. 66, cp. 75). Note that the tax upon the following income is to be withheld and paid (and return thereof made) by the source, irrespective of the amount of such income, unless exempted by the filing, by the taxpayer, of the statutory statement and claim of exemption : Interest upon bonds, mortgages, deeds of trust, and other obliga- tions of corporations, joint stock companies, associations, and insurance companies: Coupons, checks, bills of exchange in payment of interest upon bonds of foreign countries, foreign mortgages, and like obliga- tions not payable in United States: Coupons, checks and bills of exchange in payment of dividends upon stock, or interest upon obligations of foreign corpora- tions, associations, and insurance companies engaged in business in foreign countries (p. 75) . This class not only includes both those who, as representatives, are in possession and control of the particular kind of income specified by the act, but as well, all those who are charged with the payment to another of any income of that character, as, for example, mortgagors, obligors upon bonds, tenants and employers (p. 73). The importance of a correct construction of this provision lies in the fact that, coupled with the duty to make a return, is liability for the tax assessable thereon. The term, "fixed or determinable annual or periodical gains, prof- its, and income," will probably be found more difficult of def- inition that any other clause of the act. Note that the words "or periodical" are used on page 66, but not on pages 73, 75. At the end of any year, or other period, all income accrued during such term, will have become fixed and determinable, and may be said, with respect to such term, to be " annual " or " pe- riodical," as the case may be. The only income subject to the tax, however, is the net income of an entire tax year, the amount or even probable existence of which can rarely be ascertained before the expiration of that period, as gross income from whatever source investment, business, or speculation, and of whatever amount may at that time, 70 FEDERAL INCOME TAX LAW panies or associations, and insurance companies taxable upon their net income as hereinafter provided. Return, as applicable to representatives Continued be balanced by losses. Payments by the source will, on the other hand, frequently become due long before the termina- tion of the tax period, as, for example, weekly or monthly wages, collections payable quarterly, or interest creditable to account when received. Literal compliance by the source with this provision of the act will, accordingly, often result in depriving the creditor or owner, for a considerable time, of the use of a fund which will finally be found not subject to the tax, yet a default in such com- pliance may result in liability to payment of the tax by the source. The act does not afford any ad interim protection to the creditor or owner of the income, as an affidavit and statement of exemption (p. 74), or application to the collector (p. 74) can obviously not be made until the expiration of the tax year. Exceptions: Representative return (by the source) is not required to be made by the following: (a) A partnership, while not required to make return, is re- quired, upon request of the Commissioner of Internal Rev- enue or any district collector, to forward to him a correct statement of the profits and names of the individuals consti- tuting the partnership, who would be entitled to such profits if distributed (p. 67). See, also, p. 72. (b) Any corporation required by the commissioner must for- ward to him a correct statement of accumulated profits, and the names of the individuals entitled to the same, if dis- tributed (p. 50). THE ACT, ANNOTATED 71 Any person for whom return has been made and the tax paid, or to be paid as aforesaid, shall not be required Return, as applicable to representatives Continued Contents of return. (a) Return by representative. A statement of the taxable net income, of the principal, coming into the custody or control of the representative. This return is subject to all the provisions which apply to individual re- turns (p. 66) and hence, should include the same items and totals (p. 66). If made for a minor, lunatic, absentee from the United States, or invalid, it may be mad^ as a complete substitute for the in- dividual return by the principal and contain a full statement of his whole taxable net income, application for deductions, exemptions, etc., provided it be accompanied by an affidavit of the sufficiency of the representative's knowledge (p. 75). (6) Return by source. A statement of the portion of the income of the principal or cred- itor from which the normal tax has been withheld; and the name and address of the principal or creditor, or a statement that the name and address, or address, are unknown. (c) Return by tenant. A statement of the gross rental and deductions for taxes, assess- ments, and cost of maintenance, repairs and insurance. (d) Return by partnership, see Exception (c) Return, as applicable to representatives and source Construction. (See, also, pp. 49, 110). Administrators, see Decedents. Agents, see Aliens. Aliens' agents or partners may make return if possessed of suffi- cient knowledge. 7 I. R. R. 10. Children, see Step-children. Decedent's income prior to death returnable by personal repre- sentative. Mandell v. Pierce, 3 Cliff. 134; 7 I. R. R. 59. Decedent's income not returnable when death occurred between January 1st and May 1st. 2 I. R. R. 54. District Return by guardian residing abroad to be made in dis- trict of ward's residence; return of resident guardian in dis- trict of guardian's residence. 3 I. R. R. 172. Dividends, see Rules. Executors, see Decedents. 72 FEDERAL INCOME TAX LAW to make a return unless such person has other net income, but only one deduction of $3,000 shall be made in the case of any such person. 1 The collector or deputy collector shall require every list to be verified by the oath or affirmation of the party rendering it. If the collector or deputy collector have reason to believe that the amount of any income returned is under- stated, he shall give due notice to the person making the return to show cause why the amount of the return should not be increased, and upon proof of the amount under- stated may increase the same accordingly. If dissatisfied with the decision of the collector, such person may submit the case, with all the papers, to the Commis- sioner of Internal Revenue for his decision, and may furnish sworn testimony of witnesses to prove any relevant facts. E. That all assessments shall be made by the Commis- sioner of Internal Revenue and all persons shall be notified Return, as applicable to representatives Continued Father having legal control of income of minor, without guardian, should make return thereof with his own. 2 I. R. R. 68. Guardians, see District, Father, Rules. Guardians should return income of minor. 2 I. R. R. 68. Income, see Decedents, Father, Guardians. Minors, see Father, Guardians. Parents, see Step-parents. Partners, see Aliens. Personal representatives, see Decedents. Step-children regarded as children. 1 1. R. R. 156. Step-parents regarded as parents. 1 I. R. R. 156. Return as applicable to partnerships Partnerships organized under laws which give corporate character- istics must make return and pay tax. 28 Op. Atty. Gen. 189. Rules Guardian, return by should always be upon information and belief. 1 I. R. R. 181. Dividends, return of. 10 I. R. R. 9; 29 Op. Atty. Gen. 217-228; T. D., 1692, Dec. 20, 1911; T. D., 1773, May 21, 1912. 1 See Return, p. 48. THE ACT, ANNOTATED 73 of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon informa- tion obtained as provided for in this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such person or persons immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid, and interest at the rate of 1 per centum per month upon said tax from the time the same became due, except from the estates of insane, deceased, or insolvent persons. 1 All persons, firms, copartnerships, companies, corpora- tions, joint-stock companies or associations, and insurance companies, in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, agents, re- ceivers, conservators, employers, and all officers and em- ployees of the United States having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual gains, profits, and income of another person, exceeding $3,000 for any taxable year, other than dividends on capital stock, or from the net earnings of corporations and joint-stock companies or associations subject to like tax, who are required to make and render a return in behalf of another, as provided herein, to the collector of his, her, or its dis- 1 See Table of dates, Appendix. 74 FEDERAL INCOME TAX LAW trict, are hereby authorized and required to deduct and withhold from such annual gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this section, and shall pay to the officer of the United States Government authorized to receive the same, and they are each hereby made personally liable for such tax. 1 In all cases where the income tax of a person is withheld and deducted and paid or to be paid at the source, as aforesaid, such person shall not receive the deduction and benefit of the exemption allowed in paragraph C of this section except by an application for refund of the tax 2 unless he shall, not less than thirty days prior to the day on which the return of his income is due, file with the per- son who is required to withhold and pay tax for him, a signed notice in writing claiming the benefit of such exemption and thereupon no tax shall be withheld upon the amount of such exemption: 3 Provided, That if any person for the purpose of obtaining any allowance or reduction by virtue of a claim for such exemption, either for himself or for any other person, knowingly makes any false statement or false or fraudulent representation, he shall be liable to a penalty of $300; nor shall any person under the foregoing conditions be allowed the benefit of any deduction provided for in subsection B of this section unless he shall, not less than thirty days prior to the day on which the return of his income is due, either file with the person who is required to withhold and pay tax for him a true and correct return of his annual gains, profits, and income from all other sources, and also the deductions, asked for, and the showing thus made shall then become a part of the return to be made in his behalf by the person required to withhold and pay the tax, likewise make application for deductions to the collector of the dis- trict in which return is made or to be made for him : Pro 1 See Return, p. 68. , 2 See Application for Refund, p. 159. 3 See Return, p. 70. THE ACT, ANNOTATED 75 vided further, That if such person is a minor or an insane person, or is absent from the United States, or is unable owing to serious illness to make the return and application above provided for, the return and application may be made for him or her by the person required to withhold and pay the tax, he making oath under the penalties of this Act that he has sufficient knowledge of the affairs and property of his beneficiary to enable him to make a full and complete return for him or her, and that the return and application made by him are full and complete: 1 Provided further, That the amount of the normal tax hereinbefore imposed shall be deducted and withheld from fixed and determinable annual gains, profits, and income derived from interest upon bonds, and mortgages, or deeds of trust, or other similar obligations of corporations, joint- stock companies or associations, and insurance companies, whether payable annually or at shorter or longer periods, although such interest does not amount to $3,000, subject to the provisions of this section requiring the tax to be withheld at the source and deducted from annual income and paid to the Government; and likewise the amount of such tax shall be deducted and withheld from coupons, checks, or bills of exchange for or in payment of interest upon bonds of foreign countries and upon foreign mort- gages or like obligations (not payable in the United States), and also from coupons, checks, or bills of exchange for or in payment of any dividends upon the stock or interest upon the obligations of foreign corporations, associations, and insurance companies engaged in business in foreign countries; and the tax in each case shall be withheld and deducted for and in behalf of any person subject to the tax hereinbefore imposed, although such interest, div- idends, or other compensation does not exceed $3,000, by any banker or person who shall sell or otherwise realize coupons, checks, or bills of exchange drawn or made in payment of any such interest or dividends (not payable 1 Return, p. 71. 70 FEDERAL INCOME TAX LAW in the United States), and any person who shall obtain payment (not in the United States), in behalf of another of such dividends and interest by means of coupons, checks, or bills of exchange, and also any dealer in such coupons who shall purchase the same for any such div- idends or interest (not payable in the United States), otherwise than from a banker or another dealer in such coupons; but in each case the benefit of the exemption and the deduction allowable under this section may be had by complying with the foregoing provisions of this paragraph. 1 All persons, firms, or corporations undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner of Internal Revenue, and shall be subject to such regulations enabling the Government to ascertain and verify the due withholding and payment of the income tax required to be withheld and paid as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe; and any person who shall undertake to collect such payments as aforesaid without having obtained a license therefor, or without complying with such regulations, shall be deemed guilty of a misdemeanor and for each offense be fined in a sum not exceeding $5,000, or imprisoned for a term not exceeding one year, or both, in the discretion of the court. Nothing in this section shall be construed to release a taxable person from liability from income tax nor shall any contract entered into after this Act takes effect be valid in regard to any Federal income tax imposed vpon a person liable to such payment. 2 1 See Return, p. 69. 2 This provision, imposing upon the taxpayer ultimate liability for the tax, in any event, should be noted in view of the several apparent exemptions of the taxpayer, where return and payment are to be made at the source. It would seem that if the source withheld, but THE ACT, ANNOTATED 77 The tax herein imposed upon annual gains, profits, and income not falling under the foregoing and not returned and paid by virtue of the foregoing shall be assessed by personal return under rules and regulations prescribed by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. The provisions of this section relating to the deduction and payment of the tax at the source of income shall only apply to the normal tax hereinbefore imposed upon indi- viduals. F. That if any person, corporation, joint-stock com- pany, association, or insurance company liable to make the return or pay the tax aforesaid shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, such persons shall be liable to a penalty of not less than $20 nor more than $1,000. Any person or any officer of any corporation required by law to make, render, sign, or verify any return who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this section to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution. G. (a) That the normal tax hereinbefore imposed l upon failed to pay the tax, the taxpayer would still be liable for its pay- ment. 1 "Normal tax hereinbefore imposed upon individuals." For definition of "normal tax," (see p. 44). As to income of foreign corporation, (see pp. 95, 98). It will be noted that the act provides for payment by corporations of only the normal, and not the additional or sur-tax imposed upon individuals having an income of more than twenty thousand dollars (p. 46). The tax payable by the corporation on its own behalf should be distinguished from that payable by the corporation as the holder of taxable income belonging to its stockholders or other individuals. A consolidated corporation, liable, under the statute permitting 78 FEDERAL INCOME TAX LAW individuals likewise shall be levied, assessed, and paid l annually upon the entire net income arising or accruing from all sources during the preceding calendar year to every corporation, joint-stock company or association, and every insurance company, organized in the United States, no matter how created or organized, but not in- cluding partnerships; 2 but if organized, authorized, or consolidation, for the obligations of the constituent companies, is liable for any taxes and penalty which have accrued against any of them. Bailey v. R. R. Co., 22 Wall. 604, 22 L. Ed. 840. 1 " Levied, assessed and paid." For note upon this provision, see p. 33. Note omission of word "collected" included in the provisions as to individuals. This would seem purely accidental, and under the rule of fair construction, would probably be held to have no significance. As to taxation of corporations for 1912, and Jan. 1-March 1, 1913, see p. 117. 2 " Net income." (For general definitions of income, see p. 34. For rules of computation of income, gross and net, of corpora- tions, see T. D. 1571, Dec. 3, 1909. In applying to any case arising under this act, the several defini- tions below noted, due effect should be given to the wording of the particular act under which the same were stated, and especially to the view generally adopted, that a tax payable by corporations under prior acts was an excise tax measured by income and paid for the privilege of doing business. Income, applicable to corporations, has been construed to include the following: (See, also, p. 34.) Accumulations, see Earnings, Profits. Accumulations added to contingent funds of savings institutions from earnings in excess of interest allowed to depositors. United States v. Dollar Savings Bank of Pittsburgh, 15 I. R. R. 193; 12 I. R. R. 157, Nov. 12, 1870. Appreciation in value of securities. T. D., 1742, Dec. 5, 1911. Bad debts, collection of debts returned in prior year as bad. T. D., 1606, Mch. 29, 1910. Capital assets, see Increase. Coal companies, see Mining Companies. Damages awarded to corporation in excess of its capital stock THE ACT, ANNOTATED 79 existing under the laws of any foreign country, then upon the amount of net income accruing from business Income, applicable to corporations Continued for property taken for a public use. Matson's Ford Bridge Co. v. Commonwealth, 117 Pa. St. 265, 11 A. 813. Deposits in State Bank. Manhattan Co. v. Blake, 148 U. S. 412, 37 L. Ed. 504, 13 S. Ct. 640. Dividends declared by mistake. Central Natl. Bank v. United States, 137 U. S. 355, 34 L. Ed. 703, 11 S. Ct. 126. Dividends upon stock of other corporations. Spreckels v. Mc- Clain, 192 U. S. 397, 48 L. Ed. 496, 24 S. Ct. 326. Dividends applied by policy holders to payment of renewal pre- miums to shorten endowment or premium paying period, or to purchase paid up additions and annuities, are income of insurance company. T. D., 1742, Dec. 5, 1911. Earnings, see Accumulations, Profits, Receipts. Earnings carried to repair fund. 2 I. R. R. 100. Earnings, entire net, whether set aside in particular manner mentioned, or not. 3 I. R. R. 85. Earnings withheld by National Bank for payment of State taxes. Central Natl. Bank 'v. United States, 137 U. S. 355, 34 L. Ed. 703, 11 S. Ct. 126. Earnings of railroad earnings included in term "Income and Revenue." Tompkins v. Little Rock & Ft. S. Ry., 15 Fed. 6. Gas companies, see Mining Companies. Income from foreign business. T. D. 1571, Dec. 3, 1909. Increase in value of capital assets as determined by physical re- valuation and corresponding entries on books. T. D., 1742, Dec. 5, 1911. Interest on bank account. Spreckels v. McClain, 192 U. S. 397, 48 L. Ed. 496, 24 S. Ct. 326. Interest from United States bonds Upon theory that the tax was an excise tax paid for the privilege of doing business. 28 Op. Atty. Gen. 138, 139; T. D., 1583, Jan. 18, 1910. Interest on bonds of municipality issued for benefit of railroad. Boutwell (1864), p. 226. Life insurance company, see Mutual. Manufacturing corporations, rule for computing income of. T. D., 1588, Jan. 24, 1910. Mining, see Profits. Mining Co., method of computing net income. T. D., 1675, Feb. 14, 191 1;T. D., 1796, Sept. 13, 1912 ;T. D., 1833, Feb. 18, 1913. 80 FEDERAL INCOME TAX LAW transacted and capital invested within the United States during such year: 1 Income, applicable to corporations Continued Mutual Life Insurance Co., income of. Herold v. Mut. Ben. Life Ins. Co., 198 Fed. 199, 201 Fed. 918. Oil company, see Mining Company. Petroleum company, see Mining Company. Premiums returnable to policy holders less certain deductions. William Harrison Last v. London Assurance Corporation, L. R. 10 A. C. 438. Cp. L. R. 12 Q. B. D. 389. Profits accruing in income year. 1 1. R. R. 180. Profits carried to construction account. 1 I. R. R. 155. Profits from sale of real estate. T. D., 1675, Feb. 14, 1911. Profits held in reserve. 11 1. R. R. 10. Receipts from wharfage. Spreckels v. McClain, 192 U. S. 397, 48 L. Ed. 496, 24 S. Ct. 326. Securities, see Appreciation. Income, applicable to corporations, has been construed not to include the following: (See, also, p. 37.) Dividends awarded annually to policy holders, not paid out of net income, but out of excess premium receipts. 6 I. R. R. 139; Herold v. Mut. Ben. Life Ins. Co., 198 Fed. 199; 201 Fed. 918. Deferred premiums and interest, accrued but unpaid. Herold v. Mut. Ben. Life Ins. Co., 198 Fed. 199, 201 Fed. 918. Premiums, unearned, set aside as reserve. T. D., 1606, Mch. 29, 1911. Receipts from receivers' sales of articles manufactured from raw products in possession of insolvent corporation at commence- ment of receivership, and from sales of other personal prop- erty in process of winding up corporate business. Gehr v. Iron Co., 174 Pa. St. 430, 34 A. 836. Savings Banks, undistributed earnings of. 13 1. R. R. 66, 73. 1 Doing business Corporations (See, also, p. 43.) General rules: Corporations to be subject to tax must be organized and actually engaged in business. Emery, Bird, Thayer Realty Co. v. United States, 198 Fed. 242. Corporation considered as doing business in a certain territory only when becoming, in a sense, domesticated therein. Caesar v. Capell, 83 Fed. 403. THE ACT, ANNOTATED 81 Provided, however, That nothing in this section shall apply to labor, agricultural, or horticultural organizations, Doing Business, Corporations Continued Question as whether foreign corporation is carrying on busi- ness here, must be determined by past or present action, rather than possible future action, under powers reserved in existing contracts, but not exercised. United States v. Am. Bell Tel. Co., 29 Fed. 17 (cited in 119 Fed. 425). The following has been held to be doing business: Agents, see Contracts, Sales. Agents Solicitation of orders through resident agents to whom goods are shipped for delivery. John Deere Plow Co. v. Wyland, 76 P. 863, 69 Kan. 255*. Branch offices, maintenance of. United States v. Bank of Mon- treal, 21 Fed. 236. Business New Jersey corporation doing business in Cuba. T. D., 1863, June 26, 1913. Business Corporation doing business wholly within Philippine Islands and assisted by Philippine government. 29 Op. Atty. Gen. 164-169. Cable companies, having cable termini and offices in England, taxable on profits earned by transmission of messages from England. Erichson v. Last, L. R. 8 Q. B. D. 414; cited in De Beers v. Howe, L. R. (1906), A. C. 455; Comrs. v. Lovell & C. Co. (1908), A. C. 46; Kirkwood v. Gadd (1910), A. C. 422. Circulars, see Mailing. Contracts Contracting through resident agent to furnish labor and material, and sending same into state. St. L. Exp. M. & F. Co. v. Beilharz, 88 S. W. 512. Contracts to manage, and assist in operating factory within a state. Diamond Glue Co. v. U. S. Glue Co., 23 S. Ct. 206, 187 U.S. 61 1,47 L.Ed. 328. Contracts Contracting to deliver and store ice within state, regardless of place of manufacture. West Jersey Ice Mfg. v. Armour, 12 Pa. Super. Ct. 443. Contracts to furnish labor, materials, and construction within state, and having office therein. Portland Co. v. Hall & Grant Con. Co., 121 A. D. 779, 106 N. Y. Supp. 649. Ferry, operation of, between New Jersey and Pennsylvania, by New Jersey corporation holding corporate meetings, owning real estate, and having boats registered in New Jersey, and owning no property in Pennsylvania, excepting lease of slip for receipt and delivery of freight, held doing business in 82 FEDERAL INCOME TAX LAW or to mutual savings banks not having a capital stock represented by shares, or to fraternal beneficiary societies, Doing Business, Corporations Continued Pennsylvania. Commonwealth v. Gloucester Ferry Co., 98 Pa. St. 105. Reversed on another ground, 114 U. S. 196, 29 L. Ed. 158. Foreign steamship companies maintaining agencies in United States. 28 Op. Atty. Gen. 211-218; T. D., 1600, March 14, 1910. Letters, see Mailing. Mailing to persons in a state letters and circulars signed by officers and issued for purposes of business. Commonwealth v. Long, 1 Pa. Co. Ct. 190. Loan Making loan of money secured by note and mortgage within the state. Gum v. New Eng. Mortgage Security Co., 92 Ala. 135, 8 So. 141. Office, see Contracts. Premiums, collection of, by agent, although tax paid on agent's own income consisting in part of such premiums. Phoenix Ins. Co. of London v. Corp. of City of Kingston, 7 Ont. 343. Real estate Trust company contracting in a state for sale of real property therein and bringing suit to enforce such con- tract. Pa. Co. v. Bauerle, 143 111. 459, 33 N. E. 166. Real estate Tenants in common of building in New York, or- ganized as corporation in New Jersey to take title to the land, taxable in New York. People v. Miller, 181 N. Y. 328, 73 N. E. 1102. Sales of goods through agents in a state. Cone v. Tuscaloosa Mfg. Co. (C. C.), 76 Fed. 891. Steamship companies doing business in this country. 28 Op. Atty. Gen. 211-218; T. D., 1600, Mch. 14, 1910. Trust companies, see Real Estate. The following has been held not to be doing business: Agency, maintenance of, for storage and delivery of goods sold by traveling salesmen, subject to approval of home office. Rock Island Plow Co. v. Petersen, 101 N. W. 616, 93 Minn. 356. Agents, see Loans, Sales, Single Transaction. Agents Employment of agent having office for own convenience, but not exclusive control of business, bank account, or books, and making no contracts for sales of goods. Penn. Collieries Co. v. McKeever, 93 A. D. 303, 87 N. Y. S. 869, affd., 183 N. Y. 98, 74 N. E. 935. Agents Solicitation of advertisements through agents and cir- culatipn of periodicals by mail. Boardman v. S. S. McClure THE ACT, ANNOTATED 83 orders, or associations operating under the lodge system, or for the exclusive benefit of the members of a fraternity Doing Business, Corporations Continued Co., 123 Fed. 614; Amer. Contractor Pub. Co. v. Bagge, 91 N. Y. S. 73. Agents Solicitation of orders, subject to approval of home office, through. Crocker v. Muller, 83 N. Y. S. 189, 40 Misc. Rep. 685; Tallapoosa Lumber Co. v. Holbert, 5 A. D. 559, 39 N. Y. Supp. 432; Murphy Varnish Co. v. Gonnell, 10 Misc. 553; 65 St. Rep. 819, 32 N. Y. Supp. 492; Havens & Geddes . Diamond, 93 111. App. 557; Cummer Lumber Co. v. Mnfrs. Mut. Fire Ins. Corp., 67 A. D. 151, affd., 173 N. Y. 633, 6 N. E. 1106, 73 N. Y. Supp. 668. Agents Solicitation of orders through Vio Chemical Co. v. Studholme, 53 Misc. 470; Bruner v. Kansas Moline Plow Co., 168 Fed. 218. Bank account, keeping, in state where corporation has no office except for registration of stock transfers. Honeyman v. Colo. Fuel & Iron Co., 133 Fed. 96. Bonds, see Sales. Borrowing moneys. Union Trust Co. v. Sickles, 125 A. D. 105, 109 N. Y. Supp. 262. Contracts, see Single Transaction, Furnishing. Contracts to furnish and adjust machinery within a state. Milan M. & M. Co. v. Gorten, 93 Tenn. 590, 26 L. R. A. 135, 27 S. W. 791. Contracts to supply public schools with text books. State v. Amer. Book Co., 76 P. 411, 69 Kan. 1, 1 L. R. A. (N. S.) 1041. Contracts Execution of contract to light streets. Hogan v. City of St. L., 75 S. W. 604, 176 Mo. 149. Contracts of license for use of patents by other corporations in the conduct of their business, although right is reserved to collect royalties directly from customers in case of default, etc. People . Amer. Bell Tel. Co., 117 N. Y. 241, 22 N. E. 1057; Commonwealth v. Amer. Bell Tel. Co., 129 Pa. St. 217, 18 A. 122. Contracts made within the state, no sales being made or business transacted. Coml. Wood & Cement Co. v. Northampton, etc., Co., 41 Misc. 242, 84 N. Y. Supp. 38. Consignment of goods to brokers as agents; sales made in state from such goods directly at a price fixed by corporation, or in fulfillment of orders approved by it; deposit of proceeds in bank within state to credit of corporation; and payment 84 FEDERAL INCOME TAX LAW itself operating under the lodge system and providing for the payment of life, sick, accident, and other benefits Doing Business, Corporations Continued of brokers' charges by check after deposit. People ex rel. Southern Cotton Oil Co. v. Roberts, 25 A. D. 13, 48 N. Y. Supp. 1028. Consignment of goods by foreign corporation ; sales made by factor in own name; and collection and account for proceeds by factor. Bertha Zinc & Mineral Co. v. Clute, 7 Misc. 123, 57 St. Rep. 70, 27 N. Y. Supp. 342. Consignment of fruit to be sold by consignee on profit-sharing basis. Brown Seed Co. v. Richardson, 53 Misc. 517, 103 N. Y. Supp. 243. Corporations which have leased all their property to other corpo- rations. T. D., 1847, April 14, 1913; Minehill and S. H. R. Co. v. McCoach, 192 Fed. 670. Delivery, see Shipment. Fire insurance, taking out through insurance brokers within the state. Cummer Lumber Co. v. Associated Mfrs. Mut. Fire Ins. Co., 67 A. D. 151, affd., 173 N. Y. 633, 73 N. Y. Supp. 668, 6 N. E. 1106. Foreign steamship companies, occasional visits of vessels of, to United -States. T. D., 1606, Mar. 29, 1910. Furnishing materials for building in pursuance of contract. N. Y. Architectural Terra Cotta Co. v. Williams, 102 A. D. 1, 92 N. Y. Supp. 808, affd. 184 N. Y. 579, 77 N. E. 1192. Isolated transaction, see Single Transaction. Lease, see Corporations. Litigation in the courts of a state. Am. L. & T. Co. v. East & W. R. R. Co., 37 Fed. 242; Christian v. Am. Freehold L. & M. Co., 89 Ala. 198, 7 So. 427; St. L., A. & T. R. R. Co. . Fire Assurance of Phila., 55 Ark. 163, 18 S. W. 43; Utley v. Clark- Gardner L. M. Co., 4 Colo. 369. Loaning moneys within a state on application of loan brokers, the agents of the borrowers. Norton v. Union Bank & Trust Co., 46 S. W. 544. Means, see Supplying. Note, acceptance of promissory notes payable in the state. Nor- ton v . W. H. Thomas & Sons Co., 93 S. W. 711. Oil, see Purchase. Orders, see Agents. Premiums, see Agents. Purchasing oil within the state for shipment to refineries without THE ACT, ANNOTATED 85 to the members of such societies, orders, or associations and dependents of such members, nor to domestic building Doing Business, Corporations Continued the state. Commonwealth v. Standard Oil Co., 101 Pa. St. 119. Sales, see Agents, Consignment, Single Transaction. Sales of goods to customer within the state. Vaughan Mach. Co. v. Lighthouse, 64 A. D. 138, 71 N. Y. S. 799. Sales of goods within the state through traveling salesmen. Toledo Com. Co. v. Glen Mfg. Co., 55 Ohio St. 217, 45 N. E. 197; Moline Plow Co. v. Wilkinson, 105 Mich. 57, 62 N. W. 1119. Sales of goods within the state through agents, on orders subject to approval of home office. Amer. Broom & Brush Co. v. Addickes, 19 Misc. Rep. 36, 42 N. Y. S. 871; Belle City Mfg. Co. v. Frizzell, 11 Idaho, 1, 81 P. 58; Natl. Knitting Co. v. Bronner, 20 Misc. Rep. 125, 45 N. Y. S. 714; Jones v. Keeler, 40 Misc. Rep. 221, 81 N. Y. S. 648; Harvard Co. v. Wicht, 99 A. D. 507, 91 N. Y. S. 48; cited with approval in Milliken v. Fullerton, 101 A. D. 606, 91 N. Y. S. 1104. Sample room, maintenance of, within the state, all orders being filled from home office. Burrows v. Caplin, 127 A. D. 317, 111 N. Y. S. 498; Fresno Home Packing Co. v. Turle & Skid- more, 60 Misc. 79, 111 N. Y. S. 839. Shipment of goods into state on order given without the state. Novelty Mfg. Co. . Cornell, 88 Hun, 254, 34 N. Y. Supp. 717, 68 St. Rep. 697; J. L. White Furnace Co. v. C. W. Miller Transfer Co., 131 A. D. 559, 115 N. Y. S. 625. Single transaction Sale of single cargo of coal through agent. Ozark Cooperage Co. 'v. Quaker City Coo- perage Co., 112 A. D. 62, 98 N. Y. Supp. 113. " " Execution of contract within the state to manufacture and deliver machinery. Cooper Mfg. Co. v. Ferguson, 113 U. S. 727, 28 L.Ed. 1137, 58. Ct. 739. ?' ?' Purchase of securities of another corporation and execution of mortgage as security therefor. Gilchrist v- Helena R. Co., 47 Fed. 593. f* Isolated acts of business within the state. Cooper Mfg. Co. v. Ferguson, 113 U. S. 727, 733, 28 L. Ed. 1137, 5 S. Ct. 739; Na- tional Knitting Co. v, Bronner, 20 Misc. 125. 86 FEDERAL INCOME TAX LAW and loan associations, nor to cemetery companies, organ- ized and operated exclusively for the mutual benefit of their members, nor to any corporation or association or- ganized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net in- come of which inures to the benefit of any private stock- holder or individual, nor to business leagues, nor to chambers of commerce or boards of trade, not organized for profit or no part of the net income of which inures to the benefit of the private stockholder or individual; nor to any civic league or organization not organized for profit, but operated exclusively for the promotion of Doing Business, Corporations Continued Single transaction Single loan by foreign mortgage company having no office or place of business within the state. Farrior v. New Eng. Mtg. Security Co., 88 Ala. 275, 7 S. 200; Florsheim Bros. Co. v. Lester, 60 Ark. 120, 29 S. W. 34, 27 L. R. A. 505. Contra: State v. Bristol Sav. Bank, 108 Ala. 3. " " Securing single order for machinery by agent. Wolff Dryer Co. v. Bigler, 192 Pa. 466, 43 A. 1092. it " Single purchase of machinery within a state for shipment to state of domicile. Colo. Iron Works v. Sierra Grande M. Co., 15 Colo. 499, 25 P. 325; Gates Iron Co. v. Cohen, 7 Colo. App. 341, 43 P. 667. " " Execution of single contract for delivery of paving stones quarried in another state, although delivery extended over period of months. Haddam Granite Co. v. Brooklyn Hts. R. R. Co., 131 A. D. 685, 116 N. Y. S. 96. Stocks, see Sales. Subscription to newspapers, solicitation of orders for. Beard v. Union Am. Pub. Co., 71 Ala. 60. Supplying means to another with which to do business. United States v. Am. Bell Tel. Co., 29 Fed. 17. THE ACT, ANNOTATED $7 social welfare. 1 Provided further, That there shall not be taxed under this section any income derived from any 1 Exemptions, applicable to corporations, are declared by the stat- ute to include the income of the following: (See, also, pp. 51, 92.) Agricultural Associations. Beneficiary Societies, see Fraternal Beneficiary Societies. Boards of Trade, etc., not organized for profit and no part of net income of which enures to benefit of private stockholder or individual. Building loan associations (domestic, i. e., incorporated within the limits of the United States). Business leagues not organized for profit, and no part of net in- come of which enures to benefit of private stockholder or individual. Cemetery companies, organized and operated exclusively for the mutual benefit of their members. Chambers of Commerce, not organized for profit, and no part of net income of which enures to benefit of private stockholder or individual. Charitable associations, organized and operated exclusively for such purpose, no part of whose net income enures to benefit of private stockholder or individual. Civic leagues or organizations, not organized for profit, but oper- ated exclusively for promotion of social welfare. Educational corporations or associations, organized and operated exclusively for such purpose, no part of whose net income enures to benefit of private stockholder or individual. Fraternal beneficiary societies, orders, or associations, operating under the lodge system or for the exclusive benefit of the members of a fraternity, itself, operating under the lodge system and providing for the payment of benefits to members and dependents of members. (It is doubtful whether any member of this group is exempt, unless expressly providing by charter, by-laws, or recognized system of operation for the payment of benefits; that is, whether an irregular or dis- cretionary distribution of gratuities or like assistance would be sufficient to meet the statutory requirement.) Horticultural organizations. Labor organizations. Life insurance companies as to any premium repaid or credited to policy holder, etc. Mutual fire insurance companies as to any portion of premium deposits returned to policy holders. 88 FEDERAL INCOME TAX LAW public utility or from the exercise of any essential gov- ernmental function accruing to any State, Territory, or Exemptions, applicable to Corporations Continued Mutual savings banks not having a capital stock represented by shares. Religious corporation or association organized and operated ex- clusively for such purpose, no part of whose net income enures to benefit of private stockholder or individual. Scientific corporations or associations organized and operated exclusively for such purpose, no part of whose net income enures to benefit of private stockholder or individual. Exemptions, applicable to corporations, have been construed to apply to the income of the following : (See, also, pp. 53, 92). Agricultural associations not conducting business for profit, but intended for the advancement and encouragement of agricul- ture. T. D., 1742, Dec. 5, 1911. Asylums, etc., although charging those able to pay for board, treatment, and care, provided the receipts are disbursed for the legitimate mission cf such asylums. Collins v. N. Y. Post-Graduate Med. School, 59 App. Div. 68, 69 N. Y. Supp. 106. Building loan associations operating exclusively for the mutual benefit of their members, who are entitled to vote according to membership and not to their stockholding, even though returns to members are not equal. Parkview Bldg. & Loan Assn. v. Herold, 203 Fed. 876; cp. Pac. Bldg. & Loan Assn. v. Hartson, 201 Fed. 1011; Treas. Dec., 1830, Feb. 1, 1913. Cemetery associations, if not maintained for profit, even though selling lots and charging for opening graves. Negley v. City of Henderson, 21 Ky. L. R. 1394; 55 S. W. 554; City v. Board of Assessors, 52 La. Ann. 223; 26 So. 872. Cemetery associations, personal property of, as horses, carriages, &c., not exempt from taxation. Rosedale Cemetery Assn. v. Linden, 73 N. J. L. 421 ; 63 Atl. 904. Charitable organizations include associations devoted, generally, to objects beneficial to the public. Commissioners r. Pem- sel, L. R. 1891, App. Cas. 531; Re Landis Estate, 66 N. J. Eq. 291; 56 Atl. 1039. Charitable institutions deriving insignificant income from small sales of farm products. People v. Purdy, 58 Hun, 380, THE ACT, ANNOTATED 89 the District of Columbia, or any political subdivision of the State, Territory, or the District of Columbia, nor Exemptions, applicable to Corporations Continued Companies not organized for profit and doing business of purely mutual character. Treas. Dec., 1713, July 10, 1911. Corporations, see Insolvent Corporations. Fruitgrowers, see Horticultural. Horticultural associations not conducting business for profit, but intended for the advancement and encouragement of agricul- ture. T. D., 1742, Dec. 5, 1911. Hospitals, charging patients able to pay. Collins v. N. Y. Post- Graduate Med. School, 59 App. Div. 68, 69 N. Y. Supp. 106; People v. Purdy, 58 Hun, 386; Powers v. Mass. Horn. Hosp., 109 Fed. 294. Insolvent corporations in receivers' hands. Pa. Steel Co. v. New York City Ry. Co., 176 Fed. 471; 193 Fed. 286; 198 Fed. 774. Mutual savings banks, although, in a sense, organized for profit. T. D., 1606, Mch. 29, 1910. Receivers, see Insolvent Corporations. Trustees, having for a certain period the sole management and control of real property, and paying over profits to so- called shareholders. Eliot v. Freeman, 220 U. S. 178, 55 L. Ed. 424, overruling Mass. Trust Cases, 28 Op. Atty. Gen. 234-239. Exemptions, applicable to corporations, have been construed not to apply to the income of the following: (See, also, pp. 53,92). Agricultural associations, see Corporations, Sugar Plantation. Agricultural organizations not having as their chief object the promotion or advancement of agricultural interest, or any part of whose income enures to the benefit of stockholders. T. D., 1606, Mch. 29, 1910; T. D., 1742, Dec. 5, 1911. Agricultural associations conducted for profit. T. D., 1737, Dec. 5, 1911. Banks, see Natl. Banks, Savings Banks. Beneficiary associations, see Fraternal Societies, Fire Ins. Cos. Building loan associations having a capital and making loans to non-members. T. D., 1606, Mch. 29, 1910. Building loan associations receiving moneys on deposit not in payment for stock, and paying fixed rate of interest thereon, T. D., 1655, Sept. 24, 1910. 90 FEDERAL INCOME TAX LAW any income accruing to the government of the Philippine Islands or Porto Rico, or of any political subdivision of Exemptions, applicable to Corporations Continued Building loan associations making loans to non-members, issuing preferred or guaranteed-interest paying stock, and allowing directors to cancel outstanding certificates, etc. Pacific Bldg. & Loan Assn. v. Hartson, 201 Fed. 1011. Building loan associations making loans to non-members and issuing interest bearing stock. T. D., 1830, Feb. 1, 1913. Building loan associations issuing guaranteed-dividend stock. T. D., 1606, Mch. 29, 1910. Corporations engaged in growing fruits, vegetables, and like prod- ucts for profit. T. D., 1742, Dec. 5, 1911. Corporations organized for insurance against death, accident, or damage to property, however maintained, unless properly classed as fraternal beneficiary organizations operating under the lodge system. T. D., 1742, Dec. 5, 1911. Corporations, see Agricultural, Horticultural, Insurance, Insolvent Corporations, Sugar Plantation. Corporations not specifically enumerated in the act as exempt. T. D., 1606, Mch. 29, 1910. Corporations organized to sell provisions, etc., to stockholders and others. T. D., 1606, Mch. 29, 1910. Corporations which have conducted business during whole or part of tax year and dissolved before time to make return. United States v. Gen. Insp. & Loading Co., 192 Fed. 223; T. D., 1650, April 15, 1910; Dollar Savings Bank v. United States, 19 Wall. 227-240, 86 L. Ed. 80; Penn. Steel Co. v. N. Y. City Ry. Co., 198 Fed. 774; T. D., 1736, Dec. 4, 1911. Corporations, otherwise taxable, although originally granted per- petual tax-exemption by statute. City of Philadelphia v. Pennsylvania Hospital, 134 Pa. St. 171, 19 A. 490. Dividends by corporation, one of whose stockholders was munic- ipality. Logan County v. United States, 169 U. S. 255, 42 L. Ed. 737, 18 S. Ct. 361. Educational corporations, see School. Fire insurance companies, mutual. T. D., 1606, Mch. 29, 1910. Fraternal beneficiary associations not operating under the lodge systemo T. D., 1738, 1742, Dec. 5, 1911. Hail association, mutual. T. D., 1606, Mch. 29, 1910. Horticultural organizations conducted for profit. T. D., 1737, Dec. 5, 1911; T. D., 1742, Dec. 5, 1911. THE ACT, ANNOTATED 91 the Philippine Islands or Porto Rico: Provided, That whenever any State, Territory, or the District of Col- umbia, or any political subdivision of the State or Ter- ritory, has, prior to the passage of this Act, entered in good faith into a contract with any person or cor- poration, the object and purpose of which is to acquire, construct, operate, or maintain a public utility, no tax shall be levied under the provisions of this Act upon the income derived from the operation of such public utility, so far as the payment thereof will impose a loss or burden upon such State, Territory, or the District of Columbia, or a political subdivision of a State or Ter- ritory; but this provision is not intended to confer upon such person or corporation any financial gain or exemption or to relieve such person or corporation from the payment of a tax as provided for in this section upon the part or Exemptions, applicable to Corporations Continued Hospitals, founded by charitable donation, managed gratuitously by trustees, wholly supported by patients' payments, and showing annual surplus expended in enlarging and improving institution. Needham v. Bowers, L. R. 21 Q. B. D. 436. Insurance, see Corporations. Libraries, free public, conducted by municipal corporation. An- drews v. the Mayor, L. J. R. N. S., 61 Q. B. D. 715. Limited partnerships, see Partnerships. National banks. T. D., 1606, Mch. 29, 1910. Partnership associations possessing every privilege and power essential to corporations. T. D., 1606, Mch. 29, 1910. Partnerships, limited, organized for profit and having capital stock represented by shares, although no certificates of stock are issued. Op. Atty. Gen., Feb. 14, 1910. Savings banks having capital similar to other banking institu- tions. 28 Op. Atty. Gen., 189-198. School conducted by owners who receive salaries, although owners expend upon the institution, out of private means, more thai) the amount of such salaries, and school is claimed to be fm- to those unable to pay. Mundy v. Van Hoose, 104 Ga. 292, 37 S. E. 783. Sugar plantation corporations selling products. T. D., 1600, Mch. 29, 1910. 92 FEDERAL INCOME TAX LAW portion of the said income to which such person or corpo- ration shall be entitled under such contract. 1 1 Exemptions, applicable to political sovereignties, etc., are de- clared by the statute to include the following: (See, also, pp. 51, 87). (a) Income, from whatever source derived, of any state or terri- tory, or of the District of Columbia, the Philippine Islands, or Porto Rico, or of any of their political subdivisions. This exemption, as applied to states, is included in order to prevent an interference by one sovereignty with the govern- mental functions of another, an interference as clearly pro- hibited in relation to finance as to any other department of government. T. D., 1634, May 27, 1910. To territories, territorial possessions, and District of Columbia, the exemption is granted to conform to the principle of uni- formity of burden, as, aside from the necessity and proprietj 7 of regarding such principle, the Federal Government would undoubtedly have power to tax these political divisions as it sees fit, they being neither independent sovereignties nor subdivisions thereof. This expressly applies to income derived from the operation of a public utility, acquired, constructed, operated or maintained under contractual relations with a person or corporation, in so far as the payment will impose a loss or burden upon a state, territory, or subdivision thereof, or District of Columbia, but not so far as to relieve such person or corporation from tax. (6) The interest upon the obligations of a state or any political subdivision thereof. This relates to bonds or other obligations issued, not to those owned by a state or municipality or any other political sub- division. It is included for the same reason as the exemption last above noted. United States v. Bait. & 0. R. R. Co., 17 Wall. 322, 17 L. Ed. 597. Exemptions, applicable to political sovereignties, etc., have been construed not to apply to the following: (See, also, pp. 53, 89). Bonds of a municipality issued for the benefit of a railroad. Bout- well, 226. Dividends by a corporation, one of whose stockholders was munic- ipality. Logan County v. United States, 169 U. S. 255, 42 L. Ed. 737, 18 S. Ct. 361. THE ACT, ANNOTATED 93 (6) Such net income shall be ascertained by deducting from the gross amount of the income of such corporation, joint-stock company or association, or insurance company, received within the year from all sources, (first) all the ordinary and necessary expenses paid within the year in the maintenance and operation of its business and prop- erties, including rentals or other payments required to be made as a condition to the continued use or possession of property; (second) all losses actually sustained within the year and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any; and in the case of mines a reasonable allowance for depletion of ores and all other natural deposits not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation is made; and in case of insurance com- panies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided, That mutual fire insurance com- panies requiring their members to make premium de- posits to provide for losses and expenses shall not return Exemptions, applicable to political sovereignties, etc. Continued Income of a municipality from light furnished to private con- sumers. Dillon v. Corp. of Haverfordwest, L. J. R., 1891, N. S. 60, Q. B. 477. Income of business enterprise derived by a state acting as a partner therein or proprietor thereof. Brisco v. Bank, 11 Pet. 323, 9 L. Ed. 709; South Carolina v. United States, 199 U. S. 448, 50 L. Ed. 265, 26 S. Ct. 110. Income of municipality derived from coal dues originally included in taxable incomes, not exempt because subsequently made applicable to general purposes of municipality. Atty. Gen. v. Black, L. R. 6 Exch. 78, affirmed 308. Income of quasi-public corporation incorporated by special act of Parliament to superintend harbor and docks of munici- pality. Mersey Docks & Harbor Board v. Lucas, L. R. 8 App. Cases, 891; Sourey v. Harbor Moorings Cornrs., 3 Times L. R. 516. 94 FEDERAL INCOME TAX LAW as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof; and life insurance com- panies shall not include as income in any year such portion of any actual premium received from any individual policy holder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such individual policy holder, within such year; (third) the amount of interest accrued and paid within the year on its indebtedness to an amount of such indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year: Provided, That in case of indebtedness wholly secured by collateral the subject of sale in ordinary business of such corporation, joint stock company, or association, the total interest secured and paid by such company, corporation, or association within the year on any such indebtedness may be deducted as a part of its expense of doing business : Provided further, That in the case of bonds or other indebtedness, which have been issued with a guaranty that the interest payable thereon shall be free from taxa- tion, no deduction for the payment of the tax, herein im- 95 posed shall be allowed ; and in the case of a bank, banking association, loan, or trust company, interest paid within the year on deposits or on moneys received for investment and secured by interest-bearing certificates of indebted- ness issued by such bank, banking association, loan or trust company; (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof, or imposed by the Government of any foreign country, Provided, That in the case of a corporation, joint-stock company or association, or insurance company, organized, authorized, or existing under the laws of any foreign country, such net income shall be ascertained by deducting from the gross amount of its income accrued within the year from business transacted and capital invested within the United States, (first) all the ordinary and necessary expenses actually paid within the year out of earnings in the maintenance and operation of its business and prop- erty within the United States, including rentals or other payments required to be made as a condition to the con- tinued use or possession of property; (second) all losses actually sustained within the year in business conducted by it within the United States and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any, and in the case of mines a reasonable allowance for deple- tion of ores and all other natural deposits, not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation is made; and in case of insurance companies the net addition, if any, re- quired by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts. Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and ex- penses shall not return as income any portion of the pre- mium deposits returned to their policy holders, but shall 96 FEDERAL INCOME TAX LAW return as taxable income all income received by them from all other sources plus such portions of the premium de- posits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insur- ance companies shall include in their return of gross in- come gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment thereof and the payment thereof; and life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policy holder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such individual policy holder, within such year; (third) the amount of interest accrued and paid within the year on its indebted- ness to an amount of such indebtedness not exceeding the proportion of one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the capital employed in the business at the close of the year which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States: Provided, That in the case of bonds or other indebted- ness which have been issued with a guaranty that the interest payable thereon shall be free from taxation, no deduction for the payment of the tax herein imposed shall be allowed; (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any State, or Territory thereof or the District of Columbia. In the case of assessment insurance companies, whether domestic or foreign, the actual deposit of sums THE ACT, ANNOTATED 97 with State or Territorial officers, pursuant to law, as additions to guarantee or reserve funds shall be treated as being payments required by law to reserve funds. l 1 Deductions, applicable to corporations are declared by the statute, to include the following: (See, also, p. 54). (a) Ordinary and necessary expenses paid during the year in the maintenance and operation of the corporate business and properties, including rentals or payments requisite as a con- dition to the use or possession of property. It is upon the basis of such allowance that a corporation, re- gardless of the amount of its capital stock or indebtedness, has been held properly to deduct interest upon a mortgage, not assumed, which is a lien upon purchased property, p. 100. (6) Losses actually sustained during the year, not compensated by insurance or otherwise. (c) A reasonable allowance for depreciation by use, wear and tear. (d) Interest accrued and paid during the year on indebtedness not exceeding one-half the sum of the corporation's bonded indebtedness and paid-up capital stock outstanding at the close of the year, or in the case of corporations without capital stock, one-half the sum of such bonded indebtedness and the capital employed hi the business on such date. Total interest paid, where such interest is wholly secured by collateral, the subject of sale in ordinary business of such corporation, joint stock company, or association (p. 94). Interest paid upon bonds or other indebtedness issued "tax- free" shall not be deducted (p. 94). (e) Taxes imposed under the authority of the United States, or any state or territory, or by any foreign government, paid during the year. (/) In the case of mines, a reasonable allowance for depreciation of ores and deposits, not exceeding five per cent of the gross value, at the mine, of the year's output. (g) In the case of banks, banking associations, loan, and trust companies, interest paid during the year on deposits, or moneys received for investment and secured by interest- bearing certificates of indebtedness. (h) In the case of insurance companies, (a) net additions, if any, required by law to be made within year to reserve tunds (actual deposits with state or territorial officers, pursuant to law, are considered additions to guarantee or reserve funds, 98 FEDERAL INCOME TAX LAW (c) The tax herein imposed shall be computed upon its entire net income accruing during each preceding calendar year ending December thirty-first : Provided, however, That for the year ending December thirty-first, Deductions, applicable to corporations Continued (fe) Sums other than dividends paid within year on policy and annuity contracts. (c) In the case of mutual fire insurance companies, see Exemp- tions, p. 87. (d) In the case of mutual marine insurance companies, portions of premiums repaid to policy holders and interest thereon from date of ascertainment to date of payment. (e) In the case of life insurance companies, premiums returned or credited (p. 105). (/) In the case of foreign corporations, the same deductions as in the case of domestic corporations, except that the deductible losses and expenses are those of the business conducted in the United States; the deductible interest is that on indebted- ness not exceeding an amount equal to the same fraction of one-half the sum of bonded indebtedness and outstanding capital stock (or if no capital stock, capital employed in the business at the close of the year) as the income re- ceived from business transacted hi the United States is of the total income; and the deductible taxes are those im- posed by the United States, a state, or territory. No pro- vision is made for the deduction of total interest upon indebtedness secured by collateral, the subject of sale in business of such corporation, etc., as hi the case of a domestic corporation. Deductions, applicable to corporations, have been construed to include the following: (See, also, p. 57). Bad debts, see Debts. Associations, expenses of, having an entity distinct from individual shareholders. 10 I. R. R. 39. Betterments, see Improvements. Bonds, see Interest. Bonds and proceeds derived from sale of, used for ordinary and necessary expenses. T. D., 1606, Mch. 29, 1910. Bonds, fund for amortization of. T. D., 1727, Aug. 25, 1911. Bonds, book credits for amortization. T. D., 1742, Dec. 5, 1911. Building, see Rent. THE ACT, ANNOTATED 99 nineteen hundred and thirteen, said tax shall be imposed upon its entire net income accruing during that portion of said year from March first to December thirty-first, both dates inclusive, to be ascertained by taking five- Deductions, applicable to corporations Continued Coal companies, see Mining Companies. Construction, profits used in, or carried to fund for. United States v. Little Miami, etc., R. R. Co., 108 U. S. 277, 27 L. Ed. 724, 8 1. R. R. 19, 2 S. Ct. 627. Cost, see Expenses, Rent. Debts, bad or worthless, charged off during year. T. D., 1606, Mch. 29, 1910. Deductions represented by cash disbursements or evidenced in other proper manner and entered on corporate books. T. D., 1606, Mch. 29, 1910; United States v. Nipissing Mines, 202 Fed. 803. Depreciation, see Mining Companies. Depreciation, rule for computation of deductions. T. D., 1742, Dec. 5, 1911. Depreciation in value of securities, as evidenced by book entries. T. D., 1742, Dec. 5, 1911. Depreciation, pro rata part of, to reasonable amount. T. D., 1606, Mch. 29, 1910; United States v. Nipissing Mines Co., 202 Fed. 803. Depreciation of natural gas properties, rule as to computation of. T. D., 1758, Jan. 22, 1912. Depreciation of petroleum properties, rule as to computation of. T. D., 1755, Jan. 22, 1912. Depreciation of mining properties, rule as to computation of. T. D., 1675, Feb. 14, 1911. Depreciation in value of stock and bond investments. United States v. Little Miami, etc., Co., 108 U. S. 277, 27 L. Ed. 724, 2 S. Ct. 627. Dividends, see Taxes. Dividends on stock of other corporations whose net income does not exceed $5,000; Op. Atty. Gen., Jan. 24, 1910. Earnings, see Improvements. Embezzlement, see Losses. Equipment, see Expenses. Expenses to oil corporations of drilling dry wells. T. D., 1675, Feb. 14, 1911. Expenses of Insurance Co. for renewal of office furniture and 100 FEDERAL INCOME TAX LAW sixths of its entire net income for said calendar year: Provided, further, That any corporation, joint-stock com- pany or association, .or insurance company subject to this tax may designate the last day of any month in the year Deductions, applicable to corporations Continued equipment. Mutual Benefit Life Ins. Co. v. Herold, 198 Fed. 199, 201 Fed. 918. Expenses of foreign steamship companies doing regular business between United States and foreign countries, for coal, stores, etc., pro rata part of, as provided in statute for interest deduc- tions. T. D., 1606, Mch. 29, 1910. Expenses of maintenance, see Repairs. Fire, loss by, see Losses. Foreign steamship companies, see Expenses. Gas companies, see Mining Companies. Gifts to charitable or educational institutions, or hospitals con- ducted for benefit of employes. T. D., 1675, Feb. 14, 1911. Improvements, expenditure for new line for purpose of shortening tracks. United States v. Marquette H. & 0. R. Co., 17 Fed. 719. Improvements, not resulting in increase of value beyond that of original property in good repair. Grant, Collector, v. New Haven & H. R. R. Co., 9 Blatch. 543, affirmed, 93 U. S. 225. Insurance reserves. T. D. 1727, Aug. 25, 1911. Insurance, payment by Insurance Co. for re-insurance. 11 1. R. R. 122. Interest on portions of bonded or other indebtedness where aggre- gate indebtedness does not exceed statutory limit. T. D., 1606, Mch. 29, 1910. Interest, entire mortgage interest, regardless of total indebtedness, where property is purchased subject to mortgage and debt is not assumed. 28 Op. Atty. Gen. 198-201; T. D., 1595, Feb. 28, 1910. Contra, T. D. 1865, July 14, 1913. Interest on bonded indebtedness of subsidiary companies assumed by principal company. T. D., 1606, Mch. 29, 1910. Interest paid by branch upon loans by principal office and foreign bankers. Anglo, etc., Works v. Bell, 38 Solic. Journal, 325. Losses, all except losses of capital. United States v. Central Natl. Bank, 10 Fed. 612; 4 I. R. R. 46. Losses, by embezzlement. United States v. Central Natl. Bank, 10 Fed. 612. THE ACT, ANNOTATED 101 as the day of the closing of its fiscal year and shall be entitled to have the tax payable by it computed upon the basis of the net income ascertained as herein provided for the year ending on the day so designated in the year Deductions, applicable to corporations Continued Losses by fire or shipwreck. 5 I. R. R. 148. Mining, see Depreciation. Mining, etc., companies, rule as to. T. D., 1675, Feb. 14,- 1911. Notes issued during year. T. D., 1606, Mch. 29, 1910. Office furniture and equipment, sec Expenses. Oil companies, see Expenses, Mining Companies. Pensions to retired or injured employes or dependents. T. D., 1675, Feb. 14, 1911. Petroleum companies, see Mining Companies. Profits, see Construction. Profits, surplus, undivided, or retained for construction purposes. S I. R. R. 19. Profits, rule for computation. 8 I. R. R. 19. Rent paid by erection of building which is to become property of landlord. T. D., 1606, Mch. 29, 1910. Rental value of building occupied by corporation. Russell v. Bank, 13 App. Cases, 418. Re-insurance, see Insurance. Reserve held by Mutual Life Ins. Co. required to secure instal- ment payments of insurance. Mutual Benefit Life Ins. Co. v. Herald, 198 Fed. 199. Salaries, rule as to. T. D., 1742, Dec. 5, 1911. Shipwreck, see Losses. Taxes on deposits and circulation. 5 I. R. R. 74. Deductions, applicable to corporations, have been construed not to include the following: (See, also, p. 60.) Associations, statutory deductions for each member, where profits belong to association as a distinct entity. 10 1. R. R. 39. Betterments, see Improvements, Repairs. Betterments constituting an increase in capital investment. T. D., 1675, Feb. 14, 1911. Bonds, see Depreciation. Buildings, removal of, see Improvements. Capital, see Loss. Cost, see Expense. 102 FEDERAL INCOME TAX LAW preceding the date of assessment instead of upon the basis of the net income for the calendar year preceding the date of assessment; and it shall give notice of the day it has thus designated as the closing of its fiscal year to the collector of the district in which its principal business Deductions, applicable to corporations Continued Depreciation in value of corporation's own stock. T. D., 1606, Mch. 29, 1910. Depreciation of mine leased by corporation. T. D., 1606, Mch. 29, 1910. Depreciation, see Good Will. Depreciation in bonds and stocks, rule as to. T. D., 1675, Feb. 14, 1911. Dividends by insurance companies, under guise of rebates or other- wise. T. D., 1742, Dec. 5, 1911. Expense to oil corporations of drilling new wells, if productive. T. D., 1675, Feb. 14, 1911. Gifts to employees. T. D., 1675, Feb. 14, 1911. Good will of business, depreciation in, &c. T. D., 1675, Feb. 14, 1911; T. D., 1742, Dec. 5, 1911. Improvement, by removal of buildings, &c. T. D., 1675, Feb. 14, 1911. Improvements leading to increase in original value. 8 I. R. R. 19. Improvements consisting of replacement of structures, old rails, etc., T. D., 1606, Mch. 29, 1910; Grant, Collector, v. Hart- ford & New Haven R. R. Co., 9 Blatch. 543, affirmed, 93 U. S. 225, 23 L. Ed. 878. Interest on government bonds. Upon ground that tax was excise measured by receipts, of corporation. T. D., 1583, Jan. 18, 1910. Loss of capital. 4 1. R, R. 46. Notes, payment on outstanding. T. D., 1606, Mch. 29, 1910. Oil companies, see Expense. Premiums one-third of gross premiums not arbitrarily deductible as unearned or unexhausted, etc. Imperial Fire Ins. Co. v. Wilson, 35 Law Times Rep. (1876-7), 271. Profits, surplus and undivided. T. D., 1606, Mch. 29, 1910. Repairs, see Improvements. Reserves for taxes. T. D., 1742, Dec. 5, 191 1. Stocks, see Depreciation. Stock issued in payment of property. T. D., 1606, Mch. 29, 1910. Taxes, see Reserves. THE ACT, ANNOTATED 103 office is located at any time not less than thirty days prior to the date upon which its annual return shall be filed. All corporations, joint-stock companies or associations, and insurance companies subject to the tax herein im- posed, computing taxes upon the income of the calendar year, shall, on or before the first day of March, nineteen hundred and fourteen, and the first day of March in each year thereafter, and all corporations, joint-stock com- panies or associations, and insurance companies, com- puting taxes upon the income of a fiscal year which it may designate in the manner hereinbefore provided, shall render a like return within sixty days after the close of its said fiscal year, and within sixty days after the close of its fiscal year in each year thereafter, or in the case of a corporation, joint-stock company or association, or in- surance company, organized or existing under the laws of a foreign country, in the place where its principal busi- ness is located within the United States, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, shall render a true and accurate return under oath or affirma- tion of its president, vice president, or other principal officer, and its treasurer or assistant treasurer, to the collector of internal revenue for the district in which it has its principal place of business, setting forth (first) the total amount of its paid-up capital stock outstanding, or if no capital stock, its capital employed in business, at the close of the year; (second) the total amount of its bonded and other indebtedness at the close of the year; Deductions, applicable to corporations Continued Taxes, payments by banks of taxes assessed against stockholders. T. D., 1675, Feb. 14, 1911. Taxes, amount withheld to pay tax on dividends. United States t?. Central National Bank, 24 Fed. 577. Taxes, amount withheld to pay State taxes. Central Natl. Bank v. United States, 137 U. S. 355, 34 L. Ed. 703, 311 S. Ct. 126. Taxes paid by corporation under act of 1870. 5 I. R. R. 74. Timber, removal of. T. D., 1675, Feb. 14, 1911. 104 FEDERAL INCOME TAX LAW (third) the gross amount of its income, received during such year from all sources, and if organized under the laws of a foreign country the gross amount of its income received within the year from business transacted and capital invested within the United States; (fourth) the total amount of all of its ordinary and necessary expenses paid out of earnings in the maintenance and operation of the business and properties of such corporation, joint- stock company or association, or insurance company within the year, stating separately all rentals or other payments required to be made as a condition to the con- tinued use or possession of property, and if organized under the laws of a foreign country the amount so paid in the maintenance and operation of its business within the United States; (fifth) the total amount of all losses actually sustained during the year and not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in the deduc- tions from gross income amounts repaid to policy holders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertain- THE ACT, ANNOTATED 105 ment thereof and the payment thereof and life insurance companies shall not include as income in any year such portion of any actual premium received from any individ- ual policy holder as shall have been paid back or credited to such individual policy holder or treated as an abatement of premium of such individual policy holder, within such year; and in case of a corporation, joint-stock company or association, or insurance company, organized under the laws of a foreign country, all losses actually sustained by it during the year in business conducted by it within the United States, not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all in- come received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the pay- ment thereof and life insurance companies shall not in- clude as income in any year such portion of any actual premium received from any individual policy holder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of FEDERAL INCOME TAX LAW such individual policy holder, within such year; (sixth) the amount of interest accrued and paid within the year on its bonded or other indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock, outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close of the year, and in the case of a bank, banking association, or trust company, stating separately all interest paid by it within the year on deposits; or in case of a corporation, joint-stock company or association, or insurance company, organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded or other indebtedness not exceeding the proportion of its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of capital employed in the business at the close of the year, which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States; (seventh) the amount paid by it within the year for taxes imposed under the authority of the United States and separately the amount so paid by it for taxes imposed by the Government of any foreign country; (eighth) the net income of such corporation, joint-stock company or association, or insurance company, after making the deductions in this subsection authorized. All such returns shall as received be transmitted forth- with by the collector to the Commissioner of Internal Revenue. 1 1 Return, as applicable to corporations Statutory provisions. (See, also, pp. 46, 66.) Statutory requirements as to filing corporate returns are shown by the following table. THE ACT, ANNOTATED 107 All assessments shall be made and the several corpora- tions, joint-stock companies or associations, and insurance companies shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessment shall be paid on Return, as applicable to corporations Continued As to return for 1912, and Jan. 1-Mch. 1, 1913, see p. 117. Time: On or before March 1st of each year, beginning with the year 1914, except where the last day of any month has been designated by the corporation as the termination of its fiscal year, in which case, within sixty days after such date. Place: Domestic corporation: Office of Collector of the district in which principal business office of corporation is lo- cated: Foreign corporation: Office of Collector of the district in the United States in which principal business of corporation is lo- cated. Period covered: Preceding year, ending December 31st, unless other fiscal year has been designated by corporation; in sucli case, preceding fiscal year (p. 103). By whom made, verified, and filed: Except as otherwise specific- ally provided (pp. 81, 103). (a) Every corporation, joint stock company, association, and insurance company, organized in the United States, taxable under this act (pp. 78, 103). (6) Every corporation, joint-stock company, association, and insurance company, organized, authorized, or existing under the laws of any foreign country, taxable upon its net income accruing from business transacted and capital invested within the United States, during the preceding tax year (p. 103). (c) As to corporation in receiver's hands, see Receivers (p. 113). Exceptions: No return is required of: (a) Income of a corporation exempted from the tax (pp. 81, 103) but see Construction, below. (6) Any portion of the premium deposits paid back or credited by a life insurance company to policy holders (pp. 94, 96). (c) Note: The act does not provide, as in the case of an in- dividual, that no return need be made by a corporation of 108 FEDERAL INCOME TAX LAW or before the thirtieth day of June: Provided, That every corporation, joint-stock company or association, and insurance company, computing taxes upon the income of the fiscal year which it may designate in the manner Returns, as applicable to corporations Continued any part of its income whereof return and deduction have been made at the source. Contents of return: (a) By a domestic corporation: A statement under oath or affirmation of its president, vice- president, or other principal officer, and treasurer or assistant treasurer, showing the amount of: (1) Total outstanding paid-up capital stock, or, if no capital stock, capital employed in business at the close of the year: (2) Bonded and other indebtedness at close of year: (3) Gross income during year from all sources: (4) Ordinary and necessary expenses paid out of earnings in maintenance and operation of business and properties. Separate statements of rental or other payments required as condition for continued use or possession of property: (5) Losses not compensated by insurance or otherwise. Sepa- rate statement of amounts allowed for depreciation: (6) Interest paid during year on indebtedness not exceeding an amount equal to the same fraction of one-half the sum of bonded indebtedness and outstanding capital stock (or if no capital stock, capital employed in the business at the close of the year) as ihe income received from business trans- acted in the United States is of the total income. (7) Taxes paid during year, imposed under authority of United States. Taxes paid during year, imposed by government of any foreign country: (8) Net income of corporation after making authorized de- ductions: (6) By a foreign corporation: A statement, verified as in the case of a domestic corporation, showing the amount of: (1) Paid-up capital stock outstanding, or if none, capital em- ployed in business at close of year: (2) Bonded and other indebtedness at close of year : (3) Gross income received during year from business transacted and capital invested in United States: THE ACT, ANNOTATED 109 hereinbefore provided, shall pay the taxes due under its assessment within one hundred and twenty days after the date upon which, it is required to file its list or return of income for assessment; except in. cases of refusal or Returns, as applicable to corporations Continued (4) Ordinary and necessary expenses paid out of earnings in maintenance and operation of business in United States: (5). Losses during year in business conducted in United States, not compensated by insurance or otherwise, with separate statement of allowances for depreciation of property: (6) Interest paid during year on indebtedness not exceeding an amount equal to the same fraction of one-half the sum of bonded indebtedness and outstanding capital stock (or if no capital stock, capital employed in the business at the close of the year) as the income received from business transacted in the United States is of the total income. (7) Taxes paid during year imposed under authority of United States: Taxes paid during year imposed by government of any foreign country: (8) Net income after making authorized deductions: Note: The information contained in items 3, 4, and 5, while ex- pressed by the statute to be additional to that required of domestic corporations, is presumably intended as a substitute therefor. (c) By an insurance company: A statement, verified as in the case of a domestic qorporation, showing the same facts required to be set forth in the re- turns of domestic and foreign corporations, respectively. Item 5 is also required to state the net addition, if any, required by law to be made during the year to reserve, and sums other than dividends paid during the year on policy and annuity contracts. Mutual fire insurance companies requiring members to make premium deposits, do not return portion of such deposits repaid to policy holders, but do return all income received from other sources, and portion of deposits retained for purposes other than payment of losses, expenses, and re- insurance. Mutual marine insurance companies return, as gross income, premiums received, less payments for re-insurance; and, as deductions, the portion of premiums repaid to policy holders, 110 FEDERAL INCOME TAX LAW neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make Returns, as applicable to corporations Continued and interest paid upon such amounts between ascertainment and payment. (d) By a bank, banking association, or trust company: A statement, verified as in the case of a domestic corporation, showing the same facts required to be set forth in the returns of domestic and foreign corporations, respectively. Item 6 is also required to state separately all interest paid during the year on deposits. Returns, as applicable to corporations Construction. (See, also, pp. 49, 71). Association having gains which are its sole property, and not divisible among members, held a person required to make return. 10 I. R. R. 39. Associations or trusts voluntarily formed by parties in interest, not organized "under the laws of the United States, etc.," not corporations within the meaning and intent of law. T. D., 1742, Dec. 5, 1911. Banks, paying taxes assessed against stockholders, should not deduct amount so paid from gross income shown in return. T. D., 1763, March 22, 1912. Bankruptcy, see Corporations. Bonds, see Return. Branch corporations, see Corporations. Business, see Principal Place. Capital stock, see Profits, Surplus. Capital stock construed as par value of issued shares except when assessable on account of deferred payments. In such case, amount actually paid on issued shares constitutes actual, paid-up capital stock. T. D., 1675, Feb. 14, 1911. Capital stock includes both preferred and common stock. T. D., 1675, Feb. 14, 1911. Collector, see Deputy Collector. Consolidation, see Corporations. Corporations, all must make return, regardless of amount of in- come. 28 Op. Atty. Gen. 218; 29 Op. Atty. Gen. 217-226; T. D., 1729, Oct. 9, 1911; United States v. Military Cons. THE ACT, ANNOTATED 111 a return upon information obtained as provided for in this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint-stock company or association, or insurance company immediately upon Returns, as applicable to corporations Continued Co. (W. D. Mo.), T. D., 1774, May 21, 1912; United States v. Acorn Roofing Co. (E. D. N. Y.), T. D., 1784, July 1, 1912. Corporations, bankrupt Return for, must be made by trustee in bankruptcy. T. D., 1765, Feb. 14, 1911. Corporations claiming special exemption should make return accompanied by statement of ground of claim. T. D., 1675, Feb. 14, 1911. Corporations claiming exemption may file statement in lieu of return. T. D., 1806, Oct. 9, 1912. Corporations consolidated during tax year must each make return. T. D., 1606, March 29, 1910. Corporations, dissolved Return for must be made by officers. T. D., 1736, December 4, 1911; United States v. Genl. I. & L. Co., 192 Fed. 223. Corporations, foreign, should designate proper officers to make return. T. D., 1606, March 29, 1910. Corporations, dissolved Return of, if not made by officers, will be made by Commissioner. T. D., 1675, Feb. 14, 1911. Corporations having branch or subsidiary companies must in- clude, in return, income of such companies when no distinc- tion is made in operating or accounting, by reason of separate incorporations. T. D., 1675, Feb. 14, 1911. Corporations holding bonds purchased above par, and making proportionate annual deduction to equalize book and redemp- tion values, may return amortization depreciation. T. D., 1742, Dec. 5, 1911. Corporations for any variety of insurance, if not "fraternal, etc." T. D., 1742, Dec. 5, 1911. Corporations leasing properties in consideration of rental, equiva- lent to interest at certain rate on stock and bonds, rental being paid directly by a lessee to stock and bondholders, must make returns. T. D., 1742, Dec. 5, 1911. Corporations liquidated during year may immediately make and file return. T. D., 1742, Dec. 5, 1911. Corporations not doing business need make no return. Emery, Bird, Thayer Realty Co. v. United States, 198 Fed. 242. 112 FEDERAL INCOME TAX LAW notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, or after one hundred and twenty days from the date on which the return of income is required to Returns, as applicable to corporations Continued Corporations not specifically exempt, required to make returns. T. D., 1606, March 29, 1910. Corporations organized during year must make return. T. D., 1675, Feb. 14, 1911. Corporations organized for purpose of holding real estate must make return. T. D., 1606, March 29, 1910. Corporations organized under laws of the United States, state, territory, Alaska, or District of Columbia Return must include income derived from both domestic and foreign business. T. D., 1606, March 29, 1910. Corporations owning stock and bonds, see Rules. Deputy collectors, filing return with, equivalent to filing with collector. T. D., 1606, Mar. 29, 1910. Dividends in coin should be returned at value in legal tender at time and place of payment. 5 1. R. R. 74. Dividends received from non-taxable corporations must be re- turned as income. 28 Op. Atty. Gen. 140-142. Dividends in scrip must be returned at market value. 7 I. R. R. 60. Dissolution, see Corporations. Domestic corporations, see Corporations. Exemptions, see Corporations. Foreign corporations, see Corporations, Returns. Foreign steamship companies, see Returns. Income, see Corporations, Returns, Subsidiary Companies. Insurance companies, see Corporations, Reserves. Inventories, see Supplemental Statements. Leased properties, see Corporations. Liquidation, see Corporations. Mortgages, see Real Estate. Officers, see Corporations. Principal place of business held to be principal office where com- pany keeps books from which return is prepared, not operating plant. T. D., 1675, Feb. 14, 1911. Principal place of business should be designated by foreign corpo- ration having several branch offices in United States. T. D. 1606, March 29, 1910. THE ACT, ANNOTATED 113 be made by the taxpayer, and after ten days notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid and interest at the rate of 1 per centum per month upon said tax from the time the same becomes due. Returns, as applicable to corporations Continued Profits, see Returns. Profits carried, or not carried to any fund cannot be held in reserve without annual return and payment of tax. 11 1. R. R. 10. Profits, once returned, not be again returned until distribution. 11 1. R. R. 10. Profits not to be included in capital stock. T. D., 1675, Feb. 14, 1911. Profits, undivided, not to be included in capital stock. T. D., 1675, Feb. 14, 1911. Profits from sale of real estate purchased prior to taking effect of statute, should be pro-rated according to number of years land was held. T. D., 1675, Feb. 14, 1911. Railroads, see Corporations. Real estate, see Corporations. Real estate, mortgaged, should be returned at full value, and amount of mortgage returned as indebtedness. T. D., 1606, March 29, 1910. Receivers make returns and statement showing corporation is in their hands. Penn. etc., Co. v. N. Y. City Ry. Co., 176 Fed. 471. Reserves of insurance companies required by law, net addition to, may be based on highest amount of reserves required by any state in which the company does business. T. D., 1742, Dec. 5, 1911. Returns, see Subsidiary Companies. Returns need not bear corporate seal. T. D., 1675, Feb. 14, 1911. Returns should be signed and verified by two of the specified officers. Signature by one person holding two offices not permissible. T. D., 1675, Feb. 14, 1911. Returns may be signed by duly authorized agents of foreign steamship companies. T. D., 1606, March 29, 1910. Returns filed with Deputy Collector regarded as filed with Collec- tor. T. D., 1606, March 29, 1910. Returns of income based on any period other than calendar or fiscal year not permissible. T. D., 1675, Feb. 14, 1911. Returns where profits are undivided during year, leaving no 114 FEDERAL INCOME TAX LAW (d) When the assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such: Provided, That any and all such returns shall be open to inspection only upon the order of the President, under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President: Provided further, That the proper officers of any State imposing a general income tax may, upon the request of the governor thereof, have access to said returns or to an abstract thereof, showing the name and income Returns, as applicable to corporations Continued surplus at termination, should include only amount divided. 1 1. R. R. 180. Sales of stock and bonds should be accounted for as sales of capital assets. T. D., 1606, March 29, 1910. Stocks, see Capital Stock, Returns. Subsidiary companies, see Corporations. Subsidiary companies, distinguished in operating or accounting from principal corporation, must make separate return. T. D., 1675, Feb. 14, 1911. Subsidiary companies, receiving income in shape of rentals, etc., must make separate return. T. D., 1675, Feb. 14, 1911. Supplemental statement must be made, verified, and filed with return showing approximate inventory at close of year pre- ceding first tax year under statute where no regular inven- tory was made. T. D., 1578, Jan. 4, 1910. Surplus is not to be included in capital stock. T. D., 1675, Feb. 14, 1911. Trusts, see Association. Rules, returns by Corporations owning bonds and stock. T. D., 1742, Dec. 5, 1911: Insurance companies. T. D., 1727, Aug. 25, 1911; Imperial Fire Ins. Co. v. Wilson, 35 Law Times R. 271. Mining companies. T. D., 1742, Dec. 5, 1911; T. D., 1796, Sept. 13, 1912; T. D., 1833, Feb. 18, 1913. Natural gas producing companies. T. D., 1754, Jan. 22, 1912. Petroleum producing companies. T. D., 1755, Jan, 22, 1912. THE ACT, ANNOTATED 115 of each such corporation, joint-stock company, association or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe. If any of the corporations, joint-stock companies or associations, or insurance companies aforesaid, shall refuse or neglect to make a return at the time or times hereinbefore specified hi each year, or shall render a false or fraudulent return, such corporation, joint-stock com- pany or association, or insurance company shall be liable to a penalty of not exceeding $10,000. H. That the word " State" or " United States" when used in this section shall be construed to include any Ter- ritory, Alaska, the District of Columbia, Porto Rico, and the Philippine Islands, when such construction is necessary to carry out its provisions. I. That sections thirty-one hundred and sixty-seven, thirty-one hundred and seventy-two, thirty-one hundred and seventy-three, and thirty-one hundred and seventy- six of the Revised Statutes of the United States as amended are hereby amended so as to read. as follows: "SEC. 3167. (See Revised Statutes, p. 120). "SBC. 3172. (See Revised Statutes, p. 121). "SEC. 3173. (See Revised Statutes, p. 121). "SEC. 3176. (See Revised Statutes, p. 126). J. That it shall be the duty of every collector of inter- nal revenue, to whom any payment of any taxes other than the tax represented by an adhesive stamp or other engraved stamp is made under the provisions of this section, to give to the person making such payment a full written or printed receipt, expressing the amount paid and the particular account for which such payment was made; and whenever such payment is made such collector shall, if required, give a separate receipt for each tax paid by any debtor, on account of payments made to or to be made by him to separate creditors in such form that such debtor can conveniently produce the same separately to his several creditors in satisfaction of their respective 116 FEDERAL INCOME TAX LAW demands to the amounts specified in such receipts; and such receipts shall be sufficient evidence in favor of such debtor to justify him in withholding the amount therein expressed from this next payment to his creditor; but such creditor may, upon giving to his debtor a full written receipt, acknowledging the payment to him of whatever sum may be actually paid, and accepting the amount of tax paid as aforesaid (specifying the same) as a further satisfaction of the debt to that amount, require the sur- render to him of such collector's receipt. K. That jurisdiction is hereby conferred upon the dis- trict courts of the United States for the district within which any person summoned under this section to appear to testify or to produce books shall reside, to compel such attendance, production of books, and testimony by appropriate process. L. That all administrative, special, and general pro- visions of law, including the laws in relation to the as- sessment, remission, collection, and refund of internal- revenue taxes not heretofore specifically repealed and not inconsistent with the provisions of this section, are hereby extended and made applicable to all the provisions of this section and to the tax herein imposed. M. That the provisions of this section shall extend to Porto Rico and the Philippine Islands : Provided, That the administration of the law and the collection of the taxes imposed in Porto Rico and the Philippine Islands shall be by the appropriate internal-revenue officers of those gov- ernments, and all revenues collected in Porto Rico and the Philippine Islands thereunder shall accrue intact to the general governments thereof, respectively: And provided further, That the jurisdiction in this section conferred upon the district courts of the United States shall, so far as the Philippine Islands are concerned, be vested in the courts of the first instance of said islands: And provided further, That nothing in this section shall be held to ex- clude from the computation of the net income the com- THE ACT, ANNOTATED 117 pensation paid any official by the governments of the District of Columbia, Porto Rico, and the Philippine Islands or the political subdivisions thereof. * * * (See pp. 120, 121, 126) * * * S. That, except as hereinafter provided, sections one to forty-two, both inclusive, of an Act entitled "An Act to provide revenue, equalize duties, and encourage the in- dustries of the United States, and for other purposes," approved August fifth, nineteen hundred and nine, and all Acts and parts of Acts inconsistent with the provisions of this Act, are hereby repealed : Provided, That nothing in this Act shall be construed to permit any oaths to be demanded or fees to be charged except as provided in this Act or in section twenty-eight hundred and sixty-two of the Revised Statutes of the United States. * * * Pro- vided further, That all excise taxes upon corporations imposed by section thirty-eight, that have accrued or have been imposed for the year ending December thirty- first, nineteen hundred and twelve, shall be returned, as- sessed, and collected in the same manner, and under the same provisions, liens, and penalties as if section thirty-eight continued in full force and effect: And pro- vided further, That a special excise tax with respect to the carrying on or the doing of business, equivalent to 1 per centum upon their entire net income, shall be levied, assessed, and collected upon corporations, joint stock companies, or associations, and insurance companies, of the character described in section thirty-eight of the Act of August fifth, nineteen hundred and nine, for the period from January first to February twenty-eighth, nineteen hundred and thirteen, both dates inclusive, which said tax shall be computed upon one-sixth of the entire net income of said corporations, joint stock companies or associations, and insurance companies, for said year, said net income to be ascertained in accordance with the pro- visions of subsection G of section two of this Act: Provided 118 FEDERAL INCOME TAX LAW further, That the provisions of said section thirty-eight of the Act of August fifth, nineteen hundred and nine, rela- tive to the collection of the tax therein imposed shall re- main in force for the collection of the excise tax herein provided, but for the year nineteen hundred and thirteen it shall not be necessary to make more than one return and assessment for all the taxes imposed herein upon said corporations, joint stock companies or associations, and insurance companies, either by way of income or excise, which return and assessment shall be made at the times and in the manner provided in this Act; but the repeal of existing laws or modifications thereof embraced in this Act shall not affect any act done, or any right accruing or accrued, or any suit or proceeding had or commenced in any civil case before the said repeal or modification; but all rights and liabilities under said laws shall continue and may be enforced in the same manner as if said repeal or modifications had not been made. Any offenses com- mitted and all penalties or forfeitures or liabilities incurred prior to the passage of this Act under any statute embraced in or changed, modified, or repealed by this Act may be prosecuted or punished in the same manner and with the same effect as if this Act had not been passed. No Acts of limitation now in force, whether applicable to civil causes and proceedings or to the prosecution of offenses or for the recovery of penalties or forfeitures embraced in or modified, changed, or repealed by this Act shall be affected thereby, so far as they affect any suits, proceed- ings, or prosecutions, whether civil or criminal, for causes arising or acts done or committed prior to the passage of this Act, which may be commenced and prosecuted within the same time and with the same effect as if this Act had not been passed. T. If any clause, sentence, paragraph, or part of this Act shall for any reason be adjudged by any court of com- petent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of said Act, but THE ACT, ANNOTATED shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the con- troversy in which such judgment shall have been rendered. U. That unless otherwise herein specially provided, this Act shall take effect on the day following its passage. Approved, 9.10 p. m., October 3, 1913. CHAPTER V REVISED STATUTES TITLE xxv INTERNAL REVENUE SEC. 3167. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employe of the United States to divulge or to make known in any man- ner whatever not provided by law to any person the operations, style of work, or apparatus of any manufact- urer or producer visited by him in the discharge of his official duties, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return by any person or corpora- tion or to permit any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law any income return or any part thereof or the amount or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing pro- vision shall be a misdemeanor and be punished by a fine not exceeding one thousand dollars or by imprisonment not exceeding one year, or both, at the discretion of the court ; and if the offender be an officer or employe of the United States he shall be dismissed from office and be incapable thereafter of holding any office under the Government. Source: Act June 30, 1864, c. 173, 36, 38, 13 Stat. 238. Act March 3, 1865, c. 78, 1, 13 Stat. 469. Act AUK- 27, 1894, c. 349, 28 Stat. 557. Aft Oct. 3, 1913. 120 REVISED STATUTES 121 Inspection of return, rules as to. T. D., 1665, Nov. 28, 1910. Privileged communication, declaration to assistant assessor re- specting income is not. 10 I. R. R. 5. Privileged communication, return is not, so as to be withheld from evidence. 10 I. R. R. 55. Trustee, &c., having ownership or possessory right to stock is a stockholder allowed to make inspection, for proper purpose, of corporate returns, within T. D., 1665. T. D., 1675, Feb. 4, 1911. SEC. 3172. Every collector shall, from time to time, cause his deputies to proceed through every part of his district and inquire after and concerning all persons there- in who are liable to pay any internal revenue tax, and all persons owning or having the care and management of any objects liable to pay any tax, and to make a list of such persons and enumerate said objects. Source: Act June 30, 1864, c. 173, 12, 13 Stat. 225. Act Mar. 2, 1867, c. 169, 1, 14 Stat. 471. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. Act Aug. 27, 1894, c. 349, 34, 28 Stat. 558. Act Oct. 3, 1913. SEC. 3173. It shall be the duty of any person, part- nership, firm, association, or corporation, made liable to any duty, special tax, or other tax imposed by law, when not otherwise provided for, in case of a special tax, on or before the thirty-first day of July in each year, in case of income tax on or before the first day of March in each year, and in other cases before the day on which the taxes accrue, to make a list or return, verified by oath or affirmation, to the collector or a deputy collector of the district where located, of the articles or objects, includ- ing the amount of annual income charged with a duty or tax, the quantity of goods, wares, and merchandise made or sold and charged with a tax, the several rates and aggre- gate amount, according to the forms and regulations to be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, for which such person, partnership, firm, association, or cor- 122 FEDERAL INCOME TAX LAW poration is liable: Provided, That if any person liable to pay any duty or tax, or owning, possessing, or having the care or management of property, goods, wares, and mer- chandise, articles or objects liable to pay any duty, tax, or license, shall fail to make and exhibit a list or return required by law, but shall consent to disclose the partic- ulars of any and all the property, goods, wares, and mer- chandise, articles, and objects liable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid, then, and in that case, it shall be the duty of the collector or deputy collector to make such list or re- turn, which, being distinctly read, consented to, and signed and verified by oath or affirmation by the person so owning, possessing, or having the care and management as afore- said, may be received as the list of such person: Provided, further, That in case no annual list or return has been rendered by such person to the collector or deputy col- lector as required by law, and the person shall be absent from his or her residence or place of business at the time the collector or a deputy collector shall call for the annual list or return, it shall be the duty of such collector or dep- uty collector to leave at such place of residence or business, with some one of suitable age and discretion, if such be present, otherwise to deposit in the nearest post-office, a note or memorandum addressed to such person, requir- ing him or her to render to such collector or deputy collector the list or return required by law within ten days from the date of such note or memorandum, verified by oath or affirmation. And if any person on being notified or required as aforesaid shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is required to deliver a monthly or other return of objects subject to tax fails to do so at the time required, or delivers any return which, in the opinion of the collector, is false or fraudulent, or contains any undervaluation or understatement, it shall be lawful for the collector to summon such person, or any other REVISED STATUTES 123 person having possession, custody, or care of books of account containing entries relating to the business of such person, or any other person he may deem proper, to appear before him and produce such books, at a tune and place named in the summons, and to give testimony or answer interrogatories, under oath, respecting any objects liable to tax or the returns thereof. The collector may summon any person residing or found within the State in which his district lies; and when the person intended to be sum- moned does not reside and cannot be found within such State, he may enter any collection-district where such person may be found, and there make the examination herein authorized. And to this end he may there exercise all the authority which he might lawfully exercise in the district for which he was commissioned. Source: Act June 30, 1864, c. 172, 11-13, 13 Stat. 225-226. Act July 13, 1866, c. 184, 9, 14 Stat. 101. Act Mar. 2, 1867, c. 169, 1, 14 Stat. 471. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. Act Mar. 1, 1879, c. 125, 3, 20 Stat. 330. Act Aug. 27, 1894, c. 349, 34, 28 Stat. 558. Act Oct. 3, 1913. (Note right of taxpayer to require return to be prepared by col- lector upon information given p. 122). Books, no particular system of keeping, is required, provided items of business done may be verified on examination. T. D., 1606, Mch. 29, 1910; U. S. v. Nipissing Mines Co., 262 Fed. 803. Books, production of which may be required are such books of witness as are competent evidence for party requiring publi- cation, but not such as may be used to refresh memory of witness. U. S. v. Tilden, 10 Ben. 566, Fed. Gas. 16522; Boyd v. U. S., 116 U. S. 616, 29 L. Ed. 746, 6 S. Ct. 524; Re Chad- wick, 1 Low. 439, Fed. Cas. 2570, 11 I. R. R. 126. Books, production of which may be required are those of tax- payer, not of third person. Re Chadwick, 1 Low. 439. Books may not be required produced where containing evidence subjecting taxpayer to the penalty of forfeiture. Boyd v. United States, 116 U. S. 616. Evidence tending to incriminate, not available in criminal pro- 124 FEDERAL INCOME TAX LAW ceedings. People ex rel. Hackley r. Kelly, 24 N. Y. 83; Re Phillips, 10 I. R. R. 107, Fed. Cas. 11097; U. S. Rev. St. (1878), 860; U. S. Comp. St. (1901), p. 661; Re Strouse, 1 Saw. 605; U. S. v. Brown, 1 Sawyer, 531, Fed. Cas. 14671, 13 I. R. R. 126. Examination designed to permit making of correct return, not assessment and collection of unpaid taxes. Re 0. H. P. Archer, 9 Ben. 427, Fed. Cas. 506, 24 I. R. R. 110. Examination, right of claimant and counsel to be present at. U. S. v. 3 Tons of Coal, 21 1. R. R. 251, 6 Biss. 379, Fed. Cas. 16515. Privilege against giving evidence tending to incriminate, not avail- able. People ex rel. Hackley v. Kelly, 24 N. Y. 83; Re Phillips, 10 1. R. R. 107; U. S. Rev. St. (1878), 860; U. S. Comp. St. (1901), p. 661; Re Strouse, 1 Saw. 605; U. S. v. Brown, 1 Saw- yer, 531. Contra, Re Lippman, 3 Benedict, 95, Fed. Cas. 8382. Return, oath taken upon, not available in examination. Magee v. Denton, 5 Blatch. 130, Fed. Cas. 8943. SEC. 3174. Such summons shall in all cases be served by a deputy collector of the district where the person to whom it is directed may be found, by an attested copy delivered to such person in hand, or left at his last and usual place of abode, allowing such person one day for each twenty- five miles he may be required to travel, computed from the place of service to the place of examination; and the certificate of service signed by such deputy shall be evi- dence of the facts it states on the hearing of an application for an attachment. When the summons requires the pro- duction of books, it shall be sufficient if such books are de- scribed with reasonable certainty. Source: Act June 30, 1864, c. 172, 11-13, 13 Stat. 225-226. Act July 13, 1866, c. 184, 9, 14 Stat. 101. Act Dec. 24, 1872, c. 13, 17 Stat. 401. SEC. 3175. Whenever any person summoned under the two preceding sections neglects or refuses to obey such summons, or to give testimony, or to answer interroga- tories as required, the collectors may apply to the judge of the district court or to a commissioner of the circuit court of the United States for the district within which the person so summoned resides for an attachment against REVISED STATUTES 125 him as for a contempt. It shall be the duty of the judge or commissioner to hear the application, and, if satis- factory proof is made, to issue an attachment, directed to some proper officer, for the arrest of such person, and upon his being brought before him to proceed to a hearing of the case; and upon such hearing the judge or commis- sioner shall have power to make such order as he shall deem proper not inconsistent with existing laws for the punishment of contempts, to enforce obedience to the re- quirements of the summons, and to punish such person for his default or disobedience. Source: Act June 30, 1864, c. 173, 14, 13 Stat. 226. Act July 13, 1866, c. 184, 9, 14 Stat. 101. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. Amendment in proceedings may be made by Court. Re Chad- wick, 1 Low. 439, Fed. Cas. 2570, 11 1. R. R. 126. Appeal cannot be taken from decision of judge in contempt pro- ceedings. Re Meadow & Bros., 1 Abb. (U. S.) 317, Fed. Cas. No. 9375, 10 I. R. R. 74. Attachment may issue, when. Stanwood . Green, 2 Abb. (U. S.) 184, Fed. Cas. 13331. Books, see Fraud. Books, production of third person's may not be required. Re Chadwick, 1 Low. 439, Fed. Cas. 2570. Contempt, commissioner no power to commit for. Ex parte Doll, 7 Phil. 595, Fed. Cas. 3968; Re Mason, 43 Fed. 515. Contempt, request of opportunity for consultation with counsel, is not. U. S. v. Fordyce, 13 I. R. R. 77, Fed. Cas. 15130. District court judge, jurisdiction of. Re Archer, 9 Ben. 427, Fed. Cas. 506; Re Lippman, 3 Ben. 95, Fed. Cas. 8382, 9 I. R. R. 1; Re Meador, 1 Abb. (U. S.) 317, Fed. Cas. 9375, 10 I. R. R. 74; Stanwood v. Green, 2 Abb. 184, Fed. Cas. 13331. Examination, expiration of authority for, when. Re Brown, Fed. Cas. 1977, 3 I. R. R. 134. Fraud, destruction or disappearance of books prima facie evidence of. 1 I. R. R. 155. Service upon clerk of railroad company sufficient basis for attach- ment. 101. R. R. 20. Summons, cause of issuance should be stated. Re Chadwick, 1 Low. 439, Fed. Cas. 2570, 11 I. R. R. 126. 120 FEDERAL INCOME TAX LAW SEC. 3176. When any person, corporation, company or association refuses or neglects to render any return or list required by law, or renders a false or fraudulent return or list, the collector or any deputy collector shall make, according to the best information which he can obtain, including that derived from the evidence elicited by the examination of the collector, and on his own view and information, such list or return, according to the form prescribed, of the income, property, and objects liable to tax owned or possessed or under the care or management of such person or corporation, company, or association, and the Commissioner of Internal Revenue shall assess all taxes not paid by stamps, including the amount, if any, due for special tax, income or other tax, and in case of any return of a false or fraudulent list or valuation inten- tionally he shall add one hundred per centum to such tax; and in case of a refusal or neglect, except in cases of sickness or absence, to make a list or return, or to verify the same as aforesaid, he shall add fifty per centum to such tax. In case of neglect occasioned by sickness or absence as aforesaid the collector may allow such further time for making and delivering such list or return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax unless the neglect or falsity is discovered after the tax has been paid, in which case the amount so added shall be collected in the same manner as the tax; and the list or return so made and subscribed by such collector or deputy collector shall be held prima facie good and sufficient for all legal pur- poses. Source: Act June 30, 1864, c. 173, 14, 13 Stat. 226. Act July 13, 1866, c. 184, 9, 14 Stat. 101. Act Dec. 24, 1872, c. 13, 2, 17 Stat. 402. Act Mar. 1, 1879, c. 125, 3, 20 Stat. 331. Act Aug.' 27, 1894, c. 349, 34, 28 Stat. 559. Act Oct. 3, 1913. REVISED' STATUTES 127 Assessor, see Penalty. Collector has no discretion to omit imposition of penalty. 2 I. R. R. 36. Construction, statute must be precisely followed where word "must" is used. Where word "may" is used, penalty should be imposed unless assessor is satisfied of impossibility of com- pliance with statutory requirements. 2 I. R. R. 36. Construction statutory penalty cannot be varied by jury. T. D., 1774, May 21, 1912. Discretion, see Remission. Penalty assessable against "source" only on basis of the amount of tax not withheld. 3 I. R. R. 60. Default in filing return imposes liability for penalty without notice or demand. 3 I. R. R. 151. Falsity of return need not be wilful. German Sav. Bk. v. Arch- bold, 15 Blatch. 398, Fed. Cas. 5364. Reversed on another ground, 104 U. S. 708, 26 L. Ed. 901. Fraud, see Penalty. Penalty Authority for imposition of any, must be found in stat- utes. Craft v. Schafer, 153 Fed. 175. Penalty for fraudulent omission not collectible where reassessment included illegal tax, or until assessor had adjudged omission fraudulent and penalty to have been incurred. Mich. Central R. R. Co. v. Slack, 100 U. S. 647, 25 L. Ed. 647. Penalty for fraud must be imposed. 3 I. R. R. 60. Penalty 50%, imposable for understatement, although there is no intention to defraud. 3 I. R. R. 60. Penalty might be added by assessor before, but not after, return of list to collector. 11 Op. Atty. Gen. 280. Penalty not a substitute for payment of tax. U. S. v. Chamber- lain, 219 U. S. 250, 55 L. Ed. 204. Penalty, if not claimed, will not be granted in suit for tax. U. S. v. Erie Ry. Co., 106 U. S. 327, 703, 27 L. Ed. 151, 1 S. Ct. 223. Penalty, single, only, for all failures to make returns prior to com- mencement of action to recover. U. S. v. Bklyn. &c. R. R., 14 Fed. 284; U. S. v. N. Y. Guaranty Co., 8 Ben. 269, Fed. Cas. 15872. Remission, no discretion in administrative officers to allow. T. D., 1701, May 27, 1911. Return, see Default. Understatement, see Penalty. SEC. 3177. Any collector, deputy collector, or inspector may enter, in the day-time, any building or place where 128 FEDERAL INCOME TAX LAW any articles or objects subject to tax are made, produced, or kept, within his district, so far as it may be necessary, for the purpose of examining said articles or objects. And any owner of such building or place, or person having the agency or superintendence of the same, who refuses to admit such officer, or to suffer him to examine such article or articles, shall, for every such refusal, forfeit five hundred dollars. And when such premises are open at night, such officers may enter them while so open, in the performance of their official duties. And if any person shall forcibly obstruct or hinder any collector, deputy collector, or inspector, in the execution of any power and authority vested in him by law, or shall forcibly rescue or cause to be rescued any property, articles, or objects after the same shall have been seized by him, or shall attempt, or endeavor so to do, the person so offending, excepting in cases otherwise provided for, shall, for every such offense, forfeit and pay the sum of five hundred dollars, or double the value of the property so rescued, or be imprisoned for a term not exceeding two years, at the discretion of the court. Source: Act June 30, 1864, c. 173, 37-38, 13 Stat. 238. Commissioner, authority of cannot be delegated. United States v. Rhawn, 22 I. R. R. 235, Fed. Cas. 16150. Commissioner, entrance and exit of may not be obstructed. United States v. Mosley, Fed. Cas. 15823, 15 1. R. R. 8. Nat. Banks not subject to examination. United States v. Parkhill, Fed. Cas. No. 15994. Cf. United States v. Mann, 95 U. S. 580, 24 L. Ed. 531; United States v. Rhawn, Fed. Cas. No. 16150. Search warrants, duty of United States Commissioners to issue. 24 Op. Atty. Gen. 685. SEC. 3178. All persons required to make returns or lists of objects charged with an internal tax shall declare therein whether the several rates and amounts are stated according to their values in legal tender currency or ac- cording to their values in coined money; and in case of KEVISED STATUTES 129 neglect or refusal so to declare to the satisfaction of the collector receiving such returns or lists, such officer shall make returns or lists for such persons so neglecting or refusing, as in cases of persons neglecting or refusing to make the returns or lists required by law, and the Com- missioner shall assess the tax thereon, and add thereto the amount of penalties imposed by law in cases of such neglect or refusal. And whenever the rates and amounts contained in the returns or lists are stated in coined money, the collector receiving the same shall reduce them to their equivalent in legal tender currency, according to the value of such coined money in said currency for the time covered by such returns. Source: Act Mar. 10, 1866, c. 15, 3-4, 14 Stat. 5. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. Statement of provision. Pacific Ins. Co. v. Soule, 74 U. S. 433, 19 L. Ed. 95. Tax due OH interest, payable in sterling, to resident, must be esti- mated at value in legal tender currency at date when interest was payable, and not at date of trial or judgment. U. S. v. Srie Ry. Co., 24 I. R. R. 76 (reversed on another ground, 106 U. S. 327). SEC. 3179. Whenever any person delivers or discloses to the collector or deputy any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made, or, being duly summoned to appear to testify, or to appear and produce such books as aforesaid, neglects to appear or to produce said books, he shall be fined not exceeding one thousand dollars, or be imprisoned not ex- ceeding one year, or both, at the discretion of the court, with costs of prosecution. Source: Act June 30, 1864, c. 173, 15, 13 Stat. 226. % Partners jointly indictable for false return signed by both. United States v. McGinnis, 1 Abb. (U. S.) 120, Fed. Gas. 15678, 3 I. R. R. 83. 130 FEDERAL INCOME TAX LAW SEC. 3180. Whenever there are in any district any ar- ticles not owned or possessed by or under the care or con- trol of any person within such district, and liable to be taxed, and of which no list has been transmitted to the collector, as required by law, the collector or one of his deputies shall enter the premises where such articles are situated and shall take such view thereof as may be necessary, and make lists of the same, according to the form prescribed. Said lists, being subscribed by such collector or deputy, shall be taken as sufficient lists of such articles for all purposes. Source: Act June 30, 1864, c. 173, 16, 13 Stat. 227. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. SEC. 3181. The lists or returns aforesaid shall, where not otherwise specially provided for, be taken with refer- ence to the day fixed for that purpose by this Title as aforesaid; and where duties accrue at other and different times, the list shall be taken with reference ~ to the time when said taxes become due, and shall be denominated annual, monthly, and special lists or returns. Source: Act June 30, 1864, c. 173, 18, 13 Stat. 228. Act Feb. 18, 1875, c. 80, 18 Stat. 319. SEC. 3182. The Commissioner of Internal Revenue is hereby authorized and required to make the inquiries, determinations, and assessments of all taxes and penal- ties imposed by this Title, or accruing under any former internal-revenue act, where such taxes have not been duly paid by stamp at the time and in the manner pro- vided by law, and shall certify a list of such assessments when made to the proper collectors respectively, who shall proceed to collect and account for the taxes and penalties so certified. Whenever it is ascertained that any list which has been or shall be delivered to any collector is imperfect or incomplete in consequence of the omission of the name of any person liable to tax, or in consequence of any omis- sion, or understatement, or undervaluation, or false or REVISED STATUTES 131 fraudulent statement contained in any return made by any person liable to tax, the Commissioner of Internal Revenue may, at any time within fifteen months from the time of the delivery of the list to the collector as aforesaid, enter on any monthly or special list the name of such per- son so omitted, together with the amount of tax for which he may have been or shall become liable, and also the name of any such person in respect to whose return, as aforesaid, there has been or shall be any omission, under- valuation, understatement, or false or fraudulent state- ment, together with the amount for which such person may be liable, above the amount for which he may have been or shall be assessed upon any return made as afore- said; and he shall certify and return such list to the col- lector as required by law. And all provisions of law for the ascertainment of liability to any tax, or the assessment or collection thereof, shall be held to apply, so far as may be necessary, to the proceedings herein authorized and directed. Source: Act June 30, 1864, c. 173, 20, 13 Stat. 229. Act July 13, 1866, c. 184, 9, 14 Stat. 103. Act Dec. 24, 1872, c. 13, 2, 17 Stat. 402. Assessment not binding upon court in regard to legal correctness of amount, etc. U. S. v. Myers, 3 Hughes, 239, 243, Fed. Cas. 15846, 24 I. R. R. 44. Assessment, not condition of liability for tax. King v. U. S., 99 U. S. 229, 25 L. Ed. 373. Assessment not binding upon third parties. U. S. v. Rindskopf , 8 Biss. 507, Fed. Cas. 16166. Assessment, presumption of correctness. U. S. v. Phila. & Reading R. R., 123 U. S. 113, 31 L. Ed. 138, 8 S. Ct. 77. Reassessment for deficiency. United States v. O'Neill, 19 Fed. 567; Matter of Archer, 9 Ben. 427, Fed. Cas. 506, 24 I. R. R. 110; Dandelet v. Smith, 18 Wall. 646, 21 L. Ed. 758. SEC. 3183. It shall be the duty of the collectors, or their deputies, in their respective districts, and they are author- ized, to collect all the taxes imposed by law, however the same may be designated. And every collector and 132 FEDERAL INCOME TAX LAW deputy collector shall give receipts for all sums collected by him, excepting only when the same are in payment for stamps sold and delivered; but no collector or deputy collector shall issue a receipt in lieu of a stamp representing a tax. Source: Act June 30, 1864, c. 173, 36-41, 13 Stat. 238-239. Act July 13, 1866, c. 184, 9, 14 Stat. 110. Act March 1, 1879, c. 125, 3, 20 Stat. 331. Assessment by assessor, duty of collector to enforce. Erskine v. Hornbach, 14 Wall. 613, 20 L. Ed. 745. Taxes must be paid to collector, not to Treasury Department. 4 I. R. R. 156. SEC. 3184. Where it is not otherwise provided, the collector shall in person, or by deputy, within ten days after receiving any list of taxes from the Commissioner of Internal Revenue, give notice to each person liable to pay any taxes stated therein, to be left at his dwelling or usual place of business, or to be sent by mail, stating the amount of such taxes, and demanding payment thereof. If such person does not pay the taxes, within ten days after the service or the sending by mail of such notice, it shall be the duty of the collector or his deputy to collect the said taxes with a penalty of five per centum additional upon the amount of taxes, and interest at the rate of one per centum a month. /Source: Act July 13, 1866, c. 184, 9, 14 Stat. 106. Act Mar. 2, 1867, c. 169, 9, 14 Stat. 473. Act Dec. 24, 1872, c. 13, 2, 17 Stat. 402. Construction, strict, required. T. D., 1651, Aug. 27, 1910. Interest not payable where amount of tax claimed has never been levied. Lake Shore Ry. Co. v. People, 46 Mich. 193, 9 N. W. 249, cited in 183 U. S. 544. Notice and demand can be given by mail. Notice and demand mailed to taxpayer in franked envelope, ad- dressed to principal business office, bearing collector's return address, and not returned, presumptively received. T. D., 1773, May 21, 1912. REVISED STATUTES 133 Notice and demand not necessary for assessment, but necessary for imposition of 5% penalty. United States v. Bristow, 20 Fed. 378; United States v. Allen, 14 Fed. 263. Cf. Clay v. Swope, 38 Fed. 396. Notice and demand not received by reason of delay in mail. Pen- alty not imposed if tax paid in full within ten days of actual receipt. T. D., 1659, Oct. 20, 1910; T. D., 1675, Feb. 14, 1911. Penalty for non-payment, annulled by repeal of act, cannot be re- vived by new act. State v. Jersey City, 37 N. J. L. 39. Payment must be actually made to avoid penalty. T. D., 1651, Aug. 27, 1910. Penalty, single, only, for all failures to make returns prior to com- mencement of action to recover. U. S. v. Bklyn. &c. R. R., 14 Fed. 284; U. S. v. N. Y. Guaranty Co., 8 Ben. 269, Fed. Cas. 15872. Interest not payable in default of assessment. Lake Shore, etc., Ry. v. People, 46 Mich. 193, 9 N. W. 249; Ex parte Wilder's S. S. Co., 183 U. S. 545, 46 L. Ed. 321, 22 S. Ct. 225. Notice and demand must specify amount of tax, and be in writing. U. S. v. Allen et al, 14 Fed. 267, citing 4 Dillon, 71. SEC. 3185. All returns required to be made monthly by any person liable to tax shall be made on or before, the tenth day of each month, and the tax assessed or due thereon shall be returned by the Commissioner of Internal Revenue to the collector on or before the last day of each month. All returns for which no provision is otherwise made shall be made on or before the tenth day of the month succeeding the time when the tax is due and liable to be assessed, and the tax thereon shall be returned as herein provided for monthly returns, and shall be due and payable on or before the last day of the month in which the assessment is so made. When the said tax is not paid on or before the last day of the month, as aforesaid, the collector shall add a penalty of five per centum together with interest at the rate of one per centum per month, upon such tax from the time the same became due; but no interest for a fraction of a month shall be demanded: Provided, That notice of the time when such tax becomes due and payable is given in such manner as may be pre- 134 FEDERAL INCOME TAX LAW scribed by the Commissioner of Internal Revenue. It shall then be the duty of the collector, in case of non- payment of said tax on or before the last day of the month as aforesaid, to demand payment thereof, with five per centum added thereto, and interest at the rate of one per centum per month, as aforesaid, in the manner pre- scribed by law; and if said tax, penalty, and interest are not paid within ten days after such demand, it shall be lawful for the collector or his deputy to make distraint therefor, as provided by law. Source: Act July 13, 1866, c. 184, 11, 14 Stat. 150. Act Mar. 2, 1867, c. 169, 8, 14 Stat. 473. Act Dec. 24, 1872, c. 13, 1-2, 17 Stat. 401-402. Payment by agent sufficient. U. S. v. Lee, 106 U. S. 196, 27 L. Ed. 171, 1 S. Ct. 24; Atwood v. Weems, 99 U. S. 183, 25 L. Ed. 471; Bennett v. Hunter, 9 Wall. 326, 19 L. Ed. 672; Lee v. Chase, 1 Hughes, 402, Fed. Gas. 8185. Tender by agent unnecessary in case of collector's rule to receive tax only from principal. U. S. v. Lee, 106 U. S. 196, 27 L. Ed. 171, 1 S. Ct. 240; Atwood v. Weems, 99 U. S. 183, 25 L. Ed. 471; Bennett v. Hunter, 9 Wall. 326, 19 L. Ed. 672; Lee . Chase, 1 Hughes, 402, Fed. Cas. 8185. Tender of payment, by relative, of tax due upon property adver- tised for sale is sufficient. Tacey v. Irwin, 18 Wall. 549, 21 L. Ed. 786. SEC. 3186. If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount shall be a lien hi favor of the United States from the time when the assessment list was received by the collector, except when otherwise provided, until paid, with the interest, penalties, and costs that may accrue in addition thereto, upon all property and rights to property belong- ing to such person. Source. Act July 13, 1866, c. 184, 9, 14 Stat. 107. Act Mar. 1, 1879, c. 125, 3, 20 Stat. 331. Actions, see also 3207. Demand for return, only, not sufficient basis for lien. U. S. v. Pac. R. R., 4 Dill. 71, Fed. Cas. 15983. REVISED STATUTES 135 Forfeiture, time of taking effect. U. S. v. 64 Barrels of Distilled Spirits, 3 Cliff. 308, Fed. Gas. 16306. Innocent purchaser, status of forfeiture against. U. S. v. 64 Bar- rels of Distilled Spirits, 3 Cliff. 308, Fed. Cas. 16306. Innocent purchaser, taking conveyance after filing of list with ^collector and demand upon taxpayer is bound by lien. United States v. Curry, 201 Fed. 371; Alkan t>. Bean, 8~Biss. 83, Fed. Cas. 202. Lien, assessment condition precedent to. United States v. Pac. R. R. Co., 1 Fed. 100. Lien not displaced by sale under prior judgment. Osterberg v. Union Trust Co., 93 U. S. 424, 23 L. Ed. 964. Lien, notice and demand and neglect or refusal to pay, prerequisite to. Brown v. Goodwin, 75 N. Y. 409; United States v. Pacific R. Co., 4 Dill. 71, Fed. Cas. 15983. Lien, property which is subject to, is that owned by taxpayer at time of demand. U. S. v. Pac. Ry. Co., 1 Fed. 97. Lien cannot be displaced under any provision of state statutes, as, e. g., by sale under prior mortgage, judgment, or decree. Osterberg v. Union Trust Co., 93 U. S. 424, 23 L. Ed. 964. Lien, status of with respect to state law. U. S. v. Snyder, 149 U. S. 210, 37 L. Ed. 705, 13 S. Ct. 846. Lien, having accrued, relates back to time when tax became due. U. S. v. Pac. Ry. Co., 1 Fed. 97; U. S. v. Curry, 201 Fed. 371. .Non-payment, see Lien. Notice and demand, see Lien. Remedy, see State Statutes. State Statutes, remedies given by, may be enforced in federal courts. U. S. v. Wilson, 118 U. S. 86, 30 L. Ed. 110, 6 S. Ct. 991. SEC. 3187. If any person liable to pay any taxes refuses or neglects to pay the same within ten days after notice and demand, it shall be lawful for the collector or his deputy to collect the said taxes, with five per centum additional thereto, and interest as aforesaid, by distraint and sale, in the manner hereafter provided, of the goods, chattels, or effects, including stocks, securities, and evi- dences of debt, of the person delinquent as aforesaid: Provided, That there shall be exempt from distraint and sale, if belonging to the head of a family, the school- books, and wearing apparel necessary for such family; 136 FEDERAL INCOME TAX LAW also arms for personal use, one cow, two hogs, five sheep and the wool thereof, provided the aggregate market value of said sheep shall not exceed fifty dollars; the necessary food for such cow, hogs, and sheep, for a period not exceeding thirty days; fuel to an amount not greater in value than twenty-five dollars; provisions to an amount not greater than fifty dollars; household furniture kept for use to an amount not greater than three hundred dol- lars; and the books, tools, or implements of a trade or pro- fession to an amount not greater than one hundred dollars, shall also be exempt; and the officer making the distraint shall summon three disinterested householders of the vicin- ity, who shall appraise and set apart to the owner the amount of property herein declared to be exempt. Source: Act July 13, 1866, c. 184, 9, 14 Stat. *106-107-108. Act Mar. 2, 1867, c. 169, 8, 14 Stat. 473. Distraint and sale vest in purchaser taxpayer's interest in prop- erty at time of demand, and divest all interests subsequently derived from taxpayer. Blacklock, Executor, v. TJ. S., 208 U. S. 75, 52 L. Ed. 396. Distraint, right of, concurrent with right to foreclose lien in equity. Blacklock, Executor, v. U. s!, 208 U. S. 75, 52 L. Ed. 396. SEC. 3188. In such case of neglect or refusal, the col- lector may levy, or by warrant may authorize a deputy collector to levy, upon all property and rights to property, except such as are exempt by the preceding section, belonging to such person, or on which the said lien exists, for the payment of the sum due as aforesaid with interest and penalty for non-payment, and also of such further sum as shall be sufficient for the fees, costs, and expenses of such levy. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 107. Assessment, sufficient ground for distraint. Harding v. Woodcock, 137 U. S. 43, 34 L. Ed. 580, 11 S. Ct. 6. Replevin, not sustainable in case of distrained property. Strong v. Walton, 47 A. D. 114, 62 N. Y. S. 353. Warrants, regular on face, sufficient protection to collector. L. S. & M. S. Ry. Co. v. Roach, 80 N. Y. 339. REVISED STATUTES 137 SEC. 3189. All persons, and officers of companies or corporations, are required, on demand of a collector or deputy collector about to distrain or having distrained on any property, or rights of property, to exhibit all books containing evidence or statements relating to the subject of distraint, or the property or rights of property liable to distraint for the tax due as aforesaid. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 107. SEC. 3190. When distraint is made, as aforesaid, the officer charged with the collection shall make or cause to be made an account of the goods or effects distrained, a copy of which, signed by the officer making such dis- traint, shall be left with the owner or possessor of such goods or effects, or at his dwelling or usual place of busi- ness, with some person of suitable age and discretion, if any such can be found, with a note of the sum demanded, and the time and place of sale; and the said officer shall forthwith cause a notification to be published in some newspaper within the county wherein said distraint is made, if a newspaper is published in said county, or to be publicly posted at the post-office, if there be one within five miles nearest to the residence of the person whose property shall be distrained, and in not less than two other public places. Such notice shall specify the articles distrained, and the time and place for the sale thereof. Such time shall not be less than ten nor more than twenty days from the date of such notification to the owner or possessor of the property and the publication or posting of such notice as herein provided, and the place proposed for the sale shall not be more than five miles distant from the place of making such distraint. Said sale may be adjourned from time to time by said officer, if he deems it advisable, but not for a time to exceed in all thirty days. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 107. Agent, payment by sufficient. U. S. v. Lee, 106 U. S. 196, 27 L. Ed. 171, 1 S. Ct. 24; Atwood v. Weems, 99 U. S. 183, 25 138 FEDERAL INCOME TAX LAW L. Ed. 471; Bennett v. Hunter, 9 Wall. 326, 19 L. Ed. 672; Lee v. Chase, 1 Hughes, 402, Fed. Gas. 8185 Agent, tender by unnecessary where collector has made rule to receive taxes only from principal. U. S. v. Lee, 106 U. S. 196, 27 L. Ed. 171, 1 S. Ct. 24; Atwood v. Weems, 99 U. S. 183, 25 L. Ed. 471; Bennett v. Hunter, 9 Wall. 326, 19 L. Ed. 672; Lee v. Chase, 1 Hughes, 402, Fed. Cas. 8185. Sale, see Agent. Sale, not a trespass when collector acts under proper warrant from assessor. Haffin v. Mason, 15 Wall. 671, 21 L. Ed. 196. Tender of payment Relative's tender of payment, or visit to collector for such purpose, etc., sufficient. Tacey v. Irwin, 18 Wall. 549, 21 L. Ed. 786. SEC. 3191. When property subject to tax, but upon which the tax has not been paid, is seized upon distraint and sold, the amount of such tax shall, after deducting the expenses of such sale, be first appropriated out of the proceeds thereof to the payment of the tax. And if no assessment of such tax has been made upon such property, the collector shall make a return thereof in the form re- quired by law, and the Commissioner of Internal Revenue shall assess the tax thereon. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108. Act Dec. 24, 1874, c. 13, 2, 17 Stat. 402. SEC. 3192. When any property advertised for sale under distraint, as aforesaid, is of a kind subject to tax, and the tax has not been paid, and the amount bid for such property is not equal to the amount of the tax, the collector may purchase the same in behalf of the United States for an amount not exceeding the said tax. All property so purchased may be sold by the collector, under such regulations as may be prescribed by the Commis- sioner of Internal Revenue. The collector shall render to the Commissioner a distinct account of all charges in- curred in such sales, and, in case of sale, shall pay into the Treasury the surplus, if any there be, after defraying all charges and fees. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108. REVISED STATUTES 139 SEC. 3193. In any case of distraint for the payment of the taxes aforesaid, the goods, chattels, or effects so dis- trained shall be restored to the owner or possessor, if, prior to the sale, payment of the amount due is made to the proper officer charged with the collection, together with the fees and other charges; but in case of non- payment as aforesaid, the said officers shall proceed to sell the said goods, chattels, or effects at public auction, and shall retain from the proceeds of such sale the amount de- mandable for the use of the United States, and a com- mission of five per centum thereon for his own use, with the fees and charges for distraint and sale, rendering the overplus, if any there be, to the person who may be entitled to receive the same. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 106. SEC. 3194. In all cases of sale, as aforesaid, the certifi- cate of such sale shall be prima facie evidence of the right of the officer to make such sale, and conclusive evidence of the regularity of his proceedings in making the sale, and shall transfer to the purchaser all right, title, and interest of such delinquent in and to the property sold; and where such property consists of stocks, said certificate shall be notice, when received, to any corporation, com- pany, or association of said transfer, and shall be authority to such corporation, company, or association to record the same on their books, and records in the same manner as if transferred or assigned by the party holding the same, in lieu of any original or prior certificates, which shall be void, whether cancelled or not. And said certificates, where the subject of sale is securities or other evidences of debt, shall be good and valid receipts to the person holding the same, as against any person holding, or claim- ing to hold, possession of such securities or other evidences of debt. Source: Act June 30, 1864, c. 173, 45, 13 Stat. 240. Act July 13, 1866, c. 184, 9, 14 Stat. 107. 140 FEDERAL INCOME TAX LAW Sale by distraint distinguishable from seizure and condemnation in forfeiture proceedings. Sheridan v. Allen, 153 Fed. 568. Title of third person not affected by sale. Sheridan v. Allen, 153 Fed. 568. SEC. 3195. When any property liable to distraint for taxes is not .divisible, so as to enable the collector by a sale of part thereof to raise the whole amount of the tax, with all cost, charges, and commissions, the whole of such property shall be sold, and the surplus of the proceeds of the sale, after satisfying the tax, costs, and charges, shall be paid to the person legally entitled to receive the same; or, if he cannot be found, or refuses to receive the same, shall be deposited in the Treasury of the United States, to be there held for his use until he makes application therefor to the Secretary of the Treasury, who, upon such application and satisfactory proofs in support thereof, shall, by warrant on the Treasury, cause the same to be paid to the applicant. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108. Collector has reasonable discretion as to division or non-division of property upon tax sale. Springer v. U. S., 102 U. S. 586, 26 L. Ed. 253. SEC. 3196. When goods, chattels, or effects sufficient to satisfy the taxes imposed upon any person are not found by the collector or deputy collector, he is authorized to collect the same by seizure and sale of real estate. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108. See also, 3188. Failure to find personal property a condition precedent to seizure and sale of real estate. Brown v. Goodwin, 75 N. Y. 409. SEC. 3197. The officer making the seizure mentioned in the preceding section shall give notice to the person whose estate it is proposed to sell by giving him in hand, or leaving at his last or usual place of abode, if he has any such within the collection-district where said estate is REVISED STATUTES 141 situated, a notice, in writing, stating what particular estate is to be sold, describing the same with reasonable certainty, and the time when and place where said officer proposes to sell the same; which time shall not be less than twenty nor more than forty days from the time of giving said notice. The said officer shall also cause a notification to the same effect to be published in some newspaper within the county where such seizure is made, if any such there be, and shall also cause a like notice to be posted at the post-office nearest to the estate seized, and in two other public places within the county; and the place of said sale shall not be more than five miles distant from the estate seized, except by special order of the Commis- sioner of Internal Revenue. At the time and place ap- pointed, the officer making such seizure shall proceed to sell the said estate at public auction, offering the same at a minimum price, including the expense of making such levy, and all charges for advertising and an officer's fee of ten dollars. When the real estate so seized consists of several distinct tracts or parcels, the officer making sale thereof shall offer each tract or parcel for sale sepa- rately, and shall, if he deem it advisable, apportion the expenses, charges, and fees aforesaid to such several tracts or parcels, or to any of them, in estimating the minimum price aforesaid. If no person offers for said estate the amount of said minimum price, the officer shall declare the same to be purchased by him for the United States; otherwise the same shall be declared to be sold to the highest bidder. And in case the same shall be declared to be purchased for the United States, the officer shall immedi- ately transmit a certificate of the purchase to the Commis- sioner of Internal Revenue, and, at the proper time, as hereafter provided, shall execute a deed therefor, after its preparation and the indorsement of approval as to its form by the United States district attorney for the district in which the property is situate, and shall without delay cause the same to be duly recorded in the proper registry 142 FEDERAL INCOME TAX LAW of deeds, and immediately thereafter shall transmit such deed to the Commissioner of Internal Revenue. And said sale may be adjourned from time to time by said officer for not exceeding thirty days in all, if he shall think it advisable so to do. If the amount bid shall not be then and there paid, the officer shall forthwith proceed to again sell said estate in the same manner. And it is hereby provided, That all certificates of purchase, and deeds of property purchased by the United States under the internal-revenue laws, on sales for taxes, or under exe- cutions issued from the United States courts, which now are, or hereafter may be, found in the office of any collec- tor, United States marshal, or United States district attorney, shall be immediately transmitted by such offi- cers respectively to the Commissioner of Internal Revenue. And it is hereby further provided, That for the preparation and approval by the United States district attorney of each deed as above required, a fee of five dollars shall be allowed to that officer, to be paid by the United States, and which he shall account for in his emolument returns. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108-109. Act Feb. 27, 1877, c. 69, 19 Stat. 248. Act Mar. 1, 1879, c. 125, 3, 20 Stat. 331. Discretion of collector as to division of property. Springer v. U. S., 102 U. S. 586, 26 L. Ed. 253. Real property, seizure of, effected by making memorandum on warrant of description of property for levy and sale. Entry not necessary. U. S. v. Hess, 5 Saw. 533, Fed. Gas. 15358. SEC. 3198. Upon any sale of real estate, as provided in the preceding section, and the payment of the purchase- money, the officer making the seizure and sale shall give to the purchaser a certificate of purchase, which shall set forth the real estate purchased, for whose taxes the same was sold, the name of the purchaser and the price paid therefor; and if the said real estate be not redeemed in the manner and within the time hereafter provided, the said collector or deputy collector shall execute to the said REVISED STATUTES 143 purchaser, upon his surrender of said certificate, a deed of the real estate purchased by him as aforesaid, reciting the facts set forth in said certificate, and in accordance with the laws of the State in which such real estate is situate upon the subject of sales of real estate under ex- ecution. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 109. Certificate merely memorandum of purchaser's right to deed. Flemister v. Flemister, 83 Ga. 79, 9 S. E. 724. SEC. 3199. The deed of sale given in pursuance of the preceding section shall be prima facie evidence of the facts therein stated; and if the proceedings of the officer as set forth have been substantially in accordance with the provisions of law, shall be considered and operate as a con- veyance of all the right, title, and interest the party de- linquent had in and to the real estate thus sold at the time the lien of the United States attached thereto. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 109. Deed, prima facie evidence only of facts required by act to be stated. Fox v. Stafford, 90 N. C. 296; Brown v. Goodwin, 75 N. Y. 409. Notice Any purchaser, including the United States, has con- structive notice by this section that only the interest of the delinquent party is sold. United States v, Triplett, Fed. Cas. 16539, 22 I. R. R. 207, 3 Cent. L. J. 399. Title, character of, taken by purchaser, only that of title of de- linquent. Osterberg v. Union Trust Co., 93 U. S. 424, 23 L. Ed. 964; United States v. Triplett, Fed. Cas. No. 16539. Title passing by sale of leased distillery to satisfy penalty against lessee, is only that of lessee. Mansfield v. Excelsior Refining Co., 135 U. S. 326, 34 L. Ed. 162, 10 S. Ct. 825. SEC. 3200. Any collector or deputy collector may, for the collection of taxes imposed upon any person, and committed to him for collection, seize and sell the lands of such person situated in any other collection-district within the state in which such officer resides; and his pro- 144 FEDERAL INCOME TAX LAW ceedings in relation thereto shall have the same effect as if the same were had in his proper collection-district. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 110. SEC. 3201. Any person whose estate may be proceeded against as aforesaid shall have the right to pay the amount due, together with the costs and charges thereon, to the collector or deputy collector at any time prior to the sale thereof, and all further proceedings shall cease from the tune of such payment. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 109. SEC. 3202. The owners of any real estate sold as afore- said, their heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the land sold, or any particular tract thereof, at any time within one year after the sale thereof, upon payment to the purchaser, or, in case he cannot be found in the county in which the land to be redeemed is situate, then to the collector of the district in which the land is situate, for the use of the purchaser, his heirs or assigns, the amount paid by the said purchaser and interest thereon at the rate of twenty per centum per annum. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 109. SEC. 3203. It shall be the duty of every collector to keep a record of all sales of land made in his collection- district, whether by himself or his deputies, or by another collector, in which shall be set forth the tax for which any such sale was made, the dates of seizure and sale, the name of the party assessed and all proceedings hi making said sale, amount of fees and expenses, the name of the pur- chaser, and the date of the deed; and said record shall ca certified by the officer making the sale. And on or be- fore the fifth day of each succeeding month he shall transmit a copy of such record of the preceding month to the Commissioner of Internal Revenue. And it shall be REVISED STATUTES 145 the duty of every deputy making sale, as aforesaid, to return a statement of all his proceeding? to the collector, and to certify the record thereof. In case of the death or removal of the collector, or the expiration of his term of office from any other cause, said record shall be delivered to his successor in office; and a copy of every such record, certified by the collector, shall be evidence in any court of the truth of the facts therein stated. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 110. Act March 1, 1879, c. 125, 3, 20 Stat. 332. SEC. 3204. When any lands sold, as aforesaid, are re- deemed as heretofore provided, the collector shall make entry of the fact upon the record mentioned in the pre- ceding section, and the said entry shall be evidence of such redemption. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108. SEC. 3205. Whenever any property, personal or real, which is seized and sold by virtue of the foregoing pro- visions, is not sufficient to satisfy the claim of the United States for which distraint or seizure is made, the collector may, thereafter, and as often as the same may be necessary proceed to seize and sell, in like manner, any other prop- erty liable to seizure of the person against whom such claim exists, until the amount due from him, together with all expenses, is fully paid. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 110. SEC. 3206. The Commissioner of Internal Revenue shall by regulation determine the fees and charges to be allowed in all cases of distraint and other seizures; and shall have power to determine whether any expense incurred in mak- ing any distraint or seizure was necessary. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 108. SEC. 3207. In any case where there has been a refusal or neglect to pay any tax, and it has become necessary to 146 FEDERAL INCOME TAX LAW seize and sell real estate to satisfy the same, the Com- missioner of Internal Revenue may direct a bill in chancery to be filed, in a district or circuit court of the United States, to enforce the lien of the United States for tax upon any real estate, or to subject any real estate owned by the delinquent, or in which he has any right, title, or in- terest, to the payment of such tax. All persons having liens upon or claiming any interest in the real estate sought to be subjected as aforesaid shall be made parties to such proceedings, and be brought into court as pro- vided in other suits in chancery therein. And the said court shall, at the term next after the parties have been duly notified of the proceedings, unless otherwise ordered by the court, proceed to adjudicate all matters involved therein, and finally determine the merits of all claims to and liens upon the real estate in question, and, in all cases where a claim or interest of the United States therein is established, shall decree a sale of such real estate, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in re- spect to the interests of the parties and of the United States. Source: Act July 20, 1868, c. 186, 106, 15 Stat. 167. Corporation, dissolving within tax year, assets of, if distributed before list comes into collector's hands, may be followed in equity by United States as by any other creditor. If dis- tributed after such time, are impressed with lien in hands of persons other than bona fide purchasers. T. D., 1615, April 15, 1910, 28 Op. Atty. Gen. 241. Laches, defense of not applicable against United States. U. S. v. Thompson, 98 U. S. 486, 25 L. Ed. 194; U. S. v. Insley, 130 U. S. 263, 32 L. Ed. 968, 9 R. Ct. 485; U. S. v. Beebe, 127 U. S. 338, 32 L. Ed. 121, 8 S. Ct. 1083. Lien, foreclosure of in equity, necessary to cut off lessor's right in rented property sold by distraint. Mansfield v. Excelsior Refining Co., 135 U. S. 326, 34 L. Ed. 162, 10 S. Ct. 825. Lien, right to foreclose in equity, concurrent with right of distraint. Blacklock, Executor, v. U. S., 208 U. S. 75, 52 L. Ed. 396. Limitations, statute of, not applicable to United States. U. S. V, Thompson, 98 U, S. 486, 25 L. Ed. 194; U. S. v, Insley, 130 REVISED STATUTES 147 U. S. 263, 32 L. Ed. 968, 9 S. Ct. 485; U. S. v. Beebe, 127 U. S. 338, 32 L. Ed. 121, 8 S. Ct. 1083. Sale of personal property not condition precedent to suit to enforce lien against real property. U. S. Comp. Stat. 1901, p. 2073. SEC. 3208. The Commissioner of Internal Revenue shall have charge ot all real estate which is now or shall become the property of the United States by judgment of for- feiture under the internal revenue laws, or which has been or shall be assigned, set off, or conveyed by purchase or otherwise to the United States in payment of debts or pen- alties arising under the laws relating to internal revenue, or which has been or shall be vested in the United States by mortgage or other security for the payment of such debts and of all trusts created for the use of the United States in payment of such debts due them; and, with the approval of the Secretary of the Treasury, may, at public vendue, and upon not less than twenty days' notice, sell and dispose of all real estate owned or held by the United States aforesaid; and until such sale the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may lease such real estate owned as afore- said on such terms and for such period as they shall deem expedient. And in cases where real estate has or may become the property of the United States by conveyance or otherwise, in payment of or as security for a debt arising under the laws relating to internal revenue, and such debt shall have been paid, together with the interest thereon, at the rate of one per centum per month, to the United States, within two years from the date of the acquisition of such real estate, it shall be lawful for the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, to release by deed, or otherwise convey such real estate to the debtor from whom it was taken, or to his heirs or other legal representatives. Source: Act Mar. 2, 1867, c. 169, 4, 14 Stat. 472. Aot Mar. 1, 1879, c. 125, 3, 20 Stat. 332. 148 FEDERAL INCOME TAX LAW SEC. 3209. Whenever a collector has on any list duly re- turned to htm the name of any person not within his collec- tion-district who is liable to tax, or of any person so liable who has, in the collection-district in which he resides, no sufficient property subject to seizure or distraint, from which the money due for tax can be collected, such collec- tor shall transmit a statement containing the name of the person liable to such tax, with the amount and nature thereof, duly certified under his hand, to the collector of any district to which said person shall have removed, or in which he shall have property, real or personal, liable to be seized and sold for tax. And the collector to whom the said certified statement is transmitted shall proceed to collect the said tax in the same way as if the name of the person and objects of tax contained in the said certified statement were on any list of his own collection-district; and he shall, upon receiving said certified statement as aforesaid, transmit his receipt for it to the collector send- ing the same to him. Source: Act June 30, 1864, c. 173, 32, 13 Stat. 236. SEC. 3210. The gross amount of all taxes and revenues received or collected by virtue of this Title, or of any law hereafter enacted providing internal revenue, shall be paid, by the officers receiving or collecting the same, daily into the Treasury of the United States, under the instructions of the Secretary of the Treasury, without any abatement or deduction on account of salary, com- pensation, fees, costs, charges, expenses, or claims of any description; and a certificate of such payment, stating the name of the depositor and the specific account on which the deposit was made, signed by the Treasurer, assistant-treasurer, designated depositary, or proper officer of a deposit bank, shall be transmitted to the Commis- sioner of Internal Revenue: Provided, That in districts where, from the distance of the officer, collector, or agent receiving or collecting such taxes and revenues from a REVISED STATUTES 149 proper Government depository, the Secretary of the Treas- ury may deem it proper, he may extend the time for mak- ing such payment, not exceeding, however, in any case a period of one month. Source: Act Mar. 3, 1865, c. 78, 3, 13 Stat. 483. SEC. 3211. The Secretary of the Treasury is authorized to designate one or more depositories in each State, for the deposit and safe-keeping of the money collected by virtue of the internal revenue laws; and the receipt of the proper officer of such depository to a collector for the money deposited by him shall be a sufficient voucher for such collector in the settlement of his accounts at the Treasury Department. Source: Act June 30, 1864, c. 173, 33, 13 Stat. 236. SEC. 3212. Every collector shall, at the expiration of each month after he commences his collections, transmit to the Commissioner of Internal Revenue a statement of the collections made by him within the month. And every collector shall complete the collection of all sums assigned to him for collection, and shall pay over the same into the Treasury, and shall render his accounts to the Treasury Department as often as he may be required. Source: Act June 30, 1864, c. 173, 33, 13 Stat. 236. SEC. 3213. It shall be the duty of the collectors, in their respective districts, subject to the provisions of this Title, to prosecute for the recovery of any sums which may be forfeited by law. All suits for fines, penalties, and forfei- tures, where not otherwise provided for, shall be brought in the name of the United States, in any proper form of action, or by any appropriate form of proceeding, qui tarn or otherwise, before any circuit or district court of the United States, for the district within which said fine, penalty, or forfeiture may have been incurred, or before any other court of competent jurisdiction; and taxes may 150 .FEDERAL INCOME TAX LAW be sued for and recovered in the name of the United States in any proper form of action, before any circuit or district court of the United States for the district within which the liability to such tax is incurred, or where the party from whom such tax is due resides at the tune of the commence- ment of the said action. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 110. Action, assessment not necessary condition precedent. King v. U. S., 99 U. S. 229, 25 L. Ed. 373. Action, form of, entirely within discretion of government. Dollar Savings Bank v. U. S., 19 Wall. 227, 239, 22 L. Ed. 80; United States v. Chamberlain, 219 U. S. 250, 55 L. Ed. 204. Assessment, see Action. Assessment not binding upon third parties. U. S. v. Rhindskopf, 8 Biss. 507, Fed. Cas. 16166. Assessment no1^ conclusive. U. S. v. Rhindskopf, 105 U. S. 418, 26 L. Ed. 1131; U. S. v. Bank of Am., 15 Fed. 730; U. S. v. Myers, 3 Hughes, 239, Fed. Cas. 15846; United States v. Halloran, 22 I. R. R. 321, 4 Blatch. 1, Fed. Cas. 15286. Assessment not necessary condition precedent to action of debt. United States . Little Miami, etc., Co., 1 Fed. 700, 108 U. S. 277. Assessment, payment of not a bar to suit for additional amount. United States v. Little Miami, etc., Co., 1 Fed. 700, 108 U. S. 277. Assessment presumed valid. Clinkenbeard . U. S., 21 Wall. 65, 22 L. Ed. 477; U. S. v. Cole, 134 Fed. 697; U. S. v. Bristow, 20 Fed. 378; U. S. v. Black, 11 Blatch. 538, Fed. Cas. 14660; Schmidt v. Trowbridge, 24 I. R. R. 381. Burden of proof upon United States to show facts sufficient to warrant judgment. U. S. v. Phila. & Reading R. R., 123 U. S. 113, 31 L. Ed. 138, 8 S. Ct. 77. Complaint sufficient, if averring declaration of dividend or in- crease of surplus through earnings. U. S. v. Bklyn. &c. R. R., 14 Fed. 284. Corporation, action against, after dissolution. T. D., 1650, April 15, 1910. Defense, erroneous assessment or illegality of tax may be shown as, although no appeal has been taken to Commissioner. Clinkenbeard v. U. S., 21 Wall. 65, 22 L. Ed. 477; United States v. Bank of America, 15 Fed. 730. JREVISED STATUTES 151 Defense of illegality of assessment not affected by limitation pre- scribed by 3227. United States v. Nebraska Dist. Co., 80 Fed. 285, 25 C. C. A. 418. Defense, non-entry of taxes upon assessment list is not. U. S. v. Tilden, 9 Ben. 368, Fed. Cas. 16519. Defense Error in payment of dividend is not. Central Natl. Bank v. United States, 137 U. S. 355. Evidence Cash payment of dividends conclusive evidence of net profits. Central Bank v. U. S., 137 U. S. 355, 34 L. Ed. 703, 11 S. Ct. 126. Evidence, declaration of dividends conclusive. Central Natl. Bank v. U. S., 137 U. S. 365, 34 L. Ed. 703, 11 S. Ct. 126; Bailey v. R. R., 106 U. S. 109, 27 L. Ed. 81. Evidence Increase of capital stock, not even prima facie evi- dence of income. Commonwealth v. Erie & Pittsburgh R. R. Co., 74 Pa. St. 94. Evidence Report of bank showing liability to tax conclusive. Cen. Natl. Bank v. U. S., 137 U. S. 355, 34 L. Ed. 703, 11 S. Ct. 126. Evidence, sufficiency of, for recovery. U. S. v. Central Natl. Bank, 15 Fed. 222. Indictment, recovery of penalty by. United States v. Craft, 43 Fed. 374; United States v. Elliot, Fed. Cas. 15043. Laches, defense of, not applicable against U. S. U. S. v. Insley, 130 U. S. 263, 32 L. Ed. 968, 9 S. Ct. 485. Limitations, statute of, not applicable to U. S. U. S. v. Insley, 130 U. S. 263, 32 L. Ed. 968, 9 S. Ct. 485. Receiver Illegality or error of assessment may be shown upon ap- plication for. U. S. v. Neb. Distilling Co., 80 Fed. 285, 25 C. C. A. 418. Set-off A credit which could be, but has not been presented to Commissioner, cannot be set up as. R. R. Co. v. U. S., 101 U. S. 543, 25 L. Ed. 1068. Set-off, claim for, credit not allowed as, unless previously pre- sented to treasury accounting officers. R. R. v. U. S., 101 U. S. 543, 25 L. Ed. 1068. Set-off No other claim against U. S. can be alleged as. U. S. v. Pac. R. R., 4 Dill. 66, Fed. Cas. 15983. Venue Tax actions must be brought in district of defendant's residence. Rev. St., 733; United States v. N. Y., N. H. & H. R. R. Co., 10 Ben. 144, Fed. Cas. 15874. SEC. 3214. No suit for the recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the 152 FEDERAL INCOME TAX LAW Commissioner of Internal Revenue authorizes or sanc- tions the proceedings: Provided, That in case of any suit for penalties or forfeitures brought upon information re- ceived from any person, other than a collector or deputy collector, the United States shall not be subject to any costs of suit. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 111. SEC. 3215. It shall be the duty of the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, to establish such regulations, not inconsis- tent with law, for the observance of revenue officers, district attorneys, and marshals, respecting suits arising under the internal revenue laws in which the United States is a party, as may be deemed necessary for the just re- sponsibility of those officers and the prompt collection of all revenues and debts due and accruing to the United States under such laws. Source: Act Mar. 2, 1867, c. 169, 3, 14 Stat. 472. SEC. 3216. All judgments and moneys recovered or received for taxes, costs, forfeitures, and penalties shall be paid to collectors as internal taxes are required to be paid. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 111. See 3178. SEC. 3217. When any collector fails either to collect or to render his account, or to pay over in the manner or within the times provided by law, the First Comptroller of the Treasury shall, immediately after evidence of such delinquency, report the same to the Solicitor of the Trea- sury, who shall issue a -warrant of distress against such delinquent collector, directed to the marshal of the district, expressing therein the amount with which the said collec- tor is chargeable, and the sums, if any, which have been paid over by him, so far as the same are ascertainable. And the said marshal shall, himself, or by his deputy, im- REVISED STATUTES 153 mediately proceed to levy and collect the sum which may remain due, with five per centum thereon, and all the expenses and charges of collection, by distress and sale of the goods and chattels, or any personal effects of the delinquent collector, giving at least five days' notice of the time and place of the sale, in the manner provided by law for advertising sales of personal property on execution in the State wherein such collector resides. And the bill of sale of the officer of any goods, chattels, or other personal property, distrained and sold as aforesaid, shall be con- clusive evidence of title to the purchaser, and prima facie evidence of the right of the officer to make such sale, and of the correctness of his proceedings in selling the same. And for want of goods and chattels, or other personal ef- fects of such collector, sufficient to satisfy any warrant of distress, issued as aforesaid, the real estate of such collector, or so much thereof as may be necessary for satisfying the said warrant, after being advertised for at least three weeks next before the time of sale, in not less than three public places in the collection-district, and in one newspaper printed in the county or district, if any there be, shall be sold at public auction by the marshal or his deputy. Upon such sale, the marshal shall make and deliver to the pur- chaser of the premises sold a deed of conveyance thereof, to be executed and acknowledged in the manner and form prescribed by the laws of the state in which said lands are situated, and said deed so made shall invest the pur- chaser with all the title and interest of the defendant named in said warrant, existing at the time of the seizure thereof. And all moneys that may remain of the proceeds of such sale of personal or real property, after satisfying the said warrant of distress, and paying the reasonable costs and charges of sale, shall be returned to the pro- prietor of the property sold as aforesaid. Source: Act June 3, 1864, c. 173, 35, 13 Stat. 237. SEC. 3218. Every collector shall be charged with the whole amount of taxes, whether contained in lists trans- 154 FEDERAL INCOME TAX LAW mitted to him by the Commissioner of Internal Revenue, or by other collectors, or delivered to him by his prede- cessor in office, and with the additions thereto, with the par value of all stamps deposited with him, and with all moneys collected for penalties, forfeitures, fees, or costs; and he shall be credited with all payments into the Trea- sury made as provided by law, with all stamps returned. by him uncancelled to the Treasury, and with the amount of taxes contained in the lists transmitted in the manner heretofore provided to other collectors, and by them receipted as aforesaid; also with the amount of the taxes of such persons as may have absconded, or become insol- vent, prior to the day when the tax ought, according to the provisions of law, to have been collected, and with all uncollected taxes transferred by him or by his deputy acting as collector to his successor in office: Provided, That it shall be proved to the satisfaction of the Commis- sioner of Internal Revenue, who shall certify the facts to the First Comptroller of the Treasury, that due dili- gence was used by the collector. And each collector shall also be credited with the amount of all property purchased by him for the use of the United States, provided he faith- fully account for and pay over the proceeds thereof upon a resale of the same as required by law. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 110. Act Dec. 24, 1872, c. 13, 2, 17 Stat. 402. SEC. 3219. In the case of the death, resignation, or removal of any collector, all lists and accounts of taxes uncollected shall be transferred to his successor in office as soon as such successor is appointed and qualified, and it shall be the duty of such successor to collect the same. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 110. SEC. 3220. The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasury, is authorized, on appeal to him made, to remit, refund, and pay back all taxes erroneously or illegally as- REVISED STATUTES 155 sessed or collected, all penalties collected without author- ity, and all taxes that appear to be unjustly assessed or ex- cessive in amount, or in any manner wrongfully collected ; also to repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him, in any court, for any internal taxes collected by him, with the cost and expenses of suit; also all damages and costs recovered against any assessor, assistant assessor, collector, deputy collector, or inspector, in any suit brought against him by reason of anything done in the due per- formance of his official duty: Provided, That where a sec- ond assessment is made in case of a list, statement, or return which in the opinion of the collector or deputy col- lector was false or fraudulent, or contained any understate- ment or undervaluation, such assessment shall not be re- mitted, nor shall taxes collected under such assessment be refunded, or paid back, unless it is proved that said list, statement, or return was not false or fraudulent, and did not contain any understatement or undervaluation. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 111. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. Appeal, filing with proper collector a sufficient presentation to Commissioner. United States v. Savings Bank, 104 U. S. 728, 26 L. Ed. 908. Contra, 14 Op. Atty. Gen. 615. Application for refund, if made to Secretary of Treasury, must be presented before Commissioner's decision. Dupasseur et al. t>. U. S., 19 Ct. Cl. 1. Appeal, date of filing depends upon time of receipt by Commis- sioner, and not upon time of deposit with collector. Colton Press Co. v. Collector, 1 Woods, 296, Fed. Cas. 3271. Claim not insufficient because of insufficiency of treasury forms when accompanied by supplemental statement. Kings Co. Savings Inst.*. Blair, 116 U.S. 200,29 L.Ed. 657, 6 S.Ct. 353. Commissioner, see Decision. Commissioner, adverse decision of, does not prevent allowance of payment of judgment. Nixon v. U. S., 18 Ct. Cl. 448. Commissioner, decision of, as to refund not final where rules re- quired submission to Secretary. Stotesbury v. U. S., 146 U. S. 196, 36 L. Ed. 940, 23 Ct. Cl. 285. 156 FEDERAL INCOME TAX LAW Commissioner, decision judicial and prevents application by claim- ant to courts for same relief. Corning v. United States, 34 Ct. Cl. 271, 278. Commissioner, decision rendered vpid by mistake of jurisdiction, not by error of judgment or discretion. Nixon v. United States, 18 Ct. Cl. 448; Woolner v. United States, 13 Ct. Cl. 355. Commissioner, discretion as to refund, not reviewable by any other officers where such decision was in form of memoran- dum, submitted for consideration. 13 Op. Atty. Gen. 439, 14 Op. Atty. Gen. 275; Woolner v. U. S., 13 Ct. Cl. 355, 434; Barnett v. U. S., 16 Ct. Cl. 515; 17 Ct. Cl. 434; Dunnegan v. United States, 17 Ct. Cl. 247; Nixon v. U. S., 18 Ct. Cl. 448; Sybrandt . United States, 19 Ct. Cl. 461-466. Commissioner, jurisdiction of, may be inquired into by Court of Claims. Seat v. U. S., 18 Ct. Cl. 458. Commissioner, recommendation to Secretary of Treasury by, for purposes of consideration and advisement, not a final decision. Stotesbury v. United States, 146 U. S. 196, 26 L. Ed. 940, 13 S. Ct. 1. Commissioner, refund by, not reviewable by courts unless im- peached for fraud, etc. U. S. . Kaufman, 96 U. S. 567, 24 L. Ed. 792. Compromise should not be sought by any official. T. D., 1692, April 20, 1911. Costs Authority to refund, includes authority to refund costs paid. U. S. v. Davis, 54 Fed. 147, 4 C. C. A. 251. Decision of Commissioner, evidence of. First Natl. Bank v. U. S., 15 Ct. Cl. 225. Decision of Commissioner granting refund may be reversed before payment. Ridgway . U. S., 18 Ct. Cl. 707. Decision of Commissioner, reopened only for errors in fact or newly discovered evidence. 14 Op. Atty. Gen. 275. Decision of Commissioner, grounds of impeachment of, are fraud, want of jurisdiction, or apparent mistake. Nixon v. U. S., 18 Ct. Cl. 448; First Nat. Bank of Greencastle v. U. S., 15 Ct. Cl. 225. Decision of Commissioner is in the nature of an arbitrator's award, nature and status of. First Natl. Bank v. U. S., 15 Ct. Cl. 225. Decision of Commissioner prima facie evidence of liability of United States. Logan County v. U. S., 169 U. S. 255, 42 L. Ed. 737, 18 S. Ct. 737. REVISED STATUTES 157 Decision should be made by Commissioner and cannot be reviewed by courts after several applications, etc. Sybrandt et al. v. U. S., 19 Ct. Cl. 461. Effect of this section, see 3226. Judgment, see 3226. Limitations, right of recovery provided in this section must be pursued within period of two years prescribed by 3228. Logan County . United States, 169 U. S. 258, 42 L. Ed. 737, 18 S. Ct. 361. Offer, amount of should be left to discretion of corporation. T. D., 1692, April 20, 1911. Offer, trivial, not acceptable. T. D., 1698, May 23, 1911. Refund, duty of Commissioner to make, when due. Armour v. Roberts, 151 Fed. 844. Secretary of Treasury, see Application for Refund. Secretary of Treasury has absolute, statutory power to remit fines and penalties. Dorscheimer v. U. S., 7 Wall. 166, 173, 19 L. Ed. 187; U. S. v. Malone, 22 I. R. R. 403, Fed. Cas. 15713, 8 Ben. 574; Op. Atty. Gen. 399; Johnson v. U. S., 8 Wall. 166, 19 L. Ed. 187. Secretary of Treasury has no power to compromise collectible judgment. 23 Op. Atty. Gen. 20. SEC. 3224. No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court. Source: Act Mar. 2, 1867, c. 169, 10, 14 Stat. 475. Injunction will lie where Commissioner acts so ultra vires as to justify court in holding his action not controlling. Kissinger v. Bean, 8 Biss. 60, Fed. Cas. 7853. Injunction will lie, where tax has been paid, to prevent collection of additional amount. Frayser v. Russell, 3 Hughes, 227, Fed. Cas. 5067. Injunction will not lie, except in case of manifest violation of law depriving assessor of all jurisdiction. Del. R. R. Co. v. Prettyman, 17 I. R. R. 99, Fed. Cas. 3767. Injunction will not lie to prevent collection of tax alleged to have been illegally assessed. Snyder v. Marks, 109 U. S. 189, 27 L. Ed. 901, 3 S. Ct. 157. Injunction will not lie on ground of multiplicity of suits. Schulen- berg-Boeckeler Lumber Co. v. Town of Hayward, 20 Fed. 422. 158 FEDERAL INCOME TAX LAW Injunction by director or stockholder to enjoin payment of tax by corporation will not lie. T. D., 1788, July 25, 1912. Injunction, in shape of mandamus, will not lie. Robbins v. Free- land, 14 I. R. R. 28. Mandatory injunction, being in effect a bill to restrain collection, will not lie. Miles v. Johnson, 59 Fed. 38. Prohibition against injunction prevents any action hindering col- lection by tax officer. Rowland v. Soule, Deady, 413, Fed. Cas. 6800. Prohibition extends to suit for restraint of assessment. Miles v. Johnson, 59 Fed. 38. Prohibition probably inapplicable in case of clear and manifest violation of the law. Kissinger v. Bean, 7 Biss. 60, Fed. Cas. 7853. SEC. 3225. When the second assessment is made in case of any list, statement, or return, which in the opinion of the collector or deputy collector was false or fraudulent, or contained any understatement or undervaluation, no taxes collected under such assessment shall be recovered by any suit, unless it is proved that the said list, state- ment, or return was not false nor fraudulent, and did not contain any understatement or undervaluation. Source: Act July 13, 1866, c. 184, 9, 14 Stat. 111. Act Dec. 24, 1872, c. 13, 1, 17 Stat. 401. SEC. 3226. No suit shall be maintained in any court for the recovery of any internal tax alleged to have been erron- eously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until appeal shall have been duly made to the Commissioner of Internal Revenue, ac- cording to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof, and a decision of the Commissioner has been had therein: Provided, That if such decision is delayed more, than six months from the date of such appeal, then the said suit may be brought, without first EEVISED STATUTES 159 having a decision of the Commissioner at any time within the period limited in the next section. Source: Act July 13, 1866, c. 184, 19, 14 Stat. 152. Act June 6, 1872, c. 315, 44, 17 Stat. 257. Act Feb. 27, 1877, c. 69, 19 Stat. 248. Action, see Appeal, Application, Assumpsit, Burden of Proof, Decision, Protest, Rejection. Action, commencement of, may be any time within two years after Commissioner's decision, though delayed more than six months after taking appeal. Merck v. Treat, 174 Fed. 388. Action, right of, not given by minor irregularities. Bailey v. R. R. Co., 22 Wall. 604, 22 L. Ed. 840. Allowance by Commissioner, see Action, Appeal, Application, Burden of Proof, Decision, Protest, Rejection. Allowance by Commissioner sufficient basis of action against United States, in Court of Claims. United States v. Savings Bank, 104 U. S. 728; United States v. Kaufman, 96 U. S. 567, 24 L. Ed. 792; Commonwealth, etc., Co. v. United States, 37 Ct. Cl. 536; Dugan v. United States, 34 Ct. Cl. 458; Boehn v. United States, 21 Ct. Cl. 294; McClure . United States, 19 Ct. Cl. 18-29. Appeal, see Action, Application, Burden of Proof, Decision, Pro- test, Rejection. Appeal after payment not necessary when appeal has been taken from assessment. San Francisco, etc., Society v. Carey, 17 I. R. R. 109. Appeal against assessment unnecessary. U. S. v. Myers, 3 Hughes, 239, Fed. Cas. 15816, 24 I. R. R. 44. Appeal to Commissioner, a condition precedent to action. Lauer v. U. S., 5 Ct. Cl. 447; Kings Co. Savings Inst. v. Blair, 116 U. S. 200, 29 L. Ed. 657, 6 S. Ct. 353; DeBary v. Dunne, 162 Fed. 961; Arnson v. Murphy, 109 U. S. 238, 27 L. Ed. 920, 3 S. Ct. 184. Appeal to Commissioner, etc., must be pleaded. Stuart v. Barnes, 43 Fed. 281; Coblens v. Abel, Woolw. 293, Fed. Cas. 2926. Contra, Hendy v. Soule, Deady, 400, Fed. Cas. 6359. Appeal to Commissioner not condition precedent to any other action than one f6r recovery of taxes. Erskine v. Hohnbach, 14 Wall. 616, 20 L. Ed. 745. Contra, Nichols v. United States, 7 Wall. 130, 19 L. Ed. 125. Appeal, or certified copy, or other best evidence of, should be pro- 160 FEDERAL INCOME TAX LAW duced. Hubbard . Kelly, 8 W. Va. 46, cited in 65 W. Va. 69, 145; Lauer v. U. S., 5 Ct. Cl. 447. Appeal, filing with proper collector for transmission, equivalent to filing with Commissioner. U. S. v. Savings Bank, 104 U. S. 728, 26 L. Ed. 908. Appeal to Commissioner sufficiently made by claim for abatement. DeBary v. Dunne, 162 Fed. 961. Appeal taken when filed in office of Commissioner, not when lodged with collector for completion. Colton Press Co. v. Collector, 1 Woods, 296, Fed. Cas. 3271. Application, see Action, Appeal, Burden of Proof, Decision, Pro- test, Rejection. Application for refund insufficiently filed, by delivery to collector, etc. 14 Op. Atty. Gen. 615. Assessment, due and regular, complete defense to collector. Hard- ing v. Woodcock, 137 U. S. 43, 34 L. Ed. 580, 11 S. Ct. 6. Assumpsit, see Statutory Remedy. Assumpsit maintainable against collector. Improvement Co. v. Slack, 100 U. S. 654, 25 L. Ed. 609. Burden of proof, see Action, Appeal, Application, Decision, Pro- test, Rejection. Burden of proof as to fraud or mistake rests upon government seeking to defend against allowance of Commissioner. Logan County v. U. S., 169 U. S. 255, 42 L. Ed. 737, 18 S. Ct. 361. Circuit Court of Appeals, jurisdiction of. Louisville Pub. Ware- house Co. v. Collector, 49 Fed. 561, 1 C. C. A. 371. Claim, see Appeal, Application. Claim not invalid by reason of irregularity. Wayne v. U. S., 26 Ct. Cl. 274. Claim for refund, informal or defective, sufficient for purpose of amendment. 14 Op. Atty. Gen. 615. Common-law action, see Statutory Remedy. Costs allowed when sanctioned by practice of state courts. De- Bary . Carter, 102 Fed. 130, 42 C. C. A. 209. Court of Claims, jurisdiction of. U. S. v. Real Estate Savings Bank, 104 U. S. 728, 26 L. Ed. 908, 17 Ct. Cl. 434; U. S. Jud. Code (36 Stat. 1087), 145. Court of Claims No jurisdiction to allow claims rejected by Com- missioner only those allowed by him*. Boehm et al. v. U. S., 21 Ct. Cl. 290. Court of Claims Tort may not be waived to avoid limitation against tort actions. McArthur v. U. S., 29 Ct. Cl. 191-4. ( Criminal liability, see Liability. REVISED STATUTES 161 Damages, see Punitive. Decision, see Action, Appeal, Application, Burden of proof, Pro- test, Rejection. Decision of Commissioner, see 3220, citations. Decision of Commissioner, acting within scope of his authority and jurisdiction, not reviewable as to sufficiency of evidence. Woolner v. U. S., 13 Ct. Cl. 355. District Court, jurisdiction of. United States Jud. Code (36 Stat. 1087), 145. Effect of this section and 3220 not to be so construed as to per- mit adverse decision of Commissioner to bar relief, under 3220, after recovery of judgment against collector. Nixon v. United States, 18 Ct. Cl. 448. Exemplary, see Punitive. Federal Courts have power to issue writs not specially provided by statute, when necessary for exercise of jurisdiction. Re Mas- sachusetts, 197 U. S. 488, 49 L. Ed. 485, 25 S. Ct. 512. Federal Courts, jurisdiction of, action against Commissioner is cause arising under laws providing internal revenue and un- der Laws of the U. S. Downs v. Bidwell, 182 U. S. 248, 45 L. Ed. 1088, 21 S. Ct. 770; Commissioners of Sinking Fund v. Buckner, 48 Fed. 533. Federal Courts, jurisdiction of, apparently dependent upon diverse citizenship, except for purposes of removal. Cincinnati v. Bettman, 102 Fed. 16; Collector v. Hubbard, 12 Wall. 8, 20 L. Ed 272; City of Phila. v. Collector, 5 Wall. 720, 18 L. Ed. 614. Federal Courts, jurisdiction of, complete, regardless of allowance, or nature of claims. Christie St. Commissioners Co. v. U. S., 136 Fed. 326, 69 C. C. A. 464; Muskrat v. U. S., 219 U. S. 358, 55 L. Ed. 248. Federal Courts, jurisdiction of, exists where federal question is involved, without regard to citizenship of parties. Dinsmore v . Southern Exp. Co., 92 Fed. 714, 29 L. Ed. 515, 6 S. Ct. 304. Federal Courts, jurisdiction of, not affected by amount of claim. Ames v. Hager, 36 Fed. 129, 1 L. R. A. 377, 13 Sawy. 473; U. S. v. Mooney, 116 U. S. 106; Downs v. Bidwell, 182 U. S. 248, 45 L. Ed. 1088, 21 S. Ct. 770. Federal Courts, removal to, on motion of defendants, may be had in every case brought under this section. Tennessee v . Davis, 100 U. S. 257, 25 L. Ed. 648; So. Pac. R. R. Co. v. Cal., 118 U. S. 112, 30 L. Ed. 103, 6 S. Ct. 993; Starin . N. Y., 115 U. S. 257, 29 L. Ed. 388, 6 S. Ct. 28; Cohens . Va., 6 Wheat. 102 FEDERAL INCOME TAX LAW 264, 5 L. Ed. 257; Jetton v. University, 208 U. S. 498, 52 L. Ed. 584. Interest, claim for, barred by acceptance of refund. Stewart v. Barnes, 153 U. S. 456, 38 L. Ed. 781, 14 S. Ct. 849. Interest not allowed, in default of protest. Comrs. v. Buckner, 48 Fed. 533. Interest on claim should be allowed from date of payment. Conant v. Kinney, 162 Fed. 580; Treat v. Farmers' Loan & Trust Co., 185 Fed. 760; 10 I. R. R. 57. Interest on judgment allowed from date of rendition. Schell v. Cochran, 107 U. S. 625, 27 L. Ed. 543. Interest on judgment, liability of government for, must be statu- tory. White v. Arthur, 10 Fed. 80, 20 Blatch. 237. Irregularity, see Claim. Judgment against collector payable directly to plaintiff. U. S. v. Frerichs, 124 U. S. 315, 31 L. Ed. 471, 8 S. Ct. 514. Judgment against collector, United States not bound by, when having had neither actual, nor constructive notice. Dunnc- gan v. U. S., 17 Ct. Cl. 247. Judgment against officers for taxes, damages, and costs, payable by United States. Phila. v. Diehl, 5 Wall. 720, 18 L. Ed. 614. Jurisdiction, see Cir. Ct. of Appeals, Court of Claims, Federal Courts, Mandamus. Liability, criminal or in trespass, none on part of public officer unless acts are tortious or unauthorized. U. S. v. Cummings, 130 U. S. 452, 32 L. Ed. 1029, 9 S. Ct. 583; Stacey v. Emery, 97 U. S. 642, 24 L. Ed. 1035; Averill v. Smith, 17 Wall. 82, 21 L. Ed. 613; North Carolina . Kirkpatrick, 42 Fed. 689; North Carolina v. Vanderford, 35 Fed. 282. Cp. Coblens v. Abel, 1 Woolw. 293, Fed. Gas. 2926. Limitations, statute of, begins to run at end of time for Commis- sioner's decision. Cheatham et al. v. U. S., 92 U. S. 85, 23 L. Ed. 561. Limitations, statute of, prevented from running by informal ap- plication. 14 Op. Atty. Gen. 615. Mandamus, see Federal Courts: see 3224, citations. Mandamus, authority of Supreme Court of District of Columbia to issue in all cases where parties entitled by common law. U. S. v. Schurz, 102 U. S. 378, 26 L. Ed. 167; Butterworth . U. S., 112 U.'S. 50, 28 L. Ed. 656, 5 S. Ct. 25. Mandamus, Federal Courts without power to issue. McClung v. Silliman, 6 Wheat. 598, 5 L. Ed. 340. Mandamus, issuance of, presupposes no other remedy and bars REVISED STATUTES 163 subsequent action. Kendall v. Stokes, 3 How. (U. S.) 87, 11 L. Ed. 506. Mandamus issued within jurisdiction of court may be enforced by contempt proceedings. Ex parte Rowland, 104 U.-S. 612, 26 L. Ed. 861. Mandamus, judgment in action of, reviewable by Supreme Court. Hartman v. Greenhow, 102 U. S. 675, 26 L. Ed. 271. Mandamus may be issued to compel grant by tax commissioners of allowance peremptorily ordered by statute. Comrs. v. Pem- sel, L. R. 1891 App. C. 531. Mandamus, State Court cannot issue against United States officer. McClung v. Silliman, 6 Wheat. 598, 5 L. Ed. 340. Mandamus, Supreme Court of District of Columbia, will issue to compel executive officer to perform mere ministerial duty not involving discretion. U. S. v. Black, 128 U. S. 40, 32 L. Ed. 354, 9 S. Ct. 12; U. S. v. Windom, 137 U. S. 636, 34 L. Ed. 811, US. Ct. 197; Decatur v. Paulding, 14 Pet. 497, 10 L. Ed. 559; Kendall . U. S., 12 Pet. 524, 9 L. Ed. 1181. Objection, see Recovery. Protest, see Action, Appeal, Application, Burden of Proof, Deci- sion, Rejection. Protest, form of, not prescribed. T. D., 1606, Mch. 29, 1910. Protest not always condition precedent to refund. Real Estate Sav. Bank v. U. S., 16 Ct. Cl. 335. Payments not voluntary when made to prevent seizure and sale of goods. Swift v. U. S., Ill U. S. 22, 28 L. Ed. 341 ; Maxwell v. Griswold, 10 How. (U. S.) 242, 13 L. Ed. 405; Simons . U. S., 19 Ct. Cl. 601; Hubbard v. Brainard, 35 Conn. 563. Payment not voluntary when made upon demand of officer having power to distrain. Hendy v. Soule, 1 Deady, 400, Fed. Gas. 6359; Adams v. U. S., 1 Ct. Cl. 306. Protest, right of, not to be denied. T. D., 1606, Mch. 29, 1910. Protest unnecessary after appeal from assessment. Hubbard v. Kelly, 8 W. Va. 48; Northrup v. Shook, 10 Blatch. 243. Cp. Nelson v. Carman, 5 Blatch. 511. Protest, verbal, sufficient. Wright v. Blakeslie, 101 U. S. 174, 25 L. Ed. 1048; Shaefer v. Ketchum, 6 I. R. R. 4. Punitive damages recoverable for malicious or wanton act. Craw- ford v. Eidman, 139 Fed. 992. Recovery must be based upon ground of objection stated in writ- ten protest. Davies v. Arthur, 96 U. S. 148. Rejection, see Action, Appeal, Application, Burden of Proof, De- cision Protest. 1(54 FEDERAL INCOME TAX LAW Rejection by Commissioner sufficient basis of action against col- lector. United States v. Savings Bank, 104 U. S. 734, 26 L. Ed. 908; First Nat. Bk. of Greencastle v. United States, 15 Ct. Cl. 225. Removal to Federal Courts. See Federal Courts. Res judicata Decision on tax, one year, is not, as to succeeding years. Lake Shore, etc., Ry. Co. v. People, 46 Mich. 193, 9 N, W. 249. Right of taxpayer not destroyed by Commissioner's form of pro- cedure. Dunnegan v. U. S., 17 Ct. Cl. 247. Set-off, excess payment cannot be allowed as, against present taxes after expiration of period for application for refund. 16 Op. Atty. Gen. 248. State courts, action in prohibition applies to, as well as to federal courts. Collector v. Hubbard, 12 Wall. 1-8, 20 L. Ed. 272. Statutory remedy exclusive. Arnson v. Murphy, 109 U. S. 238, 27 L. Ed. 920, 3 S. Ct. 184; City of Phila. v. Collector, 5 Wall. 720, 18 L. Ed. 614; Braun . Sauerwein, 10 Wall. 218, 19 L. Ed. 895. Statutory remedy, modification of rule as to exclusive character of. Gary v. Curtis, 3 How. (U. S.) 236, 11 L. Ed. 576; De Lima v, Bidwell, 182 U. S. 128, 45 L. Ed. 1041, 21 S. Ct. 743; Pac. Whaling Co. v. U. S., 187 U. S. 453, 47 L. Ed. 253, 23 S. Ct. 154. Strict compliance with statute necessary. Hastings v. Herold, 184 Fed. 759; Hubbard v. Kelly, 8 W. Va. 46, cited in 65 W. Va. 69, 145; Commissioners v. Buckner, 48 Fed. 533. Taxes, see Involuntary Payments, Voluntary Payments. Torts, see Circuit Ct. of Appeals, Court of Claims, Liability, Tres- pass, United States. Trespass, see Liability. Trespass, appeal to Commissioner not condition precedent to ac- tion for. Erskine v. Hohnbach, 14 Wall. 613, 20 L. Ed. 745. Trespass Receipt of taxes paid under protest does not constitute. Armour v. Roberts, 151 Fed. 846. Trespass, when action for, could not be brought. Haffin v. Mason, 15 Wall. 671, 21 L. Ed. 196. United States, action against, in Court of Claims, may be based on allowance by Commissioner. Logan County v. U. S., 169 U. S. 255, 42 L. Ed. 737, 18 S. Ct. 631. United States, action to recover tax may be commenced directly against. Emery Bird Thayer Realty Co. v. U. S., 198 Fed. 242. REVISED STATUTES 165 United States not a necessary party defendant. Conant v. Kinney , 162 Fed. 580. United States not liable for tortious acts of officers, unless author- ized or ratified. Mann v. U. S., 32 Ct. Cl. 581; Wash. L. & T. Co. v. U. S., 39 Ct. Cl. 152; U. S. v. Cummings, 130 U. S. 452, 32 L. Ed. 1029, 9 S. Ct. 583. Voluntary payments cannot be recovered. Chesebrough r. U. S., 192 U. S." 253, 48 L. Ed. 432, 24 S: Ct. 262; Phila. v. Diehl, 5 Wall. 720, 18 L. Ed. 614; Elliott . Swarthout, 10 Peters, 137, 9 L. Ed. 373. SEC. 3227. No suit or proceeding for the recovery of any internal tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully col- lected, shall be maintained in any court, unless the same is brought within two years next after the cause of action accrued: Provided, That actions for such claims which accrued prior to June six, eighteen hundred and seventy- two, may be brought within one year from said date; and that where any such claim was pending before the Com- missioner, as provided in the preceding section, an action thereon may be brought within one year after such deci- sion and not after. But no right of action which was already barred by any statute on the said date shall be revived by this section. Source: Act June 6, 1872, c. 315, 14, 17 Stat. 257. Application of limitation only to actions brought by taxpayer. United States . Nebraska Distilling Co., 80 Fed. 285. Commencement of action must be within statutory period in case of delay for more than six months in Commissioner's deci- sion. Francis v. Slack, 4 Cliff. 186, 16 I. R. R. 134, Fed. Cas. 5041. Limitations, statute of, begins to run at end of time for Commis- sioner's decision. Wright v. Blakeslee, 101 U. S. 180, 25 L. Ed. 1048; Schwarzchild & Sulzberger v. Rucker, 143 Fed. 656. Limitations, statute of, begins to run from date of Commissioner's decision. Schwarzchild & Sulzberger v.. Rucker, 143 Fed. 656. Limitations of this Act and not State statutes of limitations, con- 166 FEDERAL INCOME TAX LAW trol. Arnson v. Murphy, 109 U. S. 238, 27 L. Ed. 920, 3 S. Ct. 184. Limitations, statute of, when applicable to claim delayed by public officer. Hicks v. James, 48 Fed. 542. Limitations, statute of, does not apply where Government recog- nizes claim and draws, but holds warrant in payment thereof. Ray v. U. S., 50 Fed. 166. Limitations, statute of, not a bar, until two years after decision of Commissioner, although delayed more than six months. Merck v. Treat, 174 Fed. 388. Limitations, statute of, not suspended pending appeal to Commis- sioner. Christie St. Com. Co. v. U. S., 136 Fed. 326, 69 C. C. A. 464. Limitations, statute of, suspended pending decision of protest. Klumpp v. Thomas, 162 Fed. 853. SEC. 3228. All claims for the refunding of any internal tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collec- ted without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, must be presented to the Commissioner of Internal Revenue within two years next after the cause of action accrued : Provided That claims which accrued prior to June six, eighteen hundred and seventy-two, may be presented to the Commissioner at any time within one year from said date. But nothing in this section shall be construed to revive any right of action which was already barred by any statute on that date. Source: Act June 6, 1872, c. 315, 44, 17 Stat. 257. Appeal, filing of, with Collector constitutes presentation to Com- missioner. U. S. v. Real Estate Savings Bank, 104 U. S. 728, 26 L. Ed. 908, 17 Ct. Cl. 434. SEC. 3229. The Commissioner of Internal Revenue, with the advice and consent of the Secretary of the Treasury, may compromise any civil or criminal case arising under the internal revenue laws instead of com- mencing suit thereon; and, with the advice and consent of the said Secretary and the recommendation of the At- REVISED STATUTES 167 torney-General, he may compromise any such case after a suit thereon has been commenced. Whenever a compro- mise is made in any case there shall be placed on file in the office of the Commissioner the opinion of the Solicitor of Internal Revenue, or of the officer acting as such, with his reasons therefor, with a statement of the amount of tax assessed, the amount of additional tax or penalty imposed by law in consequence of the neglect or delinquency of the person against whom the tax is assessed, and the amount actually paid in accordance with the terms of the compromise. Source: Act July 20, 1868, c. 186, 102, 15 Stat. 166. Actions referred to, are those brought by Government. 23 Op. Atty. Gen. 507. Commissioner, authority of, statement and construction of statu- tory rule. 12 Op. Atty. Gen. 472, 536; 13 Op. Atty. Gen. 479. Commissioner has power to discontinue judicial proceeding with- out consent of Secretary or Attorney General. 12 Op. Atty. Gen. 552. Compromise, basis of, must be mutuality of concession real doubt as to legality of claim or ability to meet it. 16 Op. Atty. Gen. 249. Compromise, motive of, may be justice, equity, or public policy, as well as pecuniary advantage. 17 Op. Atty. Gen. 213. Construction should be liberal in case of corporations with non- taxable incomes failing to make return. 29 Op. Atty. Gen. 217-226. Discontinuance, see Commissioner. Discontinuance of suit or proceeding not a compromise requiring approval of attorney general. 12 Op. Atty. Gen. 552. Judgment upon entry of, power to compromise ceases. 13 Op. Atty. Gen. 479. Secretary of the Treasury, power of, to compromise claims. 12 Op. Atty. Gen. 472, 536; 13 Op. Atty. Gen. 479; 23 Op. Atty. Gen. 20. SEC. 3230. No discontinuance or nolle prosequi of any prosecution under section three thousand two hundred and fifty-seven shall be allowed without the permission 168 FEDERAL INCOME TAX LAW in writing of the Secretary of the Treasury and the At- torney-General. Source: Act Mar. 31, 1868, c. 41, 7, 15 Stat. 60. SEC. 3231. It shall be lawful for any court in which any suit or criminal proceeding arising under the internal revenue laws may be pending, to continue the same at any stage thereof, for good cause shown on motion by the district attorney. Source: Act July 20, 1868, c. 186, 102, 15 Stat. 166. SEC. 3447. Whenever the mode or time of assessing or collecting any tax which is imposed is not provided for, the Commissioner of Internal Revenue may establish the same by regulation. He may also make all such regula- tions, not otherwise provided for, as may have become necessary by reason of any alteration of law in relation to internal revenue. Source: Act July 20, 1868, c. 186, 101, 15 Stat. 166. SEC. 3462. The several judges 01 ihe circuit and district courts of the United States, and commissioners of the circuit courts, may, within their respective jurisdictions, issue a search-warrant, authorizing any internal revenue officer to search any premises within the same, if such officer makes oath in writing that he has reason to believe, and does believe, that a fraud upon the revenue has been or is being committed upon or by the use of the said prem- ises. Source: Act July 13, 1866, c. 184, 15, 14 Stat. 152. APPENDIX FEDERAL INCOME TAX ACTS ACT OF AUGUST 5, 1861. 1 Chapter XLV. An Act to Provide Increased Revenue from Imports, to Pay Interest on the Public Debt, and for Other Purposes. \ ******** SEC. 49. And be it further enacted, That, from and after the first day of January next, there shall be levied, col- lected, and paid, upon the annual income of every person residing in the United States, whether such income is de- rived from any kind of property, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever, if such annual income exceeds the sum of eight hundred dol- lars, a tax of three per centum on the amount of such excess of such income above eight hundred dollars: Provided, That, upon such portion of said income as shall be derived from interest upon treasury notes or other securities of the United States, there shall be levied, collected, and paid a tax of one and one half per centum. Upon the income, rents, or dividends accruing upon any property, securities, or stocks, owned in the United States by any citizen of the United States residing abroad, there shall be levied, col- lected, and paid a tax of five per centum, excepting that portion of said income derived from interest on Treasury notes and other securities of the Government of the United States, which shall pay one and one half per centum. The tax herein provided shall be assessed upon the annual income of the persons hereinafter named for the year next preceding the time for assessing said tax, to wit, 1 12 U. S. Stat. at Large, 292. 171 172 APPENDIX [Act, Aug. 5, 1801 the year next preceding the first of January, eighteen hun- dred and sixty-two; and the said taxes, when so assessed and made public, shall become a lien on the property or other sources of said income for the amount of the same, with the interest and other expenses of collection until paid: Provided, That in estimating said income, all na- tional, state, or local taxes assessed upon the property, from which the income is derived, shall be first deducted. SEC. 50. And be it further enacted, That it shall be the duty of the President of the United States, and he is hereby authorized, by and with the advice and consent of the Sen- ate, to appoint one principal assessor and one principal collector in each of the States and Territories of the United States, and in the District of Columbia, to assess and collect the internal duties or income tax imposed by this act, with authority in each of said officers to appoint so many assistants as the public service may require, to be approved by the Secretary of the Treasury. The said taxes to be assessed and collected under such regulations as the Secretary of the Treasury may prescribe. The said collectors, herein authorized to be appointed, shall give bonds, to the satisfaction of the Secretary of the Treasury, in such sums as he may prescribe, for the faithful per- formance of their respective duties. And the Secretary of the Treasury shall prescribe such reasonable compensa- tion for the assessment and collection of said internal duties or income tax as may appear to him just and proper; not, however, to exceed in any case the sum of two thou- sand five hundred dollars per annum for the principal of- ficers herein referred to, and twelve hundred dollars per annum for an assistant. The assistant collectors herein provided shall give bonds to the satisfaction of the princi- pal collector for the faithful performance of their duties. The Secretary of the Treasury is further authorized to select and appoint one or more depositaries in each State for the deposit and safe-keeping of the moneys arising from FEDERAL INCOME TAX ACTS 173 the taxes herein imposed, when collected, and the receipt of the proper officer of such depositary to the collector for the moneys deposited by him shall be the proper voucher for such collector in the settlement of his account at the Treasury Department. And he is further authorized and empowered to make such officer or depositary the disburs- ing agent of the Treasury for the payment of all interest due to the citizens of such State upon the Treasury notes or other Government securities issued by authority of law. And he shall also prescribe the forms of returns to be made to the department by all assessors and collectors appointed under the authority of this act. He shall also prescribe the form of oath or obligation to be taken by the several officers authorized or directed to be appointed and commissioned by ,the President under this act, before a competent magistrate duly authorized to administer oaths, and the form of the return to be made thereon to the Treasury Department. SEC. 51. And be it further enacted, That the tax herein imposed by the forty-ninth section of this act shall be due and payable on or before the thirtieth day of June, in the year eighteen hundred and sixty-two, and all sums due and unpaid at that day shall draw interest thereafter at the rate of six per centum per annum; and if any person or persons shall neglect or refuse to pay after due notice said tax assessed against him, her, or them, for the space of more than thirty days after the same is due and payable, it shall be lawful for any collector or assistant collector charged with the duty of collecting such tax, and they are hereby authorized, to levy the same on the visible property of any such person, or so much thereof as may be sufficient to pay such tax, with the interest due thereon, and the expenses incident to such levy and sale, first giving thirty days' public notice of the time and place of the sale thereof; and in case of the failure of any person or persons author- ized to act as agent or agents for the collection of the rents 174 APPENDIX [Act, Aug. 5, 1861 or other income of any person residing abroad shall neglect or refuse (sic) to pay the tax assessed thereon (having had due notice) for more than thirty days after the thirtieth of June, eighteen hundred and sixty-two, the collector or his assistant, for the district where such property is located, or rents or income is payable, shall be and hereby is author- ized to levy upon the property itself, and to sell the same, or so much thereof as may be necessary to pay the tax as- sessed, together with the interest and expenses incident to such levy and sale, first giving thirty days' public notice of the time and place of sale. And in all cases of the sale of property herein authorized, the conveyance by the of- ficer authorized to make the sale, duly executed, shall give a valid title to the purchaser, whether the property sold be real or personal. And the several collectors and assistants appointed under the authority of this act may, if they find no property to satisfy the taxes assessed upon any person by authority of the forty-ninth section of this act, and which such person neglects to pay as hereinbe- fore provided, shall have power, and it shall be their duty, to examine under oath the person assessed under this act, or any other person, and may (sic) sell at public auction, after ten days' notice, any stock, bonds, or choses in action, be- longing to such person, or so much thereof as will pay such tax and the expenses of such sale; and in case he refuses to testify, the said several collectors and assistants shall have power to arrest such person and commit him to prison, to be held in custody until the same shall be paid, with interest thereon, at the rate of six per centum per annum, from the time when the same was payable as aforesaid, and all fees and charges of such commitment and custody. And the place of custody shall in all cases be the same provided by law for the custody of persons committed for any cause by the authority of the United States, and the warrant of the collector, stating the cause of commitment, shall be suf- ficient authority to the proper officer for receiving and keeping such person in custody until the amount of said FEDERAL INCOME TAX ACTS 175 tax and interest, and all fees and the expense of such cus- tody, shall have been fully paid and discharged; which fees and expenses shall be the same as are chargeable un- der the laws of the United States in other cases of com- mitment and custody. And it shall be the duty of such collector to pay the expenses of such custody, and the same, with his fees, shall be allowed on settlement of his accounts. And the person so committed shall have the same right to be discharged from such custody as may be allowed by the laws of the State or Territory, or the Dis- trict of Columbia, where he is so held in custody, to per- sons committed under the laws of such State or Territory, or District of Columbia, for the non-payment of taxes, and in the manner provided by such laws; or he may be discharged at any time by order of the Secretary of the Treasury. SEC. 54. And be it further enacted, That it shall be the duty of the collectors aforesaid in their respective districts, and they are hereby authorized, to collect the duties imposed by this act, and to prosecute for the recovery of the same, and for the recovery of any sum or sums which may be forfeited by virtue of this act; and all fines, penal- ties, and forfeitures which shall be incurred by force of this act, shall and may be sued for and recovered in the name of the United States or of the collector within whose district any such fine, penalty, or forfeiture shall have been incurred, by bill, plaint, or information; one moiety thereof to the use of the United States, and the other moiety thereof to the use of such collector. ACT OF JULY 1, 1862. 1 Chapter CXIX. An Act to Provide Internal Revenue to Support the Government and to Pay Interest on the Public Debt. RAILROADS, STEAMBOATS, AND FERRY-BOATS SEC. 80. And be it further enacted, That on and after the first day of August, eighteen hundred and sixty-two, any person or persons, firms, companies, or corporations, own- ing or possessing, or having the care or management of any railroad or railroads upon which steam is used as a propelling power, or of any steamboat or other vessel propelled by steam power, shall be subject to and pay a duty of three per centum on the gross amount of all the receipts of such railroad or railroads or steam vessel for the transportation of passengers over and upon the same; and any person or persons, firms, companies, or corpora- tions, owning or possessing, or having the care or manage- ment of any railroad or railroads using any other power than steam thereon, or owning, possessing, or having the care or management of any ferry-boat, or vessel used as a ferry-boat, propelled by steam or horse-power, shall be subject to and pay a duty of one and a half per centum upon the gross receipts of such railroad or ferry-boat, respectively, for the transportation of passengers over and upon said railroads, steamboats, and ferry-boats, re- spectively; and any person, or persons, firms, companies, or corporations, owning, possessing, or having the care or management of any bridge authorized by law to receive i 12 U. S. Stat. at Large, 432. 176 FEDERAL INCOME TAX ACTS 177 toll for the transit of passengers, beasts, carriages, teams, and freight of any description over such bridge, shall be subject to and pay a duty of three per centum on the gross amount of all then; receipts of every description. And the owner, possessor, or person or persons having the care and management of any such railroad, steamboat, ferry- boat, or other vessel, or bridge, as aforesaid, shall, within five days after the end of each and every month, com- mencing as hereinbefore mentioned, make a list or return to the assistant assessor of the district within which such owner, possessor, company, or corporation may have his or its place of business, or where any such railroad, steam- boat, ferry-boat, or bridge is located or belongs, respec- tively, stating the gross amount of such receipts for the month next preceding, which return shall be verified by the oath or affirmation of such owner, possessor, manager, agent, or other proper officer, in the manner and form to be prescribed from time to time by the Commissioner of Internal Revenue, and shall also, monthly, at the time of making such return, pay to the collector or deputy collector of the district the full amount of duties which have accrued on such receipts for the month aforesaid; and in case of neglect or refusal to make said lists or return for the space of five days after such return should be made as aforesaid, the assessor or assistant assessor shall pro- ceed to estimate the amount received and the duties payable thereon, as hereinbefore provided in other cases of delinquency to make return for purposes of assessment; and for the purpose of making such assessment, or of ascertaining the correctness of any such return, the books of any such person, company, or corporation shall be sub- ject to the inspection of the assessor or assistant assessor on his demand or request therefor; and in case of neglect or refusal to pay the duties as aforesaid when the same have been ascertained as aforesaid, for the space of five days after the same shall have become payable, the owner, possessor, or person having the management as 178 APPENDIX [Act, July 1, 1862 aforesaid, shall pay, in addition, five per centum on the amount of such duties; and for any attempt knowingly to evade the payment of such duties, the said owner, pos- sessor, or person having the care or management as afore- said, shall be liable to pay a penalty of one thousand dol- lars for every such attempt, to be recovered as provided in this act for the recovery of penalties; and all provisions of this act in relation to liens and collections by distraint not incompatible herewith, shall apply to this section and the objects therein embraced: Provided, That all such persons, companies, and corporations shall have the right to add the duty or tax imposed hereby to their rates of fare whenever their liability thereto may com- mence, any limitations which may exist by law or by agreement with any person or company which may have paid, or be liable to pay, such fare to the contrary not- withstanding. RAILROAD BONDS SEC. 81. And be it further enacted, That on and after the first day of July, eighteen hundred and sixty-two, any person or persons owning or possessing, or having the care or management of any railroad company or railroad cor- poration, being indebted for any sum or sums of money for which bonds or other evidences of indebtedness have been issued, payable in one or more years after date, upon which interest is, or shall be, stipulated to be paid, or coupons representing the interest shall be or shall have been issued to be paid, and all dividends in scrip or money or sums of money thereafter declared due or payable to stockholders of any railroad company, as part of the earn- ings, profits, or gains of said companies, shall be subject to and pay a duty of three per centum on the amount of all such interest or coupons or dividends whenever the same shall be paid; and said railroad companies or rail- road corporations, or any person or persons owning, pos- sessing, or having the care or management of any railroad FEDERAL INCOME TAX ACTS 179 company or railroad corporation, are hereby authorized and required to deduct and withhold from all payments made to any person, persons, or party, after the first day of July, as aforesaid, on account of any interest or coupons or dividends due and payable as aforesaid, the said duty or sum of three per centum; and the duties deducted as aforesaid, and certified by the president or other proper officer of said company or corporation, shall be a receipt and discharge, according to the amount thereof, of said railroad companies or railroad corporations, and the owners, possessors, and agents thereof, on dividends and on bonds or other evidences of their indebtedness, upon which interest or coupons are payable, holden by any person or party whatsoever, and a list or return shall be made and rendered within thirty days after the time fixed when said interest or coupons or dividends become due or payable, and as often as every six months, to the Commissioner of Internal Revenue, which shall contain a true and faithful account of the duties received and chargeable, as aforesaid, during the time when such duties have accrued or should accrue, and remaining un- accounted for; and there shall be annexed to every such list or return a declaration under oath or affirmation, in manner and form as may be prescribed by the Com- missioner of Internal Revenue, of the president, treasurer, or some proper officer of said railroad company or railroad corporation, that the same contains a true and faithful account of the duties so withheld and received during the time when such duties have accrued or should accrue, and not accounted for, and for any default in the making or rendering of such list or return, with the declaration annexed, as aforesaid, the person or persons owning, possessing, or having the care or management of such railroad company or railroad corporation, making such default, shall forfeit, as a penalty, the sum of five hundred dollars; and in case of any default in making or rendering said list, or of any default in the payment of the duty, or 180 APPENDIX [Act, July 1, 1862 any part thereof, accruing or which should accrue, the assessment and collection shall be made according to the general provisions of this act. BANKS, TRUST COMPANIES, SAVINGS INSTITUTIONS, AND INSURANCE COMPANIES SEC. 82. And be it further enacted, That on and after the first day of July, eighteen hundred and sixty-two, there shall be levied, collected, and paid by all banks, trust companies, and savings institutions, ancfrby all fire, marine, life, inland, stock, and mutual insurance com- panies, under whatever style or name known or called, of the United States or Territories, specially incorporated, or existing under general laws, or which may be hereafter incorporated or exist as aforesaid, on all dividends in scrip or money thereafter declared due or paid to stock- holders, to policy-holders, or to depositors, as part of the earnings, profits, or gains of said banks, trust companies, savings institutions, or insurance companies, and on all sums added to their surplus or contingent funds, a duty of three per centum: Provided, That the duties upon the dividends of Me insurance companies shall not be deemed due, or to be collected until such dividends shall be pay- able by such companies. And said banks, trust com- panies, savings institutions, and insurance companies are hereby authorized and required to deduct and with- hold from all payments made to any person, persons, or party, on account of any dividends or sums of money that may be due and payable, as aforesaid, after the first day of July, eighteen hundred and sixty-two, the said duty of three per centum. And a list or return shall be made and rendered within thirty days after the tune fixed when such dividends or sums of money shall be declared due and payable, and as often as every six months, to the Commissioner of Internal Revenue, which shall contain a true and faithful account of the amount of duties accrued or which should accrue from time to FEDERAL INCOME TAX ACTS 181 time, as aforesaid, during the time when such duties re- main unaccounted for, and there shall be annexed to every such list or return a declaration, under oath or affirmation, to be made in form and- manner as shall be prescribed by the Commissioner of Internal Revenue, of the president, or some other proper officer of said bank, trust company, savings institution, or insurance company, respectively, that the same contains a true and faithful account of the duties which have accrued or should accrue and not accounted for, and for any default in the delivery of such list or return, with such declaration annexed, the bank, trust company, savings institution, or insurance company making such default shall forfeit, as a penalty, the sum of five hundred dollars. SEC. 83. And be it further enacted, That any person or persons owning or possessing, or having the care or man- agement of any railroad company or railroad corporation, bank, trust company, savings institution, or insurance company, as heretofore mentioned, required under this act to make and render any list or return to the Commis- sioner of Internal Revenue, shall, upon rendering the same, pay to the said Commissioner of Internal Revenue the amount of the duties due on such list or return, and in default thereof shall forfeit as a penalty the sum of five hundred dollars; and in case of neglect or refusal to make such list or return as aforesaid, or to pay the duties as aforesaid, for the space of thirty days after the time when said list should have been made and rendered, or when said duties shall have become due and payable, the assess- ment and collection shall be made according to the general provisions heretofore prescribed in this act. SEC. 84. And be it further enacted, That on the first day of October, anno domini eighteen hundred and sixty-two, and on the first day of each quarter of a year thereafter, 182 APPENDIX [Act, July 1, 1862 there shall be paid by each insurance company, whether inland or marine, and by each individual or association engaged in the business of insurance from loss or damage by fire, or by the perils of the sea, the duty of one per centum upon the gross receipts for premiums and assess- ments by such individual, association, or company dur- ing the quarter then preceding; and like duty shall be paid by the agent of any foreign insurance company having an office or doing business within the United States. SEC. 85. RETURNS BY INSURANCE COMPANIES (Omitted, as unimportant.) SALARIES AND PAY OF OFFICERS AND PERSONS IN THE SERVICE OF THE UNITED STATES SEC. 86. And be it further enacted, That on and after the first day of August, eighteen hundred and sixty-two, there shall be levied, collected, and paid on all salaries of officers, or payments to persons in the civil, military, naval, or other employment or service of the United States, includ- ing senators and representatives and delegates in Congress, when exceeding the rate of six hundred dollars per annum, a duty of three per centum on the excess above the six hundred dollars; and it shall be the duty of all paymasters, and all disbursing officers, under the government of the United States, or in the employ thereof, when making any payments to officers and persons as aforesaid, or upon settling and adjusting the accounts of such officers and persons, to deduct and withhold the aforesaid duty of three per centum, and shall, at the same time, make a cer- tificate stating the name of the officer or person from whom such deduction was made, and the amount thereof, which shall be transmitted to the office of the Commis- sioner of Internal Revenue, and entered as part of the in- ternal duties; and the pay-roll, receipts, or account of FEDERAL INCOME TAX ACTS 183 officers or persons paying such duty, as aforesaid, shall be made to exhibit the fact of such payment. ADVERTISEMENT SEC. 88. And be it further enacted, That on and after the first day of August, eighteen hundred and sixty-two, there shall be levied, collected, and paid by any person or per- sons, firm, or company, publishing any newspaper, maga- zine, review, or other literary, scientific, or news publi- cation, issued periodically, on the gross receipts for all advertisements, or all matters for the insertion of which in said newspaper or other publication as aforesaid, or in extras, supplements, sheets, or fly-leaves accompanying the same, pay is required or received, a duty of three per centum; and the person or persons, firm, or company, own- ing, possessing, or having the care or management of any and every such newspaper or other publication, as afore- said, shall make a list or return quarterly, commencing as heretofore mentioned, containing the gross amount of re- ceipts as aforesaid, and the amount of duties which have accrued thereon, and render the same to the assistant assessor of the respective districts where such newspaper, magazine, review, or other literary or news publication is or may be published, which list or return shall have an- nexed a declaration, under oath or affirmation, to be made according to the manner and form which may be from time to time prescribed by the Commissioner of Internal Revenue, or the owner, possessor, or person having the care or management of such newspaper, magazine, review, or other publication, as aforesaid, that the same is true and correct, and shall also, quarterly and at the time of making said list or return, pay to the collector or deputy collector of the district, as aforesaid, the full amount of said duties; and in case of neglect or refusal to comply with any of the provisions contained in this section, or to make and render said list or return, as aforesaid, for the space 184 APPENDIX [Act, July 1, 1862 of thirty days after the time when said list or return ought to have been made, as aforesaid, the assistant assessor of the respective districts shall proceed to estimate the duties, as heretofore provided in other cases of delinquency; and in case of neglect or refusal to pay the duties, as aforesaid, for the space of thirty days after said duties become due and payable, said owner, possessor, or person or persons having the care or management of said newspapers or publications, as aforesaid, shall pay, in addition thereto, a penalty of five per centum on the amount due; and in case of fraud or evasion, whereby the revenue is attempted to be defrauded or the duty withheld, said owners, pos- sessors, or person or persons having the care or manage- ment of said newspapers or other publications, as afore- said, shall forfeit and pay a penalty of five hundred dollars for each offence, or for any sum fraudulently unaccounted for; and all provisions in this act in relation to liens, as- sessments, and collection, not incompatible herewith, shall apply to this section and the objects herein embraced : Provided, That in all cases where the rate or price of ad- vertising is fixed by any law of the United States, or Terri- tory, it shall be lawful for the company, person or persons publishing said advertisements, to add the duty or tax imposed by this act to the price of said advertisements, any law, as aforesaid, to the contrary notwithstanding: Provided further, That the receipts for advertisements to the amount of one thousand dollars, by any person or per- sons, firm or company, publishing any newspaper, maga- zine, review, or other literary, scientific, news publication, issued periodically, shall be exempt from duty: And pro- vided further, That all newspapers whose circulation does not exceed two thousand copies shall be exempted from all taxes for advertisements. INCOME DUTY SEC. 89. And be it further enacted, That for the purpose of modifying and re-enacting, as hereinafter provided, so FEDERAL INCOME TAX ACTS 185 much of an act, entitled " An act to provide increased rev- enue from imports to pay interest on the public debt, and for other purposes," approved fifth of August, eighteen hundred and sixty-one, as relates to income tax; that is to say, sections forty-nine, fifty (except so much thereof as relates to the selection and appointment of depositaries), and fifty-one, be, and the same are hereby, repealed. SEC. 90. And be it further enacted, That there shall be levied, collected, and paid annually, upon the annual gains, profits, or income of every person residing in the United States, whether derived from any kind of property, rents, interest, dividends, salaries, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever, except as hereinafter mentioned, if such annual gains, profits, or income exceed the sum of six hundred dollars, and do not exceed the sum of ten thousand dollars, a duty of three per centum on the amount of such annual gains, profits, or income over and above the said sum of six hun- dred dollars; if said income exceeds the sum of ten thou- sand dollars, a duty of five per centum upon the amount thereof exceeding six hundred dollars, and upon the an- nual gains, profits, or income, rents, and dividends ac- cruing upon any property, securities, and stocks owned in the United States by any citizen of the United States, re- siding abroad, except as hereinafter mentioned, and not in the employment of the government of the United States, there shall be levied, collected, and paid a duty of five per centum. SEC. 91. And be it further enacted, That in estimating said annual gains, profits, or income, whether subject to a duty, as provided in this act, of three per centum, or of five per centum, all other national, state, and local taxes, lawfully assessed upon the property or other sources of in- come of any person as aforesaid, from which said annual gains, profits, or income of such person is or should be de- APPENDIX [Act, July 1, 1862 rived, shall be first deducted from the gains, profits, or in- come of the person or persons who actually pay the same, whether owner or tenant, and all gains, profits, or income derived from salaries of officers, or payments to persons in the civil, military, naval, or other service of the United States, including senators, representatives, and delegates in Congress, above six hundred dollars, or derived from in- terest or dividends on stock, capital, or deposits in any bank, trust company, or savings institution, insurance, gas, bridge, express, telegraph, steamboat, ferry-boat, or railroad company, or corporation, or on any bonds or other evidences of indebtedness of any railroad company or other corporation, which shall have been assessed and paid by said banks, trust companies, savings institutions, in- surance, gas, bridge, telegraph, steamboat, ferry-boat, express, or railroad companies, as aforesaid, or derived from advertisements, or on any articles manufactured, upon which specific, stamp or ad valorem duties shall have been directly assessed or paid, shall also be deducted; and the duty herein provided for shall be assessed and col- lected upon the income for the year ending the thirty-first day of December next preceding the tune for levying and collecting said duty, that is to say, on the first day of May, eighteen hundred and sixty-three, and in each year there- after: Provided, That upon such portion of said gains, pro- fits, or income, whether subject to a duty as provided in this act of three per centum or of five per centum, which shall be derived from interest upon notes, bonds, or other securities of the United States, there shall be levied, col- lected, and paid a duty not exceeding one and one-half of one per centum, anything in this act to the contrary not- withstanding. SEC. 92. And be it further enacted, That the duties on incomes herein imposed shall be due and payable on or before the thirtieth day of June, in the year eighteen hun- dred and sixty-three, and in each year thereafter until FEDERAL INCOME TAX ACTS 187 and including the year eighteen hundred and sixty-six and no longer; and to any sum or sums annually due and unpaid for thirty days after the thirtieth of June as aforesaid, and for ten days after demand thereof by the collector, there shall be levied in addition thereto the sum of five per centum on the amount of duties unpaid, as a penalty, except from the estates of deceased and insolvent persons; and if any person or persons, or party, liable to pay such duty, shall neglect or refuse to pay the same, the amount due shall be a lien in favor of the United States from the time it was so due until paid, with the interest, penalties, and costs, that may accrue in addition thereto upon all the property, and rights to property, stocks, securities, and debts of every description from which the income upon which said duty is assessed or levied shall have accrued, or may or should accrue; and in default of the payment of said duty for the space of thirty days, after the same shall have become due, and be demanded as aforesaid, said lien may be enforced by distraint upon such property, rights to property, stocks, securities, and evidences of debt, by whomsoever holden; and for this purpose the Commissioner of Internal Revenue, upon the certificate of the collector or deputy collector that said duty is due and unpaid for the space of ten days after notice duly given of the levy of such duty, shall issue a warrant in form and manner to be prescribed by said Com- missioner of Internal Revenue, under the directions of the Secretary of the Treasury, and by virtue of such warrant there may be levied on such property, rights to property, stocks, securities, and evidences of debt, a further sum to be fixed and stated in such warrant, over and above the said annual duty, interest, and penalty for nonpayment, sufficient for the fees and expenses of such levy. And in all cases of sale, as aforesaid, the certificate of such sale by the collector or deputy collector of the sale, shall give title to the purchaser, of all right, title, and interest of such delin- quent in and to such property, whether the property be 188 APPENDIX [Act, July 1, 1862 real or personal; and where the subject of sale shall be stocks, the certificate of said sale shall be lawful authority and notice to the proper corporation, company, or associa- tion, to record the same on the books or records, in the same manner as if transferred or assigned by the person or party holding the same, to issue new certificates of stock therefor in lieu of any original or prior certificates, which shall be void whether cancelled or not ; and said certificates of sale of the collector or deputy collector, where the sub- ject of sale shall be securities or other evidences of debt, shall be good and valid receipts to the person or party holding the same, as against any person or persons, or other party holding, or claiming to hold, possession of such securities or other evidences of debt. SEC. 93. And be it further enacted, That it shall be the duty of all persons of lawful age, and all guardians and trustees, whether such trustees are so by virtue of their office as executors, administrators, or other fiduciary capacity, to make return in the list or schedule, as pro- vided in this act, to the proper officer of internal revenue, of the amount of his or her income, or the income of such minors or persons as may be held in trust as afore- said, according to the requirements hereinbefore stated, and in case of neglect or refusal to make such return, the assessor or assistant assessor shall assess the amount of his or her income, and proceed thereafter to collect the duty thereon in the same manner as is provided for in other cases of neglect and refusal to furnish lists or schedules in the general provisions of this act, where not otherwise incompatible, and the assistant assessor may increase the amount of the list or return of any party making such return, if he shall be satisfied that the same is understated : Provided, That any party, in his or her own behalf, or as guardian or trustee, as aforesaid, shall be permitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the Commissioner of In- FEDERAL INCOME TAX ACTS 189 ternal Revenue, that he or she was not possessed of an income of six hundred dollars, liable to be assessed ac- cording to the provisions of this act, or that he or she has been assessed elsewhere and (sic} the same year for an in- come duty, under authority of the United States, and shall thereupon be exempt from an income duty; or, if the list or return of any party shall have been increased by the assistant assessor, in manner, as aforesaid, he or she may be permitted to declare, as aforesaid, the amount of his or her annual income, or the amount held in trust, as aforesaid, liable to be assessed, as aforesaid, and the same so declared shall be received as the sum upon which duties are to be assessed and collected. ACT OF MARCH 3, 1863. l Chapter LXXIV. An Act to Amend an Act entitled "An Act to Provide Internal Revenue to Support the Government and Pay Interest on the Public Debt," Approved July First, Eighteen Hundred and Sixty-two, and for other Purposes. Be it enacted, ******** That section ninety-one be amended by striking out the word "gas" wherever it occurs, and by strking out the words "or on any articles manufactured" after the word ' ' advertisements. ' ' That section ninety-three be amended so that hi case of neglect or refusal to make the returns referred to in said section the proceedings thereafter for the assessment and collection of the duty shall be in the same manner as provided for in other cases of neglect. ******** SEC. 3. And be it further enacted, That any person or persons, firm, company, or corporation, who shall issue tickets, or contracts of insurance against fatal or non- fatal injury to persons while travelling by land or water, shall pay a duty of one per centum on the gross amount of all the receipts for such insurance, and shall be subject to all the provisions and regulations of existing law appli- cable thereto, in relation to insurance companies : Provided, That no stamp duty shall be required upon tickets or con- tracts of insurance as aforesaid, when limited to fatal or non-fatal injury to persons while travelling. ******** SEC. 8. And be it further enacted, That, on and after the passage of this act, any person or persons owning or pos- 1 12 U. S. Stat. at Large, 713. 190 FEDERAL INCOME 'TAX ACTS 191 sessing, or having the care or management of any canal company or canal navigation or slack-water corporation, or turnpike companies, being indebted for any sum or sums of money for which bonds or other evidences of in- debtedness have been issued, payable in one or more years after date, upon which interest is, or shall be, stipulated to be paid, or coupons representing the interest, shall be or shall have been issued to be paid; and all divi- dends in scrip or money, or sums of money thereafter declared due or payable to stockholders of any canal navigation, or slack-water or turnpike company, as part of the earning, profits, or gains, of said companies shall be subject to and pay a duty of three per centum on the amount of all such interest, or coupons, or dividends, whenever the same shall be paid; and said canal com- panies, or canal navigation, or slack-water corporations, or turnpike companies, or any person or persons owning, possessing, or having the care or management of any canal company, or canal navigation or slack- water corporation, or turnpike company, are hereby authorized and required to deduct and withhold from all payments made to any person, persons, or party, after the first day of July, as aforesaid, on account of any interest, or coupons, or dividends due and payable, as aforesaid, the said duty or sum of three per centum; and the duties deducted, as aforesaid, and certified by the president or other proper officer of said company or corporation, shall be a receipt and discharge, according to the amount thereof, of said canal companies or canal navigation, or slack-water cor- porations, or turnpike companies, and the owners, pos- sessors, and agents thereof on dividends and on bonds or other evidences of their indebtedness upon which interest or coupons are payable, holden by any person or party whatsoever, and a list or return shall be made and ren- dered within thirty days after the time fixed when said interest or coupons or dividends become due or payable, and as often as every six months, to the Commissioner of 192 APPENDIX [Act, Mch. 3, 1863 Internal Revenue, which shall contain a true and faithful account of the duties received and chargeable, as afore- said, during the time when such duties have accrued or should accrue, and remaining unaccounted for; and there shall be annexed to every such list or return a declaration, under oath of affirmation, in manner and form as may be prescribed by the commissioner of internal revenue, of the president, treasurer, or some proper officer of said canal company, .or canal or navigation and slack-water corporation or turnpike companies, that the same con- tain a true and faithful account of the duties so withheld and received during the time when such duties have accrued or should accrue, and not accounted for; and for any default in the making or rendering of such list or return, with the declaration annexed, as aforesaid, the person or persons owning, possessing, or having the care or management of such canal company or canal, naviga- tion or slack-water corporation or turnpike companies, making such default, shall forfeit, as a penalty, the sum of five hundred dollars ; and in case of any default in mak- ing or rendering said list, or of any default in the payment of the duty, or any part thereof, accruing or which should accrue, the assessment and collection shall be made ac- cording to the general provisions of the act to which this act is an amendment. SEC. 9. And be it further enacted, That any person or per- sons, firms, companies, or corporations, owning or possess- ing, or having the care or management of any ferry-boat, or vessel used as a ferry-boat, propelled by steam or horse- power, in lieu of the duties now imposed by law, shall be subject to pay a duty of one and one-half of one per cen- tum upon the gross receipts of such ferry-boat; and the return and payment thereof shall be made in the manner prescribed in the act to which this act is an amendment. SEC. 10. And be it further enacted, That on and after the first day of April, eighteen hundred and sixty-three, any FEDERAL INCOME TAX ACTS 193 person or persons, firms, companies, or corporations carry- ing on or doing an express business shall, in lieu of the tax and stamp duties imposed by existing laws, be subject to and pay a duty of two per centum on the gross amount of all the receipts of such express business, and shall be sub- ject to the same provisions, rules, and penalties, as are prescribed in section eighty of the act to which this is an amendment, for the persons, firms, companies, or corpora- tions owning or possessing or having the management of railroads, steamboats, and ferry-boats; and all acts or part[s] of acts inconsistent herewith are hereby repealed. SEC. 11. And be it further enacted, That in estimating the annual gains, profit, or income, of any person, under the act to which this act is an amendment, the amount actually paid by such person for the rent of the dwelling- house or estate on which he resides shall be first deducted from the gains, profit, or income of such person. ******** SEC. 14. And be it further enacted, That every incorpo- rated bank, or other bank legally authorized to issue notes as circulation, which shall neglect or omit to make divi- dends or additions to its surplus or contingent funds as often as once in six months, shall, in lieu thereof, make returns, under oath, to the Commissioner of Internal Revenue on the first days of January and July in each year, or within thirty days thereafter, of the amount of profits which have accrued or been earned and received by said bank during the six months next preceding said first days of January and July; and at the time of making such returns, shall pay to the Commissioner of Internal Revenue a duty of three per cent., on such profits, and shall be subject to the provisions of the eighty-second sec- tion of the act to which this is an addition : Provided, that the return for the first of January, eighteen hundred and sixty-three, shall be made within thirty days after the passage of this act. ACT OF JUNE 30, 1864. 1 Chapter CLXXIII. An Act To Provide Internal Revenue to Support the Government, to Pay Interest on the Public Debt, and for other Purposes. (Sections 11, 12, 13, 14, 15, 16, 18, 19, 20, 28, 29, 30, 31, 32, 37, 38, 42, 45, 49 are omitted as being substantially the same as the provisions of the Revised Statutes contained in Chap. V, pp. 120-168 supra). Sections 98 and 100 are omitted as not directly in point, but may be found interesting for purposes of comparison. BROKERS SEC. 99. And be it further enacted, That all brokers, and bankers doing business as brokers, shall be subject to pay the following duties and rates of duty upon the sales of merchandise, produce, gold and silver bullion, foreign exchange, uncurrent money, promissory notes, stocks, bonds, or other securities, as hereinafter mentioned, and shall be subject to all the provisions, where not in- applicable thereto, for the returns, assessment, collection of the duties, and liens and penalties as are prescribed for the persons, firms, companies, or corporations, owning or possessing, or having the management of railroads, steamboats, and ferry-boats, that is to say : Upon all sales of merchandise, produce, or other goods, one eighth of one per centum; upon all sales and contracts for sales of stocks and bonds, one twentieth of one per centum on the par value thereof; and of gold and silver bullion and coin, foreign exchange, promissory notes, or other securi- 1 13 U. S. Stat. at Large, 223. 194 FEDERAL INCOME TAX ACTS 195 ties, one twentieth of one per centum on the amount of such sales, and of all contracts for such sales: Provided, That any person, firm, or company, not being licensed as a broker, or banker, or wholesale or retail dealer, who shall sell, or offer to sell, any merchandise, produce, or gold and silver bullion, foreign exchange, uncurrent money, prom- issory notes, stocks, bonds, or other securities, not bona fide at the time his own property, and actually on hand, shall be liable, in addition to all other penalties provided in such cases, to pay fifty per centum in addition to the foregoing duties and rates of duty. RAILROADS, STEAM-BOATS, FERRY-BOATS, AND BRIDGES SEC. 103. And be it further enacted, That every person, firm, company, or corporation, owning or possessing, or having the care or management of, any railroad, canal, steamboat, ship, barge, canal-boat, or other vessel, or any stage-coach or other vehicle engaged or employed in the business of transporting passengers or property for hire; or in transporting the mails of the United States, or any canal, the water of which is used for mining purposes, shall be subject to and pay a duty of two and one-half per cen- tum upon the gross receipts of such railroad, canal, steam- boat, ship, barge, canal-boat, or other vessel, or such stage- coach or other vehicle: Provided, That the duty hereby imposed shall not be charged upon receipts for the trans- portation of persons or property, or mails, between the United States and any foreign port ; and any person or per- sons, firms, companies, or corporations, owning, possess- ing, or having the care or management of any toll-road, ferry, or bridge, authorized by law to receive toll for the transit of passengers, beasts, carriages, teams and freight of any description, "over such toll-road, ferry, or bridge, shall be subject to and pay a duty of three per centum on the gross amount of all their receipts of every description. 196 APPENDIX [Act, June 30, 1864 But when the gross receipts of any such bridge or toll- road shall not exceed the amount necessarily expended to keep such bridge or road in repair, no tax shall be imposed on such receipts: Provided, That all such persons, com- panies, and corporations shall have the right to add the duty or tax imposed hereby to their rates of fare whenever their liability thereto may commence, any limitations which may exist by law or by agreement with any person or company which may have paid or be liable to pay such fare to the contrary notwithstanding. SEC. 104. And be it further enacted, That any person, firm, company, or corporation carrying on or doing an express business, shall be subject to and pay a duty of three per centum on the gross amount of all the receipts of such express business. SEC. 105. And be it further enacted, That there shall be levied, collected, and paid a duty of one and one half of one per centum upon the gross receipts of premiums, or assess- ments for insurance from loss or damage by fire or by the perils of the sea, made by every insurance company, whether inland or marine or fire insurance company, and by every association or individual engaged in the busi- ness of insurance against loss or damage by fire or by the perils of the sea; and by every person, firm, company, or corporation, who shall issue tickets, or contracts of insur- ance against injury to persons while travelling by land or water; and a like duty shall be paid by the agent of any foreign insurance company having an office or doing busi- ness within the United States: and that in the account or return to be rendered, they shall state the amount insured, renewed, or continued, the gross amount of premiums received and assessments collected, and the duties by law accruing thereon for the quarter then next preceding. FEDERAL INCOME TAX ACTS 197 SEC. 107. And be it further enacted, That any person, firm, company, or corporation owning or possessing or having the care or management of any telegraphic line by which telegraphic despatches or messages are received or transmitted, shall be subject to, and pay a duty of, five per centum on the gross amount of all receipts of such person, firm, company, or corporation. SEC. 108. And be it further enacted, That any person, firm, or corporation, or the manager or agent thereof, owning, conducting, or having the care or management of any theatre, opera, circus, museum, or other public exhibition of dramatic or operatic representations, plays, performances, musical entertainments, feats of horseman- ship, acrobatic sports, or other shows which are opened to the public for pay, but not including occasional concerts, school exhibitions, lectures, or exhibitions of works of art, shall be subject to and pay a duty of two per centum on the gross amount of all receipts derived by such person, firm, company, or corporation from such representations, plays, performances, exhibitions, shows, or musical enter- tainments. SEC. 109. And be it further enacted, That any person, firm, company, or corporation, owning or possessing, or having the care or management of, any railroad, canal, steamboat, ship, barge, canal-boat, or other vessel, or any ferry, toll-road or bridge, as enumerated and described in section one hundred and two [three] of this act; or carrying on or doing an express business; or engaged in the business of insurance, as hereinbefore described; or owning or hav- ing the care and management of any telegraph line, or owning, possessing, leasing, or having the control or man- agement of any circus, theatre, opera, or museum, shall within twenty days after the end of each and every month, make a list or return in duplicate to the assistant assessor of the district, stating the gross amount of their receipts, 198 APPENDIX [Act, June 30, 1864 respectively, for the month next preceding, which return shall be verified by the oath or affirmation of such owner, possessor, manager, agent, or other proper officer, in the manner and form to be prescribed from time to time by the Commissioner of Internal Revenue; and shall also pay to the collector the full amount of duties which have accrued on such receipts for the month aforesaid. And in case of neglect or refusal to make said lists or return for the space of ten days after such return should have been made as aforesaid, the assessor or assistant assessor shall proceed to estimate the amount received and the duties payable thereon, and shall add thereto ten per cen- tum, as hereinbefore provided in other cases of delinquency, to make return for purposes of assessment; and for the purpose of making such assessment, or of ascertaining the correctness of any such return, the books of any such person, firm, company, or corporation shall be subject to the inspection of the assessor or assistant assessor on his demand or request therefor. And in case of neglect or refusal to pay the duties, with the addition aforesaid, when the same have been ascertained, for the space of ten days after the same shall have become payable, the owner, possessor, or person having the management as aforesaid, shall pay, in addition, ten per centum on the amount of such duties and addition ; and for any attempt knowingly to evade the payment of such duties, the said owner, possessor, or person having the care or manage- ment as aforesaid, shall be liable to pay a penalty of one thousand dollars for every such attempt, to be recovered as provided in this act for the recovery of penalties. And all provisions of this act in relation to liens and collections by distraint, not incompatible herewith, shall apply to this section and the objects therein embraced. SEC. 110. And be it further enacted, That there shall be levied, collected, and paid a duty of one twenty-fourth of one per centum each month upon the average amount FEDERAL INCOME TAX ACTS 199 of the deposits of money, subject to payment by check or draft, or represented by certificates of deposit or other- wise, whether payable on demand or at some future day, with any person, bank, association, company, or corpora- tion engaged in the business of banking; and a duty of one twenty-fourth of one per centum each month as aforesaid, upon the average amount of the capital of any bank, association, company, or corporation, or person engaged in the business of banking beyond the amount invested in United States bonds; and a duty of one twelfth of one per centum each month upon the average amount of circulation issued by any bank, association, corporation, company, or person, including as circulation all certified checks and all notes and other obligations calculated or intended to circulate or to be used as money, but not in- cluding that in the vault of the bank, or redeemed and on deposit for said bank; and an additional duty of one sixth of one per centum, each month, upon the average amount of such circulation, issued as aforesaid beyond the amount of ninety per centum of the capital of any such bank, asso- ciation, corporation, company, or person, and upon any amount of such circulation, beyond the average amount of the circulation that had been issued as aforesaid by any such bank, association, corporation, company, or person, for the six months preceding the first day of July, eighteen hundred and sixty-four. And on the first Mon- day of August next, and of each month thereafter, a true and accurate return of the amount of circulation, of deposit, and of capital as aforesaid, for the previous month, shall be made and rendered in duplicate by each of such banks, associations, corporations, companies, or persons to the assessor of the district in which any such bank, association, corporation, or company may be located, or in which such person may reside, with a de- claration annexed thereto, and the oath or affirmation of such person, or of the president or cashier of such bark, association, corporation, or company, in such form and 200 APPENDIX [Act, June 30, 1864 manner as may be prescribed by the Commissioner of Internal Revenue, that the same contains a true and faith- ful statement of the amount of circulation, deposits, and capital as aforesaid, subject to duty as aforesaid, and shall transmit the duplicate of said return to the Commissioner of Internal Revenue, and within twenty days thereafter shall pay to the said Commissioner of Internal Revenue the duties hereinbefore prescribed upon the said amount of circulation, of deposits, and of capital, as aforesaid, and for any refusal or neglect to make or to render such return and payment as aforesaid, any such bank, associa- tion, corporation, . company, or person so in default shall be subject to and pay a penalty of two hundred dollars, besides the additional penalty and forfeitures in other cases provided in this act; and the amount of circulation, deposit, and capital, as aforesaid, in default of the proper return, shall be estimated by the assessor or assistant assessor of the district as aforesaid, upon the best informa- tion he can obtain; and every such penalty, together with the duties as aforesaid, may be recovered for the use of the United States in any court of competent jurisdiction. And in the case of banks with branches, the duty herein provided for shall be imposed upon the circulation of each branch, severally, and the amount of capital of each branch shall be considered to be the amount allotted to such branch; and so much of an act entitled "An act to provide ways and means for the support of the govern- ment," approved March three, eighteen hundred and sixty-three, as imposes any tax on banks, their circulation, capital, or deposits, other than is herein provided, is hereby repealed : Provided, That this section shall not apply to associations which are taxed under and by virtue of the act "to provide a national currency, secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof;" nor to any savings bank having no capital stock, and whose business is con- fined to receiving deposits and loaning the same on in- FEDERAL INCOME TAX ACTS 201 terest for the benefit of the depositors only, and which do no other business of banking: And provided, further, That any bank ceasing to issue notes for circulation, and which shall deposit in the Treasury of the United States, in lawful money, the amount of its outstanding circulation, to be redeemed at par, under such regulations as the Secretary of the Treasury may prescribe, shall be exempt from any tax upon such circulation. SEC. 111. And be it further enacted, That every individ- ual partnership, firm, and association, being proprietors, managers, or agents of lotteries, shall pay a tax of five per centum on the gross amount of the receipts from the said business; and all persons making such sales shall, within ten days after the first day of each and every month, make and render a list or return in duplicate to the assistant assessor of the gross amount of such sales, made as aforesaid, with the amount of duty which has accrued or should accrue thereon; which list shall have annexed thereto a declaration under oath or affirmation, in such form and signed by such officer, agent, or clerk, as may be prescribed by the Commissioner of Internal Revenue, that the same is true and correct, and that the said proprietors, managers, and agents shall on or before the twentieth day of each and every month, as aforesaid, pay the collector or deputy collector of the proper dis- trict the amount of the duty or tax as aforesaid. And in default of making such lists or returns, the said proprietors, managers, and agents, and all other persons making such sales, shall be subject to and pay a penalty of one thousand dollars, besides the additions, penalties, and forfeitures in other cases provided; and the said proprietors, managers, and agents shall, m default of paying the said duty or tax at the time herein required, be subject to and pay a penalty of one thousand dollars, or be imprisoned not ex- ceeding one year. In all cases of delinquency in making said list, return, or payment, the assessments and collec- 202 APPENDIX [Act, June 30, 1864 tions shall be made in the manner prescribed in the pro- visions of this act in relation to manufactures, articles, and products: Provided, That the managers of any sani- tary fair, or of any charitable, benevolent, or religious association, may apply to the collector of the district and present to him proof that the proceeds of any contem- plated lottery, raffle, or gift enterprise will be applied to the relief of sick and wounded soldiers, or to some other charitable use, and thereupon the commissioner, shall grant a permit to hold such lottery, raffle, or gift enter- prise, and the said sanitary fair, or charitable or benevo- lent association, shall be exempt from all charge, whether from tax or license, in respect of such lottery, raffle, or gift enterprise: Provided, further, That nothing in this section contained shall be construed to legalize any lot- tery. SEC. 114. And be it further enacted, That there shall be levied, collected, and paid by any person or persons, firm, or company, publishing any newspaper, magazine, review, or other literary, scientific, or news publication, issued periodically, on the gross receipts for all advertisements, or all matters for the insertion of which in said news- papers or other publication, as aforesaid, or in extras, supplements, sheets, or fly-leaves, accompanying the same, pay is required or received, a duty of three per centum; and the person or persons, firm, or company, owning, possessing, or having the care or management of any and every such newspaper, or other publication, as aforesaid, shall make a list or return on the first day of January, April, July, and October of each year, containing the gross amount of receipts as aforesaid, and the amount of duties which have accrued thereon, and render the same in duplicate to the assistant assessor of the district where such newspaper, magazine, review, or other literary or news publication is or may be published; which iist FEDERAL INCOME TAX ACTS 203 or return shall have annexed a declaration, under oath or affirmation, to be made according to the manner and form which may be from time to time prescribed by the Commissioner of Internal Revenue, of the owner, pos- sessor, or person having the care or management of such newspaper, magazine, review, or other publication, as aforesaid, that the same is true and correct; and shall also, quarterly, within ten days after the time of making said list or return, pay to the collector or deputy collector of the district the full amount of said duties. And in case of neglect or refusal to comply with any of the provisions contained in this section, or to make and render said list or return, for the space of ten days after the time when said list or return ought to have been made, as aforesaid, the assistant assessors of the respective districts shall pro- ceed to estimate the duties as heretofore provided in other cases of delinquency; and in case of neglect or refusal to pay the duties, as aforesaid, for the space of ten days after said duties become due and payable, and have been demanded, said owner, possessor, or person or persons having the care or management of said newspapers or publications, as aforesaid, shall pay, in addition thereto, a penalty of ten per centum on the amount due. And in case of fraud or evasion, whereby the revenue is attempted to be defrauded, or the duty withheld, said owners, pos- sessors, or person or persons having the care or manage- ment of said newspapers or other publications, as afore- said, shall forfeit and pay a penalty of one thousand dollars for each offence, or for any sum fraudulently un- accounted for. And all provisions in this act in relation to returns, additions, penalties, forfeitures, liens, assess- ments, and collection, not incompatible herewith, shall apply to this section and the objects herein embraced: Provided, That in all cases where the rate or price of ad- vertising is fixed by any law of the United States, state, or territory, it shall be lawful for the company, person or persons, publishing said advertisements, to add the duty 204 APPENDIX [Act, June 30, 1864 or tax imposed by this act to the price of said advertise- ments, any law to the contrary notwithstanding; and that the receipts for advertisements to the amount of six hundred dollars annually, by any person or persons, firm, or company publishing any newspaper, magazine, review, or other literary, scientific, or news publication, issued periodically, shall be exempt from duty: And provided, further, That all newspapers whose average circulation does not exceed two thousand copies shall be exempted from all taxes for advertisements. SEC. 116. And be it further enacted, That there shall be levied, collected, and paid annually upon the annual gains, profits, or income of every person residing in the United States, or of any citizen of the United States resid- ing abroad, whether derived from any kind of property, rents, interests, dividends, salaries, or from any pro- fession, trade, employment, or vocation, carried on in the United States, or elsewhere, or from any other source whatever, except as hereinafter mentioned, if such annual gains, profits, or income exceed the sum of six hundred dollars, a duty of five per centum on the excess over six hundred dollars and not exceeding five thousand dollars; and a duty of seven and one-half of one per centum per annum on the excess over five thousand dollars and not exceeding ten thousand dollars; and a duty of ten per centum on the excess over ten thousand dollars. And the duty herein provided for shall be assessed, collected, and paid upon the gains, profits, or income for the year ending the thirty-first day of December next, preceding the time for levying, collecting, and paying said duty: Provided, That income derived from interest upon notes, bonds, and other securities of the United States, shall be included in estimating incomes under this section: Pro- vided, That only one deduction of six hundred dollars shall be made from the aggregate incomes of all the members of FEDERAL INCOME TAX ACTS 205 any family composed of parents and minor children, or husband and wife, except in cases where such separate income shall be derived from the separate and individual estates, gains, or labor of the wife or child: And provided further, That net profits realized by sales of real estate purchased within the year, for which income is estimated, shall be chargeable as income; and losses on sales of real estate purchased within the year, for which income is estimated, shall be deducted from the income of such year. SEC. 117. And be it further enacted, That in estimating the annual gains, profits, or income of any person, all national, state, and municipal taxes, other than the national income tax, lawfully assessed within the year upon the property or sources of income of any person, as aforesaid, from which said annual gains, profits, or income is or should be derived, shall be deducted, in addi- tion to six hundred dollars, from the gains, profits, or in- come of the person who has actually paid the same, whether owner, tenant, or mortgagor; also the salary or pay received for services in the civil, military, naval, or other service of the United States,' including senators, representatives, and delegates in congress, above the rate of six hundred dollars per annum; and there shall also be deducted the income derived from dividends on shares in the capital stock of any bank, trust company,' savings institution, insurance, railroad, canal, turnpike, canal navigation, or slack-water company, and the interest on any bonds, or other evidences of indebtedness of any such corporation, or company, which shall have been assessed and the tax paid, as hereinafter provided; also the amount paid by any person for the rent of the home- stead used or occupied by himself or his family, and in 3 rental value of any homestead used or occupied by any person, or by his family, in his own right, or in the right of his wife, shall not be included and assessed as part of the income of such person. In estimating the annual gains, 206 APPENDIX [Act, June 30, 1864 profits, or income of any person, the interest over and above the amount of interest paid upon all notes, bonds, and mortgages, or other forms of indebtedness, bearing in- terest, whether due and paid or not, if good and collect- ible, shall be included and assessed as part of the income of such person for each year; and also all income or gains derived from the purchase and sale of stocks or other property, real or personal, and the increased value of live stock, whether sold or on hand, and the amount of sugar, wool, butter, cheese, pork, beef, mutton, or other meats, hay and grain, or other vegetable, or other produc- tions of the estate of such person sold, not including any part thereof unsold or on hand during the year next pre- ceding the thirty-first of December, shall be included and assessed as part of the income of such person for each year, and the gains and profits of all companies, whether incorporated or partnership, other than the companies specified in this section, shall be included in estimating the annual gains, profits, or income of any person entitled to the same, whether divided or otherwise. In estimating deductions from income, as aforesaid, when any person rents buildings, lands, or other property, or hires labor to carry on land, or to conduct any other business from which sucfy income is actually derived, or pays interest upon any actual incumbrance thereon, the amount actually paid for such rent, labor, or interest shall be deducted; and also the amount paid out for usual or ordinary re- pairs, not exceeding the average paid out for such purposes for the preceding five years, shall be deducted, but no de- duction shall be made for any amount paid out for new buildings, permanent improvements, or betterments, made to increase the value of any property or estate: Provided, That in cases where the salary or other compensation paid to any person in the employment or service of the United States shall not exceed the rate of six hundred dollars per annum, or shall be by fees, or uncertain or irregular in the amount or in the time during which the FEDERAL INCOME TAX ACTS 207 same shall have accrued or been earned, such salary or other compensation shall be included in estimating the annual gains, profits, or income of the person to whom the same shall have been paid, in such manner as the commis- sioner of internal revenue, under the directions of the Secretary of the Treasury, may prescribe. SEC. 118. And be it further enacted, That it shall be the duty of all persons of lawful age, and all guardians and trustees, whether such trustees are so by virtue of their office as executors, administrators, or in other fiduciary capacity, to make a list or return under oath or affirmation, in such form and manner as may be prescribed by the commissioner of internal revenue, to the assistant assessor of the district in which he resides, of the amount of his or her income, or the income of such minors or persons as may be held in trust as aforesaid, according to the require- ments hereinbefore mentioned, stating the sources from which said income is derived, whether from any kind of property, or the purchase and sale of property, rents, interest, dividends, salaries, or from any profession, trade, employment, or vocation, or otherwise. And in case of neglect or refusal to make such return, the assessor or assistant assessor shall assess the amount of his or her income, and the duty thereon, in the same manner as is provided for in other cases of neglect and refusal to fur- nish lists or returns in the provisions of this act, where not otherwise incompatible; and the assistant assessor may increase the amount of the list or return, or of any party making such return, if he shall be satisfied that the same is understated : Provided, That any party in his or her own behalf, or as guardian or trustee, as aforesaid, shall be permitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the commis- sioner of internal revenue, that he or she was not possessed of an income of six hundred dollars, liable to be assessed ac- cording to the provisions of this act, or may declare that he 208 APPENDIX [Act, June 30, 1864 or she has been assessed elsewhere in the same year for, and has paid an income duty under authority of the United States, and shall thereupon be exempt from income duty in said district; or, if the list or return of any party shall have been increased by the assistant assessor, in manner as afore- said, such party may be permitted to declare, under oath or affirmation, the amount of annual income, or the amount held in trust, as aforesaid, liable to be assessed, and the same, so declared, shall be received by such assistant assessor as true, and as the sum upon which duties are to be assessed and collected, except that the deductions claimed in such cases shall not be made or allowed until approved by the assistant assessor. But any person feel- ing aggrieved by the decision of the assistant assessor in such cases may appeal to the assessor of the district, and his decision thereon shall be final; and the form, time, and manner of proceedings shall be subject to rules and regula- tions to be prescribed by the commissioner of internal revenue. SEC. 119. And be it further enacted, That the duties on incomes herein imposed shall be levied on the first day of May, and be due and payable on or before the thirtieth day of June, in each year, until and including the year eighteen hundred and seventy, and no longer; and to any sum or sums annually due and unpaid for thirty days after the thirtieth of June, as aforesaid, and for ten days after demand thereof by the collector, there shall be levied in addition thereto the sum of ten per centum on the amount of duties unpaid, as a penalty, except from the estate of deceased and insolvent persons. And if any per- son liable to pay such duty shall neglect or refuse to pay the same after such demand, the amount due shall be a lien in favor of the United States from the time it was due until paid, with the interest, penalties, and costs that may accrue in addition thereto, upon all the property and rights to property belonging to such person; and in default of FEDERAL INCOME TAX ACTS 209 the payment of said duty aforesaid, said lien may be en- forced by distraint upon such property, rights to property, stocks, securities, and evidences of debt, by whomsoever holden; and for this purpose the collector, after demands duly given, as aforesaid, shall issue a warrant, in form and manner to be prescribed by the commissioner of internal revenue, under the directions of the Secretary of the Treasury, and by virtue of such warrant there may be levied on such property, rights to property, stocks, securi- ties, and evidences of debt, a further sum, to be fixed and stated in such warrant, over and above the said annual duty, interest, and penalty for non-payment, sufficient for the fees, costs, and expenses of such levy. And in all cases of sale, as aforesaid, the certificate of such sale by the collector shall vest in the purchaser all right, title and interest of such delinquent in and to such property, whether the property be real or personal; and where the subject of sale shall be stocks, the certificate of said sale shall be lawful authority and notice to the proper corpora- tion, company, or association, to record the same on the books or records, in the same manner as if transferred or assigned by the person or party holding the same, to issue new certificates, of stock therefor in lieu of any original or prior certificates, which shall be void whether cancelled or not. And said certificates of sale of the collector, where the subject of sale shall be securities or .other evidences of debt, shall be good and valid receipts to the person hold- ing the same, as against any person holding, or claim- ing to hold, possession of such securities or other evidences of debt. SEC. 120. And be it further enacted, That there shall be levied and collected a duty of five per centum on all divi- dends in scrip or money thereafter declared due, and when- ever the same shall be payable, to stockholders, policy- holders, or depositors, as part of the earnings, income, or gains, of any bank, trust company, savings institution, 210 APPENDIX [Act, June 30, 1864 and of any fire, marine, life, inland insurance company, either stock or mutual, under whatever name or style known or called in the United States or territories, whether specially incorporated or existing under general laws, and on all undistributed sums, or sums made or added during the year to their surplus or contingent funds; and said banks, trust companies, savings institutions, and insurance companies shall pay the said duty, and are hereby author- ized to deduct and withhold from all payments made on ac- count of any dividends or sums of money that may be due and payable as aforesaid, the said duty of five per centum. And a list or return shall be made and rendered to the assessor or assistant assessor in duplicate, and one of said lists or returns shall be transmitted, and the duty paid to the commissioner of internal revenue within thirty days after the time when any dividends or sums of money be- come due or payable as aforesaid; and said list or return shall contain a true and faithful account of the amount of duties as aforesaid; and there shall be annexed thereto a declaration of the president, cashier, or treasurer of the bank, ti*ust company, savings institution, or insurance company, under oath or affirmation, in form and manner as may be prescribed by the commissioner of internal rev- enue, that the same contains a true and faithful account of the duties as aforesaid. And for any default in the making or rendering of such list or return, with such declaration annexed, the bank, trust company, savings institution, or insurance company, making such default, shall forfeit as a penalty the sum of one thousand dollars ; and in case of any default in making or rendering said list or return, or of any default in the payment of the duty as required, or any part thereof, the assessment and collection of the duty and penalty shall be in accordance with the general provi- sions of law in other cases of neglect and refusal: Provided, That the duty upon the dividends of life insurance com- panies shall not be deemed due or to be collected until such dividends shall be payable by such companies, nor FEDERAL INCOME TAX ACTS 211 shall the portion of premiums returned by mutual life in- surance companies to their policy-holders be considered as dividends or profits under this act. SEC. 121. And be it further enacted, That any bank legally authorized to issue notes as circulation, which shall neg- lect or omit to make dividends or additions to its surplus or contingent fund as often as once in six months, shall make a list or return in duplicate, under oath or affirma- tion of the president or cashier, to the assessor or assis- tant assessor of the district in which it is located, on the first day of January and July in each year, or within thirty days thereafter, of the amount of profits which have ac- crued or been earned and received by said bank during the six months next preceding said first days of January and July; and shall present one of said lists or returns and pay to the collector of the district a duty of five per centum on such profits; and in case of default to make such list or return and payment within the thirty days as aforesaid, shall be subject to the provisions of the foregoing section of this act: Provided, That when any dividend is made which includes any part of the surplus or contingent fund of any bank, trust company, savings institution, insur- ance or railroad company, which has been assessed and the duty paid thereon, the amount of duty so paid on that portion of the surplus or contingent fund may be deducted from the duty on such dividend. SEC. 122. And be it further enacted, That any railroad, canal, turnpike, canal navigation, or slack-water company indebted for any money for which bonds or other evi- dences of indebtedness have been issued, payable in one or more years after date, upon which interest is stipulated to be paid, or coupons representing the interest, or any such company that may have declared any dividend in scrip, or money due or payable to its stockholders, as part of the earnings, profits, income, or gains of such company, 212 APPENDIX [Act, June 30, 1864 and all profits of such company carried to the account of any fund, or used for construction, shall be subject to and pay a duty of five per centum on the amount of all such interest, or coupons, dividends, or profits, whenever the same shall be payable; and said companies are hereby authorized to deduct and withhold from all payments, on account of any interest, or coupons and dividends due and payable as aforesaid, the duty of five per centum ; and the payment of the amount of said duty so deducted from the interest, or coupons, or dividends, and certified by the president or treasurer of said company, shall discharge said company from that amount of the dividend, or in- terest, or coupon, on the bonds or other evidences of their indebtedness so held by any person or party whatever, except where said companies may have contracted other- wise. And a list or return shall be made and rendered to the assessor or assistant assessor in duplicate, and one of said lists or returns shall be transmitted and the duty paid to the commissioner of internal revenue within thirty days after the time when said interest, coupons, or divi- dends become due and payable, and as often as every six months; and said list or return shall contain a true and faithful account of the amount of the duty, and there shall be annexed thereto a declaration of the president or treas- urer of the company, under oath or affirmation, in form and manner as may be prescribed by the commissioner of internal revenue, that the same contains a true and faithful account of said duty. And for any default in making or rendering such list or return, with the declara- tion annexed, or of the payment of the duty as aforesaid, the company making such default shall forfeit as a penalty the sum of one thousand dollars; and in case of any default in making or rendering said list or return, or of the pay- ment of the duty, or any part thereof, as aforesaid, the as- sessment and collection of the duty and penalty shall be made according to the provisions of law in other cases of neglect or refusal. FEDERAL INCOME TAX ACTS 213 SEC. 123. And be it further enacted, That there shall be levied, collected, and paid, on all salaries of officers, or payments for services to persons in the civil, military, na- val, or other employment or service of the United States, including senators and representatives and delegates in Congress, when exceeding the rate of six hundred dollars per annum, a duty of five per centum on the excess above the said six hundred dollars; and it shall be the duty of all paymasters, and all disbursing officers, under the govern- ment of the United States, or in the employ thereof, when making any payments to officers and persons as aforesaid or upon settling and adjusting the accounts of such officers and persons, to deduct and withhold the aforesaid duty of five per centum, and shall, at the same time, make a cer- tificate stating the name of the officer or person from whom such deduction was made, and the amount thereof, which shall be transmitted to the office of the commissioner of internal revenue, and entered as part of the internal du- ties; and the pay-roll, receipts or account of officers or per- sons paying such duty, as aforesaid, shall be made to exhibit the fact of such payment. And it shall be the duty of the several auditors of the Treasury Department, when audit- ing the accounts of any paymaster or disbursing officer, or when settling or adjusting the accounts of any such officer, to require evidence that the duties or taxes mentioned in this section have been deducted or paid over to the com- missioner of internal revenue: Provided, That payments or prize money shall be regarded as income from salaries, and the duty thereon shall be adjusted and collected in like manner. SEC. 178. And be it further enacted, That consuls of foreign countries in the United States, who are not citizens thereof, shall be, and hereby are, exempt from any income tax imposed by this act which may be derived from their official emoluments, or from property in such countries: 214 APPENDIX [Act, June 30, 1864 Provided, That the governments which such consuls may represent shall extend similar exemptions to consuls of the United States. SEC. 182. And be it further enacted, That wherever the word state is used in this act, it shall be construed to in- clude the territories and the District of Columbia, where such construction is necessary to carry out the provision of this act. JOINT RESOLUTION OF JULY 4, 1864 * [No. 77] JOINT RESOLUTION IMPOSING A SPECIAL INCOME DUTY Be it resolved by the Senate and House of Representatives of the limited States of America in Congress assembled. That, in addition to the income duty already imposed by law, there shall be levied, assessed, and collected on the first day of October, eighteen hundred and sixty-four, a special income duty upon the gains, profits, or income for the year ending the thirty-first day of December next preceding the time herein named, by levying, assessing, and collecting said duty of all persons residing within the United States, or of citizens of the United States residing abroad, at the rate of five per centum on all sums exceed- ing six hundred dollars, and the same shall be levied, assessed, estimated, and collected, except as to the rate, according to the provisions of existing laws for the col- lection of an income duty, annually, where not inappli- cable hereto; and the Secretary of the Treasury is hereby authorized to make such rules and regulations as to time and mode, or other matters to enforce the collection of the special income duty herein provided for, as may be necessary: Provided, That in estimating the annual gains, profits, or income, as aforesaid, for the foregoing special income duty, no deductions shall be made for dividends of interest received from any association, corporation, 01 company, nor shall any deduction be made for any salary or pay received. 1 13 U. S. Stat. at Large, 417. 215 ACT OF MARCH 3, 1865 * Chapter LXXVIII. An Act to amend an Act entitled "An Act to provide Internal Revenue to support the Govern- ment, to pay Interest on the Public Debt, and for other Purposes." Approved June thirtieth, eighteen hun- dred and sixty-four. Be it enacted, That section one hundred and three be amended by adding the following after the word "vehicle," where it occurs the second time in the section: "Provided, That this section shall not apply to those teams, wagons, and vehicles used in the transportation of silver ores from the mines where the same is (are) excavated to the place where they are reduced or worked." That section one hundred and three be further amended by inserting after the words "and any foreign port," the words, "but such duty shall be assessed upon the transportation of persons and property shipped from a port within the United States, through a foreign terri- tory, to a port within the United States, and shall be assessed upon, and collected from, persons, firms, com- panies, or corporations within the United States receiv- ing such freight or transportation." And that section one hundred and three be amended by adding at the end of said section the following: "And provided, further, That no tax under this section shall be assessed upon any person whose gross receipts do not exceed one thousand dollars per annum." That section one hundred and five be amended by striking out, at the end thereof, the words "for the quarter then next preceding." 1 13 U. S. Stat. at Large, 469. 216 FEDERAL INCOME TAX ACTS 217 That section one hundred and nine be amended by striking out, after the words "one hundred and," the word "two," and inserting in lieu thereof the word "three." That section one hundred and ten be amended by strik- ing out, after the words "and redemption thereof," the words "nor to any savings bank having no capital stock, and whose business is confined to receiving deposits and loaning the same on interest for the benefit of the deposi- tors only, and which do no other business of banking." That section one hundred and sixteen be amended by striking out all after the enacting clause, and inserting, in lieu thereof, the following: "That there shall be levied, collected, and paid annually upon the annual gains, profits, and income of every person residing in the United States, or of any citizen of the United States residing abroad, whether derived from any kind of property, rents, interests, dividends, or salaries, or from any profession, trade, employment, or vocation, carried on in the United States or elsewhere, or from -any other source whatever, a duty of five per centum on the excess over six hundred dollars and not exceeding five thousand dollars, and a duty of ten per centum on the excess over five thousand dollars; and in ascertaining the income of any person liable to an income tax, the amount of in- come received from institutions whose officers, as required by law, withhold a per centum of the dividends made by such institutions, and pay the same to the commissioner of internal revenue, or other officer authorized to receive the same, shall be included: and the amount so withheld shall be deducted from the tax which otherwise would be assessed upon such person. And the duty herein provided for shall be assessed, collected, and paid upon the gains, profits, and income for the year ending the thirty-first day of December, next preceding the time for levying, collecting, and paying said duty: Provided, That incomes derived from interest upon notes, bonds, and other se- curities of the United States, and also all premiums on APPENDIX [Act, Mch. 3, 1865 gold and coupons shall be included in estimating incomes under this section. Provided, further, That only one deduction of six hundred dollars shall be made from the aggregate incomes of all the members of any family com- posed of parents and minor children, or husband and wife : And provided, further, That net profits realized by sales of real estate purchased within the year, for which in- come is estimated, shall be chargeable as income; and losses on sales of real estate purchased within the year, for which income is estimated, shall be deducted from the income of such year." That section one hundred and seventeen be amended by striking out all after the enacting clause, and inserting in lieu thereof the following: "That in estimating the annual gains, profits, and in- come of any person, all national, state, county, and muni- cipal taxes paid within the year shall be deducted from the gains, profits, or income of the person who has actually paid the same, whether owner, tenant, or mortgagor; also the salary or pay received for services, in the civil, military, naval, or other service of the United States, including senators, representatives, and delegates in Congress, above the rate of six hundred dollars per annum; also the amount paid by any person for the rent of the homestead used or occupied by himself or his family, and the rental value of any homestead, used or occupied by any person or by his family, in his own right, or in the right of his wife, shall not be included and assessed as part of the income of such person. In estimating the annual gains, profits, or income of any person, the interest, received or accrued upon all notes, bonds, and mort- gages, or other forms of indebtedness bearing interest whether paid or not, if good and collectible, less the inter- est paid by or due from such person, shall be included and assessed as part of the income of such person for each year; and also all income or gains derived from the purchase and sale of stocks or other property, real or personal, and FEDERAL INCOME TAX ACTS 219 of live stock, and the amount of live stock, sugar, wool, butter, cheese, pork, beef, mutton, or other meats, hay and grain, or other vegetable or other productions, being the growth or produce of the estate of such person sold, not including any part thereof unsold or on hand during the year next preceding the thirty-first of December, until the same shall be sold, shall be included and assessed as part of the income of such person for each year, and his share of the gains and profits of all companies, whether incorporated or partnership, shall be included in esti- mating the annual gains, profits, or income of any person entitled to the same, whether divided or otherwise. In estimating deductions from income, as aforesaid, when any person rents buildings, lands, or other property, or hires labor to cultivate land, or to conduct any other business from which such income is actually derived, or pays interest upon any actual incumbrance thereon, the amount actually paid for such rent, labor, or interest shall be deducted; and also the amount paid out for usual or ordinary repairs, not exceeding the average paid out for such purposes for the preceding five years, shall be deducted, but no deduction shall be made for any amount paid out for new buildings, permanent improve- ments, or betterments, made to increase the value of any property or estate: Provided, That in cases where the salary or other compensation paid to any person in the employment or service of the United States shall not exceed the rate of six hundred dollars per annum, or shall be by fees, or uncertain or irregular in the amount or in the time during which the same shall have accrued or been earned, such salary or other compensation shall be in- cluded in estimating the annual gains, profits, or income to whom the same shall have been paid, in such manner as the commissioner of internal revenue, under the direc- tion of the Secretary of the Treasury, may prescribe." That section one hundred and eighteen be amended by striking out all after the enacting clause, and inserting 220 APPENDIX [Act, Mch. 3, 1805 in lieu thereof the words, "That it shall be the duty of all persons of lawful age to make and render a list or return, in such form and manner as may be prescribed by the commissioner of internal revenue, to the assistant as- sessor of the district in which they reside, of the amount of their income, gains, and profits, as aforesaid; and all guardians and trustees, whether as executors, adminis- trators, or in any other fiduciary capacity, shall make and render a list or return, as aforesaid, to the assistant asses- sor, of the district in which such guardians or trustees re- side, of the amount of income, gains, and profits of any minor or person for whom they act as guardian or trustee; and the assistant assessor shall require every list or return to be verified by the oath or affirmation of the party render- ing it, and may increase the amount of any list or return, if he has reason to believe that the same is understated; and in case any person, guardian, or trustee shall neglect or refuse to make and render such list or return, or shall render a false or fraudulent list or return, it shall be the duty of the assessor or the assistant assessor to make such list, according to the best information he can obtain, by the examination of such person, and his books and accounts or any other evidence, and to add twenty-five per centum as a penalty to the amount of the duty due on such list in all cases of wilful neglect or refusal to make and render a list or return, and, in all cases of a false or fraudulent list or return having been rendered, to add one hundred per centum, as a penalty, to the amount of duty ascertained to be due, the duty and the additions thereto as penalty to be assessed and collected in the manner provided for in other cases of wilful neglect or refusal to render a list or return, or of rendering a false and fraudulent return: Provided, That any party, in his or her own behalf, or as guardian or trustee, shall be per- mitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the commissioner of internal revenue, that he or she, or his or her ward or FEDERAL INCOME TAX ACTS 221 beneficiary, was not possessed of an income of six hundred dollars, liable to be assessed according to the provisions of this act ; or may declare that he or she has been assessed and paid an income duty elsewhere in the same year, under authority of the United States, upon his or her gains and profits, as prescribed by law, and if the assistant assessor shall be satisfied of the truth of the declaration, shall thereupon be exempt from income duty in said district; or if the list or return of any party shall have been increased by the assistant assessor, such party may exhibit his books and accounts, and be permitted to prove and declare, under oath or affirmation, the amount of annual income liable to be assessed; but such oaths and evidence shall not be considered as conclusive of the facts, and no de- ductions claimed in such cases shall be made or allowed until approved by the assistant assessor. Any person feeling aggrieved by the decision of the assistant assessor in such cases may appeal to the assessor of the district, and his decision thereon, unless reversed by the commis- sioner of internal revenue, shall be final, and the form, time, and manner of proceedings shall be subject to rules and regulations to be prescribed by the commissioner of internal revenue." That section one hundred and nineteen be amended by striking out the words "for thirty days," and after the words "for ten days after," inserting the words "notice and." That section one hundred and twenty be amended by striking out, at the end thereof, the word "act," and in- serting in lieu thereof the word "section." ACT OF MARCH 10, 1866 Chap. XV. An Act to declare the Meaning of certain Parts of the Internal Revenue Act, approved June thirty, eighteen hundred and sixty-four and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That in section one hundred and twenty of the act entitled " An act to provide internal revenue to support the Govern- ment, to pay interest on the public debt, and for other purposes," approved June thirty, eighteen hundred and sixty-four, the words: "all dividends in scrip, or money thereafter declared due, and whenever the same shall be payable, to stockholders, policy-holders or depositors," are hereby declared to mean all dividends in scrip or money wherever payable, and all stock-holders, policy-holders, depositors or parties whatsoever, including non-residents, whether citizens or aliens. SEC. 2. And be it further enacted, That in section one hundred and twenty-two of said act the word " stock- holders" is hereby declared to mean all persons or parties whatsoever that are or may be stockholders, including non- residents, whether citizens or aliens; and the words "all such interest or coupons, dividends or profits, whenever the same shall be payable," are hereby declared to apply to all such interest or coupons, dividends or profits, wher- ever the same are or may be payable, and to whatso- ever party or person the same are or may be payable, including non-residents, whether citizens or aliens. SEC. 3. And be it further enacted, That it shall be the duty of all persons required to make returns or lists of 1 14 U. S. Stat. at Large, 4. 222 FEDERAL INCOME TAX ACTS 223 income and articles or objects charged with any duty or tax, as provided by the act aforesaid, or any act amenda- tory thereof, to declare in such returns whether the sev- eral rates and amounts therein contained are stated accord- ing to their values in legal tender currency; and in case of neglect or refusal so to state, to the satisfaction of the assistant assessor receiving such returns or lists, such assistant assessor is hereby required to make returns or lists for such persons so neglecting or refusing, as in case of persons neglecting or refusing to make the lists or returns required by the acts aforesaid, and to assess the duty thereon, and to add thereto the amount of penalties imposed by law in case of such neglect or refusal. SEC. 4. And be it further enacted, That whenever the rates and amounts contained in the lists or returns as aforesaid shall be stated in coined money, it shall be the duty of each assessor receiving the same to reduce such rates and amounts to their equivalent ' in legal tender currency, according to the value of such coined money in said currency at the time when and place where said lists or returns are receivable, and which value the said asses- sor shall determine. And the lists required by law to be furnished to collectors by assessors shall in all cases con- tain the several amounts of taxes or duties assessed, esti- mated, or valued in legal tender currency only. SEC. 5. And be it further enacted, That the provisions of this act shall, so far as necessary, apply to all returns, lists, assessments, and collections required by the acts aforesaid in addition to those above mentioned, by whom- soever made, returned, assessed, or collected, in any mode or for any purpose whatever. And the Commissioner of Internal Revenue, under the direction of the Secretary of the Treasury, is hereby authorized to make all necessary rules and regulations for carrying this act into effect. ACT OF JULY 13, 1866 * Chapter CLXXXIV. An Act to reduce Internal Taxation and to amend an Act entitled u An Act to provide Internal Revenue to support the Government, to pay Interest on the Public Debt, and for other Purposes," approved June Thirtieth, eighteen hundred and sixty-four, and Acts amendatory thereof. * / SEC. 9. And be it further enacted, That the act entitled "Ah Act to provide Internal Revenue to support the Gov- ernment, to pay interest on the public debt, and for other purposes," approved June thirty, eighteen hundred and sixty-four, as amended by the Act of March third, eight- een hundred and sixty-five, be and the same is hereby amended, as follows. * * * * That section one hundred and three be amended by striking out all after the enacting clause, and inserting in lieu thereof the following: That every person, firm, company, or corporation owning or possess- ing or having the care or management of any railroad, canal, steamboat, ship, barge, canal-boat, or other vessel, or any stage-coach, or other vehicle, except hacks or car- riages not running on continuous routes, engaged or em- ployed in the business of transporting passengers for hire, or in transporting the mails of the United States upon contracts made prior to August first, eighteen hundred and sixty-six, shall be subject to and pay a tax of two and one half per cent., of the gross receipts from passengers and mails of such railroad, canal, steamboat, ship, barge, 1 14 U. S. Stat. at Large, 98. 224 FEDERAL INCOME TAX ACTS 225 canal-boat; or other vessel, or such stage-coach or other vehicle: Pro vided, That the tax hereby imposed shall not be assessed upon receipts for the transportation of persons or mails between the United States and any foreign port ; but such tax shall be assessed upon the transportation of persons from a port within the United States through a foreign territory to a port within the United States, and shall be assessed upon and collected from persons, firms, companies, or corporations within the United States, receiving hire or pay for such transportation of persons or mails; and so much of section one hundred and nine as requires returns to be made of receipts hereby exempted from tax when derived from transporting property for hire is hereby repealed : Provided, also, That any person or persons, firms, companies, or corporations owning, pos- sessing, or having the care or management of any toll-road, ferry, or bridge, authorized by law to receive toll for the transit of passengers, beasts, carriages, teams, and freight of any description, over such toll-road, ferry, or bridge, shall be subject to and pay a tax of three per centum of the gross amount of all their receipts of every description; but when the gross receipts of any such bridge or toll-road, for and during any term of twelve consecutive calendar months, shall not exceed the amount necessarily expended during said term to keep such bridge or road in repair, no tax shall be assessed upon such receipts during the month next following any such term: Provided, further, That all such persons, companies, and corporations shall, until the thirtieth day of April, eighteen hundred and sixty-seven, have the right to add the tax imposed hereby to their rates of fare whenever their liability thereto may commence, any limitations which may exist by law or by agree- ment, with any person or company which may have paid or be liable to pay such fare, to the contrary notwithstand- ing. And whenever the addition to any fare shall amount only to the fraction of one cent, any person, or company, liable to the tax of two and a half per centum, may add to 226 APPENDIX [Act, July 13, 1866 such fare one cent, in lieu of such fraction; and such person or company shall keep for sale, at convenient points, tickets in packages of twenty and multiples of twenty, to the price of which only an amount equal to the revenue tax shall be added: And provided, further, That no tax under the foregoing provisions of this section shall be assessed upon any person, firm, company, or corporation, whose gross receipts do not exceed one thousand dollars per annum: And provided further, That all boats, barges, and flats not used for carrying passengers nor propelled by steam or sails, which are floated or towed by tug-boats or horses, and used exclusively for carrying coal, oil, minerals, or agricultural products to market, shall be required hereafter, in lieu of enrolment, fees or tonnage tax, to pay an annual special tax, for each and every such boat of a capacity exceeding twenty-five tons, and not exceeding one hundred tons, five dollars; and when exceed- ing one hundred tons, shall be required to pay ten dollars; and said tax shall be assessed and collected as other special taxes provided for in this act. That section one hundred and seven be amended by striking out aft after the enacting clause and inserting in lieu thereof the following: That any person, firm, com- pany, or corporation owning or possessing or having the care or management of any telegraphic line by which telegraphic despatches or messages are received or trans- mitted, shall be subject to and pay a tax of three per centum on the gross amount of all receipts of such person, firm, company, or corporation. That section one hundred and ten be amended by striking out all after the enacting clause, and inserting in lieu thereof the following: That there shall be levied, collected, and paid a tax of one twenty-fourth of one per centum each month upon the average amount of the de- posits of money, subject to payment by check or draft, or represented by certificates of deposit or otherwise, whether payable on demand or at some future day, with FEDERAL INCOME TAX ACTS 227 "any person, bank, association, company, or corporation engaged in the business of banking; and a tax of one twenty-fourth of one per centum each month, as aforesaid, upon the capital of any bank, association, company, or corporation, and on the capital employed by any person in the business of banking beyond the average amount invested in United States bonds; and a tax of one twelfth of one per centum each month upon the average amount of circulation issued by any bank, association, corporation, company, or person, including as circulation all certified checks and all notes and other obligations calculated or intended to circulate or to be used as money, but not in- cluding that in the vault of the bank, or redeemed and on deposit for said bank; and an additional tax of one sixth of one per centum, each month, upon the average amount of such circulation, issued as aforesaid, beyond the amount of ninety per centum of the capital of any such bank, association, corporation, company, or person. And a true and accurate return of the amount of circulation, of deposit, and of capital, as aforesaid, and of the amount of notes of persons, state banks, or state banking associa- tions, paid out by them for the previous month, shall be made and rendered monthly by each of such banks, associations, corporations, companies, or persons to the assessor of the district in which any such bank, association, corporation, or company may be located, or in which such person has his place of business, with a declaration an- nexed thereto, and the oath or affirmation of such person, or of the president or cashier of such bank, association, corporation, or company, in such form and manner as may be prescribed by the commissioner of internal rev- enue, that the same contains a true and faithful state- ment of the amounts subject to tax as aforesaid; and for any refusal or neglect to make or to render return and payment, any such bank, association, corporation, com- pany, or person so in default, shall be subject to and pay a penalty of two hundred dollars, besides the additional 228 APPENDIX [Act, July 13, 1866 penalty and forfeitures in other cases provided by law; and the amount of circulation, deposit, capital, and notes of persons, state banks, and banking associations paid out, as aforesaid, in default of the proper return, shall be esti- mated by the assessor or assistant assessor of the district as aforesaid, upon the best information he can obtain; and every such penalty may be recovered for the use of the United States in any court of competent jurisdiction. And in the case of banks with branches, the tax herein provided for shall be assessed upon the circulation of each branch, severally, and the amount of capital of each branch shall be considered to be the amount allotted to such branch; and so much of an act entitled "An act to provide ways and means for the support of the govern- ment," approved March three, eighteen hundred and sixty-three, as imposes any tax on banks, their circula- tion, capital, or deposits, other than as herein provided, is hereby repealed: Provided, That this section shall not apply to associations which are taxed under and by virtue of the act "to provide a national currency secured by a pledge of the United States bonds, and to provide for the circulation and redemption thereof." And the deposits in associations or companies known as Provident Institu- tions, Savings Banks, Savings Funds, or Savings Institu- tions, having no capital stock and doing no other business than receiving deposits to be loaned or invested for the sole benefit of the parties making such deposits, without profit or compensation to the association or company, shall be exempt from tax on so much of their deposits as they have invested in securities of the United States, and on all deposits, less than five hundred dollars, made in the name of any one person; and the returns required to be made by such Provident Institutions and Savings Banks after July, eighteen hundred and sixty-six, shall be made on the first Monday of January and July of each year, in such form and manner as may be prescribed by the commissioner of internal revenue. FEDERAL INCOME TAX ACTS 229 That section one hundred and eleven be amended by inserting after the words " proprietors, managers, or agents of lotteries," the words: "and all lottery ticket dealers." That section one hundred and fourteen be amended by inserting after the word " periodically," in the first sen- tence of said section, the words: or otherwise, or publish- ing any guide, almanac, catalogue, directory, or any other paper or book. That section one hundred and sixteen be amended by inserting after the words, "on the excess over five thousand dollars," the following: and a like tax shall be levied, collected, and paid, annually upon the gains, profits, and income of every business, trade, or profession carried on in the United States by persons residing without the United States, not citizens thereof. That .section one hundred and nineteen be amended by striking out all after the enacting clause and inserting in lieu thereof the following: That the taxes on incomes herein imposed shall be levied on the first day of May, and be due and payable on or before the thirtieth day of June, in each year, until and including the year eighteen hundred and seventy, and no longer; and to any sum or sums annually due and unpaid after the thirtieth of June, as aforesaid, and for ten days after notice and demand thereof by the collector, there shall be levied, in addition thereto, the sum of ten per centum on the amount of duties unpaid, as a penalty, except from the estates of deceased or insolvent persons. That section one hundred and twenty be amended by striking out all after the enacting clause and inserting in lieu thereof the following: That there shall be levied and collected a tax of five per centum on all dividends in scrip or money thereafter declared due wherever, and whenever the same shall be payable, to stockholders, policy-holders, or depositors, or parties whatsoever, in- cluding non-residents, whether citizens or aliens, as part of the earnings, income, or gains of any bank, trust com- 230 APPENDIX [Act, July 13, 1866 pany, savings institution, and of any fire, marhie, life, inland insurance company, either stock or mutual, under whatever name or style known or called, in the United States or Territories, whether specially incorporated or existing under general laws, and on all undistributed sums, or sums made or added during the year to their surplus or contingent funds; and said banks, trust companies, savings institutions, and insurance companies shall pay the said tax, and are hereby authorized to deduct and withhold from all payments made on account of any dividends or sums of money that may be due and payable as aforesaid the said' tax of five per centum. And a list or return shall be made and rendered to the assessor or assistant assessor on or before the tenth day of the month following that in which any dividends or sums of money become due or payable as aforesaid; and said list or re- turn shall contain a true and faithful account of the amount of taxes as aforesaid; and there shall be annexed thereto a declaration of the president, cashier, or treasurer of the bank, trust company, savings institution, or insurance company, under oath or affirmation in form and manner, as may be prescribed by the commissioner of internal revenue, that the same contains a true and faithful account of the taxes as aforesaid. And for any default in the making or rendering of such list or return, with such declaration annexed, the bank, trust company, savings institution, or insurance company making such default, shall forfeit as a penalty the sum of one thousand dollars; and in case of any default in making or rendering said list or return, or of any default in the payment of the tax as required, or any part thereof, the assessment and col- lection of the tax and penalty shall be in accordance with the general provisions of the law in other cases of neglect and refusal: Provided, That the tax upon the dividends of life insurance companies shall not be deemed due until such dividends are payable; nor shall the portion of premiums returned by mutual life insurance companies FEDERAL INCOME TAX ACTS 231 to their policy-holders, nor the annual or semi-annual interest allowed or paid to the depositors in savings banks or savings institutions be considered as dividends. That section one hundred and twenty-two be amended by striking out all after the enacting clause and inserting in lieu thereof the following: That any railroad, canal, turnpike, canal navigation, or slack-water company, in- debted for any money for which bonds or other evidence of indebtedness have been issued, payable in one or more years after date, upon which interest is stipulated to be paid, or coupons representing the interest, or any such company that may have declared any dividend in scrip or money due or payable to its stockholders, including non- residents, whether citizens or aliens, as part of the earn- ings, profits, income, or gains of such company, and all profits of such company carried to the account of any fund, or used for construction, shall be subject to and pay a tax of five per centum on the amount of all such interest, or coupons, dividends, or profits, whenever and wherever the same shall be payable, and to whatsoever party or person the same may be payable, including non-residents, whether citizens or aliens and said companies are hereby authorized to deduct and withhold from all payments on account of any interest, or coupons, and dividends, due and payable as aforesaid, the tax of five per centum; and the payment of the amount of said tax so deducted from the interest, or coupons, or dividends, and certified by the president or treasurer of said company, shall discharge said company from that amount of the dividend, or in- terest, or coupon on the bonds or other evidence of their indebtedness so held by any person or party whatever, ex- cept where said companies may have contracted otherwise. And a list or return shall be made and rendered to the as- sessor, or assistant assessor, on or before the tenth day of the month following that in which said interest, coupons, or dividends become due and payable, and as often as every six months ; and said list or return shall contain a true and 232 APPENDIX . [Act, July 13, 1866 faithful account of the amount of tax, and there shall be annexed thereto a declaration of the president or treasurer of the company, under oath or affirmation in form and manner as may be prescribed by the commissioner of in- ternal revenue, that the same contains a true and faithful account of said tax. And for any default in making or rendering such list or return, with the declaration an- nexed, or of the payment of the tax as aforesaid, the com- pany making such default shall forfeit as a penalty the sum of one thousand dollars; and in case of any default in making or rendering said list or return, or of the pay- ment of the tax or any part thereof, as aforesaid, the assess- ment and collection of the tax and penalty shall be made according to the provisions of law in other cases of neglect or refusal. That section one hundred and twenty-two be further amended by adding thereto the following proviso: Pro- vided, That whenever any of the companies mentioned in this section shall be unable to pay the interest on their in- debtedness, and shall in fact fail to pay such interest, that in such cases the tax levied by this section shall not be paid to the United States until said company resume the payment of interest on their indebtedness. That section one hundred and twenty-three be amended by striking out all after the enacting clause and inserting in lieu thereof the following: That there shall be levied, collected, and paid on all salaries of officers, or payments for services to persons in the civil, military, naval, or other employment or service of the United States, including senators and representatives and delegates in Congress, when exceeding the rate of six hundred dollars per annum, a tax of five per centum on the excess above the said six hundred dollars, and a tax of ten per centum on the excess over five thousand dollars; and it shall be the duty of all paymasters and all disbursing officers, under the govern- ment of the United States, or persons in the employ thereof when making any payment to any officers or persons as FEDERAL INCOME TAX ACTS 233 aforesaid, or upon settling and adjusting the accounts of such officers or persons, to deduct and withhold the afore- said tax, and they shall, at the same time, make a certifi- cate stating the name of the officer or person -from whom such deduction was made, and the amount thereof, which shall be transmitted to the office of the commissioner of internal revenue, and entered as a part of the internal tax; and the pay-roll, receipts, or account of officers or persons paying such tax, as aforesaid, shall be made to exhibit the fact of such payment. And it shall be the duty of the several auditors of the Treasury Department, when auditing the accounts of any paymaster or disbursing officer, or any officer withholding his salary from moneys received by him, or when settling or adjusting the accounts of any such officer, to require evidence that the taxes men- tioned in this section have been deducted and paid over to the commissioner of internal revenue or other officer authorized to receive the same: Provided, That payments of prize money shall be regarded as income from salaries, and the tax thereon shall be adjusted and collected in like manner: Provided, further, That this section shall not apply to payments made to mechanics or laborers em- ployed upon public works. That an act entitled "An act to declare the meaning of certain parts of the internal revenue act approved June thirty, eighteen hundred and sixty-four, and for other purposes," approved March tenth, eighteen hundred and sixty-six, be amended by striking out sections three, four, and five of said act, and inserting in lieu thereof the follow- ing : That it shall be the duty of all persons required to make returns or lists of income or articles or objects charged with an internal tax, to declare in such returns or lists whether the several rates and amounts therein contained are stated according to their values in legal tender currency or accord- ing to their values in coined money; and in case of neglect 234 APPENDIX [Act, July 13, 1866 or refusal so to declare to the satisfaction of the assistant as- sessor receiving such returns or lists, such assistant assessor is hereby required to make returns or lists for such persons so neglecting or refusing, as in cases of persons neglecting or refusing to make the returns or lists required by the acts aforesaid, and to assess the tax thereon, and to add thereto the amount of penalties imposed by law in cases of such neglect or refusal. And whenever the rates and amounts contained in the returns or lists as afore- said shall be stated in coined money, it shall be the duty of each assessor receiving the same to reduce such rates and amounts to their equivalent in legal tender currency, ac- cording to the value of such coined money in said cur- rency for the time covered by said returns. And the lists required by law to be furnished to collectors by as- sessors shall in all cases contain the several amounts of taxes assessed, estimated, or valued in legal tender cur- rency only. ACT OF MARCH 2, 1867 1 Chapter CLXIX. An Act to amend existing Laws relating to Internal Revenue, and for other Purposes SEC. 13. And be it further enacted, That the act entitled "An act to provide internal revenue to support the gov- ernment, to pay interest on the public debt, and for other purposes," approved June thirty, eighteen hundred and sixty-four, and as subsequently amended, be further amended as follows, namely: Income. That section one hundred and sixteen be amended by striking out all after the enacting clause and inserting, in lieu thereof, as follows: .That there shall be levied, collected, and paid annually upon the gains, profits, and income of every person residing in the United States, or of any citizen of the United States residing abroad whether derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation, carried on in the United States, or elsewhere, or from any other source whatever,, a tax of five per centum on the amount so derived over one thousand dollars, and a like tax shall be levied, collected, and paid annually upon the gains, profits, and income of every business, trade, or profession carried on in the United States, by persons residing without the United States, and not citizens thereof. And the tax herein provided for shall be assessed, collected, and paid upon the gains, profits and income for the year ending the thirty-first day of De- cember next preceding the time for levying, collecting, and paying said tax. 1 14 U. S. Stat. at Large, 471. 235 236 APPENDIX [Act, Mch. 2, 1867 That section one hundred and seventeen be amended by striking out all after the enacting clause and inserting in lieu thereof, the following: That, in estimating the gains, profits, and income of any person, there shall be included all income derived from interest upon notes, bonds, and other securities of the United States; profits realized within the year from sales of real estate purchased within the year or within two years previous to the year for which income was (is) estimated; interest received or accrued upon old (all) notes, bonds, and mortgages, or other forms of indebtedness bearing interest, whether paid or not, if good and collectible, less the interest which has become due from said person during the year; the amount of all premium on gold and coupons; the amount of sales of live stock, sugar, wool, butter, che(e)se, pork, beef, mutton, or other meats, hay and grain, or other vegetable or other productions, being the growth or produce of the estate of such person, not including any part thereof con- sumed directly by the family; all other gains, profits, and income derived from any source whatever, except the rental value of any homestead used or occupied by any person or by his family in his own right, or in the right of his wife; and the share of any person of the gains and prof- its of all companies, whether incorporated or partnership, who would be entitled to the same, if divided, whether divide^ or otherwise, except the amount of income received from institutions or corporations whose officers, as required by law, withhold a per centum of the dividends made by such institutions, and pay the same to the officer author- ized to receive the same; and except that portion of the salary or pay received for services in the civil, military, naval, or other service of the United States, including senators, representatives, and delegates in Congress, from which the tax has been deducted. And in addition to one thousand dollars exempt from income tax, as here- inbefore provided, all national, state, county, and munici- pal taxes paid within the year shall be deducted from the FEDERAL INCOME TAX ACTS 237 gains, profits, or income, of the person who has actually paid the same, whether such person be owner, tenant, or mortgagor; losses actually sustained during the year arising from fires, shipwreck, or incurred in trade and debts ascertained to be worthless, but excluding all esti- mated depreciation of values and losses within the year on sales of real estate purchased two years previous to the year for which income is estimated; the amount actually paid for labor or interest by any person who rents lands or hires labor to cultivate land, or who con- ducts any other business from which income is actually derived; the amounts actually paid by any person for the rent of the house or premises occupied as a residence for himself or his family; the amount paid out for usual or ordinary repairs: Provided, That no deduction shall be made for any amount paid out for new buildings, per- manent improvements or betterments, made to increase the value of any property or estate: And provided, further, That only one deduction of one thousand dollars shall be made from the aggregate income of all the members of any family, composed of one or both parents, and one or more minor children, or husband and wife; that guard- ians shall be allowed to make such deduction in favor of each and every ward, except that in case where two or more wards are comprised in one family, and have joint property interest, only one deduction shall be made in their favor: And provided, further, That in cases where the salary or other compensation paid to any person in the employment or service of the United States shall not exceed the rate of one thousand dollars per annum, or shall be by fees, or uncertain or irregular in the amount or in the time during which the same shall have accrued or been earned, such salary or other compensation shall be included in estimating the annual gains, profits, or income of the person to whom the same shall have been paid. *' That section one hundred and eighteen be amended 238 APPENDIX [Act, Mch. 2, 1867 by striking out all after the enacting clause and in- serting, in lieu thereof, the following: That it shall be the duty of all persons of lawful age to make and render a list or return, on or before the day prescribed by law, in such form and manner as may be prescribed by the commissioner of internal revenue, to the assistant asses- sor of the district in which they reside, of the amount of their income, gains, and profits, as aforesaid; and all guardians and trustees, executors, and administrators, or any person acting hi any other fiduciary capacity, shall make and render a list or return, as aforesaid, to the assistant assessor of the district in which such person acting in a fiduciary capacity resides, of the amount of income, gains, and profits of any minor or person for whom they act, and the assistant assessor shall require every list or return to be verified by the oath or affirma- tion of the party rendering it, and may increase the amount of any list or return, if he has reason to believe that the same is understated; and in case any such person shall neglect or refuse to make and render such list or return, or shall render a false or fraudulent list or return, it shall be the duty of the assessor or assistant assessor to make such list, according to the best information he can ob- tain, by the examination of such person, or his books or accounts, or any other evidence, and to add fifty per centum as a penalty to the amount of the tax due on such list in all cases of wilful neglect or refusal to make and render a list or return; and, in all cases of a false or fraud- ulent list or return having been rendered, to add one hun- dred per centum, as a penalty, to the amount of tax ascer- tained to be due, the tax and the additions thereto as a penalty to be assessed and collected in the manner pro- vided for in other cases of wilful neglect or refusal to render a list or return, or of rendering a false and fraudu- lent return : Provided, That any party, in his or her own be- half, or as such fiduciary, shall be permitted to declare, under oath or affirmation, the form and manner of which FEDERAL INCOME TAX ACTS 239 shall be prescribed by the Commissioner of Internal Reve- nue, that he or she, or his or her ward or beneficiary, was not possessed of an income of one thousand dollars, liable to be assessed according to the provisions of this act; or may declare that he or she has been assessed and paid an income tax elsewhere in the same year, under authority of the United States, upon his or her income, gains, and profits, as prescribed by law; and if the assistant assessor shall be satisfied of the truth of the declaration, shall thereupon be exempt from income tax In the said district; or if the list or return of any party shall have been in- creased by the assistant assessor, such party may exhibit his books and accounts, and be permitted to prove and declare, under oath or affirmation, the amount of income liable to be assessed; but such oaths and evidence shall not be considered as conclusive of the facts, and no de- duction claimed in such cases shall be made or allowed until approved by the assistant assessor. Any person feeling aggrieved by the decision of the assistant assessor in such cases may appeal to the assessor of the district, and his decision thereon, unless reversed by the com- missioner of internal revenue, shall be final, and the form, time, and manner of proceedings shall be subject to rules and regulations to be prescribed by the commis- sioner of internal revenue: Provided, further, That no penalty shall be assessed upon any person for such neg- lect or refusal, or for making or rendering a false or fraud- ulent return, except after reasonable notice of the time and place of hearing, to be regulated by the commissioner of internal revenue, so as to give the person charged an opportunity to be heard. That section one hundred and nineteen be amended by striking out all after the enacting clause and inserting, in lieu thereof, the following: That the taxes on incomes herein imposed shall be levied on the first day of March, and be due and payable on or before the thirtieth day of April, in each year, until and including the year eighteen 240 APPENDIX [Act, Mch. 2, 1867 hundred and seventy, and no longer; and to any sum or sums annually due and unpaid after the t[h]irtieth of April, as aforesaid, and for ten days after notice and demand thereof by the collector, there shall be levied in addition thereto the sum of five per centum on the amount of taxes unpaid and interest at the rate of one per centum per month, upon said tax from the time the same became due, as a penalty, except from the estates of deceased, insane, or insolvent persons: Provided, That the tax on incomes for the year eighteen hundred and sixty-six shall be levied on the day this takes effect. That section one hundred and twenty-three be amended by striking out all after the enacting clause and inserting, in lieu thereof, the following: That there shall be levied, collected, and paid on all salaries of officers, or payments for services to persons in the civil, military, naval or other employment or service of the United States, including senators and representatives and delegates in Congress, when exceeding the rate of one thousand dollars per annum, a tax of five per centum on the excess above the said one thousand dollars; and it shall be the duty of all paymasters and all disbursing officers, under the govern- ment of the United States, or persons in the employ thereof, when making any payment to any officers or persons as aforesaid, whose compensation is determined by a fixed salary, or upon settling or adjusting the accounts of such officers or persons to deduct and withhold the aforesaid tax of five per centum; and the pay-roll, receipts, or account of officers or' persons paying such tax as afore- said shall be made to exhibit the fact of such payment. And it shall be the duty of the accounting officers of the Treasury Department, when auditing the accounts of any paymaster or disbursing officer, or any officer with- holding his salary from moneys received by him, or when settling or adjusting the accounts of any such officer, to require evidence that the taxes mentioned in this section have been deducted and paid over to the Treasurer of the FEDERAL INCOME TAX ACTS 241 United States, or other officer authorized to receive the same: Provided, That payments of prize money shall be regarded as income from salaries, and the tax thereon shall be adjusted and collected in like manner; Provided, further, That this section shall not apply to payments made to mechanics or laborers employed upon public works: And provided, further, That in case it should become necessary for showing the true receipts of the government under the operations of this section upon the books of the Treasury Department, the requisite amount may be carried from unappropriated moneys in the treasury to the credit of said account ; and this section shall take effect upon salary and compensation for the month of March, eighteen hundred and sixty-seven. ACT OF JULY 14, 1870. * Chap. CCLV. An Act to reduce internal Taxes, and for other Purposes SEC. 6. And be it further enacted, That there shall be levied, and collected annually, as hereinafter provided, for the years eighteen hundred and seventy and eighteen hundred and seventy-one, and no longer, a tax of two and one half per centum upon the gains, profits, and in- come of every person residing in the United States, and of every citizen of the United States residing abroad, derived from any source whatever, whether within or without the United States, except as hereafter provided, and a like tax annually upon the gains, profits, and in- come derived from any business, trade or profession carried on in the United States by any person residing without the United States, and not a citizen thereof, or from rents of real estate within the United States owned by any person residing without the United States, and not a citizen thereof. SEC. 7. And be it further enacted, That in estimating the gains, profits, and income of any person, there shall be included all income derived from any kind of property, rents, interest received or accrued upon all notes, bonds, and mortgages, or other forms of indebtedness bearing interest, whether paid or not, if good and collectible, interest upon notes, bonds, or other securities of the United States; and the amount of all premium on gold and coupons; the gains, profits, and income of any business, profession, trade, employment, office, or vocation; in- 1 16 U. S. Stat. at Large, 256. 242 FEDERAL INCOME TAX ACTS 243 eluding any amount received as salary or pay for services in the civil, military, naval, or other service of the United States, or as senator, representative, or delegate hi Con- gress; except that portion thereof from which, under authority of acts of Congress previous hereto, a tax of five per centum shall have been withheld; the share of any person of the gains and profits, whether divided or not, of all companies or partnerships, but not including the amount received from any corporations whose officers, as authorized by law, withhold and pay as taxes a per centum of the dividends made, and of interest or coupons paid by such corporations; profits realized within the year from sales of real estate purchased within two years previous to the year for which income is estimated; the amount of sales of live stock, sugar, wool, butter, cheese, pork, beef, mutton, or other meats, hay or grain, fruits, vegetables, or other productions, being the growth or produce of the estate of such person, but not including any part thereof consumed directly by the family; and all other gains, profits, and income drawn from any source whatever, but not including the rental value of the home- stead used or occupied by any person, or by his family. SEC. 8. And be it further enacted, That military or naval pensions allowed to any person under the laws of the United States, and the sum of two thousand dollars of the gains, profits, and income of any persons, shall be exempt from said income tax, in the manner hereinafter provided. Only one deduction of two thousand dollars shall be made from the aggregate income of all the mem- bers of any family composed of one or both parents and one or more minor children, or of husband and wife; but when a wife has by law a separate income, beyond the control of her husband, and is living separate and apart from him, such deduction shall then be made from her income, gains, and profits; and guardians and trustees shall be allowed to make the deduction in favor of each ward or 244 APPENDIX [Act, July 14, 1870 beneficiary except that in a case of two or more wards or beneficiaries comprised in one family, having joint property interest, only one deduction shall be made in their favor. For the purpose of allowing said deduction from the income of any religious or social community holding all their property and the income therefrom jointly and in common, each five of the persons composing such society, and any remaining fractional number of such persons less than five, over such groups of five, shall be held to constitute a family, and a deduction of two thou- sand dollars shall be allowed for each of said families. Any taxes on the incomes, gains, and profits, of such societies now due and unpaid, shall be assessed and collected ac- cording to this provision, except that the deduction shall be only one thousand dollars for any year prior to eighteen hundred and seventy. SEC. 9. And be it further enacted, That in addition to the exemptions provided in the preceding section, there shall be deducted from the gains, profits, and income of any person all national, state, county, and municipal taxes paid by him within the year, whether such person be owner, tenant, or mortgager; all his losses actually sustained during the year arising from fires, floods, ship- wreck, or incurred in trade, and debts ascertained to be worthless, but excluding all estimated depreciation of values; the amount of interest paid during the year, and the amount paid for rent or labor to cultivate land, or to conduct any other business from which income is derived ; the amount paid for the rent of the house or premises occupied as a residence for himself or his family, and the amount paid out for usual and ordinary repairs. No de- duction shall be made for any amount paid out for new buildings, permanent improvements, or betterments made to increase the value of any property or estate. SEC. 10. And be it further enacted, That the tax herein- before provided shall be assessed upon the gains, profits, FEDERAL INCOME TAX ACTS 245 and income for the year ending on the thirty-first day of December next preceding the time for levying and col- lecting said tax, and shall be levied on the first day of March, eighteen hundred and seventy-one, and eighteen hundred and seventy-two, and be due and payable on or before the thirtieth day of April in each of said years. And in addition to any sum annually due and unpaid after the thirtieth day of April, and for ten days after notice and demand thereof by the collector, there shall be levied and collected, as a penalty, the sum of five per centum on the amount unpaid, and interest on said amount at the rate of one per centum per month from the time the same became due, except from the estates of deceased, insane, or insolvent persons. SEC. 11. And be it further enacted, That it shall be the duty of every person of lawful age, whose gross income during the preceding year exceeded two thousand dollars, to make and render a return on or before the day desig- nated by law, to the assistant assessor of the district in which he resides, of the gross amount of his income, gains, and profits as aforesaid; but not including the amount received from any corporation whose officers, as au- thorized by law, withhold and pay as taxes a per centum of the dividends made and of the interest or coupons paid by such corporation, nor that portion of the salary or pay received for services, in the civil, military, naval, or other service of the United States, or as senator, representative, or delegate in Congress, from which tax has been deducted, nor the wages of minor children not received; and every guardian and trustee, executor or administrator, and any person acting in any other fiduciary capacity, or as resi- dent agent for, or copartner of, any non-resident alien, deriving income, gains, and profits from any business, trade, or profession carried on in the United States, or from rents of real estate situated therein, shall make and render a return as aforesaid to the assistant assessor of the 246 APPENDIX [Act, July 14, 1870 district in which he resides of the amount of income, gains, and profits of any minor or person for whom he acts. The assistant assessor shall require every such return to be verified by the oath of the party rendering it, and may increase the amount of any return, after notice to such party, if he has reason to believe that the same is understated. In case any person having a gross income as above, of two thousand dollars or more, shall neglect or refuse to make and render such return, or shall render a false or fraudulent return, the assessor or the assistant assessor shall make such return, according to the best information he can obtain by the examination of said per- son or of his books or accounts or by any other evidence, and shall add, as a penalty, to the amount of the tax due thereon, fifty per centum in all cases of willful neglect or refusal to make and render a return, and one hundred per centum in all cases of a false or fraudulent return having been rendered. The tax and the addition thereto as penalty shall be assessed and collected in the manner provided for in cases of willful neglect or refusal to render a return, or of rendering a false or fraudulent return. But no penalty shall be assessed upon any person for such neglect or refusal, or for making or rendering a false or fraudulent return, except after reasonable notice of the time and place of hearing, to be regulated by the commis- sioner of internal revenue, so as to give the person charged an opportunity to be heard: Provided, That no collector, deputy collector, assessor, or assistant assessor shall per- mit to be published in any manner such income returns, or any part thereof, except such general statistics, not specifying the names of individuals or firms, as he may make public, under such rules and regulations as the com- missioner of internal revenue shall prescribe. SEC. 12. And be it further enacted, That when the re- turn of any person is increased by the assistant assessor, such person may exhibit his books and accounts and be INCOME TAX ACT& 247 permitted to prove and declare, under oath, the amount of income liable to be assessed; but such oath and evi- dence shall not be conclusive of the facts, and no deduc- tions claimed in such cases shall be allowed until approved by the assistant assessor. Any person may appeal from the decision of the assistant assessor, in such cases, to the assessor of the district, and his decision thereon, unless reversed by the commissioner of internal revenue, shall be final. The form, time, and manner of proceedings shall be subject to regulations to be prescribed by the commissioner of internal revenue. SEC. 13. And be it further enacted, That any person in his own behalf, or as such fiduciary or agent, shall be per- mitted to declare, under oath, that he, or his ward, bene- ficiary, or principal, was not possessed of an income of two thousand dollars, liable to be assessed according to the provisions of this act; or may declare that an income tax has been assessed and paid elsewhere in the same year, under authority of the United States, upon his income, gains, and profits, or those of his ward, beneficiary, or principal, as required by law; and if the assistant assessor shall be satisfied of the truth of the declaration, such person shall thereupon be exempt from income tax in the said district. SEC. 14. And be it further enacted, That consuls of foreign governments who are not citizens of the United States shall be exempt from any income tax imposed by this act which may be derived from their official emoluments, or from property in foreign countries. Provided, That the governments which such consuls may represent shall extend similar exemption to consuls of the United States. SEC. 15. And be it further enacted, That there shall be levied, and collected for and during the year eighteen hundred and seventy-one a tax of two and one-half per 248 APPENDIX [Act, July 14, 1870 centum on the amount of all interest or coupons paid on bonds, or other evidences of debt issued and payable in one or more years after date, by any of the corporations in this section hereinafter enumerated, and on the amount oi all dividends of earnings, income, or gains, hereafter declared, by any bank, trust company, savings institution, insurance company, railroad company, canal company, turnpike company, canal navigation company, and slack- water company, whenever and wherever the same shall be payable, and to whatsoever person the same may be due, including non-residents, whether citizens or aliens, and on all undivided profits of any such corporation which have accrued and been earned and added to any surplus, contingent, or other fund, and every such cor- poration having paid the tax as aforesaid, is hereby au- thorized to deduct and withhold from any payment on account of interest, coupons, and dividends, an amount equal to the tax of two and one-half per centum on the same; and the payment to the United States, as provided by law, of the amount of tax so deducted from the inter- est, coupons, and dividends aforesaid, shall discharge the corporation from any liability for that amount of said interest, coupons, or dividends, claimed as due to any person, except hi cases where said corporations have pro- vided otherwise by an express contract : Provided, That the tax upon the dividends of insurance companies shall not be deemed due until such dividends are payable, either in money or otherwise; and that the money returned by mutual insurance companies to their policy-holders, and the annual or semi-annual interest allowed or paid to the depositors in savings banks or savings institutions shall not be considered as dividends; and that when any dividend is made, or interest as aforesaid is paid, which includes any part of the surplus or contingent fund of any corporation which has been assessed and the tax paid thereon, or which includes any part of the dividends, interest, or coupons received from other corporations FEDERAL INCOME TAX ACTS 249 whose officers are authorized by law to withhold a per centum on the same, the amount of tax so paid on that portion of the surplus or contingent fund, and the amount of tax which has been withheld and paid on dividends, interest, or coupons so received, may be deducted from the tax on such dividend or interest. SEC. 16. And be it further enacted, That every person having the care or management of any corporation liable to be taxed under the last preceding section, shall make and render to the assessor or assistant assessor of the district in which such person has his office for conducting the business of such corporation, on or before the tenth day of the month following that in which any dividends or sums of money become due or payable as aforesaid, a true and complete return, in such form as the commissioner of internal revenue may prescribe of the amount of in- come and profits and of taxes as aforesaid; and there shall be annexed thereto a declaration of the president, cashier, or treasurer of the corporation, under oath, that the same contains a true and complete account of the income and profits and of taxes as aforesaid. And for any default in the making or rendering of such return, with such declaration annexed, the corporation so in default shall forfeit, as a penalty, the sum of one .thousand dollars; and in case of any default in making or rendering said return or of any default in the payment of the tax as required, or of any part thereof, the assessment and collection of the tax and penalty shall be in accordance with the general pro- visions of law in other cases of neglect and refusal. SEC. 17. And be it further enacted, That sections one hundred and twenty, one hundred and twenty-one, one hundred and twenty-two, and one hundred and twenty- three, of the Act of June thirty, eighteen hundred and sixty-four, entitled "An act to provide internal revenue to support the government, to pay interest on the public 250 APPENDIX [Act, July 14, 1870 debt, and for other purposes," as amended by the Act of July thirteen, eighteen hundred and sixty-six, and the Act of March two, eighteen hundred and sixty-seven, shall be construed to impose the taxes therein mentioned to the first day of August, eighteen hundred and seventy, but after that date no further taxes shall be levied or assessed under said sections; and all acts and parts of acts relating to the taxes herein repealed, and that all the pro- visions of said acts, shall continue in full force for levying and collecting all taxes properly assessed or liable to be assessed, or accruing under the provisions of former acts, or drawbacks, the right to which has already accrued or which may hereafter accrue under said acts, and for maintaining and continuing liens, fines, penalties, and forfeitures incurred under and by virtue thereof. And this act shall not be construed to affect any act done, right accrued, or penalty incurred under former acts, but every such right is hereby saved. And for carrying out and com- pleting all proceedings which have been already com- menced or that may be commenced to enforce such fines, penalties, and forfeitures, or criminal proceedings under said acts, and for the punishment of crimes of which any party shall be or has been found guilty. ACT OP AUGUST 27, 1894 l Chap. 349. An Act to reduce taxation, to provide revenue for the gotwnmcnt, and for otfier purposes SEC. 27. That from and after the first day of January, eighteen hundred and ninety-five, and until the first day of January , nineteen hundred, there shall bo assessed. levied, eollecled. and paid annually upon the stains, profits. and income received in the preceding calendar year by every citizen of the United States, whether residing at home or abroad, and every person residing t herein. >vhet her said gains, profits, or income be derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever, a tax of two per centum on the amounts so derived over and above four thousand dollars, and a like tax shall be levied, collected, and paid annually upon the gains, profits, and income from all property owned and of every business, trade, or profession carried on in the United States by persons residing without the United States. And the tax herein provided for shall bo assessed. by (lie (Commissioner of Internal Hevenue, and collected and paid upon the gains, profits, and income for the year ending the thirty -first day of IVeomber next preceding the time for levying, collecting, and paying said tax. SEC. 28. That in estimating the gains, profits, and income of any person there shall be included all income derived from interest upon notes, bonds, and other so- > 28 U. S. Stat. at Large, 609. 252 APPENDIX [Act, Aug. 27, 1894 curities, except such bonds of the United States the princi- pal and interest of which are by the law of their issuance exempt from all Federal taxation; profits realized within the year from sales of real estate purchased within two years previous to the close of the year for which income is estimated; interest received or accrued upon all notes, bonds, mortgages, or other forms of indebtedness bearing interest, whether paid or not, if good and collectible, less the interest which has become due from said person or which has been paid by him during the year; the amount of all premium on bonds, notes, or coupons; the amount of sales of live stock, sugar, cotton, wool, butter, cheese, pork, beef, mutton, or other meats, hay, and grain, or other vegetable or other productions, being the growth or produce of the estate of such person, less the amount expended in the purchase or production of said stock or produce, and not including any part thereof consumed directly by the family; money and the value of all personal property acquired by gift or inheritance; all other gains, profits, and income derived from any source whatever except that portion of the salary, compensation, or pay received for services in the civil, military, naval, or other service of the United States, including Senators, Repre- sentatives, and Delegates in Congress, from which the tax has been deducted, and except that portion of any salary upon which the employer is required by law to withhold, and does withhold the tax and pays the same to the officer authorized to receive it. In computing in- comes the necessary expenses actually incurred in carry- ing on any business, occupation, or profession shall be de- ducted, and also all interest due or paid within the year by such person on existing indebtedness. And all national, State, county, school, and municipal taxes, not including those assessed against local benefits, paid within the year shall be deducted from the gains, profits, or income of the person who has actually paid the same, whether such person be owner, tenant, or mortgagor; also losses actually FEDERAL INCOME TAX ACTS 253 sustained during the year incurred in trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise, and debts ascertained to be worthless, but excluding all estimated depreciation of values and losses within the year on sales of real estate purchased within two years previous to the year for which income is estimated: Provided, That no deduction shall be made for any amount paid out for new buildings, permanent improvements, or betterments, made to in- crease the value of any property or estate: Provided further, That only one deduction of four thousand dollars shall be made from the aggregate income of all the members of any family, composed of one or both parents, and one or more minor children, or husband and wife; that guard- ians shall be allowed to make a deduction in favor of each and every ward, except that in case where two or more wards are comprised in one family, and have joint prop- erty interests, the aggregate deduction in their favor shall not exceed four thousand dollars: And provided further, That in cases where the salary or other compensation paid to any person in the employment or service of the United States shall not exceed the rate of four thousand dollars per annum, or shall be by fees> or uncertain or irregular in the amount or in the time during which the same shall have accrued or been earned, such salary or other compensation shall be included in estimating the annual gains, profits, or income of the person to whom the same shall have been paid, and shall include that portion of any income or salary upon which a tax has not been paid by the employer, where the employer is required by law to pay on the excess over four thousand dollars: Provided also, That in computing the income of any person, corporation, company, or association there shall not be included the amount received from any corporation, company, or association, as dividends upon the stock of such corporation, company, or association if the tax of two per centum has been paid upon its net profits by 254 APPENDIX [Act, Aug. 27, 1894 said corporation, company, or association as required by this Act. SEC. 29. That it shall be the duty of all persons of lawful age having an income of more than three thousand five hundred dollars for the taxable year, computed on the basis herein prescribed, to make and render a list or return, on or before the day provided by law, in such form and manner as may be directed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, to the collector or a deputy collector of the district in which they reside, of the amount of their in- come, gains, and profits, as aforesaid; and all guardians and trustees, executors, administrators, agents, receivers, and all persons or corporations acting in any fiduciary capacity, shall make and render a list or return, as afore- said, to the collector or a deputy collector of the district in which such person or corporation acting in a fiduciary capacity resides or does business of the amount of in- come, gains, and profits, of any minor or person for whom they act, but persons having less than three thousand five hundred dollars income are not required to make such report; and the collector or deputy collector, shall require every list or return to be verified by the oath or affirmation of the party rendering it, and may increase the amount of any list or return if he has reason to believe that the same is understated; and in case any such person having a taxable income shall neglect or refuse to make and render such list and return, or shall render a willfully false or fraudulent list or return, it shall be the duty of the col- lector or deputy collector, to make such list, according to the best information he can obtain, by the examina- tion of such person, or any other evidence, and to add fifty per centum as a penalty to the amount of the tax due on such list in all cases of willful neglect or refusal to make and render a list or return; and in all cases of a willfully false or fraudulent list or return having been FEDERAL INCOME TAX ACTS 255 rendered to add one hundred per centum as a penalty to the amount of tax ascertained to be due, the tax and the additions thereto as a penalty to be assessed and collected in the manner provided for in other cases of willful neglect or refusal to render a list or return, or of rendering a false or fraudulent return: Provided, That any person, or cor- poration in his, her, or its own behalf, or as such fiduciary, shall be permitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, that he, she, or his or her, or its ward or beneficiary was not possessed of an income of four thousand dollars, liable to be assessed according to the provisions of this Act; or may declare that he, she, or it, or his, her, or its ward or beneficiary has been assessed and has paid an income tax elsewhere in the same year, under authority of the United States, upon all his, her, or its income, gains, or profits, and upon all the income, gains, or profits for which he, she, or it is liable as such fiduciary, as prescribed by law; and if the collector or deputy collector shall be satisfied of the truth of the de- claration, such person or corporation shall thereupon be exempt from income tax in the said district for that year; or if the list or return of any person or corporation, com- pany, or association shall have been increased by the collector or deputy collector, such person or corporation, company, or association may be permitted to prove the amount of income liable to be assessed; but such proof shall not be considered as conclusive of the facts, and no deductions claimed in such cases shall be made or allowed until approved by the collector or deputy collector. Any person or company, corporation or association feeling aggrieved by the decision of the deputy collector, in such cases may appeal to the collector of the district, and his decision thereon, unless reversed by the Commissioner of Internal Revenue, shall be final. If dissatisfied with the decision of the collector such person or corporation, com- 256 APPENDIX [Act, Aug. 27, 1894 pany or association may submit the case, with all the pa- pers, to the Commissioner of Internal Revenue for his deci- sion, and may furnish the testimony of witnesses to prove any relevant facts, having served notice to that effect upon the Commissioner of Internal Revenue, as herein prescribed. Such notice shall state the time and place at which, and the officer before whom, the testimony will be taken; the name, age, residence, and business of the proposed wit- ness, with the questions to be propounded to the witness, or a brief statement of the substance of the testimony he is expected to give: Provided, That the Government may at the same time and place take testimony upon like notice to rebut the testimony of the witnesses examined by the person taxed. The notice shall be delivered or mailed to the Commis- sioner of Internal Revenue a sufficient number of days previous to the day fixed for taking the testimony, to allow him, after its receipt, at least five days, exclusive of the period required for mail communication with the place at which the testimony is to be taken, in which to give, should he so desire, instructions as to the cross- examination of the proposed witness. Whenever practicable, the affidavit or deposition shall be taken before a collector or deputy collector of internal revenue, in which case reasonable notice shall be given to the collector or deputy collector of the time fixed for taking the deposition or affidavit: Provided further, That no penalty shall be assessed upon any person or corporation, company, or association for such neglect or refusal or for making or rendering a will- fully false or fraudulent return, except after reasonable notice of the time and place of hearing, to be prescribed by the Commissioner of Internal Revenue, so as to give the person charged an opportunity to be heard. SEC. 30. The taxes or incomes herein imposed shall be due and payable on or before the first day of July in each FEDERAL INCOME TAX ACTS 257 year; and to any sum or sums annually due and unpaid after the first day of July as aforesaid, and for ten days after notice and demand thereof by the collector, there shall be levied, in addition thereto, the sum of five per centum on the amount of taxes unpaid, and interest at the rates of one per cent, per month upon said tax from the time the same becomes due, as a penalty, except from the estates of deceased, insane, or insolvent persons. SEC. 31 Any nonresident may receive the benefit of the exemptions hereinbefore provided for by filing with the deputy collector of any district a true list of all his prop- erty and sources of income in the United States and complying with the provisions of section twenty-nine of this act as if a resident. In computing income he shall include all income from every source, but unless he be a citizen of the United States he shall only pay on that part of the income which is derived from any source in the United States. In case such nonresident fails to file such statement, the collector of each district shall collect the tax on the income derived from property situated in his district, subject to income tax, making no allowance for exemptions, and all property belonging to such nonresi- dent shall be liable to distraint for tax: Provided, That nonresident corporations shall be subject to the same laws as to tax as resident corporations, and the collection of the tax shall be made in the same manner as provided for collections of taxes against nonresident persons. SEC. 32. That there shall be assessed, levied, and col- lected, except as herein otherwise provided, a tax of two per centum annually on the net profits or income above actual operating and business expenses, including expenses for materials purchased for manufacture or bought for resale, losses, and interest on bonded and other indebtedness, of all banks, banking institutions, trust companies, saving institutions, fire, marine, life, and other insurance compa- 258 APPENDIX [Act, Aug. 27, 1894 nies, railroad, canal, turnpike, canal navigation, slack water, telephone, telegraph, express, electric light, gas, water, street railway companies, and all other corpora- tions, companies, or associations doing business for profit in the United States, no matter how created and organized, but not including partnerships. That said tax shall be paid on or before the first day of July in each year; and if the president or other chief officer of any corporation, company, or association, or in the case of any foreign corporation, company, or associa- tion, the resident manager or agent shall neglect or refuse to file with the collector of the internal revenue district in which said corporation, company, or association shall be located or be engaged in business, a statement verified by his oath or affirmation, in such form as shall be pre- scribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, showing the amount of net profits or income received by said corpora- tion, company, or association during the whole calendar year last preceding the date of filing said statement as here- inafter required, the corporation, company, or association making default shall forfeit as a penalty the sum of one thousand dollars and two per centum on the amount of taxes due, for each month until the same is paid, the pay- ment of said penalty to be enforced as provided in other cases of neglect and refusal to make return of taxes under the internal revenue laws. The net profits or income of all corporations, companies, or associations shall include the amounts paid to share- holders, or carried to the account of any fund, or used for construction, enlargement of plant, or any other expendi- ture or investment paid from the net annual profits made or acquired by said corporations, companies, or associa- tions. That nothing herein contained shall apply to States, counties, or municipalities; nor to corporations, companies, or associations organized and conducted solely Ifor chari- FEDERAL INCOME TAX ACTS 259 table, religious, or educational purposes, including frater- nal beneficiary societies, orders, or associations operating upon the lodge system and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations and dependents of such members; nor to the stocks, shares, funds, or securi- ties held by any fiduciary or trustee for charitable, re- ligious, or educational purposes; nor to building and loan associations or companies which make loans only to their shareholders; nor to such savings banks, savings institu- tions, or societies as shall, first, have no stockholders or members except depositors, and no capital except deposits ; secondly, shall not receive deposits to an aggregate amount in any one year, of more than one thousand dollars from the same depositor; thirdly, shall not allow an accumula- tion or total of deposits, by any one depositor, exceeding ten thousand dollars; fourthly, shall actually divide and distribute to its depositors, ratably to deposits, all the earn- ings over the necessary and proper expenses of such bank, institution, or society, except such as shall be applied to surplus; fifthly, shall not possess, in any form, a surplus fund exceeding ten per centum of its aggregate deposits; nor to such savings banks, savings institutions, or societies composed of members who do not participate in the profits thereof and which pay interest or dividends only to their depositors; nor to that part of the business of any savings bank, institution, or other similar association having a capital stock, that is conducted on the mutual plan solely for the benefit of its depositors on such plan, and which shall keep its account of its business conducted on such mutual plan separate and apart from its other accounts. Nor to any insurance company or association which conducts all its business solely upon the mutual plan, and only for the benefit of its policy-holders or members, and having no capital stock, and no stock or shareholders, and holding all its property in trust and in reserve for its policy-holders or members; nor to that part of the business 200 APPENDIX [Act, Aug. 27, 1894 of any insurance company having a capital stock and stock and shareholders, which is conducted on the mutual plan, separate from its stock plan of insurance, and solely for the benefit of the policy-holders and members insured on said mutual plan, and holding all the property belong- ing to and derived from said mutual part of its business in trust and reserve for the benefit of its policy-holders and members insured on said mutual plan. That all State, .county, municipal, and town taxes paid by corporations, companies, or associations shall be included in the operating and business expenses of such corporations, companies, or associations. SEC. 33. That there shall be levied, collected, and paid on all salaries of officers, or payments for services to persons in the civil, military, naval, or other employment or service of the United States, including Senators and Representatives and Delegates in Congress, when exceed- ing the rate of four thousand dollars per annum, a tax of two per centum on the excess above the said four thou- sand dollars; and it shall be the duty of all paymasters and all disbursing officers under the Government of the United States, or persons hi the employ thereof when making any payment to any officers or persons as aforesaid whose compensation is determined by a fixed salary, or upon settling or adjusting the accounts of such officers or persons, to deduct and withhold the aforesaid tax of two per centum; and the pay roll, receipts, or accounts of officers or persons paying such tax as aforesaid shall be made to exhibit the fact of such payment. And it shall be the duty of the accounting officers of the Treasury Depart- ment, when auditing the accounts of any paymaster or disbursing officer, or any officer withholding his salary from moneys received by him, or when settling or adjust- ing the accounts of any such officer, to require evidence that the taxes mentioned in this section have been de- ducted and paid over to the Treasurer of the United FEDERAL INCOME TAX ACTS 261 States, or other officer authorized to receive the same. Every corporation which pays to any employe a salary or compensation exceeding four thousand dollars per annum shall report the same to the collector or deputy collector of his district, and said employe shall pay thereon, subject to the exemptions herein provided for, the tax of two per centum on the excess of his salary over four thousand dollars: Provided, That salaries due to State, county, or municipal officers shall be exempt from the income tax herein levied. SEC. 34. That sections thirty-one hundred and sixty- seven, thirty-one hundred and seventy-two, thirty-6ne hundred and seventy-three, and thirty-one hundred and seventy-six of the Revised Statutes of the United States as amended are hereby amended so as to read as follows : Source: Act June 30, 1864, c. 173, 13 Stat. 238. " Mar. 3, 1865, c. 78, 13 Stat. 469, 471. " Aug. 27, 1894, c. 328, 34, 28 Stat. 557. SEC. 3167. See Revised Statutes, 3176, p. 120. SEC. 3172. See Revised Statutes, 3172, p. 121. SEC. 3173. See Revised Statutes, 3173, p. 121. SEC. 3176. See Revised Statutes, 3176, p. 126. (As amended in unimportant particulars by Act, 1913.) SEC. 35. That every corporation, company, or associa- tion doing business for profit shall make and render to the collector of its collection district, on or before the first Monday of March in every year, beginning with the year eighteen hundred and ninety-five, a full return, verified by oath or affirmation, in such form as the Commissioner of Internal Revenue may prescribe, of all the following matters for the whole calendar year last preceding the date of such return : First. The gross profits of such corporation, company, or association, from all kinds of business of every name and nature. 262 APPENDIX [Act, Aug. 27, 1894 Second. The expenses of such corporation, company, or association, exclusive of interest, annuities, and divi- dends. Third. The net profits of such corporation, company, or association, without allowance for interest, annuities, or dividends. Fourth. The amount paid on account of interest, annui- ties, and dividends, stated separately. Fifth. The amount paid in salaries of four thousand dollars or less to each person employed. Sixth. The amount paid in salaries of more than four thousand dollars to each person employed, and name and address of each of such persons and the amount paid to each. SEC. 36. That it shall be the duty of every corporation, company, or association doing business for profit to keep full, regular, and accurate books of account, upon which all its transactions shall be entered from day to day, in regular order, and whenever a collector or deputy collector of the district in which any corporation, company, or association is assessable shall believe that a true and correct return of the income of such corporation, com- pany, or association has not been made, he shall make an affidavit of such belief and of the grounds on which it is founded, and file the same with the Commissioner of Internal Revenue, and if said Commissioner shall, on examination thereof, and after full hearing upon notice given to all parties, conclude there is good ground for such belief, he shall issue a request in writing to such corporation, company, or association to permit an in- spection of the books of such corporation, company, or association to be made: and if such corporation, com- pany, or association shall refuse to comply with such re- quest, then the collector or deputy collector of the district shall make from such information as he can obtain an estimate of the amount of such income and then add FEDERAL INCOME TAX ACTS 263 fifty per centum thereto, which said assessment so made shall then be the lawful assessment of such income. SEC. 37. That it shall be the duty of every collector of internal revenue, to whom any payment of any taxes other than the tax represented by an adhesive stamp or other engraved stamp is made under the provisions of this Act, to give to the person making such payment a full written or printed receipt, expressing the amount paid and the particular account for which such payment was made; and whenever such payment is made such collector shall, if required, give a separate receipt for each tax paid by any debtor, on account of payments made to or to be made by him to separate creditors in such form that such debtor can conveniently produce the same separately to his several creditors in satisfaction of their respective demands to the amounts specified in such receipts; and such receipts shall be sufficient evidence in favor of such debtor, to justify him in withholding the amount therein expressed from his next payment to this creditor; but such creditor may upon giving to his debtor a full written receipt, acknowledging the payment to him of whatever sum may be actually paid, and accept- ing the amount of tax paid as aforesaid (specifying the same) as a further satisfaction of the debt to that amount, require the surrender to him of such collector's receipt. JOINT RESOLUTION OF FEBRUARY 21, 1895 1 JOINT RESOLUTION EXTENDING TIME TO FILE RETURNS Resolved, That the time fixed by existing law for the rendering of income returns, to wit : On or before the first Monday of March in every year (Section 35, Act of August 28, 1894, and Section 3173, Revised Statutes as amended by Section 34 of that Act) is hereby extended with refer- ence only to returns of income for the year 1894, so that it shall be lawful to make such returns for that year on 01 before April 15, 1895. Resolved, That in computing incomes under said act, the amounts necessarily paid for fire insurance premiums and for ordinary repairs shall be deducted. Resolved, That in computing incomes under said act, the amounts received as dividends upon the stock of any corporation, company, or association shall not be included in case such dividends are also liable to the tax of 2 per cent, upon the net profits of said corporation, company, or association, although such tax may not have been actually paid by said corporation, company, or association at the time of making returns by the person, corporation, or association receiving such dividends, and returns or reports of the names and salaries of employes shall not be required from employers unless called for by the col- lector hi order to verify the returns of employes. 1 28 U. S. Stat. at Large, 971. 264 ACT OF AUGUST 5, 1909 l Chapter VI. An Act to provide revenue, equalize duties and encourage industries of the United States, and for other purposes. SEC. 38. That every corporation, joint stock company or association, organized for profit and having a capital stock represented by shares, and every insurance com- pany, now or hereafter organized under the laws of the United States or of any State or Territory of the United States or under the acts of Congress applicable to Alaska or the district of Columbia, or now or hereafter organized under the laws of any foreign country and engaged in business in any State or Territory of the United States or in Alaska or in the District of Columbia, shall be sub- ject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or insurance com- pany, equivalent to one per centum upon the entire net income over and above five thousand dollars received by it from all sources during such year, exclusive of amounts received by it as dividends upon stock of other corpora- tions, joint stock companies, or associations, or insurance companies, subject to the tax hereby imposed; or if or- ganized under the laws of any foreign country, upon the amount of net income over and above five thousand dollars received by it from business transacted and capital invested within the United States and its Territories, Alaska, and the District of Columbia during such year, exclusive of amounts so received by it as dividends upon 1 36 U. S. Stat. at Large, Ch. VI. 265 266 APPENDIX [Act, Aug. 5, 1909 stock of other corporations, joint stock companies or associations, or insurance companies, subject to the tax hereby imposed; Provided, however, That nothing in this section contained shall apply to labor, agricultural or horticultural organizations, or to fraternal beneficiary so- cieties, orders, or associations operating under the lodge system, and providing for the payment of life, sick, acci- dent, and other benefits to the members of such societies, orders or associations, and dependents of such members nor to domestic building and loan associations, organized and operated exclusively for the mutual benefit of their members, nor to any corporation or association organized and operated exclusively for religious charitable, or edu- cational purposes, no part of the net income of which inures to the benefit of any private stockholder or individ- ual. Second. Such net income shall be ascertained by de- ducting from the gross amount of the income of such cor- poration, joint stock company or association, or insurance company, received within the year from all sources, (first) all the ordinary and necessary expenses actually paid within the year out of income in the maintenance and operation of its business and properties, including all charges such as rentals or franchise payments, required to be made as a condition to the continued use or possession of property; (second) all losses actually sustained within the year and not compensated by insurance or other- wise, including a reasonable allowance for depreciation of property, if any, and in the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve funds; (third) interest actually paid within the year on its bonded or other indebtedness to an amount of such bonds and other indebtedness not exceeding the paid-up capital stock of such corporation, joint stock company or associa- tion, or insurance company, outstanding at the close of FEDERAL INCOME TAX ACTS 267 the year, and in the case of a bank, banking association or trust company, all interest actually paid by it within the year on deposits; (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof, or im- posed by the government of any foreign country as a con- dition to carrying on business therein; (fifth) all amounts received by it within the year as dividends upon stock of other corporations, joint stock companies or associa- tions, or insurance companies, subject to the tax hereby imposed: Provided, That in the case of a corporation, joint stock company or association, or insurance com- pany, organized under the laws of a foreign country, such net income shall be ascertained by deducting from the gross amount of its income received within the year from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia, (first) all the ordinary and necessary expenses actually paid within the year out of earnings in the maintenance and operation of its business and prop- erty within the United States and its Territories, Alaska, and the District of Columbia, including all charges such as rentals or franchise payments required to be made as a condition to the continued use or possession of property; (second) all losses actually sustained within the year in business conducted by it within the United States or its Territories, Alaska, or the District of Columbia not com- pensated by insurance or otherwise, including a reason- able allowance for depreciation of property, if any, and in the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve funds: (third) interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other indebtedness, not exceeding the proportion of its paid-up capital stock outstanding at the close of the year which 268 APPENDIX [Act, Aug. 5, 1909 the gross amount of its income for the year from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia bears to the gross amount of its income derived from all sources within and without the United States; (fourth) the sums paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof; (fifth) all amounts re- ceived by it within the year as dividends upon stock of other corporations, joint stock companies or associations, and insurance companies, subject to the tax hereby im- posed. In the case of assessment insurance companies the actual deposit of sums with State or Territorial officers, pursuant to law, as additions to guaranty or reserve funds shall be treated as being payments required by law to reserve funds. Third. There shall be deducted from the amount of the net income of each of such corporations, joint stock com- panies or associations, or insurance companies, ascertained as provided in the foregoing paragraphs of this section, the sum of five thousand dollars, and said tax shall be computed upon the remainder of said net income of such corporation, joint stock company or association, or in- surance company, for the year ending December thirty- first, nineteen hundred and nine, and for each calendar year thereafter; and on or before the first day of March, nineteen hundred and ten, and the first day of March in each year thereafter, a true and accurate return under oath or affirmation of its president, vice-president, or other principal officer, and its treasurer or assistant treasurer, shall be made by each of the corporations, joint stock companies or associations, and insurance companies, sub- ject to the tax imposed by this section, to the collector of internal revenue for the district in which such corpora- tion, joint stock company or association, or insurance com- pany has its principal place of business, or, in the case of a corporation, joint stock company or association, or FEDERAL INCOME TAX ACTS 269 insurance company, organized under the laws of a foreign country, in the place where its principal business is carried on within the United States, in such form as the Commis- sioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth (first) the total amount of the paid-up capital stock of such corporation, joint stock company or association, or insurance company, outstanding at the close of the year; (second) the total amount of the bonded and other in- debtedness of such corporation, joint stock company or association or insurance company at the close of the year; (third) the gross amount of the income of such corporation, joint stock company or association, or in- surance company received during such year from all sources, and if organized under the laws of a foreign country the gross amount of its income received within the year from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia; also the amount received by such corporation, joint stock company or association, or insurance company within the year by way of dividends upon stock of other, corporations, joint stock companies or associations, or insurance companies, subject to the tax imposed by this section; (fourth) the total amount of all the ordinary and necessary expenses actually paid out of earnings in the maintenance and oper- ation of the business and properties of such corporation, joint stock company or association, or insurance company, within the year, stating separately all charges such as rentals or franchise payments required to be made as a condition to the continued use or possession of property, and if organized under the laws of a foreign country the amount so paid in the maintenance and operation of its business within the United States and its Territories, Alaska, and the District of Columbia; (fifth) the total amount of all losses actually sustained during the year and not compensated by insurance or otherwise, stating 270 APPENDIX [Act, Aug. 5, 1909 separately any amounts allowed for depreciation of prop- erty, and in the case of insurance companies the sums other than dividends, paid within the year on policy and an- nuity contracts and the net addition, if any, required by law to be made within the year to reserve funds; and in the case of a corporation, joint stock company or associa- tion, or insurance company, organized under the laws of a foreign country, all losses actually sustained by it during the year in business conducted by it within the United States or its Territories, Alaska, and the District of Colum- bia, not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of prop- erty, and in the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve fund; (sixth) the amount of interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other indebtedness not exceeding the paid-up capital stock of such corporation, joint stock company or associa- tion, or insurance company, outstanding at the close of the year, and in the case of a bank, banking association, or trust company, stating separately all interest paid by it within the year on deposits; or in case of a corporation, joint stock company or association, or insurance com- pany, organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded and other indebtedness not ex- ceeding the proportion of its paid-up capital stock out- standing at the close of the year, which the gross amount of its income for the year from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia, bears to the gross amount of its income derived from all sources within and without the United States; (seventh) the amount paid by it within the year for taxes imposed under the authority of the United States or any State or Terri- FEDERAL INCOME TAX ACTS 271 tory thereof, and separately the amount so paid by it for taxes imposed by the government of any foreign country as a condition to carrying on business therein; (eighth) the net income of such corporation, joint stock company or association, or insurance company, after making the deductions in this section authorized. All such returns shall as received be transmitted forthwith by the collector to the Commissioner of Internal Revenue. Fourth. Whenever evidence shall be produced before the Commissioner of Internal Revenue which in the opin- ion of the commissioner justifies the belief that the re- turn made by any corporation, joint stock company or association, or insurance company is incorrect, or when- ever any collector shall report to the Commissioner of Internal Revenue that any corporation, joint stock com- pany or association, or insurance company has failed to make a return as required by law, the Commissioner of Internal Revenue may require from the corporation, joint stock company or association, or insurance company mak- ing such return, such further information with reference to its capital, income, losses, and expenditures as he may deem expedient; and the Commissioner of Internal Reve- nue, for the purpose of ascertaining the correctness of such return or for the purpose of making a return where none has been made, is hereby authorized, by any regu- larly appointed revenue agent specially designated by him for that purpose, to examine any books and papers bearing upon the matters required to be included in the return of such corporation, joint stock company or associa- tion, or insurance company, and to require the attendance of any officer or employe of such corporation, joint stock company or association, or insurance company, and to take his testimony with reference to the matter required by law to be included in such return, with power to ad- minister oaths to such person or persons; and the Commis- sioner of Internal Revenue may also invoke the aid of any court of the United States having jurisdiction to require 272 APPENDIX [Act. Aug. 5, 1909 the attendance of such officers or employes and the pro- duction of such books and papers. Upon the information so acquired the Commissioner of Internal Revenue may amend any return or make a return where none has been made. All proceedings taken by the Commissioner of Internal Revenue under the provisions of this section shall be subject to the approval of the Secretary of the Treasury. Fifth. All returns shall be retained by the Commis- sioner of Internal Revenue, who shall make assessments thereon; and in case of any return made with false or fraudulent intent, he shall add one hundred per centum of such tax, and in case of a refusal or neglect to make a return or to verify the same as aforesaid he shall add fifty per centum of such tax. In case of neglect occasioned by the sickness or absence of an officer of such corporation, joint stock company or association, or insurance company, required to make said return, or for other sufficient reason, the collector may allow such further time for making and delivering such return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax originally assessed, unless the refusal, neglect, or falsity is discovered after the date for payment of said taxes, in which case the amount so added shall be paid by the delinquent corporation, joint stock company or associa- tion, or insurance company immediately upon notice given by the collector. All assessments shall be made and the several corporations, joint stock companies or associations, or insurance companies, shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years FEDERAL INCOME TAX ACTS 273 after said return is due, make a return upon information obtained as above provided for, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint stock company or asso- ciation, or insurance company immediately upon notifi- cation of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, -there shall be added the sum of five per centum on the amount of tax unpaid and interest at the rate of one per centum per month upon said tax from the time the same becomes due. Sixth. When the assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such. Seventh. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employe of the United States to divulge or make known in any manner whatever not provided by law to any person any informa- tion obtained by him in the discharge of his official duty, or to divulge or make known in any manner not provided by law any document received, evidence taken, or report made under this section except upon the special direction of the President; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding one thousand dollars, or by imprison- ment not exceeding one year, or both, at the discretion of the court. Eighth. If any of the corporations, joint stock com- panies or associations, or insurance companies aforesaid, shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint stock company or association, or insurance company shall be 274 APPENDIX [Act, Aug. 5, 1909 liable to a penalty of not less than one thousand dollars and not exceeding ten thousand dollars. Any person authorized by law to make, render, sign, or verify any return, who makes any false or fraudulent return, or statement, with intent to defeat or evade the assessment required by this section to be made, shall be guilty of a misdemeanor, and shall be fined not exceed- ing one thousand dollars or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution. All laws relating to the collection, remission, and refund of internal-revenue taxes, so far as applicable to and not inconsistent with the provisions of this section, are hereby extended and made applicable to the tax imposed by this section. Jurisdiction is hereby conferred upon the circuit and district courts of the United States for the district within which any person summoned under this section to appear to testify or to produce books as aforesaid, shall reside to compel such attendance, production of books, and testi- mony by appropriate process. ACT OF OCTOBER 3, 1913 1 To reduce tariff duties and to provide revenue for the Gov- ernment, and for other purposes SECTION II A. Subdivision 1. That there shall be levied, assessed, collected and paid annually upon the entire net income arising or accruing from all sources in the preceding cal- endar year to every citizen of the United States, whether residing at home or abroad, and to every person residing in the United States, though not a citizen thereof, a tax of 1 per centum per annum upon such income, except as hereinafter provided; and a like tax shall be assessed, levied, collected, and paid annually upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States by persons residing elsewhere. Subdivision 2. In addition to the income tax provided under this section (herein referred to as the normal in- come tax) there shall be levied, assessed, and collected upon the net income of every individual an additional income tax (herein referred to as the additional tax) of 1 per centum per annum upon the amount by which the total net income exceeds $20,000 and does not exceed $50,000, and 2 per centum per annum upon the amount by which the total net income exceeds $50,000 and does not exceed $75,000, 3 per centum per annum upon the amount by which the total net income exceeds $75,000 and does not exceed $100,000, 4 per centum per annum upon the amount by which the total net income exceeds 1 38 U. S. Stat. at Large, Ch. XVI. 275 276 APPENDIX [Act, Oct. 3, 1913 $100,000 and does not exceed $250,000, 5 per centum per annum upon the amount by which the total net income exceeds $250,000 and does not exceed $500,000, and 6 per centum per annum upon the amount by which the total net income exceeds $500,000. All the provisions of this section relating to individuals who are to be chargeable with the normal income tax, so far as they are applicable and are not inconsistent with this subdivision of paragraph A, shall apply to the levy, assessment, and collection of the additional tax imposed under this section. Every person subject to this additional tax shall, for the purpose of its assessment and collection, make a personal return of his total net income from all sources, corporate or otherwise, for the preceding calendar year, under rules and regulations to be prescribed' by the Com- missioner of Internal Revenue and approved by the Secretary of the Treasury. For the purpose of this additional tax the taxable in- come of any individual shall embrace the share to which he would be entitled of the gains and profits, if divided or distributed, whether divided or distributed or not, of all "corporations, joint stock companies, or associations however created or organized," formed or fraudulently availed of for the purpose of preventing the imposition of such tax through the medium of permitting such gains and profits to accumulate instead of being divided or distributed; and the fact that any such " corporation, joint stock company, or association is a mere holding company," or that the gains and profits are permitted to accumulate beyond the reasonable needs of the business shall be prima facie evidence of a fraudulent purpose to escape such tax; but the fact that the gains and profits are in any case permitted to accumulate and become sur- plus shall not be construed as evidence of a purpose to escape the said tax in such case unless the Secretary of the Treasury shall certify that in his opinion such accumula- FEDERAL INCOME TAX ACTS 277 tion is unreasonable for the purposes of the business. When requested by the Commissioner of Internal Revenue, or any district collector of internal revenue, such "corpora- tion, joint stock company, or association," shall forward to him a correct statement of such profits and the names of the individuals who would be entitled to the same if distributed. (See p. 67.) B. That, subject only to such exemptions and deduc- tions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income de- rived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent: Provided, That the proceeds of life insurance policies paid upon the death of the person insured or payments made by or credited to the insured, on life insurance, endowment, or annuity contracts, upon the return thereof to the insured at the maturity of the term mentioned in the contract, or upon surrender of the con- tract, shall not be included as income. That in computing net income for the purpose of the normal tax there shall be allowed as deductions: First, the necessary expenses actually paid in carrying on any business, not including personal, living, or family ex- penses; second, all interest paid within the year by a taxable person on indebtedness; third, all national, State, county, school, and municipal taxes paid within the year, not including those assessed against local benefits; fourth, losses actually sustained during the year, incurred in trade or arising from fires, storms, or shipwreck, and not 278 APPENDIX [Act, Oct. 3, 1913 compensated for by insurance or otherwise; fifth, debts due to the taxpayer actually ascertained to be worthless and charged off within the year; sixth, a reasonable allowance for the exhaustion, wear and tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per centum of the gross value at the mine of the output for the year for which the com- putation is made, but no deduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof for which an allowance is or has been made: Provided, That no deduction shall be allowed for any amount paid out for new buildings, permanent improvements, or betterments, made to in- crease the value of any property or estate; seventh, the amount received as dividends upon the stock or from the net earnings of any corporation, joint stock company, association, or insurance company which is taxable upon its net income as hereinafter provided; eighth, the amount of income, the tax upon which has been paid or withheld for payment at the source of the income, under the provi- sions of this section, provided that whenever the tax upon the income of a person is required to be withheld and paid at the source as hereinafter required, if such annual income does not exceed the sum of $3,000 or is not fixed or certain, or is indefinite, or irregular as to amount or time of accrual, the same shall not be deducted in the personal return of such person. The net income from property owned and business carried on in the United States by persons residing else- where shall be computed upon the basis prescribed in this paragraph and that part of paragraph G of this section relating to the computation of the net income of corpora- tions, joint-stock and insurance companies, organized, created, or existing under the laws of foreign countries, in so far as applicable. That in computing net income under this section there shall be excluded the interest upon the obligations of a FEDERAL INCOME TAX ACTS 270 State or any political subdivision thereof, and upon the obligations of the United States or its possessions; also the compensation of the present President of the United States during the term for which he has been elected, and of the judges of the supreme and inferior courts of the United States now in office, and the compensation of all officers and employees of a State or any political subdivi- sion thereof except when such compensation is paid by the United States Government. C. That there shall be deducted from the amount of the net income of each of said persons, ascertained as provided herein, the sum of $3,000, plus $1,000 additional if the person making the return be a married man with a wife living with him, or plus the sum of $1,000 additional if the person making the return be a married woman with a husband living with her; but in no event shall this addi- tional exemption of $1,000 be deducted by both a husband and a wife: Provided, That only one deduction of $4,000 shall be made from the aggregate income of both husband and wife when living together. D. The said tax shall be computed upon the remainder of said net income of each person subject thereto, accruing during each preceding calendar year ending December thirty-first: Provided, however, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax shall be computed on the net income accruing from March first to December thirty-first, nineteen hun- dred and thirteen, both dates inclusive, after deducting five-sixths only of the specific exemptions and deductions herein provided for. On or before the first day of March, nineteen hundred and fourteen, and the first day of March in each year thereafter, a true and accurate return, under oath or affirmation, shall be made by each person of lawful age, except as hereinafter provided, subject to the tax imposed by this section, and having a net income of $3,000 or over the taxable year, to the collector of internal revenue for the 280 APPENDIX [Act, Oct. 3, 1913 district in which such person resides or has his principal place of business, or, in the case of a person residing in a foreign country, in the place where his principal business is carried on within the United States, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth specifically the gross amount of income from all separate sources and from the total thereof, deducting the aggregate items or expenses and allowance herein authorized ; guardians, trustees, executors, administrators, agents, receivers, conservators, and all persons, corpora- tions, or associations acting in any fiduciary capacity, shall make and render a return of the net income of the person for whom they act, subject to this tax, coming into their custody or control and management, and be subject to all the provisions of this section which apply to ni- di viduals: Provided, That a return made by one of two or more joint guardians, trustees, executors, administra- tors, agents, receivers, and conservators, or other persons acting in a fiduciary capacity, filed in the district where such person resides, or in the district where the will or other instrument under which he acts is recorded, under such regulations as the Secretary of the Treasury may prescribe, shall be a sufficient compliance with the re- quirements of this paragraph; and also all persons, firms, companies, copartnerships, corporations, joint-stock com- panies or associations, and insurance companies, except as hereinafter provided, in whatever capacity acting, having the control, receipt, disposal, or payment of fixed or determinable annual or periodical gains, profits, and in- come of another person, subject to tax, shall in behalf of such person deduct and withhold from the payment an amount equivalent to the normal income tax upon the same and make and render a return, as aforesaid, but separate and distinct, of the portion of the income of each person from which the normal tax has been thus withheld, and containing also the name and address of FEDERAL INCOME TAX ACTS 281 such person or stating that the name and address or the address, as the case may be, are unknown : Provided, That the provision requiring the normal tax of individuals to be withheld at the source of the income shall not be construed to require any of such tax to be withheld prior to the first day of November, 1913; Provided, further, That in either case above mentioned no return of income not exceeding $3,000 shall be required '.Provided further, That any persons carrying on business in partnership shall be liable for income tax only in their individual capacity, and the share of the profits of a partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxa- tion and the tax paid, under the provisions of this section, and any such firm, when requested by the Commissioner of Internal Revenue, or any district collector, shall for- ward to him a correct statement of such profits and the names of the individuals who would be entitled to the same, if distributed : Provided further, That persons liable for the normal income tax only, on their own account or in behalf of another, shall not be required to make return of the income derived from dividends on the capital stock or from the net earnings of corporations, joint-stock com- panies or associations, and insurance companies taxable upon their net income as hereinafter provided. Any person for whom return has been made and the tax paid, or to be paid as aforesaid, shall not be required to make a return unless such person has other net income, but only one deduction of $3,000 shall be made in the case of any such person. The collector or deputy collector shall require every list to be verified by the oath or affirmation of the party rendering it. If the collector or deputy collector have reason to believe that the amount of any income returned is under- stated, he shall give due notice to the person making the return to show cause why the amount of the return should 282 APPENDIX [Act, Oct. 3, 1913 not be increased, and upon proof of the amount under- stated may increase the same accordingly. If dissatisfied with the decision of the collector, such person may submit the case, with all the papers, to the Commis- sioner of Internal Revenue for his decision, and may furnish sworn testimony of witnesses to prove any relevant facts. E. That all assessments shall be made by the Commis- sioner of Internal Revenue and all persons shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon informa- tion obtained as provided for in this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such person or persons immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid, and interest at the rate of 1 per centum per month upon said tax from the tune the same became due, except from the estates of insane, deceased, or insolvent persons. All persons, firms, copartnerships, companies, corpora- tions, joint-stock companies or associations, and insurance companies, in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, agents, re- ceivers, conservators, employers, and all officers and em- ployees of the United States having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, FEDERAL INCOME TAX ACTS 283 emoluments, or other fixed or determinable annual gains, profits, and income of another person, exceeding $3,000 for any taxable year, other than dividends on capital stock, or from the net earnings of corporations and joint-stock companies or associations subject to like tax, who are required to make and render a return in behalf of another, as provided herein, to the collector of his, her, or its dis- trict, are hereby authorized and required to deduct and withhold from such annual gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this section, and shall pay to the officer of the United States Government authorized to receive the same, and they are each hereby made personally liable for such tax. In all cases where the income tax of a person is withheld and deducted and paid or to be paid at the source, as aforesaid, such person shall not receive the deduction and benefit of the exemption allowed in paragraph C of this section except by an application for refund of the tax unless he shall, not less than thirty days prior to the day on which the return of his income is due, file with the per- son who is required to withhold and pay tax for him, a signed notice hi writing claiming the benefit of such exemption and thereupon no tax shall be withheld upon the amount of such exemption: Provided, That if any person for the purpose of obtaining any allowance or reduction by virtue of a claim for such exemption, either for himself or for any other person, knowingly makes any false statement or false or fraudulent representation, he shall be liable to a penalty of $300; nor shall any person under the foregoing conditions be allowed the benefit of any deduction provided for in subsection B of this section unless he shall, not less than thirty days prior to the day on which the return of his income is due, either file with the person who is required to withhold and pay tax for him a true and correct return of his annual gains, profits, and income from all other sources, and also the deductions, 284 APPENDIX [Act, Oct. 3, 1913 asked for, and the showing thus made shall then become a part of the return to be made in his behalf by the person required to withhold and pay the tax, likewise make application for deductions to the collector of the dis- trict in which return is made or to be made for him : Pro- vided further, That if such person is a minor or an insane person, or is absent from the United States, or is unable owing to serious illness to make the return and application above provided for, the return and application may be made for him or her by the person required to withhold and pay the tax, he making oath under the penalties of this Act that he has sufficient knowledge of the affairs and property of his beneficiary to enable him to make a full and complete return for him or her, and that the return and application made by him are full and complete: Provided further, That the amount of the normal tax hereinbefore imposed shall be deducted and withheld from fixed and determinable annual gains, profits, and income derived from interest upon bonds, and mortgages, or deeds of trust, or other similar obligations of corporations, joint- stock companies or associations, and insurance companies, whether payable annually or at shorter or longer periods, although such interest does not amount to $3,000, subject to the provisions of this section requiring the tax to be withheld at the source and deducted from annual income and paid to the Government; and likewise the amount of such tax shall be deducted and withheld from coupons, checks, or bills of exchange for or in payment of interest upon bonds of foreign countries and upon foreign mort- gages or like obligations (not payable in the United States), and also from coupons, checks, or bills of exchange for or in payment of any dividends upon the stock or interest upon the obligations of foreign corporations, associations, and insurance companies engaged in business in foreign countries; and the tax in each case shall be withheld and deducted for and in behalf of any person subject to the tax hereinbefore imposed, although such interest, div- FEDERAL INCOME TAX ACTS 285 idends, or other compensation does not exceed $3,000, by any banker or person who shall sell or otherwise realize coupons, checks, or bills of exchange drawn or made in payment of any such interest or dividends (not payable in the United States), and any person who shall obtain payment (not in the United States), in behalf of another of such dividends and interest by means of coupons, checks, or bills of exchange, and also any dealer in such coupons who shall purchase the same for any such div- idends or interest (not payable in the United States), otherwise than from a banker or another dealer in such coupons; but in each case the benefit of the exemption and the deduction allowable under this section may be had by complying with the foregoing provisions of this paragraph. All persons, firms, or corporations undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner of Internal Revenue, and shall be subject to such regulations enabling the Government to ascertain and verify the due withholding and payment of the income tax required to be withheld and paid as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe; and any person who shall undertake to collect such payments as aforesaid, without having obtained a license therefor, or without complying with such regulations, shall be deemed guilty of a misdemeanor and for each offense be fined in a sum not exceeding $5,000, or imprisoned for a term not exceeding one year, or both, in the discretion of the court. Nothing in this section shall be construed to release a taxable person from liability from income tax nor shall any contract entered into after this Act takes effect be valid in regard to any Federal income tax imposed upon a person liable to such payment. The tax herein imposed upon annual gains, profits, and 286 APPENDIX [Act, Oct. 3, 1913 income not falling under the foregoing and not returned and paid by virtue of the foregoing shall be assessed by personal return under rules and regulations prescribed by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. The provisions of this section relating to the deduction > and payment of the tax at the source of income shall only apply to the normal tax hereinbefore imposed upon indi- viduals. F. That if any person, corporation, joint-stock com- pany, association, or insurance company liable to make the return or pay the tax aforesaid shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, such persons shall be liable to a penalty of not less than $20 nor more than $1,000. Any person or any officer of any corporation required by law to make, render, sign, or verify any return who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this section to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution. G. That the normal tax hereinbefore imposed upon individuals likewise shall be levied, assessed, and paid annually upon the entire net income arising or accruing from all sources during the preceding calendar year to every corporation, joint-stock company or association, and every insurance company, organized in the United States, no matter how created or organized, but not in- cluding partnerships; but if organized, authorized, or existing under the laws of any foreign country, then upon the amount of net income accruing from business transacted and capital invested within the United States during such year. Provided, however, That nothing in this section shall apply to labor, agricultural, or horticultural organizations, FEDERAL INCOME TAX ACTS 287 or to mutual savings banks not having a capital stock represented by shares, or to fraternal beneficiary societies, orders, or associations operating under the lodge system, or for the exclusive benefit of the members of a fraternity itself operating under the lodge system and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations and dependents of such members, nor to domestic building and loan associations, nor to cemetery companies, organ- ized and operated exclusively for the mutual benefit of their members, nor to any corporation or association or- ganized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net in- come of which inures to the benefit of any private stock- holder or individual, nor to business leagues, nor to chambers of commerce or boards of trade, not organized for profit or no part of the net income of which inures to the benefit of the private stockholder or individual; nor to any civic league or organization not organized for profit, but operated exclusively for the promotion of social welfare. Provided further, That there shall not be taxed under this section any income derived from any public utility or from the exercise of any essential gov- ernmental function accruing to any State, Territory, or the District of Columbia, or any political subdivision of the State, Territory, or the District of Columbia, nor any income accruing to the government of the Philippine Islands or Porto Rico, or of any political subdivision of the Philippine Islands or Porto Rico: Provided, That whenever any State, Territory, or the District of Co- lumbia, or any political subdivision of the State or Ter- ritory, has, prior to the passage of this Act, entered in good faith into a contract with any person or cor- poration, the object and purpose of which is to acquire, construct, operate, or maintain a public utility, no tax shall be levied under the provisions of this Act upon the income derived from the operation of such public 288 APPENDIX '[Act, Oct. 3, 1913 utility, so far as the payment thereof will impose a loss or burden upon such State, Territory, or the District of Columbia, or a political subdivision of a State or Ter- ritory; but this provision is not intended to confer upon such person or corporation any financial gain or exemption or to relieve such person or corporation from the payment of a tax as provided for in this section upon the part or portion of the said income to which such person or corpo- ration shall be entitled under such contract. (6) Such net income shall be ascertained by deducting from the gross amount of the income of such corporation, joint-stock company or association, or insurance company, received within the year from all sources, (first) all the ordinary and necessary expenses paid within the year in the maintenance and operation of its business and prop- erties, including rentals or other payments required to be made as a condition to the continued use or possession of property; (second) all losses actually sustained within the year and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any; and in the case of mines a reasonable allowance for depletion of ores and all other natural deposits not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation is made; and in case of insurance com- panies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided, That mutual fire insurance com- panies requiring their members to make premium de- posits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided FEDERAL INCOME TAX ACTS 289 further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof; and life insurance com- panies shall not include as income in any year such por- tion of any actual premium received from any individual policy holder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such individual policy holder, within such year; (third) the amount of interest accrued and paid within the year on its indebtedness to an amount of such indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of its indebtedness not exceeding the amount of capital employed in the business at the close of the year: Provided, That in case of indebtedness wholly secured by collateral the subject of sale in ordinary business of such corporation, joint stock company, or association, the total interest secured and paid by such company, corporation, or association within the year on any such indebtedness may be deducted as a part of its expense of doing business : Provided further, That in the case of bonds or other indebtedness, which have been issued with a guaranty that the interest payable thereon shall be free from taxa- tion, no deduction for the payment of the tax herein im- posed shall be allowed; and in the case of a bank, banking association, loan, or trust company, interest paid within the year on deposits or on moneys received for investment and secured by interest-bearing certificates of indebted- ness issued by such bank, banking association, loan or trust company; (fourth) all sums paid by it within the 290 APPENDIX [Act, Oct. 3, 1913 year for taxes imposed under the authority of the United States or of any State or Territory thereof, or imposed by the Government of any foreign country, Provided, That in the case of a corporation, joint-stock company or association, or insurance company, organized, authorized, or existing under the laws of any foreign country, such net income shall be ascertained by deducting from the gross amount of its income accrued within the year from business transacted and capital invested within the United States, (first) all the ordinary and necessary expenses actually paid within the year out of earnings in the maintenance and operation of its business and prop- erty within the United States, including rentals or other payments required to be made as a condition to the con- tinued use or possession of property; (second) all losses actually sustained within the year in business conducted by it within the United States and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use, wear and tear of property, if any, and in the case of mines a reasonable allowance for deple- tion of ores and all other natural deposits, not to exceed 5 per centum of the gross value at the mine of the output for the year for which the computation is made; and in case of insurance companies, the net addition if any, re- quired by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts. Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and ex- penses shall not return as income any portion of the pre- mium deposits returned to their policy holders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium de- posits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insur- ance companies shall include in their return of gross in- FEDERAL INCOME TAX ACTS 291 come gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment thereof and the payment thereof; and life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policy holder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such individual policy holder, within such year; (third) the amount of interest accrued and paid within the year on its indebted- ness to an amount of such indebtedness not exceeding the proportion of one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock outstanding at the close of the year, or if no capital stock, the capital employed in the business at the close of the year which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States: Provided, That in the case of bonds or other indebted- ness which have been issued with a guaranty that the interest payable thereon shall be free from taxation, no deduction for the payment of the tax herein imposed shall be allowed; (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any State, or Territory thereof or the District of Columbia. In the case of assessment insurance companies, whether domestic or foreign, the actual deposit of sums with State or Territorial officers, pursuant to law, as additions to guarantee or reserve funds shall be treated as being payments required by law to reserve funds. (c) The tax herein imposed shall be computed upon its entire net income accruing during each preceding calendar year ending December thirty-first: Provided, 292 APPENDIX [Act, Oct, 3, 1913 however, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax skall be imposed upon its entire net income accruing during that portion of said year from March first to December thirty-first, both dates inclusive, to be ascertained by taking five- sixths of its entire net income for said calendar year: Provided, further, That any corporation, joint-stock com- pany or association, or insurance company subject to this tax may designate the last day of any month in the year as the day of the closing of its fiscal year and shall be entitled to have the tax payable by it computed upon the basis of the net income ascertained as herein provided for the year ending on the day so designated in the year preceding the date of assessment instead of upon the basis of the net income for the calendar year preceding the date of assessment; and it shall give notice of the day it has thus designated as the closing of its fiscal year to the collector of the district in which its principal business office is located at any time not less than thirty days prior to the date upon which its annual return shall be filed. All corporations, joint-stock companies or associations, and insurance companies subject to the tax herein im- posed, computing taxes upon the income of the calendar year, shall, on or before the first day of March, nineteen hundred and fourteen, and the first day of March in each year thereafter, and all corporations, joint-stock com- panies or associations, and insurance companies, com- puting taxes upon the income of a fiscal year which it may designate in the manner hereinbefore provided, shall render a like return within sixty days after the close of its said fiscal year, and within sixty days after the close of its fiscal year in each year thereafter, or in the case of a corporation, joint-stock company or association, or in- surance company, organized or existing under the laws of a foreign country, in the place where its principal busi- ness is located within the United States, in such form as the Commissioner of Internal Revenue, with the approval . FEDERAL INCOME TAX ACTS 293 of the Secretary of the Treasury, shall prescribe, shall render a true and accurate return under oath or affirma- tion of its president, vice president, or other principal officer, and its treasurer or assistant treasurer, to the collector of internal revenue for the district in which it has its principal place of business, setting forth (first) the total amount of its paid-up capital stock outstanding, or if no capital stock, its capital employed in business, at the close of the year; (second) the total amount of its bonded and other indebtedness at the close of the year; (third) the gross amount of its income, received during such year from all sources, and if organized under the laws of a foreign country the gross amount of its income received within the year from business transacted and capital invested within the United States; (fourth) the total amount of all of its ordinarj^ and necessary expenses paid out of earnings in the maintenance and operation of the business and properties of such corporation, joint- stock company or association, or insurance company within the year, stating separately all rentals or other payments required to be made as a condition to the con- tinued use or possession of property, and if organized under the laws of a foreign country the amount so paid in the maintenance and operation of its business within the United States; (fifth) the total amount of all losses actually sustained during the year and not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all income received by them from all other sources 294 APPENDIX [Act, Oct. 3, 1913 plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in the deduc- tions from gross income amounts repaid to policy holders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertain- ment thereof and the payment thereof and life insurance companies shall not include as income in any year such portion of any actual premium received from any individ- ual policy holder as shall have been paid back or credited to such individual policy holder or treated as an abatement of premium of such individual policy holder, within such year; and in case of a corporation, joint-stock company or association, or insurance company, organized under the laws of a foreign country, all losses actually sustained by it during the year in business conducted by it within the United States, not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all in- come received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and FEDERAL INCOME TAX ACTS 295 received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the pay- ment thereof and life insurance companies shall not in- clude as income in any year such portion of any actual premium received from any individual policy holder as shall have been paid back or credited to such individual policy holder, or treated as an abatement of premium of such individual policy holder, within such year; (sixth) the amount of interest accrued and paid within the year on its bonded or other indebtedness not exceeding one-half of the sum of its interest-bearing indebtedness and its paid-up capital stock, outstanding at the close of the year, or if no capital stock, the amount of interest paid within the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close of the year, and in the case of a bank, banking association, or trust company, stating separately all interest paid by it within the year on deposits; or in case of a corporation, joint-stock company or association, or insurance company, organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded or other indebtedness not exceeding the proportion of its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of capital employed in the business at the close of the year, which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States; (seventh) the amount paid by it within the year for taxes imposed under the authority of the United States and separately the amount so paid by it for taxes imposed by the Government of any foreign country; (eighth) the net income of such corporation, joint-stock company or 296 APPENDIX [Act, Oct. 3, 1913 association, or insurance company, after making the deductions in this subsection authorized. All such returns shall as received be transmitted forth- with by the collector to the Commissioner of Internal Revenue. All assessments shall be made and the several corpora- tions, joint-stock companies or associations, and insurance companies shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessment shall be paid on or before the thirtieth day of June: Provided, That every corporation, joint-stock company or association, and insurance company, computing taxes upon the income of the fiscal year which it may designate in the manner hereinbefore provided, shall pay the taxes due under its assessment within one hundred and twenty days after the date upon which it is required to file its list or return of income for assessment; except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as provided for in this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint-stock company or association, or insurance company immediately upon notification of the amount of such assessment ; and to any sum or sums due and unpaid after the thirtieth day of June in any year, or after one hundred and twenty days from the date on which the return of income is required to be made by the taxpayer, and after ten days notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid and interest at the rate of 1 per centum per month upon said tax from the time the same becomes due. (d) When the assessment shall be made, as provided in FEDERAL INCOME TAX ACTS 297 this section, the returns, together with any corrections thereof which may have been made by the commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such: Provided, That any and all such returns shall be open to inspection only upon the order of the President, under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President: Provided further, That the proper officers of any State imposing a general income tax may, upon the request of the governor thereof, have access to said returns or to an abstract thereof, showing the name and income of each such corporation, joint-stock company, association or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe. If any of the corporations, joint-stock companies or associations, or insurance companies aforesaid, shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint-stock com- pany or association, or insurance company shall be liable to a penalty of not exceeding $10,000. H. That the word "State" or "United States" when used in this section shall be construed to include any Ter- ritory, Alaska, the District of Columbia, Porto Rico, and the Philippine Islands, when such construction is necessary to carry out its provisions. I. That sections thirty-one hundred and sixty-seven, thirty-one hundred and seventy-two, thirty-one hundred and seventy-three, and thirty-one hundred and seventy- six of the Revised Statutes of the United States as amended are hereby amended so as to read as follows: SEC. 3167. (See Revised Statutes, p. 120.) SEC. 3172. (See Revised Statutes, p. 121.) SEC. 3173. (See Revised Statutes, p. 121.) SEC. 3176. (See Revised Statutes, p. 126.) J. That it shall be the duty of every collector of inter- 298 APPENDIX [Act, Oct. 3, 1913 nal revenue, to whom any payment of any taxes other than the tax represented by an adhesive stamp or other engraved stamp is made under the provisions of this section, to give to the person making such payment a full written or printed receipt, expressing the amount paid and the particular account for which such payment was made ; and whenever such payment is made such collector shall, if required, give a separate receipt for each tax paid by any debtor, on account of payments made to or to be made by him to separate creditors in such form that such debtor can conveniently produce the same separately to his several creditors in satisfaction of their respective demands to the amounts specified in such receipts; and such receipts shall be sufficient evidence hi favor of such debtor to justify him in withholding the amount therein expressed from his next payment to his creditor, but such creditor may, upon giving to his debtor a full written receipt, acknowledging the payment to him of whatever sum may be actually paid, and accepting the amount of tax paid as aforesaid (specifying the same) as a further satisfaction of the debt to that amount, require the sur- render to him of such collector's receipt. K. That jurisdiction is hereby conferred upon the dis- trict courts of the United States for the district within which any person summoned under this section to appear to testify or to produce books shall reside, to compel such attendance, production of books, and testimony by appropriate process. L. That all administrative, special, and general pro- visions of law, including the laws in relation to the as- sessment, remission, collection, and refund of internal- revenue taxes not heretofore specifically repealed and not inconsistent with the provisions of this section, are hereby extended and made applicable to all the provisions of this section and to the tax herein imposed. M. That the provisions of this section shall extend to Porto Rico and the Philippine Islands: Provided, That the FEDERAL INCOME TAX ACTS 290 administration of the law and the collection of the taxes imposed in Porto Rico and the Philippine Islands shall be by the appropriate internal-revenue officers of those gov- ernments, and all revenues collected in Porto Rico and the Philippine Islands thereunder shall accrue intact to the general governments thereof, respectively: And provided further, That the jurisdiction in this section conferred upon the district courts of the United States shall, so far as the Philippine Islands are concerned, be vested in the courts of the first instance of said islands: And provided further, That nothing in this section shall be held to ex- clude from the computation of the net income the com- pensation paid any official by the governments of the District of Columbia, Porto Rico, and the Philippine Islands or the political subdivisions thereof. (See pp. 120, 121, 126) S. That, except as hereinafter provided, sections one to forty-two, both inclusive, of an Act entitled "An Act -to provide revenue, equalize duties, and encourage the in- dustries of the United States, and for other purposes," approved August fifth, nineteen hundred and nine, and all Acts and parts of Acts inconsistent with the provisions of this Act, are hereby repealed : Provided, That nothing in this Act shall be construed to permit any oaths to be demanded or fees to be charged except as provided in this Act or in section twenty-eight hundred and sixty-two of the Revised Statutes of the United States. * * * Pro- vided further, That all excise taxes upon corporations imposed by section thirty-eight, that have accrued or have been imposed for the year ending December thirty- first, nineteen hundred and twelve, shall be returned, as- sessed, and collected in the same manner, and under the same provisions, liens, and penalties as if section thirty-eight continued in full force and effect: And pro- vided further, That a special excise tax with respect to the carrying on or the doing of business, equivalent to 1 300 APPENDIX [Act, Oct. 3, 1913 per centum upon their entire net income, shall be levied, assessed, and collected upon corporations, joint stock companies, or associations, and insurance companies, of the character described in section thirty-eight of the Act of August fifth, nineteen hundred and nine, for the period from January first to February twenty-eighth, nineteen hundred and thirteen, both dates inclusive, which said tax shall be computed upon one-sixth of the entire net income of said corporations, joint stock companies or associations, and insurance companies, for said year, said net income to be ascertained in accordance with the pro- visions of subsection G of section two of this Act: Provided further, That the provisions of said section thirty-eight of the Act of August fifth, nineteen hundred and nine, rela- tive to the collection of the tax therein imposed shall re- main in force for the collection of the excise tax herein provided, but for the year nineteen hundred and thirteen it shall not be necessary to make more than one return and assessment for all the taxes imposed herein upon said corporations, joint stock companies or associations, and insurance companies, either by way of income or excise, which return and assessment shall be made at the times and in the manner provided in this Act; but the repeal of existing laws or modifications thereof embraced in this Act shall not affect any act done, or any right accruing or accrued, or any suit or proceeding had or commenced in any civil case before the said repeal or modification; but all rights and liabilities under said laws shall continue and may be enforced in the same manner as if said repeal or modifications had not been made. Any offenses com- mitted and all penalties or forfeitures or liabilities incurred prior to the passage of this Act under any statute embraced in or changed, modified, or repealed by this Act may be prosecuted or punished in the same manner and with the same effect as if this Act had not been passed. No Acts of limitation now in force, whether applicable to civil causes and proceedings or to the prosecution of offenses FEDERAL INCOME TAX ACTS 301 or for the recovery of penalties or forfeitures embraced in or modified, changed, or repealed by this Act shall be affected thereby, so far as they affect any suits, proceed- ings, or prosecutions, whether civil or criminal, for causes arising or acts done or committed prior to the passage of this Act, which may be commenced and prosecuted within the same tune and with the same effect as if this Act had not been passed. T. If any clause, sentence, paragraph, or part of this Act shall for any reason be adjudged by any court of com- petent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of said Act, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the con- troversy in which such judgment shall have been rendered. U. That unless otherwise herein specially provided, this Act shall take effect on the day following its passage. Approved, 9.10 p. m., October 3, 1913. TABLES Date of filing Increased return by Collector. After notice and proof justifying increase. Notice designating fiscal year, by corporation, joint stock com- pany, association, and insurance company. Not less than 30 days prior to filing annual return. Return, by individual, representative, source, corporation, joint stock company, association, and insurance company (except as below). March 1st. (No statutory provision for modification of date of return, assessment, or payment is made where the representative or source is a corporation.) Return, by corporation, joint stock company, association, and in- surance company, filing designation. Within 60 days after close of fiscal year. Return, by Commissioner. Within 3 years after taxpayer's false or fraudulent return. (Rev. Stat. \Y 2 years.) Return on behalf of minor, incompetent or invalid. Only pro- vision in this respect is that, in case of sickness or absence, Collector may extend statutory period not exceeding 30 days. Statement of accumulated profits, etc., by corporation. When requested by Commissioner or Collector. Statement of profits, etc., by partnership. At request of Commissioner or Collector. Statement and claim for exemption, by owner of withheld income. Not less than 30 days prior to return date. Date of imposition of Interest (1% per month), or non-payment, against all taxpayers (except as below). After June 30th and 10 days' notice and demand by Collector. (If such notice and demand is given later than June 20th, date of imposition of interest is correspondingly postponed.) TABLES 303 Interest (1% per month), for non-payment, against corporation, joint stock company, association, and insurance company (ex- cept as below). After 120 days from return date and 10 days' notice and de- mand by Collector. (If such notice and demand is not given 10 days prior to payment date, date of imposition of penalty is correspond- ingly postponed). Penalty (5%), for non-payment, against all taxpayers (except as below). After June 30th and 10 days' notice and demand by Collector. Delay in notice and demand effects corresponding postpone- ment of imposition, as in case of interest. Penalty (5%), for non-payment, against corporations, joint stock companies, association, and insurance company designating fiscal year. After 120 days from return date. (Delay in notice and demand effects corresponding postpone- ment of imposition, as in case of interest). Dale of making Assessment, against all taxpayers (except as below). June 1st. See note under " Return." Assessment, against corporation, joint stock company, associa- tion, and insurance company, designating fiscal year. Not provided By analogy, 90 days after return date. Assessment, upon Commissioner's return, against any taxpayer. Not provided Presumably, immediately upon filing return. Collection of taxes, etc. by Collector. 10 days after notice and demand. Distraint of personal property by Collector. 10 days after notice and demand. Payment, by all taxpayers (except as below). June 30th. (See note under "Return.") Payment, by corporation, joint stock company, association, and in- surance company, designating fiscal year. 120 days after list or return date. Payment, by any taxpayer, on Commissioner's return. Immediately upon notice of amount of assessment. Payment to prevent sale. Any time before sale. 304 TABLES Redemption. Within one year after sale. Redemption of real property bought in by United States, in cer- tain cases. Within two years from acquisition by the United States. Sale of personal property by Collector. Not less than 10 days, nor more than 20 days after notice of distraint. (Adjournments not to exceed 30 days.) Sale of real property. Not less than 20 days, nor more than 40 days after notice of seizure. (Adjournments not to exceed 30 days.) Seizure of real property. After failure to find sufficient personal property to satisfy tax, etc. *** i Date of giving Notice of assessment, against individual, corporation, joint stock company, association, and insurance company (except as below). June 1st. Notice of assessment against corporation, joint stock company, association and insurance company, designating fiscal year. No provision by analogy, 90 days after return date. Notice of proposed increase of return. No provision. Notice is to show cause. Limitation for Appeal (claim) to Commissioner for refund of taxes, penalties, etc. Two years after accrual of cause of action. Action against United States or Collector for recovery of taxes, penalties, etc., erroneously assessed or collected. Two years after accrual of cause of action, subject to prior appeal to Commissioner for refund. (Cause of action is deemed to accrue at date of adverse deci- sion by Commissioner. Action may be commenced at ex- piration of six months after date of appeal, if decision has not then been rendered.) Appeal to Commissioner from Collector's increase of return. No provision. PENALTIES Ground Collection of foreign coupons, etc., without license: Disclosure of information re- garding taxpayer's return or affairs: Examination Failure to appear or produce books for: Return Failure, refusal, or neg- lect to make; or to include standard of valuation: Return False or fraudulent: Penalty Fine, not exceeding $5000 and or Imprisonment, not exceeding 1 yr. (p. 285). Fine, not exceeding $1000 and or Imprisonment, not exceeding 1 yr. Dismissal and permanent dis- qualification, in case of U. S. officer or employe (p. 120). Punishment as for a contempt (p. 124). Fine, not exceeding $1000 and or Imprisonment, not exceeding 1 yr. Costs of prosecution (p. 129). Return by Collector (p. 126). " " Commissioner (pp. 282, 296). Addition, 50% of tax (note excep- tions) (p. 126). Penalty, $20-$1000 (p. 286). Penalty, not exceeding $10,000, in case of corporation (p. 297). Return by Collector (p. 126). " " Commissioner (pp. 282, 296). Addition, 100% of tax, if fraud or falsity intentional (p. 126). Fine, not exceeding $2000 and or Imprisonment, not exceeding 1 yr. Costs of prosecution (p. 286). Penalty, not exceeding $10,000 (corporations, only) (p. 297). 306 PENALTIES Ground Return or statement False or fraudulent, to defeat or evade valuation, enumeration or as- sessment: Return False or fraudulent by officer of corporation, etc.: Return Understatement or un- dervaluation in: Revenue officer, interference with: Statement or representation False or fraudulent, to secure exemption at source, etc.: Tax Failure to pay as required by statute: Tax Failure of representative, source, etc., to withhold and pay: Penalty Fine, not exceeding $1000 and or Imprisonment, not exceeding 1 yr. Costs of prosecution (p. 129). Fine, not exceeding $2000 and or Imprisonment, not exceeding 1 yr. Costs of prosecution (p. 286). Examination by Collector. Increase " " (p. 281). Penalty, $500 or Imprisonment not exceeding 2 yrs. (p. 128). Penalty, $300 (p. 283). Addition, 5% of unpaid tax. Interest, 1% per month (pp. 282, 296). Collection by distraint (pp. 135, 140). Collection by foreclosure of lien (p. 145). * Personal liability of representa- tive, etc., therefor (p. 283). INDEX References are to pages Note: The expressions "Deduction of tax" and "Payment of tax" have, in all cases, been used to refer to deductions and payment by "the source," on behalf of another. A Absentees . PAGE Return and statement for 67, 75 Return, time of filing 126 Accounts receivable 37, 49 Accumulations Betterments 98 Income 38, 39, 49, 78 Statement of, to Commissioner or Collector 50 Act of August 5, 1861 171 " " July 1, 1862 176 " " March 3, 1863 190 " " June 30, 1864 194 Joint Resolution, July 4, 1870 215 Act of March 3, 1865 216 " " March 10, 1866 222 " " July 13, 1866 224 " " March 2, 1867 235 " " July 14, 1870 242 " " August 27, 1894 251 Joint Resolution, February 21, 1895 264 Act of August 5, 1909 265 " " October 3, 1913 275 Act of 1913 32 Constitutionality 18 Construction 31, 32 Invalidity 118 Text 32 Actions against U. S. or Collector. (See Courts.) Appeal to Commissioner, condition precedent 158-160 Assumpsit 160 308 INDEX References are to pages PAGE Burden of proof 160 Claim for interest 162 Costs 160 Evidence 159 False or fraudulent return or statement 158 Illegal tax 158 Injunction 157 Judgment, payment 152, 162 Limitations, statutory 158, 162, 164, 165 Mandamus 163 Overpayment of tax 158 Parties '. 164-165 Payments, voluntary 163, 165 Protest, condition precedent 163 Punitive damages 163 Res judicata 164 Set-off 164 Torts 160, 164 Trespass by Collector 138, 164 Actions by Collector or U. S. (See Courts.) 149-150 Assessment, condition precedent 151 Assessment, status 150 Authorization by Commissioner, condition precedent 151 Burden of proof 150 Compromise 166-168 Continuance 168 Costs 152 Defences 151 Discontinuance 167 Evidence 151 Judgments, payment 152 Laches 151 Limitations 151 Set-off 151 Venue 151 Acts American Colonial, State and Territorial 4 British Colonial 2 English 1 Federal 6 Foreign (except English) 2 Mediaeval 1 INDEX 309 References are to pages PAGE Additional tax 44 Administrators 66, 73 Affidavits for deductions and exemption 74 Agents 66, 73, 113 Tender of payment 134, 138 Agricultural organizations 81, 87, 88, 89 Alaska Statutory definition 115 Alien. (See Citizen, Non-resident, Resident.) Computation of income of non-resident 56, 57, 64 Constitutional limitations 15, 20 Definition 42 Income 34 Non-resident 20-23 Return 48 Resident 20 Tax 20 Allowance To children 37 Amendment, constitutional 15 Annual Income Definition 34 Annuity 34 Appeal to Commissioner 155, 158-160 From collector 72 Application for exemption 74 Application for refund 155 Assessment 33, 130 Condition precedent to action 151 " " interest 133 Corporate 107-112 Date of notification 73 For public improvements 55, 57 On Commissioner's return 73, 130 On property sold for taxes , 138 On taxpayer's return 73 Status of 131 Assessor Error, effect 12 Associations Deductions 93-103 Deduction of tax . . 73 310 INDEX References are to pages PAGE Foreign 78, 95 Payment of tax 73 Return 66, 73, 110, 118 Statement of profits 50 Tax 78, 117 Attachment For neglect or refusal to obey summons 124 Attorney General Authority, tax, etc., actions 166-168 B Bad or Worthless Debts Deductible 54, 55, 58, 99 Income 35, 49, 78 Banks, Banking Associations, &c 89, 95, 110 Bankers and Brokers Collection of foreign coupons, &c 75 License 76 Bequests 51 Betterments. (See Cost, Expenses, Repairs.) Deductible 36, 100 Non-deductible 37, 54, 101 Betting profits 35 Boards of trade 86, 87 Bonds 69 Amortization Ill Municipality. (See State.) . Bonded indebtedness 69, 75, 94, 96, 106 Books Examination by Collector 13-14 Method of keeping 55, 123 Production 116, 123 Building and Loan Associations 85, 87, 88, 89, 90 Business". (See Doing Business.) Expenses 52, 55, 99 Losses 59 Business Leagues 86, 87 C Capital 38, 103, 104 Capital Stock Distribution 37, 38, 39 Return 103, 110, 113 INDEX 311 References are to pages PAGE Cash Dividends 35 Cemetery Companies 86, 87, 88 Chambers of Commerce 86, 87 Charitable Corporations 86, 87, 88 Children. (See Minors.) 72 Allowance to 37 Citizen. (See Alien, Non-resident, Resident.) 39 Definition, judicial 40-41 Definition, statutory 40 Civic Leagues 86, 87 Claims for Refund. (See Refund.) Collection of Tax 131-2, 148 Collector . . .>. . Actions against. (See Actions v. U. S. or Collector.) Authority 123 Authority on tax sale 140-143 Collection of tax 131, 148 Death and Resignation 154 Delinquent 152 Demand for payment of tax and penalty 134 Discretion 127, 140 Disposition of collected taxes 148 Distraint 134, 135-137 Duty and responsibility as to collections, &c 148-149, 153 Entry for inspection, &c 13-14, 18, 127, 130 Examination of books, taxpayer's, &c 13-14, 18 Extension of time for return 126 Inquiries 121 Preparation of return for taxpayer 122 Receipts for taxes 115, 131 Return for delinquent taxpayer 72, 130 Return of property sold for taxes 138 Summons 123 Tax sales 136-145 Commissioner of Internal Revenue Actions for tax, authorization condition precedent 151 Actions, &c., authority to compromise 166 Actions, authority to discontinue 167 Appeal, condition precedent 158-160 Appeal from collector 72 Assessments 130 Contempt, authority 125 312 INDEX References are to pages AGE Decision, review 156 Decision, status and effect 155-156, 161 Discretion 127 Fees, &c., on tax sale, authority to fix 145 Forms, authority to prescribe , 121 Inquiries 130 License 76 Penalties, authority to determine 126, 130 Real estate, authority to lease or reconvey 147 Refund and remission 154, 156-157 Regulations, authority to make 66, 152, 168 Remission 127 Return for delinquent taxpayer 73, 110, 126 Submission 72 Tax, authority to determine 130, 138 " increase 73, 113, 126 Company Deduction of tax 73 Payment of tax 73 Return 66, 73 Compromise 166 Congress 9,10 Conservators Deduction of tax 66 Payment of tax 73 Return 66, 73 Constitutional Amendment 15 Constitutionality 9-23 Act of 1913 18 Aliens, taxation of 15 Classification of taxation 11 Direct taxation 9, 14 Distraint 13 Double taxation 12 Due process 13 Entry by Collector 13-14, 18 Examination by Collector 13-14, 18 Exemption from taxation 11 Ex post facto statutes 15-18 Impairment of contracts 10 Inequality of taxation 12 Payment at source 10 INDEX 313 References are to pages PAGE Penalties 13, 16 Power to tax, limitation upon 9 Prohibition of restraining action 13 Retroactive statutes 15-18 Salaries of President and Judges 9 Taxation of States and subdivisions 9, 10 Uniformity of exemption 11 Uniformity of taxation 11 Construction of Statutes 24-31 Act of 1913 31, 32 Legislative intent, external evidence of 26 Legislative intent, internal evidence of 26 Particular acts 30 Rules, general 24-26 Rules applicable to tax acts 27-30 Consul 41 Contempt 124-125 Contingent Income 37 Accounts receivable 37 Promissory notes 37 Stock dividends 37 Copartnership. (See Partnership.) Corporations. (See particular corporations under appropriate title.) Bankrupt Ill Consolidated 77, 111 Deductions 93-103 Deduction of tax 73 Dissolved Ill Dividends 54 Excise tax 117 Exemptions 81, 111, 112 Fiscal year. 100 Foreign .78, 95, 103-106, 108, 111 Income 78 Insolvent 89 Liquidated Ill Net income 78 Organized during year 112 Payment of tax 73 Principal place of business 112 Profits, undivided 39, 80, 113 Quasi-public 93 314 INDEX References are to pages PAGE Return 66, 73, 103-114, 118 Statement of profits 50, 70 Subsidiary Ill, 114 Tax 78-92, 117 Cost 50, 57 Coupons, &c 69, 75 Courts and Judges Jurisdiction Federal courts 161 Federal judges 125, 168 Philippine 116 Removal 161 State courts 164 Supreme court, District of Columbia 162 United States Court of Claims 160 United States District Court 116, 124, 161 D Damages. (See Limitations.) 38, 78 Date Assessment on Commissioner's return 73 Assessment on taxpayer's return 73 Payment on Commissioner's return 73 Payment on taxpayer's return 73 Return for invalid, &c ' 75 Return by taxpayer 47, 103 Return by Commissioner 73 fable 302 Tax year 65 Debts. (See Bad Debts.) Decedent Nonpayment of tax by estate 73 Return and statement for 49, 71 Deductions j Bad debts .\ 54, 55, 58 Basic 72 Book entries 99 Corporation 93-103 Cost 57 Definition 51 Depreciation 54, 55, 58, 61, 93 Dividends 54, 58, 61 INDEX 315 References are to pages PAGE Expenses 53, 58, 61, 93 Foreign corporations 95 Foreign coupons, &c 75, 76 Individual 52-64 Indebtedness secured by collateral, &c 94 Insurance 58, 62 Interest 53, 55, 59, 62, 94 Loss 53, 59, 63, 93 Married persons 56, 65 Payments at source 54, 74 Profits 59 Rents 60, 63, 93 Repairs 63 Subjects excluded by construction 60-64, 97-98, 101, 103 Subjects included by construction 57-60, 98-101 Subjects excluded by statute 53 Subjects included by statute 53, 93-103 Taxes 53, 55, 64 Deed, tax 141-143 Definitions Alien 42 Citizen 40-42 Excise 33 Income 34 Net income 33 Resident 44-45 Revenue law 33 Tax 32 Deposits. (See Interest) 79 Depreciation Deductible 54, 55, 58, 61, 99, 104 Estimated 58 Mines 54 Not deductible 102 Descent 51 Devise 51 Distraint Constitutionality of 13 For collection of tax 134, 135-137 Repeated 145 District Attorney Authority in tax actions 168 316 INDEX References are to pages PAGE District of Columbia Salaries 53, 117 Statutory definition 115 Dividends 35, 36-38, 58, 61, 79, 80, 92 Cash 35 Return 69, 112 Scrip 35, 49 Stock 35, 37, 38 Tax paid 54, 56 Undivided 35, 48 Wages, payment 58 Doing business By non-resident Corporation 80-82, 111 Individual 43 What does not constitute 82-86 Double taxation 12 Due process 13 E Earnings. (See Income.) 79 Educational corporation 86, 87 Embezzlements 100 Employer Deduction of tax 73 Payment of tax 73 Return 66, 73 Entry by Collector 127-128, 130 Equity Injunction 13, 157, 164 Proceedings for foreclosure of tax lien 146 Examination. (See Privileged Communication.) Books, taxpayer, &c 13-14, 116, 122-124 Constitutionality of 13-14 Neglect or refusal to obey summons 116, 124-125 Excise Definition 33 Excise taxes 117-118 Executors and Administrators Deduction of tax 66 Payment of tax 73 Return 66, 73 INDEX 317 References are to pages Exemptions PAGE Affidavit and statement for 74 Constitutionality 11 Construction 51 Corporations, &c 81-86 Definition 51 Foreign coupon, &c 75,76 Payments at source 74 Quasi-public corporations 93 Subjects excluded by construction 53, 89-91 Subjects included by construction 87-89 Subjects excluded by statute 93 Subjects included by statute 51, 93, 95 Exhaustion. (See Depreciation.) 54 Expenditure. (See Costs, Expenses.) Expenses Business 52, 58, 61, 93, 99, 104 Ex Post Facto Statutes Civil proceedings, application to 16, 17 Penalties 15 Retroactive statutes 15, 19 Rules of evidence 16 Extension of Time for Return 126 F Failure, Neglect, or Refusal Return 73, 77, 110, 113, 115, 122, 126, 130 Tax 73, 113, 126 False or Fraudulent Return Penalty 73, 113, 115, 126, 129 Refund and remission 155 Return by Commissioner 73, 110, 130 Suit to recover taxes 158 False or Fraudulent Statement 74, 129, 155 Family Expenses 52 Farmer 61 Farm Produce 35, 38, 51 Rent , 37 Fees 35, 49 Fiduciary Return 66 Fine. (See Penalty.) Fire 54, 101 318 INDEX References are to pages Fire Insurance Companies (Mutual) PAGE Deductions 93 Exemptions 87, 93, 95 Foreign 95 Return 104, 105, 109 Firms. (See Partnerships.) Fiscal Year 100, 102 Fixed and Determinable 66, 69, 73, 75 Foreign Corporations Business done in U. S 78 Coupons &c 75 Deductions 98 Exemptions .' 98 Return 108 Foreign Mortgages 75 Franchise Effect on citizenship 41 Fraternal Societies 82, 87, 90 G Gift 36, 51, 62, 100, 102 Gross Income 33 Guardians 58 Deduction of tax 66 Payment of tax 66, 72 Return 66 H Half Breed. (See Alien, Citizen.) 40 Historical. (See Acts.) 1-8 Horse 58 Horticultural Organizations 81, 87, 89, 90 Hospitals. (See Charitable Corporations.) 89, 91 Husband Apportionment of income 56 Deductions 56, 65 Effect of citizenship 40-41 I Import Duties 64 Imprisonment. (See Penalties.) 76, 77, 120, 129 Immunity 123-124 INDEX 319 References are to pages Income. (See Deductions, Exemptions, Return.) PAGE (For income of particular corporations, &c., see titles of such corporations.) Corporations 78 Definition 33 Individual 33-38 Net income 33, 78, 93, 106 Subjects excluded by construction 37-39, 57-60, 80 Subjects included by construction 34-37, 56, 60-64, 78-80 Subjects excluded by statutes 51-57 Subjects included by statutes 34, 48-49, 50, 78 Income Tax. (See Acts, Income, Taj ,) Incompetents Return and statement for 67, 73, 75 Return, time of filing 73 Increase Return, by Collector 72, 130 Return, by Commissioner 73, 110, 126 Tax 112 Increase of Value Of real and personal property 36, 38, 79 Indians. (See Citizen, Alien.) 42 Infants. (See Children, Minors.) Inheritance 51 Inheritance, Foreign 36 Injunction Suits In restraint of collection 157, 164 Inquiry by Collector 121 Insane person Non-payment of tax by estate 73 Return, tune of filing 73 Return and statement for 67, 75 Insolvency Corporations 89 Individuals 73 Non-payment of tax by estate 73 Return and statement 113 Inspection. (See Collector, Examination.) Insurance Deduction 58, 62 Proceeds upon death of insured 51-52 Proceeds upon surrender of policy 51-52 320 INDEX References are to pages Insurance companies PAGE Additions to reserves 93, 95 Deduction of tax 73 Deductions 93-102 Deposits with state officers, &c I 96 Exemptions 87 Fire 87, 93, 95 Foreign 78, 95 Life 79, 87, 93, 94, 96, 105 Marine 94, 96, 104, 105, 109 Payment of tax 73 Return 66, 73, 104, 109, 111, 114, 118 Tax ! 78, 117 Interest. (See Bonded Indebtedness.) 36-37, 104 Collection of foreign, by bankers, &c 69, 75 Deduction 52, 55, 59, 62, 94-96, 100 Deposits 59 Income 36, 38, 79 Mortgages, &c 69, 75 Notes 37, 38, 62 Pro rating 36, 59 Savings bank 36 Secured by collateral, &c 94 Internal Revenue. (See Commissioner, Taxes.) Invalid Return and statement for 67, 75 Return, time of filing 126 J Joint Guardians, Executors, Trustees, &c 66 Joint Stock Company Deductions 93-103 Deduction of tax 73 Foreign 78, 95 Payment of tax 73, 107, 117 Return 66, 73, 118 Statement of profits 50 Tax 78 Judges. (See Courts.) Salaries 9, 52, 65 Judgment Payable by U. S 162 Payable to U. S 152 Jurisdiction. (See Courts.) INDEX 321 References are to pages L Labor. (See Cost, Expense.) PAGE Labor Organizations 81, 87 Legacy ,; -. 51 Legislative intent. (See Construction.) Lessees Deduction of tax 73 Payment of tax 73 Return 66, 73 "Levied, assessed, collected, and paid" 32 Levy 136 Libraries. (See Charitable Corporations, Educational Corpora- tions.) License Bankers collecting foreign coupons, &c 76 Lien for tax 134-135 Suits to foreclose, &c 146 Life insurance companies 79, 87, 93, 94, 96, 105 Limitations, statutes of Action against U. S 158, 162, 164, 165 Action by U. S 151 Application for refund 154, 166 Redemption of property from tax sale 144, 147 Return by Commissioner 73, 110 Tables: 302 Live stock Profits from sale 36 Living Expenses 52 Loan Associations. (See Building & Loan Associations.) Loans Bonus 61 Local Benefits Assessments for 57, 61 Lodge System 83, 87 Losses Business 53, 59, 93, 104 Capital 103 Depreciation. 54, 58, 61, 93, 95, 99, 102 Embezzlement 99 Fire 54, 55, 101 Robbery 63 Sales.. 59, 63 322 INDEX References are to pages PAGE Shipwreck 54, 101 Speculation 63 Storms 54 Suretyship. . . ., 63 Wear and tear 54, 95 M Mandamus 162-163 Federal courts 162 State courts 163 Supreme Court, District of Columbia 163 Manufacturing Concern 79 Marine Insurance Companies (Mutual) Deductions 94 Exemptions 94, 96 Return 104, 105, 109 Marriage Effect on citizenship 41-42 Married Persons Deductions 56, 65 Mines Depreciation 54, 93, 95, 99 Rent 37 Royalties 37 Mining Companies 79, 101, 114 Ministers Gifts 36 Minors. (See Children.) Citizenship 40-41 Return 50, 67 Return and statement for 75 Misdemeanor 76, 77, 120 Mortgagors Deduction of tax 73 Payment of tax 73 Return 73 Municipality. (See State.) Mutual Companies 89 N Natural Gas Companies 79, 99, 114 Necessary Expenses Business '. 52 INDEX 323 References are to pages PAGE Family 52 Net Income. (See Income.) New Buildings ; 37 Non-resident. (See Alien, Citizen, Resident.) Computation of income 64 Deductions 56, 57 Taxation, alien 20-23 Income, definition 33 Return 48 Normal Tax. (See Tax.) 66, 74, 77 Notes. (See Promissory Notes.) Notice Assessment of tax 73, 130, 132 Demand for payment of tax . . . , 132, 134 Return, proposed increase 72 Return, to make 122 Tax sale 137, 141 O Oil Company 80, 99 Operating Expenses 93 Ores Depletion 93 P Partnership Deduction of tax 66, 73 Non-taxable 67 Payment of tax 73 Profits 67 Return 66, 67, 70, 72, 73 Statement 67 Taxable 91 Patents and Patent Rights 57, 58 Pay, Extra 35 Payment at Source 10, 66, 73, 75 Payment of Tax Dates \ : 73 On Commissioner's assessment 73 Penalty for delay 73 Penalty Constitutionality 13 324 INDEX References are to pages PAGE Deductions 60 Delay in payment of tax 73, 113, 126 Determination by Commissioner 126, 130 Divulging information 120 Ex post facto 15 False or fraudulent return 73, 110, 113, 115, 126, 129 False or fraudulent statement 74, 77, 129 Foreign coupons, &c., collection 76 Neglect to declare monetary standard in return 128 Neglect or refusal to make return 73, 77, 110, 115, 126 Non-payment of tax 132, 133 Not collectible when 150 Obstruction, &c., of Collector 128 Remission by Collector or Commissioner 127, 154 Remission by Secretary of Treasury 157 Single, only 127 Source, liability 74 Table 302 Pensions 36, 49, 63 Personal Expenses 58, 61 Personal Injuries Damages 38 Personal Liability 76 Petroleum Company 80, 99, 101, 114 Philippine Islands Administration of Income Tax, Act 1 16 Native 40 Salaries 53, 117 Statutory definition 115 Political Sovereignties. (See State, &c.) Porto Rico Administration of Income Tax Act 116 Native or resident Spaniard 40 Salaries 53, 117 Statutory definition 115 Premiums Bonds '. 63 Insurance ' 80, 93, 94, 95, 96, 104 Lease 63 Loan 61 President of the United States Salary .' 9, 52, 65 INDEX 325 References are to pages PAGE Principal Place of Business 112 Privileged Communication 121, 123, 124 Production of Books 123-124 Profits. (See Income.) Accumulation or use for betterments 39, 80, 99, 101 Betting 35 Deduction 59 Expenses of distribution 58 Live stock, sales 36 Partnership 36 Personal property, sales 36-37 Prospective 39 Real property, sales 36 Rules for computation 36-37, 79 Stock, exchange 36, 39 Stock, sales 36-37 Timber, sales 37 Undivided 39, 80, 113 Promissory Notes 37-38 Contingent income 37 Property Delinquent Collector 152 Distraint 134, 135-137 Exempt by State Statute 53 Profits from sales 36-37, 59, 63 Redemption 147 Repeated distraints and seizures 145 Seizure and sale 140-145 Unsold, increase in value 36, 38 Property Rights Affecting citizenship 41 Protest 163 Public Officers Federal 73 State 9, 52, 65 Public record 114 Public Utility 88, 91 Punitive Damages 163 Purchase Price 63 Instalments 37, 38 326 INDEX References are to pages R Rate of Tax. (See Tax.) PAGE Real Estate Authority of commissioner 147 Companies 82 Deed, upon tax sale 141-143 Depreciation 60 Mortgaged 113 Profits from sales 36 Purchase price, instalments 37, 38 Redemption from tax sale 144-145, 147 Repeated seizure and sale 145 Seizure and sale for taxes 140-145 Receipt Tax 115 Receivers Deduction of tax 66 Payment of tax 73 Return '. ... .66, 73, 113 Sales 80 Redemption from Tax Sale 144-145, 147 Refund, &c. Application 154 By Commissioner 154 By Secretary of Treasury 154, 157 Limitation, statutory 166 Refusal. (See Failure, Neglect and Refusal.) Re-insurance 94, 96 Religious corporations 86, 88 Rent. (See Income.) 37-39, 49, 60, 63, 93, 101, 104 Betterments by tenants 37 Mine royalties 37 Payment in produce 37 Rental value 39, 63 Repairs. (See Betterments, Cost, Expenses.) 60, 63 Representatives Deduction of Tax 66 Liability 74 Payment of tax return 66, 75 Reserve fund 93, 94, 95, 104, 104, 113 Residence 44-45 Resident. (See Alien, Citizen, Non-resident.) 43-45 INDEX 327 References are to pages Retroactive . PAGE Ex post facto penalties 15-18 Return 47-50, 65, 103 Absentee 67, 75 Agents 66 Amendments, &c. by commissioner 73, 110, 126 Associations 66, 73, 118 Banks, &c 110 Collector 72 Commissioner 73, 110, 130 Companies 66, 73 Confidential information 120 Conservators 66 Contents 47, 71, 103 Corporation 66, 73, 103-114, 118 Date 47, 68, 73, 103 Debt to be collected 49 Decedent 71 Definition 47 Deputy collector 112 District 47, 65, 71, 103 Dividends 48-49, 112 Divulging information 120 Employers 66, 73 Exceptions Exempt corporations 03 Executors and administrators 66, 73 Extension of time 126 Failure, neglect or refusal 73, 77, 110, 113, 115, 122 False or fraudulent 73, 110, 113, 115, 122, 155, 158 Fiduciaries ' 66 Form 47 Guardians 66, 71 Increase by Collector, Commissioner 72, 73 Individual 47-50, 65 Insane 67, 75 Insurance companies 66, 73, 104, 118 Invalid 67, 75 Items returnable 49-50, 69-71, 112-114 Items not returnable 48, 50 Joint stock companies 66, 73, 118 Lessees 73 Minor 50, 67, 72, 75 Monetary standard, statement 128 328 INDEX References are to pages PAGE Mortgagors 73 Normal tax 66 Notice and demand by Collector 122 Partnership 67, 70, 72, 73 Period 113 Place 47, 65, 68, 103 Preparation by Collector 122 Privileged communication 121 Profits 113 Public record 114 Real estate, mortgaged 113 Receivers and conservators 66, 73, 113 Representatives 66-73 Rules 50, 72 Source 66 Statutory provisions, table 47-48, 68-70, 107-110 Subjects excluded 48, 50 Subjects included 49-50, 69-71, 110-114 Subsidiary companies 114 Supplemental statement 114 Trustees 66, 73 Understatement 72, 130 Undervaluation 72, 130 United States officers 73 Verification 48, 68, 72, 103, 107 Wife 50 Revised Statutes 120-168 Amendment 115, 117 Rules and Regulations 66, 76, 152, 158, 168 S Salaries 60 Judges, federal 9 President of the United States 9 State officers and employes 9 Sale for Taxes Certificate 139, 141-142 Character 139 Collector, authority 136, 138, 141-142 Deed 141-143 Disposition of proceeds 138, 140 Expenses and fees 136, 139, 145 INDEX 329 References are to pages PAGE Notice 137, 141 Personal property 137-140 Prevention by payment 139, 144 Purchase by U. S 138, 141 Real property 140-145 Savings Banks (Mutual) 82, 88, 89 School 91 Scientific Corporations 86, 88 Search Warrant 168 Secretary of the Treasury Compromise of actions 157, 166-168 Forms, regulations, &c 66, 76, 158 Real estate, reconveyance 147 Refund 154, 157 Remission 157 Taxes, &c., disposition , 149 Securities 94, 96 Seizure and Sale. (See Property, Sale for Taxes.) Shipwreck 54, 101 Source Deductions, interest on bonds, &c 56 Deduction of tax 56, 66, 73 Liability 74 Payment at 10 Payment of tax 56, 73 Return 66-73 State, &c. (See Courts.) Business operations * 93 Obligations 10, 52, 64, 91, 92 Officers and employes, salaries 9, 52, 64 Statutory definition 115 Statutory exemption 52, 53, 88, 90, 91, 92-93 Taxation, constitutionality 9 Statement of Profits 50, 67 Statement for Exemption False or fraudulent 74, 129, 155, 158 Supplemental 114 Statutes Effect 118 In force 116 Repeal 117, 118 330 INDEX References are to pages PAGE Steamship Companies 82, 84, 100, 113 Stock Appreciation in value 36 Depreciation in value 58 Dividends 35-38 Profits from exchange 36, 39 Profits from sales 36-37 Storms 54 Submission to Commissioner 72 Suits. (See Actions.) Summons 116, 123, 124 Supplemental Statement 114 Sur-Tax. (See Tax.) 46, 47, 48 T Tax 63 Actions against United States 158-165 Actions by United States 149-151 Agent, payment, tender 134, 138 Apportionment 56 Assessment 100, 131 Assessor's error, effect 12 Classification, constitutionality 11 Collection 131, 148 Commissioner 73 Corporate 76, 99, 106, 117 Deduction 52, 55, 64, 95, 96 Deed 141-143 Definitions 32 Deposit 149 Direct, constitutionality 8, 14 Distraint for collection 134, 135-137 Distraint, constitutionality 13 Dividends v 54 Double, constitutionality 12 Excise tax 117 Ex post facto 15 Increase 73, 113, 126 Individual .34, 39, 46 Inequality, constitutionality 11 Liability of taxpayer , 76 Lien.. ..134-135 INDEX 331 References are to pages PAGE Limitations 168 Non-payment 132, 133 Non-resident 15, 20-23 Normal tax 34, 39, 46, 66, 74, 77 Notice and demand 132 Payment by agent 134, 137, 138 Payment by source 10, 73 Payment on Commissioner's return 73 Payment on taxpayer's return 108, 132 Payment to prevent sale 139 Penalties 132, 133 Period, tax 34, 65, 98 Reasonableness, constitutionality 10 Refund and remission 154, 157, 166 Representative 73 Residence 44-45 Retroactive, constitutionality 15 Source 54, 56, 66, 71 Sur-tax 46, 47, 48 Table 46 i Uniformity 11 Tax-Free Payments 94, 96 Taxpayer Liability , . . 76 Tender of Payment 134, 138 I Territories 53, 115 i Timber 37 ) Torts 164 . Trespass 138, 164 Trust Companies 82, 95 Trustees 89, 121 Deduction of tax 66 Distribution of profits, expense 58 Payment of tax 66 Return 66 Right to inspect return of corporation 121 Tender of Payment 134, 183 U , United States. (See Actions, Courts.) Limitations, statute of 151 Obligations 64 332 INDEX References are to pages PAGE Officers in control of funds 66, 73 Statutory definition 115 V Verification 103 W Wages 60, 64 Children 49, 50 Deductions by source 73 Unproductive 64 Wear and Tear 54 Wife Apportionment of income 56 Citizenship 41 Deductions 56, 60, 65 Return 50 Withholding Tax. (See Source Tax). Witnesses.. . 123 cP A 000 698 251 6